[Federal Register Volume 59, Number 102 (Friday, May 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-12516]


[[Page Unknown]]

[Federal Register: May 27, 1994]


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Part III





Department of Health and Human Services





_______________________________________________________________________



Health Care Financing Administration



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42 CFR Parts 412, 413, 485 and 489



Medicare; Hospital Inpatient Prospective Payment Systems and Fiscal 
Year 1995 Rates; Proposed Rule
DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 412, 413, 482, 485, and 489

[BPD-802-P]
RIN 0938-AG46

 

Medicare Program; Changes to the Hospital Inpatient Prospective 
Payment Systems and Fiscal Year 1995 Rates

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Proposed rule.

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SUMMARY: We are proposing to revise the Medicare hospital inpatient 
prospective payment systems for operating costs and capital-related 
costs to implement necessary changes arising from our continuing 
experience with the system. In addition, in the addendum to this 
proposed rule, we are describing proposed changes in the amounts and 
factors necessary to determine prospective payment rates for Medicare 
hospital inpatient services for operating costs and capital-related 
costs. These changes would be applicable to discharges occurring on or 
after October 1, 1994. We are also setting proposed rate-of-increase 
limits for hospitals and hospital units excluded from the prospective 
payment systems.

DATES: Comments will be considered received at the appropriate address, 
as provided below, no later than 5 p.m. on July 26, 1994.

ADDRESSES: Mail written comments (an original and 3 copies) to the 
following address:

Health Care Financing Administration, Department of Health and Human 
Services, Attention: BPD-802-P, P.O. Box 7517, Baltimore, MD 21207-
0517.

    . If you prefer, you may deliver your written comments (an original 
and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or
Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore, 
MD 21207.

    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code BPD-802-P. Comments received timely will be available for 
public inspection as they are received, generally beginning 
approximately 3 weeks after publication of a document, in Room 309-G of 
the Department's offices at 200 Independence Avenue, SW., Washington, 
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. 
(phone: (202) 690-7890).
    For comments that relate to information collection requirements, 
mail a copy of comments to: Office of Information and Regulatory 
Affairs, Office of Management and Budget, Room 3001, New Executive 
Office Building, Washington, DC 20503, Attn: Allison Herron Eydt, HCFA 
Desk Officer.
    Copies: To order copies of the Federal Register containing this 
document, send your request to: New Orders, Superintendent of 
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date 
of the issue requested and enclose a check or money order payable to 
the Superintendent of Documents, or enclose your Visa or Master Card 
number and expiration date. Credit card orders can also be placed by 
calling the order desk at (202) 783-3238 or by faxing to (202) 275-
6802. The cost for each copy is $6.00. As an alternative, you can view 
and photocopy the Federal Register document at most libraries 
designated as Federal Depository Libraries and at many other public and 
academic libraries throughout the country that receive the Federal 
Register.
     To obtain data used in deriving the standardized amounts and DRG 
relative weights, see section VIII.B. of the Supplementary Information 
section of this preamble, Requests for Data From the Public.

FOR FURTHER INFORMATION CONTACT: Lana Price, (410) 966-4529.

SUPPLEMENTARY INFORMATION:

I. Background

A. Summary

    Under section 1886(d) of the Social Security Act (the Act), a 
system of payment for the operating costs of acute hospital inpatient 
stays under Medicare Part A (Hospital Insurance) based on 
prospectively-set rates was established effective with hospital cost 
reporting periods beginning on or after October 1, 1983. Under this 
system, Medicare payment for hospital inpatient operating costs is made 
at a predetermined, specific rate for each hospital discharge. All 
discharges are classified according to a list of diagnosis-related 
groups (DRGs). The regulations governing the hospital inpatient 
prospective payment system are located in 42 CFR part 412. On September 
1, 1993, we published a final rule with comment period (58 FR 46270) to 
implement changes to the prospective payment system for hospital 
operating costs beginning with Federal fiscal year (FY) 1994.
    For cost reporting periods beginning before October 1, 1991, 
hospital inpatient operating costs were the only costs covered under 
the prospective payment system. Payment for capital-related costs had 
been made on a reasonable cost basis because, under sections 1886(a)(4) 
and (d)(1)(A) of the Act, those costs had been specifically excluded 
from the definition of inpatient operating costs. However, section 
4006(b) of the Omnibus Budget Reconciliation Act of 1987 (Public Law 
100-203) revised section 1886(g)(1) of the Act to require that, for 
hospitals paid under the prospective payment system for operating 
costs, capital-related costs would also be paid under a prospective 
payment system effective with cost reporting periods beginning on or 
after October 1, 1991. As required by section 1886(g) of the Act, we 
replaced the reasonable cost-based payment methodology with a 
prospective payment methodology for hospital inpatient capital-related 
costs. Under the new methodology, effective for cost reporting periods 
beginning on or after October 1, 1991, a predetermined payment amount 
per discharge is made for Medicare inpatient capital-related costs. 
(See subpart M of 42 CFR part 412, and the August 30, 1991, final rule 
(56 FR 43358) for a complete discussion of the prospective payment 
system for hospital inpatient capital-related costs.)

B. Major Contents of This Proposed Rule

    In this proposed rule, we are setting forth proposed changes to the 
Medicare hospital inpatient prospective payment systems for both 
operating costs and capital-related costs. This proposed rule would be 
effective for discharges occurring on or after October 1, 1994. 
Following is a summary of the major changes that we are proposing to 
make:
1. Changes to the DRG Classification and Relative Weights
    As required by section 1886(d)(4)(C) of the Act, we must adjust the 
DRG classifications and relative weights at least annually. Our 
proposed changes for FY 1995 are set forth in section II of this 
preamble.
2. Changes to the Hospital Wage Index
    In section III of this preamble, we discuss revisions to the wage 
index and the annual update of the wage data. Specific issues addressed 
in this section include:
     FY 1995 wage index update.
     Changes in the reporting of hospital wage index data.
     Revisions to the wage index based on hospital 
redesignations.
     Impact of the revised hospital wage index.
     Occupational mix adjustment.
     Research on refinements to labor market areas.
     State labor market options.
3. Other Changes to the Prospective Payment System for Inpatient 
Operating Costs
    In section IV of this preamble, we discuss several provisions of 
the regulations in 42 CFR parts 412, 413, 485, and 489 and set forth 
certain proposed changes concerning the following:
     Definition of and payment for transfer cases.
     Review of DRG assignments.
     National average standardized amounts for FY 1995.
     Outliers.
     Rural referral centers.
     Determination of number of beds in determining the 
indirect medical education adjustment.
     Disproportionate share adjustment.
     Changes affecting essential access community hospitals 
(EACHs) and rural primary care hospitals (RPCHs).
     Clarification of payments to rural referral center/EACH 
hospitals.
     Direct graduate medical education payment.
     Other technical changes.
4. Changes and Clarifications to the Prospective Payment System for 
Capital-Related Costs
    In section V of this preamble, we discuss several provisions of the 
regulations in 42 CFR parts 412 and 413 and set forth certain proposed 
changes concerning the following:
     Evaluation of provisions relating to obligated capital for 
hospitals subject to lengthy certificate-of-need (CON) process.
     Specific adjustment for taxes to the capital prospective 
payment system federal rate.
     Revision of provision relating to exceptions payments.
     Extraordinary circumstances exceptions payments.
     Funding of depreciation.
5. Changes for Hospitals Excluded from the Prospective Payment System
    In section VI of this preamble, we discuss changes to the 
regulations at 42 CFR parts 412 and 413 for hospitals and hospital 
units excluded from the prospective payment system. The proposed 
changes concern the following:
     New requirements for certain long-term care hospitals 
excluded from the prospective payment systems.
     Removal of the 1986 malpractice rule.
     Related technical changes.
6. Determining Prospective Payment Rates and Rate-of-Increase Limits
    In the addendum to this proposed rule, we set forth proposed 
changes to the amounts and factors for determining the FY 1995 
prospective payment rates for operating costs and capital-related 
costs. We are also proposing new update factors for determining the 
rate-of-increase limits for cost reporting periods beginning in FY 1995 
for hospitals and hospital units excluded from the prospective payment 
system.
7. Impact Analysis
    In Appendix A, we set forth an analysis of the impact that the 
proposed changes described in this rule would have on affected 
entities.
8. Capital Acquisition Model
    Appendix B contains the technical appendix on the proposed FY 1995 
capital acquisition model and budget neutrality adjustment.
9. Report to Congress on the Update Factor for Prospective Payment 
Hospitals and Hospitals Excluded from the Prospective Payment System
    Section 1886(e)(3)(B) of the Act requires that the Secretary report 
to Congress no later than March 1, 1994 on our initial estimate of an 
update factor for FY 1995 for both prospective payment hospitals and 
hospitals excluded from the prospective payment system. This report is 
included as Appendix C to this proposed rule.
10. Proposed Recommendation of Update Factor for Hospital Inpatient 
Operating Costs
    As required by sections 1886 (e)(4) and (e)(5) of the Act, Appendix 
D provides our recommendation of the appropriate percentage change for 
FY 1995 for the following:
     Large urban, other urban, and rural average standardized 
amounts (and hospital-specific rates applicable to sole community 
hospitals) for hospital inpatient services paid for under the 
prospective payment system for operating costs.
     Target rate-of-increase limits to the allowable operating 
costs of hospital inpatient services furnished by hospitals and 
hospital units excluded from the prospective payment system.
11. Framework for Capital Update
    In Appendix E, we are setting forth a preliminary framework for 
developing the annual update factor for inpatient hospital capital-
related costs.
12. Discussion of Prospective Payment Assessment Commission 
Recommendations
    The Prospective Payment Assessment Commission (ProPAC) is directed 
by section 1886(e)(2)(A) of the Act to make recommendations on the 
appropriate percentage change factor to be used in updating the average 
standardized amounts. In addition, section 1886(e)(2)(B) of the Act 
directs ProPAC to make recommendations regarding changes in each of the 
Medicare payment policies under which payments to an institution are 
prospectively determined. In particular, the recommendations relating 
to the hospital inpatient prospective payment systems are to include 
recommendations concerning the number of DRGs used to classify 
patients, adjustments to the DRGs to reflect severity of illness, and 
changes in the methods under which hospitals are paid for capital-
related costs. Under section 1886(e)(3)(A) of the Act, the 
recommendations required of ProPAC under sections 1886(e)(2) (A) and 
(B) of the Act are to be reported to Congress not later than March 1 of 
each year.
    We are printing ProPAC's March 1, 1994 report, which includes its 
recommendations, as Appendix F of this document. The recommendations, 
and the actions we are proposing to take with regard to them (when an 
action is recommended), are discussed in detail in the appropriate 
sections of this preamble, the addendum, or the appendices to this 
proposed rule. See section VII of this preamble for specific 
information concerning where individual recommendations are addressed. 
For a brief summary of the ProPAC recommendations, we refer the reader 
to the beginning of the ProPAC report as set forth in Appendix F of 
this proposed rule. ProPAC also produced technical appendices in its 
March 1, 1994 report that provide background material and detailed 
analyses used in preparation of the ProPAC recommendations. For further 
information relating specifically to the ProPAC report or to obtain a 
copy of the technical appendices, contact ProPAC at (202) 401-8986.

II. Proposed Changes to DRG Classifications and Relative Weights

A. Background

    Under the prospective payment system, we pay for inpatient hospital 
services on the basis of a rate per discharge that varies by the DRG to 
which a beneficiary's stay is assigned. The formula used to calculate 
payment for a specific case takes an individual hospital's payment rate 
per case and multiplies it by the weight of the DRG to which the case 
is assigned. Each DRG weight represents the average resources required 
to care for cases in that particular DRG relative to the average 
resources used to treat cases in other DRGs.
    Congress recognized that it would be necessary to recalculate the 
DRG relative weights periodically to account for changes in resource 
consumption. Accordingly, section 1886(d)(4)(C) of the Act requires 
that the Secretary adjust the DRG classifications and relative weights 
annually. These adjustments are made to reflect changes in treatment 
patterns, technology, and any other factors that may change the 
relative use of hospital resources. The proposed changes to the DRG 
classification system and the proposed recalibration of the DRG weights 
for discharges occurring on or after October 1, 1994 are discussed 
below.

B. DRG Reclassification

1. General
    Cases are classified into DRGs for payment under the prospective 
payment system based on the principal diagnosis, up to eight additional 
diagnoses, and up to six procedures performed during the stay, as well 
as age, sex, and discharge status of the patient. The diagnosis and 
procedure information is reported by the hospital using codes from the 
International Classification of Diseases, Ninth Edition, Clinical 
Modification (ICD-9-CM). The Medicare fiscal intermediary enters the 
information into its claims system and subjects it to a series of 
automated screens called the Medicare Code Editor (MCE). These screens 
are designed to identify cases that require further review before 
classification into a DRG can be accomplished.
    After screening through the MCE and any further development of the 
claims, cases are classified by the GROUPER software program into the 
appropriate DRG. The GROUPER program was developed as a means of 
classifying each case into a DRG on the basis of the diagnosis and 
procedure codes and demographic information (that is, sex, age, and 
discharge status). It is used both to classify past cases in order to 
measure relative hospital resource consumption to establish the DRG 
weights and to classify current cases for purposes of determining 
payment. The records for all Medicare hospital inpatient discharges are 
maintained in the Medicare Provider Analysis and Review (MedPAR) file. 
The data in this file are used to evaluate possible DRG classification 
changes and to recalibrate the DRG weights.
    Currently, cases are assigned to one of 491 DRGs in 25 major 
diagnostic categories (MDCs). Most MDCs are based on a particular organ 
system of the body (for example, MDC 6, Diseases and Disorders of the 
Digestive System); however, some MDCs are not constructed on this basis 
since they involve multiple organ systems (for example, MDC 22, Burns).
    In general, principal diagnosis determines MDC assignment. However, 
there are four DRGs to which cases are assigned on the basis of 
procedure codes rather than first assigning them to an MDC based on the 
principal diagnosis. These are the DRGs for liver and bone marrow 
transplant (DRGs 480 and 481, respectively) and the two DRGs for 
tracheostomies (DRGs 482 and 483). Cases are assigned to these DRGs 
before classification to an MDC.
    Within most MDCs, cases are then divided into surgical DRGs (based 
on a surgical hierarchy that orders individual procedures or groups of 
procedures by resource intensity) and medical DRGs. Medical DRGs 
generally are differentiated on the basis of diagnosis and age. Some 
surgical and medical DRGs are further differentiated based on the 
presence or absence of complications or comorbidities (hereafter CC).
    Generally, GROUPER does not consider other procedures; that is, 
nonsurgical procedures or minor surgical procedures generally not 
performed in an operating room are not listed as operating room (OR) 
procedures in the GROUPER decision tables. However, there are a few 
non-OR procedures that do affect DRG assignment for certain principal 
diagnoses, such as extracorporeal shock wave lithotripsy for patients 
with a principal diagnosis of urinary stones.
    The changes we are proposing to make to the DRG classification 
system for FY 1995 are set forth below.
2. MDC 2 (Diseases and Disorders of the Eye)
    When a case is coded with a principal diagnosis of subcorneal 
pustular dermatosis (diagnosis code 694.1), it is classified to MDC 2 
(Diseases and Disorders of the Eye), where it is assigned to DRGs 46, 
47, and 48 (Other Disorders of the Eye).\1\ We recently received a 
suggestion from the public that we should review the DRG classification 
of subcorneal pustular dermatosis because it is a dermatological 
condition and is not a disease or disorder of the eye.
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    \1\A single title combined with two DRG numbers is used to 
signify pairs. Generally, the first DRG is for cases with CC and the 
second is for cases without CC. If a third number is included, it 
represents cases of patients who are age 0-17. Occasionally, a pair 
of DRGs is split on age >17 and age 0-17.
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    Since this issue involves a possible medical misclassification of a 
diagnosis, we asked our medical consultants to evaluate the condition. 
They determined that subcorneal pustular dermatosis is indeed a 
dermatological condition and not an eye condition. Based on their 
determination and recommendations, we propose to remove diagnosis code 
694.1 from its current classification in MDC 2 and assign it to MDC 9 
(Diseases and Disorders of the Skin, Subcutaneous Tissue and Breast).
    In order to determine the appropriate DRG assignment in MDC 9, we 
first made a clinical evaluation of the medical DRGs. Based on the 
current MDC 9 configuration, the only possible DRGs appear to be DRGs 
272 and 273 (Major Skin Disorders) or DRGs 283 and 284 (Minor Skin 
Disorders). After reviewing the average standardized charges and the 
types of costs assigned to DRGs 272 and 273, we believe the best 
assignment for 694.1 is DRGs 283 and 284. We note that the proposed FY 
1995 relative weights of DRGs 46, 47, and 48 (0.7573, 0.4330, and 
0.4182, respectively) are approximately equal to those of DRGs 283 and 
284 (0.7142 and 0.4358, respectively). Therefore, we propose to move 
diagnosis code 694.1 to DRGs 283 and 284.
3. MDC 15 (Newborns and Other Neonates with Conditions Originating in 
the Perinatal Period)
    In the September 1, 1993 final rule (58 FR 46283), we stated that 
we would be evaluating the newborn and neonate DRG classifications and 
relative weights for possible improvements. Because of the low volume 
of cases in these DRGs in the MedPAR file, we stated that we intended 
to rely on data bases outside the Medicare claims file to supplement 
our data. We expect that any major reclassification changes to MDC 15 
will be based on an evaluation of actual neonate case data, including 
charges and clinical information.
    As we have not yet completed this evaluation, we will not be 
proposing our MDC 15 revisions for FY 1995. However, since publication 
of the September 1, 1993 final rule, we have received several 
suggestions from the public concerning improvements for the neonate DRG 
classifications. Some commenters suggested that we reevaluate the 
diagnoses that are currently considered significant problems in 
determining the assignment of a neonate case to DRG 390 (Neonate with 
Other Significant Problems) rather than DRG 391 (Normal Newborn). These 
commenters believe that many of the diagnoses currently assigned to DRG 
390 are not truly significant clinically and in terms of resource use. 
These commenters also identified specific diagnoses within this group 
that are problematic. Even though we are not ready to proceed with a 
comprehensive proposal for revising MDC 15, we did ask our medical 
specialists to evaluate the specific conditions that were identified as 
problematic in the assignment of newborns to DRG 390.
    Currently, cases of otherwise normal newborns with one of the 
following diagnoses are assigned to DRG 390 rather than DRG 391:

752.5--Undescended testicle
795.4--Other nonspecific abnormal histological findings
V05.3--Need for prophylactic vaccination against viral hepatitis
V05.4--Need for prophylactic vaccination against Varicella
V20.1--Other healthy infant or child receiving care

    All of these diagnoses were identified by the commenters as 
nonsignificant conditions that are either not problems or require only 
minimal diagnostic work-up, no treatment, and result in the consumption 
of minimal or no additional resources. For these reasons, the 
commenters believe that these diagnoses should be added to the list of 
conditions that may be found as secondary diagnoses for DRG 391.
    Specifically, a healthy newborn with undescended testicles requires 
only a minimal diagnostic work-up and no treatment at the time of 
birth. In addition, the conditions that are assigned to diagnosis code 
795.4 (Other nonspecific abnormal histological findings) are 
nonsignificant problems and require no additional resources to treat.
    Commenters also pointed out that it has become standard practice to 
inoculate newborns against viral hepatitis, and that a prophylactic 
vaccination against Varicella is normal and routine and does not 
indicate a problem with the newborn. Diagnosis code V20.1 is generally 
used to identify a healthy infant that remains in the hospital for an 
extended period of time because of maternal illness, and should not be 
considered a significant problem.
    All of the conditions listed above were reevaluated on a clinical 
basis by our medical specialists, who determined that these diagnoses 
are not significant problems in neonates. Therefore, we are proposing 
to add them to the list of secondary diagnoses that would assign an 
otherwise normal newborn to DRG 391.
    Based on comments received, we also reevaluated perinatal jaundice 
(diagnosis codes 774.0 through 774.7) and its DRG assignments. 
Currently, all of these diagnosis codes except 774.6 (unspecified fetal 
and neonatal jaundice) are considered major problems and are assigned 
to DRGs 387 (Prematurity with Major Problems) and 389 (Full Term 
Neonate with Major Problems). Diagnosis code 774.6 is not considered a 
significant problem and is assigned to DRG 388 (Prematurity without 
Major Problems) and DRG 391. Some commenters did not believe that 774.6 
should be assigned to DRG 391 when all the other perinatal jaundice 
codes are considered major problems. Other commenters believe that some 
of the perinatal jaundice diagnoses that are currently considered major 
are really not that resource intensive.
    Our medical specialists reevaluated these perinatal jaundice 
conditions, and, based on their determinations, we are proposing 
several revisions to the neonatal DRG assignments. First, the following 
diagnosis codes would be removed from the major problems list in DRGs 
387 and 389 and would be added to the significant problems list:

774.0--Perinatal jaundice from hereditary hemolytic anemias
774.1--Perinatal jaundice from other excessive hemolysis
774.2--Neonatal jaundice associated with preterm delivery

Thus, a premature newborn with one of these codes would be assigned to 
DRG 388 and a full-term newborn with one of these codes would be 
assigned to DRG 390.

    The following diagnosis codes would be removed from the major 
problems list in DRGs 387 and 389 and would not be added to the 
significant problems list:

774.30--Neonatal jaundice due to delayed conjugation, cause unspecified
774.31--Neonatal jaundice due to delayed conjugation in diseases 
classified elsewhere
774.39--Other neonatal jaundice due to delayed conjugation from other 
causes
774.5--Perinatal jaundice from other causes

Therefore, a premature newborn with one of these conditions would be 
assigned to DRG 388 and a full-term newborn with one of these 
conditions would be assigned to DRG 391.
    The following diagnosis codes would remain on the major problems 
list and continue to result in assignment to DRGs 387 and 389:

774.4--Perinatal jaundice due to hepatocellular damage
774.7--Kernicterus not due to isoimmunization

    Finally, diagnosis codes 774.6 (Unspecified fetal and neonatal 
jaundice) would continue to be considered a nonsignificant condition 
and result in assignment to DRGs 388 and 391.
    We note again that these proposals are based only on clinical 
considerations and respond to specific requests made by the public. We 
will continue our work on a more comprehensive evaluation of the MDC 15 
DRGs and will announce our proposal when that evaluation is completed.
4. Surgical Hierarchies
    Some inpatient stays entail multiple surgical procedures, each one 
of which, occurring by itself, could result in assignment of the case 
to a different DRG within the MDC to which the principal diagnosis is 
assigned. It is, therefore, necessary to have a decision rule by which 
these cases are assigned to a single DRG. The surgical hierarchy, an 
ordering of surgical classes from most to least resource intensive, 
performs that function. Its application ensures that cases involving 
multiple surgical procedures are assigned to the DRG associated with 
the most resource-intensive surgical class.
    Because the relative resource intensity of surgical classes can 
shift as a function of DRG reclassification and recalibration, we 
reviewed the surgical hierarchy of each MDC, as we have for previous 
reclassifications, to determine if the ordering of classes coincided 
with the intensity of resource utilization, as measured by the same 
billing data used to compute the DRG relative weights.
    A surgical class can be composed of one or more DRGs. For example, 
in MDC 5, the surgical class ``heart transplant'' consists of a single 
DRG (DRG 103) and the class ``coronary bypass'' consists of two DRGs 
(DRGs 106 and 107). Consequently, in many cases, the surgical hierarchy 
has an impact on more than one DRG. The methodology for determining the 
most resource-intensive surgical class, therefore, involves weighting 
each DRG for frequency to determine the average resources for each 
surgical class. For example, assume surgical class A includes DRGs 1 
and 2 and surgical class B includes DRGs 3, 4, and 5, and that the 
average charge of DRG 1 is higher than that of DRG 3, but the average 
charges of DRGs 4 and 5 are higher than the average charge of DRG 2. To 
determine whether surgical class A should be higher or lower than 
surgical class B in the surgical hierarchy, we would weight the average 
charge of each DRG by frequency (that is, by the number of cases in the 
DRG) to determine average resource consumption for the surgical class. 
The surgical classes would then be ordered from the class with the 
highest average resource utilization to that with the lowest, with the 
exception of ``other OR procedures'' as discussed below.
    This methodology may occasionally result in a case involving 
multiple procedures being assigned to the lower-weighted DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER searches for the procedure in the 
most resource-intensive surgical class, which may sometimes occur in 
cases involving multiple procedures, this result is unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average relative 
weight is ordered above a surgical class with a higher average relative 
weight. For example, the ``other OR procedures'' surgical class is 
uniformly ordered last in the surgical hierarchy of each MDC in which 
it occurs, regardless of the fact that the relative weight for the DRG 
or DRGs in that surgical class may be higher than that for other 
surgical classes in the MDC. The ``other OR procedures'' class is a 
group of procedures that are least likely to be related to the 
diagnoses in the MDC but are occasionally performed on patients with 
these diagnoses. Therefore, these procedures should only be considered 
if no other procedure more closely related to the diagnoses in the MDC 
has been performed.
    A second example occurs when the difference between the average 
weights for two surgical classes is very small. We have found that 
small differences generally do not warrant reordering of the hierarchy 
since, by virtue of the hierarchy change, the relative weights are 
likely to shift such that the higher-ordered surgical class has a lower 
average weight than the class ordered below it.
    Based on the preliminary recalibration of the DRGs, we are 
proposing to modify the surgical hierarchy as set forth below. As we 
stated in the September 1, 1989 final rule (54 FR 36457), we are unable 
to test the effects of the proposed revisions to the surgical hierarchy 
and to reflect these changes in the proposed relative weights due to 
the unavailability of revised GROUPER software at the time this 
proposed rule is prepared. Rather, we simulate most major 
classification changes to approximate the placement of cases under the 
proposed reclassification and then determine the average charge for 
each DRG. These average charges then serve as our best estimate of 
relative resource use for each surgical class. We test the proposed 
surgical hierarchy changes after the revised GROUPER is received and 
reflect the final changes in the DRG relative weights in the final 
rule. Further, as discussed below in section II.C of this preamble, we 
anticipate that the final recalibrated weights will be somewhat 
different from those proposed, since they will be based on more 
complete data. Consequently, further revision of the hierarchy, using 
the above principles, may be necessary in the final rule.
    At this time, we would revise the surgical hierarchy for MDC 2 
(Diseases and Disorders of the Eye) and MDC 3 (Diseases and Disorders 
of the Ear, Nose, Mouth and Throat).
     In MDC 2, we would reorder Extraocular Procedures Except 
Orbit (DRGs 40 and 41) above Intraocular Procedures Except Retina, Iris 
and Lens (DRG 42).
     In MDC 3, we would reorder Rhinoplasty (DRG 56) above 
Salivary Gland Procedures Except Sialoadenectomy (DRG 51).
5. Refinement of Complications and Comorbidities List
    There is a standard list of diagnoses that are considered 
complications or comorbidities (CCs). We developed this list using 
physician panels to include those diagnoses that, when present as a 
secondary condition, would be considered a substantial complication or 
comorbidity. In preparing the original CC list, a substantial CC was 
defined as a condition that, because of its presence with a specific 
principal diagnosis, would increase the length of stay by at least 1 
day for at least 75 percent of the patients.
    In previous years, we have made changes to the standard list of 
CCs, either by adding new CCs or deleting CCs already on the list. For 
FY 1995, we are not proposing to make any changes to the current CC 
list.
    In the September 1, 1987 final notice concerning changes to the DRG 
classification system (52 FR 33143), we modified the GROUPER logic so 
that certain diagnoses included on the standard list of CCs would not 
be considered a valid CC in combination with a particular principal 
diagnosis. Thus, we created the CC Exclusions List. We made these 
changes to preclude coding of CCs for closely related conditions, to 
preclude duplicative coding or inconsistent coding from being treated 
as CCs, and to ensure that cases are appropriately classified between 
the complicated and uncomplicated DRGs in a pair.
    In the May 19, 1987 proposed notice concerning changes to the DRG 
classification system (52 FR 18877), we explained that the excluded 
secondary diagnoses were established using the following five 
principles:
     Chronic and acute manifestations of the same condition 
should not be considered CCs for one another (as subsequently corrected 
in the September 1, 1987 final notice (52 FR 33154)).
     Specific and nonspecific (that is, not otherwise specified 
(NOS)) diagnosis codes for a condition should not be considered CCs for 
one another.
     Conditions that may not co-exist, such as partial/total, 
unilateral/bilateral, obstructed/unobstructed, and benign/malignant, 
should not be considered CCs for one another.
     The same condition in anatomically proximal sites should 
not be considered CCs for one another.
     Closely related conditions should not be considered CCs 
for one another.
    The creation of the CC Exclusions List was a major project 
involving hundreds of codes. The FY 1988 revisions were intended to be 
only a first step toward refinement of the CC list in that the criteria 
used for eliminating certain diagnoses from consideration as CCs were 
intended to identify only the most obvious diagnoses that should not be 
considered complications or comorbidities of another diagnosis. For 
that reason, and in light of comments and questions on the CC list, we 
have continued to review the remaining CCs to identify additional 
exclusions and to remove diagnoses from the master list that have been 
shown not to meet the definition of a CC stated above, as appropriate. 
(See the September 30, 1988 final rule for the revision made for the 
discharges occurring in FY 1989 (53 FR 38485), the September 1, 1989 
final rule for the revision made for discharges occurring in FY 1990 
(54 FR 36552), the September 4, 1990 final rule for the revision made 
for discharges occurring in FY 1991 (55 FR 36126), the August 30, 1991 
final rule for the revision made for discharges occurring in FY 1992 
(56 FR 43209), the September 1, 1992 final rule for the revisions made 
for discharges occurring in FY 1993 (57 FR 39753), and the September 1, 
1993 final rule for the revisions made for discharges occurring in FY 
1994 (58 FR 46278).)
    We are proposing a limited revision of the CC Exclusions List to 
take into account the changes that will be made in the ICD-9-CM 
diagnosis coding system effective October 1, 1994. (See section II.B.7, 
below, for a discussion of these changes.) These proposed changes are 
being made in accordance with the principles established when we 
created the CC Exclusions List in 1987.
    In addition, upon review of our current CC Exclusions List, we 
found that there are some diagnosis codes that do not exclude 
themselves as CCs. In the September 1, 1987 final notice, we noted that 
a very few codes were not excluded from themselves because they may 
signify the bilateral occurrence of a particular condition (for 
example, diagnosis code 730.02 (acute osteomyelitis of upper arm)) (52 
FR 33154). However, we found some diagnosis codes that do not meet this 
criterion. Therefore, we are proposing to add the following diagnosis 
codes to the CC Exclusions List as excluding themselves when they are 
secondary diagnoses:

710.0--Systemic lupus erythematous
710.1--Systemic sclerosis
710.3--Sicca syndrome
710.4--Dermatomyositis
710.8--Other specified diffuse diseases of connective tissue

    Based on a comment we received, we are also proposing to exclude 
diagnosis code 707.1 (Ulcer of lower limb, except decubitus) as a CC 
when the principal diagnosis is 440.23 (atherosclerosis of the 
extremities with ulceration). The commenter believes that this 
exclusion is similar to the current exclusion of 785.4 (Gangrene) when 
the principal diagnosis is 440.24 (Atherosclerosis of the extremities 
with gangrene), and we agree with the commenter's assessment.
    Finally, it was brought to our attention by another commenter that 
when a patient's principal diagnosis is complication of a transplant 
condition (diagnosis codes 996.71 and 996.8x), the diagnosis codes used 
to denote transplant status (V42.x) should not be considered CCs. Thus, 
for the following principal diagnoses, we are proposing to delete the 
indicated status code:
     For code 996.71 (Complications due to heart valve 
prosthesis) delete code V42.2 (Heart valve transplant influencing 
health status) as a CC.
     For code 996.80 (Complications of unspecified organ 
transplant) delete codes V42.0 (Kidney transplant influencing health 
status), V42.1 (Heart transplant influencing health status), V42.6 
(Lung transplant influencing health status), V42.7 (Liver transplant 
influencing health status), and V42.8 (Other specified organ or tissue 
transplant influencing health status) as CCs.
     For code 996.81 (Complications of kidney transplant) 
delete code V42.0 (Kidney transplant influencing health status) as a 
CC.
     For code 996.82 (Complications of liver transplant) delete 
code V42.7 (Liver transplant influencing health status)
     For code 996.83 (Complications of heart transplant) delete 
code V42.1 (Heart transplant influencing health status) as a CC.
     For code 996.84 (Complications of lung transplant) delete 
code V42.6 (Lung transplant influencing health status) as a CC.
     For code 996.86 (Complications of pancreas transplant) 
delete code V42.8 (Other specified organ or tissue transplant 
influencing health status) as a CC.
     For code 996.89 (Complications of other specified organ 
transplant) V42.8 (Other specified organ or tissue transplant 
influencing health status) as a CC.
    All of the changes discussed above have been added to Table 6f, 
Additions to the CC Exclusions List, in section V of the addendum to 
this proposed rule.
    Tables 6f and 6g in section V of the addendum to this proposed rule 
contain the proposed revisions to the CC Exclusions List that would be 
effective for discharges occurring on or after October 1, 1994. Each 
table shows the principal diagnoses with proposed changes to the 
excluded CCs. Each of these principal diagnoses is shown with an 
asterisk and the additions or deletions to the CC Exclusions List are 
provided in an indented column immediately following the affected 
principal diagnosis.
    CCs that are added to the list are in Table 6f--Additions to the CC 
Exclusions List. Beginning with discharges on or after October 1, 1994, 
the indented diagnoses will not be recognized by the GROUPER as valid 
CCs for the asterisked principal diagnosis.
    CCs that are deleted from the list are in Table 6g--Deletions from 
the CC Exclusions List. Beginning with discharges on or after October 
1, 1994, the indented diagnoses will be recognized by the GROUPER as 
valid CCs for the asterisked principal diagnosis.
    Copies of the original CC Exclusions List applicable to FY 1988 can 
be obtained from the National Technical Information Service (NTIS) of 
the Department of Commerce. It is available in hard copy for $84.00 and 
on microfiche for $20.50, plus $3.00 for shipping and handling. A 
request for the FY 1988 CC Exclusions List (which should include the 
identification accession number, (PB) 88-133970) should be made to the 
following address: National Technical Information Service; United 
States Department of Commerce; 5285 Port Royal Road, Springfield, 
Virginia 22161; or by calling (703) 487-4650.
    Users should be aware of the fact that all revisions to the CC 
Exclusions List (FYs 1989, 1990, 1991, 1992, 1993, and 1994) and those 
in Tables 6f and 6g of this document must be incorporated into the list 
purchased from NTIS in order to obtain the CC Exclusions List 
applicable for discharges occurring on or after October 1, 1994.
    Alternatively, the complete documentation of the GROUPER logic, 
including the current CC Exclusions List, is available from 3M/Health 
Information Systems (HIS), which, under contract with HCFA, is 
responsible for updating and maintaining the GROUPER program. The 
current DRG Definitions Manual, Version 11.0, is available for $195.00, 
which includes $15.00 for shipping and handling. Version 12.0 of this 
manual, which will include the changes proposed in this document as 
finalized in response to public comment, will be available in September 
1994 for $195.00. These manuals may be obtained by writing 3M/HIS at: 
100 Barnes Road; Wallingford, Connecticut 06492; or by calling (203) 
949-0303. Please specify the revision or revisions requested.
6. Review of Procedure Codes in DRGs 468, 476, and 477
    Each year, we review cases assigned to DRG 468 (Extensive OR 
Procedure Unrelated to Principal Diagnosis), DRG 476 (Prostatic OR 
procedure Unrelated to Principal Diagnosis), and DRG 477 (Nonextensive 
OR Procedure Unrelated to Principal Diagnosis) in order to determine 
whether procedures are properly assigned among these DRGs.
    DRGs 468, 476, and 477 are reserved for those cases in which none 
of the OR procedures performed is related to the principal diagnosis. 
These DRGs are intended to capture atypical cases, that is, those cases 
not occurring with sufficient frequency to represent a distinct, 
recognizable clinical group. DRG 476 is assigned to those discharges in 
which one or more of the following prostatic procedures are performed 
and are unrelated to the principal diagnosis:

60.0--Incision of prostate
60.12--Open biopsy of prostate
60.15--Biopsy of periprostatic tissue
60.18--Other diagnostic procedures on prostate and periprostatic tissue
60.2--Transurethral prostatectomy
60.61--Local excision of lesion of prostate
60.69--Prostatectomy NEC
60.81--Incision of periprostatic tissue
60.82--Excision of periprostatic tissue
60.93--Repair of prostate
60.94--Control of (postoperative) hemorrhage of prostate
60.95--Transurethral balloon dilation of the prostratic urethra
60.99--Other operations on prostate
    All remaining OR procedures are assigned to DRGs 468 and 477, with 
DRG 477 assigned to those discharges in which the only procedures 
performed are nonextensive procedures that are unrelated to the 
principal diagnosis. The original list of the ICD-9-CM procedure codes 
for the procedures we consider nonextensive procedures if performed 
with an unrelated principal diagnosis was published in Table 6C in 
section IV of the addendum to the September 30, 1988 final rule (53 FR 
38591). As part of the final rules published on September 4, 1990, 
August 30, 1991, September 1, 1992, and September 1, 1993, we moved 
several other procedures from DRG 468 to 477. (See 55 FR 36135, 56 FR 
43212, 57 FR 23625, and 58 FR 46279, respectively.)
    a. Adding Procedure Codes to MDCs. We annually conduct a review of 
procedures producing DRG 468 or 477 assignments on the basis of volume 
of cases in these DRGs with each procedure. Our medical consultants 
then identify those procedures occurring in conjunction with certain 
principal diagnoses with sufficient frequency to justify adding them to 
one of the surgical DRGs for the MDC in which the diagnosis falls. On 
the basis of this review, we are proposing the following DRG 
classification changes in order to reduce unnecessary assignment of 
cases to DRG 468 or 477.
     MDC 1 (Diseases and Disorders of the Nervous System)
    We have observed that surgical pacemaker procedures are being 
performed with increasing frequency for anatomical nerve problems 
associated with heart block. These diagnoses, diagnosis codes 337.0 
(Idiopathic peripheral autonomic neuropathy), 742.8 (Other specified 
anomalies of nervous system), and 742.9 (Unspecified anomaly of brain, 
spinal cord, and nervous system), are assigned to MDC 1, but the 
surgical pacemaker procedures are not. Consequently, when a pacemaker 
procedure is performed on a patient with one of these diagnoses, the 
case is assigned to DRG 468. Therefore, we propose to add the following 
procedure codes to DRGs 7 and 8 (Peripheral and Cranial Nerve and Other 
Nervous System Procedures):

37.74--Insertion or replacement of epicardial lead (electrode) into 
epicardium
37.75--Revision of lead (electrode)
37.76--Replacement of transvenous atrial and/or ventricular lead(s) 
(electrode)
37.77--Removal of lead(s) (electrode) without replacement
37.79--Revision or relocation of pacemaker pocket
37.80--Insertion of permanent pacemaker, initial or replacement, type 
of device not specified
37.85--Replacement of any type pacemaker device with single-chamber 
device, not specified as rate responsive
37.86--Replacement of any type pacemaker device with single-chamber 
device, rate responsive
37.87--Replacement of any type pacemaker device with dual-chamber 
device
37.89--Revision or removal of pacemaker device

    In addition, during our review of DRG 468 cases, we found that 
there are several hundred cases of lower limb amputation procedures 
with a principal diagnosis from MDC 1. Patients with diabetes often 
develop complications that require the performance of a lower limb 
amputation. Although the majority of the diagnosis codes for diabetes 
are assigned to MDC 10 (Endocrine, Nutritional and Metabolic Diseases 
and Disorders), cases with a principal diagnosis of diabetes with 
neurological manifestations (diagnosis codes 250.60, 250.61, 250.62 and 
250.63) are assigned to MDC 1. Therefore, we are proposing to move the 
following procedures to DRGs 7 and 8:

84.11--Amputation of toe
84.12--Amputation through foot
84.13--Disarticulation of ankle
84.14--Amputation of ankle through malleoli of tibia and fibula
84.15--Other amputation below knee
84.16--Disarticulation of knee
84.17--Amputation above knee
     MDC 5 (Diseases and Disorders of the Circulatory System)
    Closed endoscopic biopsy of lung (procedure code 33.27) and open 
biopsy of lung (procedure code 33.28), diagnostic tools for vascular 
tumors, are often performed on patients with a principal diagnosis of 
228.00 (Hemangioma of unspecified site) or 228.09 (Hemangioma of other 
sites). Although these principal diagnoses are assigned to MDC 5, the 
diagnostic procedures are not. Thus, if they are included together on 
the same claim, the case will be assigned to DRG 468. Therefore, we are 
proposing to assign procedure codes 33.27 and 33.28 to DRG 120 (Other 
Circulatory System OR Procedures) in MDC 5.
    In addition, we identified the following nonextensive OR procedures 
(that is, procedures assigned to DRG 477) as appropriate to move to MDC 
5:

40.11--Biopsy of lymph structure
40.19--Other diagnostic procedures on lymphatic structures
40.21--Excision of deep cervical lymph node
40.23--Excision of axillary lymph node
40.24--Excision of inguinal lymph node
40.29--Simple excision of other lymphatic structure
40.3--Regional lymph node excision

These procedures are commonly performed with a variety of diagnoses 
found in MDC 5 such as disorders of the peripheral vascular system 
(diagnosis codes 747.60 and 747.69) and peripheral angiopathy 
(diagnosis code 443.81), as well as a number of heart conditions 
including malignant neoplasm of the heart (diagnosis code 164.1), and 
coxsackie carditis, coxsackie pericarditis, coxsackie endocarditis, and 
coxsackie myocarditis (diagnosis codes 074.20, 074.21, 074.22, 074.23, 
respectively). We note that these commonly performed diagnostic 
procedures are assigned to virtually every other MDC because they are 
associated with many diagnoses. Therefore, we propose to move these 
procedures to DRG 120.
    We also note that hemangioma and anomalies of the peripheral 
vascular system may require open rectal biopsy (procedure code 48.25) 
or excision of the rectal lesion (procedure code 48.35) as part of 
their treatment. At the present time, neither of these procedure codes 
classify to MDC 5. Thus, we are proposing to move procedure codes 48.25 
and 48.35 to DRG 120.
     MDC 6 (Diseases and Disorders of the Digestive System)
    A total splenectomy (procedure code 41.5) may be performed on 
patients with a principal diagnosis of secondary malignant neoplasm of 
other digestive organs and spleen (diagnosis code 197.8). This 
diagnosis is included in MDC 6, but the procedure is not, resulting in 
the assignment of cases to DRG 468. Thus, we propose to add procedure 
code 41.5 to DRG 170 and 171 (Other Digestive System OR Procedures) in 
MDC 6.
    b. Reassignment of Procedures Among DRGs 468, 476, and 477. We also 
reviewed the list of procedures that produce assignments to each of DRG 
468, 476, and 477 to ascertain if any of those procedures should be 
moved to one of the other DRGs based on average charges and length of 
stay. Generally, we move only those procedures for which we have an 
adequate number of discharges to analyze the data. Based on our review 
this year, we are proposing to move a limited number of procedures.
    In reviewing the list of OR procedures that produce DRG 468 
assignments, we analyzed the average charge and length of stay data for 
cases assigned to that DRG to identify those procedures that are more 
similar to the discharges that currently group to either DRG 476 or 
477. We identified three procedures that are significantly less 
resource intensive than the other procedures assigned to DRG 468. 
Therefore, we are proposing to move the following procedures to the 
list of procedures that result in assignment to DRG 477:

24.5--Alveoloplasty
53.61--Incisional hernia repair with prosthesis
53.69--Repair of other hernia of anterior abdominal wall with 
prosthesis

    We conducted a similar analysis of the procedures that assign cases 
to DRG 477 to determine if any of those procedures might more 
appropriately be classified to DRG 468. Again, we analyzed charge and 
length of stay data to identify procedures that were more similar to 
discharges assigned to DRG 468 than to those classified in DRG 477. We 
did not identify any procedures in DRG 477 that should be assigned to 
DRG 468.
    All of the proposed reassignments of procedures in DRGs 468 and 477 
would be effective with discharges beginning on or after October 1, 
1994.
7. Changes to the ICD-9-CM Coding System
    As discussed above in section II.B.1. of this preamble, the ICD-9-
CM is a coding system that is used for the reporting of diagnoses and 
procedures performed on a patient. In September 1985, the ICD-9-CM 
Coordination and Maintenance Committee was formed. This is a Federal 
interdepartmental committee charged with the mission of maintaining and 
updating the ICD-9-CM. That mission includes approving coding changes, 
and developing errata, addenda, and other modifications to the ICD-9-CM 
to reflect newly developed procedures and technologies and newly 
identified diseases. The Committee is also responsible for promoting 
the use of Federal and non-Federal educational programs and other 
communication techniques with a view toward standardizing coding 
applications and upgrading the quality of the classification system.
    The Committee is co-chaired by the National Center for Health 
Statistics (NCHS) and HCFA. The NCHS has lead responsibility for the 
ICD-9-CM diagnosis codes included in Volume 1--Diseases: Tabular List 
and Volume 2--Diseases: Alphabetic Index, while HCFA has lead 
responsibility for the ICD-9-CM procedure codes included in Volume 3--
Procedures: Tabular List and Alphabetic Index.
    The Committee encourages participation in the above process by 
health-related organizations. In this regard, the Committee holds 
public meetings for discussion of educational issues and proposed 
coding changes. These meetings provide an opportunity for 
representatives of recognized organizations in the coding fields, such 
as the American Health Information Management Association (AHIMA) 
(formerly American Medical Record Association (AMRA)), the American 
Hospital Association (AHA), and various physician specialty groups as 
well as physicians, medical record administrators, health information 
management professionals, and other members of the public to contribute 
ideas on coding matters. After considering the opinions expressed at 
the public meetings and in writing, the Committee formulates 
recommendations, which then must be approved by the agencies.
    The Committee presented proposals for coding changes at public 
meetings held on May 6, August 5, and December 2, 1993, and finalized 
the coding changes after consideration of comments received at the 
meetings and in writing within 30 days following the December 1993 
meeting. The initial meeting for consideration of coding issues for 
implementation in FY 1996 will be held on May 5, 1994. Copies of the 
minutes of these meetings may be obtained by writing to one of the co-
chairpersons representing NCHS and HCFA. We encourage commenters to 
address suggestions on coding issues involving diagnosis codes to: Sue 
Meads, Co-Chairperson; ICD-9-CM Coordination and Maintenance Committee; 
NCHS; Rm. 9-58; 6525 Belcrest Road; Hyattsville, Maryland 20782.
    Questions and comments concerning the procedure codes should be 
addressed to: Patricia E. Brooks, Co-Chairperson; ICD-9-CM Coordination 
and Maintenance Committee; HCFA, Office of Coverage and Eligibility 
Policy; Rm. 401 East High Rise Building; 6325 Security Boulevard; 
Baltimore, Maryland 21207.
    The ICD-9-CM code changes that have been approved will become 
effective October 1, 1994. The new ICD-9-CM codes are listed, along 
with their proposed DRG classifications, in Tables 6a and 6b (New 
Diagnosis Codes and New Procedure Codes, respectively) in section IV of 
the addendum to this proposed rule. As we stated above, the code 
numbers and their titles were presented for public comment in the ICD-
9-CM Coordination and Maintenance Committee meetings. Both oral and 
written comments were considered before the codes were approved. 
Therefore, we are soliciting comments only on the proposed DRG 
classification.
    Further, the Committee has approved the expansion of certain ICD-9-
CM codes to require an additional digit for valid code assignment. 
Diagnosis codes that have been replaced by expanded codes, other codes, 
or have been deleted are in Table 6c (Invalid Diagnosis Codes). The 
invalid diagnosis codes will not be recognized by the GROUPER beginning 
with discharges occurring on or after October 1, 1994. The 
corresponding new or expanded codes are included in Tables 6a and 6b. 
The committee did not delete any procedure codes effective for October 
1, 1994. Revisions to diagnosis and procedure code titles are in Tables 
6d (Revised Diagnosis Code Titles) and 6e (Revised Procedure Code 
Titles), which also include the proposed DRG assignments for these 
revised codes.
8. DRG Refinements
    For several years, we have been analyzing major refinements to the 
DRG classification system to compensate hospitals more equitably for 
treating severely ill Medicare patients. These refinements, generally 
referred to as severity of illness adjustments, would create DRGs 
specifically for hospital discharges involving very ill patients who 
consume far more resources than do other patients classified to the 
same DRGs in the current system. This approach has been taken by 
various other groups in refining the DRG system, most notably the 
research done for Yale, the changes incorporated by the State of New 
York into its all patient (AP) DRG system, and the all-patient refined 
(APR) DRGs, which are a joint effort of 3M/HIS and the National 
Association of Children's Hospitals and Related Institutions.
    Our preliminary work on these refinements is finished, and we have 
prepared a paper available to the public for comment that describes our 
proposed severity DRG classification system as well as the analysis 
upon which our proposal was formulated. Briefly, our approach was to 
develop a list of secondary diagnoses that have a major effect on the 
resources used by hospitals in treating patients across DRGs and to 
evaluate the need to create DRGs for major CCs on a DRG-by-DRG basis. 
The following is a description of our methodology:
     Our first step, similar to the process used by Yale, was 
to collapse the current paired DRG groupings (DRGs with and without 
CCs). We also evaluated the current DRGs to determine if any of them 
could be combined. Based on this analysis, we eliminated 24 DRGs.
     Our next step was to evaluate individual diagnosis codes 
to determine if the presence of the diagnosis as a secondary condition 
resulted in increased resource use for hospitals across all DRGs. We 
analyzed how the presence of the secondary diagnosis affected resource 
use compared to other secondary diagnoses that have been classified as 
non-CC, CC, or major CC.
     Although our final decisions of the CC designation of a 
secondary diagnosis were primarily data driven, we did make some 
designations based on other factors. Specifically, regardless of the 
data, we did not designate a diagnosis as major if it is indicative of 
poor quality of care or is prone to hospital upcoding.
     After finalizing the classification of secondary 
diagnoses, we evaluated which collapsed DRGs should be split on the 
basis of the presence of a major CC, other CCs, or both. We developed 
criteria for this evaluation that allow a DRG to split only if the 
volume and difference in resource use is significantly different from 
the remainder of the cases in the DRG and there is a significant 
reduction in variance. The collapsed DRGs can be split into three 
variations:

--DRG With CC or Major CC
--DRG Without CC
--DRG With Major CC
--DRG Without Major CC
--DRG With Major CC
--DRG With CC
--DRG Without CC

There are 120 DRGs that do not split at all. This final step resulted 
in the creation of 652 DRGs compared to the 491 DRGs we currently use.
    The paper we have prepared includes a listing of the revised DRGs 
as well as the relative weights that would have been assigned to the 
DRGs using the FY 1992 MedPAR data and a list of every diagnosis code 
in effect in FY 1993 with its current and proposed CC assignment (non-
CC, CC, or major CC). In order to begin consultation with the hospital 
industry and other interested organizations before formally proposing 
our revised system, we will be distributing the paper to many hospital-
related associations and organizations for their comment. In addition, 
requests for the DRG severity refinement paper may be made to the 
following address: Division of Hospital Payment Policy, 1-H-1 East Low 
Rise, 6325 Security Boulevard, Baltimore, Maryland 21207, Attn: Nancy 
Edwards; or by calling (410) 966-4532. Comments are due to HCFA by 
September 30, 1994.
    Similar to our usual practice for proposed DRG changes to the 
prospective payment system, we are making available to the public an FY 
1992 Expanded Modified MedPAR File for Severity that contains the 
discharge records we used to calculate the severity DRG relative 
weights. Requests for this file can be made by following the 
instructions set forth in section VIII.B of this preamble (Requests for 
Data from the Public). Also available are Severity versions of the HCFA 
Medicare Case-Mix Index File, Table 5 DRG, and the AOR/BOR File.
    Our plan is to incorporate comments and suggestions we receive and 
to consider proposing the complete revised DRG system as part of the FY 
1996 prospective payment system proposed rule, which will be published 
in the spring of 1995. However, as the final rule published on 
September 1, 1992 (57 FR 39761) indicates, we would not propose to make 
significant changes to the DRG classification system unless we are able 
either to improve our ability to predict coding changes by validating 
in advance the impact that potential DRG changes may have on coding 
behavior, or to make methodological changes to prevent building the 
inflationary effects of the coding changes into future program 
payments.
    Besides the mandate of section 1886(d)(4)(C)(iii) of the Act, which 
provides that aggregate payments may not be affected by DRG 
reclassification and recalibration changes, we do not believe it is 
prudent policy to make changes for which we cannot predict the effect 
on the case-mix index and, thus, payments. Our goal is to refine our 
methodology so that we can fulfill, in the most appropriate manner, 
both the statutory requirement to make appropriate DRG classification 
changes and to recalibrate DRG relative weights (as mandated by section 
1886(d)(4)(C) of the Act) as well as to make DRG changes in a budget 
neutral manner.
    One approach to this problem would be to maintain the average case 
weight at 1.0 after recalibration, thereby eliminating the process of 
normalization. In other words, after recalibration, we would not scale 
the new relative weights upward to carry forward the cumulative effects 
of past case-mix increases. We would, instead, make an adjustment or 
include in the annual update factor a specific allowance for any real 
case-mix change that occurred during the previous year. This is a 
relatively simple and straightforward system for preventing the effects 
of year-to-year increase in the case-mix index from accumulating in the 
DRG weights.
    In addition to the severity changes, we also intend to improve the 
classification and relative weights of the DRGs that apply to newborns, 
children, and maternity patients. The Medicare population does not 
include many of these individuals. The original DRG classification 
system was developed from analysis of claims data representative of the 
total inpatient population. When we calculated the original Medicare 
weights for the DRGs to which newborn, children and maternity patients 
are classified, we used non-MedPAR discharge records from Maryland and 
Michigan hospitals because there were either no MedPAR cases or too few 
cases assigned to these DRGs to provide a reasonably precise estimate 
of the average cost of care. (See the September 1, 1983 prospective 
payment final rule with comment period (48 FR 39768).) Since that time, 
because of the lack of MedPAR data, these low-volume DRGs have not been 
analyzed and refined, and the relative weights assigned to them may no 
longer be entirely reflective of the resources needed to treat the 
patients. We again intend to rely on data bases outside the MedPAR file 
to supplement our data.

C. Recalibration of DRG Weights

    We are proposing to use the same basic methodology for the FY 1995 
recalibration as we did for FY 1994. (See the September 1, 1993 final 
rule (58 FR 46290).) That is, we would recalibrate the weights based on 
charge data for Medicare discharges. However, we would use the most 
current charge information available, the FY 1993 MedPAR file, rather 
than the FY 1992 MedPAR file. The MedPAR file is based on fully-coded 
diagnostic and surgical procedure data for all Medicare inpatient 
hospital bills.
    The proposed recalibrated DRG relative weights are constructed from 
FY 1993 MedPAR data, received by HCFA through December 1993, from all 
hospitals subject to the prospective payment system and short-term 
acute care hospitals in waiver States. The FY 1993 MedPAR file includes 
data for approximately 10.5 million Medicare discharges.
    The methodology used to calculate the proposed DRG relative weights 
from the FY 1993 MedPAR file is as follows:
     To the extent possible, all the claims were regrouped 
using the proposed DRG classification revisions discussed above in 
section II.B of this preamble. As noted in section II.B.4, due to the 
unavailability of revised GROUPER software, we simulate most major 
classification changes to approximate the placement of cases under the 
proposed reclassification. However, there are some changes that cannot 
be modeled.
     Charges were standardized to remove the effects of 
differences in area wage levels, indirect medical education costs, 
disproportionate share payments, and, for hospitals in Alaska and 
Hawaii, the applicable cost-of-living adjustment.
     The average standardized charge per DRG was calculated by 
summing the standardized charges for all cases in the DRG and dividing 
that amount by the number of cases classified in the DRG.
     We then eliminated statistical outliers using the same 
criterion as was used in computing the current weights. That is, all 
cases outside of 3.0 standard deviations from the mean of the log 
distribution of charges per case for each DRG were eliminated.
     The average charge for each DRG was then recomputed 
(excluding the statistical outliers) and divided by the national 
average standardized charge per case to determine the relative weight.
     We established the relative weight for heart transplants 
(DRG 103) in a manner consistent with the methodology for all other 
DRGs except that the heart transplant cases that were used to establish 
the weight were limited to those Medicare-approved heart transplant 
centers that have cases in the FY 1993 MedPAR file. Similarly, we 
limited the liver transplant cases that were used to establish the 
weight for DRG 480 (Liver Transplant) to those hospitals that are 
Medicare-approved liver transplant centers.
     Acquisition costs for kidney, heart, and liver transplants 
continue to be paid on a reasonable cost basis. Unlike other excluded 
costs, the acquisition costs are concentrated in specific DRGs (DRG 302 
(Kidney Transplant); DRG 103 (Heart Transplant); and DRG 480 (Liver 
Transplant)). Because these costs are paid separately from the 
prospective payment rate, it is necessary to make an adjustment to 
prevent the relative weights for these DRGs from including the effect 
of the acquisition costs. Therefore, we subtracted the acquisition 
charges from the total charges on each transplant bill that showed 
acquisition charges before computing the average charge for the DRG and 
before eliminating statistical outliers.
    When we recalibrated the DRG weights for previous years, we set a 
threshold of 10 cases as the minimum number of cases required to 
compute a reasonable weight. We propose to use that same case threshold 
in recalibrating the DRG weights for FY 1995. Using the FY 1993 MedPAR 
data set, there are 35 DRGs that contain fewer than 10 cases. We 
computed the weight for the 35 low-volume DRGs by adjusting the 
original weights of these DRGs by the percentage change in the average 
weight of the cases in the remaining DRGs.
    The weights developed according to the methodology described above, 
using the proposed DRG classification changes, result in an average 
case weight that is different from the average case weight before 
recalibration. Therefore, the new weights are normalized by an 
adjustment factor, so that the average case weight after recalibration 
is equal to the average case weight before recalibration. This 
adjustment is intended to ensure that recalibration by itself neither 
increases nor decreases total payments under the prospective payment 
system.
    Section 1886(d)(4)(C)(iii) of the Act requires that beginning with 
FY 1991, reclassification and recalibration changes be made in a manner 
that assures that the aggregate payments are neither greater than nor 
less than the aggregate payments that would have been made without the 
changes. Although normalization is intended to achieve this effect, 
equating the average case weight after recalibration to the average 
case weight before recalibration does not necessarily achieve budget 
neutrality with respect to aggregate payments to hospitals because 
payment to hospitals is affected by factors other than average case 
weight. Therefore, as discussed in section II.A.4.b. of the Addendum to 
this proposed rule, we are proposing to make a budget neutrality 
adjustment to assure the requirement of section 1886(d)(4)(C)(iii) of 
the Act is met.

III. Proposed Changes to the Hospital Wage Index and Possible 
Refinements to Labor Market Areas

A. Background

    Under the Medicare prospective payment system, different payment 
rates are calculated for hospitals located in rural, urban, and large 
urban areas. For purposes of the standardized payment amount, section 
1886(d)(2)(D) of the Social Security Act requires that we use 
Metropolitan Statistical Areas (MSAs) as defined by the Office of 
Management and Budget (OMB) to determine whether hospitals are located 
in rural, urban or large urban areas (areas with a population over 1 
million). However, section 1886(d)(3)(A) of the Act provides for the 
elimination of separate urban and rural standardized payment amounts 
beginning in FY 1995. This change is discussed below in section IV.C. 
of this proposed rule.
    Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary shall adjust the standardized amounts ``for area differences 
in hospital wage levels by a factor (established by the Secretary) 
reflecting the relative hospital wage level in the geographic area of 
the hospital compared to the national average hospital wage level.'' In 
accordance with the broad discretion conferred by this provision, we 
currently define hospital labor market areas based on the definitions 
of MSAs issued by OMB. Additionally, as discussed below, we adjust the 
wage index to take into account the geographic reclassification of 
hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of 
the Act.
    Section 1886(d)(3)(E) of the Act also requires that the wage index 
be updated annually beginning October 1, 1993. This section further 
provides that the Secretary base the update on a survey of wages and 
wage-related costs of short-term acute care hospitals. The survey 
should measure, to the extent feasible, the earnings and paid hours of 
employment by occupational category and must exclude data with respect 
to the wages and wage-related costs incurred in furnishing skilled 
nursing services.
    For determining prospective payments to hospitals in FY 1994, the 
wage index is based on the data collected from the Medicare cost 
reports submitted by short-term acute care hospitals for cost reporting 
periods beginning in FY 1990 (that is, cost reporting periods beginning 
on or after October 1, 1989 and before October 1, 1990). The current 
wage index includes wages and salaries paid by a hospital, home office 
salaries, fringe benefits, and certain contract labor costs and hours. 
The current computation for the wage index excludes salaries and wages 
associated with non-hospital type services, such as skilled nursing 
facility services, home health agency services, or other subprovider 
components that are not subject to the prospective payment system.
    As discussed in detail below, we are proposing to use updated wage 
data to construct the wage index as required by section 1886(d)(3)(E) 
of the Act. The FY 1995 wage index would be based on data for hospital 
cost reporting periods beginning on or after October 1, 1990 and before 
October 1, 1991 (FY 1991).

B. FY 1995 Wage Index Update

    We propose to base the FY 1995 wage index, effective for hospital 
discharges occurring on or after October 1, 1994 and before October 1, 
1995, upon the data collected from the Medicare cost report (Worksheet 
S-3, Part II) submitted by hospitals for cost reporting periods 
beginning in FY 1991.
    We propose to use all of the categories of data collected from 
Worksheet S-3, Part II. Therefore, the proposed FY 1995 wage index 
reflects the following:
     Total short-term acute care hospital salaries and hours.
     Home office costs and hours.
     Fringe benefits associated with hospital and home office 
salaries.
     Direct patient care related contract labor cost and hours.
     The exclusion of salaries and hours for non-hospital type 
services such as skilled nursing facility services, home health 
services, or other sub-provider components that are not subject to the 
prospective payment system.
1. Verification of Wage Data from the Medicare Cost Report
    The data for the proposed FY 1995 wage index was obtained from 
Worksheet S-3, Part II, of the HCFA-2552 submitted by short-term acute 
care hospitals for cost reporting periods beginning during FY 1991. The 
wage data are reported electronically to HCFA through the Hospital Cost 
Report Information System (HCRIS). Because of substantial deficiencies 
in the initial data reported by hospitals on the cost report (including 
missing data items such as excluded hours and total paid hours), we 
initiated an intensive review of the wage data and made numerous edits 
to ensure quality and accuracy. Medicare intermediaries were instructed 
to transmit any revisions through HCRIS by early January 1994.
    We subjected the revised cost report data to several edit checks. 
Of the 5,294 providers in the data base, over 1,400 providers had data 
elements that failed an edit; 53 of these involved mathematical errors 
and have been resolved.
The other edits involved data that appeared unusual and had to be 
verified by the intermediary. Only 74 providers had data elements that 
were unresolved as of March 14, 1994. Most of the unresolved data 
elements fall outside established edit parameters and require 
verification by the intermediary. None of the unresolved data elements 
failed critical edits (that is, edits indicating serious data errors 
that affect the wage index computation).
    The wage file used to construct the proposed wage index includes 
data obtained in late January 1994 from the HCRIS database and 
subsequent changes we received from intermediaries through March 14, 
1994. We have instructed the intermediaries to complete their 
verification of questionable data elements and to transmit any changes 
to the wage data, via HCRIS, no later than June 15, 1994. We expect 
that all outstanding data elements will be resolved by that date and 
that we will be able to reflect the corrected data in the final rule.
    In the past, the hospital wage index data file was not available to 
the public until mid-May. However, to allow hospitals more time to 
evaluate the wage data used to construct the proposed hospital wage 
index, on March 16, 1994, we made available to the public a diskette 
containing the raw hospital wage data that were used to construct the 
proposed FY 1995 wage index. We advised State and national hospital 
groups of the availability of the data. We also instructed all fiscal 
intermediaries to inform the prospective payment hospitals they service 
that we would not be sending out hospital-specific wage data as we had 
for the proposed FY 1994 wage index, but that we would make the FY 1991 
data available on a diskette. The fiscal intermediaries were instructed 
to advise hospitals of the availability of the data either through 
their representative hospital organizations or directly from HCFA using 
order forms provided to them. Additional details on the cost and 
ordering of this file will be found below in section VIII. B. of this 
proposed rule, Requests for Data from the Public.
    In addition, we note that Table 3c in the Addendum to this proposed 
rule contains each hospital's inflated average hourly wage used to 
construct the wage index values. By backing out the applicable 
inflation factors (set forth below in section III.B.3.), a hospital can 
determine its uninflated average hourly wage as reflected in the 
proposed wage index. This table will also be included in the final 
rule. If a hospital believes, based on its review of the data contained 
in Table 3c, that its average hourly wage is inconsistent with the data 
submitted on Worksheet S-3, the hospital should contact its 
intermediary.
2. Requests for Wage Data Corrections
    As noted above we will use cost report data from FY 1991 (that is, 
cost reporting periods beginning on or after October 1, 1990 and before 
October 1, 1991) for the update to the wage index. As such, we believe 
hospitals have had ample time to ensure the accuracy of their FY 1991 
wage data. Moreover, the ultimate responsibility for accurately 
completing the cost report rests with the hospital, which must attest 
to the accuracy of the data at the time the cost report is filed. 
However, if a hospital believes that its FY 1991 wage data have been 
incorrectly reported, the hospital must submit corrections along with 
complete supporting documentation to its intermediary in time to allow 
for review, verification and transmission of the data before the 
development of the final wage index. To allow sufficient time to 
process any changes, a hospital must submit requests for corrections to 
its fiscal intermediary by May 15, 1994. The request should include all 
documentation necessary to support the requested change. To be 
reflected in the final wage index, any wage data corrections must be 
reviewed by the intermediary and transmitted to HCFA via HCRIS on or 
before June 15, 1994.
    This deadline is necessary to allow sufficient time to download and 
edit the data so that the final wage index calculation can be completed 
for development of the final prospective payment rates to be published 
by September 1, 1994. We cannot guarantee that corrections transmitted 
to HCFA after June 15, 1994, will be reflected in the final wage index. 
Therefore, we suggest that hospitals wishing to submit corrected data 
do so as soon as possible and follow up with their intermediaries to 
ensure inclusion of the corrected data in the final FY 1995 wage index.
    After reviewing requested changes submitted by hospitals, 
intermediaries will transmit any revised cost reports to HCRIS and will 
forward to the hospitals a copy of the revised Worksheet S-3, Part II. 
If requested changes are not accepted, fiscal intermediaries will 
notify hospitals in writing of reasons why the changes were not 
accepted. This procedure will ensure that hospitals have an opportunity 
to verify the data that will be used to construct their wage index 
values. We believe that fiscal intermediaries are in the best position 
to make evaluations regarding the appropriateness of a particular cost 
and whether it should be included in the wage index data. However, in 
the event that a hospital disagrees with the intermediary's resolution 
of a requested change, the hospital may contact HCFA to attempt to 
resolve the dispute.
    We have created the above-described process to resolve all 
substantive wage data correction disputes before we finalize the raw 
wage data for the FY 1995 payment rates, Accordingly, hospitals that do 
not meet the procedural deadlines described above will not be afforded 
a later opportunity to submit wage corrections or to dispute the 
intermediary's decision with respect to requested changes. We note that 
we intend to make a diskette available in mid-August that will contain 
the finalized raw wage data that will be used to construct the wage 
index values in the final rule. As with the diskette made available in 
March 1994, HCFA will make the August diskette available to hospital 
associations and the public. This August diskette, however, is being 
made available only for the limited purpose of identifying any 
potential errors made by HCFA or the intermediary in the entry of the 
finalized wage data, not for the initiation of new wage data correction 
requests. Hospitals are encouraged to review their hospital wage data 
promptly after the release of the second diskette.
    If after reviewing the August diskette, a hospital believes that 
its wage data is incorrect due to a fiscal intermediary or HCFA error, 
it should send a letter to both its fiscal intermediary and HCFA. The 
letters to the intermediary and HCFA should outline why the hospital 
believes an error exists. These requests must be received by HCFA no 
later than September 23. Requests should be sent to: Charles R. Booth, 
Director; Office of Payment Policy; 181 East High Rise; 6325 Security 
Boulevard; Baltimore, Maryland 21207. The intermediary will review 
requests upon receipt and, if it is determined that an intermediary or 
HCFA error exists, the fiscal intermediary will notify HCFA 
immediately.
    As indicated above, after mid-August, we will make changes to the 
hospital wage data only in those very limited situations involving an 
error by the intermediary or HCFA that the hospital could not have 
known about before its review of the August diskette. Specifically, 
neither the intermediary nor HCFA will accept the following types of 
requests in conjunction with this mid-August process: requests for wage 
data correction that were submitted too late to be included in the data 
transmitted to the HCRIS system on or before June 15, 1994, requests 
for correction of errors made by the hospital not identified during the 
hospital's review of the March 1994 data, or requests to revisit 
factual determinations or policy interpretations made by the 
intermediary or HCFA during the wage data correction process. Verified 
corrections to the wage index made as a result of an intermediary or 
HCFA error received timely (that is, by September 23, 1994) will be 
effective October 1, 1994.
    We continue to believe, as outlined in the final rule published 
September 1, 1992 (57 FR 39765), that midyear corrections should not be 
made in most cases. We believe the wage data correction process 
described above provides hospitals with sufficient opportunity to bring 
errors made during the preparation of Worksheet S-3 to the 
intermediary's attention. Moreover, because hospitals will have access 
to the raw wage data in mid-August, they will have the opportunity to 
detect any ministerial data tabulation errors made by the intermediary 
or HCFA before the implementation of the prospective payment rates on 
October 1. We believe that if hospitals avail themselves of this 
opportunity, the wage index implemented on October 1 should be free of 
such errors. Nevertheless, in the unlikely event that such errors 
should occur, we do not believe a hospital should be disadvantaged 
because actions taken by its intermediary or HCFA in the tabulation of 
its data resulted in an error of which the hospital could not have been 
aware. Since the current regulations do not provide for midyear 
corrections in these situations, we are proposing to revise the 
regulations to specify that the Secretary retains the right to make 
midyear changes to the wage index under very limited circumstances. 
Again, we believe that it is appropriate to reserve the right to make 
midyear changes to the wage index in those limited circumstances where 
the hospital can show that an error was made, and the hospital could 
not have known about, or sought to correct, the error by September 23, 
1994.
    Specifically, we propose to revise Sec. 412.63(s)(2) to provide 
that the Secretary may make midyear corrections to the wage index only 
in those limited circumstances where a hospital can show: (1) That the 
intermediary or HCFA made an error in tabulating its data, and (2) that 
the hospital could not have known about the error, or did not have an 
opportunity to correct the error, by September 23, 1994. As indicated 
earlier, since a hospital will have the opportunity to verify its data 
and the intermediary will notify the hospital of any changes, we do not 
foresee any specific circumstances under which midyear corrections 
would be made. However, should a midyear correction be necessary, the 
wage index change for the affected area will be made prospectively from 
the date the correction is made. If midyear corrections are made, we 
will evaluate their impact to determine if a budget neutrality 
adjustment to the program payments should be made at the beginning of 
the following fiscal year in accordance with Sec. 412.63(s)(4).
3. Computation of the Wage Index
    As noted above, we are proposing to base the FY 1995 wage index on 
wage data reported on the FY 1991 cost report. The wage index would be 
based on data from 5,294 hospitals paid under the prospective payment 
system and short-term acute care hospitals in waiver States. The method 
used to compute the proposed wage index is as follows:
    Step 1--We gathered data from each of the non-Federal short-term 
acute care hospitals for which data were reported on the Worksheet S-3, 
Part II of the Medicare cost report for the hospital's cost reporting 
periods beginning on or after October 1, 1990, and before October 1, 
1991. Each hospital was assigned to its appropriate urban or rural area 
prior to any reclassifications under sections 1886(d)(8) or 1886(d)(10) 
of the Act. In addition, we included data from a few hospitals that had 
cost reporting periods beginning in September 1990 and had reported a 
cost reporting period exceeding 52 weeks. The data were included 
because no other data from these hospitals would be available for the 
cost reporting period described above, and particular labor market 
areas might be affected due to the omission of these hospitals. 
However, we generally describe this wage data as FY 1991 data.
    Step 2--For each hospital, we subtracted the excluded salaries 
(that is, direct salaries attributable to skilled nursing facility 
services, home health services, and other sub-provider components not 
subject to the prospective payment system) from gross hospital salaries 
to determine net hospital salaries. To the net hospital salaries, we 
added hospital contract labor costs, hospital fringe benefits, and any 
home office salaries and fringe benefits reported by the hospital to 
determine total salaries plus fringe benefits.
    Step 3--For each hospital, we inflated or deflated, as appropriate, 
the total salaries plus fringe benefits resulting from Step 2 to a 
common period to determine total adjusted salaries. To make the wage 
inflation adjustment, we used the percentage change in average hourly 
earnings for each 30-day increment from October 14, 1990 through 
September 15, 1992, for hospital industry workers from S.I.C. 806, 
Bureau of Labor Statistics Employment and Earnings Bulletin. The annual 
inflation rates used were 5.6 percent for FY 1990 and FY 1991 and 4.8 
percent for FY 1992. The inflation factors used to inflate the 
hospital's data were based on the midpoint of the cost reporting period 
as indicated below.

                   Midpoint of Cost Reporting Period                    
------------------------------------------------------------------------
                                                              Adjustment
                     After                          Before      factor  
------------------------------------------------------------------------
10/14/90........................................    11/15/90    1.071953
11/14/90........................................    12/15/90    1.067097
12/14/90........................................    01/15/91    1.062262
01/14/91........................................    02/15/91    1.057450
02/14/91........................................    03/15/91    1.052659
03/14/91........................................    04/15/91    1.047890
04/14/91........................................    05/15/91    1.043143
05/14/91........................................    06/15/91    1.038417
06/14/91........................................    07/15/91    1.033713
07/14/91........................................    08/15/91    1.029030
08/14/91........................................    09/15/91    1.024368
09/14/91........................................    10/15/91    1.019727
10/14/91........................................    11/15/91    1.015751
11/14/91........................................    12/15/91    1.011790
12/14/91........................................    01/15/92    1.007845
01/14/92........................................    02/15/92    1.003915
02/14/92........................................    03/15/92    1.000000
03/14/92........................................    04/15/92    0.996101
04/14/92........................................    05/15/92    0.992217
05/14/92........................................    06/15/92    0.988348
06/14/92........................................    07/15/92    0.984494
07/14/92........................................    08/15/92    0.980655
08/14/92........................................    09/15/92    0.976831
------------------------------------------------------------------------

For example, the midpoint of a cost reporting period beginning January 
1, 1991 and ending December 31, 1991 is June 30, 1991. An inflation 
adjustment factor of 1.033713 would be applied to the wages of a 
hospital with such a cost reporting period. In addition, for the data 
for any cost reporting period that began in FY 1991 and covers a period 
of less than 360 days or greater than 370 days, we annualized the data 
to reflect a 1-year cost report. Annualization is accomplished by 
dividing the data by the number of days in the cost report and then 
multiplying the results by 365.
    Step 4--For each hospital, we subtracted the reported excluded 
hours from the gross hospital hours to determine net hospital hours. We 
increased the net hours by the addition of any reported contract labor 
hours and home office hours to determine total hours.
    Step 5--As part of our editing process, we deleted data for 69 
hospitals that are no longer participating in the Medicare program or 
that are in bankruptcy status, and for which we lacked sufficient 
documentation to verify data that failed edits. We retained the data 
for other hospitals that are no longer participating in the Medicare 
program because these hospitals contributed to the relative wage levels 
in their labor market areas during their FY 1991 cost reporting period.
    Step 6--Within each urban or rural labor market area we added the 
total adjusted salaries plus fringe benefits obtained in Step 3 for all 
hospitals in that area to determine the total adjusted salaries plus 
fringe benefits for the labor market area.
    Step 7--We divided the total adjusted salaries plus fringe benefits 
obtained in Step 6 by the sum of the total hours (from Step 4) for all 
hospitals in each labor market area to determine an average hourly wage 
for the area.
    Step 8--We added the total adjusted salaries plus fringe benefits 
obtained in Step 3 for all hospitals in the nation and then divided the 
sum by the national sum of total hours from Step 4 to arrive at a 
national average hourly wage. Using the data as described above, the 
national average hourly wage is $18.1808.
    Step 9--For each urban or rural labor market area, we calculated 
the hospital wage index value by dividing the area average hourly wage 
obtained in Step 7 by the national average hourly wage computed in Step 
8.

C. Changes In the Reporting of Hospital Wage Index Data

    Currently, the data used to develop the wage index are submitted by 
hospitals on the Worksheet S-3, Part II of the Medicare cost report. We 
developed this worksheet as part of the FY 1990 cost reports, and we 
used the worksheet to calculate the wage index for FY 1994. The 
worksheet has been evaluated by HCFA and industry representatives to 
ensure that this data collection mechanism captures relative wage costs 
as accurately as possible and to determine whether any refinements are 
appropriate. The Medicare Technical Advisory Group (MTAG) established a 
task force to study and recommend changes to the cost reporting form 
used to collect wage index data. The task force was comprised of 
hospital, intermediary, and HCFA representatives. The MTAG task force 
recommended, and we are proposing, three major changes to the Worksheet 
S-3, Part II; the provider cost report questionnaire (HCFA 339); and 
accompanying instructions as discussed below. We note that the proposed 
changes outlined below are effective for cost reporting periods 
beginning on or after October 1, 1994. Therefore the proposed changes 
will not affect the proposed FY 1995 wage index, which is based on FY 
1991 wage data.
1. The Elimination of Part A Physicians' and CRNA Salaries
    Currently, a hospital that directly employs and pays the salary of 
a physician can include the Part A portion of the physician's salary in 
total salaries reported on Worksheet S-3, Part II. (The Part B portion 
of physician salaries has always been excluded from the wage index.) 
However, if a hospital contracts for physician services, it is not 
permitted to include the Part A physician services as contract labor 
because we consider Part A physician services to be administrative, not 
direct patient-care related (to be included in the computation of the 
wage index, contract labor must be directly related to patient care).
    Not all hospitals directly employ physicians. There are currently 
five States in which State laws specifically restrict hospitals from 
directly hiring physicians. Hospitals in these States are forced to 
contract out for physicians. The inability of those hospitals that 
contract for physician services to include the Part A portion of the 
services as contract labor has been perceived as inequitable. In States 
where hospitals may directly employ physicians, the hospitals may 
include some of these characteristically high wages in the wage data, 
while in States where hospitals must contract for their physician 
services, these contract wages cannot be included in their wage data.
    We agree with the MTAG task force recommendation and are proposing 
to exclude all Part A physician costs on the Worksheet S-3, Part II, 
regardless of whether the physician is a hospital employee or 
contractor. For purposes of this exclusion, physician's salaries are 
defined as salaries applicable to positions that require a licensed 
physician, such as a medical director of a department. Salaries for 
physicians employed in other positions, such as hospital administrator, 
that do not require a physician would not be excluded.
    Since this change would apply equally to hospitals that are 
permitted to employ physicians and to those that must contract for 
physician services, we believe this proposal will promote payment 
equity and provide more uniformity in the wage data across areas. This 
action should not require any additional reporting burden since these 
Part A physician salaries already are reported on the cost report 
(Worksheet A-8-2).
    We believe that this proposal to eliminate Part A physicians' 
salaries is more appropriate than the alternative of allowing all Part 
A physician costs (whether salaried or under contract) for three 
reasons. First, physician costs are not driven by normal labor market 
situations and, in many cases, hospitals must hire physicians from 
outside of their recruiting areas. Second, many hospitals have 
indicated difficulty in accurately determining the hours for the 
physicians attributable to Part A services, especially for those under 
contract.
Third, we have found that some hospitals that employ physicians are not 
appropriately eliminating Part B physician salaries from the total 
salaries reported for the wage index as required in the cost reporting 
instructions. Accordingly, we are proposing that hospitals exclude all 
physicians' salaries (both Part A and Part B related) from the wage 
data reported on the Medicare cost report. In addition, we are 
proposing that the salaries for teaching physicians also be excluded, 
since payment for these services does not fall under the prospective 
payment system.
    Regarding Part A CRNA (certified registered nurse anesthetist) 
costs, we propose to require hospitals to exclude these salaries from 
the wage data reported on the cost report. These Part A services are 
currently paid on a ``pass-through'' basis, outside the prospective 
payment system. Therefore, we believe it is appropriate to exclude 
these costs from the wage index. Moreover, this Part A pass-through 
provision is applicable to a limited number of hospitals (small rural 
hospitals). All other hospitals are paid for CRNA services under Part B 
of the Medicare program. Therefore, in order to ensure consistency 
across areas, we believe that no CRNA costs should be reflected in the 
wage index computation. CRNA services are generally excluded from the 
wage index as Part B services. Since the Part A portion was granted as 
a pass through for certain rural hospitals, it is currently included in 
wage index.
    We note that these changes are effective for cost reporting periods 
beginning on or after October 1, 1994 and will not affect the current 
reporting of physicians and CRNA salaries.
2. Management Contracts
    The second major proposed change concerns the inclusion of certain 
management contracts in the hospital wage index data. Before FY 1994, 
the wage index did not include any costs associated with contract 
services. However, many hospitals indicated that they were 
inappropriately disadvantaged because they were forced to contract out 
for nurses and technicians due to shortages of these services in their 
areas. To alleviate this problem, we revised the cost report to collect 
the data associated with any direct patient care service contract (that 
is, nursing, therapeutic, etc.). We specifically excluded any Part B 
services, Part A physician services, management contracts, or any 
contract for services not directly involved with patient care.
    The hospital industry has expressed concern that we do not 
currently recognize the cost of certain contract management services. 
In particular, many rural hospitals that are either unable to recruit 
or cannot afford top managers such as hospital administrators must 
contract for the services of these individuals. Therefore, we believe 
it is appropriate to include the costs of certain management contracts 
in the wage index. We propose to expand the definition of contract 
services reported on the Worksheet
S-3 to include the personnel cost associated with contracts for any 
personnel hired in the top four positions within the hospital. 
Allowable contract management services would be limited to the 
personnel costs for those individuals who are working at the hospital 
facility in the capacity of the Chief Executive Officer (CEO)/Hospital 
Administrator, Chief Operating Officer (COO), Chief Financial Officer 
(CFO), or Nursing Administrator. The exact titles assigned to 
individuals may vary but the individuals should be performing 
essentially the same duties as customarily assigned these management 
positions.
    The hospitals (via HCFA-339 form) would be required to provide the 
fiscal intermediary with complete details on all direct patient care 
related contracts and the description and aggregate totals for all 
management contracts. Because of the difficulty in accurately 
determining hours and isolating wage related costs for the other types 
of contract services, the wage data would continue to exclude all other 
non-patient care contract services except those limited management 
contracts discussed above.
    Since the current cost report does not provide for the collection 
of management contract data, this revised definition would not be 
effective until cost reporting periods beginning on or after October 1, 
1994. To provide consistent reporting of data, hospitals must continue 
to exclude all management contracts until the FY 1995 data is reported.
3. Reporting of Wage-Related Costs
    Since we began including fringe benefits in the wage index, we have 
been concerned with the inconsistent reporting of fringe benefits, 
whether because of a lack of provider proficiency in identifying fringe 
benefit costs or varying interpretations across fiscal intermediaries 
of the definition for fringe benefits in PRM-I, Sec. 2144.1. Although 
we have attempted to promote consistent reporting of fringe benefits by 
providing fiscal intermediaries with general guidelines to be used in 
determining allowable fringe benefit costs, the intermediaries must 
necessarily make judgments as to whether certain costs qualify as a 
fringe benefit, and inconsistencies persist.
    Last summer, HCFA conducted a survey to determine what costs the 
health care industry thought should be recognized as fringe benefit 
costs. The survey consisted of a questionnaire with a yes/no response 
column and a column for comments. We received 238 responses from 
hospitals, fiscal intermediaries, state hospital associations, national 
hospital associations, state agencies, and bureaus and offices within 
HCFA. The results of those surveys were examined closely by the MTAG 
task force.
    Based on the recommendations of the task force, we are proposing 
several changes that we believe will promote more equitable and 
consistent reporting of wage-related costs for all hospitals. Where the 
term ``fringe benefit'' has been used in the past, we will now refer to 
these costs as ``wage- related costs'' for wage index purposes. We 
believe that this change in terminology will eliminate the confusion 
regarding those wage-related costs that we will allow to be 
incorporated in the wage index versus the definition of fringe benefits 
required by Medicare principles for cost reimbursement purposes. 
Accordingly, we are proposing to revise the Worksheet S-3, Part II to 
capture wage-related costs in three parts.
    a. Wage-Related Costs (Core). For most hospitals, the wage-related 
costs used to develop the wage index would be limited to ``core'' wage-
related costs. The list of ``core'' wage-related costs includes all 
commonly recognized costs (which are similar to fringe benefits used 
for cost reimbursement purposes) that contribute significantly to the 
wage costs of a hospital and that are readily identifiable on the 
hospital records. These costs will also be listed on the revised HCFA-
339 form, and hospitals will be required to provide the intermediary 
with a detailed description of the wage-related costs in Exhibit 7. 
This description will allow the intermediary to review the 
appropriateness of each wage-related cost. We believe that this core 
list includes virtually all significant wage-related costs, including 
those costs that are required by statute.
    To develop the list of core wage-related costs, the MTAG task force 
established a number of specific criteria. To be considered a core 
wage-related cost, one or more of the following criteria must be met:
     The wage-related cost is provided at a significant 
financial cost to the employer.
     The wage-related cost is of a type and nature that would 
generally be offered as a fringe benefit by most employers.
     The perceived value of this wage-related cost is of such 
importance that it would influence an individual's employment 
decisions.
     The wage-related cost is a mandatory requirement under 
Federal or State law (for example FICA, Federal and State unemployment, 
etc.).
     Fees paid to external organizations that are directly 
associated with the core wage-related costs may be included as part of 
the wage-related cost (for example, actuarial fees, claim 
administration fees, IRS form preparation fees, etc.).
    The following is the proposed list of core wage-related costs:

(1) Retirement Costs:
401(k) employer contributions
Tax sheltered annuity (TSA) employer contributions
Qualified and non-qualified pension plan cost
Prior year pension service cost
(2) Plan Administration Costs (Paid to external organization):
401(k)/TSA plan administration fees
Legal/accounting/management fees--pension plan
Employee managed care program administration fees
(3) Health and Insurance Costs:
Health insurance (purchased or self-funded)
Prescription drug plan
Dental, hearing, vision plans
Life insurance (if employee is owner or beneficiary)
Accident insurance (if employee is owner or beneficiary)
Disability insurance (if employee is owner or beneficiary)
Long-term care insurance (if employee is owner or beneficiary)
Workmen's compensation insurance
Retiree health care cost (only current year, not the extraordinary 
accrual required by FASB 106 (that is, the non-cumulative portion))
(4) Taxes:
FICA--employers portion only
Medicare taxes--employers portion only
Unemployment insurance
State or Federal unemployment taxes
(5) Other:
Executive deferred compensation
Day care cost and allowances
Tuition reimbursement
    b. Other Wage-Related Costs. A hospital may be able to report an 
additional wage-related cost that does not appear on the core list if 
it meets the following criteria:
     The wage-related cost is provided at a significant 
financial cost to the employer. To meet this test the individual wage-
related cost must be greater than 1 percent of total salaries after the 
direct excluded salaries are removed (Column 3, line 3 on Worksheet S-
3, Part II).
     Any wage-related cost that would be a fringe benefit if 
reported to the IRS as a fringe benefit.
     The wage-related cost has not been furnished for the 
convenience of the provider.
    We note that those wage-related costs that are required to be 
reported to the IRS as salary (for example, loan forgiveness and sick 
pay accruals) would not be included as other wage-related costs, since 
the costs associated with these items are considered salaries and would 
already be included in the total salaries reported on line 1.01 of the 
Worksheet S-3, Part II.
    c. Wage-Related Costs (Excluded Area). Wage-related costs 
associated with employees in areas of the hospital that are excluded 
from the data used to calculate the wage index (such as a hospital-
based SNF) should be removed from the total wage-related costs. This is 
not a new policy; however, to ensure that hospitals are removing these 
costs, we have added a new line on the Worksheet S-3, Part II.
    In addition to the above changes, we are proposing that, beginning 
on or after October 1, 1994, hospitals use Generally Accepted 
Accounting Principles (GAAP) in developing the wage-related costs 
contained in the Worksheet S-3, Part II, for purposes of the hospital 
wage index. For all other purposes, however, Medicare principles will 
continue to apply in determining the allowability of fringe benefit 
costs. The MTAG task force recommended application of GAAP for purposes 
of developing wage-related costs used to construct the hospital wage 
index. We believe it is appropriate to apply GAAP for these purposes 
because the function of the wage index is to measure relative hospital 
labor costs across areas. This function is distinct from that of cost 
reimbursement, in which applicable Medicare principles (which may 
differ from GAAP) measure the actual costs incurred by individual 
hospitals. We believe the application of GAAP for purposes of compiling 
data on wage-related costs used to construct the wage index will more 
accurately reflect relative labor costs, because certain wage-related 
costs (such as pension costs) as recorded under GAAP tend to be more 
static from year to year. Application of Medicare principles, on the 
other hand, could create large swings in these costs from year to year, 
particularly in years when there are large over- or under-funded 
pension estimates; such application might lead to a wage index that 
does not accurately reflect relative labor costs. Again, we emphasize 
that under this proposal, GAAP will apply only for purposes of 
developing wage-related costs on Worksheet S-3 Part II. Our policy 
requiring the use of applicable Medicare principles for determining 
fringe benefits for all other purposes remains unchanged.
    The revised cost report and the HCFA-339 forms are currently being 
evaluated by the Office of Management and Budget. Once these forms are 
approved, we propose to implement the form to collect wage data for any 
cost report beginning on or after October 1, 1994. However, we will 
issue subsequent revisions to the forms and instructions to reflect any 
changes incorporated in the final rule based on public comments.

D. Revisions to the Wage Index Based on Hospital Redesignation

    Under section 1886(d)(8)(B) of the Act, hospitals in certain rural 
counties adjacent to one or more Metropolitan Statistical Areas (MSAs) 
are considered to be located in one of the adjacent MSAs if certain 
standards are met. Under section 1886(d)(10) of the Act, the Medicare 
Geographic Classification Review Board (MGCRB) considers applications 
by hospitals for geographic reclassification for purposes of payment 
under the prospective payment system.
    The methodology for determining the wage index values for 
redesignated hospitals is applied jointly to the hospitals located in 
those rural counties that were deemed urban under section 1886(d)(8)(B) 
of the Act and those hospitals that were reclassified as a result of 
the MGCRB decisions under section 1886(d)(10) of the Act. Section 
1886(d)(8)(C) of the Act provides that the application of the wage 
index to redesignated hospitals is dependent on the hypothetical impact 
that the wage data from these hospitals would have on the wage index 
value for the area to which they have been redesignated. Therefore, 
pursuant to section 1886(d)(8)(c) of the Act, the wage index values 
were determined by considering the following:
     If including the wage data for the redesignated hospitals 
reduces the MSA wage index value by 1 percentage point or less, the MSA 
wage index value determined exclusive of the wage data for the 
redesignated hospitals applies to the redesignated hospitals.
     If including the wage data for the redesignated hospitals 
reduces the wage index value for the area to which the hospitals are 
redesignated by more than 1 percentage point, the hospitals that are 
redesignated are subject to the wage index value of the area that 
results from including the wage data of the redesignated hospitals (the 
``combined'' wage index value). However, the wage index value for the 
redesignated hospitals cannot be reduced below the wage index value for 
the rural areas of the State in which the hospitals are located.
     Rural areas whose wage index values would be reduced by 
excluding the data for hospitals that have been redesignated to another 
area continue to have their wage index calculated as if no 
redesignation had occurred. Those rural areas whose wage index value 
increases as a result of excluding the wage data for the hospitals that 
have been redesignated to another area have their wage index calculated 
exclusive of the redesignated hospitals.
     The wage index value for an urban area is calculated 
exclusive of the wage data for hospitals that have been reclassified to 
another area. However, geographic reclassification may not reduce the 
wage index for an urban area below the Statewide rural average, 
provided the wage index prior to reclassification was greater than the 
Statewide rural wage index value.
     Section 13501(b) of Public Law 103-66 amended section 
1886(d)(8)(C) of the Act to provide that a change in classification of 
hospitals from one area to another may not result in the reduction in 
the wage index for any urban area whose wage index is below the rural 
wage index for the State. This provision also applies to any urban area 
that encompasses an entire State.
    We note that, except for those rural areas where redesignation 
would reduce the rural wage index value, and in the situation described 
above that was addressed by section 13501(b) of Public Law 103-66, the 
wage index value for each area is computed exclusive of the data for 
hospitals that have been redesignated from the area for purposes of 
their wage index. As a result, several MSAs listed in Table 4a have no 
hospitals remaining in the MSA. This is because all the hospitals 
originally in these MSAs have been reclassified to another area by the 
MGCRB. For those areas, we have listed the Statewide rural wage index 
value.
    The proposed revised wage index values effective for discharges 
occurring on or after October 1, 1994 are shown in Tables 4a, 4b, and 
4c of the addendum to this proposed rule. Hospitals that are 
redesignated should use the wage index values shown in Table 4c. For 
some areas, more than one wage index value will be shown in Table 4c. 
This occurs when hospitals from more than one State are included in the 
group of redesignated hospitals, and one State has a higher Statewide 
rural wage index value than the wage index value otherwise applicable 
to the redesignated hospitals. Tables 4d and 4e list the average hourly 
wage for each labor market area based on the FY 1991 wage data. In 
addition, we have expanded Table 3c (Hospital Case-Mix Indexes for 
Discharges) to include the average hourly wage for each hospital based 
on the FY 1991 data. The average hourly wage published in the final 
rule will be used by the MGCRB to evaluate if a hospital meets the 
reclassification criteria. Hospitals that choose to apply before 
publication of the final rule can use the proposed wage data in 
applying to the MGCRB for wage index reclassifications that would be 
effective for FY 1996. We note that in adjudicating these wage 
reclassification requests during FY 1995, the MGCRB will use the 
average hourly wages for each hospital and labor market area that are 
reflected in the final FY 1995 wage index.
    The proposed FY 1995 wage index values incorporate all 
reclassification decisions made by the MGCRB for FY 1995. At the time 
this proposed wage index was constructed, the MGCRB had completed its 
review. There were 429 hospitals redesignated for purposes of the wage 
index (including hospitals redesignated under both sections 
1886(d)(8)(B) and 1886(d)(10) of the Act). This number does not include 
MGCRB decisions that are still under review by the Administrator.
    Any changes to the wage index that result from withdrawals of 
requests for reclassification, wage index corrections, appeals, and the 
Administrator's review process will be incorporated into the wage index 
values published in the final rule. The changes may affect not only the 
wage index value for specific geographic areas, but also whether 
redesignated hospitals receive the wage index value for the area to 
which they are redesignated or a combined wage index that includes the 
data for both the hospitals already in the area and the redesignated 
hospitals. Further, the wage index value for the area from which the 
hospitals are redesignated may be affected.
    Under Sec. 412.273, hospitals that have been reclassified by the 
MGCRB are permitted to withdraw their applications within 45 days of 
the publication of this Federal Register document. The request for 
withdrawal of an application for reclassification that would be 
effective in FY 1995 must be received by the MGCRB by [OFR: Insert date 
45 days after date of publication]. A hospital that requests to 
withdraw its application may not request that the MGCRB decision be 
reinstated after publication of the final wage index values.

E. Impact of the Revised Hospital Wage Index

    Section 1886(d)(3)(E) of the Act requires that the wage index be 
updated annually beginning October 1, 1993. In addition, this section 
requires that updates to the hospital wage index be budget neutral. The 
FY 1995 wage index will represent the second annual update to the wage 
data. We will use the wage data from the FY 1991 Medicare cost report 
to calculate the updated wage index. For FY 1995, the wage index will 
continue to include salaries, fringe benefits, home office salaries, 
and certain contract labor salaries. In the past, updates to the wage 
data have resulted in significant payment shifts among hospitals. Since 
the wage index is now updated annually and there are no changes to the 
types of costs included in the wage index data, we expect these payment 
fluctuations will be minimized. Based on the proposed wage index 
calculation (after reclassifications under sections 1886(d)(8)(B) and 
1886(d)(10) of the Act), there is a significant drop, compared with 
previous years, in the number of labor markets that experience major 
increases or decreases in wage index values. We reviewed the data for 
any area that experienced a wage index change of 10 percent or more to 
determine the reason for the fluctuation. When necessary, we contacted 
the intermediaries to determine the validity of the data, or to obtain 
an explanation for the change. Our review indicated that most of the 
significant changes were attributable to improved reporting by 
hospitals.
    The following chart compares the shifts in wage index values (after 
reclassifications) for labor markets for FY 1995 with those experienced 
as a result of last year's wage index update. 

------------------------------------------------------------------------
                                                         Number of labor
                                                          market areas  
      Percentage change in area wage index values      -----------------
                                                        FY 1995  FY 1994
------------------------------------------------------------------------
Increase more than 10 percent.........................        6       13
Increase between 5 and 10 percent.....................       18       24
Decrease between 5 and 10 percent.....................       17       58
Decrease more than 10 percent.........................       11       14
------------------------------------------------------------------------

    Under the proposed FY 1995 wage index, 86.4 percent of all 
prospective payment hospitals (4,778 hospitals) would experience a 
change in their wage index value of less than 5.0 percent. 
Approximately 5.2 percent (283 hospitals) would experience a change of 
between 5 and 10 percent, and 8.4 percent (469 hospitals) would 
experience a change of more than 10 percent. The following chart shows 
the projected impact for urban and rural hospitals. (The totals in this 
chart exceed the number of hospitals in our database, as our projection 
includes new hospitals and hospitals that for other reasons are not 
included in our wage file.)

------------------------------------------------------------------------
                                                            Number of   
                                                            hospitals   
      Percentage change in area wage index values      -----------------
                                                         Rural    Urban 
------------------------------------------------------------------------
Decrease more than 10 percent.........................      188      196
Decrease between 5 and 10 percent.....................       26       94
Change between -5 and +5 percent......................    2,099    2,679
Increase between 5 and 10 percent.....................       44      119
Increase more than 10 percent.........................       67      18 
------------------------------------------------------------------------

F. Occupational Mix Adjustment

    In its March 1, 1994 report, ProPAC recommended that the Secretary 
develop methods to collect more timely hospital wage data by 
occupational categories and to adjust the HCFA wage index for 
occupational mix (Recommendation 15).
    The HCFA wage index reflects variations in the cost of labor; that 
is, it includes the effects of variations in the mix of occupations as 
well as the price of labor. ProPAC believes that the wage index should 
reflect only variations in the price of labor, which are beyond the 
hospital's control and are not otherwise accounted for by adjustments 
in the prospective payment system.
    Previous ProPAC studies on the effect of adjusting the wage index 
for occupational mix using data collected from California hospitals 
found that a wage index adjusted for occupational mix would 
redistribute funds from urban to rural hospitals. Within urban areas, 
the occupational mix adjustment would redistribute funds from large to 
small hospitals. Within rural areas, the occupational mix adjustment 
would increase the wage index values of all bed-size groups. ProPAC 
also reanalyzed the California data to examine the impact of an 
occupational mix adjustment on wage index values based on hospital-
specific labor market areas. ProPAC currently believes that the 
implementation of revised labor areas, including nearest neighbor labor 
markets, would substantially improve payment equity among hospitals if 
an occupational adjustment was developed.
    We are not convinced that an occupational mix adjustment would 
improve the accuracy of the wage index, as we have discussed most 
recently in the August 30, 1991 final rule (56 FR 43222). Currently, 
the wage index measures the overall costs of labor. If the wage index 
were to measure the price of labor, then a set of occupational weights 
would have to be developed to determine a standard occupational mix. 
Hospitals would not be compensated for a mix of employees above the 
standard, while hospitals with a mix of employees below the standard 
would be overcompensated, relative to their cost of labor. If we were 
to adopt hospital-specific labor market areas in conjunction with an 
occupational mix adjustment, one concern would be the application of 
occupational weights to every prospective payment hospital in the 
country. Application of one set of occupational weights to every 
prospective payment hospital would conflict with the intended purpose 
of hospital-specific labor markets, which is to make the wage index 
more responsive to local conditions. We cannot envision a single set of 
occupational weights that could be applied to all prospective payment 
hospitals in an equitable manner.
    Last year, ProPAC suggested that we convene a working group made up 
of representatives from HCFA and the hospital industry to try to 
improve the timeliness and accuracy of the wage data. HCFA assembled 
such a discussion work group and presented ProPAC comments concerning 
the equity of adopting a method to collect data to assist in the 
development of an occupational mix. The discussion workgroup's 
consensus was that the data required to implement the proposal is not 
currently available and the likelihood of obtaining such data would be 
minimal. There seems to be little support among hospital industry 
representatives for developing a system that in their opinion clearly 
creates additional reporting burdens with an unproven or minimal impact 
on the distribution of payments. Therefore, at this time we are not 
proposing any changes to the collection of data to be used in 
developing an occupational mix adjustment.

G. Research on Refinements to Labor Market Areas

1. Background
    Almost from the beginning of the prospective payment system, we 
have received comments from hospitals and ProPAC objecting to the use 
of MSA-based labor market areas to construct the wage index. Common 
concerns have been that the Statewide rural areas are too large to 
distinguish differences in labor market conditions, and that the MSA-
based wage index does not reflect the fact that hospitals in the center 
cities (the ``urban core'') pay higher wages than suburban hospitals. 
Some commenters have argued that rural labor market areas should be 
subdivided into two smaller groups based on county populations and that 
MSA-based labor market areas should be divided into urban core and 
suburban ring labor markets to distinguish the differences in labor 
market conditions.
    In light of these concerns, we have continued to examine a variety 
of options for revising wage index labor market areas. In this proposed 
rule, we discuss in detail issues raised by commenters concerning 
ProPAC's ``nearest neighbor'' recommendation, our research and analysis 
on alternative labor market areas, and the possibility of allowing all 
hospitals in a State to opt out of the current labor market system.
2. Discussion of Comments Concerning ProPAC's Nearest Neighbor 
Recommendation
    In its March 1, 1993 report, ProPAC recommended that the Secretary 
substantially revise the hospital wage index under the prospective 
payment system for FY 1994. In its March 1, 1994 report, ProPAC made 
the same recommendation (Recommendation 16). Specifically, ProPAC 
recommends that we develop hospital-specific labor market areas based 
on geographic proximity, using each hospital's ``nearest neighbors'' 
for purposes of a revised wage index. As in 1993, ProPAC has also 
recommended that Congress repeal the current statutory provisions 
relating to geographic reclassification for the wage index.
    In ProPAC's 1993 report, the Commission discussed establishing each 
hospital's labor market area based on its 10 nearest neighbors within a 
50-mile radius. In its 1994 report, ProPAC examined defining labor 
markets for each hospital by including the nearest 15 hospitals within 
a 20-mile radius, and extending the radius up to 30 or 35 miles when 
needed in order to include a total of at least 3 hospitals.
    In our May 26, 1993 proposed rule (58 FR 30242), we stated that we 
believed, and ProPAC agreed, that legislation would be required before 
we could use hospital-specific labor market areas in constructing the 
wage index due to the statutory requirements regarding hospital 
reclassifications for wage index purposes. We also stated that in 
addition to the statutory constraints, we did not believe that it would 
be feasible or advisable to attempt to implement ProPAC's 
recommendation in FY 1994. Although we acknowledged that ProPAC's 
recommendation might have promise, we indicated that careful analysis 
of the impact of such a proposal on hospitals was necessary before 
proposing to adopt such a significant change. In addition, we stated 
there were also a number of administrative issues that must be 
carefully considered before ProPAC's proposal could be implemented, 
including the possible development of an exceptions or appeals process 
to resolve disputes concerning the labor market areas. We agreed with 
ProPAC that if we adopted hospital-specific labor market areas using 
its methodology, the MGCRB as it is currently constituted might no 
longer be necessary. We also stated that we would not recommend that 
Congress repeal the MGCRB provisions of the Act until we had analyzed 
fully the implications of adopting hospital-specific labor market areas 
or some other revisions to labor market areas. We noted that after our 
analysis was complete, we would decide whether to recommend that the 
mission of the MGCRB be altered to make it responsible for resolving 
disputes concerning hospital-specific labor market areas.
    To facilitate a thorough analysis of ProPAC's proposal, we 
published in the FY 1994 proposed rule hospital-specific wage index 
values using ProPAC's data on hospital locations and the new FY 1990 
hospital wage data (58 FR 30457). The tables indicated what each 
hospital's wage index value would be if the wage index were based on 
the wage data for the hospital and its 10 nearest neighbors up to a 
radius of 50 air miles. The tables also showed which hospitals were in 
each hospital's labor market area based on ProPAC's data base. 
Subsequently, we discovered a technical error in the wage index values 
and republished a revised wage index value for each hospital in a 
correction notice (June 29, 1993, 58 FR 34742).
    We solicited public comments on ProPAC's proposal and suggestions 
concerning the development of an exceptions or appeals process, if 
appropriate, for possible implementation in FY 1995. We also solicited 
comments on a number of other issues such as the feasibility of using 
road miles instead of air miles, a process to verify hospital 
locations, and what the process should be to establish a wage index for 
new hospitals. We stated that we planned to continue our analysis of 
alternatives based on the current MSA based system that have appeared 
promising in the past, and that we planned to evaluate all potential 
labor market revisions using the same basic criteria. Comments on these 
issues were due to HCFA by August 31, 1993.
    In both the proposed and final rules for FY 1994, we stated our 
intention to analyze the comments we received as well as to conduct the 
research we outlined. We also stated that we would continue to consult 
with ProPAC and study any additional information they developed. We 
stated our intention to publish a proposal for formal public comment in 
the FY 1995 proposed rule if hospital-specific labor market areas based 
on the nearest neighbor concept proved promising. We indicated that we 
would include information describing all aspects of our proposal, and 
consider all comments, before issuing a final rule for implementation.
    In response to the May 26, 1993 proposed rule, we received a total 
of 266 comments on the nearest neighbor wage index proposal, including 
28 from national, State, and local organizations representing 
hospitals. In all, 33 commenters were in favor of the nearest neighbors 
proposal, 128 were opposed and 105 were in support if changes were made 
to satisfy their concerns. The areas of major concern raised by the 
commenters were the redistribution of Medicare payments that would 
occur if hospital-specific labor market areas were adopted, how the 
boundaries should be drawn around hospitals to define labor market 
areas, and the nature and extent of an exceptions process. Several 
commenters also had reservations about whether a hospital's nearest 
neighbors were reflective of its labor market area. We discuss these 
and other issues below.
     Redistribution of Medicare Payments--Many commenters were 
concerned about whether instituting hospital-specific labor market 
areas would lead to major shifts in Medicare payments at the same time 
that hospitals face an uncertain financial future because of the impact 
of health care reform. One state hospital association noted that 
adoption of the nearest neighbors proposal would cause a major 
redistribution of payments among rural hospitals, and that many 
hospitals that would be adversely affected were already in precarious 
financial condition. Another state association commented that the 
effects of the proposal on the hospitals in its State would vary 
greatly, with substantially increased payments to some hospitals and 
decreased payments to others. Many commenters suggested that if we were 
to adopt the nearest neighbors proposal, some type of phase-in over 
several years would be essential.
     Definition of Labor Market Areas--Several commenters 
stated that hospital characteristics such as size, services offered, 
and case mix are a more reliable determinant of who a hospital competes 
with for labor than who its nearest neighbors are. One state 
association stated that its analysis of the wage index computed under 
the nearest neighbors proposal demonstrates that geographic proximity 
does not provide an accurate measure of the amount a hospital must pay 
to compete for labor. Since there are a wide range of options for 
defining hospital-specific labor market areas, many of the commenters 
suggested variations depending on their perception of what new labor 
market areas should achieve. Some favored changing the size of labor 
market areas so as to increase payment to a particular hospital or type 
of hospital, while others favored defining labor markets in a way that 
would decrease the payment shifts that would occur under the options.
    In order to minimize the payment changes that would result from the 
wage index, some groups supported including a larger number of 
hospitals in each labor market, while others supported limiting the 
size of labor market areas. One state association asserted that both 
nearest neighbor and fixed boundary labor market alternatives are 
problematic because neither method allows a sufficient amount of 
flexibility for determining labor market areas. The association 
believes that it would be more accurate if the direction and distance 
of worker commuting patterns were incorporated into the determination 
of a hospital's nearest neighbors. Another association stated that it 
may be difficult to identify a uniform approach that is equitable for 
all areas of the country, and urged HCFA to consider using different 
methodologies in different regions as appropriate. A national 
association stated that while the nearest neighbors proposal has 
conceptual appeal, whether the association would support a nearest 
neighbor proposal ultimately would depend on where HCFA draws the line 
around hospitals.
     Exceptions Process--Most of the commenters agreed that 
some type of exceptions process would be needed regardless of which 
system for defining hospital labor market areas is developed. Several 
commenters stressed the need for an exceptions process to address 
geographic anomalies; cases in which air miles are not equivalent to 
road miles; and cases in which a hospital is grouped with unlike 
hospitals, such as a rural referral center (RRC) grouped with much 
smaller primary care hospitals or a tertiary care hospital in a single 
hospital MSA that is grouped with much smaller rural hospitals. Another 
commenter supported giving a hospital the right to appeal to add or 
delete hospitals from its labor market area if the target hospital can 
demonstrate substantial labor market competition (or a lack of it) with 
a specific hospital. Some commenters supported special exception 
criteria for RRCs. One group believes that the nearest neighbors 
proposal should be modified to accommodate RRCs that otherwise would 
have been reclassified, that have only other rural hospitals in their 
nearest neighbors group, or that would be significantly harmed by the 
proposal. Another group believes that RRCs should be excluded from a 
nearest neighbors wage index and that they should be allowed to use 
either their own hospital-specific wage index or be allowed to 
reclassify into the nearest MSA using the existing MGCRB rules.
     Multi-campus hospitals--We received a wide range of 
comments concerning multi-campus hospitals. Some commenters suggested 
that the hospital's location should be its main address listed on the 
cost report. Other commenters suggested that the facility with the 
largest concentration of employees be defined as the hospital's 
location, or that a hospital should be allowed to pick which campus 
would be considered its location for labor market area purposes.
     Hospital Location Verification--Some commenters suggested 
that we publish each hospital's longitude and latitude and require them 
to submit documentation to verify any requests for corrections to this 
data. Others suggested that we use the Global Positioning System to 
verify location. Some commenters suggested that the hospital's 
emergency room entrance should be used as the hospital's location, 
others suggested the main employee entrance, and still others suggested 
that a hospital be allowed to designate any point on its campus as its 
location.
     State Boundaries--Some commenters stated that labor market 
areas should not be constructed across State lines because cost of 
living and labor costs can vary greatly from State to State due to 
differences in State tax structures, costs of health insurance and 
other employee benefit programs dependent on State law.
     Blend/Floor--Some commenters suggested that a nearest 
neighbors wage index should not be adopted unless a hospital's own wage 
data were weighted more heavily than those of its neighbors. Other 
commenters suggested that we institute a floor below which a hospital's 
wage index could not fall or that we blend the current wage index with 
any index based on revised labor market definitions.
3. Analysis of Alternative Labor Market Areas
    We agree with commenters, and with ProPAC, that improvements to the 
current labor market system should be explored. Below, we discuss the 
feasibility of several alternative methodologies for establishing labor 
markets, including revised versions of the current MSA-based system, 
various hospital-specific methodologies, as well as an alternative that 
combines the hospital-specific and MSA-based methodologies. In 
evaluating each of the alternatives presented, we considered the major 
issues raised by commenters, ProPAC's recommendations, as well as our 
own internal research and analysis. ProPAC's data on air-mile distances 
between hospitals were used to develop wage indexes based on hospital-
specific systems.
    We note that in our May 26, 1993 proposed rule (58 FR 30244), we 
indicated that we would hold a meeting with a working group consisting 
of hospital industry representatives to review potential revisions to 
labor market areas, and other issues related to the wage index. On 
November 19, 1993, HCFA staff met with 17 representatives of State and 
national hospital associations to discuss options for redefining 
hospital labor market areas and other issues related to the current 
wage index. A ProPAC representative also attended and presented 
information on the status of the Commission's current research. HCFA 
staff presented information on each of the options under consideration.
    The group expressed no preference for any of the hospital-specific 
or MSA-based options with the possible exception of a hospital-specific 
wage index based in large part on the hospital's own wages. The group 
was extremely concerned about the redistribution of dollars that would 
occur if nearest neighbors labor market areas were adopted in the 
current budgetary climate. It was also concerned about how an 
exceptions process would function under any revised labor market 
scheme, fearing that it would be too subjective and that it would be 
impossible to predict how many hospitals would be reclassified.
    a. MSA-based and Hospital-Specific Alternatives. In our labor 
market research, we reviewed a large number of options: nine hospital-
specific wage indexes based on the nearest neighbor and fixed radius 
approaches and seven MSA-based indexes involving ways of subdividing 
MSAs or statewide rural areas. Following is a description of the 
options we reviewed. We have assigned each option a name to facilitate 
discussion and for use in tables that follow later in this section.

Hospital-Specific Alternatives

    10 Nearest Neighbors--A wage index based on each hospital's own 
wage data and that of its 10 nearest neighbors, or all hospitals within 
a distance of 50 miles, if there are fewer than 10 other hospitals 
within 50 miles. One hundred ninety-five hospitals had no neighbor 
within 50 miles. These hospitals were assigned their own relative wage 
level, which is computed by comparing its own wages to the national 
average hourly wage. The same 195 hospitals also were assigned their 
``own wage index'' for the 15 Nearest Neighbors and 20 Nearest 
Neighbors wage indexes.
    10 Nearest Neighbors/Minimum of 2--A wage index based on each 
hospital's own wage data and that of its 10 nearest neighbors within 20 
miles (with a minimum of at least 2 nearest neighbors within 20 miles 
or all hospitals within 35 miles).
    15 Nearest Neighbors--A wage index based on each hospital's own 
wage data and that of its 15 nearest neighbors, or all hospitals within 
a distance of 50 miles if there are fewer than 15 other hospitals 
within 50 miles.
    15 Nearest Neighbors/Minimum of 2--A wage index based on each 
hospital's own wage data and that of its 15 nearest neighbors within 20 
miles (with a minimum of at least 2 nearest neighbors within 20 miles 
or all hospitals within 35 miles).
    20 Nearest Neighbors--A wage index based on each hospital's own 
wage data and that of its 20 nearest neighbors, or all hospitals within 
50 miles if there are fewer than 20 other hospitals within 50 miles.
    20-Mile Radius--A wage index based on each hospital's own wage data 
and that of all its neighbors within a 20-mile radius. The 887 
hospitals having no neighbor within 20 miles were assigned their own 
relative wage level.
    25-Mile Radius--A wage index based on each hospital's own wage data 
and that of all its neighbors within a 25-mile radius. The 522 
hospitals having no neighbor within 25 miles were assigned their own 
relative wage level.
    30-Mile Radius--A wage index based on each hospital's own wage data 
and that of all its neighbors within a 30-mile radius. The 391 
hospitals having no neighbor within 30 miles were assigned their own 
relative wage level.
    35-Mile Radius--A wage index based on each hospital's own wage data 
and that of all its neighbors within a 35-mile radius. The 301 
hospitals having no neighbor within 35 miles were assigned their own 
relative wage level.

MSA-Based Alternatives

    These alternatives represent various subdivisions (by counties) of 
the current MSA/rural labor market area definitions. As such, all 
counties in each subdivided category need not be contiguous.
    Central-Outlying--A wage index in which each MSA is divided into 2 
areas based on its central and outlying counties.
    Rural-Population--A wage index in which each Statewide rural area 
is divided into 2 distinct labor market areas, one including all 
counties with populations greater than 25,000 and one made up of 
counties with populations less than 25,000.
    Rural-Density--A wage index in which each Statewide rural area is 
divided into 2 areas if it contains counties with population densities 
greater and less than 35 persons per square mile.
    Rural-Population/Density--A wage index in which each Statewide 
rural area is divided into as many as 4 areas depending on whether 
populations are greater or less than 25,000 person and population 
densities are greater or less than 35 persons per square mile.
    Rural-Adjacent--A wage index in which each Statewide rural area is 
divided into 2 areas, one including all counties adjacent to an MSA and 
the other made up of counties not adjacent to an MSA.
    Rural-Population/Adjacent--A wage index in which each Statewide 
rural area is divided into as many as 4 areas depending on the 
adjacent/non-adjacent status of its non-MSA counties and whether county 
populations are greater or less than 25,000 persons.
    Rural-Density/Adjacent--A wage index in which each Statewide rural 
area is divided into as many as 4 areas depending on the adjacent/non-
adjacent status of its non-MSA counties and whether county population 
densities are greater or less than 35 persons per square mile.
    As a basis of comparison for these alternatives, we also reviewed 
three variations of the current MSA-based wage index.

Current MSA-based Indexes

    Geographic--The FY 1994 hospital wage index without the effects of 
geographic reclassification.
    Reclassification--The actual FY 1994 hospital wage index after 
reclassification.
    Estimated FY 1995--The FY 1994 hospital wage index revised to 
include an estimate of the effects of geographic reclassification in FY 
1995 (based on FY 1990 data).
    We used three basic criteria to analyze each of the alternatives:
    (1) Wage Conformity Within Labor Markets. This criterion assesses 
the extent to which a wage index conforms to a hospital's own relative 
wage level. It also evaluates the extent to which a hospital's wages 
are aberrant for its labor market area (that is, are more than one 
standard deviation above the labor market wage index);
    (2) Wage Index Conformity Across Labor Markets (Boundary Problems). 
This criterion measures the extent to which the new labor market areas 
reflect uniform labor market conditions as indicated by the degree of 
similarity in the hospital wage rates across labor market areas. The 
boundaries should minimize inequitable treatment, that is, cases in 
which hospitals facing similar labor costs are grouped into different 
labor markets.
    (3) Distributional Equity Improvement. This criterion examines the 
impact of a labor market option to determine its effects on the 
distribution of hospital payments, and the extent to which the 
hospitals that would gain and lose under various proposals are already 
doing well or poorly under the current system. Redistribution of 
payments should fairly compensate both high-wage hospitals and low-wage 
hospitals.
    None of the options we initially reviewed were a significant 
improvement over the current reclassified wage index in terms of wage 
conformity within labor markets, wage conformity across labor markets, 
or distributional equity improvement. The following tables summarize 
our major results:
Wage Conformity Within Labor Markets
    Table A displays the number of hospitals for which the difference 
between the area wage index value for a given alternative and the 
hospital's own relative wage index value (determined by dividing the 
hospital's average hourly wage by the national average hourly wage) is 
greater than .08 either positive or negative. A .08 difference in the 
wage index was selected as it represents approximately a $200 
difference in payments per case. For each wage index option, the Lose 
and Gain columns show the number of hospitals for whom the difference 
represents a given decrease or increase in wage index value.
    Table B displays the number of hospitals whose wage index values 
are more than 108 percent above their labor market wage index value 
(that is, one standard deviation greater).

   Table A.--Number of Hospitals Losing or Gaining More Than .08 Relative to Own Wage Level, for Selected Wage  
                                       Indexes by Type of Geographic Area                                       
----------------------------------------------------------------------------------------------------------------
                              All hospitals     Large urban n=1,612   Other urban n=1,307      Rural n=2,311    
                                n=5,230        -----------------------------------------------------------------
       Wage index        ----------------------                                                                 
                          Lose >.08  Gain >.08  Lose >.08  Gain >.08  Lose >.08  Gain >.08  Lose >.08  Gain >.08
                                                                                                                
----------------------------------------------------------------------------------------------------------------
Existing System:                                                                                                
    Geographic FY 94....        682      1,708        263        531        137        321        282        856
    Estimate FY 95......        590      1,672        289        493        141        317        160        862
Hospital-Specific:                                                                                              
    Nearest 10..........        627      1,674        268        452        178        302        181        920
    Nearest 10/Min 2....        597      1,204        260        421        140        259        197        524
    Nearest 15/Min 2....        592      1,224        255        439        140        261        197        524
    20 Mile Radius......        549      1,014        264        438        141        244        144        332
MSA-Based:                                                                                                      
    Central-Outlying....        676      1,576        264        474        134        233        278        869
    Rural-Adjacent......        682      1,690        263        530        137        321        282        839
    Rural-Density.......        706      1,540        262        530        137        321        307        689
----------------------------------------------------------------------------------------------------------------


   Table B.--Number of Hospitals Whose Wages are More Than 108 Percent  
                     Above Their Labor Market Area                      
------------------------------------------------------------------------
                                         Number of hospitals with wages 
                                           greater than 108 percent     
                                      ----------------------------------
             Wage index                            Large   Other        
                                          All      urban   urban   Rural
                                       hospitals  n=1612  n=1307  n=2311
                                        n=5230                          
------------------------------------------------------------------------
Existing System:                                                        
    Geographic FY 94.................      746       235     144     367
    Estimate FY 95...................      559       232     137     190
Hosp.-Specific:                                                         
    Nearest 10.......................      620       217     181     222
    Nearest 10/Min 2.................      650       224     135     291
    Nearest 15/Min 2.................      653       228     134     291
    20 Mile Radius...................      594       229     139     226
MSA-based:                                                              
    Central-Outlying.................      758       243     148     367
    Rural-Adjacent...................      756       235     144     377
    Rural-Density....................      798       235     144     419
------------------------------------------------------------------------

Wage Conformity Across Labor Markets
    Table C presents the assessment of wage conformity across labor 
markets. We determined that a ``boundary problem'' existed for a target 
hospital (that is, the hospital whose wage index value is being 
calculated) if--
     Among nearby hospitals, one or more other hospitals' wage 
index value is at least .04 greater than that of the target hospital, 
corresponding to approximately a $100 difference in payments per case, 
and
     The hospital with the lower wage index value pays higher 
wages than the hospital with the higher wage index value.
    ``Nearby hospitals'' were defined as the 20 nearest hospitals or if 
a hospital does not have 20 other hospitals within a 35 mile radius, 
all hospitals within a 35 mile radius. Table C shows the number of 
hospitals with one or more boundary problems and the average size of 
the wage index difference for those boundary problems. An average wage 
index difference of .12 corresponds to a payment difference of about 
$300 per case.
    Table D shows the effects that different labor market alternatives 
would have when compared to the current FY 1994 pre-reclassified wage 
index.

 Table C.--Number of Hospitals Subject to ``Boundary Problem'' and Average Size of ``Boundary Problem'' by Type 
                                               of Geographic Area                                               
----------------------------------------------------------------------------------------------------------------
                      All hospitals n=5230    Large Urban n=1612     Other urban n=1307         Rural n=2311    
                     -------------------------------------------------------------------------------------------
     Wage index         Number     Average     Number     Average     Number     Average     Number     Average 
                      hospitals  difference  hospitals  difference  hospitals  difference  hospitals  difference
                                                                                                                
----------------------------------------------------------------------------------------------------------------
Existing System:                                                                                                
    Geographic FY 94        760       0.113         49       0.099        240       0.103        471       0.125
    Estimate FY 95..        662       0.110         51       0.105        215       0.101        396       0.120
Hospital--Specific:                                                                                             
    Nearest 10......       1223       0.077        387       0.074        224       0.074        612       0.086
    Nearest 10/Min 2       1343       0.084        405       0.079        263       0.079        675       0.091
    Nearest 15/Min 2       1240       0.085        305       0.080        260       0.079        676       0.091
    20 Mile Radius..       1041       0.083        169       0.079        264       0.080        608       0.089
MSA-Based:                                                                                                      
    Central-Outlying        712       0.101        106       0.107        232       0.094        374       0.107
    Rural-Adjacent..        838       0.106         49       0.098        241       0.102        548       0.113
    Rural-Density...        884       0.109         49       0.098        241       0.103        594      0.120 
----------------------------------------------------------------------------------------------------------------


                   Table D.--Labor Market Alternatives: Percent Change from Current MSA Values                  
                                             [Pre-Reclassification]                                             
----------------------------------------------------------------------------------------------------------------
                                      Greater                                                          Less than
     All hospitals            N       than 10      5-10       0-5         0       -5 to 0   -10 to -5     -10   
                                      percent    percent    percent               percent    percent    percent 
----------------------------------------------------------------------------------------------------------------
Estimate FY 95..........      5,230        210         64      1,114      3,556        235         48          3
Nearest 10..............      5,230        614        665      1,629          0      1,514        490        318
Nearest 10/Min 2........      5,230        366        480      1,692          0      1,353        590        749
Nearest 15/Min 2........      5,230        356        452      1,761          0      1,359        553        749
20 Mile Radius..........      5,230        356        333      1,775          0      1,381        491        894
Central-Outlying........      5,230         10          3      1,380      3,389        150        108        190
Rural-Adjacent..........      5,230          9          5      1,441      2,936        685        126         28
Rural-Density...........      5,230          7        163        775      3,149        506        432       198 
----------------------------------------------------------------------------------------------------------------

    As demonstrated by the above tables, our analyses showed that none 
of the MSA-based options consistently outperformed the current 
estimated FY 1995 post-reclassified wage index in terms of wage 
conformity within labor market areas and wage conformity across labor 
market areas.
    With respect to wage conformity within labor market areas, the 
results in Table A demonstrate that the 20-mile radius hospital-
specific option, with 549 losing hospitals, best reduces the number of 
hospitals with wage index values more than .08 below their own wage 
level. The FY 1995 post-reclassified wage index was second best, with 
590 hospitals with wage index values more than .08 below their own wage 
level. The 20-mile radius approach also produced the fewest number of 
hospitals (1014) with wage index values more than .08 above their own 
wage levels. However, as demonstrated in Table B, the estimated FY 1995 
post-reclassified wage index outperformed the other labor market 
options, with only 559 hospitals whose own average hourly wages were 
108 percent or more of their respective labor market area's average 
hourly wage. Therefore, the 20-mile radius and the estimated FY 1995 
post-reclassified wage indexes demonstrated somewhat better outcomes 
for wage conformity within labor market areas than any of the other 
options we studied.
    With respect to wage conformity across labor market areas 
(``boundary problems''), as indicated in Table C, the estimated FY 1995 
post-reclassified wage index generated the fewest hospitals having 
boundary problems (662), with the central-outlying MSA option having 
the second lowest number of such hospitals (712). All of the nearest 
neighbor options, including the 20-mile radius option (with 1,041 
hospitals), had the effect of significantly increasing the number of 
boundary problems that would occur, although the problems were of a 
smaller magnitude.
    Overall, none of the MSA-based options or the nearest neighbor 
options consistently outperformed the current estimated FY 1995 post-
reclassification wage index. While the 20-mile radius option performed 
well in terms of wage conformity within labor market areas, it 
performed significantly worse than the current system with respect to 
wage conformity across labor market areas. Additionally, with respect 
to the distributional effects of all the options, none demonstrated any 
measurable improvement in payment equity across hospital groups. 
Therefore, we are not presenting any tables concerning the 
distributional effect in this discussion. We have decided not to 
propose changes to labor market areas for FY 1995 because we believe 
that neither revisions to the current MSA-based system or the nearest 
neighbors labor market options that we studied constitute a clearly 
demonstrable improvement over the current system.
    b. Options for Future Wage Index Refinements Using Combined MSA/
Hospital-Specific Approach. While none of the alternative labor market 
areas that we studied, whether based on current MSA definitions or the 
``nearest neighbor'' approach, provided a distinct improvement over the 
current reclassification wage index, we believe a classification system 
that uses a combination of both approaches has considerable potential 
for improving the wage index. Discussed below are some options for 
further study that we believe may offer a viable alternative to the 
current system by taking into consideration all of the varying factors 
that affect a hospital's labor market. Each of these options is based 
on a weighted average of each hospital's own average hourly wages and 
the average hourly wages of a group of other hospitals. The following 
concepts and assumptions underlie the wage index options that we are 
now analyzing:
     Empirically defining labor market areas in a highly 
accurate, definitive manner is extremely difficult, if not impossible. 
MSAs and statewide rural areas may be reasonably accurate in many 
cases, but in other cases, these areas may be larger than a hospital's 
``true'' labor market area. None of the methodologies we studied for 
subdividing MSAs and/or statewide rural areas or for designing nearest 
neighbor labor market areas proved to have been demonstrably more 
accurate than the current system.
     Both a hospital's own wage data and that of other 
hospitals in its vicinity may contain relevant information about the 
level of wages in the hospital's true labor market. In particular, a 
hospital's own data may reflect specific circumstances of the 
hospital's labor market that we have yet to discover in our analysis of 
the data, but that reflect geographic variation that Medicare would 
want to capture in the wage index.
     No matter how we determine labor market areas, both a 
hospital's own wage data and that of other hospitals assigned to its 
labor market area may contain any number of spurious sources of 
variation, including data errors, that should not be captured in the 
wage index. The larger the number of hospitals whose data are averaged, 
the more the effects of spurious factors are reduced.
    To address all of these considerations, we have designed for 
comment and future study an approach that uses the current MSA system 
but generally gives a hospital's own wages a higher weight than under 
the current system. (We have assigned each hospital's own wages a 
weight sufficient to ensure that in no case would the weight of a 
hospital's own wages be reduced below its current level.) We believe 
that a hospital's own wages, to some degree, reflect its specific labor 
market conditions. Hence, a hospital's wage index would be more 
representative of these labor market conditions if a higher weight was 
assigned to its own wages than typically occurs in large MSA or 
statewide rural area labor markets. If this approach results in 
situations in which a hospital's wage level continues to be 
significantly higher than the combined average hourly wage used to 
construct its wage index, we would provide an exceptions mechanism 
whereby a hospital's wage index would be derived entirely or in part 
from its ``nearest neighbor'' labor market area.
    We are considering two alternative wage indexes based on this 
approach. The first of two wage indexes we considered places a 25 
percent (.25) weight on each hospital's own average hourly wage and a 
75 percent weight (.75) on the average hourly wage of the other 
hospitals in each hospital's MSA or statewide rural area. However, if a 
hospital's data represent more than 25 percent of the hours in the MSA 
or statewide rural area in which it is located, then, in calculating 
the hospital's wage index, that higher percent was used instead of the 
25 percent weight. The resulting weighted average hourly wage is 
divided by the national average hourly wage to obtain each hospital's 
wage index value. For purposes of discussion, this wage index is 
denoted as ``Minimum 25'' or ``M25''.
    The second wage index differs from the first alternative only in 
that a minimum weight of .50 is given the hospital's own average hourly 
wage, instead of a minimum 25 percent. This wage index is denoted as 
``Minimum 50'' or ``M50''.
    However, we recognize that in some cases a hospital's immediate 
labor market area as defined under a ``nearest neighbor'' approach may 
be more representative of its true labor market area than an MSA-based 
labor market area. To address such situations, we have developed a 
mechanism that would essentially provide a hospital with an alternative 
wage index derived entirely or in part from its nearest neighbors labor 
market. Currently, we are examining two methods for reclassification, a 
``simple'' method and a ``refined'' method. Both methods utilize the 
two wage indexes just introduced, and like the current MGCRB 
reclassification system, also require a hospital's own wages to exceed 
certain thresholds to meet eligibility. These thresholds are as 
follows:
    The first threshold would be used to identify hospitals 
whose own wage levels are still aberrant when using the Minimum 25 or 
Minimum 50 wage indexes. We set this threshold at the mean plus 1.0 
standard deviation of the ratio of each hospital's own average hourly 
wage to the weighted sum of its own average hourly wage plus the 
average hourly wage of the other hospitals in the MSA or Statewide 
rural area in which the hospital is located. For the M25 wage index, 
the threshold would be 1.07. That is, a hospital's average hourly wage 
would have to equal at least 107 percent of the weighted average hourly 
wage used to develop its wage index in order to qualify for 
reclassification. For the M50 wage index, the threshold would be 1.05.
     The second threshold, which would be used to identify 
hospitals whose wages are comparable to the hospitals in the immediate 
(that is, nearest neighbor) labor market area, was set at 83 percent, 
which equals the mean minus 1 standard deviation of the ratio of each 
hospital's average hourly wage to the average hourly wage of its 
nearest 10 neighbors.
    Under the ``simple'' reclassification methodology, there would be 
only a single adjustment available to a hospital that demonstrates that 
its wages are aberrant within its labor market area (that is, it meets 
both thresholds discussed above). The basis for the adjustment is 
evidence that the average hourly wage of the other hospitals in its MSA 
or statewide rural area is not representative of the average hourly 
wage in the hospital's actual labor market. A common reason that the 
MSA's average hourly wage may not be representative of a particular 
hospital's actual wage costs is that the MSA is too large and comprises 
multiple labor markets.
    To qualify for reclassification under this method, a hospital would 
have to meet a third criterion. The average hourly wage of a hospital's 
nearest 10 neighbors (with a minimum of at least 2 neighbor hospitals 
within 20 miles or all hospitals within 35 miles) would have to exceed 
the average hourly wage of the other hospitals in its MSA or statewide 
rural area. If this is the case, then the average hourly wage of the 
hospital's nearest 10 neighbors would be substituted for the MSA or 
statewide rural average hourly wage in calculating the numerator of the 
hospital's wage index. Under this reclassification scheme a hospital's 
own wages would be given the same weight as in the MSA-based 
alternative wage index (M25 or M50).
    The ``refined'' reclassification methodology would add a second 
basis for adjusting a reclassified hospital's wage index. This was 
developed to assist hospitals whose situation warrants a different 
nearest neighbor approach. For example, it is possible that a 
hospital's data could represent more than 25 percent, or even 50 
percent, of the total hours when combined with its 10 nearest 
neighbors. However, the same hospital's data very likely might 
represent a much lower percentage of the total hours in the MSA or 
statewide rural area in which it is located. This refined method would 
allow a hospital to use not only the average hourly wage of its 10 
nearest neighbors, but also its hours weight when combined with its 10 
nearest neighbors. So, in addition to the test of the 
representativeness of the other hospitals' average hourly wage 
described above, there would be a test of the appropriateness of 
substituting its hours weight from the hospital's immediate labor 
market for the weight that would otherwise be used (.25, .50, or its 
MSA/statewide rural hours weight). A reclassified hospital's hour 
weight reflected in the wage index would be adjusted under this method 
if two criteria are met. First, a hospital's share of the total hours 
in its nearest 10 neighbors ``labor market'' would have to exceed its 
hour weight in its MSA/statewide rural labor market. Second, the use of 
the nearest neighbors' hours weight would have to increase the average 
hourly wage that comprises the numerator of its wage index value. If 
both criteria were met, then the nearest neighbors' weight would be 
substituted for the hours weight that would have been used were the 
hospital not reclassified.
    This refined reclassification methodology would allow for three 
different types of reclassification groups under which a hospital's 
wage index would be calculated by using one of the following: (1) The 
nearest neighbors' average hourly wage and the MSA hour weight; (2) the 
nearest neighbors' hours weight and the MSA-based average hourly wage; 
or (3) both the nearest neighbors' weight and average hourly wage. The 
following tables summarize our findings under each of the options we 
examined in comparison with the current labor market system.
    Table E displays the number of hospitals for which the difference 
between the area wage index value for a given alternative and the 
hospital's own relative wage index value (determined by dividing the 
hospital's average hourly wage by the national average hourly wage) is 
greater than .08, either positive or negative. For each wage index 
option, the Lose and Gain columns show the number of hospitals for whom 
the difference represents a given decrease or increase in wage index 
value.
    Table F presents the assessment of wage conformity across labor 
markets. We determined that a ``boundary problem'' existed for a target 
hospital (that is, the hospital whose wage index value is being 
calculated) if--
     Among nearby hospitals, one or more other hospitals' wage 
index value is at least .04 greater than that of the target hospital, 
and
     The hospital with the lower wage index value pays higher 
wages than the hospital with the higher wage index value.
    ``Nearby hospitals'' were defined as the 20 nearest hospitals or if 
a hospital does not have 20 other hospitals within a 35 mile radius, 
all hospitals within a 35 mile radius. Table F shows the number of 
hospitals with one or more boundary problems and the average size of 
the wage index difference for those boundary problems. An average wage 
index difference of .12 corresponds to a payment difference of about 
$300 per case.

Table E.--Number of Hospitals Losing or Gaining More Than .08 Relative to Their Own Wage Level for Selected Wage
                                       Indexes by Type of Geographic Area                                       
----------------------------------------------------------------------------------------------------------------
                             All hospitals          Large urban           Other urban              Rural        
                         ---------------------------------------------------------------------------------------
       Wage index         Lose >.08             Lose >.08             Lose >.08             Lose >.08  Gain >.08
                                     Gain >.08             Gain >.08             Gain >.08                      
----------------------------------------------------------------------------------------------------------------
FY94 Pre-Reclass WI.....        684      1,708        263        530        137        321        281        857
Est. 95 Post-Reclass WI.        590      1,672        289        493        141        317        160        862
M25 Simple..............        385      1,305        161        412        101        269        123        624
M25 Refined.............        352      1,284        165        408        104        266         83        610
M50 Simple..............        195        698         90        235         48        153         57        310
M50 Refined.............        187        693         91        234         48        151         48       308 
----------------------------------------------------------------------------------------------------------------


  Table F.--Number of Hospitals Subject to and Average Size of ``Boundary Problem'' by Type of Geographic Area  
----------------------------------------------------------------------------------------------------------------
                          All hospitals           Large urban            Other urban               Rural        
                     -------------------------------------------------------------------------------------------
     Wage Index         Number                 Number                 Number                 Number             
                      hospitals    Average   hospitals    Average   hospitals    Average   hospitals    Average 
                                 difference             difference             difference             difference
----------------------------------------------------------------------------------------------------------------
FY94 Pre-Reclass WI.        760       0.113         49       0.099        240       0.103        471       0.125
Est. 95 Post-Reclass                                                                                            
 WI.................        662       0.110         51       0.105        215       0.101        396       0.120
M25 Simple..........        532       0.087         26       0.081        161       0.083        345       0.090
M25 Refined.........        515       0.085         25       0.081        161       0.082        329       0.089
M50 Simple..........        273       0.067          8       0.089         86       0.060        179       0.071
M50 Refined.........        268       0.067          8       0.089         85       0.060        175       0.071
----------------------------------------------------------------------------------------------------------------

    Table G shows the effects of the two possible reclassification 
schemes as compared to the current reclassification system. Table H 
shows the effects the different labor market alternatives would have 
when compared to the current FY 1994 pre-reclassified wage index.

     Table G.--Number of Hospitals Qualifying for Simple and Refined    
  Reclassification Using the Minimum 25 (M25) and the Minimum 50 (M50)  
 Wage Indexes, Compared to the Number of Hospitals Estimated to Reclass 
                     for the Wage Index in FY 1995                      
------------------------------------------------------------------------
  Reclassification        All      Large urban  Other urban             
    alternatives       hospitals                                Rural   
------------------------------------------------------------------------
Estimated FY 1995                                                       
 Reclasses..........          362           60           81          221
Hospitals Eligible                                                      
 for Reclass under                                                      
 1.07 Criterion for                                                     
 M25................          660          197          141          322
Simple Reclass:                                                         
    N10 AHW/MSA Hrs.          411          121           84          206
    No Adjustment...          249           76           57          116
Refined Reclass:                                                        
    N10 AHW/MSA Hrs.          250          111           61           78
    N10 AHW/N10 Hrs.          161           10           23          128
    MSA AHW/N10 Hrs.          110            7           13           90
    No Adjustment...          139           69           44           26
Hospitals for                                                           
 Reclass under 1.05                                                     
 Criterion for M50..          610          178          140          292
Simple Reclass:                                                         
    N10 AHW/MSA Hrs.          378          102           85          191
    No Adjustment...          232           76           55          101
Refined Reclass:                                                        
    N10 AHW/MSA Hrs.          300           98           75          127
    N10 AHW/N10 Hrs.           78            4           10           64
    MSA AHW/N10 Hrs.           54            1            4           49
    No Adjustment...          178           75           51           52
------------------------------------------------------------------------


                                       Table H--Labor Market Alternatives--Percent Change From Current MSA Values                                       
                                                                 [Pre-Reclassification]                                                                 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Greater than                                                                       -5 to -       Less than - 
                                             10percent     5-10 percent     0-5percent           0        0 to -5percent     10percent       10percent  
--------------------------------------------------------------------------------------------------------------------------------------------------------
Est. 95 Post-Reclass WI.................             210              64           1,114           3,556             235              48               3
M25 Simple..............................             180             201           2,155               0           2,302             379              13
M25 Refined.............................             222             230           1,982               0           2,387             396              13
M50 Simple..............................             318             332           1,662               0           1,528             925             465
M50 Refined.............................             343             301           1,643               0           1,546             927             470
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As demonstrated in the above tables, we believe these options for 
refining the wage index show promising results. All four of the wage 
index options significantly reduce the number of boundary problems, as 
seen in Table F. Not only would the number of boundary problems be 
reduced, but the boundary problems that do remain would be smaller, 
especially for the M50 wage indexes where the average difference is 
0.067 for both the simple and refined reclassification methods. As 
indicated in Table E, these wage index options produce wage index 
values that would more closely resemble a hospital's own wage level, as 
was expected. Table G demonstrates that the new reclassification 
methods would likely affect a larger number of hospitals than the 
current system. Whereas in the current system, we estimated that only 
362 hospitals qualify for the wage index reclassification, under the 
M25 wage index the simpler reclassification method would lead to 411 
hospitals being adjusted to their nearest neighbors' average hourly 
wage. The refined reclassification method under the M25 wage index 
would make it possible for 250 hospitals to use the nearest neighbors' 
average hourly wage, 161 hospitals to use both the nearest neighbors' 
average hourly wage and hours weight, and 110 hospitals to use just the 
nearest neighbors' hours weight. We show the effects the four new 
options would have when compared to the estimated 1995 post-
reclassified system against the current 1994 pre-reclassified values in 
Table H.
    We plan to continue our evaluation of these new wage index options 
in the coming months and are soliciting public comment. We will 
continue to accept comments on these wage index refinements until 
August 31, 1994. We will respond to these comments in the FY 1996 
prospective payment system proposed rule. Comments on this issue should 
be sent to: Lana Price, Director; Division of Hospital Payment Policy; 
1-H-1 East Low Rise; 6325 Security Boulevard; Baltimore, Maryland 
21207.
    While we believe the alternatives discussed above offer much 
promise with respect to refining the hospital wage index, we do not 
believe that sections 1886(d)(2), (3) and (8) of the Act authorize a 
hospital-specific wage index scheme that combines each hospital's own 
wages and the wages of other hospitals in its MSA or Statewide rural 
area using different hour weights. Moreover, the MGCRB provisions under 
section 1886(d)(10) of the Act contemplate wage index reclassifications 
from one area to another that cannot be reasonably implemented 
consistent with these alternatives. Therefore, before we could 
implement these alternatives, legislative changes would be necessary to 
allow the Secretary greater flexibility in refining the hospital wage 
index. Again, we invite public comments on these issues by August 31, 
1994, so that we may consider them in our continuing evaluation of wage 
index refinements.

H. State Labor Market Option

    In addition to the alternatives discussed above, we are also 
considering a State labor market option (SLMO) under which hospitals 
would be able to voluntarily design labor market areas within their own 
State boundaries. Although we are not formally proposing the SLMO at 
this time, we welcome comments on this option. Under the SLMO, an 
application to design labor market areas could be submitted by a group 
of hospitals or any entity that represents hospitals that would be 
affected under the SLMO (for example, a state hospital association, the 
Office of the Governor, etc.). The application would have to include a 
statement signed by each hospital's chief executive or chief financial 
officer supporting participation in the SLMO.
    The SLMO is being considered on the premise that hospitals within a 
State may, in some circumstances, have better information than HCFA 
concerning local labor market competition between hospitals. 
Accordingly, we are considering the SLMO along with the alternatives 
discussed above, which we believe would require legislative changes. 
Absent changes to the statute, we believe that the SLMO would offer 
opportunities for hospitals to design labor market areas that are more 
reflective of local wage conditions than the current system.
1. Criteria for Participating in a SLMO
    Below we describe some of the criteria we would apply to determine 
whether labor market areas under the SLMO could be approved. (We have 
not fully designed or specified the limitations for creating labor 
market areas under the SLMO, and we are interested in any comments from 
the public for developing criteria under which a SLMO would be 
approved.) However, we envision that hospitals participating in a SLMO 
could design labor market areas under the following restrictions:
     We are considering limiting approval of labor market areas 
under the SLMO to cases in which there is unanimous support among 
hospitals. (We may also consider use of ``overwhelming support'' as a 
criterion rather than unanimous support. We likely would specify a 
percentage of participating hospitals that must support the SLMO labor 
market areas (for example, 75 percent). Such a criterion may also 
specify that to be approved, the SLMO labor market area must be 
supported by each hospital that would lose more than 5 percent of 
payments relative to the current system.)
     Aggregate payments to hospitals participating in the SLMO 
could be no higher than they otherwise would have been in the absence 
of the SLMO.
     All hospitals that participate in the SLMO must sign an 
application for it to become effective. Although the application could 
come from a group of hospitals or its representatives, each 
participating hospital must sign the application and agree to its 
provisions. In addition, each participating hospital must indicate in 
the application (or a separate agreement) that:
    The participating hospital waives its rights to any wage index it 
would otherwise receive absent the SLMO, including a wage index it 
might receive through geographic reclassification.
    The hospital understands how its participation in the SLMO would 
affect its prospective payments, including an understanding that the 
hospital's wage index could be higher or lower under the SLMO in 
comparison to its wage index under labor market areas in the absence of 
the SLMO. (The SLMO application would only have to specify that the 
hospital understands the effect of HCFA regulations regarding SLMOs and 
that there may be a reduction of their wage index as a result of 
participation. The hospital would not have to indicate the precise 
level of its wage index in the SLMO application.)
    Labor market areas under the SLMO would be automatically renewed 
each year for the purpose of calculating the wage index until one or 
more participating hospitals withdraws its support for the SLMO.
     Labor market areas under the SLMO generally would be 
prohibited from crossing State boundaries. The only exception would be 
that hospitals from a bordering State may be included in a SLMO labor 
market area if they are currently located in an MSA that crosses a 
State boundary. In this case, the wage index would be calculated as if 
hospitals in the bordering State were included under the SLMO labor 
market area. For hospitals in the bordering State, the wage index would 
continue to be calculated as it is under the current system.
    Section 1886(d)(3)(E) of the Act requires that the Secretary 
establish the wage index for the purposes of adjusting payment rates 
for hospital inpatient services to reflect wages in a geographic area 
relative to the national average. For this reason, we are considering 
establishing a criterion that labor market areas under the SLMO must 
include all hospitals within a contiguous area or must have defined 
geographic boundaries or distance parameters. However, we are concerned 
that such a requirement may prevent hospitals in noncontiguous areas 
within a State that share similar demographic features from being 
grouped in one labor market area under the SLMO. We are also concerned 
that hospitals may be able to meet the contiguity requirement but 
design an area with an illogical configuration that may not represent a 
labor market area. For example, we do not believe it would be 
appropriate to approve an application for a new labor market area that 
groups 2 hospitals 100 miles apart but excludes the hospitals located 
in between. We are also concerned about approving a SLMO application 
under which the wage index would be based only on hospital-specific 
wages. Such an application would not reflect local market conditions 
based on contiguous geographic areas. Because of these concerns, we are 
soliciting public comments regarding appropriate criteria for approving 
labor market areas under the SLMO.
2. Calculation of Budget Neutrality
    As noted above, we would require payments to hospitals under the 
SLMO to be budget neutral in relation to payments in the absence of the 
SLMO. We are considering alternatives for applying a budget neutrality 
adjustment. Because the budget neutrality calculation for the SLMO 
labor market areas would be made after the effects of reclassification, 
we expect that hospitals under a SLMO will continue to apply for 
reclassification as they do under the current system. Such 
reclassifications would be recognized both for purposes of computing 
the budget neutrality adjustment and computing the wage index values 
applicable to reclassified hospitals. We envision two options for 
applying the budget neutrality adjustment:
     Adjusting the wage index for the SLMO labor market areas. 
Under this option, there would be a single adjustment to the wage index 
that would affect all hospitals participating in the SLMO in equal 
proportions.
     Adjusting the wage index for selected hospitals within the 
SLMO labor market areas. Under this option, the application to create 
labor market areas under SLMO would specify how the budget neutrality 
adjustment would be applied. For example, it could be applied equally 
to all SLMO hospitals or it could be limited to selected hospitals.
    If the SLMO application does not specify how to apply the budget 
neutrality adjustment, the adjustment to the wage index would have a 
proportional effect on payments to all hospitals participating in a 
SLMO labor market area. (As indicated above, reclassification granted 
to hospitals participating in a SLMO would be recognized in computing 
the wage index values applicable to non-SLMO reclassified hospitals 
under section 1886(d)(8)(C) of the Act.)
3. Effect on Hospitals Not Participating in the SLMO
    Hospitals that are not part of labor market areas under the SLMO 
would continue to have their wage index calculated under the current 
labor market areas--including the effects of reclassification. The wage 
index for these hospitals would continue to reflect the average hourly 
wage in their current labor market area relative to the national 
average. If a non-SLMO hospital were reclassified to an MSA that 
includes hospitals that are part of a SLMO labor market area, the wage 
index for the non-SLMO hospital would be calculated as if the SLMO did 
not exist.
    We note that hospitals in SLMO States that are not part of a 
redesigned labor market area would not necessarily have to be part of 
the budget neutrality adjustment and their support for the SLMO would 
not be needed. However, if they chose to be part of the budget 
neutrality adjustment, their support for the SLMO would be needed even 
if they were not included in a redesigned labor market areas.
4. Process for Submitting a SLMO Proposal
    We are considering establishing the process described below for 
establishing labor market areas under the SLMO. Given that hospitals 
may apply both for geographic reclassification by the MGCRB and for a 
revised labor market area under the SLMO in the same year, our time 
frames for SLMO decisions may parallel the time frames used for 
reclassification decisions by the MGCRB. However, we expect that 
approval or rejection of SLMO applications would be made by HCFA's 
Bureau of Policy Development. The potential process would consist of 
the following:
    (1) The initial SLMO application would be made to HCFA and would 
include a statement from each participating hospital attesting to their 
support for labor market areas under the SLMO.
    (2) We envision providing notification to applicants of approval of 
the SLMO labor market areas before publication of our annual 
prospective payment system proposed rule (usually published in the 
Federal Register by May of each year). For hospitals whose SLMO 
application has been denied, we are considering providing an 
opportunity to submit additional information in support of a SLMO 
application. This information would be used by HCFA in reconsidering a 
denial before publication of the proposed rule.
    (3) Approval of SLMO labor market areas and the resulting proposed 
wage indices would be announced in the proposed rule. The proposed rule 
would include the wage index under the current labor market areas 
(including the effects of reclassification) and under the SLMO labor 
market areas.
    (4) Hospitals participating in the SLMO would be able to withdraw 
support for the SLMO during the 60-day comment period following 
publication of the proposed rule. If one or more hospitals withdraws 
support for a labor market area under the SLMO, the SLMO would not go 
into effect in the following fiscal year. To withdraw from the SLMO, 
the participating hospital would submit a letter to HCFA referencing 
the appropriate proposed rule and stating its participation in the SLMO 
labor market area is being withdrawn.
    (5) Absent any withdrawal of support for labor market areas under 
the SLMO, HCFA would announce labor market areas and wage indices under 
the SLMO in the prospective payment system final rule (published by 
September 1 of each year).
    (6) The labor market areas under the SLMO would be in effect for at 
least 1 Federal fiscal year following approval by HCFA. The SLMO labor 
market areas would be automatically renewed for following years unless 
a participating hospital informed HCFA in writing of its decision to 
withdraw.
5. Special Issues Affecting the SLMO
    We are considering the following policies that would address the 
effects of special situations on the SLMO concept.
     New Hospitals--If a new hospital is established in a SLMO 
labor market area after its approval, the wage index for the new 
hospital would be determined as it is under the current system for the 
remainder of the fiscal year. In order for the SLMO labor market area 
to be renewed for the following fiscal year, the new hospital would 
have to inform HCFA in writing of its support for the SLMO labor market 
area.
     Ownership Changes and Hospital Mergers--If there is an 
ownership change or hospital merger during the period that the SLMO 
labor market area is in effect, the SLMO would remain in effect for the 
remainder of the fiscal year. In order for the SLMO labor market area 
to be renewed for the following fiscal year, the new ownership would 
have to inform HCFA in writing of its support for the SLMO labor market 
area.
    We will accept comments on the SLMO until August 31, 1994. These 
comments should be sent directly to: Lana Price, Director; Division of 
Hospital Payment Policy; 1-H-1 East Low Rise; 6325 Security Boulevard; 
Baltimore, Maryland 21207. Responses to these comments will appear in 
the FY 1996 prospective payment system proposed rule.

I. Conclusion

    Since the inception of the prospective payment system, we have 
repeatedly solicited comments concerning how labor market areas used to 
construct the wage index should be defined. In recent years, we have 
also solicited comments concerning specific proposals to modify or 
replace our current use of MSAs. For example, we have offered for 
public comment the reclassification criteria used by the MGCRB and 
alternatives to the MSA-based system such as ProPAC's nearest neighbor 
proposal and the options outlined in the present rule. In essence, 
therefore, we have been engaged in a continuing dialogue with the 
public concerning whether it is appropriate to use MSAs to define labor 
market areas to construct the wage index.
    On June 30, 1993, the Office of Management and Budget announced the 
revised definitions for Metropolitan Areas (MA) to reflect the MA 
standards published on March 30, 1990, and the demographic data drawn 
from the 1990 Decennial Census. In that bulletin, OMB stated that in 
cases where an agency is publishing for comment a proposed regulation 
that would use the MA definitions for a nonstatistical purpose, the 
agency should seek public comment on the proposed use of the MA 
definitions. As indicated above, we are not proposing the options 
outlined in sections III G and H at this time. However, consistent with 
OMB's bulletin and as part of our continuing review of the definitions 
used to define labor market areas for wage index purposes, we are 
soliciting comments on the use of MSA definitions as incorporated in 
the options described in this document.

IV. Other Proposed Changes to the Prospective Payment System for 
Inpatient Operating Costs

A. Definition of and Payment for Transfer Cases (Sec. 412.4)
    The prospective payment system distinguishes between 
``discharges'', situations in which a patient leaves an acute-care 
hospital after receiving complete treatment, and ``transfers'', 
situations in which the patient is transferred to another acute-care 
hospital for related care. If a full DRG payment were made to each 
hospital involved in a transfer situation irrespective of the length of 
time the patient spent in the ``sending'' hospital prior to transfer, 
this would create a strong incentive to increase transfers, thereby 
unnecessarily endangering patients' health. Therefore, the regulations 
at Sec. 412.4(d) provide that, in a transfer situation, full payment is 
made to the final discharging hospital and each transferring hospital 
is paid a per diem rate for each day of the stay, not to exceed the 
full DRG payment that would have been made if the patient had been 
discharged without being transferred.
    Currently, the per diem rate paid to a transferring hospital is 
determined by dividing the full DRG payment that would have been paid 
in a nontransfer situation by the geometric mean length-of-stay for the 
DRG into which the case falls. Transferring hospitals are also eligible 
for outlier payments for cases that meet the cost outlier criteria 
established for all other cases (nontransfer and transfer cases alike) 
classified to the DRG. They are not, however, eligible for day outlier 
payments. Two exceptions to the transfer payment policy are transfer 
cases classified into DRG 385 (Neonates, Died or Transferred to Another 
Acute Care Facility) or DRG 456 (Burns, Transferred to Another Acute 
Care Facility), which are not paid on a per diem basis but instead 
receive the full DRG payment.
1. Definition of a Transfer Case
    Under current policy, cases that are transferred from an acute-care 
area paid under the prospective payment system to a hospital or unit 
excluded from the prospective payment system are considered to be 
discharges (as opposed to transfers) from the acute-care hospital. As a 
discharge, payment for the case is the full DRG amount.
    The rationale for this policy was set forth in the initial hospital 
inpatient prospective payment interim final rule with comment period, 
which was published on September 1, 1983. In that document, we stated 
that: ``* * * Hospitals and units excluded from the prospective payment 
system are organized for treatment of conditions distinctly unlike 
treatment encountered in short-term acute care facilities. Therefore, 
the services obtained in excluded facilities would not be the same 
services obtained in transferring hospitals (that is, paid under the 
prospective payment system), and payment to both facilities would be 
appropriate.'' (See 48 FR 39759.) Thus, since the prospective payment 
hospital was assumed to be providing a full course of acute inpatient 
care before transfer to the excluded hospital or unit for additional 
care and treatment, we believed it was appropriate to pay the 
prospective payment hospital the full DRG amount.
    For the most part, inpatient hospital services furnished by 
hospitals and hospital units excluded from the prospective payment 
system are paid on a reasonable cost basis, subject to a cost per 
discharge limit. This payment does not vary by source of admission or 
discharge destination. Under Secs. 412.22 through 412.29, the following 
types of facilities are identified as being excluded from the 
prospective payment system: psychiatric hospitals and distinct part 
units; rehabilitation hospitals and distinct part units; long-term care 
hospitals; cancer hospitals; children's hospitals; hospitals outside 
the 50 States, the District of Columbia, or Puerto Rico; Veterans 
Administration and other Federal hospitals; and nonparticipating 
hospitals furnishing emergency services to Medicare beneficiaries. Also 
listed in Sec. 412.22(c) (2) and (3) are hospitals paid under approved 
State cost control systems and hospitals reimbursed in accordance with 
authorized demonstration projects. Under Sec. 412.4(b)(3)(i), patients 
moving from an acute-care hospital paid under the prospective payment 
system to hospitals within either of these categories are currently 
considered transfers, and therefore they are not referred to in the 
following discussion.
    Since implementation of the prospective payment system over 10 
years ago the distinctions between the types of services provided in 
acute-care hospitals and excluded hospitals and hospital units have 
become less clear. Acute-care hospitals may have an incentive to reduce 
patient lengths of stay, and thus patient costs, in order to maximize 
profits since payment is no longer linked to actual costs. This has led 
to a steady increase in the numbers of excluded hospitals and units, as 
well as postacute-care facilities, as acute-care hospitals look to 
discharge patients whom heretofore they were treating until the 
patients were ready to be discharged to their homes. (See Langenbruner 
et al., Health Care Financing Review, Spring 1989.)
    As part of a study of Medicare transfer cases funded by HCFA 
(``Transfers of Medicare Hospital Patients under the Prospective 
Payment System'', PM-191-HCFA, January 1994), RAND examined trends in 
transfer episodes from FY 1987 to FY 1991. RAND's analysis found that, 
from 1987 to 1991, while transfers from one prospective payment system 
setting to another increased 4.1 percent, transfers from a prospective 
payment system setting to excluded rehabilitation units and excluded 
psychiatric units increased 18.9 percent and 7.0 percent, respectively. 
We believe that this growth in transfers to excluded hospital units is 
an indication that the distinction in the types of services provided in 
short-term acute-care settings and excluded settings is not as 
significant as it was in 1983.
    In addition, in section VI.A. of this preamble, we are proposing 
revised criteria for determining whether an entity qualifies for 
exclusion from the prospective payment system as a separate long-term 
care hospital. This proposed change is in response to situations where 
hospitals are manipulating the process for recognition as a separate 
Medicare provider in order to circumvent the prospective payment system 
exclusion rules. For example, some hospitals have begun to organize 
themselves under what they themselves refer to as the ``hospital within 
a hospital'' model. The effect of such a reorganization is to grant an 
exclusion to what is, for all practical purposes, a long-term care 
hospital unit, even though section 1886(d)(1)(B) of the Act limits the 
exclusion from the prospective payment system for hospital units to 
rehabilitation and psychiatric units.
    We believe that the motivation for such arrangements is primarily 
financial and may lead to inappropriate transfers that are not 
necessarily in the best interests of patients' health and well-being. 
We strongly believe that patients should be treated in settings that 
are best suited to provide the levels of care the patients need. 
Decisions regarding the most appropriate setting should be based on 
clinical criteria. To help ensure that this occurs, to the greatest 
extent practicable, financial incentives should be neutral regarding 
the setting wherein a patient is treated. This means matching payments 
as nearly as possible to the resources required to treat the patient. 
We believe our current definition of transfer cases provides financial 
incentives on the acute-care side to transfer patients to excluded 
hospitals and units in order to reduce lengths of stay and at the same 
time receive payment at the full DRG amount. These incentives exist 
whether the acute-care hospital is transferring patients to its 
hospital-based excluded units or to other excluded hospitals.
    For these reasons, we are proposing to change our definition of a 
transfer case by adding new Sec. 412.4(b)(4) to include cases 
transferred from an acute-care setting paid under the prospective 
payment system to an excluded hospital or unit. We believe that this 
policy would more appropriately pay those prospective payment hospitals 
that are transferring patients to an excluded hospital or unit before 
completion of a course of treatment. This policy would extend to cases 
transferred to all excluded hospitals and units, Veterans 
Administration hospitals, other Federal hospitals, and hospitals not 
participating in Medicare. Discharges to non-hospital settings, such as 
skilled nursing facilities and intermediate care facilities, would 
still be paid as discharges.
2. Payment for Transfer Cases
    Since the inception of the prospective payment system, there has 
been concern that a flat per diem payment rate for transfer cases fails 
to account for the likelihood that the beginning of a patient's 
hospitalization is the most resource intensive portion of the stay. 
Comments received in response to the September 1, 1983 interim final 
rule recommended that the transferring hospital should receive either 
the full DRG amount or should be paid on a sliding scale to reflect the 
higher costs of the first few days of a patient's stay. Our response at 
that time was that little or no data were provided in support of this 
position (49 FR 245, January 3, 1984).
    Last year, in the May 26, 1993 proposed rule, we responded to a 
ProPAC recommendation concerning payment of transfer cases and 
described the preliminary results of the analysis undertaken by RAND to 
evaluate the adequacy of our transfer payment policy (58 FR 30245). 
RAND found that among cases transferred prior to reaching the mean 
length-of-stay, 1-day stays cost 2.096 times the per diem payment 
amount for cases in nonsurgical DRGs (based on the geometric mean 
length of stay) and 2.576 times the per diem for surgical DRGs. Among 
nonsurgical transfer cases, the costs of 2-day stays are about 1.215 
times the per diem payment amount, and cases transferred after 2 days 
cost about 10 percent more than the applicable per diem amount. Among 
surgical cases, the costs of stays of 2 or more days are actually about 
7 percent below the applicable per diem amount.
    To evaluate the impact of replacing the flat per diem methodology 
with one designed to reflect the observed relationship between costs 
and the first few days of hospitalization, RAND simulated a transfer 
payment methodology that multiplies the per diem amounts by the 
coefficients referred to above. The improvement in payment-to-cost 
ratios for per diem transfer cases was significant, from 0.7224 under 
current policy to 0.9722 using the scaled per diem.
    We did not propose a change to the transfer payment policy last 
year, however, due to concerns over the specification of the transfer 
payment formula. First, the coefficients used to graduate the per diem 
amount are dependent on the specification of the model and the data 
employed. Ensuring the continued validity of the per diem weighting 
factors would require frequent reestimation as other payment parameters 
change and more recent data become available.
    Second, we were concerned that weighting the per diem amounts by 
the coefficients directly from the regression may overstate the 
precision of the estimates of costs per day prior to transfer. Because 
available data do not attribute charges or costs to a particular day, 
the estimated costs for each additional day reflect the incrementally 
higher costs per case compared to transfers occurring 1 day earlier. 
If, in transfers occurring after 3 or more days, for example, costs per 
day were more evenly distributed than the graduated per diem payments, 
the coefficients in the regression might not reflect the costs of 
additional days.
    This leads to a third concern, that the graduation of the scaled 
per diem amounts may generate inappropriate incentives to transfer 
patients as soon as possible, that is, before the point at which costs 
equal payments. This incentive could arise, for example, for cases in 
which payments early in a patient's stay are greater than costs (that 
is, cases with more even costs throughout the stay rather than high 
costs in the first day or two). In such cases, the longer the patient 
stays in the hospital, the more likely that total costs will approach 
total payments. Under this scenario, a hospital seeking to maximize its 
profit could do so by transferring the patient as soon as possible.
    In order to address these concerns and to pay hospitals more 
appropriately for the treatment they furnish to patients before 
transfer, we are proposing at Sec. 412.4(d)(1) to pay transfers twice 
the per diem amount for the first day of any transfer stay plus the per 
diem amount for each of the remaining days prior to transfer, up to the 
full DRG amount. We believe this method will improve the payment equity 
for transfer cases in a straightforward way while alleviating our 
concerns about a steeply graduated per diem based directly on 
regression coefficients. We are proposing that this change be applied 
uniformly for both medical and surgical transfer cases; although 
surgical transfer cases appear to be more costly, on average, the first 
day, they are relatively less costly for the second day and beyond.
    Using the graduated per diem methodology we are proposing, RAND 
estimated the payment-to-cost ratio of transfer cases that were 
transferred prior to reaching the geometric mean length of stay would 
be 0.9321. While this is somewhat less than the payment-to-cost ratio 
for nontransfer cases (0.9645), it represents a significant improvement 
over the current ratio for these cases (0.7224).
    Since publication of the September 1, 1993 final rule, RAND has 
completed the second and final phase of its study. This phase of the 
study focused on the receiving hospitals and how they fare under our 
current transfer payment policy. Their findings in this regard were 
more ambiguous than in the case of sending hospitals. RAND performed 
regressions on transfer cases in receiving hospitals to determine 
whether these cases were more expensive than nontransfer cases within 
the same DRGs. They found no consistent relationship.
    Over 60 percent of all transfer cases were assigned DRGs from MDC 5 
(Diseases and Disorders of the Circulatory System). According to RAND, 
``* * * for the surgical DRGs in MDC 5 (DRGs 104 through 116), the 
costs of transfer cases relative to nontransfer cases at the same 
hospital range from almost the same (in DRG 106, coefficient = 0.007) 
to about 11 percent greater (DRG 105, coefficient = 0.105). In the 
medical DRGs in MDC 5, the range is even wider, with transfers received 
into DRG 121 and 122 actually costing less than other cases in the same 
DRG at the same hospital and transfers received in DRG 127 costing 37 
percent more.'' (See RAND page 40.)
    Based on these results, RAND did not recommend and we are not 
proposing any change in the payments for the receiving hospital in a 
transfer episode. That is, if the receiving hospital is also the final 
discharging hospital, they will be paid the full DRG amount plus any 
outlier payments they are eligible to receive (under either the day or 
cost outlier thresholds). If the patient is transferred again prior to 
discharge, then, under the change we are proposing, the sending 
hospital in this second transfer episode would be paid using the 
graduated per diem methodology, rather than the flat per diem rate they 
currently receive.

B. Review of DRG Assignments (Sec. 412.60)

    Under the provisions of Sec. 412.60(d), a hospital has 60 days from 
the date of the notice of the initial DRG assignment of a claim to 
request review of that assignment. The hospital may submit additional 
information as part of its request. The intermediary reviews the 
request and any additional information and decides if a change in the 
assignment is appropriate. Any change by the intermediary to a higher-
weighted DRG must be reviewed by the hospital's Peer Review 
Organization (PRO) to determine if the request and the change are 
appropriate.
    Under the first PRO contract cycle, this review was conducted on a 
postpayment basis. However, the second PRO contract, effective July 1, 
1986, required that this review be conducted on a prepayment basis. 
Therefore, Sec. 412.60(d)(2) currently provides that the intermediary 
must request that the PRO review any change in assignment to a higher-
weighted DRG.
    Under the fourth contract cycle, the PROs are no longer required to 
review these cases on a prepayment basis. Rather, the cases are flagged 
and the PRO conducts a 100 percent review after payment. Therefore, we 
are proposing to revise Sec. 412.60(d)(2) to conform the regulations to 
current practice. At the same time, we would revise an incorrect cross-
reference to the regulations that govern the PROs' review of these DRG 
reassignments. The correct cross-reference is Sec. 466.71(c)(2).

C. National Average Standardized Amounts for FY 1995 (Sec. 412.63)

    Section 1886(d)(3)(A) of the Act directs the Secretary to compute 
national average standardized amounts for use in determining payments 
for inpatient operating services, updated annually by the applicable 
percentage increase set forth under section 1886(b)(3)(B) of the Act. 
Under section 1886(d)(3)(A)(ii) of the Act, for FYs 1988 through 1994, 
the Secretary has computed separate national average standardized 
amounts for large urban, other urban and rural areas. However, section 
1886(d)(3)(A)(iii) of the Act requires that, for discharges occurring 
after October 1, 1994, the average standardized amounts for hospitals 
located in a rural area shall be equal to the average standardized 
amount for hospitals located in an other urban area. We note that 
hospitals located in a rural area will continue to be considered rural 
for all other payment purposes, such as the disproportionate share 
adjustment.
    The Secretary has been applying updates to the average standardized 
amounts for each fiscal year as provided under section 1886(b)(3)(B) of 
the Act. For FY 1995, section 1886(b)(3)(B)(i)(X) of the Act directs 
the Secretary to update the rural national average standardized amount 
by the amount necessary to make it equal to the other urban national 
average standardized amount.
    Current Sec. 412.63(m) already reflects the requirement that, for 
discharges occurring after October 1, 1994, we will pay for inpatient 
hospital services based on national average standardized amounts for 
large urban and other areas. Thus, there will no longer be separate 
national average standardized amounts for other urban and rural areas. 
However, we are proposing to make several technical changes to 
Sec. 412.63(m) and (r), concerning computation of Federal rates, to 
eliminate now obsolete references to the rural and other urban 
standardized amounts and replace them with references to the 
standardized amounts for other areas. In the addendum to this proposed 
rule, we provide a description of the updates being proposed for FY 
1995 under the requirements of sections 1886(b)(3)(B)(i)(X) and 
1886(d)(3)(A)(iv) of the Act.

D. Outliers (Secs. 412.80, 412.82 and 412.84)

    Section 1886(d)(5)(A) of the Act provides that, in addition to the 
basic prospective payment rates, payments must be made for discharges 
involving day outliers and may be made for cost outliers. Under section 
1886(d)(3)(B) of the Act, the Secretary has been required to separately 
reduce the urban and rural national standardized amount by the 
proportion of estimated total DRG payments attributable to outliers in 
each respective area. Beginning with FY 1995, section 1886(d)(3)(B) of 
the Act, as amended by section 4002(c)(2)(B)(iii) of Public Law 101-
508, requires the Secretary to reduce the large urban and other 
national standardized amounts by the same factor to account for the 
proportion of total DRG payments made to outlier cases. (As explained 
in section IV.C. of this preamble, section 1886(d)(3)(A)(iii) of the 
Act specifies that beginning in FY 1995, the standardized amount for 
other urban and rural areas will be equal, with the result that there 
will be only two standardized amounts, one for large urban areas and 
one for all other areas.) Section 1886(d)(9)(B)(iv) of the Act requires 
that the urban and other standardized amounts applicable to hospitals 
in Puerto Rico be reduced by the proportion of estimated total DRG 
payments attributable to estimated outlier payments. Furthermore, 
section 1886(d)(5)(A)(iv) of the Act directs that outlier payments in 
any year may not be less than 5 percent nor more than 6 percent of 
total payments projected or estimated to be made based on the 
prospective payment rates.
    Section 13501(c) of the Omnibus Budget Reconciliation Act of 1993 
(Public Law 103-66) amended section 1886(d)(5)(A) of the Act with 
respect to outliers beginning in FY 1995. With regard to cost outliers, 
section 13501(c) of Public Law 103-66 requires that the Secretary 
modify the methodology for determining the cost outlier threshold. 
Formerly, section 1886(d)(5)(A)(ii) of the Act specified that a 
hospital can receive payment for a cost outlier if the adjusted costs 
for a discharge exceed the greater of a fixed dollar amount or a fixed 
multiple the DRG payment for the case. As amended by section 
13501(c)(2) of Public Law 103-66, section 1886(d)(5)(A)(ii) of the Act 
now specifies that, for discharges on or after October 1, 1994, a 
hospital may receive payment for a cost outlier if adjusted costs 
exceed the DRG prospective payment rate plus a fixed dollar amount 
determined by the Secretary. We will refer to this revised cost outlier 
threshold as ``fixed loss.'' A further discussion of the methodology 
for determining the fixed loss is provided below.
    Section 13501(c) of Public Law 103-66 also amended section 
1886(d)(5)(A) of the Act with respect to day outliers. Beginning with 
FY 1995, section 1886(d)(5)(A) of the Act requires the Secretary to 
reduce the proportion of total outlier payments paid under the day 
outlier methodology. Under the requirements of section 1886(d)(5)(A)(v) 
of the Act, the proportion of outlier payments paid under the day 
outlier methodology, relative to the proportion of outlier payments in 
FY 1994, shall be 75 percent in FY 1995, 50 percent in FY 1996 and 25 
percent in FY 1997. Under the provisions of section 1886(d)(5)(A)(i) of 
the Act, the Secretary will no longer pay for day outliers after 
September 30, 1997. As indicated in the table published in our 
September 1, 1993 final rule (58 FR 46348), we estimated that 18 
percent of FY 1994 outlier payments would be for outliers meeting the 
day outlier threshold only, while 13 percent would meet the day and 
cost outlier thresholds and be paid under the day outlier methodology. 
Thus, a total of 31.3 percent of total outlier payments in FY 1994 
would be paid as day outlier cases. Pursuant to section 1886(d)(5)(A) 
of the Act, we propose setting the day outlier thresholds for FY 1995 
through FY 1998 so that day outlier payments approximate the following 
proportion of total outlier payments:
     FY 1995--24 percent (75 percent of 31.3 percent).
     FY 1996--16 percent (50 percent of 31.3 percent).
     FY 1997--8 percent (25 percent of 31.3 percent).
    As payments to day outliers are reduced, there will be a 
corresponding increase in payments to cost outliers.
1. FY 1995 Outlier Thresholds
    For FY 1994, the day outlier threshold is the geometric mean length 
of stay for each DRG plus the lesser of 23 days or 3.0 standard 
deviations. The marginal cost factor (or the percent of Medicare's 
average per diem payment paid for each outlier day) for day outliers is 
equal to 55 percent in FY 1994. The cost outlier threshold is the 
greater of 2.0 times the prospective payment rate for the DRG or 
$36,000 ($33,000 for hospitals that have not yet entered the 
prospective payment system for inpatient capital-related costs). The 
marginal cost factor (or the percent of costs paid after costs for the 
case exceed the threshold) for cost outliers is 75 percent.
    For FY 1995, we propose to set the day outlier threshold at the 
geometric mean length of stay for each DRG plus the lesser of 22 days 
or 3.0 standard deviations. Section 13501(c)(3) of Public Law 103-66 
provides that the additional payments for outlier cases may be 
different than the hospital's marginal cost of care during the 
transition period phasing out payments to day outliers. We are 
proposing to revise Sec. 412.80 to reflect this provision. We also 
propose to revise Sec. 412.82(c), so that it does not specify a 
marginal cost factor of 55 percent. HCFA will specify the level of the 
marginal cost factor during the day outlier phase-out in the annual 
prospective payment system rulemaking process.
    Our proposed policy would reduce the proportion of outlier payments 
paid to day outliers as required by section 1886(d)(5)(A) of the Act. 
We are proposing to accomplish the required reduction in payments to 
day outliers for FY 1995 solely through a reduction in the marginal 
cost factor rather than through an increase in the threshold. To 
determine the marginal cost factor necessary to achieve the mandated 
reduction in outlier payments, we simulated both the current and 
proposed outlier policies. Based on these simulations, we determined 
that a reduction in the marginal cost factor to 49 percent is necessary 
to achieve the required 25 percent reduction in the proportion of 
payments paid under the day outlier methodology. Therefore, we are 
proposing to reduce the marginal cost factor from 55 percent in FY 1994 
to 49 percent in FY 1995.
    We are also proposing a fixed loss cost outlier threshold in FY 
1995 equal to the prospective payment rate for the DRG plus $23,300 
($21,400 for hospitals that have not yet entered the prospective 
payment system for capital-related costs). The fixed loss threshold 
would replace the current threshold, which is equal to the greater of 
2.0 multiplied by the DRG payment for the case or $36,000. We are 
proposing the fixed loss threshold under the requirements of section 
1886(d)(5)(A) of the Act. We believe the fixed loss threshold is an 
improvement over current policy because it focuses Medicare's outlier 
payments on the most costly cases. Under current policy, it is possible 
that cases in certain high-weight DRGs can incur losses significantly 
greater than $36,000 before Medicare will make an outlier payment. (We 
note that the fixed loss threshold is adjusted by the wage index, 
similar to the current cost outlier threshold. Thus, hospitals that are 
paid based on a wage index value of less than 1.0 will have this 
threshold reduced while other hospitals will be paid based on a higher 
threshold.)
    To further focus Medicare's cost outlier payments on the costliest 
cases, we are proposing to increase the marginal cost factor from 75 
percent to 80 percent. We note that raising the marginal cost factor to 
80 percent is consistent with a recommendation made by ProPAC in its 
March 1, 1994 annual report. While we are raising the marginal cost 
factor for cost outlier cases to 80 percent, we are continuing to set 
the cost and day outlier thresholds in order to maintain the estimated 
5.1 percent proportion of total DRG payments paid as outliers.
    The thresholds we would propose if we were not implementing the 
change in the day and cost outlier payment methodology required by 
section 1886(d)(5)(A)(v) of the Act and discussed above would be:
     Day outliers--The geometric mean length of stay for each 
DRG plus the lesser of 21 days or 3 standard deviations.
     Cost outliers--The greater of 2.0 times the prospective 
payment rate for the DRG or $31,000.
    We estimate that the proposed FY 1995 outlier thresholds would 
result in 76 percent of outlier cases paid using the cost outlier 
methodology and 24 percent paid using the day outlier methodology. 
Cases that meet the day outlier threshold but that would be paid using 
the cost outlier methodology, because it yields the higher payment, 
would represent 20 percent of all outlier cases. Our simulation of FY 
1995 outlier payments based on FY 1993 MedPAR data indicates that the 
percentage of outlier cases that would qualify as day outliers is 
approximately 67 percent. The cases qualifying as day outliers would 
receive 69 percent of operating outlier payments in FY 1995. An 
estimated 33 percent of outlier cases would be cost-only outlier cases, 
which would receive about 31 percent of operating outlier payments.
    The following table illustrates these findings in greater detail: 

                                                                        
------------------------------------------------------------------------
                                    Percentage                          
                       Percentage       of       Percentage   Percentage
  Type of outlier      of outlier   operating    of capital    of total 
                         cases       outlier      outlier      outlier  
                                    payments     payments     payments  
------------------------------------------------------------------------
Meets day threshold                                                     
 only...............         38.0         13.0         10.0         12.0
Meets day and cost                                                      
 thresholds, paid                                                       
 using day                                                              
 methodology........          9.0         11.0          9.0         11.0
Meets day and cost                                                      
 thresholds, paid                                                       
 using cost                                                             
 methodology........         20.0         45.0         44.0        45.0 
                     ---------------------------------------------------
Subtotal--All cases                                                     
 meeting day                                                            
 threshold..........         67.0         69.0         63.0         68.0
Meets cost threshold                                                    
 only...............         33.0         31.0         37.0        32.0 
                     ---------------------------------------------------
      Total.........        100.0        100.0        100.0       100.0 
------------------------------------------------------------------------

    When we modeled the combined operating and capital outlier 
payments, we found that using a common set of thresholds resulted in a 
slightly higher percentage of outlier payments for capital-related 
costs than for operating costs. We estimate the proposed thresholds for 
FY 1995 would result in outlier payments equal to 5.1 percent of 
operating DRG payments and 6.3 percent of capital payments based on the 
Federal rate.
2. Outlier Changes Planned for FY 1996 Through FY 1998
    As stated above, section 1886(d)(5)(A) of the Act requires us to 
phase out payments for day outliers over the FY 1995 through FY 1997 
period. We currently expect to meet the statutory reductions in day 
outlier payments for FY 1996 and FY 1997 solely through a reduction in 
the marginal cost factor without having to raise the day outlier 
threshold. If necessary, we will propose achieving the reduction in day 
outlier payments between FYs 1996 and 1997 through a combination of 
reducing the marginal cost factor and raising the threshold. There will 
be corresponding increases in payments to cost outliers as we phase-out 
payment to day outliers. We welcome comments on this issue.

E. Rural Referral Centers (Sec. 412.96)

    Under the authority of section 1886(d)(5)(C)(i) of the Act, 
Sec. 412.96 sets forth the criteria a hospital must meet in order to 
receive special treatment under the prospective payment system as a 
rural referral center. For discharges occurring before October 1, 1994, 
rural referral centers receive the benefit of payment based on the 
other urban payment rate rather than the rural payment rate. As of that 
date, the other urban and rural payment rates will be the same. 
However, rural referral centers will continue to receive special 
treatment under both the disproportionate share hospital payment 
adjustment and the criteria for geographic reclassification.
    One of the criteria under which a rural hospital may qualify as a 
referral center is to have 275 or more beds available for use. A rural 
hospital that does not meet the bed size criterion can qualify as a 
rural referral center if the hospital meets two mandatory criteria 
(number of discharges and case-mix index) and at least one of three 
optional criteria (medical staff, source of inpatients, or volume of 
referrals). With respect to the two mandatory criteria, a hospital is 
classified as a rural referral center if its--
     Case-mix index is at least equal to the lower of the 
median case-mix index for urban hospitals in its census region, 
excluding hospitals with approved teaching programs, or the median 
case-mix index for all urban hospitals nationally; and
     Number of discharges is at least 5,000 discharges per year 
or, if fewer, the median number of discharges for urban hospitals in 
the census region in which the hospital is located. (The number of 
discharges criterion for an osteopathic hospital is at least 3,000 
discharges per year.)
1. Case-Mix Index
    Section 412.96(c)(1) provides that HCFA will establish updated 
national and regional case-mix index values in each year's annual 
notice of prospective payment rates for purposes of determining rural 
referral center status. In determining the proposed national and 
regional case-mix index values, we would follow the same methodology we 
used in the November 24, 1986, final rule, as set forth in regulations 
at Sec. 412.96(c)(1)(ii). Therefore, the proposed national case-mix 
index value includes all urban hospitals nationwide, and the proposed 
regional values are the median values of urban hospitals within each 
census region, excluding those with approved teaching programs (that 
is, those hospitals receiving indirect medical education payments as 
provided in Sec. 412.105).
    These values are based on discharges occurring during FY 1993 
(October 1, 1992, through September 30, 1993), and include bills posted 
to HCFA's records through December 1993. Therefore, in addition to 
meeting other criteria, we are proposing that to qualify for initial 
rural referral center status for cost reporting periods beginning on or 
after October 1, 1994, a hospital's case-mix index value for FY 1993 
would have to be at least--
     1.3028; or
     Equal to the median case-mix index value for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec. 412.105) calculated by HCFA for the census region in 
which the hospital is located.
    The median case-mix values by region are set forth in the table 
below:

------------------------------------------------------------------------
                                                                Case-mix
                           Region                                index  
                                                                 value  
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)......................     1.1976
2. Middle Atlantic (PA, NJ, NY)..............................     1.2040
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).......     1.3082
4. East North Central (IL, IN, MI, OH, WI)...................     1.2234
5. East South Central (AL, KY, MS, TN).......................     1.2499
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...........     1.2033
7. West South Central (AR, LA, OK, TX).......................     1.2844
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY).................     1.3572
9. Pacific (AK, CA, HI, OR, WA)..............................    1.3087 
------------------------------------------------------------------------

    The above numbers will be revised in the final rule to the extent 
required to reflect the updated MedPAR file, which will contain data 
from additional bills received for discharges through September 30, 
1993.
    For the benefit of hospitals seeking to qualify as referral centers 
or those wishing to know how their case-mix index value compares to the 
criteria, we are publishing each hospital's FY 1993 case-mix index 
value in Table 3C in section V of the addendum to this proposed rule. 
In keeping with our policy on discharges, these case-mix index values 
are computed based on all Medicare patient discharges subject to DRG-
based payment.
2. Discharges
    Section 412.96(c)(2)(i) provides that HCFA will set forth the 
national and regional numbers of discharges in each year's annual 
notice of prospective payment rates for purposes of determining 
referral center status. As specified in section 1886(d)(5)(C)(ii) of 
the Act, the national standard is set at 5,000 discharges. However, we 
are proposing to update the regional standards. The proposed regional 
standards are based on discharges for urban hospitals' cost reporting 
periods that began during FY 1992 (that is, October 1, 1991 through 
September 30, 1992). That is the latest year for which we have complete 
discharge data available.
    Therefore, in addition to meeting other criteria, we are proposing 
that to qualify for initial rural referral center status for cost 
reporting periods beginning on or after October 1, 1994, the number of 
discharges a hospital must have for its cost reporting period that 
began during FY 1993 would have to be at least--
     5,000; or
     Equal to the median number of discharges for urban 
hospitals in the census region in which the hospital is located, as 
indicated in the table below. 

------------------------------------------------------------------------
                                                                No. of  
                           Region                             discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).....................        6707
2. Middle Atlantic (PA, NJ, NY).............................        8965
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)......        6972
4. East North Central (IL, IN, MI, OH, WI)..................        7043
5. East South Central (AL, KY, MS, TN)......................        5363
6. West North Central (IA, KS, MN, MO, NE, ND, SD)..........        5649
7. West South Central (AR, LA, OK, TX)......................        4385
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)................        8529
9. Pacific (AK, CA, HI, OR, WA).............................       5768 
------------------------------------------------------------------------

    We reiterate that, to qualify for rural referral center status for 
cost reporting periods beginning on or after October 1, 1994, an 
osteopathic hospital's number of discharges for its cost reporting 
period that began during FY 1993 would have to be at least 3,000.
3. Retention of Referral Center Status
    Section 412.96(f) states that each hospital receiving the referral 
center adjustment is reviewed every 3 years to determine if the 
hospital continues to meet the criteria for referral center status. To 
retain status as a referral center, a hospital must meet the criteria 
for classification as a referral center specified in Sec. 412.96 (b)(1) 
or (b)(2) or (c) for 2 of the last 3 years, or for the current year. A 
hospital may meet any one of the three sets of criteria for individual 
years during the 3-year period or the current year. For example, a 
hospital may meet the two mandatory requirements in Sec. 412.96(c)(1) 
(case-mix index) and (c)(2) (number of discharges) and the optional 
criterion in paragraph (c)(3) (medical staff) during the first year. 
During the second or third year, the hospital may meet the criteria 
under Sec. 412.96(b)(1) (rural location and appropriate bed size).
    A hospital must meet all of the criteria within any one of these 
three sections of the regulations in order to meet the retention 
requirement for a given year. That is, it will have to meet all of the 
criteria of Sec. 412.96(b)(1) or Sec. 412.96(b)(2) or Sec. 412.96(c). 
For example, if a hospital meets the case-mix index standards in 
Sec. 412.96(c)(1) in years 1 and 3 and the number of discharge 
standards in Sec. 412.96(c)(2) in years 2 and 3, it will not meet the 
retention criteria. All of the standards would have to be met in the 
same year.
    The requirement for triennial review was originally added to the 
regulations in 1984, to be effective for cost reporting periods 
beginning on or after October 1, 1987 (the end of the first 3 years of 
the referral center adjustment). However, three statutory moratoriums 
on the performance of the triennial reviews were enacted by Congress. 
The third of these moratoriums expires at the end of cost reporting 
periods that began during FY 1994. (See the September 1, 1993 final 
rule (58 FR 46310) for a detailed explanation of the moratorium and the 
implementation of the triennial reviews.)
    With the expiration of the current moratorium, we will begin 
reviewing each rural referral center's compliance with the triennial 
review criteria effective with cost reporting periods beginning on and 
after October 1, 1994. As noted above, although rural referral centers 
will no longer be paid a higher standardized amount than other rural 
hospitals, hospitals approved as rural referral centers continue to be 
entitled to higher disproportionate share payments and continue to 
receive preferential consideration before the Medicare Geographic 
Classification Review Board. Therefore, we believe it is important that 
only those hospitals that meet the rural referral center triennial 
review criteria continue to be so classified. Thus, effective with cost 
reporting periods beginning on and after October 1, 1994, a hospital 
that has been classified as a referral center for at least 3 years will 
be subject to the triennial review criteria as discussed below.
    In accordance with Sec. 412.96(f)(2), the review process is limited 
to the hospital's compliance during the last 3 years. Thus, if a 
hospital meets the criteria in effect for at least 2 of the last 3 
years or if it meets the criteria in effect for the current year (that 
is, the criteria for FY 1995 outlined above in this section of the 
preamble), it will retain its status for another 3 years. No hospital 
is subject to a review until the end of its third full cost reporting 
period as a referral center. We have constructed the following chart 
and example to aid hospitals that qualify as referral centers under the 
criteria in Sec. 412.96(c) in projecting whether they will retain their 
status as a referral center.
    Under Sec. 412.96(f), to qualify for a 3-year extension effective 
with cost reporting periods beginning in FY 1995, a hospital must meet 
the criteria in Sec. 412.96(c) for FY 1995 or it must meet the criteria 
for 2 of the last 3 years as follows: 

------------------------------------------------------------------------
                         Use the                                        
                       discharges                                       
 For the       Use       for the                                        
   cost    hospital's  hospital's                                       
reporting   case-mix      cost      Use numerical standards as published
  period    index for   reporting        in the Federal Register on     
beginning      FY        period                                         
during FY               beginning                                       
                        during FY                                       
------------------------------------------------------------------------
1994.....  1992......  1992......  September 1, 1993.                   
1993.....  1991......  1991......  September 1, 1992.                   
1992.....  1990......  1990......  August 30, 1991.                     
------------------------------------------------------------------------

    Example: A hospital with a cost reporting period beginning July 1 
qualified as a referral center effective July 1, 1992. The hospital has 
fewer than 275 beds. Its 3-year status as a referral center is 
protected through June 30, 1995 (the end of its cost reporting period 
beginning July 1, 1994). To determine if the hospital should retain its 
status as a referral center for an additional 3-year period, we will 
review its compliance with the applicable criteria for its cost 
reporting periods beginning July 1, 1992, July 1, 1993, and July 1, 
1994. The hospital must meet the criteria in effect either for its cost 
reporting period beginning July 1, 1995, or for two out of the three 
past periods. For example, to be found to have met the criteria at 
Sec. 412.96(c) for its cost reporting period beginning July 1, 1993, 
the hospital's case-mix index value during FY 1991 must have equaled or 
exceeded the lower of the national or the appropriate regional standard 
as published in the September 1, 1992 final rule. The hospital's total 
number of discharges during its cost reporting year beginning July 1, 
1991, must have equaled or exceeded 5,000 or the regional standard as 
published in the September 1, 1992 final rule.
    For those hospitals that seek to retain referral center status by 
meeting the criteria of Sec. 412.96(b)(1)(i) and (ii) (that is, rural 
location and at least 275 beds), we will look at the number of beds 
shown for indirect medical education purposes (as defined at 
Sec. 412.105(b)) on the hospital's cost report for the appropriate 
year. We will consider only full cost reporting periods when 
determining a hospital's status under Sec. 412.96(b)(1)(ii). This 
definition varies from the number of beds criterion used to determine a 
hospital's initial status as a referral center because we believe it is 
important for a hospital to demonstrate that it has maintained at least 
275 beds throughout its entire cost reporting period, not just for a 
particular portion of the year.

F. Determination of Number of Beds in Determining the Indirect Medical 
Education Adjustment (Sec. 412.105)

    Section 1886(d)(5)(B) of the Act provides that prospective payment 
hospitals that have residents in an approved graduate medical education 
program receive an additional payment to reflect the higher indirect 
operating costs associated with graduate medical education. The 
regulations regarding the calculation of this additional payment, known 
as the indirect medical education (IME) adjustment, are at 
Sec. 412.105. The additional payment is calculated by multiplying a 
hospital's DRG revenue (including outlier payments) by the applicable 
IME adjustment factor. The adjustment factor is calculated by using a 
hospital's ratio of residents-to-beds in the formula set forth at 
section 1886(d)(5)(B)(ii) of the Act.
    Section 412.105(b) states that the number of beds used in the 
resident-to-bed ratio is calculated by dividing the number of days 
during the cost reporting period into ``the number of available bed 
days during the cost reporting period, not including beds assigned to 
newborns, custodial care, and excluded distinct part hospital units * * 
*.'' Since we added this language to the regulations in the September 
3, 1985 final rule (50 FR 35679 and 35690), there has been some 
confusion over whether this definition includes or excludes bed days 
attributable to neonatal intensive care units. This confusion has 
resulted in some hospitals contesting their fiscal intermediaries' 
inclusion of intensive care neonatal intensive care beds in the 
hospitals' count of available beds.
    Prior to the adoption of Sec. 412.105(b), the definition of 
available beds was at section 2510.5A of the Provider Reimbursement 
Manual--Part 1, which was originally used to establish bed-size 
categories for purposes of applying the cost limits under section 
1861(v)(1)(A) of the Act. That definition excluded newborn beds but 
specifically included beds in intensive care units, coronary care 
units, and other special care inpatient hospital units. This exclusion 
of newborn beds was consistent with the exclusion of newborn days and 
costs from the determination of Medicare's share of allowable routine 
service costs (see section 2202.11B of the Manual). If a neonatal unit 
qualifies as an intensive care unit, however, the costs of that unit 
are included in determining Medicare's costs (see section 2202.7.II.B 
of the Manual). Correspondingly, the days in a neonatal unit that 
qualifies as an intensive care unit are counted as intensive care type 
days rather than nursery days (see section 2202.7.II.A of the Manual). 
Finally, section 2510.5A of the Manual clearly indicates that intensive 
care unit beds and special care unit beds are included in a hospital's 
bed complement.
    In the September 3, 1985 final rule, we added the definition of 
available beds to the regulations governing the IME adjustment (then 
Sec. 412.118(b)). The expressed purpose for the change was to stop 
counting beds ``based upon the total number of beds available on the 
first day of the pertinent cost reporting period'' and to begin 
counting based on ``the number of available bed days (excluding beds 
assigned to newborns, custodial beds, and beds in excluded units) 
during the current cost reporting period divided by the number of days 
in the cost reporting period'' (50 FR 35679). We did not change the 
definition of available beds. Our current position regarding the 
treatment of these beds is unchanged from the time when the cost limits 
established under section 1861(v)(1)(A) of the Act were in effect and 
is consistent with the way we treat beds in other hospital areas. That 
is, if the bed days and costs are allowable in the calculation of 
Medicare's share of inpatient costs, the beds within that unit are 
included as well.
    Some hospitals have asserted that when we excluded beds assigned to 
newborns, we changed our treatment of neonatal intensive care unit 
beds. However, we note that the term ``newborn'' has historically been 
used synonymously with nursery. Perhaps the clearest illustration of 
this is the definition of a ``newborn inpatient day'' as a day that 
``an infant occupies a newborn bed in the nursery'' (see section 2815 
of the Provider Reimbursement Manual--Part 2.) This definition dates 
back at least to 1975. If Sec. 412.105(b) was indeed meant to change 
our established policy, we would have referenced that intent at the 
time. This would have been necessary since neonatal intensive care 
costs and days were still included in the calculation of Medicare's 
costs. Finally, in August 1988, we issued Provider Reimbursement Manual 
Transmittal No. 345, revising section 2405.3G of the Manual, which 
provides implementing instructions for the IME adjustment. As part of 
this revision, the definition of the number of beds was clarified to 
specifically exclude beds ``* * * assigned to newborns which are not in 
intensive care areas * * *.'' Those arguing that Sec. 412.105(b) 
excludes neonatal intensive care unit beds from the hospital bed count 
also argue that this Manual issuance is contradictory to the 
regulations.
    In order to clarify our policy, we are proposing to revise the 
regulations at Sec. 412.105(b) to exclude specifically only beds 
assigned to newborns in the nursery. Thus, neonatal intensive care beds 
would not be excluded from the bed count. We would like to stress that 
this does not represent a policy change in our bed counting rules, but 
rather a reaffirmation of our longstanding position. Revising the 
wording of the regulations should alleviate any future 
misunderstandings, as well as clarify our position regarding previous 
application of this policy, both before and since the original 
publication of our bed counting regulations now specified at 
Sec. 412.105(b).
    We are also proposing to make a technical change to 
Sec. 412.105(d)(1) to correct a reference.

G. Disproportionate Share Adjustment (Sec. 412.106)

    Section 1886(d)(5)(F) of the Act provides for additional Medicare 
payments for hospitals that serve a disproportionate share of low 
income patients. Section 1886(d)(5)(F)(vii) of the Act, as added by 
section 6003(c)(1)(B) of Public Law 101-239 and amended by section 
4002(b)(1) of Public Law 101-508, specifies the formula for determining 
the disproportionate share adjustment percentage for hospitals that are 
located in an urban area and have 100 or more beds, or are located in a 
rural area and have 500 or more beds. The statute establishes different 
payment formulas for different years, including a change in the formula 
for discharges occurring on or after October 1, 1994.
    Regulations concerning the Medicare disproportionate share 
adjustment are set forth at Sec. 412.106. Under Sec. 412.106(c)(1)(i), 
a hospital that is located in an urban area and has 100 or more beds, 
or is located in a rural area and has 500 or more beds, must have a 
``disproportionate patient percentage'' of at least 15 percent to 
qualify for a disproportionate share payment adjustment. Section 
412.106(d)(2) sets forth the formulas for determining the 
disproportionate payment adjustment factors applicable to these two 
groups of hospitals.
    We are not proposing changes to any part of Sec. 412.106 in this 
proposed rule. However, we wish to ensure that hospitals are aware of 
the revised payment formulas that will take effect in FY 1995 pursuant 
to the statute. Specifically, for discharges occurring on or after 
October 1, 1994, any such hospital with a disproportionate share 
patient percentage greater than 20.2 percent will receive a 
disproportionate share adjustment equal to 5.88 percent plus 82.5 
percent of the difference between 20.2 percent and the hospital's 
disproportionate share patient percentage.

H. Changes Affecting Essential Access Community Hospitals (EACHs) and 
Rural Primary Care Hospitals (RPCHs) (Secs. 412.109, 485.602, 485.635, 
and 489.102)

    On May 26, 1993, we published a final rule to implement the EACH 
program (58 FR 30630). The rule set forth the requirements for 
designating certain hospitals as EACHs or RPCHs, the conditions that an 
RPCH must meet to participate in Medicare, and the rules for Medicare 
payment for services furnished by EACHs and RPCHs. The final rule 
implemented section 1820 of the Act, as added by sections 6003(g) and 
6116(b)(2) of Public Law 101-239 and revised by section 4008(d) of 
Public Law 101-508. The amendments were intended to promote 
regionalization of rural health services in grant States, improve 
access to hospital and other health services for rural residents, and 
enhance the provision of emergency and other transportation services 
related to health care.
    Since the publication of that rule, we have identified several 
necessary additions to the EACH/RPCH provisions. First, to provide for 
orderly review and adjudication of disagreements about whether a 
facility's designation has been terminated properly, we propose to 
specify under new Sec. 412.109(e) that a determination by HCFA that a 
hospital does not meet the criteria for EACH designation, or that a 
hospital's EACH designation should be terminated, is subject to review 
under 42 CFR part 405, subpart R.
    We also propose several clarifying changes to the definition of 
``direct services'' at Sec. 485.602, as well as clarifying references 
in Sec. 485.635, the condition of participation on provision of 
services. These revisions merely would restate more clearly our 
existing policies under which the services listed in Sec. 485.635(b) 
(``direct services'') must be furnished by employed staff, not under 
agreements or arrangements.
    In addition, we are proposing to revise the range of laboratory 
services that an RPCH must furnish as direct services. In a final rule 
with comment period published on December 2, 1993 (58 FR 63533), we 
revised the RHC regulations at Sec. 491.9 to eliminate, as required 
direct services, tests not classified as waived under the Clinical 
Laboratories Improvement Act of 1988 (CLIA). (See 42 CFR 493.15.) We 
made these changes in the RHC regulations because the CLIA program 
introduced participation requirements that may cause some RHCs to 
withdraw from the program, creating a shortage of available medical 
care in some areas.
    Because RPCHs typically are located in rural areas similar to those 
served by RHCs and serve similar patient populations, and because the 
RPCH designation criteria in section 1820(f)(1)(H) of the Act state 
that RPCHs must meet the requirement for direct provision of routine 
diagnostic services in the statutory definition of ``rural health 
clinic,'' we believe it is appropriate to impose the same requirements 
in both settings. Therefore, we propose to revise the RPCH regulations 
at Sec. 485.635 to require the RHCs to provide directly the following 
laboratory services:
    (1) Chemical examination of urine by stick or tablet method or both 
(including urine ketones);
    (2) Hemoglobin or hematocrit;
    (3) Blood glucose;
    (4) Examination of stool specimens for occult blood;
    (5) Pregnancy tests; and
    (6) Primary culturing for transmittal to a certified laboratory.
    We note that this change would not prevent any RPCH from providing 
tests that are not listed in Sec. 485.635(b)(2). An RPCH is free to 
choose a higher level CLIA certification than the certificate of waiver 
if it wishes to provide tests of a higher complexity and to comply with 
all CLIA requirements.
    The current regulations do not set out a clear and consistent 
position on the applicability of the advance directives requirement. 
Under the regulations in Sec. 485.645(b)(1), swing-bed RPCHs are 
required to meet a number of skilled nursing facility (SNF) 
requirements, including Sec. 483.10(b)(4). That regulation requires 
that the patient be given the right to make an advance directive. (An 
advance directive is a written instruction, such as a living will or a 
durable power of attorney for health care, that deals with the 
provision of health care when the individual is incapacitated. See 
Subpart I of 42 CFR Part 489.) Thus, the regulations apply the advance 
directives requirement to RPCH inpatients receiving a SNF level of care 
in swing beds, but not to inpatients receiving RPCH care.
    We believe the RPCH benefit could be administered more simply and 
equitably if both hospitals and RPCHs were required to comply with the 
same advance directives requirement. As explained in the preamble to 
the May 26, 1993 final rule on EACHs (58 FR 30635-30636), as authorized 
by section 1861(e) of the Act, we have read the word ``hospital'' to 
include RPCHs where the context appears to support such a reading. We 
believe the context of section 1866(a)(1)(Q) of the Act would support 
this reading, since many patients are likely to seek RPCH care as an 
alternative to treatment in a hospital or SNF, and many RPCHs will 
accept patients who are at risk of the kind of incapacitating condition 
addressed by an advance directive. Thus, we propose to revise the 
regulations at Sec. 489.102 to provide for more consistent application 
of the advance directive requirement, by specifying that it will apply 
to RPCHs on the same basis as to hospitals.
    We believe this approach is simpler to administer and expands 
beneficiary rights. Moreover, since all prospective RPCHs must be (or 
have been) hospitals and have been required to meet the advance 
directive requirement, there should not be any added burden.

I. Clarification of Payment to RRC/EACH Hospitals

    We wish to clarify a response in the EACH final rule of May 26, 
1993 (58 FR 30639-30640), regarding the effect on a rural referral 
center's (RRC) payment rate should it elect to become an EACH. An RRC 
that elects to become an EACH is considered to have dual 
classification; that is, it is classified as an RRC/EACH. Since section 
1886(d)(5)(D)(iii)(III) of the Act specifies that an EACH is to be 
treated as an sole community hospital (SCH), in determining which of 
the three payment rates will yield the highest aggregate payment, we 
will use the ``other'' standardized amount in determining the Federal 
payment rate for discharges occurring on or after October 1, 1994. (As 
discussed above, as of that date, the other urban and rural payment 
rates will be the same.) For discharges occurring before October 1, 
1994, the Federal payment rate is based on the ``other urban'' payment 
rate.
    Thus, an RRC that elects to become an EACH is paid based on 
whichever of the following rates yields the greatest aggregate payment 
for the cost reporting period:
     The national Federal rate applicable to the hospital (that 
is, other urban before October 1, 1994 and ``other'' on or after that 
date);
     The updated hospital-specific rate using FY 1982 cost per 
discharge; or
     The updated hospital-specific rate using the FY 1987 cost 
per discharge.

J. Direct Graduate Medical Education Payment (Sec. 413.86)

    1. Definition of Initial Residency Period
    Section 1886(h)(4) of the Act bases payment for direct graduate 
medical education (GME) costs on the hospital's number of full-time 
equivalent (FTE) residents multiplied by a hospital-specific adjusted 
base year per resident amount. The number of FTE residents is 
determined by applying a weighting factor to each FTE resident. A 
resident in an initial residency period is weighted as 1.0 FTE. 
Residents in approved training programs that are beyond their initial 
residency period are required by law to be counted as .50 FTE. The 
initial residency period is defined at Sec. 413.86(g)(1), as the 
minimum number of years of formal training necessary to satisfy the 
requirements for initial board eligibility in the particular specialty 
plus 1 year, not to exceed 5 years.
    Section 13563(b) of Public Law 103-66 amended section 1886(h)(5)(F) 
of the Act by deleting ``plus one year'' from the statutory definition 
of initial residency period, effective July 1, 1995. To conform the 
regulations to the statute, we propose to revise Sec. 413.86(g)(1) by 
specifying that, effective July 1, 1995, an initial residency period is 
defined as the minimum number of years required for board eligibility.
    For example, if a resident completed a 3-year internal medicine 
program and then started a cardiology program that requires an 
additional 2 years of training, the resident would be counted as 1.0 
FTE for the 3 years spent in internal medicine and as a .50 for 2 years 
in the cardiology program. (Prior to Public Law 103-66, the resident 
would have been counted as 1.0 FTE during the first year of the 
cardiology residency program.)
2. Part-time Resident
    Currently, the last sentence of Sec. 413.86(f)(1)(ii) specifies 
that, for purposes of GME, ``[a] part-time resident counts as a partial 
FTE based on the proportion of time worked as compared to the average 
time spent by other residents working in the same specialty program.''
    The definition of part-time resident for purposes of GME is 
consistent with the definition of part-time resident for purposes of 
IME. However, the language in the regulations text differs and this 
difference has led to some confusion. Therefore, we are proposing to 
revise the language at Sec. 413.86(f)(1)(ii) as follows:
    A part-time resident counts as a partial FTE based on the 
proportion of time worked in the hospital compared to the total time 
necessary to fill a full-time internship or residency slot.
    This definition of part-time resident, for the purpose of 
determining GME full-time equivalent resident counts, is consistent 
with the IME definition specified at Sec. 412.105(g).
    Thus, in determining the FTE count for a part-time resident, for 
purposes of GME, the proportion of time the resident works in an 
approved program in any area of the hospital complex is compared to the 
total time necessary to fill a full-time slot.
    We are also proposing to make a technical change to 
Sec. 412.113(b)(3) to correct a reference to Sec. 413.86.

K. Other Technical Changes (Sec. 412.232)

    We are republishing provisions in Sec. 412.232(c) that were 
inadvertently deleted from the regulations text published in the Code 
of Federal Regulations (CFR) due to an error in amendatory language in 
our September 1, 1992 final rule. In order to provide the public with 
the complete text of the provisions of Sec. 412.232(c), pending 
publication of the next edition of the CFR, we are publishing 
Sec. 412.232(c) in its entirety.

V. Proposed Changes and Clarifications to the Prospective Payment 
System for Capital-Related Costs

A. Evaluation of Provisions Relating to Obligated Capital for Hospitals 
Subject to Lengthy Certificate-of-Need (CON) Process 
(Sec. 412.302(c)(2))

    Section 412.302(c)(2) of the regulations specifies the conditions 
under which capital projects may be treated as obligated capital for 
hospitals subject to a lengthy CON process. Under this provision, a 
capital project that is subject to a CON process may qualify as 
obligated capital if several conditions are met. These conditions are:
     The hospital is required under State law to obtain prior 
approval of the capital project by a designated State or local planning 
authority in the State in which the hospital is located;
     The hospital filed by December 31, 1989, an initial 
application meeting the requirements of the State that includes, at a 
minimum, a detailed description of the project and its estimated cost, 
and had not received approval or disapproval by September 30, 1990;
     The hospital expended the lesser of $750,000 or 10 percent 
of the estimated project cost by December 31, 1990; and
     The project is completed and the asset put into use for 
patient care on or before the earlier of September 30, 1996 or 4 years 
from the date CON approval is received.
    The purpose of allowing hospitals in CON states to qualify projects 
for recognition as obligated capital under these special conditions was 
to recognize that in situations where there is a lengthy CON process, 
hospitals may have deferred making the legal commitments required under 
the general rule for recognizing obligated capital until the CON 
approval was received. We believe that such hospitals should not be 
disadvantaged if they reasonably anticipated the CON approval process 
in their capital planning but were unable to meet the December 31, 1990 
cut-off date for obligated capital because timely approval had not been 
received. Our intent was not to afford more favorable treatment for 
these hospitals relative to other hospitals, but rather to make a 
reasonable and equitable allowance for the impact a lengthy CON process 
may have on the ability of hospitals that have already made a 
substantial financial commitment to meet the criteria for recognition 
of obligated capital costs. Thus, the intent was to put these hospitals 
on an even footing with other hospitals.
    Since we established this special provision in the August 30, 1991 
final rule implementing the prospective payment system for capital-
related costs (56 FR 43393-43394), we have received comments from 
individual hospitals and hospital associations requesting revision to 
the provision. With one exception, these hospitals come from a single 
State and indeed most of them are located in a single large urban area 
of that State. Citing varied problems and delays frequently encountered 
throughout the CON process, such as a requirement for separate CON 
approval for each phase of a multi-phase project, the commenters have 
suggested that the policies be revised as follows:
     Allow later phases of a staged construction project to be 
deemed part of the originally approved obligation for purposes of 
meeting the December 31, 1989 deadline.
     Extend the deadline for putting the project into use for 
patient care by up to 3 years.
     Allow a 10-year transition for each phase under the hold-
harmless methodology.
    We stated in our September 1, 1993 final rule that we would conduct 
an evaluation of the issues raised by these commenters once we were 
able to obtain data on the impact of the current provision. We also 
noted that any reassessment of the current provisions would be made 
solely within the policy framework used to establish the initial 
transition payment policies. We emphasized that we would not adopt 
revisions that would give hospitals subject to CON processes more 
favorable treatment than other hospitals.
    We now have limited, but significant, data available on the impact 
of the obligated capital provisions. Since the beginning of the capital 
prospective payment system, the Medicare intermediaries have compiled a 
special data set to monitor the implementation of the system. These 
intermediary data have provided us with information concerning 
virtually all hospitals that have requested recognition of obligated 
capital and the amount, if any, of the obligated capital approved by 
the intermediary. Using this data, we have been able to develop some 
relevant comparisons. The data show, for example, that nationally 42.9 
percent (2,281 out of 5,316) of all hospitals requested recognition of 
obligated capital. A total of $21.2 billion in obligated capital has 
been recognized by the intermediaries. The average amount of obligated 
capital recognized is $9.3 million per requesting hospital.
    Since most of the comments concerning the effects of the CON 
provision have come from a small group of hospitals in one particular 
State with a lengthy CON process, we compared the data for that group 
of hospitals, and the hospitals in that State as a whole, with the 
national average and the averages for similar States. We found that the 
group of hospitals that has recommended revisions to the current rule 
had an average approved amount of obligated capital far above the 
national average approved amount per requesting hospital. All of the 21 
hospitals in the group in question requested recognition of obligated 
capital. Furthermore, 17 of those hospitals (81 percent) received at 
least partial approval of that request. The average amount of obligated 
capital approved was $139.5 million. Since 1 of these 21 hospitals 
received approval for an extraordinarily large obligated capital 
project, we also computed the average amount of obligated capital 
approved for the other 20 hospitals. Even excluding the hospital with 
the extraordinarily large project, the average amount of obligated 
capital approved in the group in question is $67.5 million. This group 
of 21 hospitals, in fact, accounted for 13.8 percent of all the 
obligated capital recognized in the country (6.4 percent for 20 
hospitals, excluding the hospital with the extraordinarily large 
project). This group of hospitals also has averages of obligated 
capital approved that are significantly above the average for the State 
in which they are located. In turn, the averages for the State in which 
they are located are significantly higher than the averages for similar 
States (that is, States with large populations, CON processes, and/or 
large urban areas).
    Although the fiscal intermediary data base contains data on the 
amount of obligated capital approved for each hospital, it does not 
include data on the amount of obligated capital requested by each 
hospital. We are therefore unable to develop ratios of obligated 
capital approved to obligated capital requested for specific hospitals 
and groups of hospitals in order to determine whether that ratio is 
lower for this group of hospitals than the average for any regional or 
other groups of hospitals. However, we believe that the large amounts 
of obligated capital approved for the hospitals that have requested 
revision of the current rules indicate that the current rules do not 
disadvantage hospitals subject to lengthy CON processes.
    In addition, our current data also cannot show how much of the 
obligated capital tentatively approved by the intermediaries will 
eventually meet the deadlines imposed under the general rule for 
obligated capital and each of the special rules for putting assets into 
use for patient care. Under the general rule, the asset must be put in 
use for patient care no later than October 1, 1994 (which is 45 months 
after the latest date by which the asset must have been obligated under 
the general rule). In cases of extraordinary circumstances beyond the 
hospital's control, that deadline can be extended to no later than 
September 30, 1996. For hospitals in CON states, the deadline for 
putting the asset into use for patient care is the earlier of September 
30, 1996 or 4 years from the date of CON approval 
(Sec. 412.302(c)(2)(D)).
    Thus, under current regulations, hospitals that receive CON 
approval after September 30, 1992 may have less than 4 years to 
complete the project in order to meet the deadline. In the interests of 
maintaining an equal playing field for those hospitals, we are 
proposing to change the deadline for putting assets into use for 
patient care to the later of September 30, 1996 or 4 years from the 
date of CON approval. We believe that establishing any later deadline 
for hospitals in CON states would violate the principle of equal 
treatment by giving those hospitals an advantage over hospitals that 
must satisfy the upcoming deadline established in the general rule for 
obligated capital.
    On the basis of the available data, it appears that the existing 
CON provision has otherwise given this group of hospitals fair access 
to the special protection for obligated capital. The amounts of 
obligated capital approved for the affected hospitals simply do not 
support the need for more extensive relief to these hospitals in the 
context of the obligated capital provisions. Revision of practically 
every element of the obligated capital provision would be required to 
accommodate all the requests of the affected hospitals. Since it 
appears the CON rules have provided fair access to obligated capital 
protections, we do not believe that it would be appropriate to propose 
significant changes. We are therefore proposing no other revisions to 
the obligated capital rules at this time.
    However, this does not mean that revisions to other provisions of 
the capital prospective payment system, such as the exceptions process, 
are also unwarranted. The same hospitals that have recommended changes 
in the obligated capital rules have also recommended policy measures in 
connection with exceptions payments under the prospective payment 
system for capital-related costs. Specifically, these hospitals have 
asked that the present 80 percent minimum payment level for urban 
hospitals with at least 100 beds and a disproportionate share 
percentage of at least 20.2 percent be guaranteed through the rest of 
the transition and extended for at least 10 years after the transition. 
While we do not propose to adopt those precise recommendations, we have 
tried to address the legitimate concerns of these hospitals in 
developing the revisions which we are proposing to exceptions payment 
policy below in section V.C. of this preamble.

B. Specific Adjustment for Taxes to the Capital Prospective Payment 
System Federal Rate (Sec. 412.312)

    In the August 30, 1991 final rule implementing the capital 
prospective payment system, we acknowledged the need to study whether 
special treatment of the property tax component of capital-related 
costs is appropriate (56 FR 43364-43365). Subsequently, comments 
received on the May 26, 1993 proposed rule asked that we revisit this 
issue in a timely manner to eliminate any inequitable payment 
distributions. One of the commenters also suggested a specific 
methodology to adjust the capital Federal rate using a capital 
prospective payment system base-year survey to develop a hospital-
specific adjustment to the capital Federal rate payment.
    The Medicare cost report has recently been revised to obtain tax 
data directly from each hospital for cost reporting periods beginning 
on or after October 1, 1991 (FY 1992). These data are just now becoming 
available to us. Our preliminary review indicates a need for additional 
information and analysis. The FY 1992 cost report data currently 
available show that with slightly less than 90 percent of all 
prospective payment system hospitals in the data base (only 60 percent 
of which reflect audited data), only 77 percent of the proprietary 
hospitals reported property tax payments. This leaves a significant 
number of proprietary hospitals for which no tax data have been 
reported. In addition, approximately 13 percent of the non-proprietary 
hospitals are reporting some form of payments ``in lieu of taxes.'' The 
nature of the payments ``in lieu of taxes'' is not yet entirely clear.
    Given the limitations of the available data, we believe that it 
would be premature to develop a proposal for a property tax adjustment. 
We do not believe that we should proceed with development and 
implementation of a property tax adjustment until we have determined 
the status of the reported payments in lieu of taxes and whether an 
adjustment would be appropriate for these expenses. We also need to 
determine why a significant number of proprietary hospitals have 
reported no tax payments and what effect this might have on a budget 
neutrality adjustment to the Federal rate if a property tax adjustment 
were adopted. We have therefore asked our regional offices to develop 
information on a sample of hospitals from each group in order to refine 
and complete our analysis. We invite submission of relevant information 
and data by interested parties and the public during the comment period 
to this proposed rule.
    Furthermore, although we appreciate the concern that this issue 
addresses, we believe that at this point the possible adverse effects 
of our current policy are minimal. Capital costs represent less than 10 
percent of total costs and a proprietary hospital's average tax cost 
burden for assessed property represents only 7 to 9 percent of its 
total capital-related costs. The tax burden for proprietary hospitals 
thus amounts to less than 1 percent of total costs. In addition, for 
the first 5 years of the capital prospective payment system transition 
period, the majority of payments to most hospitals are based on each 
hospital's own cost experience. Therefore, we do not believe delaying a 
specific adjustment to proprietary hospitals until more data are 
available would cause undue hardship to the affected hospitals.
    In the interim, we hope to advance the discussion of this issue by 
raising the issue of whether a property tax adjustment would be 
appropriate and by presenting one approach to such an adjustment. We 
welcome comments and recommendations on every aspect of this 
presentation.
    One approach to a methodology for a property tax adjustment for 
proprietary hospitals is to develop a property tax factor (PTF) from 
data on hospital-specific tax payments in the most recently audited 
cost reporting year.
The PTF would take the form of a percentage add-on to the Federal rate 
and would remain fixed for future periods. That is, unless a hospital 
had property tax costs in its most recently audited cost reporting 
year, it would not qualify for an adjustment. The PTF would be based on 
capital cost and property tax information provided on the most current 
audited cost report, as follows:
    (1) Audited cost report property tax data;
    (2) Total capital cost for that year;
    (3) Property tax unit cost multiplier (Line 1 divided by Line 2);
    (4) Medicare inpatient capital cost;
    (5) Medicare inpatient property taxes (Line 3 times Line 4);
    (6) Medicare discharges;
    (7) Medicare inpatient property taxes per discharge (Line 5 divided 
by Line 6);
    (8) Federal capital rate (for fiscal year with most recent audited 
data);
    (9) Property tax factor (Line 7 divided by Line 8).
    This approach would be consistent with the philosophy of a 
prospective payment system. Although the initial determination of the 
PTF reflects a hospital's actual tax burden in a specific year, the PTF 
divorces payment from subsequent changes in the tax costs a hospital 
may experience. Because the PTF would be determined on the basis of tax 
costs from an audited cost reporting year and computed as a constant 
ratio of the Federal rate, States could not use property tax changes to 
capriciously increase Medicare reimbursement. Under this plan, 
Medicare's payment for taxes would increase with the underlying rate of 
increase in the Federal rate.
    One objection to the PTF is that over time the ratio of actual 
Medicare allowable property taxes to Medicare inpatient capital costs 
in a rate year could diverge from the ratio in the year used to set the 
PTF. Such a divergence would create windfall gains or losses for 
particular hospitals, but we know of no way to determine the magnitude 
of possible gains and losses to particular hospitals. The greater the 
magnitude of such gains and losses, the less appropriate the PTF 
methodology would be. We welcome information on this issue and 
recommendations about how to determine the magnitude of such gains and 
losses, while safeguarding the program from arbitrary increases in 
hospital taxes.
    A related problem is that applying a constant ratio to the Federal 
rate has the effect of increasing (or decreasing) the amount of the 
adjustment for property taxes across all hospitals by the same factor 
as the increase (or decrease) to the national rate. We currently have 
no data that show conclusively whether property taxes generally 
increase at the same rate as capital costs as a whole. This is 
difficult to determine since property tax assessment systems vary 
enormously from one locality to another, and changes in property taxes 
can reflect complicated changes in tax rates, methods of property 
assessment, and the tax base (that is, the percent of property value 
subject to tax assessment) in different localities, as well as 
appreciation of existing property values. We know of no definitive 
sources of information on this matter. We encourage submission of 
relevant information, observations, and suggestions.
    An alternative methodology could employ a hospital-specific add-on 
amount, as opposed to the hospital-specific ratio discussed above. Such 
an add-on could be determined on the basis of the base year tax costs 
per discharge attributable to Medicare. This alternative may be 
preferable if strong evidence emerges that property taxes do not tend 
to increase at the same rate as other capital costs. However, in that 
case, a tax increase index would need to be developed. We welcome 
comments on the merits of this alternative.
    We are especially interested in comments regarding an adjustment 
for non-proprietary hospitals that make payments in lieu of taxes and 
on a methodology for determining such an adjustment. As we previously 
noted, 13 percent of non-proprietary hospitals report payments in lieu 
of taxes. The uncertainty about the exact nature of those payments is 
one reason why we have decided to delay implementation of a specific 
property tax adjustment for those hospitals. However, our initial 
limited investigation of this issue suggests that those payments do not 
reflect assessments that can be categorized as capital-related costs 
under Sec. 413.130(a)(3). It appears that some non-proprietary 
hospitals may have reflected payments made for assessments that are not 
based on the valuation of the hospital's real or personal property. 
Thus, the available evidence does not support adoption of an adjustment 
for non-proprietary hospitals' payments in lieu of taxes. However, we 
will continue to study this matter.
    Any property tax adjustment would have to be implemented in a 
budget neutral fashion, so that total estimated payments under the 
prospective payment system for capital-related costs with such an 
adjustment would equal total estimated payments in the absence of a 
property tax adjustment. A property tax adjustment applied to the 
Federal rate thus requires a corresponding reduction to the base 
Federal rate to assure budget neutrality. It is impossible to determine 
the precise magnitude of the required adjustment to the Federal rate 
until we determine both the status of those proprietary hospitals that 
are not currently reporting taxes and the nature of the payments 
reported by non-proprietary hospitals in lieu of taxes. However, since 
our preliminary data indicates that tax payments by proprietary 
hospitals are at least 0.77 percent of total capital costs, we believe 
that a reduction to the base capital rate of at least 0.77 percent 
would be necessary. The final amount of the necessary adjustment to the 
Federal rate would depend upon the ultimate determination concerning 
the proprietary hospitals not reporting tax payments and the nature of 
the payments reported by non-proprietary hospitals. We welcome comments 
on the equity of removing tax amounts from the base Federal rate and 
distributing them only to tax-paying hospitals in the form of an 
adjustment to the Federal rate payment. Our concern is that special 
payment adjustments recognize only costs that are distinguishable and 
unique. We also wish to avoid granting unwarranted advantages to any 
particular class of hospitals.
    We plan to conduct further analysis on this issue prior to the 
publication of the final rule. We will also analyze comments and 
recommendations submitted in response to this discussion. We will make 
a determination concerning whether to adopt a property tax adjustment, 
and the form that any such adjustment would take, when we have obtained 
sufficient relevant data and have resolved all significant problems 
inherent to any adjustment methodology.

C. Revision of Provision Relating to Exceptions Payment (Sec. 412.348)

    Section 412.348 provides that, during the transition period, a 
hospital may receive additional payment under an exceptions process 
when its regular payments are less than a minimum percentage, 
established by class of hospital, of the hospital's reasonable capital-
related costs. The amount of the exceptions payment is the difference 
between the hospital's minimum payment level and the payments the 
hospital would receive under the capital prospective payment system in 
the absence of an exceptions payment. The comparison is made on a 
cumulative basis for all cost reporting periods during which the 
hospital is subject to the capital prospective payment transition 
rules.
    Under current Sec. 412.348(b)(1), the minimum payment percentages 
by class of hospitals for FY 1995 are:
     For sole community hospitals, 90 percent;
     For urban hospitals with at least 100 beds that have a 
disproportionate share patient percentage of at least 20.2 percent or 
that received more than 30 percent of its net inpatient care revenues 
from State or local governments for indigent care, 80 percent;
     For all other hospitals, 70 percent of the hospital's 
reasonable inpatient capital-related costs.
    The current regulations also provide that total estimated payments 
under the exceptions process in a year may not exceed 10 percent of 
total estimated capital prospective payments (exclusive of hold-
harmless payments for old capital) for the same fiscal year. As we 
stated in the August 30, 1991 final rule, we will revise the minimum 
payment percentages during any subsequent transition year, if 
necessary, to ensure that exceptions payments do not exceed the 10 
percent limit. It has not yet been necessary to reduce the original 
minimum payment percentages to meet the 10 percent limit.
    In the final rule for the prospective payment system for capital-
related costs, we stated that we would carefully monitor the impact of 
the capital prospective payment system in order to determine whether 
``some type of permanent exceptions process is necessary and the 
circumstances under which additional payments would be made (56 FR 
43409).'' Since the publication of the final rule for the capital 
prospective payment system, several commenters have urged us to provide 
special protection for hospitals that are undertaking major renovation 
or replacement of aging facilities during the decade of the transition. 
These commenters have pointed out that, unlike hospitals that undertook 
major renovation or replacement during the 1980s, many hospitals that 
undertake capital replacement or renovation projects during the 
transition do not qualify for the protection for old capital or 
obligated capital during the transition. In addition, unlike hospitals 
that will undertake major capital replacement or renovation in the 
decade after the transition period, such hospitals have not had an 
opportunity to accrue capital prospective payments to fund the 
projects. We are aware of a number of major projects, scheduled for 
completion later in the transition, that could therefore not be 
included as old or obligated capital, and that involve major 
replacement or renovation of aging facilities. In the design of the 
capital prospective payment system, we have made every effort to 
consider the circumstances of hospitals for whom the transition to 
prospective payment poses special difficulties. We agree with the 
commenters that hospitals that need to undertake major renovation or 
replacement projects during the transition face special difficulties 
merely because of the timing of their projects. We do not believe that 
the Medicare program should guarantee to underwrite every major program 
of replacement or renovation of capital assets. However, under certain 
circumstances we believe that it is fair to provide special protection, 
through the exceptions process, for hospitals that find themselves in 
the circumstances cited.
    In addition to the exceptions categories identified above, we are 
therefore proposing at Sec. 412.348 to provide special protection for 
some hospitals that are undertaking major projects to renovate or 
replace aging plant during the transition period. This special 
protection, which will provide a 70 percent minimum payment level for 
up to ten years beyond the transition period, will be available only to 
the following classes of hospitals:
     Sole community hospitals that have a current ratio less 
than or equal to of 1.75 in the exception year;
     Urban hospitals with at least 100 beds that either have 
disproportionate share percentages of at least 20.2 percent or receive 
at least 30 percent of their revenue from State or local funds for 
indigent care, and that have a current ratio less than or equal to 1.75 
in the exception year; and
     Hospitals with a combined inpatient Medicare and Medicaid 
utilization of at least 70 percent. In addition, the hospital must meet 
an age of asset test and, if applicable, receive approval for the 
project from a State or local planning authority. If planning approval 
is not required, an urban hospital must demonstrate either that it is 
in a metropolitan statistical area (MSA) that does not have an overall 
average occupancy rate less than 80 percent or that its capacity is no 
more than 80 percent of its prior capacity (in terms of bed size).
    We believe that this exception should apply only to hospitals that 
have previously been identified for special protection under the 
Medicare program (that is, sole community hospitals or large urban 
hospitals that serve disproportionate shares of indigent patients), or 
that have heavy utilization by beneficiaries of the Federal health 
programs. The average hospital utilization by Medicaid beneficiaries is 
approximately 10 percent. Hospitals with 60 percent Medicare 
utilization can reasonably claim high Medicare utilization rates. We 
have therefore determined that, aside from certain sole community 
hospitals and large urban disproportionate share hospitals, this 
special exception should be restricted to hospitals with combined 
Medicare and Medicaid utilization of at least 70 percent.
    We are also requiring that sole community hospitals and large urban 
disproportionate share hospitals must have current ratios of less than 
or equal to 1.75 in order to be eligible for this special exception. We 
do not believe that hospitals that do not have high Medicare and 
Medicaid utilization should be eligible for this special exception 
unless they are financially vulnerable. The current ratio is perhaps 
the most widely used measure of hospital liquidity. It is defined as 
the number of dollars held in current assets per dollar of current 
liabilities. Thus, higher values reflect a stronger short-term 
financial condition. A current ratio of 2.0 or better is a common 
hospital target for financial performance. We therefore believe that a 
current ratio of less than or equal to 1.75 is a sufficient indication 
of financial stress to qualify for special protection under the 
exceptions policy. The current ratio can be determined from information 
available on the Medicare cost report (HCFA 2552-92, Worksheet G, Lines 
11 and 43).
    One concern that we have about the use of the current ratio as a 
measure is that it may be possible for hospitals to manipulate cost 
report statistics to meet a current ratio threshold. Some analysis 
suggests that the current ratio should be supplemented by measures such 
as days in accounts receivable and/or days in accounts payable in order 
to reduce the prospects for manipulation. We will continue to study 
this issue before publication of a final rule on this special 
exceptions provision. We welcome comments on the use of the current 
ratio as a measure of hospital financial vulnerability, on the 
appropriate threshold under this measure, and on whether the current 
ratio should be supplemented by other measures.
    An eligible hospital must pass an age of asset test in order to 
qualify for an exception. Hospitals almost universally have plant and 
equipment of varying ages. The average age of a hospital's assets is 
commonly determined as the ratio of accumulated depreciation to current 
depreciation expense. The current version of the Medicare cost report 
(HCFA 2552-92) allows for determination of average age of assets for 
all hospital assets, for building and fixed equipment alone, or for 
moveable equipment alone. The average age of buildings and fixed 
equipment can be determined on the basis of information on the current 
Medicare cost report (HCFA 2552-92, Worksheet G, Lines 14, 14.01, 16, 
16.01, 18, 18.01, 20, and 20.01, and Worksheet A-7, Part III, Column 9, 
Lines 1 and 3).
    We propose a two-part age of asset test to identify aging hospitals 
that undertake needed major capital replacement or renovation projects 
during the transition. The test would only consider changes in the 
average age of building and fixed equipment (determined by the ratio of 
accumulated depreciation for building and fixed equipment to current 
depreciation for building and fixed equipment) in order to focus on 
major capital replacement and renovation projects. We believe that it 
is appropriate to grant exceptions only to aging hospitals that 
undertake and complete major capital projects during the capital 
prospective payment transition period.
    The first part of the age-of-asset test is designed to determine 
whether a hospital had relatively aged fixed assets at the beginning of 
the capital transition period (that is, the hospital's first cost 
reporting period beginning on or after October 1, 1991). We would 
determine a hospital's average age of building and fixed equipment 
using cost report data for the first year of the transition in 
comparison to the national average age of buildings and fixed equipment 
for that year. The threshold for qualifying under this part of the test 
would be the 75th percentile. We do not believe that the special 
protection we are proposing under this provision should be extended to 
hospitals who cannot demonstrate an urgent need for replacement or 
renovation of facilities. We believe that an average age of assets at 
or above the 75th percentile nationally is a sufficient indicator that 
a hospital had a pressing need for renovation or replacement at the 
beginning of the capital transition period to serve as a threshold 
qualifier for a special exception.
    We would determine whether a hospital is at or above the 75th 
percentile nationally on the basis of Medicare cost report data for FY 
1992. That data is becoming available this year. Preliminary but 
incomplete data suggest that the average age of buildings and fixed 
equipment at the 75th percentile is approximately 16.4 years. We intend 
to make a final determination on the basis of more complete data that 
will become available at a later date.
    The second part of the test would compare the average age of 
buildings and fixed equipment in the cost reporting period beginning in 
FY 1992 with the average age of fixed assets in the year the hospital 
reports the completion of a major capital replacement or renovation. A 
major renovation or replacement of hospital capital during the 
transition period should result in a dramatically reduced average age 
of buildings and fixed equipment compared to the first year of the 
transition. We are therefore proposing that the test would be whether a 
hospital's average age of buildings and fixed equipment has declined by 
at least 50 percent since the first year of payment under the capital 
prospective payment system. Thus, a hospital whose average age of 
buildings and fixed equipment is at or above the 75th percentile 
nationally in the first year of capital prospective payment, and whose 
average age of buildings and fixed equipment has declined by at least 
50 percent in a designated year later in the transition, meets the age-
of-assets test.
    We welcome comment on the use of an average age of asset measure, 
on the age-of-assets test as we have conceived it, and on the 
appropriate threshold levels to apply under such a test.
    We do not believe that this special exception for replacement and 
renovation of old facilities should apply to hospitals whose capital 
projects preserve the overcapacity that is currently evident in much of 
the hospital industry. Therefore, a hospital cannot qualify for an 
exception unless it has received any required approval from a State or 
local planning authority. If such approval is not required, an urban 
hospital must demonstrate either that (1) overall average occupancy in 
its MSA is at least 80 percent, or (2) its capacity is no more than 80 
percent of its prior capacity (in terms of bed size). We are exempting 
rural hospitals from this requirement because of concern about 
maintaining access to needed services in rural areas.
    Hospitals that qualify for exceptions under this special provision 
may continue to receive exceptions payments for up to 10 years beyond 
the transition. Exceptions payments will be available to hospitals that 
meet the special criteria above for 10 years after the date when the 
hospital meets the age of asset test, provided that the hospital meets 
the age of asset test no later than the end of the capital prospective 
payment system transition period for the hospital (that is, the last 
day of the hospital's last cost reporting period beginning before 
October 1, 2001). We believe that extending exceptions payments for up 
to 10 years after the transition should be sufficient for hospitals who 
must undertake major renovation or replacement of facilities during the 
transition period.
    We would continue to determine the amount of the exceptions 
payments under this special provision on a cumulative basis. That is, 
we would determine the hospital's exception payment by comparing the 
cumulative payments made to the hospital under the capital prospective 
payments system to the cumulative minimum payment levels applicable to 
the hospital for each cost reporting period subject to the prospective 
payment system. Any amount by which the hospital's cumulative payments 
exceed its cumulative minimum payment levels would continue to be 
deducted from the additional payment that would otherwise be payable 
for the cost reporting period. In addition, we will apply another test 
designed to limit the amount of exceptions payments under this special 
provision. We would reduce the amount of an exception payment that 
would otherwise be made for any cost reporting period under this 
special provision by the amount of any Medicare hospital inpatient 
prospective payment system payments for the cost reporting period (less 
75 percent of operating prospective payment system disproportionate 
share payments if applicable) that are in excess of Medicare inpatient 
operating and capital costs. This calculation includes payments under 
both the capital and operating prospective payment systems. It does not 
include graduate medical education payments, outpatient service 
payments, or payments for any other services covered under Medicare 
Part B. We propose to exclude 75 percent of operating prospective 
payment system disproportionate share payments from the determination 
of the Medicare operating prospective payments system payments in order 
to account for the financial pressure that disproportionate share 
hospitals experience in other parts of their operations.
    Finally, we emphasize that these proposed policies would be subject 
to reevaluation in the light of passage of comprehensive health care 
reform by Congress. The hospitals for whom we currently propose to 
provide special protections may no longer require such protections 
after the implementation of comprehensive health care financing reform. 
Therefore, we will carefully monitor the impact of final health care 
reform legislation on the hospitals that would receive special 
treatment under the policies proposed above to determine whether such 
legislation justifies revision of those policies.
    We are proposing the following revisions to the regulations text to 
implement the changes discussed above:
     Under new Sec. 412.348(a), we would define current ratio, 
fixed assets, and average age of fixed assets.
     The new special exceptions requirements are set forth at 
proposed Sec. 412.348(g).
     Current paragraphs (a) through (e) have been redesignated 
as paragraphs (b) through (f), and current paragraph (f) has been 
redesignated as paragraph (h).
     We are also proposing to make conforming technical changes 
to Sec. 412.348 to correct references.

D. Extraordinary Circumstances Exceptions Payments (Sec. 412.348(e))

    Currently, Sec. 412.348(e) provides that a hospital may request an 
additional payment during the capital transition period if the hospital 
incurs an unanticipated capital expenditure in excess of $5 million 
(net of insurance proceeds) due to extraordinary circumstances beyond 
the hospital's control. Extraordinary circumstances include but are not 
limited to a flood, fire, or earthquake. A hospital must apply to the 
HCFA regional office, for a determination by the HCFA Administrator, 
within 180 days of the extraordinary circumstance that caused the 
unexpected expenditures in order to qualify for exceptions payments. We 
propose to revise Sec. 412.348 to clarify our policy and reconcile 
conflicts between the regulation text and the language and intent of 
the preamble to the August 30, 1991 final rule that implemented 
prospective payment system for capital-related costs (56 FR 43411).
    With respect to current Sec. 412.348(e)(1), we intend to clarify 
that the minimum expenditure criteria that the hospital must meet in 
order to qualify for payments is the net amount of proceeds expected to 
be recovered by the hospital in connection with the event from any 
other source including, but not limited to, insurance, litigation, or 
other government relief funding. In the August 30, 1991 final rule, in 
response to a comment concerning the exceptions process, we indicated 
that we intended to provide for an additional payment when a hospital 
has extraordinary circumstances that result in unanticipated capital 
spending of at least $5 million. We then stated that in determining 
whether this threshold was met, we would take into account any 
insurance proceeds received by the hospital in connection with the 
extraordinary circumstances. However, we inadvertently failed to list 
other sources that may reduce the unanticipated capital-related expense 
to the hospital. Later in that response we noted that HCFA's decision 
will be contingent on a final determination of the associated costs for 
the unanticipated circumstance and we provided an example of how the 
extraordinary circumstance exception policy would be applied. In that 
example we noted that the hospital must provide evidence of the extent 
to which the loss will be covered by insurance proceeds or other 
sources. In the regulations text, we reflected our intention to 
establish the threshold net of insurance but did not include the other 
comparable sources, such as court awards for damages, or other 
governmental relief funds.
    The purpose of establishing this exception was to protect hospitals 
during the transition period from out-of-pocket expenditures at a level 
that could put severe financial strain on them. Thus, we clearly did 
not intend to replace or supplement other payment sources that have an 
obligation to pay or provide special authorization for funding in these 
same circumstances. As a result, we intend to revise current 
Sec. 412.348(e)(1) to conform with the example provided in the August 
30, 1991 final rule concerning application of the extraordinary 
circumstances exception policy and, specifically, documentation of 
evidence of the extent of net loss.
    We also propose to correct the provision in current 
Sec. 412.348(e)(2) regarding the level at which the determination of a 
hospital's eligibility for an extraordinary circumstance exception 
payment is made. Although the determination authority was reserved to 
the HCFA Administrator, we believe that the appropriate official to 
make this decision is the Director of the Office of Payment Policy, 
Bureau of Policy Development, Health Care Financing Administration. 
This change is warranted because it is inappropriate that the HCFA 
Administrator make a decision that he or she may be called on to review 
if a hospital requests an administrative appeal of an adverse decision 
on its exceptions application. As the director of the HCFA component 
that determines policy on hospital payment in general and exceptions 
payment policy in particular, the Director of the Office of Payment 
Policy is ideally suited to make the determination on an exceptions 
request. The determination is subject to the appeal procedures of 
subpart R of 42 CFR part 405 when the provider receives the NPR for the 
cost reporting period for which the provider is seeking additional 
payments.

E. Funding of Depreciation (Secs. 413.134 and 413.153)

    Section 1861(v)(1)(A) of the Act gives the Secretary broad latitude 
to prescribe regulations concerning Medicare payments to providers on a 
reasonable cost basis. Under this authority, Sec. 413.134(e) provides 
that, although we do not require the funding of depreciation, we 
strongly recommend it as a means of conserving funds for the 
replacement of depreciable assets.
1. Offset of Investment Income
    To encourage the funding of depreciation, we have specified at 
Secs. 413.134(e)(1) and 413.153(b)(2)(iii) that investment income 
earned on funded depreciation will not be used to reduce allowable 
interest expense. Further, Sec. 413.134(e) stipulates that additions to 
the funded depreciation account must remain in the account for at least 
6 months to be considered valid funding transactions and be eligible 
for the benefits of a funded depreciation account.
    In response to a comment in the August 30, 1991 final rule on the 
prospective payment system for inpatient hospital capital-related costs 
(56 FR 43424), we stated that interest on any funds that do not qualify 
as funded depreciation account funds, which would include funded 
depreciation deposits of less than 6 months duration, must be used to 
offset interest expense. Section 226.3 of the Provider Reimbursement 
Manual (HCFA Pub. 15-1) provides that investment income earned prior to 
the elapse of the 6-month period will not be offset unless the deposits 
are actually withdrawn during this period.
    We are proposing to revise Sec. 413.134(e)(1) to state specifically 
that investment income earned during the 6-month period will not be 
used to offset interest expense unless the funds are withdrawn for an 
improper purpose during this period. Under this change, if a provider 
withdraws funds from the funded depreciation account before the 
expiration of the 6-month time limit, and the withdrawal is made for an 
allowable purpose as described in Sec. 413.134(e)(3)(i)(A), the 
investment income earned on the funds is not offset against allowable 
interest expense.
2. Loans to the General Fund
    We propose to revise and clarify our policy regarding loans from 
the provider's funded depreciation fund to the provider's general fund. 
Sections 413.153(b)(3)(ii) and (c)(2) permit a provider to lend its 
funded depreciation funds to its general fund. Moreover, these sections 
provide that interest expense incurred on such loans are considered 
allowable costs. Section 226.1 of the Manual amplifies this policy by 
explaining that, in order for the interest expense incurred on such 
loans to be allowable, the interest expense must meet the ``necessary 
and proper'' tests (set forth in the regulations at Sec. 413.153(b) (2) 
and (3), and in the Manual at sections 202.2 and 202.3). This section 
of the Manual also explains that the funds loaned to the general fund 
must not be used to acquire depreciable assets used to furnish patient 
care because the provider is expected to use its funded depreciation, 
rather than to lend it, for that purpose. Finally, this section of the 
Manual explains that deposits to the funded depreciation fund will not 
be recognized to the extent that loans of funded depreciation funds to 
the general fund are outstanding. Rather, such deposits will be 
considered repayments of the loan to the general fund.
    Three other sections of the Manual address loans from a provider's 
funded depreciation fund to the provider's general fund. Section 226.C 
of the Manual, in discussing the availability of funded depreciation 
funds, provides that loans made from funded depreciation do not alter 
the requirement that funded depreciation must be available for the 
acquisition of the provider's depreciable assets used to furnish 
patient care, or for other capital purposes related to patient care. 
Section 226.3 of the Manual, in discussing the application of the 6-
month rule for a deposit to become a valid funding transaction, 
provides that a loan of funded depreciation funds to the general fund 
is considered a withdrawal for purposes of applying the 6-month rule. 
That is, if the provider borrows from funded depreciation for a working 
capital purpose, and some or all of the funds borrowed were not on 
deposit in the funded depreciation fund for at least 6 months, the 
borrowing would be considered a withdrawal from the funded depreciation 
account. In addition, if a deposit did not satisfy the 6-month rule any 
investment income earned on the deposit would have to be used to offset 
otherwise allowable interest expense. Section 226.4B of the Manual, in 
an example of applying of the last-in, first-out basis to withdrawals 
from funded depreciation for an improper purpose, also characterizes a 
loan to the general fund from the funded depreciation fund as a 
withdrawal.
    In recent years, we have received a number of inquiries suggesting 
that loans from the provider's funded depreciation fund to the 
provider's general fund are characterized more appropriately as 
investments of funded depreciation, rather than withdrawals. We agree 
with the inquirers. The term ``withdrawal'' implies that the funds have 
been removed from the funded depreciation account and used, either for 
a proper purpose (for example, acquisition of a depreciable asset) or 
an improper purpose (for example, to purchase office supplies). In 
contrast, the term ``investment'' implies that the funds have not 
actually been removed from the funded depreciation account and used; 
rather, they have been temporarily converted to one or more income 
producing vehicles (for example, the purchase of U.S. Treasury bills). 
Because loans from the funded depreciation funds to the general fund 
generate investment income for the funded depreciation fund, we believe 
that such loans more properly should be considered as investments, 
rather than withdrawals.
    In conjunction with this change, we had to decide whether such 
loans would have to meet the ``readily marketable'' test for allowable 
funded depreciation investments expressed in Sec. 413.134(e) and 
section 226 of the Manual. We believe that, because we require that 
loans made from funded depreciation do not alter the requirement that 
the funded depreciation be available for the acquisition of depreciable 
assets used to furnish patient care, or for other capital purposes 
related to patient care, application of the ``readily marketable'' test 
would be redundant. That is, if a provider loans funded depreciation to 
the general fund, and while that loan is outstanding the provider needs 
funds to acquire a depreciable asset related to patient care, the 
provider may not borrow funds to acquire the depreciable asset. Rather, 
the provider must recall the funds from the general fund loan to use to 
acquire the asset.
    Accordingly, we propose to add paragraph (e)(4) to Sec. 413.134 to 
address loans from the funded depreciation account. New 
Sec. 413.134(e)(4) would both consolidate the policies now set forth in 
the manual sections cited above and revise our policy regarding the 
characterization of loans from the funded depreciation account. Such 
loans would be considered investments, rather than withdrawals.
3. Spenddown of ``Tainted'' Funded Depreciation
    The preamble to the August 30, 1991 final rule also addressed the 
issue of spenddown (56 FR 43421). ``Spenddown'' is a process whereby we 
permit providers to ``cure'' borrowing that was found to be unnecessary 
because of available funded depreciation by using those funded 
depreciation funds for a proper purpose. Under spenddown, if additional 
deposits are made to funded depreciation after the unnecessary 
borrowing determination, withdrawals from the funded depreciation 
subsequent to a determination of unnecessary borrowing are made on a 
last-in, first-out basis (typically, withdrawals for a proper purpose 
are made on a first-in, first-out basis). The result of this policy is 
that all additional deposits to funded depreciation must be used before 
spending can be allotted to the ``tainted'' funds, that is, the portion 
of the funded depreciation that resulted in the unnecessary borrowing. 
In addition, Medicare's policy has been that any other funded 
depreciation funds in the account at the time of the unnecessary 
borrowing must be used before the ``tainted'' funds can be spent down 
or cured.
    Since the publication of the August 30, 1991 final rule, we have 
received several inquiries asking why our policy on spenddown was not 
incorporated into the regulations. These inquiries also have pointed 
out that the last-in, first-out method set forth at 
Sec. 413.134(e)(3)(i)(C) will not work properly when the unnecessary 
borrowing is repaid from the funded depreciation account and that 
account contained untainted funded depreciation at the time of the 
unnecessary borrowing or received additional deposits after the 
borrowing. The inquirers suggested that this situation may be rectified 
by establishing an exception to the last-in, first-out rule when the 
unnecessary borrowing that caused the ``tainting'' is repaid out of 
funded depreciation. In this case, any use of funded depreciation to 
repay the unnecessary borrowing will be deemed to be from ``tainted'' 
funded depreciation. We agree and propose to provide for such an 
exception in Sec. 413.134(e)(2)(iv).
    Similarly, where the provider repays part or all of the principal 
of the unnecessary borrowing that caused the ``tainted'' funded 
depreciation by using general funds, a corresponding amount of the 
``tainted'' funded depreciation must be cured. This is necessary so 
that the ``tainted'' portion of the funded depreciation does not exceed 
the amount of the balance of the unnecessary borrowing that caused the 
``tainting'' in the first place.
    We are proposing to revise Sec. 413.134(e) to incorporate the 
curing process of ``tainted'' funded depreciation and also to provide 
that the provider's subsequent repayment of the principal portion of 
the unnecessary borrowing will be from the ``tainted'' funds in the 
funded depreciation. Thus, neither the first-in, first-out nor the 
last-in, first-out basis would be applicable for such repayments.
4. Necessary and Unnecessary Borrowing
    In February 1977, HCFA published Sec. 203 of the Provider 
Reimbursement Manual to address interest on loans in excess of asset 
value acquired after 1970. Section 203.D of the Manual states that 
``[r]epayments of the funds borrowed are applied first to reducing the 
portion of the loan applied to the allowable cost of the patient care 
assets, then to the tangible and intangible assets not considered 
reasonably related to patient care, and lastly to goodwill.'' We have 
applied this long-standing principle to cases where a provider repays 
borrowed funds where some of these funds are deemed to be unnecessary. 
In these circumstances, we have held that all of necessary borrowing 
must be repaid before any of the repayments may be applied to the 
unnecessary borrowing.
    We also apply this principle to unnecessary borrowing that causes 
``tainted'' funded depreciation. When a portion of a provider's 
borrowing is considered unnecessary because of the availability of 
funded depreciation, subsequent repayments, whether from funded 
depreciation or general funds, are first applied to the allowable 
portion of the borrowing and, when all of the allowable borrowing is 
repaid, to the unallowable portion of the loan. This places the 
provider in the same position as if the available funded depreciation 
had been used without any unnecessary borrowing.
    These applications have not been clearly set forth in the 
regulations. Therefore, we propose to revise Secs. 413.134(e) and 
413.153(d) to clearly address both situations.
    We are also proposing to make a technical change to 
Sec. 413.134(d)(1) to correct a reference.

VI. Proposed Changes for Hospitals Excluded From the Prospective 
Payment Systems

A. New Requirements for Certain Long-Term Care Hospitals Excluded From 
the Prospective Payment Systems (Sec. 412.23)

    Section 1861(e) of the Act and the regulations at 42 CFR part 482 
define a hospital as an institution that qualifies to participate in 
Medicare because it meets certain health and safety standards, known as 
``conditions of participation'' (COPs). A hospital must be surveyed for 
compliance with the COPs by State agencies that work under agreement 
with HCFA unless, under section 1865 of the Act and regulations at 42 
CFR part 488, the hospital is presumed to meet the COPs on the basis of 
accreditation by the Joint Commission on Accreditation of Healthcare 
Organizations or the American Osteopathic Association.
    Recently, some entities have discovered that the process for 
becoming a provider under the COPs can be manipulated to permit them to 
receive exclusion from the prospective payment systems. Specifically, 
hospitals have begun to organize themselves under what they themselves 
refer to as the ``hospital within a hospital'' model. Under this model, 
an entity may operate in space leased from a hospital, and have most or 
all services furnished under arrangements by employees of the lessor 
hospital. The newly organized entity may be operated by a corporation 
formed and controlled by the lessor hospital, or by a third entity that 
controls both. In either case, the new entity seeks State licensure and 
Medicare participation as a hospital, demonstrates that it has an 
average length of stay of over 25 days, and obtains an exclusion from 
the prospective payment systems. The effect of this process is to 
extend the long-term care hospital exclusion to what is for all 
practical purposes a long-term care hospital unit.
    We believe it may not be appropriate for a long-term care 
``hospital within a hospital'' to receive an exclusion from the 
prospective payment systems. The considerations underlying exclusions 
from the prospective payment systems may not apply to these entities.
    Under the prospective payment systems, hospitals are paid for 
inpatient services on the basis of prospectively determined rates. 
Under section 1886(d)(1)(B) of the Act, certain hospitals and units are 
excluded from the prospective payment systems including, psychiatric, 
rehabilitation, children's, and long-term care hospitals, and 
psychiatric and rehabilitation units. These hospitals and units are 
excluded because they could not be paid appropriately under the 
prospective payment systems. The statute does not exclude ``long-term 
care units'' of general hospitals.
    The prospective payment systems are based on an averaging concept 
which recognizes that some patients will stay longer and consume more 
resources than expected, while others will have shorter, less costly 
stays. We expect that an efficiently operated hospital will be able to 
deliver quality care to Medicare patients at an aggregate cost no 
greater than its aggregate Medicare payments under the prospective 
payment systems for each cost reporting period.
    The DRG system does not, however, apply well to long-stay 
hospitals. Those hospitals have few short-stay or low-cost cases, and 
might be systematically underpaid if the prospective payment method 
applied. Thus, exclusion of entire long-term care hospitals from the 
prospective payment systems is appropriate. However, if an entity that 
provides long-term care is part of a larger hospital, the reasons for 
exclusion may not apply. A long-term care ``hospital within a 
hospital'' is essentially a long-term care hospital unit which accounts 
for only a part of the larger hospital's patient load. The principles 
underlying the prospective payment systems do apply to the larger 
hospital, unlike entire long-term care hospitals. Exclusion of long-
term care units could inadvertently encourage hospitals to try to abuse 
the prospective payment systems, by diverting all long-stay cases to 
the excluded unit, leaving only the shorter, less costly cases to be 
paid for under the prospective payment systems. In such cases, 
hospitals would profit inappropriately from prospective payments.
    For these reasons, we believe it may be inappropriate to grant an 
exclusion to a long-term care ``hospital within a hospital.'' Moreover, 
exclusion of long-term care ``units'' is inconsistent with the 
statutory scheme. Section 1886(d)(1)(B) of the Act clearly provides for 
exclusions from the prospective payment systems for long-term care 
hospitals, and also for psychiatric units and rehabilitation units, but 
the statute does not provide for exclusion of long-term care units. 
Also, we note that section 1886(d)(1)(B) of the Act begins with the 
phrase ``as used in this section'' in referring to hospitals; we 
believe this language suggests that the definition of ``hospital'' for 
prospective payment purposes may be different from other definitions. 
Furthermore, section 1886(d)(1)(B) of the Act provides that excluded 
from the definition of prospective payment systems hospital is a 
psychiatric or rehabilitation unit of a hospital that is a distinct 
part of the hospital ``as defined by the Secretary.''
    We believe these distinctions were intended to be meaningful, and 
that it would undermine the distinctions if we allowed exclusion of 
long-term care units. Because we believe such exclusions are contrary 
to the purpose and scheme of section 1886(d)(1)(B) of the Act, we are 
proposing to revise the regulations to prevent inappropriate 
exclusions. Section 1871 of the Act provides that the Secretary ``shall 
prescribe such regulations as may be necessary to carry out the 
administration of the insurance programs under this title,'' and 
section 1102 of the Act authorizes the Secretary to ``make and publish 
such rules and regulations * * * as may be necessary to the efficient 
administration of the functions with which [the Secretary] is charged 
under this Act.''
    To avoid recognizing nominal hospitals, while allowing adequate 
flexibility for legitimate networking and sharing of services, we are 
proposing additional criteria in 42 CFR part 412, subpart B for 
determining whether an entity qualifies for exclusion from the 
prospective payment systems as a separate long-term care hospital. 
These criteria would be applied to entities seeking exclusion from the 
prospective payment systems as a long-term care hospital. The revised 
criteria would apply to entities seeking exclusion as a long-term care 
hospital for cost reporting periods beginning on or after October 1, 
1994, including reapprovals of long-term care exclusions for entities 
that are currently excluded.
    We propose that in addition to meeting any of the classification 
requirements set forth in Sec. 412.23, for cost reporting periods 
beginning on or after October 1, 1994, to be excluded from the 
prospective payment systems, a hospital located in the same building or 
in one or more entire buildings located on the same campus as another 
hospital and seeking long-term care exclusion must meet the following 
requirements:
     Separate governing body. The hospital has a governing body 
that is separate from the governing body of the hospital from which it 
obtains space. The hospital's governing body is not under the control 
of the hospital that provides space, or of any third entity that 
controls both hospitals.
     Separate chief medical officer. The hospital has a single 
chief medical officer who reports directly to the governing body and 
who is responsible for all medical staff activities of the hospital. 
The chief medical officer of the hospital is not employed by or under 
contract with either the hospital that provides space or any third 
entity that controls both hospitals.
     Separate medical staff. The hospital has a medical staff 
that is separate from the medical staff of the hospital from which it 
obtains space. The hospital's medical staff is directly accountable to 
the governing body for the quality of medical care provided in the 
hospital, and adopts and enforces bylaws governing medical staff 
activities, including criteria and procedures for recommending to the 
governing body the privileges to be granted to individual 
practitioners.
     Chief executive officer. The hospital has a single chief 
executive officer through whom all administrative authority flows, and 
who exercises control and surveillance over all administrative 
activities of the hospital. The chief executive officer is not employed 
by, or under contract with, either the hospital that provides space or 
any third entity that controls both hospitals.
     Performance of basic hospital functions. The hospital 
performs the basic hospital functions specified in Secs. 482.21 through 
482.27, 482.30, and 482.42 through the use of employees or under 
contracts or other agreements with entities other than the hospital 
from which it obtains space, or a third entity that controls both 
hospitals. Food and dietetic services and housekeeping, maintenance, 
and other services necessary to maintain a clean and safe physical 
environment could be obtained under contracts or other agreements with 
the hospital that provides space, or with a third entity that controls 
both hospitals.
    For purposes of these proposals, we would consider ``control'' to 
exist if an individual or organization has the power, directly or 
indirectly, significantly to influence or direct the actions or 
policies of an organization or institution. This definition of 
``control'' is now codified in the regulations at Sec. 413.17(b)(3), 
concerning allowable Medicare costs, and we would apply the same 
criteria to determine whether hospitals and hospital units should be 
excluded from the prospective payment systems. Thus, most hospital 
managers and administrators are familiar with this definition. We 
welcome comments on this and other issues concerning the proposed 
exclusion criteria.
    Finally, to ensure that hospitals that are excluded from the 
prospective payment systems are not confused with the types of 
facilities that can participate separately in Medicare as distinct-part 
psychiatric hospitals or skilled nursing facilities, we propose to 
delete all references in the current prospective payment systems 
regulations to excluded units as ``distinct part'' facilities.

B. Removal of the 1986 Malpractice Rule (Sec. 413.56)

    We propose removing from the regulations ``the 1986 malpractice 
rule'', which is set forth at Sec. 413.56. We also would remove all 
cross-references to Sec. 413.56. This proposal is a technical change 
designed to conform the regulations to the various authorities that 
have previously established that the 1986 malpractice rule is invalid.
    The history of Medicare reimbursement policy under the cost-based 
reimbursement system for provider malpractice insurance costs is 
described in detail in Sections I. and II.A. of the March 27, 1987 
final rule (52 FR 9833). To summarize briefly: for cost reporting 
periods beginning before July 1, 1979, provider malpractice insurance 
costs were included in the general and administrative cost center (``G 
& A pool'') with other overhead costs, and apportioned to the Medicare 
program in accordance with the provider's Medicare utilization rate (52 
FR 9834). (See also Sec. 405.452(b)(1) (``the pre-1979 utilization 
method) redesignated at Sec. 413.53(a)(1)(i).) Effective for cost 
reporting periods beginning on or after July 1, 1979, ``the 1979 
malpractice rule'' removed provider malpractice insurance costs from 
the G & A pool, and directly apportioned those insurance costs based on 
the ratio of provider malpractice losses paid for Medicare patients 
compared to losses paid for all patients (52 FR 9834). On April 1, 
1986, we published an interim final rule with comment period that 
replaced the 1979 malpractice rule, effective May 1, 1986, with the 
1986 malpractice rule (51 FR 11142). The 1986 malpractice rule was set 
forth in regulations at Sec. 405.457, subsequently redesignated as 
Sec. 413.456, and then confirmed in our above-cited March 27, 1987 
final rule. The 1986 malpractice rule reestablished reimbursement of 
skilled nursing facility malpractice insurance costs under the pre-1979 
utilization method, Sec. 413.56(c), whereas hospital malpractice 
insurance costs were reimbursed based on both a hospital's utilization 
rate and aspects of the claims-paid approach of the 1979 regulation. 
(See Sec. 413.56(b).)
    The Secretary's authority to apply the hospital payment provisions 
of the 1986 malpractice rule has been eliminated through a series of 
events. As promulgated initially, the 1986 rule applied retroactively, 
subject to the Medicare program's general rules of administrative 
finality, to cost reporting periods beginning on or after July 1, 1979. 
(See Sec. 413.56(a).) Subsequently, however, the Supreme Court held 
that the Medicare statute does not generally authorize retroactive 
rulemaking, Bowen v. Georgetown University Hosp., 488 U.S. 204 (1988) 
(``Georgetown''). Therefore, the Administrator of HCFA issued HCFA 
Ruling 89-1 (Jan. 26, 1989) which, first, discontinued retroactive 
application of the 1986 rule and, second, required application of the 
pre-1979 utilization method to all open hospital malpractice insurance 
cost claims, and all properly pending appeals of the malpractice issue, 
for cost reporting periods beginning before the May 1, 1986 effective 
date of the 1986 rule.
    The prospective applicability of the 1986 malpractice rule was 
circumscribed from its outset by the prospective payment system. For 
hospitals subject to the prospective payment system, malpractice 
insurance costs attributable to inpatient services paid under the 
prospective payment system are subsumed under the prospectively 
determined payment rates that are applied to the various diagnosis 
related groups. Thus, the 1986 malpractice rule applied prospectively 
to only malpractice insurance costs attributable to: (1) outpatient 
services furnished by prospective payment hospitals; and (2) all 
services furnished by specialty hospitals and distinct-part hospital 
units excluded from the prospective payment system.
    In the March 27, 1987 final rule, we determined that it was 
necessary to develop separate ``scaling factor formula'' values under 
the 1986 malpractice rule (see Sec. 413.56(b)(3) through (5)), for 
malpractice insurance costs attributable to hospital outpatient 
services and for costs attributable to inpatient services furnished by 
facilities excluded from the prospective payment system (see 52 FR 
9836). However, we were unable to derive separate formula values for 
inpatient and outpatient services for ``the R factor'' in the formula 
(that is, the national Medicare malpractice loss ratio, as adjusted for 
associated claims adjustment expense), due to the difficulty of 
securing hospital data attributing malpractice claims (and associated 
claims adjustment expense) separately to outpatient services and 
inpatient services. Moreover, separate scaling factor formula values 
for hospital facilities excluded from the prospective payment system 
were not developed.
    In Children's National Medical Center, et al. v. Sullivan, Civil 
Action No. 90-1362-WBB (D.D.C. July 16, 1991) (``Children's 
National''), the Secretary entered into a Consent Order providing that 
the 1986 malpractice rule is invalid and shall not be enforced, due to 
the agency's inability to develop separate scaling factor formula 
values for outpatient services and for inpatient services furnished by 
hospital facilities excluded from the prospective payment system. The 
Children's National Consent Order was approved by the United States 
District Court for the District of Columbia on July 16, 1991. The 
Administrator of HCFA then issued HCFA Ruling 91-1 (Sept. 30, 1991), 
which, first, provided that the Children's National Consent Order 
governs all open hospital malpractice insurance cost claims, and all 
properly pending appeals of the malpractice issue, for cost reporting 
periods beginning on or after May 1, 1986 and, second, required 
reimbursement of such claims under the pre-1979 utilization method.
    The Supreme Court's Georgetown decision, the Children's National 
Consent Order, and the two corresponding HCFA Rulings establish that 
the 1986 malpractice rule is null and void as to all open hospital 
malpractice insurance cost claims, and all properly pending hospital 
appeals of the malpractice insurance cost reimbursement issue. See 42 
CFR 401.108(c). See also HCFA Transmittal No. 395 (December 1993), 
which deleted as ``obsolete,'' due to HCFA Ruling 91-1, the 
implementation provisions for the 1986 rule that were formerly included 
in Sec. 2214 of the Medicare Intermediary Manual, Part 2. We are 
proposing to conform Medicare regulations to the actual state of the 
law governing provider malpractice insurance cost reimbursement by 
removing Sec. 413.56 from the regulations, and by eliminating all 
cross-references to Sec. 413.56 from the regulations. As a result of 
this proposal, the amended Medicare rules would reflect the previously 
established legal requirement that reasonable cost reimbursement for 
provider malpractice insurance cost claims that are either open or the 
subject of properly pending appeals, must be determined under the pre-
1979 utilization method.

C. Related Technical Changes (Secs. 412.20, 412.22, 412.25, 412.27, 
412.29, 412.30, 412.96, 412.105, 412.108, 412.116, 412.130, 412.71, 
413.40, 413.53, 413.174 and 482.66)

    We are proposing to remove the words ``distinct part'', wherever 
they appear, in the following places:
    (a) Section 412.20(b)(1);
    (b) Section 412.22(b);
    (c) The section title and paragraph (a) of Sec. 412.25;
    (d) The undesignated introductory texts of Secs. 412.27 and 412.29;
    (e) The section title of Sec. 412.30;
    (f) Section 412.96(c)(1) and (c)(2);
    (g) Section 412.105(b), (f)(5) and (g)(1)(iii);
    (h) Section 412.108(a)(2);
    (i) Section 412.116(a) and (b);
    (j) The section title of 412.130;
    (k) Section 412.130(a)(2) and (a)(3);
    (l) Section 413.40(a)(2)(ii), (b)(1)(i) through (b)(1)(iii) and 
(f)(2); and
    (m) In Sec. 482.66(a)(7)(i), the second appearance of the words 
``distinct part'' are removed.
    We also propose to revise the section titles of Secs. 412.27 and 
412.29 to remove the words ``distinct part'' and replace them with the 
word ``excluded''.
    In addition, we propose to make technical changes to 
Secs. 412.71(b), 413.53 and 413.174(b)(4)(iv) to remove and replace 
obsolete language and to correct references.

VII. ProPAC Recommendations

    We have reviewed the March 1, 1994 report submitted by ProPAC to 
Congress and have given its recommendations careful consideration in 
conjunction with the proposals set forth in this document. 
Recommendations 1 through 6 focus on specific features of the 
President's Health Security Act and other health care reform activities 
and will be resolved through the legislative process. Therefore, we are 
not addressing these recommendations in this document. Recommendations 
9, 12, and 13 concerning the update factors for inpatient operating 
costs are discussed in Appendix D of this proposed rule. 
Recommendations 10 and 11 concerning the update factors for inpatient 
capital costs are also discussed in Appendix E. Recommendations 15 and 
16 concerning hospital wage data and the hospital wage index are 
discussed in section III of this preamble. The remaining 
recommendations are discussed below.

A. Controlling Medicare Spending Across All Sites of Care 
(Recommendation 7)

    Recommendation: Medicare should continue to develop policies to 
monitor and control total expenditure growth across all sites of care. 
Payment methods should not unduly favor the choice of one site over 
another. They should also provide consistent incentives to constrain 
increases in volume and service intensity across physicians and other 
providers.
    Response: In response to a similar ProPAC recommendation last year, 
we stated in the proposed rule for FY 1994 that controlling the overall 
growth of Medicare spending is of critical importance. We believe the 
hospital inpatient prospective payment system has been effective in 
slowing the growth in Medicare spending compared with estimates of 
growth in spending under reasonable cost reimbursement. Also, during 
the first 2 years of the physician fee schedule, the growth in spending 
for physician services under Medicare has been reduced. In addition, we 
are developing a prospective payment system for outpatient hospital 
services that will provide the appropriate economic incentives to help 
control the growth of Medicare spending for outpatient services.
    While prospective payment has shown promise for controlling 
Medicare spending growth, we remain concerned about growth in the 
volume and intensity of Medicare services. Currently, we are using the 
Medicare volume performance standard to provide physicians with 
incentives to control volume and intensity.
    There are no similar volume control systems for other services. We 
are continuing to study other mechanisms for controlling expenditures 
growth, such as bundling payments for multiple services into a single 
payment.

B. Strengthening Medicare's Risk Contracting Program (Recommendation 8)

    Recommendation: The Commission recommends that the Secretary 
improve Medicare's risk-based managed care program to give more 
Medicare beneficiaries the option of enrolling in managed care plans. 
To increase plan participation, deficiencies related to the risk 
adjustment formula and local differences in payments need to be 
corrected.
    Response: We support giving more Medicare beneficiaries the option 
of enrolling in managed care plans. We are aware of the need to 
institute new methodologies for payment to risk plans. Currently, we 
are sponsoring research on risk adjustment methods, including 
diagnostic cost groups (DCGs) and ambulatory care groups (ACGs). In 
addition, our recent grants announcement (Health Care Financing 
Research and Demonstration Cooperative Agreements and Grants for Fiscal 
Years 1994 Through 1996) (59 FR 1951) calls for work on risk adjustors, 
both for the Medicare and the under 65 populations. We have also 
initiated a demonstration that is expected to test alternative payment 
methods that may incorporate adjustments for enrollee health status.
    With regard to correcting local differences in payment to Medicare 
risk plans, we note that section 1876 of the Act requires payment to 
Medicare risk plans to be based on projected Medicare per capita costs 
for beneficiaries who are not enrolled in managed care plans. Given 
that there are local differences in Medicare's per capita costs for 
these beneficiaries, local differences in Medicare's risk plan payment 
rates are a logical result.

C. Update to the Composite Rate for Dialysis Services (Recommendation 
14)

    Recommendation: The FY 1995 update recommendation for the composite 
rate for dialysis services accounts for the following:
     The projected increase in the market basket for dialysis 
services in FY 1995, estimated at 4.3 percent;
     A positive adjustment of 0.7 percentage points to reflect 
the additional costs associated with scientific and technological 
advances;
     A negative adjustment of 1.0 percentage points to 
encourage productivity improvements; and
     A negative discretionary adjustment of 4.0 percentage 
points to reflect the relationship between payments and estimated FY 
1994 costs.
    This results in a net update recommendation of 0.0 percent.
    Response: We agree with ProPAC's recommendation not to propose a 
payment rate increase for dialysis services. The 1991 audited data 
support this decision. As the Commission points out, these data show 
that independent renal facility composite payment rates are higher than 
their Medicare allowable costs, while hospital renal facilities 
continue to report costs in excess of their payment rates. The audits 
did not provide an explanation for the higher reported costs of 
hospital renal facilities relative to independent renal facilities. 
However, auditors found that hospital renal facilities often fail to 
maintain adequate records for allocation costs in the renal department. 
Since hospitals' payments are not affected by renal cost reports, 
Supplement Worksheet I of HCFA-2552, hospitals do not always complete 
their cost reports accurately.
    Although we realize the importance of regular renal audits, the 
budget for audits continues to decline. Thus, we do not plan to conduct 
renal audits in 1994 or 1995. We have requested funds to conduct renal 
audits in 1996. During this 2-year interval, we would review the 1992 
and 1993 cost report data for those renal facilities in the 1991 audit 
sample.
    We believe that this analysis will provide cost information about 
the ESRD program in lieu of audited data for these years. Furthermore, 
it will provide a basis for analyzing cost data over time and allow for 
better comparison of audited and unaudited costs.

D. Nursing Facility Wage Index (Recommendation 17)

    Recommendation: The Secretary should collect data on employee 
compensation and paid hours of employment for employees of nursing 
facilities that care for Medicare skilled nursing facility (SNF) 
patients. Once these data become available, the Secretary should 
develop a nursing facility wage index and use it to adjust Medicare 
skilled nursing facility payments.
    Response: In recommending an adjustment to SNF payments, we presume 
that ProPAC is referring to the SNF cost limits. We agree that HCFA 
should collect the data necessary to develop a SNF wage index. In the 
conference report on OBRA 1993, the conferees indicated an expectation 
that HCFA collect such data (H.R. Rep. No. 2264, 103d Cong., 1st Sess. 
747 (1993)). However, we do not believe it is prudent to recommend 
implementing a SNF wage index to adjust the SNF cost limits until the 
accuracy of those data and impact of the resulting wage index have been 
thoroughly analyzed. Under current Medicare rules, most SNFs are paid 
their reasonable costs for routine services subject to a cost limit. 
The current methodology for computing the SNF routine service cost 
limits utilizes the hospital wage index to account for geographic 
variations in wages. Only about 35 percent of facilities have costs at 
or above these cost limits.
    We have maintained that, because hospitals and SNFs generally 
compete for employees in the same labor market, one would expect that 
the relationship of hospital area average wages to hospital national 
average wages would fairly represent the relationship of SNF area 
average wages to SNF national average wages. Therefore, we believe the 
hospital wage index is an accurate mechanism for adjusting the SNF 
routine service cost limits for geographic variations in wages. While 
certain limited studies have suggested that a SNF-specific wage index 
may be more accurate, no substantial empirical data have been offered 
to refute our policy. The study undertaken by ProPAC utilized only 
limited data to develop a simulated wage index. Due to the limited 
scope of this study, we believe it is not a sufficient basis for 
refuting the accuracy of the hospital wage index relative to SNF wages.
    We plan to begin collecting SNF wage data for potential use in the 
development of a SNF wage index. These data will help us answer two 
important questions related to the development of a SNF wage index. The 
first is whether SNFs, which are smaller than hospitals and have less 
sophisticated accounting systems, can develop and provide accurate wage 
index data on a national basis. If such data can be provided, our 
second question is whether differences between the resulting wage index 
and the hospital wage index would be significant enough to justify the 
increased Medicare costs involved and the increased reporting and 
information collection burden on SNFs (especially small and rural 
SNFs), the fiscal intermediaries, and HCFA.
    The collection of SNF wage data also will allow us to determine the 
potential impact of a SNF wage index on payments to individual SNFs. A 
change in the wage index may favorably impact SNFs in some areas while 
it may disadvantage SNFs in other areas (possibly significantly), even 
within the same State. While this latter point is not a reason to avoid 
the use of a SNF wage index, it does point out the absolute necessity 
for collecting accurate wage index data from SNFs for construction of 
the wage index. Our experience with the development of a home health 
agency (HHA) wage index is also relevant. In 1988, HCFA implemented an 
HHA-specific wage index based on data received from HHAs. Subsequently, 
HCFA and Congress received numerous complaints from providers 
concerning the burden that the reporting requirements posed and the 
accuracy of the data. As a result, Congress retroactively repealed its 
mandate for use of the HHA wage index and required continued use of the 
hospital wage index. This caused great confusion among both providers 
and fiscal intermediaries.
    Until SNF wage data have been collected and examined, we believe it 
is premature to recommend their use for the adjustment of either the 
SNF cost limits or any future prospective payment system that may 
require a wage adjustment.

E. Improving Outlier Payment Policy (Recommendation 18)

    Recommendation: The Commission believes the outlier payment 
provisions of the Omnibus Budget Reconciliation Act of 1993 will 
improve the current policy for identifying outlier cases and 
determining outlier payments under the prospective payment system. 
However, the following changes also should be implemented for FY 1995:
     The estimated cost of the case and the outlier payment 
amount should no longer be adjusted to reflect the hospital's indirect 
medical education and disproportionate share status.
     The marginal cost factor for cost outliers should be 
increased to 80 percent.
    These changes would further increase the effectiveness of outlier 
payment in protecting against the risk of large losses on some cases. 
They would also improve the distribution of outlier payments across 
hospitals, including hospitals that receive a large number of transfer 
cases.
    Response: The Commission's first recommendation with regard to 
improving outlier payment policy concerns the methodology we use to 
determine whether the cost of a case exceeds the cost outlier 
threshold. ProPAC is asking that Medicare no longer standardize 
hospital costs to remove the effects of the indirect costs of medical 
education (IME) and the costs associated with serving a 
disproportionate share of low income patients (DSH). The effect of 
standardizing the hospital's charges to remove the effects of their IME 
and DSH adjustments is to lower the ``costs'' of cases, for purposes of 
applying the cost outlier threshold, for teaching and disproportionate 
share hospitals relative to other hospitals.
    We responded to this same recommendation in our May 26, 1993 
proposed rule (58 FR 30255). In that response, we noted that sections 
1886(d)(5)(B)(i) and 1866(d)(5)(F)(ii) of the Act require that we pay 
hospitals for IME and DSH costs associated with their outlier payments. 
Given this statutory requirement, we believe it would be inappropriate 
to implement the Commission's recommendation without a change to the 
law.
    In that same response, we also stated our belief that the 
adjustment for IME and to the prospective payment rate is currently 
higher than the additional cost of serving a Medicare beneficiary at a 
teaching hospital. The policy advocated by ProPAC in this 
recommendation would have the effect of increasing outlier payments to 
teaching hospitals. Relative to the costs associated with teaching 
activity, we are concerned that the teaching adjustment may 
overcompensate teaching hospitals for their Medicare cases. For this 
reason, we believe it would be inappropriate to implement ProPAC's 
recommendation without making a reduction in the level of the IME 
adjustment.
    We concur with ProPAC's second recommendation regarding raising the 
marginal cost factor for cost outliers to 80 percent from its current 
level of 75 percent. We currently pay 75 percent of the difference 
between the cost of a case and the cost outlier threshold. Paying 75 
percent of costs beyond a threshold protects hospitals against 
inordinate losses resulting from the costliest Medicare cases. As we 
describe in section IV.D. of this proposed rule, section 13501(c) of 
Public Law 103-66 requires that we phase-out payments for day outliers, 
while simultaneously increasing payments for cost outliers. We believe 
the change mandated by the statute improves Medicare's outlier policy 
by focusing outlier payments on the costliest cases. Consistent with 
focusing Medicare's outlier payments on cases with the greatest losses, 
we are raising the marginal cost factor to 80 percent. We note that 
raising the marginal cost factor to 80 percent necessitates an increase 
in the fixed loss cost outlier threshold in order to maintain outlier 
payments at 5.1 percent of estimated total prospective payments.

F. Level of the Indirect Medical Education Adjustment to PPS Operating 
Payments (Recommendation 19)

    Recommendation: The Commission recommends that the indirect medical 
education adjustment to prospective payments for hospital inpatient 
operating costs be reduced from its current level of 7.7 percent to 7.0 
percent for fiscal year 1995. This reduction should be implemented with 
the anticipated decrease in indirect medical education payments 
returned to all hospitals through a proportionate increase in the 
standardized payment amounts. The Commission also recommends 
continuation of the indirect medical education adjustment to operating 
payments until an alternative system of compensating appropriately for 
the higher costs of patient care in teaching institutions is fully 
operational.
    Response: The first part of this recommendation is identical to 
ProPAC's recommendation on the level of the IME adjustment for FY 1994, 
to which we responded in the May 26, 1993 proposed rule (58 FR 30255) 
and September 1, 1993 final rule (58 FR 46326) containing the changes 
to the prospective payment systems for FY 1994. We agree that the IME 
adjustment should be reduced. Although we have disagreed with ProPAC in 
the past over the degree of reduction, we have proposed reductions as 
part of the President's budgets for the last several years.
    With respect to ProPAC's methodology for estimating the indirect 
cost effect of teaching without accounting for the DSH adjustment, we 
explained our opposition to this suggestion in the September 1, 1993 
final rule (58 FR 46328). To reiterate, our analysis indicates that 
there is evidence of significantly higher costs related to DSH among 
urban hospitals with 100 or more beds (see O'Dougherty et al., Health 
Care Financing Review, Winter 1992, p. 31). Since these hospitals 
receive over 96 percent of all DSH payments, we believe ProPAC's claim 
that ``DSH payments generally do not reflect differences in costs'' is 
overstated. We do agree, however, that the current level of DSH 
payments exceeds the measured cost effect of DSH even among urban 
hospitals with 100 or more beds. In that regard, we point out that in 
the regression model used to estimate the teaching effect, we did not 
specify the DSH variable as the level of DSH payments, but instead set 
it equal to the DSH percentage for urban hospitals with 100 or more 
beds and zero for all other hospitals. (For a complete description of 
our estimating model, see the August 30, 1991 final rule implementing 
the capital prospective payment system, 56 FR 43370.) As ProPAC alludes 
to in its report, not controlling for DSH leads to its higher IME cost 
estimate relative to our IME cost estimate.
    The remainder of ProPAC's recommendation raises policy issues 
related to the appropriate level of IME funding as the transition is 
made from the current system to the new health care system. Since these 
transition issues are currently being addressed as part of the health 
care reform debate, we are not responding in this document to this part 
of ProPAC's recommendation.

G. Prospective Payment Method for Outpatient Services (Recommendation 
20)

    Recommendation: The Commission believes a prospective payment 
system for hospital outpatient services should be implemented. 
Outpatient payment reform should result in consistent policies across 
all sites and providers. Payment should be based on a prospective price 
per unit of service until other methods can be developed that would 
appropriately control the volume of services. The payment rate should 
be adjusted to reflect justifiable cost differences across settings.
    Response: We appreciate ProPAC's support for efforts to develop a 
prospective payment system for hospital outpatient services. We share 
the Commission's view that a hospital outpatient prospective payment 
system can provide meaningful incentives for controlling costs. We also 
believe that such a system could have the potential to be adapted for 
other outpatient settings, resulting in more consistent policies across 
varying sites of service. We look forward to the Commission's comments 
when our report on a hospital outpatient prospective payment system is 
issued.

H. Revision of Payment Formula for Outpatient Services (Recommendation 
21)

    Recommendation: Until prospective payment systems can be 
implemented for hospital outpatient services, the blend formula used to 
calculate hospital payments for ambulatory surgery center-approved 
procedures, radiology services, and diagnostic services should be 
revised. The formula should subtract beneficiary copayment after the 
total payment has been calculated. The resulting reduction in Medicare 
program payments to hospitals should be used to partially offset 
increases in program expenditures due to reducing beneficiary 
liability.
    Response: We agree that the blend formula used to calculate 
Medicare payments to hospitals for ambulatory surgical center-approved 
procedures, radiology services, and certain other diagnostic procedures 
should be revised, as suggested by ProPAC. It should be noted that the 
President's proposed Health Security Act contains a provision that 
would make the correction suggested by ProPAC.

I. Beneficiary Liability for Hospital Outpatient Services 
(Recommendation 22)

    Recommendation: Beneficiary coinsurance for hospital outpatient 
services should be limited to 20 percent of the Medicare-allowed 
payment, as it is in other settings. For services not paid on a 
prospective basis, beneficiary copayment would need to be estimated 
because it is not known at the time of service delivery.
    Response: We share ProPAC's concern that beneficiaries may be 
paying a disproportionate share of the total payment for hospital 
outpatient services under the current cost based system. However, we 
are in the process of developing a prospective payment system for 
hospital outpatient services that will be moving away from costs and 
charges as a basis for payment. We believe that it would be most 
appropriate to make any changes to beneficiary coinsurance in 
conjunction with the implementation of this hospital outpatient 
prospective payment system. Therefore, as we develop this system, we 
are reviewing the issue of beneficiary liability and are working to 
come up with an approach that will be fair to beneficiaries, while 
minimizing the negative financial impact on the Medicare program.

J. Limit the Length of Outpatient Observation Stays (Recommendation 23)

    Recommendation: The Commission recommends limiting the length of 
hospital outpatient observation stays. Further, these changes should be 
coordinated with Peer Review Organizations (PROs) so that appropriate 
short stay admissions are not denied. ProPAC supports HCFA's efforts in 
this regard.
    Response: We appreciate ProPAC's support for our efforts to limit 
the length of hospital outpatient observation stays. Later this year, 
we plan to release Part A Intermediary Manual and Hospital Manual 
instructions to help curb inappropriate use of outpatient observation 
services, including lengthy stays of days and weeks. These instructions 
will require hospitals to admit patients who have been under 
observation in outpatient departments for two consecutive midnights.
    Release of this new national policy will provide needed consistency 
throughout the country in applying outpatient observation service 
guidelines, reduce inappropriate use of such services, and reduce the 
beneficiary's liability for Part B copayments.
    On August 13, 1993, we released a letter to the Executive Directors 
of all PROs to clarify PRO responsibilities when conducting reviews of 
cases involving short hospital stays. PROs were asked to assure that 
their review staffs base their determinations on the beneficiary's need 
for inpatient services rather than basing the decision on the payment 
consequences.

VIII. Other Required Information

A. Paperwork Reduction Act

    As discussed in detail in section III.C. of this preamble, we are 
proposing several changes to forms used to gather hospital wage data, 
specifically the Worksheet S-3, Part II, of the Medicare cost report, 
and the provider cost report questionnaire (HCFA-339). The current 
information collection requirements associated with these items have 
been approved by the Office of Management and Budget (OMB) under 
approval numbers 0938-0050 and 0938-0301, respectively. We are 
proposing that the changes to these forms would be effective for cost 
reporting periods beginning on or after October 1, 1994. However, these 
changes will not be effective until OMB approval is received under the 
authority of the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et 
seq.).

B. Requests for Data from the Public

    In order to respond promptly to public requests for data related to 
the prospective payment system, we have set up a process under which 
commenters can gain access to the raw data on an expedited basis. 
Generally, the data are available in computer tape format or 
cartridges; however, some files are available on diskette. Data files 
are listed below with the cost of each. Anyone wishing to purchase data 
tapes, cartridges, or diskettes should submit a written request along 
with a company check or money order (payable to HCFA-PUF) to cover the 
cost, to the following address: Health Care Financing Administration, 
Public Use Files, Accounting Division, P.O. Box 7520, Baltimore, 
Maryland 21207-0520, (410) 597-5151.
1. Expanded Modified MedPAR-Hospital (National)
    The Medicare Provider Analysis and Review (MedPAR) file contains 
records for 100 percent of Medicare beneficiaries using hospital 
inpatient services in the United States. The records are stripped of 
most data elements that will permit identification of beneficiaries. 
Provider numbers and beneficiary claim numbers have been encrypted to 
protect the privacy of individuals. The hospital is identified by the 6 
position Medicare billing number. The file is available to persons 
qualifying under the terms of the Notice of Proposed New Routine Uses 
for an Existing System of Records published in the Federal Register on 
December 24, 1984 (49 FR 49941), and amended by the July 2, 1985 notice 
(50 FR 27361). The national file consists of approximately 11 million 
records. Under the requirements of these notices, a data release must 
be signed by the purchaser before release of these data. For all files 
requiring a signed data release agreement, please write or call to 
obtain a blank agreement form before placing order. Two versions of 
this file are created each year. They support the following:
     Notice of Proposed Rulemaking (NPRM) published in the 
Federal Register, usually available by the end of May. This file is 
derived from the MedPAR file with a cutoff of 3 months after the end of 
the fiscal year (December file).
     Final Rule published in the Federal Register, usually 
available by the first week of September. This file is derived from the 
MedPAR file with a cutoff of 9 months after the end of the fiscal year 
(June file).

Media: Tape/Cartridge
File cost: $3,415.00 per fiscal year
Periods available: FY 1988 through FY 1993, and FY 1992 for Severity 
DRGs
2. Expanded Modified MedPAR-Hospital (State)
    The State MedPAR file contains records for 100 percent of Medicare 
beneficiaries using hospital inpatient services in a particular State. 
The records are stripped of most data elements that will permit 
identification of beneficiaries. Provider numbers and beneficiary claim 
numbers have been encrypted to protect the privacy of individuals. The 
hospital is identified by the 6 position Medicare billing number. The 
file is available to persons qualifying under the terms of the Notice 
of Proposed New Routine Uses for an Existing System of Records 
published in the December 24, 1984 Federal Register notice, and amended 
by the July 2, 1985 notice. This file is a subset of the Expanded 
Modified MedPAR-Hospital (National) as described above. Under the 
requirements of these notices, a data release must be signed by the 
purchaser before release of these data. Two versions of this file are 
created each year. They support the following:
     NPRM published in the Federal Register, usually available 
by the end of May. This file is derived from the MedPAR file with a 
cutoff of 3 months after the end of the fiscal year (December file).
     Final Rule published in the Federal Register, usually 
available by the first week of September. This file is derived from the 
MedPAR file with a cutoff of 9 months after the end of the fiscal year 
(June file).

Media: Tape/Cartridge
File cost: $1,050.00 per State per year
Periods available: FY 1988 through FY 1993
3. HCFA Hospital Wage Index Data
    This tape contains four files. Included are: (1) the hospital hours 
and salaries for FY 1991 used to create the proposed FY 1995 
prospective payment system wage indexes; (2) a history of all wage 
indexes used since October 1, 1983; (3) a list of State and county 
codes used by SSA and FIPS (Federal Information Processing Standards), 
county name, and Metropolitan Statistical Area (MSA); and (4) a file of 
hospitals that were reclassified for the purpose of the FY 1995 wage 
index. Two versions of these files are created each year. They support 
the following:
     NPRM published in the Federal Register, usually by the end 
of May.
     Final Rule published in the Federal Register, usually by 
the first week of September.

Media: Tape/Cartridge
File cost: $500.00
Periods available: FY 1995 PPS Update

    We note that the files also are available individually as indicated 
below.
    (1) HCFA Hospital Wage Index Survey Only (usually available by the 
end of March for the NPRM and the middle of August for the final rule.)
    (2) Urban and Rural Wage Indices Only
    (3) PPS SSA/FIPS MSA State and County Crosswalk Only (usually 
available by the end of March)
    (4) Reclassified Hospitals by Provider Only

Media: Diskette
File cost: $145.00 Each
4. PPS-I Minimum Data Set, Cost Reporting Periods Beginning On or After 
October 1, 1983, and Before October 1, 1984
    The PPS-I Minimum Data Set contains cost, statistical, financial, 
and other information from the Medicare hospital cost report (HCFA Form 
2552-84). The dataset includes only the most current cost report (as 
submitted, final settled or reopened) submitted for a Medicare 
participating hospital by the Medicare Fiscal Intermediary to HCFA. The 
majority of these cost reports have been settled by the Medicare fiscal 
intermediary. This file is no longer updated.

Media: Tape/Cartridge
Price: $715.00
5. PPS-II Minimum Data Set, Cost Reporting Periods Beginning on or 
After October 1, 1984, and before October 1, 1985
    The PPS-II Minimum Data Set contains cost, statistical, financial, 
and other information from the Medicare hospital cost report (HCFA Form 
2552-85). The dataset includes only the most current cost report (as 
submitted, final settled or reopened) submitted for a Medicare 
certified hospital by the Medicare fiscal intermediary to HCFA. This 
dataset is updated annually (October) and is available on the last day 
of the following month.

Media: Tape/Cartridge
Price: $715.00
6. PPS-III Minimum Data Set, Cost Reporting Periods beginning on or 
after October 1, 1985, and before October 1, 1986
    The PPS-III Minimum Data Set contains cost, statistical, financial, 
and other information from the Medicare hospital cost report (HCFA Form 
2552-85). The dataset includes only the most current cost report (as 
submitted, final settled or reopened) submitted for a Medicare 
certified hospital by the Medicare fiscal intermediary to HCFA. This 
dataset is updated annually (October) and is available on the last day 
of the following month.

Media: Tape/Cartridge
Price: $715.00
7. PPS-IV Minimum Data Set, Cost Reporting Periods Beginning on or 
After October 1, 1986, and Before October 1, 1987
    The PPS-IV Minimum Data Set, contains cost, statistical, financial, 
and other information from the Medicare hospital cost report (HCFA Form 
2552-85). The dataset includes only the most current cost report (as 
submitted, final settled or reopened) submitted for a Medicare 
certified hospital by the Medicare fiscal intermediary to HCFA. This 
dataset is updated at the end of each calendar quarter and is available 
on the last day of the following month.

Media: Tape/Cartridge
Price: $715.00
8. PPS-V Minimum Data Set, Cost Reporting Periods Beginning On or After 
October 1, 1987, and Before October 1, 1988
    The PPS-V Minimum Data Set, contains cost, statistical, financial, 
and other information from the Medicare hospital cost report (HCFA Form 
2552-85). The dataset includes only the most current cost report (as 
submitted, final settled or reopened) submitted for a Medicare 
certified hospital by the Medicare fiscal intermediary to HCFA. This 
dataset is updated at the end of each calendar quarter and is available 
on the last day of the following month.

Media: Tape/Cartridge
Price: $715.00
9. PPS-VI Minimum Data Set, Cost Reporting Periods Beginning on or 
After October 1, 1988, and Before October 1, 1989
    The PPS-VI Minimum Data Set contains cost, statistical, financial, 
and other information from the Medicare hospital cost report for the 
hospital fiscal periods beginning on or after October 1, 1988, and 
before January 1, 1989, and for the hospital fiscal periods beginning 
on or after January 1, 1989, and before October 1, 1989 (Forms HCFA 
2552-85 and 2552-89, respectively). The dataset includes only the most 
current cost report (as submitted, final settled or reopened) submitted 
for a Medicare certified hospital by the Medicare fiscal intermediary 
to HCFA. This dataset is updated at the end of each calendar quarter 
and is available on the last day of the following month.

Media: Tape/Cartridge
Price: $715.00
10. PPS-VII Minimum Data Set, Cost Reporting Periods Beginning on or 
After October 1, 1989, and Before October 1, 1990
    The PPS-VII Minimum Data Set contains cost, statistical, financial 
and other information from the Medicare hospital cost report (Form HCFA 
2552-89) for the hospital fiscal periods beginning on or after October 
1, 1989, and before October 1, 1990. The data set includes only the 
most current cost report (as submitted, final settled or reopened) 
submitted for a Medicare certified hospital by the Medicare fiscal 
intermediary to HCFA. This data set is updated at the end of each 
calendar quarter and is available on the last day of the following 
month.

Media: Tape/Cartridge
Price: $715.00
11. PPS-VIII Minimum Data Set, Cost Reporting Periods Beginning on or 
After October 1, 1990, and Before October 1, 1991
    The PPS-VIII Minimum Data Set contains cost, statistical, financial 
and other information from the Medicare hospital cost report (Form HCFA 
2552-89) for the hospital fiscal periods beginning on or after October 
1, 1990, and before October 1, 1991. The data set includes only the 
most current cost report (as submitted, final settled or reopened) 
submitted for a Medicare certified hospital by the Medicare fiscal 
intermediary to HCFA. This data set is updated at the end of each 
calendar quarter and is available on the last day of the following 
month.

Media: Tape/Cartridge
Price: $715.00
12. PPS-IX Minimum Data Set, Cost Reporting Periods Beginning on or 
After October 1, 1991 and Before October 1, 1992
    The PPS-IX Minimum Data Set contains cost, statistical, financial 
and other information from the Medicare Hospital Cost Report (Form HCFA 
2552-89) for the hospital fiscal periods beginning on or after October 
1, 1991 and before October 1, 1992. The data set includes only the most 
current cost report (as submitted, final settled or reopened) submitted 
for a Medicare certified hospital by the Medicare fiscal intermediary 
to HCFA. This data set is updated at the end of each calendar quarter 
and is available on the last day of the following month.

Media: Tape/Cartridge
File Cost: $715.00
13. PPS-VI Capital Data Set, Cost Reporting Periods Beginning on or 
After October 1, 1988, and before October 1, 1989
    The PPS-VI Capital Data Set contains selected data for capital-
related costs, interest expense and related information and complete 
balance sheet data from the Medicare hospital cost report for the 
hospital fiscal periods beginning on or after October 1, 1988, and 
before January 1, 1989, and for the hospital fiscal periods beginning 
on or after January 1, 1989, and before October 1, 1989 (Forms HCFA 
2552-85 and 2552-89, respectively). The data set includes only the most 
current cost report (as submitted, final settled or reopened) submitted 
for a Medicare certified hospital by the Medicare fiscal intermediary 
to HCFA. This data set is updated at the end of each calendar quarter 
and is available on the last day of the following month.

Media: Tape/Cartridge
Price: $715.00
14. PPS-VII Capital Data Set, Cost Reporting Periods Beginning on or 
After October 1, 1989, and Before October 1, 1990
    The PPS-VII Capital Data Set contains selected data for capital 
related costs, interest expense and related information and complete 
balance sheet data from the Medicare hospital cost report (Form 2552-
89) for the hospital fiscal periods beginning on or after October 1, 
1989, and before October 1, 1990. The data set includes only the most 
current cost report (as submitted, final settled or reopened) submitted 
for a Medicare certified hospital by the Medicare fiscal intermediary 
to HCFA. This data set is updated at the end of each calendar quarter 
and is available on the last day of the following month.

Media: Tape/Cartridge
Price: $715.00
15. PPS-VIII Capital Data Set, Cost Reporting Periods Beginning on or 
After October 1, 1990, and Before October 1, 1991
    The PPS-VIII Capital Data Set contains selected data for capital 
related costs, interest expense and related information and complete 
balance sheet data from the Medicare hospital cost report (Form 2552-
89) for the hospital fiscal periods beginning on or after October 1, 
1990, and before October 1, 1991. The data set includes only the most 
current cost report (as submitted, final settled or reopened) submitted 
for a Medicare certified hospital by the Medicare fiscal intermediary 
to HCFA. This data set is updated at the end of each calendar quarter 
and is available on the last day of the following month.

Media: Tape/Cartridge
Price: $715.00
16. PPS-IX Capital Data Set, Cost Reporting Periods Beginning on or 
After October 1, 1991, and Before October 1, 1992
    The PPS-VIII Capital Data Set contains selected data for capital 
related costs, interest expense and related information and complete 
balance sheet data from the Medicare hospital cost report (Form 2552-
89) for the hospital fiscal periods beginning on or after October 1, 
1991, and before October 1, 1992. The data set includes only the most 
current cost report (as submitted, final settled or reopened) submitted 
for a Medicare certified hospital by the Medicare fiscal intermediary 
to HCFA. This data set is updated at the end of each calendar quarter 
and is available on the last day of the following month.

Media: Tape/Cartridge
Price: $715.00
17. Provider-Specific File
    This file is a component of the PRICER program used in the fiscal 
intermediary's system to compute DRG payments for individual bills. The 
file contains records for all prospective payment system eligible 
hospitals, including hospitals in waiver States, and data elements used 
in the prospective payment system recalibration processes and related 
activities. Beginning with December 1988, the individual records were 
enlarged to include pass-through per diems and other elements. 
Beginning with December 1991, the individual records were enlarged to 
include elements related to the capital prospective payment system.

Media: Tape/Cartridge
File Cost: $500.00 per file
Periods available: FY 1987 through FY 1994 (December updates)
Media: Diskette
File Cost: $265.00
Periods Available: FY 1994 PPS Update
18. HCFA Medicare Case-Mix Index File
    This file contains the Medicare case-mix index by provider number 
as published in each year's update of the Medicare hospital inpatient 
prospective payment system. The case-mix index is a measure of the 
costliness of cases treated by a hospital relative to the cost of the 
national average of all Medicare hospital cases, using DRG weights as a 
measure of relative costliness of cases. Two versions of this file are 
created each year. They support the following:
     NPRM published in the Federal Register, usually by the end 
of May.
     Final rule published in the Federal Register, usually by 
the first week of September.

Media: Diskette
Price: $145.00 per year
Periods available: FY 1985 through FY 1993, and FY 1992 for Severity 
DRGs
19. Table 5 DRG File
    This file contains a listing of DRGs, DRG narrative description, 
relative weight, geometric and arithmetic mean lengths of stay, and day 
outlier trim points as published in the Federal Register. The hardcopy 
image has been copied to diskette. There are two versions of this file 
as published in the Federal Register:
    1. NPRM, usually published by the end of May.
    2. Final rule, usually published by the first week of September.

Media: Diskette
File cost: $145.00
Periods available: FY 1994 PPS Update, and Severity DRGs
20. PPS Payment Impact File
    This file contains data used to estimate payments under Medicare's 
hospital inpatient prospective payment systems for operating and 
capital-related costs. The data are taken from various sources, 
including the Provider-Specific File, the PPS-VI and PPS-VII Minimum 
Data Sets, and prior impact files. The data set is abstracted from an 
internal file used for the impact analysis of the changes to the 
prospective payment systems published in the Federal Register. This 
file is available for release 1 month after the final rule is published 
in the Federal Register, usually during the first week of September.

Media: Diskette
File Cost: $145.00
Periods available: FY 1994 PPS Update
21. AOR/BOR Tables
    This diskette contains data used to develop the DRG relative 
weights. It contains mean, maximum, minimum, standard deviation and 
coefficient of variation statistics by DRG for length of stay and 
standardized charges. The BOR tables are ``Before Outliers Removed'' 
and the AOR is ``After Outliers Removed.'' (Outliers refers to 
statistical outliers, not payment outliers.)

Media: Diskette
File cost: $145.00
Periods available: FY 1994 PPS Update, and Severity DRGs

    For further information concerning these data tapes, contact Mary 
R. White at (410) 597-3671.
    In addition, certain other data, such as area wage data and data 
used to construct the Puerto Rico standardized amounts, are available 
in hard copy format. Commenters interested in examining hard copy data 
should contact John Davis at (410) 966-5654.
    We realize that commenters may be interested in obtaining data 
other than those we have discussed above. These commenters should 
direct their requests to John Davis at the number provided above.
    Finally, in lieu of obtaining data through the mail, certain data 
may also be available for inspection at the central office of the 
Health Care Financing Administration in Baltimore, Maryland. Commenters 
interested in obtaining more information about this alternative for 
reviewing data should also contact John Davis.

C. Public Comments

    Because of the large number of items of correspondence we normally 
receive on a proposed rule, we are not able to acknowledge or respond 
to them individually. However, in preparing the final rule, we will 
consider all comments concerning the provisions of this proposed rule 
that we receive by the date and time specified in the ``Dates'' section 
of this preamble and respond to those comments in the preamble to that 
rule. We emphasize that, given the statutory requirement under section 
1886(e)(5) of the Act that our final rule for FY 1995 be published by 
September 1, 1994, we will consider only those comments that deal 
specifically with the matters discussed in this proposed rule.

List of Subjects

42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Puerto Rico, 
Reporting and recordkeeping requirements.

42 CFR Part 482

    Grant programs-health, Hospitals, Medicaid, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 485

    Grant programs-health, Health facilities, Medicaid, Medicare, 
Reporting and recordkeeping requirements.

42 CFR Part 489

    Health facilities, Medicare, Reporting and recordkeeping 
requirements.
    42 CFR chapter IV would be amended as set forth below:
    A. Part 412 would be amended as follows:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

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

    Authority: Secs. 1102, 1815(e), 1820, 1871, and 1886 of the 
Social Security Act (42 U.S.C. 1302, 1395g(e), 1395i-4, 1395hh, and 
1395ww).

Subpart A--General Provisions

    2. In Sec. 412.4, paragraphs (a)(3), (b) introductory text, (b)(2), 
and (b)(3)(ii) are revised, a new paragraph (b)(4) is added, and 
paragraph (d)(1) is revised to read as follows:


Sec. 412.4  Discharges and transfers.

    (a) * * *
    (3) For discharges occurring before October 1, 1994, the patient is 
transferred to a hospital or hospital unit that is excluded from the 
prospective payment systems under subpart B of this part.
    (b) Transfers. A discharge of a hospital inpatient is not counted 
for purposes of the prospective payment systems when the patient is 
transferred--
* * * * *
    (2) From the care of a hospital paid under this section to the care 
of another such hospital;
    (3) * * *
    (ii) Whose first cost reporting period under the prospective 
payment systems has not yet begun; or
    (4) For discharges occurring on or after October 1, 1994, from the 
care of a hospital paid under this section to the care of a hospital or 
hospital unit that is excluded from the prospective payment systems 
under subpart B of this part.
* * * * *
    (d) Payment to a hospital transferring an inpatient to another 
hospital or unit. (1) A hospital that transfers an inpatient under the 
circumstances described in paragraph (b)(2), (b)(3), or (b)(4) of this 
section, is paid a graduated per diem rate for each day of the 
patient's stay in that hospital, not to exceed the amount that would 
have been paid under subparts D, E, and M of this part if the patient 
had been discharged to another setting. The per diem is determined by 
dividing the appropriate prospective payment rates (as determined under 
subparts D, E, and M of this part) by the geometric mean length of stay 
for the specific Diagnosis-Related Group (DRG) into which the case 
falls. Payment is graduated by paying twice the per diem for the first 
day of the stay, and paying the per diem amount for each subsequent 
day, up to the full DRG payment amount as described in this paragraph.
* * * * *

Subpart B--Hospital Services Subject to and Excluded From the 
Prospective Payment Systems for Inpatient Operating Costs and 
Inpatient Capital-Related Costs

    3. In Sec. 412.23, paragraph (e) is revised to read as follows:


Sec. 412.23  Excluded hospitals: Classifications.

* * * * *
    (e) Long-term care hospitals. A long-term care hospital must meet 
the requirements of paragraphs (e)(1) and (e)(2) of this section, and, 
where applicable, the additional requirements in paragraph (e)(3) of 
this section.
    (1) The hospital must have a provider agreement under part 489 of 
this chapter to participate as a hospital
    (2) The hospital must have an average length of inpatient stay 
greater than 25 days--
    (i) As computed by dividing the number of total inpatient days 
(less leave or pass days) by the number of total discharges for the 
hospital's most recent complete cost reporting period; or
    (ii) If a change in the hospital's average length of stay is 
indicated, as computed by the same method for the immediately preceding 
six-month period.
    (3) For cost reporting periods beginning on or after October 1, 
1994, a hospital that occupies space in a building also used by another 
hospital, or in one or more entire buildings located on the same campus 
as buildings used by another hospital, must meet the following 
additional requirements:
    (i) Separate governing body. The hospital has a governing body that 
is separate from the governing body of the hospital from which it 
obtains space. The hospital's governing body is not under the control 
of the hospital that provides space, or of any third entity that 
controls both hospitals.
    (ii) Separate chief medical officer. The hospital has a single 
chief medical officer who reports directly to the governing body and 
who is responsible for all medical staff activities of the hospital. 
The chief medical officer of the hospital is not employed by or under 
contract with either the hospital that provides space or any third 
entity that controls both hospitals.
    (iii) Separate medical staff. The hospital has a medical staff that 
is separate from the medical staff of the hospital from which it 
obtains space. The hospital's medical staff is directly accountable to 
the governing body for the quality of medical care provided in the 
hospital, and adopts and enforces bylaws governing medical staff 
activities, including criteria and procedures for recommending to the 
governing body the privileges to be granted to individual 
practitioners.
    (iv) Chief executive officer. The hospital has a single chief 
executive officer through whom all administrative authority flows, and 
who exercises control and surveillance over all administrative 
activities of the hospital. The chief executive officer is not employed 
by, or under contract with, either the hospital that provides space or 
any third entity that controls both hospitals.
    (v) Performance of basic hospital functions. The hospital performs 
the basic hospital functions specified in Secs. 482.21 through 482.27, 
482.30, and 482.42 of this chapter through the use of employees or 
under contracts or other agreements with entities other than the 
hospital from which it obtains space, or a third entity that controls 
both hospitals. Food and dietetic services and housekeeping, 
maintenance, and other services necessary to maintain a clean and safe 
physical environment could be obtained under contracts or other 
agreements with the hospital that provides space, or with a third 
entity that controls both hospitals.
    (4) For purposes of this section, control exists if an individual 
or an organization has the power, directly or indirectly, significantly 
to influence or direct the actions or policies of an organization or 
institution.
* * * * *


Sec. 412.27  [Amended]

    4. In Sec. 412.27, the section heading is revised to read 
``Excluded psychiatric units: Additional requirements.''


Sec. 412.29  [Amended]

    5. In Sec. 412.29, the section heading is revised to read 
``Excluded rehabilitation units: Additional requirements.''

Subpart D--Basic Methodology for Determining Prospective Payment 
Federal Rates for Inpatient Operating Costs

    6. In paragraph (d)(2) of Sec. 412.60, the second sentence is 
revised to read as follows:


Sec. 412.60  DRG classification and weighting factors.

* * * * *
    (d) * * *
    (2) * * * If the intermediary decides that a higher-weighted DRG 
should be assigned, the case will be reviewed by the appropriate PRO to 
verify the change in DRG assignment as specified in Sec. 466.71(c)(2) 
of this chapter.
* * * * *
    7. In Sec. 412.63, paragraph (m)(1), the paragraph heading of 
paragraph (r), and paragraphs (r)(1) introductory text, (r)(1)(i), 
(r)(2) introductory text, (r)(2)(i), and (s)(2) are revised to read as 
follows:


Sec. 412.63  Federal rates for inpatient operating costs for fiscal 
years after Federal fiscal year 1984.

* * * * *
    (m) * * *
    (1) Plus, for hospitals located in rural areas, the percentage 
increase necessary so that the average standardized amounts computed 
under paragraph (c) through (i) of this section are equal to the 
average standardized amounts for hospitals located in an urban area 
other than a large urban area.
* * * * *
    (r) Computing Federal rates for inpatient operating costs for 
hospitals located in large urban and other
areas. * * *
    (1) For hospitals located in a large urban area in the United 
States or that region respectively, the rate equals the product of--
    (i) The adjusted average standardized amount (computed under 
paragraph (c) of this section) for the fiscal year for hospitals 
located in a large urban area in the United States or in that region; 
and
* * * * *
    (2) For hospitals located in an other area in the United States or 
that region respectively, the rate equals the product of--
    (i) The adjusted average standardized amount (computed under 
paragraph (c) of this section) for the fiscal year for hospitals 
located in an other area in the United States or that region; and
* * * * *
    (s) * * *
    (2) HCFA makes a midyear correction to the wage index for an area 
only if a hospital can show that--
    (i) The intermediary or HCFA made an error in tabulating the 
hospital's data; and
    (ii) The hospital could not have known about the error, or did not 
have the opportunity to correct the error, before the beginning of the 
Federal fiscal year. A midyear correction to the wage index is 
effective prospectively from the date the change is made to the wage 
index.
* * * * *

Subpart E--Determination of Transition Period Payment Rates for the 
Prospective Payment System for Inpatient Operating Costs

    8. In Sec. 412.71, paragraph (b) introductory text is revised, 
paragraph (b)(1) is removed and paragraphs (b)(2) through (b)(8) are 
redesignated as paragraphs (b)(1) through (b)(7). The revision is to 
read as follows:


Sec. 412.71  Determination of base-year inpatient operating costs.

* * * * *
    (b) Modifications to base-year costs. Prior to determining the 
hospital-specific rate, the intermediary will adjust the hospital's 
estimated base-year inpatient operating costs, as necessary, to include 
malpractice insurance costs in accordance with Sec. 413.53(a)(1)(i) of 
this chapter, and exclude the following:
* * * * *

Subpart F-- Payment for Outlier Cases

    9. In Sec. 412.80, the introductory text of paragraphs (a)(1) and 
(a)(1)(ii) are revised, and a new paragraph (a)(1)(iii) is added to 
read as follows:


Sec. 412.80  General provisions.

    (a) Basic rule. (1) For discharges before October 1, 1994, except 
as provided in paragraph (a)(2) of this section concerning transferring 
hospitals, HCFA provides for additional payment, approximating a 
hospital's marginal cost of care beyond thresholds specified by HCFA, 
to a hospital for covered inpatient hospital services furnished to a 
Medicare beneficiary if either of the conditions specified in 
paragraphs (a)(1)(i) and (a)(1)(ii) of this section is met. For 
discharges occurring on or after October 1, 1994, except as provided in 
paragraph (a)(2) of this section concerning transferring hospitals, 
HCFA provides for additional payment, beyond standard DRG payments, to 
a hospital for covered inpatient hospital services furnished to a 
Medicare beneficiary if either of the conditions specified in 
paragraphs (a)(1)(i) and (a)(1)(iii) of this section is met.
* * * * *
    (ii) For discharges occurring before October 1, 1994, the 
beneficiary's length of stay does not exceed criteria established under 
paragraph (a)(1)(i) of this section, but the hospital's charges for 
covered services furnished to the beneficiary, adjusted to operating 
costs and, effective with cost reporting periods beginning on or after 
October 1, 1991, capital costs, by applying cost-to-charge ratios as 
described in Sec. 412.84(h), exceed the greater of the
following: * * *
    (iii) For discharges occurring on or after October 1, 1994, the 
beneficiary's length of stay does not exceed criteria established under 
paragraph (a)(1)(i) of this section, but the hospital's charges for 
covered services furnished to the beneficiary, adjusted to operating 
costs and capital costs by applying cost-to-charge ratios as described 
in Sec. 412.84(h), exceed the DRG payment for the case plus a fixed 
dollar amount (adjusted for geographic variation in costs) as specified 
by HCFA.
* * * * *
    10. In Sec. 412.82, paragraph (c) is revised to read as follows:


Sec. 412.82  Payment for extended length-of-stay cases (day outliers).

* * * * *
    (c) Except as provided in Sec. 412.86, the per diem payment made 
under paragraph (a) of this section is derived by taking a percentage 
of the average per diem payment for the applicable DRG, as calculated 
by dividing the Federal prospective payment rate for inpatient 
operating costs and inpatient capital-related costs determined under 
subpart D of this part by the arithmetic mean length of stay for that 
DRG. HCFA issues the applicable percentage of the average per diem 
payment in the annual publication of the prospective payment rates in 
accordance with Sec. 412.8(b).
* * * * *


Sec. 412.84  [Amended]

    11. In paragraph (j) of Sec. 412.84, remove the words ``75 
percent'' from wherever they appear in the paragraph and add, in their 
place, the words ``80 percent''.

Subpart G--Special Treatment of Certain Facilities Under the 
Prospective Payment System for Inpatient Operating Costs

    12. In Sec. 412.96, paragraph (d) is revised to read as follows:


Sec. 412.96  Special treatment: Referral centers.

* * * * *
    (d) Payment to rural referral centers. Effective for discharges 
occurring on or after April 1, 1988, and before October 1, 1994, a 
hospital that is located in a rural area and meets the criteria of 
paragraphs (b)(1), (b)(2) or (c) of this section is paid prospective 
payments for inpatient operating costs per discharge based on the 
applicable other urban payment rates as determined in accordance with 
Sec. 412.63, as adjusted by the hospital's area wage index.
* * * * *
    13. Section 412.105 is amended as follows:
    a. Paragraph (b) is revised.
    b. In paragraph (d)(1), the phrase ``set forth in paragraph (c)(1) 
of this section.'' is revised to read ``set forth in paragraph (c) of 
this section.''
    The revision is to read as follows:


Sec. 412.105  Special treatment: Hospitals that incur indirect costs 
for graduate medical education programs.

* * * * *
    (b) Determination of number of beds. For purposes of this section, 
the number of beds in a hospital is determined by counting the number 
of available bed days during the cost reporting period, not including 
beds assigned to newborns who are not in intensive care areas, 
custodial care beds, and beds in excluded distinct part hospital units, 
and dividing that number by the number of days in the cost reporting 
period.
* * * * *
    14. In Sec. 412.109, a new paragraph (e) is added to read as 
follows:


Sec. 412.109  Special treatment: Essential access community hospitals 
(EACHs).

* * * * *
    (e) Review of HCFA Determination. A determination by HCFA that a 
hospital does not meet the criteria for EACH designation, or that a 
hospital's EACH designation should be terminated, is subject to review 
under part 405, subpart R of this chapter.

Subpart H--Payments to Hospitals Under the Prospective Payment 
Systems


Sec. 412.113  [Amended]

    15. In Sec. 412.113(b)(3), the phrase ``Except as provided in 
Sec. 413.86(c)(1) of this chapter,'' is revised to read ``Except as 
provided in Sec. 413.86(c) of this chapter,''.

Subpart L--The Medicare Geographic Classification Review Board

    16. In Sec. 412.232, paragraph (c) is revised to read as follows:


Sec. 412.232  Criteria for all hospitals in a rural county seeking 
urban redesignation.

* * * * *
    (c) Wage criteria. In applying the following numeric criteria, 
rounding of numbers to meet the qualifying percentages is not 
permitted.
    (1) Aggregate hourly wage. The aggregate average hourly wage for 
all hospitals in the rural county must be equal to at least 85 percent 
of the average hourly wage in the adjacent urban area; or
    (2) Aggregate hourly wage weighted for occupational mix. The 
aggregate average hourly wage for all hospitals in the rural county, 
weighted for occupational categories, is at least 90 percent of the 
average hourly wage in the adjacent urban area.
* * * * *

Subpart M--Prospective Payment System for Inpatient Hospital 
Capital Costs

    17. In Sec. 412.302, paragraph (c)(2)(i)(D) is revised to read as 
follows:


Sec. 412.302  Introduction to capital costs.

* * * * *
    (c) * * *
    (2) * * *
    (i) * * *
    (D) The hospital put the asset into patient use on or before the 
latter of September 30, 1996 or 4 years from the date the certificate 
of need was approved.
* * * * *
    18. Section 412.348 is revised to read as follows:


Sec. 412.348  Exception payments.

    (a) Definitions. As used in this section--
    Average age of fixed assets. The average age of fixed assets is the 
ratio of accumulated depreciation for buildings and fixed equipment to 
current depreciation expense for buildings and fixed equipment. The 
average age of fixed assets is determined from information on the 
Medicare cost report.
    Current ratio. Current ratio means the ratio of current liabilities 
to current assets. The current ratio is determined from information on 
the Medicare cost report.
    Fixed assets. Fixed assets mean buildings and fixed equipment.
    (b) Criterion for additional payment during the transition period. 
An additional payment is made to a hospital paid under either the fully 
prospective payment methodology or the hold-harmless payment 
methodology as determined under paragraph (c) of this section for cost 
reporting periods beginning on or after October 1, 1991 and before 
October 1, 2001.
    (c) Minimum payment level by class of hospital. (1) HCFA 
establishes a minimum payment level by class of hospital. The minimum 
payment level for a hospital will equal a fixed percentage of the 
hospital's capital-related costs. The minimum payment levels may be no 
greater than the percentages of allowable capital-related costs that 
follow:
    (i) 90 percent for sole community hospitals.
    (ii) 80 percent for hospitals located in an urban area for purposes 
of Sec. 412.63(a) with at least 100 beds, as determined under 
Sec. 412.105(b), that have a disproportionate share patient percentage 
of at least 20.2 percent as determined under Sec. 412.106(b), and for 
hospitals located in an urban area for purposes of Sec. 412.63(a) with 
at least 100 beds that qualify for disproportionate share payments 
under Sec. 412.106(c)(2).
    (iii) 70 percent for all other hospitals.
    (2) HCFA will issue the minimum payment levels for each class of 
hospital in determining the additional exception payment in the annual 
notice of capital prospective payment rates, published in accordance 
with Sec. 412.8(b).
    (d) Additional payments. A hospital is entitled to an additional 
payment if its capital payments for the cost reporting period would 
otherwise be less than the applicable minimum payment level. The 
additional payment equals the difference between the applicable minimum 
payment level and the capital payments that the hospital would 
otherwise receive minus any offset amount determined under paragraph 
(e)(2) of this section.
    (e) Determining a hospital's exception payment amount--(1) 
Cumulative comparison. For each cost reporting period beginning before 
October 1, 2001, the hospital's exception payment is determined by 
comparing the cumulative payments made to the hospital under the 
capital prospective payment system to the cumulative minimum payment 
levels applicable to the hospital for each cost reporting period 
subject to the prospective payment system.
    (2) Offsetting amounts. Any amount by which the hospital's 
cumulative payments exceed its cumulative minimum payment levels is 
deducted from the additional payment that would otherwise be payable 
for a cost reporting period.
    (f) Additional payment exception for extraordinary circumstances. 
(1) A hospital may request an additional payment if the hospital incurs 
unanticipated capital expenditures in excess of $5 million (net of 
proceeds from other payment sources such as insurance, litigation 
decisions and other State, local or Federal government funding 
programs) due to extraordinary circumstances beyond the hospital's 
control. Extraordinary circumstances include, but are not limited to, a 
flood, fire, or earthquake.
    (2) A hospital must apply to its HCFA Regional Office by the later 
of October 1, 1992 or 180 days after the extraordinary circumstance 
causing the unanticipated expenditures for a determination by the 
Director, Office of Payment Policy, Bureau of Policy Development, HCFA 
of whether the hospital is eligible for an additional payment based on 
the nature of the circumstances and the amount of financial loss 
documented by the hospital.
    (3) Except for sole community hospitals, the additional payment is 
based on a minimum payment amount of 85 percent for Medicare's share of 
allowable capital-related costs attributable to the extraordinary 
circumstances. For sole community hospitals, the minimum payment amount 
is 100 percent.
    (4) The minimum payment level applicable under paragraph (c)(1) of 
this section is adjusted to take into account the 85 percent minimum 
payment level (100 percent for sole community hospitals) under 
paragraph (f)(3) of this section for the unanticipated capital-related 
costs. The additional payment for the cost reporting period equals the 
difference between the adjusted minimum payment level and the capital 
payments the hospital would otherwise receive less any offset amount 
determined under paragraph (e)(2) of this section.
    (g) Special exceptions process. For eligible hospitals that meet an 
age of assets test, receive any required approval from a State or local 
planning authority, and, in the case of urban hospitals, meet an excess 
capacity test, an additional payment may be made for up to 10 years 
beyond the end of the capital prospective payment system transition 
period.
    (1) Eligible hospitals. The following classes of hospitals are 
eligible to receive exceptions payments under this special exceptions 
provision:
    (i) Sole community hospitals that have a current ratio less than or 
equal to 1.75 in the exception year.
    (ii) Hospitals located in an urban area under Sec. 412.63(a) with 
at least 100 beds, as determined under Sec. 412.105(b), that either 
have a disproportionate share of at least 20.2 percent as determined 
under Sec. 412.106(b) or qualify for disproportionate share payments 
under Sec. 412.106(c)(2), and that have a current ratio less than or 
equal to 1.75 in the exception year.
    (iii) Hospitals with a combined inpatient Medicare and Medicaid 
utilization of at least 70 percent.
    (2) Age of assets test. A hospital meets the age of assets test 
if--
    (i) Its average age of fixed assets is at or above the 75th 
percentile for the hospital's first cost reporting period beginning on 
or after October 1, 1991; and
    (ii) Its average age of fixed assets in a subsequent cost reporting 
period (but no later than the last cost reporting period beginning 
before October 1, 2001) declines by at least 50 percent from its 
average age of fixed assets in the first cost reporting period 
beginning on or after October 1, 1991.
    (3) Planning authority approval. The hospital must obtain any 
required approval from a State or local planning authority.
    (4) Excess capacity test for urban hospitals. Urban hospitals that 
are not required to receive approval from a State or local planning 
authority must demonstrate that either--
    (i) The overall average occupancy rate in its metropolitan 
statistical area is at least 80 percent; or
    (ii) Its capacity is no more than 80 percent of its prior capacity 
(in terms of bed size).
    (5) Minimum payment level. The minimum payment level for qualifying 
hospitals will be 70 percent.
    (6) Limitation on the period for exception payments. A qualifying 
hospital may receive an exceptions payment for up to 10 years from the 
year in which it first meets the age of assets test, provided that it 
meets the age of asset test no later than the last cost reporting 
period beginning before October 1, 2001.
    (7) Determining a hospital's exception payment amount--(i) 
Cumulative comparison. For each cost reporting period, the hospital's 
exception payment is determined by comparing the cumulative payments 
made to the hospital under the capital prospective payment system to 
the cumulative minimum payment levels applicable to the hospital for 
each cost reporting period subject to the prospective payment system.
    (ii) Offsetting amounts. Any amount by which the hospital's 
cumulative payments exceed its cumulative minimum payment levels is 
deducted from the additional payment that would otherwise be payable 
for a cost reporting period.
    (iii) Other offset. Any amount by which the hospital's Medicare 
inpatient operating and capital prospective payments exceed its 
Medicare inpatient operating and capital costs is deducted from the 
additional payment that would otherwise be payable for the cost 
reporting period.
    (h) Limit on exception payments. Total estimated payments under the 
exception process may not exceed 10 percent of the total estimated 
capital prospective payments (exclusive of hold-harmless payments for 
old capital) for the same fiscal year.


Secs. 412.20, 412.22, 412.25, 412.27, 412.29, 412.30, 412.96, 412.105, 
412.108, 412.116 and 412.130  [Amended]

    19. In part 412, remove the words ``distinct part'', wherever they 
appear, in the following places:
    a. Section 412.20(b)(1);
    b. Section 412.22(b);
    c. Section heading of Sec. 412.25;
    d. Section 412.25(a) introductory text;
    e. Section 412.27, the introductory text for the section;
    f. Section 412.29, the introductory text for the section;
    g. Section heading of Sec. 412.30;
    h. Section 412.96(c)(1) introductory text and (c)(2)(i) 
introductory text;
    i. Section 412.105(b), (f)(5) and (g)(1)(iii);
    j. Section 412.108(a)(2);
    k. Section 412.116(a) and (b)(1) introductory text;
    l. Section heading of Sec. 412,130; and
    m. Section 412.130 (a)(2) and (a)(3).
    B. Part 413 would be amended as follows:

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES

    1. The authority citation for part 413 is revised to read as 
follows:

    Authority: Secs. 1102, 1814(b), 1815, 1833 (a), (i), and (n), 
1861(v), 1871, 1881, 1883, and 1886 of the Social Security Act (42 
U.S.C. 1302, 1395f(b), 1395g, 13951 (a), (i), and (n), 1395x(v), 
1395hh, 1395rr, 1395tt, and 1395ww); sec. 104(c) of Public Law 100-
360 as amended by sec. 608(d)(3) of Public Law 100-485 (42 U.S.C. 
1395ww (note)) and sec. 101(c) of Public Law 101-234 (42 U.S.C. 
1395ww (note)).

Subpart C--Limits on Cost Reimbursement


Sec. 413.40  [Amended]

    2. In paragraph (a)(2)(ii), (b)(1)(i) through (b)(1)(iii) and 
(f)(2) of Sec. 413.40, remove the words ``(distinct parts)'' and 
``distinct part'', wherever they appear.

Subpart D--Apportionment

    3. In Sec. 413.53, paragraph (a)(1)(i) is revised to read as 
follows:


Sec. 413.53  Determination of cost of services to beneficiaries.

    (a) * * *
    (1) Departmental method--(i) Methodology. Except as provided in 
paragraph (a)(1)(ii) of this section with respect to the treatment of 
the private room cost differential for cost reporting periods starting 
on or after October 1, 1982, the ratio of beneficiary charges to total 
patient charges for the services of each ancillary department is 
applied to the cost of the department; to this is added the cost of 
routine services for program beneficiaries, determined on the basis of 
a separate average cost per diem for general routine patient care areas 
as defined in paragraph (b) of this section, taking into account, in 
hospitals, a separate average cost per diem for each intensive care 
unit, coronary care unit, and other intensive care type inpatient 
hospital units.
* * * * *


Sec. 413.56  [Removed and Reserved]

    4. Section 413.56 is removed and reserved.

Subpart F--Specific Categories of Costs

    5. Section 413.86 is amended as follows:
    a. In paragraph (f)(1)(ii), the third sentence is revised.
    b. In paragraph (g)(1) introductory text, a new sentence is added 
after the second sentence.
    The revision and addition are to read as follows:


Sec. 413.86  Direct graduate medical education payments.

* * * * *
    (f) * * *
    (1) * * *
    (ii) * * * A part-time resident counts as a partial FTE based on 
the proportion of time worked in the hospital compared to the total 
time necessary to fill a full-time internship or residency slot.
* * * * *
    (g) * * *
    (1) * * * Effective July 1, 1995, an initial residency period is 
defined as the minimum number of years required for board eligibility. 
* * *
* * * * *

Subpart G--Capital-Related Costs

    6. Section 413.134 is amended as follows:
    a. In paragraph (d)(1), the phrase ``where permitted under 
Sec. 413.134(a)(3),'' is revised to read ``when permitted under 
paragraph (a)(3) of this section,''.
    b. Paragraphs (e)(1) and (e)(2)(ii) are revised, and paragraphs 
(e)(2)(iii), (e)(2)(iv) and (e)(4) are added.
    The revisions and additions are to read as follows:


Sec. 413.134  Depreciation: Allowance for depreciation based on asset 
costs.

* * * * *
    (e) * * *
    (1) Incentive. As an incentive for funding, investment income on 
funded depreciation is not treated as a reduction of allowable interest 
expense. Investment income earned on deposits before the 6-month period 
elapses are not offset unless the deposits are withdrawn for an 
improper purpose during this period.
    (2) * * *
    (ii) Borrowing for a purpose for which funded depreciation account 
funds should have been used makes the borrowing unnecessary to the 
extent that funded depreciation account funds were available at the 
time of the borrowing. Available funds in the funded depreciation 
account, to the extent of the unnecessary borrowing, are called 
``tainted'' funds. Interest expense incurred on borrowing for a capital 
purpose is not an allowable cost to the extent that funded depreciation 
account funds were available at the time of the borrowing.
    (iii) A provider can remove the ``unnecessary'' characterization of 
borrowing, and thereby cure tainted funded depreciation, by using the 
tainted funds for a proper purpose described in paragraph (e)(3)(i) of 
this section. However, any funded depreciation that existed at the time 
of the unnecessary borrowing and is not classified as tainted must be 
used before any of the tainted funds.
    (iv) When only a portion of the borrowing is considered unnecessary 
under paragraph (e)(2)(ii) of this section, subsequent repayments of 
such borrowing from general funds is applied first to the allowable 
portion of the borrowing and then, when all of the allowable borrowing 
is repaid, to the unallowable portion of the borrowing. When funds from 
the funded depreciation account are used for the repayment of the 
unnecessary borrowing, an equivalent amount of tainted funds is cured 
without regard to the provisions of paragraphs (e)(2)(ii) and 
(e)(3)(i)(C) of this section. Similarly, where general funds are used 
to pay for the unallowable borrowing after the necessary borrowing has 
been repaid, an equivalent amount of tainted funded depreciation is 
cured without regard to the provisions of paragraphs (e)(2)(ii) and 
(e)(3)(i)(C) of this section.
* * * * *
    (4) Loans from funded depreciation. (i) When the general fund of 
the provider borrows from the funded depreciation to obtain working 
capital for normal operating expenses to furnish patient care, interest 
incurred by the general fund is an allowable operating cost only if the 
interest expense is supported by documents that evidence that the funds 
were borrowed and that payment of interest and repayment of the funds 
are required, is separately identified in the provider's accounting 
records, and meets the necessary and proper tests described in 
Secs. 413.153 (b)(2) and (b)(3).
    (ii) Loans from funded depreciation to the general fund are 
considered investments of funded depreciation, but do not have to meet 
the readily marketable test described in paragraph (e) of this section. 
Loans made from funded depreciation are subject to the requirement that 
funded depreciation must be available for the acquisition of 
depreciable assets used to furnish patient care, or for other capital 
purposes related to patient care. Costs incurred to secure lines of 
credit from lending institutions to ensure such availability are not 
allowable costs.
    (iii) Funding of depreciation from general funds will not be 
recognized to the extent of any outstanding loans from the funded 
depreciation account to the general fund. Deposits from the general 
fund into the funded depreciation account must be first applied to 
reduce any loans outstanding from the funded depreciation to the 
general fund. When the loans are repaid in full, general funds 
deposited in the funded depreciation account are considered as 
repayments of the general fund. Therefore, any subsequent interest 
expense of the general fund paid to the funded depreciation fund is not 
an allowable cost.
* * * * *
    7. In Sec. 413.153, paragraph (d)(2) is revised and a new paragraph 
(d)(3) is added to read as follows:


Sec. 413.153  Interest expense.

* * * * *
    (d) * * *
    (2) In determining whether a loan was made for the purpose of 
acquiring a facility, we apply any owner's investment or funds first to 
the tangible assets, then to the intangible assets other than goodwill, 
and lastly to the goodwill. If the owner's investment or funds are not 
sufficient to cover the cost allowed for tangible assets, we apply 
funds borrowed to finance the acquisition to the portion of the allowed 
cost of the tangible assets not covered by the owner's investment, then 
to the intangible assets other than goodwill, and lastly to the 
goodwill. Repayments of the funds borrowed are applied first to the 
tangible assets, then to the intangible assets other than goodwill, and 
lastly to the goodwill.
    (3) When a provider borrows funds for a purpose related to patient 
care, but only some of the funds are necessary, repayments of the loan 
are applied first to pay for the necessary portion of the loan. Only 
after all of the necessary portion has been repaid are any repayments 
applied to the unnecessary portion of the loan.
* * * * *

Subpart H--Payment for End-Stage Renal Disease (ESRD) Services

    8. In Sec. 413.174, paragraph (b)(4)(iv) is revised to read as 
follows:


Sec. 413.174  Recordkeeping and cost reporting requirements for 
outpatient maintenance dialysis.

* * * * *
    (b) * * *
    (4) * * *
    (iv) Sections 413.64, Payments to providers, and Secs. 413.13, 
413.30, 413.35, 413.40, 413.74, and Secs. 405.465 through 405.482 of 
this chapter, Principles of reimbursement for services by hospital-
based physicians.
    C. Part 482 would be amended as follows:

PART 482--CONDITIONS OF PARTICIPATION FOR HOSPITALS

    1. The authority citation for part 482 continues to read as 
follows:

    Authority: Secs. 1102, 1136, 1138, 1814(a)(6), 1861 (e), (f), 
(r), (v)(1)(G), (z), and (ee), 1864, 1871, 1883, 1886, 1902(a)(30), 
and 1905(a) of the Social Security Act (42 U.S.C. 1302, 1320b-6, 
1338, 1395f(a)(6), 1395x (e), (f), (k), (r), (v)(1)(G), (z), and 
(ee), 1395aa, 1395aa, 1395hh, 1395tt, 1395ww, 1396a(a)(30), and 
1396(a)).

Subpart E--Requirements for Specialty Hospitals

    2. In paragraph (a)(7)(i) of Sec. 482.66, the second sentence is 
revised to read as follows:


Sec. 482.66  Special requirements for hospital providers of long-term 
care services (``swing-beds'').

    (a) * * *
    (7) * * *
    (i) * * * Also excluded from the bed count are beds in separately 
certified ``distinct part'' SNFs and NFs and beds in a psychiatric or 
rehabilitation unit that is excluded from the prospective payment 
system.
* * * * *
    D. Part 485 would be amended as follows:

PART 485--CONDITIONS OF PARTICIPATION AND CONDITIONS FOR COVERAGE: 
SPECIALIZED PROVIDERS

    1. The authority citation for part 485 continues to read as 
follows:

    Authority: Secs. 1102, 1124, 1138, 1820, 1861 (aa), and (cc) and 
1871 of the Social Security Act; (42 U.S.C. 1302, 1320a-3, 1320b-8, 
1395i-4, 1395x (aa) and (cc) and 1395hh); and sec. 353 of the Public 
Health Service Act (42 U.S.C. 263a).

Subpart F--Conditions of Participation: Rural Primary Care 
Hospitals (RPCHs)

    2. Section 485.602 is revised to read as follows:


Sec. 485.602  Definitions.

    As used in this subpart, unless the context indicates otherwise:
    Direct services means services provided by employed staff of the 
RPCH, not services provided through arrangements or agreements.
    3. In Sec. 485.635, paragraph (b) is revised to read as follows:


Sec. 485.635  Condition of participation: Provision of services.

* * * * *
    (b) Standard: Direct services. (1) General. The RPCH staff 
furnishes, as direct services, those diagnostic and therapeutic 
services and supplies that are commonly furnished in a physician's 
office or at another entry point into the health care delivery system, 
such as a low intensity hospital outpatient department or emergency 
department. These direct services include medical history, physical 
examination, specimen collection, assessment of health status, and 
treatment for a variety of medical conditions.
    (2) Laboratory services. The RPCH provides, as direct services, 
basic laboratory services essential to the immediate diagnosis and 
treatment of the patient that meet the standards imposed under section 
353 of the Public Health Service Act (42 U.S.C. 236a). (See the 
laboratory requirements specified in part 493 of this chapter.) The 
services provided include:
    (i) Chemical examination of urine by stick or tablet method or both 
(including urine ketones);
    (ii) Hemoglobin or hematocrit;
    (iii) Blood glucose:
    (iv) Examination of stool specimens for occult blood;
    (v) Pregnancy tests; and
    (vi) Primary culturing for transmittal to a certified laboratory.
    (3) Radiology services. Radiology services furnished at the RPCH 
are provided as direct services by staff qualified under State law, and 
do not expose RPCH patients or staff to radiation hazards.
    (4) Emergency procedures. In accordance with the requirements of 
Sec. 485.618, the RPCH provides as direct services medical emergency 
procedures as a first response to common life-threatening injuries and 
acute illness.
* * * * *
    E. Part 489 would be amended as follows:

PART 489--PROVIDER AND SUPPLIER AGREEMENTS

    1. The authority citation for part 489 continues to read as 
follows:

    Authority: Secs. 1102, 1861, 1864, 1866, and 1871 of the Social 
Security Act (42 U.S.C. 1302, 1395x, 1395aa, 1395cc, and 1395hh).

Subpart I--Advance Directives

    2. In Sec. 489.102, paragraph (a) introductory text is revised to 
read as follows:


Sec. 489.102  Requirements for providers.

    (a) Hospitals, rural primary care hospitals, skilled nursing 
facilities, nursing facilities, home health agencies, providers of home 
health care (and for Medicaid purposes, providers of personal care 
services), and hospices must maintain written policies and procedures 
concerning advance directives with respect to all adult individuals 
receiving medical care by or through the provider and are required to:
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: May 5, 1994.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
    Dated: May 10, 1994.
Donna E. Shalala,
Secretary.
    Note: The following addendum and appendixes will not appear in 
the Code of Federal Regulations.

Addendum--Proposed Schedule of Standardized Amounts Effective with 
Discharges On or After October 1, 1994 and Update Factors and Rate-of-
Increase Percentages Effective With Cost Reporting Periods Beginning On 
or After October 1, 1994

I. Summary and Background

    In this addendum, we are setting forth the proposed amounts and 
factors for determining prospective payment rates for Medicare 
inpatient operating costs and Medicare inpatient capital-related costs. 
We are also setting forth new proposed rate-of-increase percentages for 
updating the target amounts for hospitals and hospital units excluded 
from the prospective payment system.
    For discharges occurring on or after October 1, 1994, except for 
sole community hospitals and hospitals located in Puerto Rico, each 
hospital's payment per discharge under the prospective payment system 
will be comprised of 100 percent of the Federal national rate.
    Sole community hospitals are paid based on whichever of the 
following rates yields the greatest aggregate payment: the Federal 
national rate, the updated hospital-specific rate based on FY 1982 cost 
per discharge, or the updated hospital-specific rate based on FY 1987 
cost per discharge. Hospitals in Puerto Rico are paid on the basis of a 
rate per discharge comprised of 75 percent of a Puerto Rico rate and 25 
percent of a national rate (section 1886(d)(9)(A) of the Act).
    As discussed below in section II, we are proposing to make changes 
in the determination of the prospective payment rates for Medicare 
inpatient operating costs. The changes, to be applied prospectively, 
would affect the calculation of the Federal rates. In section III we 
discuss our proposed changes for determinating the prospective payment 
rates for Medicare inpatient capital-related costs. Section IV sets 
forth our proposed changes for determining the rate-of-increase limits 
for hospitals excluded from the prospective payment system. The tables 
to which we refer in the preamble to the proposed rule are presented at 
the end of this addendum in section V.

II. Proposed Changes to Prospective Payment Rates For Inpatient 
Operating Costs for FY 1995

    The basic methodology for determining prospective payment rates for 
inpatient operating costs is set forth at Sec. 412.63 for hospitals 
located outside of Puerto Rico. The basic methodology for determining 
the prospective payment rates for inpatient operating costs for 
hospitals located in Puerto Rico is set forth at Secs. 412.210 and 
412.212. Below, we discuss the manner in which we are changing some of 
the factors used for determining the prospective payment rates. The 
Federal and Puerto Rico rate changes, once issued as final, will be 
effective with discharges occurring on or after October 1, 1994. As 
discussed in section IV.C of this proposed rule, section 
1886(d)(3)(A)(iii) specifies that for discharges occurring in the 
fiscal year beginning October 1, 1994, the average standardized amount 
for hospitals located in a rural area shall be equal to the average 
standardized amount for hospitals located in an other urban area. 
Pursuant to section 1886(b)(3)(B)(i)(X) of the Act, we will update the 
rural standardized amount by the amount necessary to equate the rural 
standardized amount with the other urban standardized amount. As there 
will no longer be separate other urban and rural standardized amounts, 
we will refer to the urban and rural standardized amounts that will be 
effective beginning with FY 1995 as the ``other standardized amount.'' 
As required by section 1886(d)(4)(C) of the Act, we must adjust the DRG 
classifications and weighting factors for discharges in FY 1995.
    In summary, the proposed standardized amounts set forth in Tables 
1a, 1b, and 1c of section V of this addendum reflect--
    Updates of 1.1 percent for large urban and other urban 
hospitals (that is, the market basket percentage increase of 3.6 
percent minus 2.5 percentage points) and an update for rural hospitals 
of approximately 8.4 percent (that is, the amount required to equate 
the rural standardized amount with the other urban standardized 
amount);
     Revised labor and nonlabor shares of the national average 
standardized amounts to reflect the national average labor portion of 
the standardized amounts for urban and rural hospitals (the revised 
labor and nonlabor shares of the Puerto Rico standardized amounts 
reflect the Puerto Rico average labor portion of the standardized 
amounts for urban and rural hospitals);
     An adjustment to ensure budget neutrality as provided for 
in sections 1886(d)(4)(C)(iii) and (d)(3)(E) of the Act by applying new 
budget neutrality adjustment factors to the urban and other 
standardized amounts;
     An adjustment to ensure budget neutrality as provided for 
in section 1886(d)(8)(D) of the Act by removing the FY 1994 budget 
neutrality factor and applying a revised factor; and
     An adjustment to apply the revised outlier offset by 
removing the FY 1994 outlier offsets and applying a new offset.

A. Calculation of Adjusted Standardized Amounts

1. Standardization of Base-Year Costs or Target Amounts
    Section 1886(d)(2)(A) of the Act required the establishment of 
base-year cost data containing allowable operating costs per discharge 
of inpatient hospital services for each hospital. The preamble to the 
September 1, 1983 interim final rule (48 FR 39763) contains a detailed 
explanation of how base-year cost data were established in the initial 
development of standardized amounts for the prospective payment system 
and how they are used in computing the Federal rates.
    Section 1886(d)(9)(B)(i) of the Act required that Medicare target 
amounts be determined for each hospital located in Puerto Rico for its 
cost reporting period beginning in FY 1987. The September 1, 1987 final 
rule contains a detailed explanation of how the target amounts were 
determined and how they are used in computing the Puerto Rico rates (52 
FR 33043, 33066).
    The standardized amounts are based on per discharge averages of 
adjusted hospital costs from a base period or, for Puerto Rico, 
adjusted target amounts from a base period, updated and otherwise 
adjusted in accordance with the provisions of section 1886(d) of the 
Act. Sections 1886(d)(2)(C) and (d)(9)(B)(ii) of the Act required that 
the updated base-year per discharge costs and, for Puerto Rico, the 
updated target amounts, respectively, be standardized in order to 
remove from the cost data the effects of certain sources of variation 
in cost among hospitals. These include case mix, differences in area 
wage levels, cost of living adjustments for Alaska and Hawaii, indirect 
medical education costs, and payments to hospitals serving a 
disproportionate share of low-income patients.
    Since the standardized amounts have already been adjusted for 
differences in case mix, wages, cost-of-living, indirect medical 
education costs, and payments to hospitals serving a disproportionate 
share of low-income patients, no additional adjustments for these 
factors for FY 1995 were made. That is, the standardization adjustments 
reflected in the FY 1995 standardized amounts are the same as those 
reflected in the FY 1994 standardized amounts.
    Sections 1886(d)(2)(H) and (d)(3)(E) of the Act require that, in 
making payments under the prospective payment system, the Secretary 
adjust the proportion of payments that are wage-related (as estimated 
by the Secretary from time to time). Beginning with October 1, 1990, 
when the market basket was rebased, we have considered 71.40 percent of 
costs to be labor-related for purposes of the prospective payment 
system.
2. Computing Urban and Other Averages Within Geographic Areas
    Beginning in FY 1995, section 1886(d)(3) of the Act requires the 
Secretary to compute two average standardized amounts for discharges 
occurring in a fiscal year: one for hospitals located in large urban 
areas and one for hospitals located in other areas. In addition, under 
section 1886(d)(9)(B)(iii) of the Act, the average standardized amount 
per discharge must be determined for hospitals located in urban and 
other areas in Puerto Rico. Hospitals in Puerto Rico are paid a blend 
of 75 percent of the applicable Puerto Rico standardized amount and 25 
percent of a national standardized payment amount.
    Section 1886(d)(2)(D) of the Act defines ``urban areas'' as those 
areas within a Metropolitan Statistical Area (MSA). A ``large urban 
area'' is defined as an urban area with a population of more than 
1,000,000. In addition, section 4009(i) of Public Law 100-203 provides 
that a New England County Metropolitan Area (NECMA) with a population 
of more than 970,000 is classified as a large urban area. As required 
by section 1886(d)(2)(D) of the Act, population size is determined by 
the Secretary based on the latest population data published by the 
Bureau of the Census. Urban areas that do not meet the definition of a 
``large urban area'' are referred to as ``other urban areas.'' Areas 
that are not included in MSAs are considered ``rural areas'' under 
section 1886(d)(2)(D). Payment for discharges from hospitals located in 
large urban areas will be based on the large urban standardized amount. 
Payment will be based on the other standardized amount for discharges 
from hospitals located in other urban and rural areas.
    Based on 1991 population estimates published by the Bureau of the 
Census, 54 areas meet the criteria to be defined as large urban areas 
for FY 1995. These areas are identified by an asterisk in Table 4a.
    Table 1a contains the two national standardized amounts that we are 
proposing be applicable to most hospitals. Under section 
1886(d)(9)(A)(ii) of the Act, the national standardized payment amount 
applicable to hospitals in Puerto Rico consists of the discharge-
weighted average of the national large urban standardized amount and 
the national other standardized amount (as set forth in Table 1a). The 
national average standardized amount for Puerto Rico is set forth in 
Table 1c. This table also includes the two standardized amounts that 
would be applicable to most hospitals in Puerto Rico.
3. Updating the Average Standardized Amounts
    In accordance with section 1886(d)(3)(A) of the Act, we are 
proposing to update the large urban, other urban, and rural average 
standardized amounts for FY 1994 using the applicable percentage 
increases specified in section 1886(b)(3)(B)(i) of the Act. As 
explained earlier, there are currently separate large urban, other 
urban and rural standardized payment amounts, and section 1886(d)(3)(A) 
of the Act provides for the elimination of separate other urban and 
rural payment amounts beginning in FY 1995. Section 1886(b)(3)(B)(i)(X) 
of the Act, as amended by section 13501(a)(1) of Public Law 103-66, 
specifies the following update factors for the standardized amounts for 
FY 1995:
     For hospitals located in large urban and other urban 
areas, the market basket percentage increase minus 2.5 percentage 
points.
     For hospitals located in rural areas, the market basket 
percentage increase plus the amount necessary to make the rural 
standardized amount equal the standardized amount for other urban 
areas.
    The percentage change in the market basket reflects the average 
change in the price of goods and services purchased by hospitals to 
furnish inpatient care. The most recent forecasted hospital market 
basket increase for FY 1995 is 3.6 percent. For FY 1995, this yields an 
update to the urban average standardized amounts of 1.1 percent (3.6 
percent minus 2.5 percent). To satisfy the requirement of section 
1886(b)(3)(i)(X) of the Act that the update for hospitals located in a 
rural area be equal to that for hospitals located in an other urban 
area beginning in FY 1995, we estimate that an overall update of the 
market basket rate of increase (that is, 3.6 percent) plus 
approximately 4.8 percentage points will be necessary. Thus, we are 
proposing an update to the other urban and rural average standardized 
amounts for FY 1995 of 8.4 percent. However, as explained below, we are 
currently estimating that the overall increase in the rural 
standardized amount will be approximately 4.6 percent, as a result of 
two adjustments that must be made to the updated standardized amounts. 
These adjustments were previously applied differentially to the urban 
and rural standardized amounts.
    First, we are adjusting the FY 1994 standardized amounts to remove 
the effects of the FY 1994 geographic reclassifications and outlier 
payments before applying the FY 1995 updates. That is, we are 
increasing the standardized amounts to restore the reductions that were 
made for the effects of geographic reclassification and outliers. As 
these reductions were larger for urban than rural hospitals, restoring 
the reductions results in a larger increase in the urban standardized 
amounts than the rural standardized amounts. After applying an update 
of 1.1 percent to the adjusted urban standardized amount, we estimate 
that an overall update of 7.3 percent is required to equate the rural 
and other urban standardized amounts.
    However, the estimated actual increase in the standardized amounts 
for rural hospitals will be less because we also have to reduce the 
standardized amounts for the effects of geographic reclassification and 
outliers. For FY 1995, there will be a single reduction to the 
standardized amounts for each of these factors, rather than separate 
adjustments to the urban and rural standardized amounts based on the 
effect of geographic reclassification and outliers in each respective 
area. For instance, in FY 1994, we reduced the urban standardized 
amounts by 5.4 percent and the rural standardized amounts by 2.3 
percent to account for outliers in each respective area. For FY 1995, 
we will apply one adjustment for the effect of outliers--a single 
reduction in the standardized amounts of 5.1 percent. Similarly, there 
were separate reductions to the standardized amounts in FY 1994 for the 
effects of geographic reclassification of 0.7 percent for urban 
hospitals and 0.1 percent for rural hospitals. Our proposed 
standardized amounts reflect a single reduction for this factor of 0.6 
percent. After including offsets to the standardized amounts for 
outliers and geographic reclassification, we estimate that there will 
be an actual increase of 4.6 percent to the rural standardized amounts 
and 1.5 percent to the urban standardized amounts. A more detailed 
explanation of the impact of the single standardized amount for other 
urban and rural hospitals and single adjustments for the effects of 
outliers and geographic reclassification is included in Appendix A of 
this proposed rule.
    With the phase-out of the rural payment amount, rural hospitals and 
other urban hospitals will be paid based on the same standardized 
amount. Since Congress has mandated the elimination of separate payment 
rates based on whether a hospital is located in an urban or rural area, 
we believe it is appropriate to revise the national average 
standardized amounts based on national average labor/nonlabor shares. 
Therefore, we propose to adjust the labor and nonlabor proportions of 
the standardized amount to reflect the national average. (We are 
revising the Puerto Rico standardized amounts by the average labor 
share in Puerto Rico of 82.7 percent.) Currently, the rural labor share 
represents 75.6 percent of the standardized amount while the urban 
labor share represents 70.8 percent. This differential is the result of 
standardization of labor-related costs by the area wage index. Because 
rural hospitals generally have lower wage index values than urban 
hospitals, the standardization process resulted in a higher labor share 
for rural hospitals. We are therefore proposing to adjust the labor/
nonlabor proportions of the standardized amounts that will be 
applicable to both rural and urban hospitals based on the national 
average. As a result, the national average labor share (as reflected in 
the hospital market basket) will equal 71.4 percent of the standardized 
payment amounts.
    Although the update factor for FY 1995 is set by law, we were 
required by section 1886(e)(3)(B) of the Act to report to Congress no 
later than March 1, 1994 on our initial recommendation of update 
factors for FY 1995 for both prospective payment hospitals and 
hospitals excluded from the prospective payment system. For general 
information purposes, we have included the report to Congress as 
Appendix C to this proposed rule. Our proposed recommendation on the 
update factors (which is required by sections 1886(e)(4)(A) and 
(e)(5)(A) of the Act), as well as our responses to ProPAC's 
recommendation concerning the update factor, is set forth as Appendix D 
to this proposed rule.
4. Other Adjustments to the Average Standardized Amounts
    a. Recalibration of DRG Weights and Updated Wage Index--Budget 
Neutrality Adjustment. Section 1886(d)(4)(C)(iii) of the Act specifies 
that beginning in FY 1991, the annual DRG reclassification and 
recalibration of the relative weights must be made in a manner that 
ensures that aggregate payments to hospitals are not affected. As 
discussed in section II of the preamble, we normalized the recalibrated 
DRG weights by an adjustment factor, so that the average case weight 
after recalibration is equal to the average case weight prior to 
recalibration. While this adjustment is intended to ensure that 
recalibration does not affect total payments to hospitals, our analysis 
indicates that the normalization adjustment does not necessarily 
achieve budget neutrality with respect to aggregate payments to 
hospitals.
    Section 1886(d)(3)(E) of the Act specifies that the hospital wage 
index must be updated based on new survey data no later than October 1, 
1990 and on an annual basis beginning October 1, 1993. This provision 
also requires that any updates or adjustments to the wage index must be 
made in a manner that ensures that aggregate payments to hospitals are 
not affected by the change in the wage index.
    To comply with the requirement of section 1886(d)(4)(C)(iii) of the 
Act that the DRG reclassification changes and recalibration of the 
relative weights be budget neutral and the requirement in section 
1886(d)(3)(E) of the Act that the updated wage index be implemented in 
a budget neutral manner, we compared aggregate payments using the FY 
1994 relative weights and the wage index effective October 1, 1993 to 
aggregate payments using the proposed FY 1995 relative weights and wage 
index. The same methodology was used for the FY 1994 budget neutrality 
adjustment. (See the discussion in the September 1, 1992 final rule (57 
FR 39832).) Based on this comparison, we computed a budget neutrality 
adjustment factor equal to 0.997647. This budget neutrality adjustment 
factor is applied to the standardized amounts without removing the 
effects of the FY 1994 budget neutrality adjustment. We do not remove 
the prior budget neutrality adjustment because the statute requires 
that aggregate payments after the changes in the DRG relative weights 
and wage index equal estimated payments prior to the changes. If we 
removed the prior year adjustment, we would not satisfy this condition.
    In addition, we are proposing to continue to apply the same FY 1995 
adjustment factor to the hospital-specific rates that are effective for 
cost reporting periods beginning on or after October 1, 1994, in order 
to ensure that we meet the statutory requirement that aggregate 
payments neither increase nor decrease as a result of the 
implementation of the DRG weights and updated wage index. (See the 
discussion in the September 4, 1990 final rule (55 FR 36073).)
    b. Reclassified Hospitals--Budget Neutrality Adjustment. Section 
1886(d)(8)(B) of the Act provides that certain rural hospitals are 
deemed urban effective with discharges occurring on or after October 1, 
1988. In addition, section 1886(d)(10) of the Act provides for the 
reclassification of hospitals based on determinations by the Medicare 
Geographic Classification Review Board (MGCRB). Under section 
1886(d)(10) of the Act, a hospital may be reclassified for purposes of 
the standardized amount or the wage index, or both.
    Prior to FY 1995, section 1886(d)(8)(D) of the Act required the 
Secretary to adjust the urban standardized amounts so as to ensure that 
total aggregate payments under the prospective payment system after 
implementation of the provisions of sections 1886(d)(8)(B) and (C) and 
1886(d)(10) of the Act were equal to the aggregate prospective payments 
that would have been made absent these provisions. The rural 
standardized amounts were also adjusted to ensure that aggregate 
payments to rural hospitals not affected by these provisions neither 
increased nor decreased as a result of these provisions. Beginning 
October 1, 1994, the Secretary is required to adjust the standardized 
amounts by the same factor to account for the effects of 
reclassification. We applied an adjustment of 0.993814 to ensure that 
the effects of reclassification are budget neutral.
    The adjustment factors are applied to the standardized amounts 
after removing the effects of the FY 1994 budget neutrality adjustment 
factors. We note that the proposed FY 1995 adjustments reflect wage 
index and standardized amount reclassifications approved by the MGCRB 
or the Administrator as of March 14, 1994. The effects of any 
additional reclassification changes resulting from appeals and review 
of the MGCRB's decisions for FY 1995 or from a hospital's request for 
the withdrawal of a reclassification request will be reflected in the 
final budget neutrality adjustment required under section 1886(d)(8)(D) 
of the Act and published in the final rule for FY 1995.
    c. Outliers. Section 1886(d)(5)(A) of the Act provides that, in 
addition to the basic prospective payment rates, payments must be made 
for discharges involving day outliers and may be made for cost 
outliers. Under section 1886(d)(3)(B) of the Act, the Secretary has 
been required to separately reduce the urban and rural national 
standardized amounts by the proportion of estimated total DRG payments 
attributable to outliers in each respective area. Beginning with FY 
1995, section 1886(d)(3)(B) requires the Secretary to adjust both the 
large urban and other national standardized amounts by the same factor 
to account for the estimated proportion of total DRG payments made to 
outlier cases. Section 1886(d)(9)(B)(iv) of the Act requires that the 
urban and other standardized amounts applicable to hospitals in Puerto 
Rico be reduced by the proportion of estimated total DRG payments 
attributable to estimated outlier payments. Furthermore, section 
1886(d)(5)(A)(iv) of the Act directs that outlier payments in any year 
may not be less than 5 percent nor more than 6 percent of total 
payments projected or estimated to be made based on the prospective 
payment rates.
    Section 13501(c) of the Omnibus Budget Reconciliation Act of 1993 
(Public Law 103-66) amended section 1886(d)(5)(A) with respect to 
outliers beginning in FY 1995. With regard to cost outliers, section 
13501(c) of Public Law 103-66 requires that the Secretary modify the 
methodology for determining the cost outlier threshold. For discharges 
occurring before October 1, 1994, a hospital may receive payment for a 
cost outlier if the adjusted costs for a discharge exceed a fixed 
multiple of the DRG payment for the case or a fixed dollar amount. 
Effective for discharges occurring on or after October 1, 1994, a 
hospital may receive payment for a cost outlier if adjusted costs 
exceed the DRG prospective payment rate plus a fixed dollar amount. As 
discussed in section IV.D of the preamble, we refer to this revised 
cost outlier threshold as ``fixed loss.''
    Section 13501(c) of Public Law 103-66 also amended section 
1886(d)(5)(A) of the Act with respect to day outliers. Beginning with 
FY 1995, section 1886(d)(5)(A) requires the Secretary to reduce the 
proportion of total outlier payments paid under the day outlier 
methodology. Under the requirements of section 1886(d)(5)(A)(v), the 
proportion of outlier payments made under the day outlier methodology, 
relative to the proportion of outlier payments made under the day 
outlier methodology in FY 1994 (which we estimated at 31.3 percent in 
our September 1, 1993 final rule (58 FR 46348)), shall be 75 percent in 
FY 1995, 50 percent in FY 1996 and 25 percent in FY 1997. After 
September 30, 1997, the Secretary will no longer pay for day outliers 
under the provisions of section 1886(d)(5)(A)(i). Again, the changes 
required by section 1886(d)(5)(A) are discussed in detail in section 
IV.D of the preamble to this proposed rule.
    i. FY 1995 Outlier Thresholds. For FY 1994, the day outlier 
threshold is the geometric mean length of stay for each DRG plus the 
lesser of 23 days or 3.0 standard deviations. The marginal cost factor 
for day outliers (or the percent of Medicare's average per diem payment 
paid for each outlier day) is equal to 55 percent in FY 1994. The cost 
outlier threshold is the greater of 2.0 times the prospective payment 
rate for the DRG or $36,000 ($33,000 for hospitals that have not yet 
entered the prospective payment system for inpatient capital-related 
costs). The marginal cost factor for cost outliers (or the percent of 
costs paid after costs for the case exceed the threshold) is 75 
percent. We applied an outlier adjustment to the FY 1994 standardized 
amounts of 0.945960 for the urban rates, 0.977157 for the rural rates, 
and 0.9454 for the capital Federal rate.
    For FY 1995, we propose to set the day outlier threshold at the 
geometric mean length of stay for each DRG plus the lesser of 22 days 
or 3.0 standard deviations. We are also proposing to reduce the 
marginal cost factor for each outlier day from 55 percent to 49 percent 
in FY 1995.
    Our proposed policy will reduce the proportion of outlier payments 
paid to day outliers as required by section 1886(d)(5)(A) of the Act. 
We are also proposing a fixed loss cost outlier threshold in FY 1995 
equal to the prospective payment rate for the DRG plus $23,300 ($21,400 
for hospitals that have not yet entered the prospective payment system 
for capital-related costs). Additionally, we are proposing to increase 
the marginal cost factor for cost outliers from 75 to 80 percent.
    Pursuant to section 1886(d)(5)(A)(iv) of the Act, we calculated 
outlier thresholds so that estimated outlier payments equal 5.1 percent 
of estimated DRG payments. In conjunction with the elimination of the 
rural standardized amount, we considered raising the proportion of 
operating payments estimated to be paid as outliers from 5.1 percent to 
5.5 percent. This is the percentage offset that currently applies to 
the urban standardized amounts and is in the middle of the 5 to 6 
percent range for outlier payments required by statute. Raising the 
proportion of operating payments paid as outliers would reduce the 
financial risk to hospitals in treating outlier cases. However, 
financing 5.5 percent in outlier payments would require reducing the 
average standardized amounts by 5.5 percent. We welcome comments on 
this issue.
    The model that we use to determine the outlier thresholds necessary 
to target our desired outlier payment percentage for FY 1995 uses the 
FY 1993 MedPAR file and the most recent available information on 
hospital-specific payment parameters (such as the cost-to-charge 
ratios). This information is based on the January 1994 update of the 
provider-specific file used in the PRICER program. In estimating 
payments we convert billed charges to costs for purposes of estimating 
cost outlier payments. As we explained in the September 1, 1993 final 
rule (58 FR 46347), prior to FY 1994, we used a charge inflation factor 
to adjust charges to costs; beginning with FY 1994, we are currently 
using a cost inflation factor to estimate costs. In other words, 
instead of inflating the FY 1993 charge data by a charge inflation 
factor for 2 years in order to estimate FY 1995 charge data and then 
applying the cost-to-charge ratio, we adjust the charges by the cost-
to-charge ratio and then inflate the estimated costs for 2 years of 
cost inflation. In this manner, we will be automatically adjusting for 
any changes in the cost-to-charge ratios that may occur, since the 
relevant variable is the costs estimated for a given case.
    In setting the proposed FY 1995 outlier thresholds, we used a cost 
inflation factor of 1.04735. This is the average increase in cost per 
case between PPS-7 (data from cost reporting periods beginning in FY 
1990) and PPS-9 (data from cost reporting periods beginning in FY 
1992), for a matched set of hospitals. We made an audit adjustment for 
any cost report that had not been settled, based on the average ratio 
between submitted and final cost report data. This adjustment was made 
separately for Medicare inpatient capital costs and Medicare inpatient 
operating costs. We used the actual settlement ratio for PPS-7 (data 
from cost reporting periods beginning in FY 1990), since most cost 
reports for that period had been settled. We also used the settlement 
ratio from PPS-7 for the PPS-8 cost reports, since the PPS-8 settlement 
ratio currently available is based on many fewer hospitals 
(approximately 37 percent, as opposed to 92 percent for PPS-7).
    When we modeled the combined operating and capital outlier 
payments, we found that using a common set of thresholds resulted in a 
higher percentage of outlier payments for capital-related costs than 
for operating costs. We estimate the proposed thresholds for FY 1995 
would result in outlier payments equal to 5.1 percent of operating DRG 
payments and 6.3 percent of capital payments based on the Federal rate.
    As stated in the September 1, 1993 final rule (58 FR 46348), we 
have established outlier thresholds that would be applicable to both 
inpatient operating costs and inpatient capital-related costs. As 
explained earlier, we will apply a reduction of approximately 5.1 
percent to the FY 1995 standardized amounts to account for the 
proportion of PPS payments paid to outliers. The proposed outlier 
adjustment factors applied to the standardized amounts and the capital 
Federal rate for FY 1995 are as follows:

------------------------------------------------------------------------
   Operating standardized amounts            Capital federal rate       
------------------------------------------------------------------------
0.948772...........................                   0.9372            
------------------------------------------------------------------------

We would apply the proposed outlier adjustment factors after removing 
the effects of the FY 1994 outlier adjustment factors on the 
standardized amounts and the capital Federal rate.
    ii. Other Changes Concerning Outliers. Table 5 of section V of this 
addendum contains the DRG relative weights, geometric and arithmetic 
mean lengths of stay, as well as the day outlier threshold for each 
DRG. When we recalibrate DRG weights, we set a threshold of 10 cases as 
the minimum number of cases required to compute a reasonable weight and 
geometric mean length of stay. DRGs that do not have at least 10 cases 
are considered to be low volume DRGs. For the low volume DRGs, we use 
the original geometric mean lengths of stay, because no arithmetic mean 
length of stay was calculated based on the original data.
    Table 8a in section V of this addendum contains the updated 
Statewide average operating cost-to-charge ratios for urban hospitals 
and for rural hospitals to be used in calculating cost outlier payments 
for those hospitals for which the intermediary is unable to compute a 
reasonable hospital-specific cost-to-charge ratio. These Statewide 
average ratios would replace the ratios published in the September 1, 
1993 final rule (58 FR 46439), effective October 1, 1994. Table 8b 
contains comparable Statewide average capital cost-to-charge ratios. 
These average ratios would be used to calculate cost outlier payments 
for those hospitals for which the intermediary computes operating cost-
to-charge ratios lower than 0.279 or greater than 1.314 and capital 
cost-to-charge ratios lower than 0.013 or greater than 0.241. This 
range represents 3.0 standard deviations (plus or minus) from the mean 
of the log distribution of cost-to-charge ratios for all hospitals. The 
cost-to-charge ratios in Tables 8a and 8b would be applied to all 
hospital-specific cost-to-charge ratios based on cost report 
settlements occurring during FY 1995.
    iii. FY 1993 and FY 1994 Outlier Payments. In the May 26, 1993 
proposed rule (58 FR 30271), we estimated that actual FY 1993 outlier 
payments would be approximately 4.5 percent of actual FY 1993 total DRG 
payments. We also estimated that total DRG payments for FY 1993 would 
be higher than estimated at the time that we set the FY 1993 outlier 
thresholds. Our estimates of actual outlier payments and actual total 
DRG payments were computed by simulating payments using actual FY 1993 
bill data available at the time. Our current estimate is that actual FY 
1993 outlier payments were approximately 4.1 percent of total DRG 
payments. At the same time, we estimate that FY 1993 total DRG payments 
per case were 1.6 percent higher than we estimated when we set the FY 
1993 outlier thresholds (1.9 percent higher if indirect teaching and 
disproportionate share payments are included). These estimates are 
based on simulations using the January 1994 update of the provider-
specific file and the December 31, 1993 update of the MedPAR file.
    In our June 4, 1992 proposed rule (57 FR 23645), we discussed 
several factors that could explain the difference between estimated 
outlier payments and actual outlier payments, relative to total DRG 
payments. With regard to FY 1993 outlier payments, we note that the 
percentage increase in the Medicare case-mix index was 0.8 percent 
between FY 1992 and FY 1993, which was a lower rate of increase than 
for prior years. Although the case-mix index is not a factor in setting 
the outlier thresholds, lower growth in FY 1993 indicates that the 
average severity of a Medicare case increased less in FY 1993 than in 
prior years.
    We also believe that use of a charge inflation factor in setting 
the FY 1993 outlier thresholds may account for some of the difference. 
As we explained in our June 4, 1992 proposed rule, charges have 
historically grown faster than costs. In setting thresholds for FY 
1993, we used the most recently available Medicare data, but that data 
contained 2-year old cost-to-charge ratios. Thus, the cost-to-charge 
ratios used to set the FY 1993 outlier thresholds are higher than those 
used to determine payments. Consequently, actual FY 1993 outlier 
payments as a percent of actual total DRG payments may be lower than we 
estimated when setting outlier thresholds.
    To address this problem in FY 1994, we began using a cost inflation 
factor rather than a charge inflation factor to update billed charges 
for purposes of estimating outlier payments. We believed that this 
refinement would improve our estimation methodology.
    In the September 1, 1993 final rule, we set the outlier thresholds 
so that estimated operating outlier payments were equal to 5.1 percent 
of estimated total estimated operating prospective payments. We 
currently estimate that FY 1994 outlier payments will be 4.0 percent of 
total DRG payments. This figure is based on a computer simulation of 
payments in FY 1994 using FY 1993 bill data.
    We believe that actual outlier payments as a percentage of actual 
total DRG payments may be lower than estimated because actual hospital 
costs may be lower than reflected in the estimation methodology. Our 
most recent data on hospital costs show a significant trend in 
declining rates of increase. Thus, the cost inflation factor of 8.3 
percent used to estimate FY 1994 outlier payments (based on the best 
available data) appears to have been overstated. Based on more recent 
data, we are using a cost inflation factor of 4.7 percent to set 
outlier payments for FY 1995. Also, although we estimate that FY 1994 
outlier payments will approximate 4.0 percent of total DRG payments, we 
note that the estimate of the market basket rate of increase used to 
set the FY 1994 rates was 4.3 percentage points, while the latest FY 
1994 market basket rate of increase forecast is 2.8 percent. Thus, the 
net effect is that hospitals are receiving higher FY 1994 payments than 
would have been established based on a more recent forecast of the 
market basket rate of increase.

B. Adjustments for Area Wage Levels and Cost of Living

    This section contains an explanation of the application of two 
types of adjustments to the adjusted standardized amounts that would be 
made by the intermediaries in determining the prospective payment rates 
as described in this addendum. For discussion purposes, it is necessary 
to present the adjusted standardized amounts divided into labor and 
nonlabor portions. Tables 1a, 1b, and 1c, as set forth in this 
addendum, contain the actual labor-related and nonlabor-related shares 
that will be used to calculate the prospective payment rates for 
hospitals located in the 50 States, the District of Columbia, and 
Puerto Rico.
1. Adjustment for Area Wage Levels
    Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require 
that an adjustment be made to the labor-related portion of the 
prospective payment rates to account for area differences in hospital 
wage levels. This adjustment is made by multiplying the labor-related 
portion of the adjusted standardized amounts by the appropriate wage 
index for the area in which the hospital is located. In section III of 
the preamble, we discuss certain revisions we are making to the wage 
index. This index is set forth in Tables 4a through 4e of this 
addendum.
2. Adjustment for Cost of Living in Alaska and Hawaii
    Section 1886(d)(5)(H) of the Act authorizes an adjustment to take 
into account the unique circumstances of hospitals in Alaska and 
Hawaii. Higher labor-related costs for these two States are taken into 
account in the adjustment for area wages described above. For FY 1995, 
the adjustment necessary for nonlabor-related costs for hospitals in 
Alaska and Hawaii would be made by the intermediaries by multiplying 
the nonlabor portion of the standardized amounts by the appropriate 
adjustment factor contained in the table below. If the Office of 
Personnel Management releases revised cost-of-living adjustment factors 
before August 1, 1994, we will publish them in the final rule and use 
them in determining FY 1995 payments.

 Table of Cost-of-Living Adjustment Factors, Alaska and Hawaii Hospitals
Alaska--All areas.............................................      1.25
Hawaii:                                                                 
    Oahu......................................................     1.225
    Kauai.....................................................     1.175
    Maui......................................................      1.20
    Molokai...................................................      1.20
    Lanai.....................................................      1.20
    Hawaii....................................................      1.15
(The above factors are based on data obtained from the U.S. Office of   
  Personnel Management.)                                                

C. DRG Relative Weights

    As discussed in section II of the preamble, we have developed a 
classification system for all hospital discharges, assigning them into 
DRGs, and have developed relative weights for each DRG that are 
intended to reflect the resource utilization of cases in each DRG 
relative to Medicare cases in other DRGs. The intermediary makes an 
adjustment to the prospective payment rate by multiplying the 
standardized amount by the relative weight for the DRG to which the 
discharge is assigned.
    Table 5 of section V of this addendum contains the relative weights 
that we propose to use for discharges occurring in FY 1995. These 
factors have been recalibrated as explained in section II of the 
preamble.

D. Calculation of Prospective Payment Rates for FY 1995

General Formula for Calculation of Prospective Payment Rates for FY 
1995
Prospective payment rate for all hospitals located outside Puerto Rico 
except sole community hospitals=Federal rate.
Prospective payment rate for sole community hospitals=Whichever of the 
following rates yields the greatest aggregate payment: 100 percent of 
the Federal rate, 100 percent of the FY 1982 hospital-specific rate, or 
100 percent of the FY 1987 hospital-specific rate.
    Prospective payment rate for Puerto Rico=75 percent of the Puerto 
Rico rate+25 percent of a discharge-weighted average of the large 
urban, other urban, and rural national rates.
1. Federal Rate
    For discharges occurring on or after October 1, 1994 and before 
October 1, 1995, except for sole community hospitals and hospitals in 
Puerto Rico, the hospital's rate is comprised exclusively of the 
Federal national rate.
    The Federal rates are determined as follows:
    Step 1--Select the appropriate national adjusted standardized 
amount considering the type of hospital and designation of the hospital 
as large urban or other (see Tables 1a and 1b, section V of this 
addendum).
    Step 2--Multiply the labor-related portion of the standardized 
amount by the applicable wage index for the geographic area in which 
the hospital is located (see Tables 4a, 4b, and 4c, section V of this 
addendum).
    Step 3--For hospitals in Alaska and Hawaii, multiply the nonlabor-
related portion of the standardized amount by the appropriate cost-of-
living adjustment factor.
    Step 4--Add the amount from Step 2 and the nonlabor-related portion 
of the standardized amount (adjusted if appropriate under Step 3).
    Step 5--Multiply the final amount from Step 4 by the relative 
weight corresponding to the appropriate DRG (see Table 5, section V of 
this addendum).
2. Hospital-Specific Rate (Applicable Only to Sole Community Hospitals)
    Sections 1886(d)(5)(D)(i) and (b)(3)(C) of the Act provide that 
sole community hospitals are paid based on whichever of the following 
rates yields the greatest aggregate payment: the Federal rate, the 
updated hospital-specific rate based on FY 1982 cost per discharge, or 
the updated hospital-specific rate based on FY 1987 cost per discharge.
    Hospital-specific rates have been determined for each of these 
hospitals based on both the FY 1982 cost per discharge and the FY 1987 
cost per discharge. For a more detailed discussion of the calculation 
of the FY 1982 hospital-specific rate and the FY 1987 hospital-specific 
rate, we refer the reader to the September 1, 1983 interim final rule 
(48 FR 39772); the April 20, 1990 final rule with comment (55 FR 
15150); and the September 4, 1990 final rule (55 FR 35994).
    a. Updating the FY 1982 and FY 1987 Hospital-Specific Rates for FY 
1995. We are proposing to increase the hospital-specific rates by 1.4 
percent (the hospital market basket percentage increase minus 2.2 
percentage points) for sole community hospitals located in all areas in 
FY 1995. Section 1886(b)(3)(C)(ii) of the Act, as amended by Public Law 
103-66, provides that the update factor applicable to the hospital-
specific rates for sole community hospitals equals the update factor 
provided under section 1886(b)(3)(B)(ii) of the Act, which, for FY 
1995, is the market basket rate of increase minus 2.2 percentage 
points. Prior to FY 1994, the update to the hospital specific rates was 
applied according to a hospital's cost reporting period. However, 
beginning with FY 1994, the update to the hospital specific rate is 
applied on a Federal fiscal year basis under amended section 
1886(b)(3)(C)(ii). Section 1886(b)(3)(C)(ii) required us to apply the 
FY 1994 update taking into account the portion of the 12-month cost 
reporting period beginning during FY 1993 that occurred during FY 1994. 
In our September 1, 1993 final rule with comment (58 FR 46308), we 
described a methodology for calculating a ``deemed FY 1993'' update 
which affected payment rates in FY 1994. Based on public comments, we 
have revised our interpretion of section 1886(b)(3)(C)(ii) and decided 
to prorate the FY 1994 applicable update based on the number of months 
after the end of a hospital's cost reporting period that occurred in FY 
1994. This revision was outlined in a separate final rule.
    b. Calculation of Hospital-Specific Rate. For sole community 
hospitals, the applicable FY 1995 hospital-specific rate would be 
calculated by multiplying a hospital's hospital-specific rate for the 
preceding fiscal year by the applicable update factor (that is, 2.4 
percent), which equals the average update for all prospective system 
hospitals. In addition, the hospital-specific rate would be adjusted by 
the budget neutrality adjustment factor (that is, .997647) as discussed 
in section II.A.4.b. of this addendum. This resulting rate would be 
used in determining under which rate a sole community hospital is paid 
for its discharges beginning on or after October 1, 1994, based on the 
formula set forth above.
3. General Formula for Calculation of Prospective Payment Rates for 
Hospitals Located in Puerto Rico Beginning On or After October 1, 1994 
and Before October 1, 1995
    a. Puerto Rico Rate. The Puerto Rico prospective payment rate is 
determined as follows:
    Step 1--Select the appropriate adjusted average standardized amount 
considering the large urban or other designation of the hospital (see 
Table 1c, section V of the addendum).
    Step 2--Multiply the labor-related portion of the standardized 
amount by the appropriate wage index (see Tables 4a and 4b, section V 
of the addendum).
    Step 3--Add the amount from Step 2 and the nonlabor-related portion 
of the standardized amount.
    Step 4--Multiply the result in Step 3 by 75 percent.
    Step 5--Multiply the amount from Step 4 by the appropriate DRG 
relative weight (see Table 5, section V of the addendum).
    b. National Rate. The national prospective payment rate is 
determined as follows:
    Step 1--Multiply the labor-related portion of the national average 
standardized amount (see Table 1c, section V of the addendum) by the 
appropriate wage index.
    Step 2--Add the amount from Step 1 and the nonlabor-related portion 
of the national average standardized amount.
    Step 3--Multiply the result in Step 2 by 25 percent.
    Step 4--Multiply the amount from Step 3 by the appropriate DRG 
relative weight (see Table 5, section V of the addendum).
    The sum of the Puerto Rico rate and the national rate computed 
above equals the prospective payment for a given discharge for a 
hospital located in Puerto Rico.

III. Proposed Changes to Payment Rates for Inpatient Capital-
Related Costs for FY 1995

    The prospective payment system for hospital inpatient capital-
related costs was implemented for cost reporting periods beginning on 
or after October 1, 1991. Effective with that cost reporting period and 
during a 10-year transition period extending through FY 2001, hospital 
inpatient capital-related costs are paid on the basis of an increasing 
proportion of the capital prospective payment system Federal rate and a 
decreasing proportion of the historical costs for capital.
    The basic methodology for determining Federal capital prospective 
rates is set forth at Secs. 412.308 through 412.352 of the regulations. 
Below we discuss the factors that we propose to use to determine the 
Federal rate and the hospital-specific rate for FY 1995. The proposed 
rates would be effective for discharges occurring on or after October 
1, 1994.
    We computed the FY 1992 standard Federal payment rate for capital-
related costs under the prospective payment system by updating the FY 
1989 Medicare inpatient capital cost per case by an actuarial estimate 
of the increase in Medicare inpatient capital costs per case. Each year 
after FY 1992 we updated the standard Federal rate for increases in 
capital-related costs as provided in Sec. 412.308(c)(1). Also, 
Sec. 412.308(c)(2) provides that the Federal rate is adjusted annually 
by a factor equal to the estimated additional payments under the 
Federal rate for outlier cases, determined as a proportion of total 
capital payments under the Federal rate. For FY 1992 through FY 2001, 
Sec. 412.308(c)(3) requires that the Federal rate be reduced by an 
adjustment factor equal to the estimated additional payments made for 
exceptions under Sec. 412.348, and Sec. 412.308(c)(4)(ii) requires that 
the Federal rate be adjusted so that the estimated aggregate payments 
after any changes resulting from the annual DRG reclassification and 
the recalibration of DRG weights and changes in the geographic 
adjustment factor are budget neutral. For FY 1992 through FY 1995, 
Sec. 412.352 requires that the Federal rate also be adjusted by a 
budget neutrality factor, so that estimated aggregate payments for 
inpatient hospital capital costs will equal 90 percent of the estimated 
payments that would have been made for capital-related costs on a 
reasonable cost basis during the fiscal year. In addition, Public Law 
103-66 required that, effective for discharges occurring after 
September 30, 1993, the unadjusted standard Federal rate be reduced by 
7.4 percent.
    The hospital-specific rate for each hospital was calculated by 
dividing the hospital's Medicare inpatient capital-related costs for a 
specified base year by its Medicare discharges (adjusted for 
transfers), and dividing the result by the hospital's case mix index 
(also adjusted for transfers). The resulting case-mix adjusted average 
cost per discharge was then updated to FY 1992 based on the national 
average increase in Medicare's inpatient capital cost per discharge and 
adjusted by the exceptions payment adjustment factor and the budget 
neutrality adjustment factor to yield the FY 1992 hospital-specific 
rate. The hospital-specific rate is updated each year after FY 1992 for 
inflation and for changes in the exceptions payment adjustment factor 
and the budget neutrality adjustment factor.
    To determine the appropriate budget neutrality adjustment factors 
and the exceptions payment adjustment factor, we developed a dynamic 
model of Medicare inpatient capital-related costs, that is, a model 
that projects changes in Medicare inpatient capital-related costs over 
time. The model and its application are described more fully in 
Appendix B.
    In accordance with section 1886(d)(9)(A) of the Act, under the 
prospective payment system for inpatient operating costs, hospitals 
located in Puerto Rico are paid under a special payment formula. These 
hospitals are paid a blended rate that takes into account their 
geographical designation and is comprised of 75 percent of the 
applicable standardized amount specific to Puerto Rico hospitals and 25 
percent of the applicable national average standardized amount. Section 
412.374 provides for the use of this blended payment system for 
payments to Puerto Rico hospitals under the prospective payment system 
for inpatient capital-related costs. Accordingly, for capital-related 
costs we compute a separate payment rate specific to Puerto Rico 
hospitals using the same methodology used to compute the national 
Federal rate for capital. Hospitals in Puerto Rico are paid based on 75 
percent of the Puerto Rico rate and 25 percent of the Federal rate.

A. Determination of Federal Inpatient Capital-Related Prospective 
Payment Rate Update

    For FY 1994, the Federal rate was $378.34. With the changes we are 
proposing to the factors used to establish the Federal rate, we are 
proposing that the FY 1995 Federal rate would be $353.87.
    In the discussion that follows, we explain the factors that were 
used to determine the proposed FY 1994 Federal rate. In particular, we 
explain why the FY 1994 Federal rate has decreased 6.47 percent 
compared to the FY 1993 Federal rate. We also explain that aggregate 
payments under the capital proposal are estimated to increase by 2.24 
percent.
    The major factor contributing to the decrease in the FY 1994 rate 
in comparison to FY 1993 is the requirement at Sec. 412.352 that 
estimated payments each year from FY 1992 through FY 1995 for capital 
costs equal 90 percent of what would have been payable that year on a 
reasonable cost basis. Based on the most recent data, we now estimate 
that capital payments for FY 1992 were approximately 92.98 percent of 
reasonable costs, that capital payments for FY 1993 were approximately 
97.44 percent of reasonable costs, and that capital payments for FY 
1994 were approximately 93.05 percent of reasonable costs. The data 
thus indicate that the budget neutrality adjustments for FY 1992, FY 
1993, and FY 1994 were not sufficient to meet the 90 percent target and 
that, as a consequence, the Federal rates for both FY 1992, FY 1993, 
and FY 1994 were higher than they should have been. While we do not 
retroactively adjust the budget neutrality factor and the Federal rate 
for previous years to account for revised estimates, we do employ the 
most recent information available to refine the budget neutrality 
adjustment for subsequent years. The result is a lower budget 
neutrality adjustment factor for FY 1995 than FY 1994, which is the 
cause of the decrease in the Federal rate.
    Although the Federal rate for FY 1995 is 6.47 percent lower than 
the FY 1994 Federal rate, we estimate that total capital payments per 
case will increase 2.24 percent in FY 1995. The increase in total 
payments per case is due to the increase in the budget neutrality 
target to equal 90 percent of estimated FY 1994 capital costs per case. 
Since section 1886(g)(1)(A) of the Act requires that estimated payments 
equal 90 percent of estimated reasonable costs for capital-related 
expenses, payments under the capital prospective payment system can be 
expected to increase as capital costs per case increase. The increase 
in payments per case from FY 1994 to FY 1995 (2.24 percent) is less 
than the total estimated increase in capital costs per case between FY 
1994 and FY 1995 (5.70 percent) because estimated FY 1994 payments were 
3.39 percent higher than the FY 1994 budget neutrality target. As a 
result, payments must increase less than the full increase in costs to 
prevent estimated payments for FY 1995 from exceeding 90 percent of 
reasonable cost. Specifically, the increase in payments from FY 1994 to 
FY 1995 is determined by dividing the increase in cost per case by the 
excess of FY 1994 payments over the budget neutrality target (that is, 
1.0570/1.0339 = 1.0224, an increase of 2.24 percent). We discuss the 
determination of the budget neutrality target in section III.A.3 below.
    Finally, it should be noted that total payments to hospitals under 
the prospective payment system will be relatively insensitive to 
changes in the Federal rate even after the expiration of the budget 
neutrality provision in FY 1996. Since capital payments constitute 
about 10 percent of hospital payments, a 1 percent change in the 
Federal rate yields only about a 0.1 percent change in actual payments 
to hospitals.
1. Standard Federal Rate Update
    Section 412.308(c)(1)(i) provides that for FY 1993 through FY 1995, 
the standard Federal rate is updated on the basis of a lagged 2-year 
moving average of the actual increase, adjusted for case-mix index 
change, in Medicare inpatient capital-related costs per case for the 
fiscal years 3 and 4 years before the fiscal year in question. For FY 
1995, the increase is based on the increase in Medicare inpatient 
capital-related costs per case from FY 1990 through FY 1992. These are 
the most recent fiscal years for which cost report data are available. 
To determine the amount of the increase, we apportioned a hospital's 
costs and discharges to each fiscal year based on the number of months 
in the hospital's cost reporting period that occurred during the 
applicable fiscal year. Thus, an individual hospital may have more than 
one cost report included in the calculation.
    We are proposing that the FY 1995 update factor for the Federal 
rate be 2.22 percent. The following chart, based on the December 1993 
update of HCRIS, shows how this figure was computed:

                                                 Capital Costs Per Case Increase From Cost Report Data                                                  
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                 Update 
                                                                                                              Average 2-                        (average
                                                                               Increase             Increase     year                            2-year 
                                                            No.      Unadj.    in cost     Audit       in      increase   Observed     CMI      increase
                                                 No.     hospitals   capital   per case  adjusted   adjusted      in        CMI      adjusted    of CMI 
                Fiscal year                   hospitals     2nd     cost per   (unadj.)   capital   cost per   adjusted  (percent)   increase   adjusted
                                               1st HCR    HCR\1\      case    (percent)  cost per     case     cost per             (percent)   rate of 
                                                                                         case\2\   (percent)     case                          increase)
                                                                                                              (percent)                        (percent)
                                                                                                                                                        
                                                    (1)        (2)       (3)        (4)       (5)        (6)        (7)        (8)        (9)       (10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1990........................................       4251       5412   $543.27  .........   $540.05  .........  .........  .........  .........  .........
1991........................................       4171       5323    584.69       7.62    567.92       5.16  .........       2.52       2.57  .........
1992........................................       4098       4733    633.80       8.40    587.53       3.45       4.30       1.55       1.87       2.22
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Columns 1 and 2 represent the numbers of hospital cost reports used in developing capital costs per case figures in column 3. Since hospital cost    
  reporting periods do not all coincide with the Federal fiscal year, data for a given Federal fiscal year must be derived from more than one hospital  
  cost report, allocated proportionately to the Federal fiscal year. For example, for a hospital with a cost reporting period beginning January 1, one  
  quarter of its cost report for the period ending December 31, 1987 would be allocated to Federal fiscal year 1988, and three quarters of its cost     
  report for the period ending December 31, 1988 would be allocated to Federal fiscal year 1987. Column 1 represents the number of cost reports used    
  that ended in the Federal fiscal year in question. Column 2 represents the number of cost reports used that began in the Federal fiscal year in       
  question. Column 2 is greater than Column 1 because Column 2 includes cost reports for hospitals whose cost reporting period coincides with the       
  Federal year along with cost reports for those hospitals whose cost reporting periods do not coincide with the Federal fiscal year. Column 1 includes 
  only cost reports for hospitals whose cost reporting periods do not coincide with the Federal fiscal year.                                            
\2\Figures in column 5 represent capital costs per case, adjusted for the anticipated effects of cost report audits and reopenings, from the December   
  1993 update of HCRIS. For settled cost reports, and audit adjustment factor of 1.0043 was used in each fiscal year for adjusting capital costs per    
  case figures from column 3 for the effects of audits and reopenings. For as-submitted cost reports, the adjustment factors were as follows: FY 1990-- 
  0.9256, FY 1991--0.9172, FY 1992--0.9250.                                                                                                             
The costs per case figures that result after the application of these audit adjustments to submitted and settled cost reports, respectively, are entered
  in Column 5.                                                                                                                                          

    For the final rule, we will recalculate the FY 1995 update factor 
on the basis of the June 1994 update of HCRIS.
    We note that the effect of the update on the Federal rate is 
limited by the requirement of budget neutrality until FY 1996. Thus, 
although the update factor for inflation is 2.22 percent, the FY 1995 
Federal rate is lower than the FY 1994 Federal rate because of the 
effects of the budget neutrality adjustment. We also note that the FY 
1995 budget neutrality target is determined by the estimate of FY 1995 
capital costs, not by the 2-year average update factor applied to the 
FY 1995 Federal rate. We further discuss the basis for the budget 
neutrality target in section III.A.4 below.
2. Outlier Payment Adjustment Factor
    Section 412.312(c) establishes a unified outlier methodology for 
inpatient operating and inpatient capital-related costs. A single set 
of thresholds is used to identify outlier cases for both inpatient 
operating and inpatient capital-related payments. Outlier payments are 
made only on the portion of the Federal rate that is used to calculate 
the hospital's inpatient capital-related payments (for example, 40 
percent for cost reporting periods beginning in FY 1995 for hospitals 
paid under the fully prospective methodology). Section 412.308(c)(2) 
provides that the standard Federal rate for inpatient capital-related 
costs be reduced by an adjustment factor equal to the estimated 
additional payments under the Federal rate for outlier cases, 
determined as a proportion of inpatient capital-related payments under 
the Federal rate. The outlier thresholds are set so that estimated 
outlier payments are 5.1 percent of estimated inpatient operating 
payments. The inpatient capital-related outlier reduction factor is 
then set according to the estimated inpatient capital-related outlier 
payments that would be made if all hospitals were paid according to 100 
percent of the Federal rate. For purposes of calculating the outlier 
thresholds and the outlier reduction factor, we model all hospitals as 
if paid 100 percent of the Federal rate because, as explained above, 
outlier payments are made only on the portion of the Federal rate that 
is included in the hospital's inpatient capital-related payments.
    In the September 1, 1993 final rule, we estimated that outlier 
payments for FY 1994 would equal 5.46 percent of inpatient capital-
related payments based on the Federal rate. Accordingly, we applied an 
outlier adjustment factor of 0.9454 to the Federal rate. Based on the 
thresholds as set forth in section II.A.4.d of the addendum, we 
estimate that outlier payments will equal 6.28 percent of inpatient 
capital-related payments based on the Federal rate in FY 1995. We are 
therefore proposing an outlier adjustment factor of 0.9372 to the 
Federal rate. When we modeled the combined operating and capital 
outlier payments, we found that using a common set of thresholds 
resulted in a higher percentage of outlier payments for capital-related 
costs than for operating costs. We believe the increase in capital-
related outlier payments for FY 1995 results from a combination of the 
lower proposed capital standard payment amount and the change to a 
fixed loss threshold for cost outlier payments. As a result, estimated 
capital outlier payments for FY 1995 represent a higher percentage of 
total capital standard payments than in FY 1994.
    The outlier reduction factors are not built permanently into the 
rates; that is, they are not applied cumulatively in determining the 
Federal rate. Therefore, the net change in the outlier adjustment to 
the Federal rate for FY 1995 is .9913 (.9372/.9454). Thus, the proposed 
outlier adjustment would reduce the FY 1995 Federal rate by 0.87 
percent (.9913-1) compared with the FY 1994 outlier adjustment.
3. Budget Neutrality Adjustment Factor for Changes in DRG Weights and 
the Geographic Adjustment Factor
    Section 412.308(c)(4)(ii) requires that the Federal rate be 
adjusted so that estimated aggregate payments for the fiscal year based 
on the Federal rate after any changes resulting from the annual 
reclassification and recalibration of the DRG weights and changes in 
the geographic adjustment factor equal estimated aggregate payments 
that would have been made on the basis of the Federal rate without such 
changes. We used the actuarial model described in Appendix B to 
estimate the aggregate payments that would have been made on the basis 
of the Federal rate without changes in the DRG classifications and 
weights and in the geographic adjustment factor. We also used the model 
to estimate aggregate payments that would be made on the basis of the 
Federal rate as a result of those changes. We then used these figures 
to compute the adjustment required to maintain budget neutrality for 
changes in DRG weights and in the geographic adjustment factor.
    For FY 1994, we calculated a GAF/DRG budget neutrality factor of 
1.0053. In this proposed rule, we are applying a factor of 1.00115. The 
GAF/DRG budget neutrality factors are built permanently into the rates; 
that is, they are applied cumulatively in determining the Federal rate. 
This follows from the requirement that aggregate payments each year be 
no more than it is estimated that they would have been in the absence 
of the changes from the annual DRG reclassification and recalibration 
and in the geographic adjustment factor. The incremental change in the 
adjustment from FY 1994 to FY 1995 is 1.00115.
    We note that this factor accounts for DRG reclassifications and 
recalibration and changes in the geographic adjustment factor. It also 
incorporates the effects on the geographic adjustment factor of FY 1995 
geographic reclassification decisions made by the MGCRB compared to FY 
1994 decisions. However, it does not account for changes in payments 
due to changes in the disproportionate share and indirect medical 
education adjustment factors or in the large urban add-on.
4. Budget Neutrality Adjustment Factor to Assure Aggregate Payments 
Equal 90 Percent of Reasonable Cost Payments
    Section 1886(g)(1)(A) of the Act requires that aggregate payments 
made each year in FY 1992 through FY 1995 for hospital inpatient 
services be reduced in a manner that results in payments equal to 90 
percent of the amount the Secretary estimates would have been payable 
on a reasonable cost basis for inpatient capital-related costs in that 
year. No retroactive increase or decrease is made if aggregate payments 
are greater than or less than 90 percent of actual Medicare inpatient 
capital-related costs for that year.
    Section 412.352 of the regulations provides that HCFA determines an 
adjustment to the hospital-specific rate and the Federal rate 
proportionately, so that the estimated payments for capital in each 
year from FY 1992 through FY 1995 will equal 90 percent of what would 
have been payable that year on a reasonable cost basis. The effect of 
this provision is that the reduction required under section 
1886(g)(1)(A) of the Act is realized entirely through a reduction in 
the prospective payments for capital costs (that is, no reduction is 
made for this purpose in the reasonable cost payments for old capital) 
in FY 1992 through FY 1995.
    For FY 1994, we determined that a budget neutrality factor of 
0.8947 was required so that estimated aggregate payments for inpatient 
capital-related costs would equal 90 percent of what would have been 
payable on a reasonable cost basis in that year. For FY 1995, we are 
proposing a budget neutrality factor of 0.7986.
    As we explain in Appendix B, we determine the budget neutrality 
adjustment factor on the basis of a projected FY 1995 capital costs per 
case budget neutrality target. We develop this target from available 
data on average Medicare capital costs per case for all short-term 
acute care hospitals subject to the capital prospective payment system 
(that is, data from excluded and waiver hospitals were eliminated). For 
the FY 1995 proposed rule, we have actual data for FY 1992 from the 
December 1993 HCRIS update. We also have revised estimates of the rates 
of increase in Medicare capital costs per case for the years FY 1993 
through FY 1995.
    At the time of the final rule for FY 1994, we had estimated that 
there would be a 30.53 percent increase in Medicare inpatient capital 
cost per case between FY 1992 and FY 1995. In this proposed rule for FY 
1995, we estimate that there will be a 12.83 percent increase in 
Medicare inpatient capital cost per case between FY 1992 and FY 1994, a 
decline of 13.56 percent (1.1283/1.3053=.8644, or -13.56 percent) in 
the estimated rate of increase since the final rule for FY 1995. The 
following chart shows how the rate-of-increase estimates for FY 1992 
through FY 1995 were calculated in the final rule for FY 1994 and in 
this proposed rule for FY 1995.

                              Comparison of Factors for Medicare Inpatient Capital Cost Per Case Increases--FY 1994 Final Rule (FR) and FY 1995 Proposed Rule (PR)                              
                                                                                        [In percentages]                                                                                        
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                       Total inpatient      Medicare share (2)     Medicare inpatient    Medicare enrollment   Admissions incidence   Medicare admissions   Estimated increases 
                                         capital (1)      ---------------------- capital (1) x (2)=(3) ---------------------------------------------     (4) x (5)=(6)     in medicare inpatient
                                   -----------------------                      -----------------------                                             ---------------------- capital cost per case
          Estimate for FY                                                                                                                                                       (3)/(6)=(7)     
                                     FY94    FY95           FY94   FY95  Change   FY94    FY95           FY94   FY95  Change   FY94    FY95  Change   FY94   FY95         ----------------------
                                      FR      PR   Change    FR     PR             FR      PR   Change    FR     PR             FR      PR             FR     PR   Change   FY94    FY95        
                                                                                                                                                                             FR      PR   Change
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1993..............................    8.00   5.23   -2.56   3.30   0.52   -2.69   11.56   5.77   -5.19   2.03   2.67    0.63    1.02   1.00   -0.02   3.07   3.70    0.61    8.24   2.00   -5.77
1994..............................    9.00   7.00   -1.83   3.60   1.00   -2.51   12.92   8.07   -4.30   2.11   2.13    0.02    1.03   1.11    0.08   3.16   3.26    0.10    9.46   4.65   -4.39
1995..............................   10.00   8.00   -1.82   3.50   1.00   -2.42   13.85   9.08   -4.19   2.04   1.83   -0.21   -1.27   1.34    0.07   3.34   3.19   -0.14   10.17   5.70   -4.06
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    The chart shows the causes of the decline in the rate-of-increase 
projections since the final rule for FY 1994. As the chart shows, the 
decline in the rate of increase projections is due almost entirely to a 
decline in the rate of increase projections for Medicare inpatient 
capital. (As the chart also shows, the rate of increase projections for 
Medicare enrollment, Medicare admissions incidence, and Medicare 
admissions, have changed only marginally.) In turn, the decline in the 
rate of increase projections for Medicare inpatient capital is the 
result of declines in the rate of increase projections for total 
inpatient capital and Medicare share. For FY 1993, the panel survey 
data that we use to develop the projected rate of increase for total 
inpatient capital shows a decline in actual interest payments compared 
to FY 1992. We believe that this decline in interest payments is due to 
refinancing of debt instruments by hospitals to take advantage of lower 
interest rates. For FY 1994 and FY 1995, we are projecting that total 
inpatient capital cost increases will return to the level at which 
increases for depreciation costs alone have been running (i.e., 7-8 
percent) as the number of refinancings declines. The projection of the 
rate of increase in Medicare share for FY 1993 is similarly grounded in 
panel survey data. The panel survey data for that year show that, 
contrary to our previous assumption, Medicare day share has not been 
increasing in proportion to the increase in Medicare admissions. We 
have accordingly reduced the FY 1994 and FY 1995 rate of increase 
projections for Medicare share to account for that fact.
    In addition to the decline in the rate of increase estimates since 
the FY 1994 final rule, there has been a slight (-0.54 percent) 
decrease in the FY 1992 cost per case in the December 1993 HCRIS data, 
compared to the June 1993 HCRIS data that we used for FY 1994. The 
following chart shows the combined effect of the reduced rates of 
increase estimates and the reduced FY 1992 cost per case by comparing 
the projections from FY 1992 to FY 1995 at the time of the FY 1994 
final rule and in this proposed rule.

  Effect of Revised Rate of Increase Estimates on Calculation of Fiscal 
                   Year 1995 Budget Neutrality Target                   
------------------------------------------------------------------------
                                                                Percent 
                                          Capital    Percent   change in
                                          cost per  change in   capital 
                                            case     rate of    cost per
                                                     increase     case  
------------------------------------------------------------------------
Fiscal year 1992 cost per case:                                         
Final FY 94: 6/93 HCRIS................  \1\$594.0                      
                                                 9        N/A      -.054
Proposed FY 95: 3/94 HCRIS.............  \2\590.87  .........  .........
Fiscal year 1993 adjusted cost:                                         
Final FY 94: 8.24%.....................     643.05      -5.77      -6.27
Proposed FY 95: 2.00%..................     602.72  .........  .........
Fiscal year 1994 adjusted cost:                                         
Final FY 94: 9.45%.....................     703.85      -4.39     -10.38
Proposed FY 95: 4.65%..................     630.78  .........  .........
Fiscal year 1995 adjusted cost:                                         
Final FY 94: 10.17%....................     775.43      -4.06     -14.01
Proposed FY 95: 5.70%..................     666.75  .........  .........
Cumulative.............................  .........    -13.56.           
------------------------------------------------------------------------
\1\Fiscal year 1992 cost per case based on June 1993 HCRIS data, audit- 
  adjusted, excluding waiver hospitals and PPS-excluded hospitals.      
\2\Fiscal year 1992 cost per case based on December 1993 HCRIS data,    
  audit-adjusted, excluding waiver hospitals and PPS-excluded hospitals.
                                                                        

    The chart shows that the cumulative effect of the revised rates of 
increase is to lower the FY 1994 budget neutrality target by 13.56 
percent. Together with the 0.54 percent decline due to updated HCRIS 
data, this accounts for the 14.01 percent reduction in the FY 1995 
capital cost per case budget neutrality target compared to the level 
estimated at the time of the FY 1994 final rule.
    For FY 1994, we employed a budget neutrality factor of 0.8947 to 
realize the 90 percent target. In this proposed rule for FY 1995, the 
budget neutrality adjustment factor is 0.7986. The budget neutrality 
factors are not built permanently into the rates; that is, the factors 
are not applied cumulatively in determining the Federal rate. The net 
adjustment to the FY 1994 Federal rate would therefore be .7986/.8947 
or 0.8926. For the final rule, we will recalculate the budget 
neutrality factor on the basis of the most recent data available.
5. Exceptions Payment Adjustment Factor
    Section 412.308(c)(3) requires that the standard Federal rate for 
inpatient capital-related costs be reduced by an adjustment factor 
equal to the estimated additional payments for exceptions under 
Sec. 412.348 determined as a proportion of total payments under the 
hospital-specific rate and Federal rate. The model developed for 
determining the budget neutrality adjustment factor is also used to 
estimate payments under the exceptions payment process and to determine 
the exceptions payment adjustment factor.
    For FY 1994, we estimated that exceptions payments would equal 5.15 
percent of aggregate payments based on the Federal rate and the 
hospital-specific rate. Therefore, we applied an exceptions reduction 
factor of 0.9485 (1-.0515) in determining the Federal rate. For FY 
1995, we estimate that exceptions payments will equal 2.03 percent of 
aggregate payments based on the Federal rate and the hospital-specific 
rate. Therefore, we propose to apply an exceptions reduction factor of 
0.9797 (1-.0203) to determine the FY 1995 Federal rate.
    The exceptions reductions factors are not built permanently into 
the rates; that is, the factors are not applied cumulatively in 
determining the Federal rate. The net adjustment to the FY 1995 Federal 
rate is therefore .9797/.9485, or 1.0329. The proposed exceptions 
reduction factor for FY 1995 is thus 3.29 percent higher than the 
factor for FY 1994.
6. Standard Federal Rate for FY 1995
    For FY 1994, the Federal rate was $378.34. With the changes we are 
proposing to the factors used to establish the Federal rate, the FY 
1995 Federal rate would be $353.87. The proposed changes are as 
follows:
     The FY 1995 update factor would be 1.0222.
     The FY 1995 outlier adjustment factor would be 0.9372.
     The FY 1995 budget neutrality adjustment factor that is 
applied to the standard Federal payment rate for changes in the DRG 
relative weights and in the geographic adjustment factor would be 
1.00115.
     The FY 1995 budget neutrality adjustment factor that is 
applied to the standard Federal payment rate and the hospital-specific 
rate to assure that aggregate payments equal 90 percent of payments 
that would have been made on a reasonable cost basis would be 0.7986.
     The FY 1995 exceptions payments adjustment factor would be 
0.9797.
    Since the Federal rate has already been adjusted for differences in 
case mix, wages, cost of living, indirect medical education costs, and 
payments to hospitals serving a disproportionate share of low-income 
patients, we propose to make no additional adjustments in the standard 
Federal rate for these factors other than the budget neutrality factors 
for changes in the DRG relative weights and the geographic adjustment 
factor.
    We are providing a chart that shows how each of the factors and 
adjustments for FY 1995 affected the computation of the proposed FY 
1995 Federal rate in comparison to the FY 1994 Federal rate. The FY 
1995 update factor has the effect of increasing the Federal rate 2.22 
percent compared to the rate in FY 1994, while the geographic and DRG 
budget neutrality factor has the effect of increasing the Federal rate 
by 0.12 percent. The FY 1995 exceptions reduction factor has the effect 
of increasing the Federal rate by 3.29 percent compared to the 
exceptions reduction for FY 1994. The proposed FY 1995 budget 
neutrality adjustment factor has the effect of reducing the final FY 
1994 rate by 10.74 percent compared to the budget neutrality reduction 
in FY 1994. The combined effect of all the proposed changes is to 
decrease the proposed Federal rate by 6.47 percent compared to the 
Federal rate for FY 1994.

Comparison of Factors and Adjustments--Fiscal Year 1994 Federal Rate and
                 Proposed Fiscal Year 1995 Federal Rate                 
------------------------------------------------------------------------
                                                                Percent 
                                                      Change     Change 
------------------------------------------------------------------------
Update factor\1\:                                                       
Fiscal year 1994:......................     1.0304                      
Proposed Fiscal year 1995:.............     1.0222     1.0222       2.22
GAF/DRG adjustment factor\1\:                                           
Fiscal year 1994:......................     1.0053                      
Proposed Fiscal year 1995:.............    1.00115    1.00115       0.12
Outlier adjustment factor\2\:                                           
Fiscal year 1994:......................     0.9454                      
Proposed Fiscal year 1995:.............     0.9372     0.9913      -0.87
Exceptions adjustment factor:                                           
Fiscal year 19942:.....................     0.9485                      
Proposed Fiscal year 1995:.............     0.9797     1.0329       3.29
Budget neutrality adjustment factor\2\:                                 
Fiscal year 1994:......................     0.8947                      
Proposed Fiscal year 1995:.............     0.7986     0.8926     -10.74
Federal rate:                                                           
Fiscal year 1994:......................    $378.34                      
Proposed Fiscal year 1995:.............     353.87     0.9353     -6.47 
------------------------------------------------------------------------
\1\The update factor and the GAF/DRG budget neutrality factors are built
  permanently into the rates. Thus, for example, the incremental change 
  from FY 1994 to FY 1995 resulting from the application of the 1.00115 
  GAF/DRG budget neutrality factor for FY 1995 is 1.00115.              
\2\The outlier reduction factor, the exceptions reduction factor, and   
  the budget neutrality factor to assure that payments do not exceed 90 
  percent of what it is estimated would have been paid on the basis of  
  reasonable cost are not built permanently into the rates; that is,    
  these factors are not applied cumulatively in determining the rates.  
  Thus, for example, the net change resulting from the application of   
  the FY 1995 exceptions reduction factor is 0.9797/0.9485, or 1.0329.  

    We have refined our proposed budget neutrality and exceptions 
reduction factors for FY 1995 on the basis of the best available data. 
We have not retroactively adjusted the Federal rate for FY 1994 in 
determining the rate for FY 1995.
7. Special Rate for Puerto Rico Hospitals
    For FY 1994, the special rate for Puerto Rico hospitals was 
$291.03. With the changes we are proposing to the factors used to 
determine the rate, we are proposing that the FY 1995 special rate for 
Puerto Rico will be $272.20.

B. Determination of Hospital-Specific Rate Update

    Section 412.328(e) of the regulations provides that the hospital-
specific rate for FY 1995 be determined by adjusting the FY 1994 
hospital-specific rate by the following factors:
1. Hospital-Specific Rate Update Factor
    The hospital-specific rate is updated in accordance with the update 
factor for the standard Federal rate determined under 
Sec. 412.308(c)(1). For FY 1995, we are proposing that the hospital-
specific rate be updated by a factor of 1.0222.
2. Exceptions Payment Adjustment Factor
    For FY 1992 through FY 2001, the updated hospital-specific rate is 
multiplied by an adjustment factor equal to the estimated additional 
payments for capital-related costs for exceptions under Sec. 412.348, 
determined as a proportion of the total amount of payments under the 
hospital-specific rate and the Federal rate. For FY 1995, we estimate 
that exceptions payments will be 2.03 percent of aggregate payments 
based on the Federal rate and the hospital-specific rate. We therefore 
propose that the updated hospital-specific rate be reduced by a factor 
of 0.9797. The exceptions reductions factors are not built permanently 
into the rates; that is, the factors are not applied cumulatively in 
determining the hospital-specific rate. The net adjustment to the FY 
1995 hospital-specific rate is therefore .9797/.9485, or 1.0329.
3. Budget Neutrality Adjustment Factor
    For FY 1992 through FY 1995, the updated hospital-specific rate is 
adjusted by a budget neutrality adjustment factor determined under 
Sec. 412.352, so that estimated aggregate payments under the capital 
prospective payment system will equal 90 percent of what would have 
been payable on a reasonable cost basis. (The budget neutrality 
adjustment for changes in the DRG relative weights and in the 
geographic adjustment factor is not applied to the hospital-specific 
rate.) For FY 1995, we are proposing a budget neutrality factor of 
0.7986. The budget neutrality factor is not built permanently into the 
rates; that is, the factor is not applied cumulatively in determining 
the hospital-specific rate. The net adjustment to the FY 1995 hospital-
specific rate is therefore .7986/.8947, or 0.8926.
4. Net Change to Hospital-Specific Rate
    We are providing a chart below to show the proposed net change to 
the hospital-specific rate. The chart shows the factors for FY 1994 and 
FY 1995 and the net adjustment for each factor. It also shows that the 
proposed cumulative net adjustment from FY 1994 to FY 1995 is 0.9424, 
which represents a decrease of 5.76 percent to the hospital-specific 
rate. The proposed FY 1995 hospital-specific rate for each hospital is 
determined by multiplying the FY 1994 hospital-specific rate by the 
cumulative net adjustment of 0.9424.

  Proposed Fiscal Year 1995 Update and Adjustments to Hospital-Specific 
                                 Rates                                  
------------------------------------------------------------------------
                                                       Net              
                                                   adjustment   Percent 
                                                                change  
------------------------------------------------------------------------
Update factor:                                                          
Fiscal year 94........................     1.0304  ..........  .........
Proposed fiscal year 95...............     1.0222      1.0222       2.22
Exceptions payment adjustment factor:                                   
Fiscal year 94........................     0.9485  ..........  .........
Proposed fiscal year 95...............     0.9797      1.0329       3.29
Budget neutrality factor:                                               
Fiscal year 94........................     0.8947  ..........  .........
Proposed fiscal year 95...............     0.7986      0.8926     -10.74
Cumulative adjustments:                                                 
Fiscal year 94........................     0.8744  ..........  .........
Proposed fiscal year 95...............     0.8241      0.9424     -5.76 
------------------------------------------------------------------------
Note: The update factor for the hospital-specific rate is applied       
  cumulatively in determining the rates. Thus, the incremental increase 
  in the update factor from fiscal year 1994 to fiscal year 1995 is     
  1.0222. In contrast, the exceptions payment adjustment factor and the 
  budget neutrality factor are not applied cumulatively. Thus, for      
  example, the incremental increase in the budget neutrality factor from
  fiscal year 1994 to fiscal year 1995 is .7986/.8947, or .8926.        

C. Calculation of Inpatient Capital-Related Prospective Payments for FY 
1995

    During the capital prospective payment system transition period, a 
hospital is paid for the inpatient capital-related costs under one of 
two alternative payment methodologies: the fully prospective payment 
methodology or the hold-harmless methodology. The payment methodology 
applicable to a particular hospital is determined when a hospital comes 
under the prospective payment system for capital-related costs by 
comparing its hospital-specific rate to the Federal rate applicable to 
the hospital's first cost reporting period under the prospective 
payment system. The applicable Federal rate is determined by adjusting:
     For outliers by dividing the standard Federal rate by the 
outlier reduction factor for that fiscal year; and,
     For the payment adjustment factors applicable to the 
hospital (that is, the hospital's geographic adjustment factor, the 
disproportionate share adjustment factor, and the indirect medical 
education adjustment factor, when appropriate). If the hospital-
specific rate is above the applicable Federal rate, the hospital is 
paid under the hold-harmless methodology. If the hospital-specific rate 
is below the applicable Federal rate, the hospital is paid under the 
fully prospective methodology. For purposes of calculating payments for 
each discharge under both the hold-harmless payment methodology and the 
fully prospective payment methodology, the standard Federal rate is 
adjusted as follows: (Standard Federal Rate)  x  (DRG weight)  x  
(Geographic Adjustment Factor)  x  (Large Urban Add-on, if applicable) 
x  (COLA adjustment for hospitals located in Alaska and Hawaii)  x  (1 
+ Disproportionate Share Adjustment Factor + Indirect Medical Education 
Adjustment Factor, if applicable).
    The result is termed the adjusted Federal rate.
    Payments under the hold-harmless methodology are determined under 
one of two formulas. A hold-harmless hospital is paid the higher of:
     100 percent of the adjusted Federal rate for each 
discharge; or
     An old capital payment equal to 85 percent (100 percent 
for sole community hospitals) of the hospital's allowable Medicare 
inpatient old capital costs per discharge for the cost reporting period 
plus a new capital payment based on a percentage of the adjusted 
Federal rate for each discharge. The percentage of the adjusted Federal 
rate equals the ratio of the hospital's allowable Medicare new capital 
costs to its total Medicare inpatient capital-related costs in the cost 
reporting period.
    Once a hospital receives payment based on 100 percent of the 
adjusted Federal rate in a cost-reporting period beginning on or after 
October 1, 1994 (or the first cost reporting period after obligated 
capital that is recognized as old capital under Sec. 412.302(c) is put 
in use for patient care, if later), the hospital continues to receive 
capital prospective payment system payments on that basis for the 
remainder of the transition period.
    Payment for each discharge under the fully prospective methodology 
is the sum of:
     The hospital-specific rate multiplied by the DRG relative 
weight for the discharge and by the applicable hospital-specific 
transition blend percentage for the cost reporting period; and
     The adjusted Federal rate multiplied by the Federal 
transition blend percentage.
    The blend percentages for cost reporting periods beginning in FY 
1995 are 40 percent of the adjusted Federal rate and 60 percent of the 
hospital-specific rate.
    Hospitals may also receive outlier payments for those cases that 
qualify under the thresholds established for each fiscal year. Section 
412.312(c) provides for a single set of thresholds to identify outlier 
cases for both inpatient operating and inpatient capital-related 
payments. Outlier payments are made only on that portion of the Federal 
rate that is used to calculate the hospital's inpatient capital-related 
payments. For fully prospective hospitals, that will be 40 percent of 
the Federal rate for discharges occurring in cost reporting periods 
beginning during FY 1995. Thus, a fully prospective hospital will 
receive 40 percent of the capital-related outlier payment calculated 
for the case for discharges occurring in cost reporting periods 
beginning in FY 1995. For hold-harmless hospitals paid 85 percent of 
their reasonable costs for old inpatient capital, the portion of the 
Federal rate that is included in the hospital's outlier payments is 
based on the hospital's ratio of Medicare inpatient costs for new 
capital to total Medicare inpatient capital costs. For hold-harmless 
hospitals that are paid 100 percent of the Federal rate, 100 percent of 
the Federal rate is included in the hospital's outlier payments.
    The proposed rules to establish outlier thresholds for FY 1995 are 
published in section II.A.4.c of the Addendum to this proposed rule. 
For FY 1995 we are proposing that a case qualifies as a cost outlier if 
the cost for the case (after standardization for the indirect teaching 
adjustment and disproportionate share adjustment) is greater than the 
prospective payment rate for the DRG plus $23,300. We are also 
proposing that a case qualifies as a day outlier for FY 1995 if the 
length of stay is greater than the geometric mean length of stay for 
the DRG plus the lesser of three standard deviations of the length of 
stay or 22 days.
    During the capital prospective payment system transition period, 
any hospital may also receive an additional payment under an exceptions 
process if its total inpatient capital-related payments are less than a 
minimum percentage of its allowable Medicare inpatient capital-related 
costs. The minimum payment level is established by class of hospital 
under Sec. 412.348. The minimum payment levels for portions of cost 
reporting periods occurring in FY 1995 are:
     Sole community hospitals (located in either an urban or 
rural area), 90 percent;
     Urban hospitals with at least 100 beds and a 
disproportionate share patient percentage of at least 20.2 percent and 
urban hospitals with at least 100 beds that qualify for 
disproportionate share payments under Sec. 412.106(c)(2), 80 percent; 
and,
     All other hospitals, 70 percent.
    Under Sec. 412.348(d), the amount of the exceptions payment is 
determined by comparing the cumulative payments made to the hospital 
under the capital prospective payment system to the cumulative minimum 
payment levels applicable to the hospital for each cost reporting 
period subject to that system. Any amount by which the hospital's 
cumulative payments exceed its cumulative minimum payment is deducted 
from the additional payment that would otherwise be payable for a cost 
reporting period.
    New hospitals are exempted from the capital prospective payment 
system for their first 2 years of operation and are paid 85 percent of 
their reasonable costs during that period. A new hospital's old capital 
costs are its allowable costs for capital assets that were put in use 
for patient care on or before the later of December 31, 1990 or the 
last day of the hospital's base year cost reporting period, and are 
subject to the rules pertaining to old capital and obligated capital as 
of the applicable date. Effective with the third year of operation, we 
will pay the hospital under either the fully prospective methodology, 
using the appropriate transition blend in that Federal fiscal year, or 
the hold-harmless methodology. If the hold-harmless methodology is 
applicable, the hold-harmless payment for assets in use during the base 
period would extend for 8 years, even if the hold-harmless payments 
extend beyond the normal transition period.

IV. Proposed Rate-of-Increase Percentages for Hospitals and 
Hospital Units Excluded From the Prospective Payment System

    The inpatient operating costs of hospitals and hospital units 
excluded from the prospective payment system are subject to rate-of-
increase limits established under the authority of section 1886(b) of 
the Act, which is implemented in Sec. 413.40 of the regulations. Under 
these limits, an annual target amount (expressed in terms of the 
inpatient operating cost per discharge) is set for each hospital, based 
on the hospital's own historical cost experience trended forward by the 
applicable rate-of-increase percentages (update factors). The target 
amount is multiplied by the number of Medicare discharges in a 
hospital's cost reporting period, yielding the ceiling on aggregate 
Medicare inpatient operating costs for the cost reporting period.
    Effective with cost reporting periods beginning on or after October 
1, 1991, a hospital that has Medicare inpatient operating costs in 
excess of its ceiling is paid its ceiling plus 50 percent of its costs 
in excess of the ceiling. Total payment may not exceed 110 percent of 
the ceiling. A hospital that has inpatient operating costs less than 
its ceiling will continue to be paid its costs plus the lower of--
     Fifty percent of the difference between the inpatient 
operating costs and the ceiling; or
     Five percent of the ceiling.
    Each hospital's target amount is adjusted annually, at the 
beginning of its cost reporting period, by an applicable rate-of-
increase percentage. For cost reporting periods beginning on or after 
October 1, 1993 and before October 1, 1994, section 1886(b)(3)(B) of 
the Act provides that the applicable rate-of-increase percentage is the 
market basket percentage increase minus the lesser of one percentage 
point or the percentage point difference between 10 percent and the 
hospital's ``update adjustment percentage'' except for hospitals with 
an ``update adjustment percentage'' of at least 10 percent. The rate-
of-increase percentage for hospitals in the latter case will be the 
market basket percentage increase. The ``update adjustment percentage'' 
is the percentage by which a hospital's allowable inpatient operation 
costs exceeds the hospital's ceiling for the cost reporting period 
beginning in Federal fiscal year 1990. For cost reporting periods 
beginning on or after October 1, 1994 and before October 1, 1997, the 
update adjustment percentage is the update adjustment percentage from 
the previous year plus the previous year's applicable reduction. The 
applicable reduction and applicable percentage are then determined in 
the same manner as for FY 1994. The most recent forecasted market 
basket increase for FY 1995 for hospitals and hospital units excluded 
from the prospective payment system is 3.7 percent.

V. Tables

    This section contains the tables referred to throughout the 
preamble to this proposed rule and in this addendum. For purposes of 
this proposed rule, and to avoid confusion, we have retained the 
designations of Tables 1 through 5 that were first used in the 
September 1, 1983 initial prospective payment final rule (48 FR 39844). 
Tables 1a, 1b, 1c, 1d, 3C, 4a, 4b, 4c, 4d, 4e, 5, 6a, 6b, 6c, 6d, 6e, 
6f, 6g, 7A, 7B, 8a, 8b, and 9 are presented below. The tables presented 
below are as follows:

Table 1a--National Adjusted Operating Standardized Amounts, Labor/
Nonlabor
Table 1b--Regional Adjusted Operating Standardized Amounts, Labor/
Nonlabor
Table 1c--Adjusted Operating Standardized Amounts for Puerto Rico, 
Labor/Nonlabor
Table 1d--Capital Standard Federal Payment Rate
Table 3C--Hospital Case Mix Indexes for Discharges Occurring in Federal 
Fiscal Year 1993 and Hospital Average Hourly Wage for Federal Fiscal 
Year 1995 Wage Index
Table 4a--Wage Index and Capital Geographic Adjustment Factor (GAF) for 
Urban Areas
Table 4b--Wage Index and Capital Geographic Adjustment Factor (GAF) for 
Rural Areas
Table 4c--Wage Index and Capital Geographic Adjustment Factor (GAF) for 
Hospitals That Are Reclassified
Table 4d--Average Hourly Wage for Urban Areas
Table 4e--Average Hourly Wage for Rural Areas
Table 5--List of Diagnosis Related Groups (DRGs), Relative Weighting 
Factors, Geometric Mean Length of Stay, and Length of Stay Outlier 
Cutoff Points Used in the Prospective Payment System
Table 6a--New Diagnosis Codes
Table 6b--New Procedure Codes
Table 6c--Invalid Diagnosis Codes
Table 6d--Revised Diagnosis Code Titles
Table 6e--Revised Procedure Code Titles
Table 6f--Additions to the CC Exclusions List
Table 6g--Deletions to the CC Exclusions List
Table 7A--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay FY 93 MEDPAR Update 12/93 GROUPER V11.0
Table 7B--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay FY 93 MEDPAR Update 12/93 GROUPER V12.0
Table 8a--Statewide Average Operating Cost-to-Charge Ratios for Urban 
and Rural Hospitals (Case Weighted) April 1994
Table 8b--Statewide Average Capital Cost-to-Charge Ratios for Urban and 
Rural Hospitals (Case Weighted) April 1994
Table 9--1993 Transfer Adjusted Case-Mix Index and Transfer Adjustment 
to Discharges for Capital Hospital-Specific Rate Redeterminations

   Table 1a.--National Adjusted Operating Standardized Amounts, Labor/  
                                Nonlabor                                
------------------------------------------------------------------------
           Large urban areas                      Other areas           
------------------------------------------------------------------------
    Labor-related     Nonlabor-related   Labor-related  Nonlabor-related
------------------------------------------------------------------------
$2,707.19...........         $1,084.39       $2,664.33         $1,067.23
------------------------------------------------------------------------


                   Table 1b.--Regional Adjusted Operating Standardized Amounts, Labor/Nonlabor                  
----------------------------------------------------------------------------------------------------------------
                                           Large Urban               Other Urban                  Rural         
                                   -----------------------------------------------------------------------------
                                       Labor-      Nonlabor      Labor-     Nonlabor-      Labor-     Nonlabor- 
                                      related      related      related      related      related      related  
----------------------------------------------------------------------------------------------------------------
1. New England (CT, ME, MA, NH,                                                                                 
 RI, VT)..........................     2,838.28     1,136.90     2,793.33     1,118.90     2,793.33     1,118.90
2. Middle Atlantic (PA, NJ, NY)...     2,590.32     1,037.58     2,549.32     1,021.16     2,549.32     1,021.16
3. South Atlantic (DE, DC, FL, GA,                                                                              
 MD, NC, SC, VA, WV)..............     2,652.11     1,062.33     2,610.13     1,045.51     2,610.13     1,045.51
4. East North Central (IL, IN, MI                                                                               
 OH, WI)..........................     2,889.93     1,157.60     2,844.18     1,139.26     2,844.18     1,139.26
5. East South Central (AL, KY, MS,                                                                              
 TN)..............................     2,506.18     1,003.88     2,466.50       987.98     2,466.50       987.98
6. West North Central (IA, KS, MN,                                                                              
 MO, NE, ND, SD)..................     2,708.96     1,085.10     2,666.07     1,067.92     2,666.07     1,067.92
7. West South Central (AR, LA, OK,                                                                              
 TX)..............................     2,636.66     1,056.14     2,594.92     1,039.42     2,594.92     1,039.42
8. Mountain (AZ, CO, ID, MT, NV,                                                                                
 NM, UT, WY)......................     2,619.72     1,049.35     2,578.25     1,032.74     2,578.25     1,032.74
9. Pacific (AK, CA, HI, OR, WA)...     2,678.36     1,072.84     2,635.96     1,055.86     2,635.96     1,055.86
----------------------------------------------------------------------------------------------------------------



               Table 1c.--Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor               
----------------------------------------------------------------------------------------------------------------
                                                        Large Urban Areas                  Other Areas          
                                                 ---------------------------------------------------------------
                                                                     Nonlabor-                       Nonlabor-  
                                                  Labor-related      related      Labor-related      related    
----------------------------------------------------------------------------------------------------------------
National........................................       $2,680.76       $1,073.81       $2,680.76       $1,073.81
Puerto Rico.....................................        2,415.12          502.29        2,376.88         494.33 
----------------------------------------------------------------------------------------------------------------



            Table 1d.--Capital Standard Federal Payment Rate            
------------------------------------------------------------------------
                                                                 RATE   
------------------------------------------------------------------------
National.....................................................    $353.87
Puerto Rico..................................................    $272.20
------------------------------------------------------------------------



                                     Table 3C.--Hospital Case Mix Indexes for Discharges Occurring in Federal Fiscal Year 1993; Hospital Average Hourly Wage for Federal Fiscal Year 1995 Wage Index                                    
                                                                                                              Page 1 of 16                                                                                                              
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
010001...........     01.3420        15.05     010095...........     01.0740        09.76     020027...........     00.9447    ............  030095...........     01.1907    ............  040091..........     01.3688        19.00   
010004...........     01.0476        10.14     010096...........     01.0307    ............  030001...........     01.3709        18.78     040001...........     01.1219        11.01     040093..........     00.9667        10.76   
010005...........     01.1175        13.17     010097...........     00.9013        11.13     030002...........     01.7652        19.83     040002...........     01.1970        13.30     040095..........     00.8495        10.35   
010006...........     01.3879        13.78     010098...........     00.9474        12.29     030003...........     01.3771        19.56     040003...........     00.9783        12.33     040100..........     01.1202        13.79   
010007...........     01.0771        11.93     010099...........     01.0412        11.87     030004...........     01.0291        11.84     040004...........     01.2751        15.36     040105..........     01.0229        11.32   
010008...........     00.9887        09.72     010100...........     01.2293        13.10     030006...........     01.5829        16.65     040005...........     00.9361        10.85     040106..........     01.1842        09.69   
010009...........     01.0696        14.73     010101...........     01.0924        13.51     030007...........     01.2297        14.86     040007...........     01.6608        16.45     040107..........     01.1705        15.19   
010010...........     01.1143        11.37     010102...........     00.8939        11.19     030008...........     01.9721        19.55     040008...........     01.0900        10.26     040109..........     01.0816        11.14   
010011...........     01.4690        17.34     010103...........     01.6296        14.09     030009...........     01.2268        14.70     040010...........     01.2161        12.51     040114..........     01.7750        15.03   
010012...........     01.3013        13.75     010104...........     01.5973        14.71     030010...........     01.3951        17.87     040011...........     00.9919        10.61     040116..........     01.3746        17.22   
010015...........     01.0334        12.39     010108...........     01.2484        12.94     030011...........     01.4456        18.72     040013...........     00.9019        10.97     040118..........     01.1411        12.62   
010016...........     01.1878        12.69     010109...........     01.0713        12.62     030012...........     01.2298        15.25     040014...........     01.2065        14.27     040119..........     01.1532        12.83   
010018...........     00.8714        14.94     010110...........     00.9980        10.56     030013...........     01.2248        16.12     040015...........     01.1017        11.30     040124..........     01.1966        12.65   
010019...........     01.2433        12.48     010112...........     01.1608        12.89     030014...........     01.4715        18.10     040016...........     01.6758        14.44     040126..........     00.9911        10.09   
010021...........     01.2801        13.82     010113...........     01.6215        12.67     030016...........     01.3387        21.17     040017...........     01.3327        11.19     050002..........     01.3608        24.36   
010022...........     00.9848        14.35     010114...........     01.2590        14.30     030017...........     01.4178        16.52     040018...........     01.2814        15.40     050006..........     01.3545        18.51   
010023...........     01.3947        14.63     010115...........     00.8736        13.94     030018...........     01.7499        19.61     040019...........     01.1968        11.70     050007..........     01.5316        24.12   
010024...........     01.3212        14.19     010117...........     00.9040        17.92     030019...........     01.2389        19.51     040020...........     01.4919        12.24     050008..........     01.5692        24.13   
010025...........     01.2142        11.22     010118...........     01.2169        14.55     030022...........     01.5013        17.29     040021...........     01.2687        13.19     050009..........     01.5115        22.22   
010027...........     00.8693        12.83     010119...........     01.0976        14.41     030023...........     01.2798        15.17     040022...........     01.8431        12.85     050013..........     01.9538        21.58   
010029...........     01.4511        13.86     010120...........     00.9957        13.31     030024...........     01.6683        18.15     040024...........     01.0205        10.84     050014..........     01.0954        19.15   
010031...........     01.2743        12.35     010121...........     01.1816        12.93     030025...........     01.1226        13.58     040025...........     00.9309        10.28     050015..........     01.3226        20.74   
010032...........     00.9122        13.01     010122...........     00.8442    ............  030027...........     01.1406        14.27     040026...........     01.5721        14.46     050016..........     01.1459        19.69   
010033...........     01.9025        17.10     010123...........     01.2703        15.56     030030...........     01.6899        21.32     040027...........     01.3041        11.24     050017..........     02.0516        22.91   
010034...........     01.0487        12.98     010124...........     01.2775        14.78     030033...........     01.2468        14.70     040028...........     01.0211        08.78     050018..........     01.3060        16.74   
010035...........     01.1925        13.41     010125...........     01.0384        11.83     030034...........     01.1108        15.82     040029...........     01.1563        13.43     050019..........     00.8715    ............
010036...........     01.1288        14.33     010126...........     01.0658        11.19     030035...........     01.2902        18.75     040030...........     00.9032        11.23     050021..........     01.3029        19.57   
010038...........     01.2377        14.62     010127...........     01.5502        15.59     030036...........     01.1810        17.67     040031...........     00.8130        10.74     050022..........     01.4834        21.23   
010039...........     01.6339        14.65     010128...........     00.9523        11.41     030037...........     01.9369        20.11     040032...........     00.9855        09.75     050024..........     01.4206        22.43   
010040...........     01.4400        16.28     010129...........     01.0844        10.44     030038...........     01.5192        18.07     040035...........     00.9250        09.29     050025..........     01.6169        21.40   
010043...........     01.0176        12.49     010130...........     01.0868        13.73     030040...........     01.0077        16.22     040036...........     01.3628        14.75     050026..........     01.4947        20.53   
010044...........     01.0350        14.66     010131...........     01.2385        16.21     030041...........     00.9257        16.66     040037...........     01.1689        10.55     050028..........     01.3246        15.49   
010045...........     01.1157        11.53     010134...........     00.8763        10.46     030043...........     01.1903        19.23     040039...........     01.2340        11.05     050029..........     01.2621        24.70   
010046...........     01.3949        12.45     010136...........     00.8956        13.02     030044...........     01.0476        13.44     040040...........     01.1168        14.85     050030..........     01.3462        17.25   
010047...........     00.9809        08.62     010137...........     01.2463        14.66     030046...........     00.9874        17.75     040041...........     01.3478        12.64     050032..........     01.2648        20.61   
010049...........     01.0941        13.78     010138...........     00.9621        11.08     030047...........     00.9435        16.97     040042...........     01.2495        12.86     050033..........     01.4525        24.11   
010050...........     00.9541        10.19     010139...........     01.6340        19.91     030049...........     00.9657        14.22     040044...........     00.9053        09.86     050036..........     01.7641        21.61   
010051...........     00.8938        07.25     010143...........     01.1684        14.49     030054...........     00.8935        12.19     040045...........     01.0369        13.67     050038..........     01.4514        27.19   
010052...........     00.9459        12.78     010144...........     01.3170        15.09     030055...........     01.2526        15.39     040047...........     00.9986        12.83     050039..........     01.6270        20.18   
010053...........     01.0696        12.36     010145...........     01.2440        16.15     030059...........     01.3014        18.17     040048...........     01.2044        12.62     050040..........     01.2672        22.53   
010054...........     01.1993        13.64     010146...........     01.1200        15.02     030060...........     01.0476        13.68     040050...........     01.1348        10.29     050041..........     01.2871        23.30   
010055...........     01.3844        14.09     010148...........     00.9561        11.17     030061...........     01.5819        16.15     040051...........     01.0615        11.86     050042..........     01.2658        17.72   
010056...........     01.3818        16.34     010149...........     01.4268        15.65     030062...........     01.3433        14.98     040053...........     01.1476        13.70     050043..........     01.4999        25.99   
010058...........     01.0025        07.49     010150...........     01.0421        13.50     030064...........     01.5451        16.64     040054...........     01.0561        10.02     050045..........     01.2470        17.59   
010059...........     01.0580        13.64     010152...........     01.3659        14.13     030065...........     01.5203        18.30     040055...........     01.3698        13.50     050046..........     01.1624        21.80   
010061...........     01.0054        14.30     010153...........     02.7788        18.16     030067...........     01.0966        14.05     040058...........     01.1385        12.39     050047..........     01.7578        27.86   
010062...........     00.9869        10.43     010155...........     01.0043        09.32     030068...........     00.9690        13.73     040060...........     00.9459        12.62     050051..........     01.1101        15.76   
010064...........     01.8446        14.55     020001...........     01.4478        24.33     030069...........     01.3048        18.16     040062...........     01.5107        14.60     050052..........     01.8867    ............
010065...........     01.4383        13.58     020002...........     00.9554        21.71     030071...........     00.8846    ............  040063...........     01.5592        14.49     050054..........     01.2707        17.87   
010066...........     00.9167        08.90     020004...........     01.0549        23.25     030072...........     00.8577    ............  040064...........     00.9000        09.17     050055..........     01.2716        25.35   
010068...........     01.2901        17.41     020005...........     00.8748        22.74     030073...........     01.1491    ............  040066...........     01.1047        12.97     050056..........     01.4274        21.51   
010069...........     01.1443        12.42     020006...........     01.0673        22.50     030074...........     01.0145    ............  040067...........     01.0706        10.71     050057..........     01.4671        18.64   
010072...........     01.1737        11.43     020007...........     00.9203        18.20     030075...........     00.9415    ............  040069...........     01.0147        11.34     050058..........     01.4160        21.51   
010073...........     00.9141        08.91     020008...........     01.0488        24.76     030076...........     00.9714    ............  040070...........     00.9926        10.66     050060..........     01.4775        17.76   
010078...........     01.2195        14.43     020009...........     01.0479        19.58     030077...........     00.9788    ............  040071...........     01.3838        15.71     050061..........     01.2809        19.57   
010079...........     01.1299        11.88     020010...........     01.0530        26.51     030078...........     01.0573    ............  040072...........     01.1024        12.66     050063..........     01.4005        19.94   
010080...........     00.9871        11.70     020011...........     01.0005        21.11     030079...........     00.6048    ............  040074...........     01.2110        13.36     050065..........     01.5209        22.66   
010081...........     01.8425        16.28     020012...........     01.2989        22.42     030080...........     01.6490        18.80     040075...........     01.1243        10.83     050066..........     01.2423        22.96   
010083...........     01.0472        15.00     020013...........     00.9887        28.18     030083...........     01.2864        19.53     040076...........     01.0898        12.49     050067..........     01.3622        21.76   
010084...........     01.3987        16.55     020014...........     01.0902        23.36     030084...........     01.1305    ............  040077...........     00.9152        09.81     050068..........     01.0968        16.17   
010085...........     01.2018        14.98     020017...........     01.3908        22.51     030085...........     01.4462        17.81     040078...........     01.2594        14.24     050069..........     01.6106        22.39   
010086...........     01.0069        11.41     020018...........     00.9955    ............  030086...........     01.1425        17.91     040080...........     01.0441        14.19     050070..........     01.2341        27.81   
010087...........     01.8189        13.54     020019...........     00.8069    ............  030087...........     01.6225        16.84     040081...........     00.8897        09.28     050071..........     01.2940        27.45   
010089...........     01.1427        14.71     020020...........     00.8059    ............  030088...........     01.3583        17.48     040082...........     01.2362        14.75     050072..........     01.3291        27.78   
010090...........     01.5674        15.24     020021...........     00.7674    ............  030089...........     01.4020        17.92     040084...........     01.0794        12.59     050073..........     01.2413        27.89   
010091...........     00.9618        11.17     020024...........     01.0985        21.11     030092...........     01.4797        16.73     040085...........     01.2333        13.67     050074..........     01.1081        26.44   
010092...........     01.3537        14.56     020025...........     00.9424        21.76     030093...........     01.3608        16.81     040088...........     01.3005        13.30     050075..........     01.3725        27.54   
010094...........     01.1717        16.12     020026...........     01.3206    ............  030094...........     01.2937        17.50     040090...........     00.9091        11.44     050076..........     01.5761        28.16   
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
050077...........     01.5888        21.33     050172...........     01.3184        19.50     050278...........     01.4113        20.78     050391...........     01.3501        18.94     050503..........     01.2838        21.76   
050078...........     01.3429        23.69     050173...........     01.2800        21.21     050279...........     01.2214        18.52     050392...........     00.9938        14.75     050506..........     01.4404        24.03   
050079...........     01.4659        29.24     050174...........     01.6603        24.97     050280...........     01.5529        20.37     050393...........     01.4112        23.29     050510..........     01.3259        27.75   
050080...........     01.3017        23.23     050175...........     01.3332        22.08     050281...........     01.4099        19.38     050394...........     01.4900        19.55     050512..........     01.3095        28.18   
050081...........     01.6255        19.94     050177...........     01.2291        17.98     050282...........     01.3130        21.41     050396...........     01.5505        22.84     050515..........     01.3002        28.20   
050082...........     01.5067        22.06     050179...........     01.2486        17.01     050283...........     01.2409        25.87     050397...........     01.0685        18.46     050516..........     01.6453        22.41   
050084...........     01.5688        21.41     050180...........     01.5089        28.43     050286...........     00.9236        20.24     050401...........     01.2124        16.24     050517..........     01.2752        19.39   
050088...........     01.1161        22.27     050181...........     01.2434        22.67     050289...........     01.7583        25.03     050404...........     01.2031        15.52     050522..........     01.3951        25.98   
050089...........     01.3890        17.98     050183...........     01.2199        18.72     050290...........     01.6125        24.11     050406...........     01.1134        14.52     050523..........     01.2343        24.38   
050090...........     01.2810        20.35     050186...........     01.5126        22.72     050291...........     01.2418        22.82     050407...........     01.2727        22.69     050526..........     01.3692        23.17   
050091...........     01.2021        24.16     050188...........     01.4071        23.46     050292...........     01.0899        20.59     050410...........     01.0230        24.20     050528..........     01.2460        15.17   
050092...........     00.9137        17.43     050189...........     00.9779        19.77     050293...........     01.1454        19.45     050411...........     01.3083        27.43     050531..........     01.3634        20.08   
050093...........     01.5318        19.94     050191...........     01.4374        22.19     050295...........     01.4479        19.53     050414...........     01.2959        24.31     050534..........     01.4949        22.13   
050095...........     01.2160        29.20     050192...........     01.2147        18.02     050296...........     01.2165        23.31     050417...........     01.2310        14.24     050535..........     01.3594        22.44   
050096...........     01.2536        20.89     050193...........     01.3657        20.72     050298...........     01.1893        18.06     050418...........     01.3350        22.55     050537..........     01.3233        20.44   
050097...........     01.4638        16.38     050194...........     01.2171        23.28     050299...........     01.2957        22.08     050419...........     01.3458        16.62     050539..........     01.1707        21.36   
050099...........     01.5707        21.78     050195...........     01.5808        28.26     050300...........     01.3000        17.35     050420...........     01.4446        21.82     050541..........     01.5404        27.82   
050100...........     01.8059        23.83     050196...........     01.3418        17.36     050301...........     01.3553        16.92     050421...........     01.4212        22.08     050542..........     01.1191        13.71   
050101...........     01.3948        22.78     050197...........     01.9405        25.14     050302...........     01.3664        23.01     050423...........     00.9847        16.65     050543..........     00.9021        21.03   
050102...........     01.3802        19.71     050199...........     01.3409        18.65     050305...........     01.5587        27.33     050424...........     01.7253    ............  050545..........     00.8636        20.90   
050103...........     01.6487        19.35     050204...........     01.3590        21.05     050307...........     01.4328        16.76     050425...........     01.2768        25.74     050546..........     00.8588        21.22   
050104...........     01.3975        20.54     050205...........     01.3860        17.92     050308...........     01.5305        30.21     050426...........     01.3363        22.67     050547..........     00.9978        22.15   
050107...........     01.2997        19.86     050207...........     01.2834        18.15     050309...........     01.3553        17.39     050427...........     00.8642        21.11     050549..........     01.7500        24.00   
050108...........     01.4869        22.51     050208...........     01.2820        23.14     050310...........     01.2482        19.13     050430...........     01.0378        14.73     050550..........     02.3752        21.19   
050109...........     02.1024        23.09     050211...........     01.3048        26.33     050312...........     01.8372        20.46     050431...........     01.1481        21.80     050551..........     01.3686        22.23   
050110...........     01.2300        18.29     050213...........     01.3361        18.97     050313...........     01.1905        20.49     050432...........     01.5702        21.41     050552..........     01.2522        19.17   
050111...........     01.3371        18.50     050214...........     01.5530        20.85     050315...........     01.3130        20.06     050433...........     01.2087        13.93     050557..........     01.5951        20.11   
050112...........     01.4563        22.04     050215...........     01.5201        24.70     050317...........     01.2464        22.00     050434...........     01.0841        18.98     050559..........     01.3602        23.50   
050113...........     01.1277        26.39     050217...........     01.2348        15.90     050320...........     01.3742        27.40     050435...........     01.2208        16.54     050560..........     01.4461        22.18   
050114...........     01.4083        27.65     050219...........     01.3050        19.43     050324...........     01.8379        22.28     050436...........     01.0234        15.83     050561..........     01.1552        27.90   
050115...........     01.5724        20.93     050220...........     01.6373        18.06     050325...........     01.2822        20.26     050438...........     01.5703        22.52     050564..........     01.2896        26.82   
050116...........     01.5110        21.77     050222...........     01.5416        19.26     050327...........     01.5963        20.41     050440...........     01.3051        17.95     050565..........     01.2043        19.30   
050117...........     01.2909        18.00     050224...........     01.5769        20.63     050328...........     01.4331        25.87     050441...........     01.8336        25.65     050566..........     00.9537        15.29   
050118...........     01.2111        22.47     050225...........     01.3867        19.07     050329...........     01.2272        20.16     050443...........     00.9414        11.92     050567..........     01.6119        17.35   
050121...........     01.4281        18.50     050226...........     01.3703        19.25     050331...........     01.3813        28.94     050444...........     01.2662        19.12     050568..........     01.3214        19.87   
050122...........     01.5309        22.28     050228...........     01.3574        28.38     050333...........     00.9543        17.59     050446...........     00.9121        17.49     050569..........     01.2319        21.62   
050124...........     01.1949        22.67     050230...........     01.3971        23.56     050334...........     01.5605        27.46     050447...........     01.0660        19.33     050570..........     01.7230        24.72   
050125...........     01.3559        23.19     050231...........     01.4915        21.30     050335...........     01.2485        18.97     050448...........     01.1675        21.09     050571..........     01.4640        22.91   
050126...........     01.3906        22.84     050232...........     01.8417        24.76     050336...........     01.3208        18.34     050449...........     01.3221        20.80     050573..........     01.6776        22.60   
050127...........     01.3033        22.13     050233...........     01.2555        26.78     050337...........     01.3970        24.13     050451...........     00.8860        16.91     050575..........     01.2563        21.28   
050128...........     01.5335        20.01     050234...........     01.2753        18.69     050342...........     01.4351        15.53     050454...........     01.8239        24.08     050577..........     01.2346        20.65   
050129...........     01.4961        20.29     050235...........     01.4825        24.01     050343...........     01.0576        15.51     050455...........     01.8556        21.40     050578..........     01.3664        23.75   
050131...........     01.2653        23.99     050236...........     01.5336        22.42     050345...........     01.4979        19.74     050456...........     01.3067        22.43     050579..........     01.3955        24.73   
050132...........     01.3960        21.23     050238...........     01.4985        23.50     050348...........     01.5558        24.59     050457...........     01.9297        27.09     050580..........     01.4070        21.12   
050133...........     01.3169        19.07     050239...........     01.4936        21.81     050349...........     00.9553        14.35     050458...........     00.8608        22.37     050581..........     01.4767        22.03   
050135...........     01.2049        24.37     050240...........     01.4862        25.19     050350...........     01.3982        21.96     050459...........     01.2485        29.05     050583..........     01.6915        20.33   
050136...........     01.3894        21.51     050241...........     01.3108        27.24     050351...........     01.5038        26.10     050464...........     01.8722        21.87     050584..........     01.3064        20.35   
050137...........     01.2685        28.56     050242...........     01.4019        25.08     050352...........     01.3180        21.27     050468...........     01.4071        13.23     050585..........     01.3335        25.78   
050138...........     01.7806        29.95     050243...........     01.5391        21.44     050353...........     01.5294        21.82     050469...........     01.1161        17.38     050586..........     01.3292        22.31   
050139...........     01.3319        28.23     050245...........     01.4078        23.48     050355...........     00.9418        12.78     050470...........     01.1282        16.91     050587..........     01.2915        19.72   
050140...........     01.3405        28.60     050248...........     01.1352        22.92     050357...........     01.9560        21.24     050471...........     01.7664        23.28     050588..........     01.2571        26.65   
050144...........     01.5703        21.85     050251...........     01.1011        15.38     050359...........     01.0668        18.20     050476...........     01.2760        14.66     050589..........     01.3244        22.33   
050145...........     01.3480        23.97     050253...........     00.9026        14.33     050360...........     01.4403        27.20     050477...........     01.4080        24.42     050590..........     01.2877        20.82   
050146...........     01.3134    ............  050254...........     01.1834        18.88     050363...........     02.0568        20.97     050478...........     01.0122        20.41     050591..........     01.2159        19.81   
050147...........     00.6839        16.46     050256...........     01.7804        20.44     050366...........     01.3064        18.50     050481...........     01.4379        23.28     050592..........     01.2442        19.32   
050148...........     01.0960        14.81     050257...........     01.0788        15.23     050367...........     01.2722        24.59     050482...........     00.9607        14.95     050593..........     01.4496        24.80   
050149...........     01.3550        21.03     050258...........     01.3469        20.82     050369...........     01.2917        22.10     050483...........     01.1758        19.39     050594..........     02.0996        23.13   
050150...........     01.3002        21.08     050260...........     00.9852        18.54     050373...........     01.3104        22.71     050485...........     01.6348        21.08     050597..........     01.2906        22.04   
050152...........     01.3969        24.04     050261...........     01.1831        16.58     050376...........     01.3833        23.30     050486...........     01.3887        22.96     050598..........     01.4691        27.45   
050153...........     01.6374        26.51     050262...........     01.7785        24.23     050377...........     00.8593        15.28     050488...........     01.3346        24.28     050599..........     01.6386        16.11   
050154...........     01.3031        24.09     050263...........     01.3131        23.85     050378...........     01.0643        24.65     050489...........     01.0503        23.76     050601..........     01.3012        27.93   
050155...........     01.1490        22.21     050264...........     01.4286        20.69     050379...........     01.1506        16.12     050491...........     01.3654        22.42     050603..........     01.4450        20.02   
050158...........     01.5261        27.23     050267...........     01.5610        23.58     050380...........     01.6344        25.52     050492...........     01.1875        19.19     050604..........     01.4080        26.67   
050159...........     01.3367        19.16     050270...........     01.3528        21.37     050382...........     01.4210        21.49     050494...........     01.0804        21.35     050607..........     01.2383        19.43   
050167...........     01.3826        21.03     050272...........     01.3906        17.78     050385...........     01.3893        23.35     050496...........     01.7873        27.58     050608..........     01.1536        16.21   
050168...........     01.5785        22.94     050274...........     01.1350        20.00     050387...........     00.9157        12.76     050497...........     00.9525        11.97     050609..........     01.3281        29.05   
050169...........     01.5337        22.37     050276...........     01.2419        27.73     050388...........     00.8750        15.42     050498...........     01.3025        20.21     050613..........     01.0145        22.54   
050170...........     01.4515        20.26     050277...........     01.4520        21.98     050390...........     01.3121        20.66     050502...........     01.6475        21.63     050615..........     01.4462        21.07   
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                                                                                                              Page 3 of 16                                                                                                              
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
050616...........     01.2668        20.14     060018...........     01.2478        14.35     070018...........     01.3461        25.96     100044...........     01.4385        17.59     100129..........     01.3576        17.02   
050618...........     01.2205        15.89     060020...........     01.5148        13.63     070019...........     01.2546        21.49     100045...........     01.4586        14.39     100130..........     01.1735        17.79   
050619...........     01.3454        19.03     060022...........     01.6489        17.08     070020...........     01.4090        22.14     100046...........     01.3491        16.46     100131..........     01.3011        18.69   
050622...........     01.2594        21.36     060023...........     01.4618        16.23     070021...........     01.1805        22.73     100047...........     01.7883        16.54     100132..........     01.4678        14.76   
050623...........     01.2415        21.16     060024...........     01.6545        22.87     070022...........     01.6425        22.82     100048...........     00.9941        11.41     100135..........     01.4981        14.49   
050624...........     01.2593        23.39     060026...........     01.4360        18.06     070023...........     01.2170        20.41     100049...........     01.2745        16.51     100137..........     01.2378        15.05   
050625...........     01.5187        22.82     060027...........     01.4463        18.37     070024...........     01.3190        19.55     100050...........     01.1777        14.96     100138..........     00.9841        10.25   
050630...........     01.2840        23.63     060028...........     01.3973        18.91     070025...........     01.6812        22.92     100051...........     01.2637        14.91     100139..........     01.0354        16.00   
050633...........     01.3224        20.24     060029...........     00.9745        13.15     070026...........     01.1737        22.90     100052...........     01.4135        14.15     100140..........     01.1950        16.26   
050635...........     01.3005        27.91     060030...........     01.3474        16.34     070027...........     01.2102        22.98     100053...........     01.3040        17.73     100142..........     01.1735        15.12   
050636...........     01.3914        21.83     060031...........     01.5041        16.92     070028...........     01.4587        21.83     100054...........     01.3343        16.83     100143..........     02.0179    ............
050637...........     01.1286        21.41     060032...........     01.4297        19.33     070029...........     01.2280        19.44     100055...........     01.3835        15.30     100144..........     01.2923        12.10   
050638...........     00.9629        24.33     060033...........     01.0659        11.58     070030...........     01.2106        22.70     100056...........     01.4682        21.01     100145..........     01.3601        13.45   
050641...........     01.1445        12.65     060034...........     01.4734        17.45     070031...........     01.2886        18.49     100057...........     01.3224        15.19     100146..........     01.1054        15.35   
050643...........     00.9463    ............  060036...........     01.1802        13.52     070033...........     01.2662        22.64     100059...........     01.6370        16.57     100147..........     01.1178        12.08   
050644...........     00.9876        21.63     060037...........     01.0016        12.14     070034...........     01.3205        23.33     100060...........     01.6849        17.02     100150..........     01.3137        15.58   
050660...........     01.1294    ............  060038...........     01.0138        11.55     070035...........     01.3536        21.55     100061...........     01.5760        20.45     100151..........     01.8123        17.47   
050661...........     00.9004        17.84     060041...........     00.9757        12.12     070036...........     01.2995        25.17     100062...........     01.7345        15.56     100154..........     01.6034        16.55   
050662...........     00.8162        20.98     060042...........     00.9336        13.29     080001...........     01.5955        20.42     100063...........     01.2715        14.64     100156..........     01.1648        16.74   
050663...........     01.1104        20.81     060043...........     01.0173        10.83     080002...........     01.2126        15.45     100067...........     01.4192        14.72     100157..........     01.5925        17.06   
050666...........     00.9587        23.34     060044...........     01.2606        14.53     080003...........     01.3146        18.22     100068...........     01.4448        15.32     100159..........     01.0454        15.40   
050667...........     01.0628        23.63     060046...........     01.0839        14.51     080004...........     01.3343        16.62     100069...........     01.3373        15.97     100160..........     01.2104        16.10   
050668...........     01.1227        23.59     060047...........     00.9059        12.30     080005...........     01.3780        15.58     100070...........     01.4119        16.41     100161..........     01.4468        18.23   
050671...........     01.1408        25.26     060049...........     01.0436        16.46     080006...........     01.2292        14.99     100071...........     01.2555        14.91     100162..........     01.4019        16.66   
050672...........     00.6536        19.59     060050...........     01.2061        12.70     080007...........     01.2443        15.70     100072...........     01.2274        14.14     100165..........     01.2153        16.85   
050674...........     01.1806        26.59     060052...........     01.1046        12.22     090001...........     01.4395        18.92     100073...........     01.7772        18.60     100166..........     01.4564        18.62   
050675...........     01.5233        13.30     060053...........     00.9701        12.72     090002...........     01.1469        16.35     100074...........     01.2353        17.34     100167..........     01.3520        20.21   
050676...........     01.0310        12.91     060054...........     01.2556        14.73     090003...........     01.3337        22.14     100075...........     01.6602        16.96     100168..........     01.3310        17.37   
050677...........     01.3039        29.81     060056...........     00.9390        12.62     090004...........     01.5440        22.25     100076...........     01.4829        18.32     100169..........     01.8247        17.12   
050678...........     01.1010        24.06     060057...........     00.9491        20.55     090005...........     01.2751        20.28     100077...........     01.3344        15.68     100170..........     01.4798        15.72   
050680...........     01.2170        22.47     060058...........     00.9388        10.75     090006...........     01.3492        19.65     100078...........     01.1773        16.18     100172..........     01.3807        13.20   
050682...........     00.9485        10.78     060060...........     01.0545        11.33     090007...........     01.3332        19.75     100079...........     01.1808        14.43     100173..........     01.6413        15.21   
050684...........     01.2065        22.04     060062...........     00.9885        11.79     090008...........     01.5360        23.18     100080...........     01.5561        17.32     100174..........     01.4223        18.01   
050685...........     01.1498        24.19     060063...........     01.1531        10.58     090010...........     00.9704        24.67     100081...........     01.1438        11.05     100175..........     00.9507        15.25   
050686...........     01.3521        27.79     060064...........     01.4240        19.02     090011...........     01.9539        22.57     100082...........     01.5130        16.68     100176..........     01.9273        22.43   
050688...........     01.2100        25.21     060065...........     01.3963        18.91     100001...........     01.4755        16.11     100083...........     01.2907        14.73     100177..........     01.3233        16.58   
050689...........     01.4361        25.57     060066...........     00.9247        10.92     100002...........     01.4477        17.78     100084...........     01.4897        15.78     100179..........     01.6567        17.36   
050690...........     01.3430        27.92     060068...........     01.2113        14.39     100004...........     01.0426        11.37     100085...........     01.3162        18.81     100180..........     01.4305        17.00   
050693...........     01.2805        28.69     060070...........     01.0193        15.33     100005...........     01.1676        10.61     100086...........     01.3967        20.75     100181..........     01.6785        15.78   
050694...........     01.3233        21.34     060071...........     01.2363        14.78     100006...........     01.5872        17.22     100087...........     01.7516        19.08     100183..........     01.3645        17.97   
050695...........     01.2523        25.38     060072...........     00.9067    ............  100007...........     01.8626        17.77     100088...........     01.6031        16.52     100186..........     01.3873        15.09   
050696...........     02.1294        26.65     060073...........     01.0035        15.52     100008...........     01.6722        18.69     100089...........     01.2394        15.39     100187..........     01.3648        20.35   
050697...........     01.1817    ............  060075...........     01.2510        16.15     100009...........     01.5732        19.14     100090...........     01.3507        15.49     100189..........     01.2844        20.80   
050698...........     01.0828        23.39     060076...........     01.4167        14.58     100010...........     01.3922        18.78     100092...........     01.5228        15.54     100191..........     01.3365        17.44   
050699...........     00.8397    ............  060085...........     00.9715        08.89     100012...........     01.5330        17.48     100093...........     01.4605        13.19     100196..........     01.5278        15.84   
050700...........     01.3721    ............  060087...........     01.6124        18.10     100014...........     01.2841        16.40     100098...........     01.2636        16.57     100199..........     01.2095        18.69   
050701...........     01.2544    ............  060088...........     01.0255        13.60     100015...........     01.2998        17.02     100099...........     01.2457        14.53     100200..........     01.3761        21.17   
050702...........     01.2301    ............  060090...........     00.9595        11.72     100017...........     01.6648        15.75     100100...........     01.4537        16.89     100203..........     01.1543        18.05   
050703...........     00.8584    ............  060096...........     01.0163        18.00     100018...........     01.3502        17.76     100102...........     01.0628        15.90     100204..........     01.5521        16.81   
050704...........     01.1767    ............  060100...........     01.3718        20.86     100019...........     01.4523        17.17     100103...........     01.0168        15.39     100206..........     01.3816        21.64   
050705...........     02.8281    ............  060103...........     01.2629        18.66     100020...........     01.3567        17.23     100105...........     01.3999        16.60     100207..........     01.3831        19.04   
050706...........     00.9345    ............  060104...........     01.3353        18.64     100022...........     01.7086        21.32     100106...........     01.0493        13.29     100208..........     01.7426        18.61   
050707...........     00.8718    ............  070001...........     01.7491        21.77     100023...........     01.3279        14.40     100107...........     01.2660        18.22     100209..........     01.5360        19.87   
050708...........     00.8707    ............  070002...........     01.8085        23.72     100024...........     01.3809        19.06     100108...........     01.0548        15.87     100210..........     01.7022        15.54   
060001...........     01.4811        19.15     070003...........     01.1494        21.97     100025...........     01.5786        14.73     100109...........     01.3304        15.27     100211..........     01.2770        17.28   
060003...........     01.2871        17.53     070004...........     01.1568        21.82     100026...........     01.5007        13.18     100110...........     01.4363        16.61     100212..........     01.6217        16.73   
060004...........     01.0753        17.28     070005...........     01.3284        23.96     100027...........     00.8567        11.51     100112...........     00.9782        10.90     100213..........     01.6398        17.36   
060006...........     01.2663        15.07     070006...........     01.3028        25.81     100028...........     01.2753        15.02     100113...........     02.0716        15.79     100217..........     01.1813        17.84   
060007...........     01.2642        12.50     070007...........     01.3876        22.29     100029...........     01.4463        18.08     100114...........     01.4901        17.00     100220..........     01.8037        17.82   
060008...........     01.0108        13.26     070008...........     01.2477        20.66     100030...........     01.2726        16.73     100117...........     01.2942        16.44     100221..........     01.4528        17.64   
060009...........     01.4433        18.59     070009...........     01.2619        21.54     100032...........     01.8944        16.62     100118...........     01.1782        15.44     100222..........     01.2534        17.00   
060010...........     01.5626        18.49     070010...........     01.4558        21.31     100034...........     01.6897        17.25     100121...........     01.2318        12.92     100223..........     01.4309        16.46   
060011...........     01.2311        20.96     070011...........     01.2121        21.19     100035...........     01.5541        15.75     100122...........     01.3611        14.84     100224..........     01.4390        18.78   
060012...........     01.4222        14.56     070012...........     01.1724        22.67     100038...........     01.6487        18.93     100124...........     01.3583        16.19     100225..........     01.3933        19.07   
060013...........     01.3011        16.63     070013...........     01.3356        22.91     100039...........     01.7033        20.12     100125...........     01.1450        15.06     100226..........     01.3664        17.05   
060014...........     01.6988        20.85     070015...........     01.3013        22.09     100040...........     01.6908        16.07     100126...........     01.4583        17.85     100227..........     00.9833        17.48   
060015...........     01.5477        17.63     070016...........     01.2496        22.14     100042...........     01.2013        20.82     100127...........     01.6130        16.84     100228..........     01.2300        18.52   
060016...........     01.1622        10.83     070017...........     01.3625        22.45     100043...........     01.4167        16.03     100128...........     02.1646        18.67     100229..........     01.3900        16.27   
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                                                                                                              Page 4 of 16                                                                                                              
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
100230...........     01.3263        18.30     110030...........     01.2645        16.95     110115...........     01.6528        17.83     120002...........     01.2217        15.87     140010..........     01.3101        18.77   
100231...........     01.7128        17.42     110031...........     01.2900        20.89     110117...........     00.9252        11.64     120003...........     00.9686        20.59     140011..........     01.1180        12.97   
100232...........     01.2625        16.44     110032...........     01.1290        13.22     110118...........     01.0460        10.01     120004...........     01.3006        18.29     140012..........     01.2087        15.31   
100234...........     01.3611        17.94     110033...........     01.4228        18.34     110120...........     01.0429        10.51     120005...........     01.2765        17.03     140013..........     01.5994        14.68   
100235...........     01.3838        15.58     110034...........     01.4418        15.64     110121...........     01.1441        11.37     120006...........     01.1577        21.83     140014..........     01.0948        15.12   
100236...........     01.4843        15.80     110035...........     01.3123        17.12     110122...........     01.2847        14.70     120007...........     01.6191        20.22     140015..........     01.2255        12.74   
100237...........     02.1485        22.04     110036...........     01.6990        18.05     110124...........     01.0975        14.20     120009...........     00.9941        18.32     140016..........     00.9811        10.62   
100238...........     01.3721        17.27     110037...........     01.0668        09.10     110125...........     01.1846        14.60     120010...........     01.7086        20.04     140018..........     01.3993        17.67   
100239...........     01.4964        17.74     110038...........     01.3932        12.03     110127...........     00.9029        09.56     120011...........     01.2355        26.59     140019..........     00.9331        11.96   
100240...........     00.7985        14.20     110039...........     01.3483        16.87     110128...........     01.1445        15.46     120012...........     00.9017        16.54     140024..........     01.0133        12.34   
100241...........     00.9439        11.33     110040...........     01.0515        12.16     110129...........     01.5341        12.01     120014...........     01.2144        19.14     140025..........     01.1030        15.27   
100242...........     01.3147        14.92     110041...........     01.1478        14.35     110130...........     01.0852        09.68     120015...........     00.7376        19.23     140026..........     01.1244        13.42   
100243...........     01.4253        16.65     110042...........     01.0563        13.66     110132...........     01.1502        12.20     120016...........     00.9880        18.55     140027..........     01.2037        14.63   
100244...........     01.3604        16.21     110043...........     01.5753        13.73     110134...........     00.8603        10.02     120018...........     00.9138        17.94     140029..........     01.3194        16.19   
100246...........     01.3451        19.50     110044...........     01.1396        12.22     110135...........     01.1047        13.78     120019...........     01.2284        17.90     140030..........     01.5352        19.79   
100248...........     01.6651        17.89     110045...........     01.1248        19.62     110136...........     01.1607        13.15     120021...........     00.8779        19.14     140031..........     01.0307        11.46   
100249...........     01.2753        16.66     110046...........     01.2166        14.30     110140...........     00.8308        13.51     120022...........     01.6508        20.55     140032..........     01.2858        14.20   
100252...........     01.2002        17.43     110048...........     01.0990        13.14     110141...........     00.8985        09.72     120024...........     01.0150        15.72     140033..........     01.2505        17.22   
100253...........     01.3611        16.33     110049...........     01.0655        14.55     110142...........     01.0156        10.29     120026...........     01.2780        20.12     140034..........     01.1750        14.54   
100254...........     01.6064        17.14     110050...........     01.0814        11.33     110143...........     01.2843        17.24     120027...........     01.3586        19.59     140035..........     01.1563        09.85   
100255...........     01.3252        20.39     110051...........     00.9789        15.64     110144...........     01.1674        12.74     130001...........     01.0148        13.17     140036..........     01.1223        14.22   
100256...........     01.8452        18.38     110052...........     00.9264        14.74     110146...........     00.9386        11.89     130002...........     01.3673        14.35     140037..........     01.0229        11.74   
100258...........     01.7064        17.96     110054...........     01.2709        15.38     110149...........     01.0758        11.01     130003...........     01.2239        16.63     140038..........     01.1479        13.82   
100259...........     01.4448        16.66     110056...........     00.8858        12.63     110150...........     01.2959        14.47     130005...........     01.3647        16.13     140039..........     01.0245        11.51   
100260...........     01.3841        17.08     110059...........     01.3072        12.94     110152...........     01.1655        11.82     130006...........     01.7673        16.81     140040..........     01.2480        13.79   
100262...........     01.3971        18.96     110061...........     01.0258        08.05     110153...........     00.9827        15.92     130007...........     01.5351        16.38     140041..........     01.1585        14.31   
100263...........     01.3560        17.78     110062...........     00.9617        10.81     110154...........     00.9834        11.86     130008...........     00.9305        12.71     140042..........     01.1053        12.72   
100264...........     01.3747        15.50     110063...........     01.0889        11.47     110155...........     01.0504        12.55     130009...........     00.9680        13.18     140043..........     01.2469        15.68   
100265...........     01.3078        16.66     110064...........     01.2603        15.82     110156...........     00.9625        11.50     130010...........     00.9419        15.53     140045..........     01.0057        12.10   
100266...........     01.3057        15.42     110065...........     00.9738        11.47     110157...........     01.1062        15.28     130011...........     01.3629        13.99     140046..........     01.2869        14.33   
100267...........     01.3075        18.95     110066...........     01.3014        15.59     110161...........     01.2406        18.47     130012...........     00.9957        16.65     140047..........     01.2210        11.40   
100268...........     01.2432        21.03     110069...........     01.1733        14.92     110162...........     00.8551    ............  130013...........     01.2686        16.91     140048..........     01.3075        19.73   
100269...........     01.3512        21.42     110070...........     00.9992        11.51     110163...........     01.4226        16.50     130014...........     01.3483        16.35     140049..........     01.3583        17.97   
100270...........     00.8848        11.94     110071...........     01.0202        09.41     110164...........     01.3721        17.39     130015...........     00.8789        11.45     140051..........     01.3491        18.90   
100271...........     01.5981        16.88     110072...........     01.0029        12.37     110165...........     01.2814        15.93     130016...........     00.8534        15.89     140052..........     01.2829        14.67   
100273...........     01.0658        16.49     110073...........     01.2832        12.22     110166...........     01.4919        15.76     130017...........     01.0063        12.65     140053..........     01.7736        16.02   
100275...........     01.3391        20.17     110074...........     01.4458        16.63     110168...........     01.6681        17.53     130018...........     01.5841        19.65     140054..........     01.3068        22.11   
100276...........     01.3211        20.62     110075...........     01.1310        13.64     110169...........     00.7635        17.87     130019...........     01.1681        14.07     140055..........     00.9319        11.82   
100277...........     01.0745        12.90     110076...........     01.3167        16.41     110171...........     01.3480        19.39     130021...........     00.9239        10.63     140058..........     01.1573        14.34   
100278...........     00.8454        16.01     110078...........     01.5683        21.62     110172...........     01.2274        25.10     130022...........     01.1192        15.42     140059..........     01.0737        11.39   
100279...........     01.4267        21.86     110079...........     01.3817        19.60     110174...........     01.0087        12.79     130024...........     01.1025        14.66     140061..........     01.1005        15.08   
100280...........     01.4186    ............  110080...........     01.1821        14.65     110176...........     01.1874        18.24     130025...........     01.1127        15.36     140062..........     01.2328        20.99   
100281...........     01.2150    ............  110082...........     02.0157        23.13     110177...........     01.3898        18.41     130026...........     01.1130        15.59     140063..........     01.3452        19.00   
110001...........     01.2556        15.46     110083...........     01.6420        20.82     110178...........     01.4860        17.06     130027...........     00.8925        16.13     140064..........     01.1804        15.21   
110002...........     01.2481        14.41     110086...........     01.0577        14.40     110179...........     01.1708        19.22     130028...........     01.1858        15.29     140065..........     01.4131        21.65   
110003...........     01.3332        12.00     110087...........     01.2668        17.61     110181...........     01.0329        08.35     130029...........     01.0240        14.26     140066..........     01.1807        13.05   
110004...........     01.2190        15.29     110088...........     00.8756        12.27     110183...........     01.2881        18.73     130030...........     01.0332        12.46     140067..........     01.7219        16.34   
110005...........     01.1837        15.96     110089...........     01.2054        14.65     110184...........     01.0935        18.56     130031...........     01.0192        11.69     140068..........     01.4082        15.54   
110006...........     01.2858        16.38     110091...........     01.3779        19.15     110185...........     01.1329        12.31     130034...........     01.0509        14.13     140069..........     01.0752        13.61   
110007...........     01.4541        15.97     110092...........     01.0729        11.21     110186...........     01.3360        15.53     130035...........     00.9959        13.66     140070..........     01.2902        14.49   
110008...........     01.1034        14.16     110093...........     00.9706        08.54     110187...........     01.1704        16.81     130036...........     01.2485        08.52     140074..........     01.0194        14.20   
110009...........     01.0167        14.23     110094...........     01.0195        11.02     110188...........     01.4346        17.33     130037...........     01.1261        14.67     140075..........     01.4173        18.23   
110010...........     02.0011        20.95     110095...........     01.2492        13.02     110189...........     01.0969        19.00     130043...........     01.0444        13.65     140077..........     01.2251        13.35   
110011...........     01.1821        14.71     110096...........     01.0935        12.76     110190...........     01.0867        12.93     130044...........     00.9725        12.73     140079..........     01.2689        21.34   
110013...........     01.1076        13.50     110097...........     01.1032        16.29     110191...........     01.2378        17.33     130045...........     00.9056        11.43     140080..........     01.7910        17.20   
110014...........     01.1944        11.39     110098...........     01.0389        13.41     110192...........     01.3453        19.60     130048...........     01.1126        10.87     140081..........     01.1106        10.92   
110015...........     01.1391        15.78     110100...........     01.0995        11.22     110193...........     01.1414        16.99     130049...........     01.2253        15.55     140082..........     01.4026        19.71   
110016...........     01.2956        13.84     110101...........     01.0725        09.49     110194...........     00.9753        12.31     130054...........     00.9348        14.10     140083..........     01.2849        15.35   
110017...........     00.9338        10.40     110103...........     00.9623        08.82     110195...........     01.2032        10.66     130056...........     00.9454        11.94     140084..........     01.2094        17.72   
110018...........     01.1783        15.88     110104...........     01.1365        12.86     110198...........     01.3710        21.77     130058...........     00.9163        11.59     140086..........     01.1079        11.72   
110020...........     01.2001        16.49     110105...........     01.1331        13.47     110200...........     01.9920        14.43     130060...........     01.1839    ............  140087..........     01.4134        13.47   
110023...........     01.2550        17.01     110107...........     01.6426        17.03     110201...........     01.3910        14.99     140001...........     01.2552        14.19     140088..........     01.5041        21.90   
110024...........     01.3810        15.58     110108...........     01.0257        10.19     110203...........     00.9973        15.78     140002...........     01.2503        15.22     140089..........     01.2489        13.84   
110025...........     01.3110        15.02     110109...........     01.1223        11.30     110204...........     00.8082        13.88     140003...........     01.0438        13.21     140090..........     01.4535        26.53   
110026...........     01.1592        12.82     110111...........     01.1291        12.36     110205...........     01.0556        11.10     140004...........     00.9869        13.64     140091..........     01.6832        15.96   
110027...........     01.0364        15.43     110112...........     00.9915        15.95     110207...........     01.1408    ............  140005...........     00.9628        09.64     140093..........     01.1907        14.60   
110028...........     01.6330        14.95     110113...........     01.0259        13.67     110208...........     00.9511        12.61     140007...........     01.4628        19.18     140094..........     01.3196        15.67   
110029...........     01.3254        16.69     110114...........     01.0579        14.00     120001...........     01.7407        22.04     140008...........     01.4351        19.25     140095..........     01.2220        17.48   
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
140097...........     00.9791        13.23     140184...........     01.1712        12.95     150007...........     01.2318        16.00     150084...........     01.8372        20.84     160034..........     00.9808        12.48   
140098...........     01.2746        18.87     140185...........     01.4027        14.80     150008...........     01.3200        17.15     150085...........     00.9594        10.27     160035..........     00.9182        10.60   
140100...........     01.4568        18.43     140186...........     01.1937        17.96     150009...........     01.2890        15.82     150086...........     01.2674        14.97     160036..........     01.1018        12.62   
140101...........     01.1878        16.70     140187...........     01.4084        14.44     150010...........     01.1625        16.81     150088...........     01.1619        16.44     160037..........     01.1005        13.20   
140102...........     01.0169        13.47     140188...........     00.9954        10.46     150011...........     01.2281        16.35     150089...........     01.3818        17.35     160039..........     01.0959        13.56   
140103...........     01.3066        15.26     140189...........     01.1429        14.82     150012...........     01.6231        17.37     150090...........     01.3008        18.44     160040..........     01.3003        14.92   
140105...........     01.3383        18.62     140190...........     01.1585        12.46     150013...........     01.1922        12.66     150091...........     01.0805        14.68     160041..........     01.1337        10.87   
140107...........     01.1328        11.58     140191...........     01.4009        22.19     150014...........     01.3802        17.11     150092...........     01.0350        13.77     160043..........     01.0150        11.81   
140108...........     01.3305        19.18     140192...........     01.0739        16.18     150015...........     01.2578        14.80     150094...........     01.0092        15.63     160044..........     01.1775        12.06   
140109...........     01.0517        11.80     140193...........     01.0185        12.72     150017...........     01.7801        16.19     150095...........     01.0820        13.62     160045..........     01.6657        15.84   
140110...........     01.2889        12.82     140197...........     01.3049        18.59     150018...........     01.3147        15.79     150096...........     01.0517        17.17     160046..........     01.0096        11.17   
140112...........     01.0816        12.81     140199...........     01.0385        13.34     150019...........     01.0784        14.92     150097...........     01.0921        15.62     160047..........     01.3667        14.34   
140113...........     01.4240        16.37     140200...........     01.3994        20.01     150020...........     01.0988        11.59     150098...........     01.1536        11.43     160048..........     01.0676        12.01   
140114...........     01.2753        17.35     140202...........     01.2611        18.76     150021...........     01.6021        16.77     150099...........     01.2551        15.68     160049..........     00.9371        11.45   
140115...........     01.1709        16.67     140203...........     01.2234        15.95     150022...........     01.1271        17.24     150100...........     01.7076        17.00     160050..........     01.0221        12.47   
140116...........     01.2906        17.61     140205...........     00.8429        11.22     150023...........     01.4118        15.52     150101...........     01.1150        13.32     160051..........     01.2040        12.25   
140117...........     01.2995        18.69     140206...........     01.0688        17.10     150024...........     01.2090        13.89     150102...........     01.0600        13.18     160052..........     01.0482        12.05   
140118...........     01.6000        20.68     140207...........     01.3987        18.78     150025...........     01.5400        16.21     150103...........     01.0248        13.14     160054..........     01.1041        12.01   
140119...........     01.6599        20.07     140208...........     01.4899        22.91     150026...........     01.1922        16.04     150104...........     01.0818        13.64     160055..........     00.9470        11.27   
140120...........     01.4135        13.85     140209...........     01.6465        14.84     150027...........     01.0151        14.08     150105...........     01.1638        15.14     160056..........     01.0686        12.76   
140121...........     01.5618        08.74     140210...........     01.0426        11.29     150029...........     01.2539        17.48     150106...........     01.0490        17.80     160057..........     01.3496        13.92   
140122...........     01.4707        20.02     140211...........     01.1981        17.90     150030...........     01.0811        15.16     150109...........     01.3696        14.70     160058..........     01.7009        16.69   
140123...........     01.2304        15.10     140212...........     01.1686        20.58     150031...........     01.0977        14.78     150110...........     00.9317        13.42     160059..........     01.2637        16.34   
140124...........     01.1384        19.67     140213...........     01.2004        19.50     150032...........     01.7458        17.72     150111...........     01.0977        12.33     160060..........     01.0314        12.31   
140125...........     01.2373        13.29     140215...........     01.1466        10.48     150033...........     01.5916        18.01     150112...........     01.2074        16.18     160061..........     00.9508        13.54   
140127...........     01.2957        15.43     140217...........     01.2331        19.16     150034...........     01.2852        17.20     150113...........     01.1462        15.45     160062..........     00.9618        10.53   
140128...........     01.0440        15.50     140218...........     00.9554        13.96     150035...........     01.4059        17.05     150114...........     00.9923        12.31     160063..........     01.1404        10.67   
140129...........     01.0657        12.58     140220...........     01.1751        13.57     150036...........     01.0196        16.08     150115...........     01.3254        13.92     160064..........     01.5961        15.57   
140130...........     01.1624        19.25     140223...........     01.5048        22.80     150037...........     01.1976        17.77     150122...........     01.1137        17.31     160065..........     01.0734        13.89   
140132...........     01.5296        17.61     140224...........     01.3260        19.20     150038...........     01.1996        15.85     150123...........     01.0974        12.57     160066..........     01.0808        13.35   
140133...........     01.3520        19.24     140228...........     01.6052        16.14     150039...........     00.9143        12.82     150124...........     01.1228        14.04     160067..........     01.3100        15.77   
140135...........     01.2363        14.27     140229...........     00.9407        09.86     150042...........     01.1860        14.72     150125...........     01.3770        16.98     160068..........     00.9997        13.07   
140137...........     01.0275        12.24     140230...........     00.9519        13.17     150043...........     01.0836        15.00     150126...........     01.5072        18.30     160069..........     01.3779        13.62   
140138...........     01.0230        11.15     140231...........     01.5344        19.84     150044...........     01.2715        14.96     150127...........     01.2073        11.94     160070..........     01.0467        11.90   
140139...........     01.0515        12.47     140233...........     01.7207        14.89     150045...........     01.1628        15.40     150128...........     01.2183        17.22     160072..........     01.1165        11.93   
140140...........     01.1266        11.90     140234...........     01.2036        14.46     150046...........     01.5483        16.63     150129...........     01.2138        18.69     160073..........     01.0381        11.15   
140141...........     00.9828        12.26     140236...........     01.0093        12.56     150047...........     01.6825        17.65     150130...........     01.1189        13.18     160074..........     01.0287        14.05   
140143...........     01.0752        14.62     140239...........     01.5754        16.58     150048...........     01.1687        15.11     150132...........     01.3674        19.15     160075..........     01.0542        13.37   
140144...........     00.9982        13.14     140240...........     01.4164        20.64     150049...........     01.1209        12.76     150133...........     01.1742        14.00     160076..........     01.0078        13.71   
140145...........     01.1474        14.17     140242...........     01.5349        19.78     150050...........     01.1417        13.85     150134...........     01.1513        15.65     160077..........     00.9898        09.72   
140146...........     00.9718        14.22     140245...........     01.0567        12.26     150051...........     01.3401        15.58     150136...........     00.8476        18.39     160079..........     01.3235        13.50   
140147...........     01.1893        12.55     140246...........     01.0445        11.22     150052...........     01.0967        10.31     150137...........     03.5965    ............  160080..........     01.1524        14.09   
140148...........     01.6523        16.06     140250...........     01.2052        19.71     150053...........     01.0011        16.74     150897...........     04.9520    ............  160081..........     01.1063        13.36   
140150...........     01.4667        20.76     140251...........     01.3102        16.26     150054...........     01.0911        12.38     160001...........     01.1851        15.08     160082..........     01.6689        15.84   
140151...........     01.1067        15.02     140252...........     01.3435        20.39     150056...........     01.7030        18.99     160002...........     01.1626        12.09     160083..........     01.5067        16.06   
140152...........     01.0760        21.93     140253...........     01.3680        24.54     150057...........     02.3835        13.49     160003...........     01.0532        11.80     160085..........     01.0135        11.42   
140155...........     01.1692        15.83     140258...........     01.3897        19.92     150058...........     01.6377        18.17     160005...........     01.0842        12.28     160086..........     00.9890        11.97   
140158...........     01.4052        19.65     140271...........     00.9892        12.27     150059...........     01.1917        17.35     160007...........     00.9470        11.53     160088..........     01.1125        12.79   
140159...........     01.2391        14.82     140275...........     01.2742        14.62     150060...........     01.1339        15.24     160008...........     01.1458        13.05     160089..........     01.2182        15.64   
140160...........     01.1842        14.33     140276...........     02.0641        18.92     150061...........     01.1944        12.43     160009...........     01.2457        13.34     160090..........     01.0496        13.51   
140161...........     01.1034        15.66     140280...........     01.2359        15.41     150062...........     01.0306        12.77     160012...........     01.1231        12.70     160091..........     01.0971        11.91   
140162...........     01.6836        15.64     140281...........     01.5894        19.47     150063...........     01.0814        13.91     160013...........     01.2460        13.60     160092..........     00.9912        13.58   
140164...........     01.2776        13.78     140285...........     01.3046        14.03     150064...........     01.0623        15.32     160014...........     00.9484        11.72     160093..........     01.1434        11.33   
140165...........     01.0581        12.51     140286...........     01.1259        15.67     150065...........     01.0835        15.64     160016...........     01.2668        14.26     160094..........     01.1070        14.65   
140166...........     01.2118        14.64     140288...........     01.6350        20.42     150066...........     01.0441        12.68     160018...........     00.8947        11.86     160095..........     01.1374        14.50   
140167...........     01.1182        12.82     140289...........     01.2672        14.49     150067...........     01.0977        13.31     160020...........     01.0939        12.14     160097..........     01.1379        12.11   
140168...........     01.1811        14.17     140290...........     01.3143        19.19     150069...........     01.2295        14.39     160021...........     01.0810        12.04     160098..........     00.9934        12.47   
140170...........     01.0149        10.98     140291...........     01.3049        20.19     150070...........     01.0205        13.03     160023...........     01.0726        12.61     160099..........     01.0448        10.99   
140171...........     00.9273        12.22     140292...........     01.1654        19.76     150071...........     01.1204        12.39     160024...........     01.5235        15.43     160101..........     01.1499        15.34   
140172...........     01.4866        18.33     140294...........     01.1318        14.61     150072...........     01.2197        14.26     160025...........     01.8369        15.04     160102..........     01.4216        15.23   
140173...........     01.0401        13.57     140297...........     01.2311        20.74     150073...........     00.9874        16.29     160026...........     01.1259        13.21     160103..........     00.9621        12.62   
140174...........     01.4906        16.75     140299...........     00.8525        22.50     150074...........     01.5503        19.36     160027...........     01.1481        12.49     160104..........     01.2144        15.40   
140176...........     01.2723        18.62     150001...........     01.0574        15.39     150075...........     01.2023        12.67     160028...........     01.2129        16.44     160106..........     01.0838        12.86   
140177...........     01.5162        15.14     150002...........     01.3527        16.25     150076...........     01.0757        15.74     160029...........     01.5220        15.57     160107..........     01.2059        12.64   
140179...........     01.2505        18.13     150003...........     01.6861        15.65     150077...........     01.2356        14.59     160030...........     01.3263        14.98     160108..........     01.0881        12.98   
140180...........     01.5116        19.11     150004...........     01.4976        18.00     150078...........     01.1053        15.23     160031...........     01.1528        12.06     160109..........     00.9666        09.86   
140181...........     01.2713        17.32     150005...........     01.1840        17.30     150079...........     01.1046        12.83     160032...........     01.1889        13.93     160110..........     01.4793        16.07   
140182...........     01.2655        18.80     150006...........     01.2392        14.67     150082...........     01.4669        16.73     160033...........     01.4596        14.99     160111..........     01.0547        09.59   
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                                                                                                              Page 6 of 16                                                                                                              
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
160112...........     01.4113        13.17     170051...........     00.9991        13.38     170134...........     01.0170        11.44     180049...........     01.3997        13.11     190010..........     01.0796        14.19   
160113...........     01.0156        11.03     170052...........     01.0907        10.94     170137...........     01.1563        15.62     180050...........     01.2711        14.68     190011..........     01.1174        12.19   
160114...........     01.0339        13.68     170053...........     00.8734        10.41     170139...........     01.0590        11.31     180051...........     01.3043        12.81     190013..........     01.2335        13.20   
160115...........     01.0563        12.36     170054...........     01.0950        11.90     170140...........     01.0446        11.09     180053...........     01.2874        13.26     190014..........     01.0883        12.69   
160116...........     01.1445        12.61     170055...........     00.9663        13.55     170142...........     01.3007        15.41     180054...........     01.0039        12.50     190015..........     01.1613        16.30   
160117...........     01.2812        14.07     170056...........     00.9755        10.54     170143...........     01.1380        11.86     180055...........     01.0488        12.65     190017..........     01.2184        12.10   
160118...........     01.0402        12.14     170057...........     01.0704        13.53     170144...........     01.4733        14.19     180056...........     01.0708        15.74     190018..........     01.2776        14.25   
160120...........     00.9891        08.34     170058...........     01.0792        13.89     170145...........     01.1872        13.04     180058...........     00.8952        12.36     190019..........     01.4676        15.85   
160122...........     01.1598        13.40     170060...........     01.0608        11.99     170146...........     01.3467        16.72     180059...........     00.8662        12.17     190020..........     01.1858        14.53   
160123...........     01.0397        13.08     170061...........     01.1210        11.60     170147...........     01.1342        16.47     180063...........     01.0480        09.78     190025..........     01.2411        11.69   
160124...........     01.2475        13.81     170062...........     00.9459        11.58     170148...........     01.4002        17.53     180064...........     01.0967        10.97     190026..........     01.3902        15.09   
160126...........     01.0582        11.21     170063...........     00.9011        10.43     170150...........     01.0802        12.81     180065...........     00.9647        09.28     190027..........     01.4599        15.99   
160129...........     01.0286        12.08     170064...........     00.9869        11.33     170151...........     01.0014        10.84     180066...........     01.2927        16.62     190029..........     01.1633        13.12   
160130...........     01.0393        11.62     170066...........     00.9312        11.45     170152...........     00.9702        12.21     180067...........     01.8619        15.59     190033..........     00.9144        07.96   
160131...........     01.1439        11.67     170067...........     00.8618        12.46     170159...........     00.9310    ............  180069...........     01.0208        14.41     190034..........     01.2090        13.01   
160133...........     01.0977        16.39     170068...........     01.2512        14.20     170160...........     00.9845        10.63     180070...........     01.0470        12.77     190035..........     01.4040        17.47   
160134...........     01.0733        10.74     170069...........     01.0356        12.27     170164...........     00.9554        13.38     180072...........     01.0754        14.38     190036..........     01.6426        17.28   
160135...........     00.9879        10.91     170070...........     00.9728        11.79     170166...........     01.0100        13.17     180075...........     00.9831        10.68     190037..........     01.0946        17.85   
160138...........     01.1152        12.46     170072...........     00.9193        10.58     170168...........     00.9152        08.28     180078...........     01.0778        15.71     190039..........     01.4726        16.44   
160140...........     01.0691        13.24     170073...........     01.1042        12.78     170171...........     01.0976        10.91     180079...........     00.9809        12.61     190040..........     01.4131        17.30   
160141...........     00.8389        10.05     170074...........     01.0966        11.30     170172...........     00.9710    ............  180080...........     01.1033        12.85     190041..........     01.5242        16.54   
160142...........     01.0835        11.71     170075...........     00.8448        09.47     170174...........     00.8374        10.81     180081...........     01.5083        17.66     190043..........     01.0969        10.44   
160143...........     01.0662        12.59     170076...........     01.1225        10.14     170175...........     01.2775        15.08     180085...........     01.3138        16.18     190044..........     01.0850        15.51   
160145...........     01.0361        11.04     170077...........     00.9366        11.31     170176...........     01.4835        18.26     180087...........     01.0826        12.45     190045..........     01.2844        17.63   
160146...........     01.3598        14.81     170079...........     01.0751        09.81     180001...........     01.2077        15.10     180088...........     01.6481        18.61     190046..........     01.5064        16.01   
160147...........     01.1838        13.17     170080...........     01.0304        11.45     180002...........     01.0572        14.95     180092...........     01.1071        13.45     190047..........     01.1529        15.23   
160151...........     01.1023        12.32     170081...........     01.0284        10.30     180004...........     01.1815        12.90     180093...........     01.3857        14.17     190048..........     01.0974        13.35   
160152...........     00.9977        12.73     170082...........     01.0264        10.91     180005...........     01.0416        14.66     180094...........     00.9476        11.59     190049..........     01.0517        13.59   
160153...........     01.6467        16.13     170084...........     00.8766        10.03     180006...........     00.9024        11.80     180095...........     01.1208        11.81     190050..........     01.0986        13.67   
170001...........     01.2086        14.25     170085...........     00.9608        11.57     180007...........     01.4578        13.73     180099...........     01.0748        10.13     190053..........     01.0891        11.08   
170004...........     01.0588        12.68     170086...........     01.7002        17.38     180009...........     01.2762        16.51     180101...........     01.2300        19.85     190054..........     01.4422        12.13   
170006...........     01.1783        13.00     170087...........     01.3951        18.90     180010...........     01.8129        15.34     180102...........     01.4438        12.80     190059..........     00.9497        17.29   
170008...........     01.0815        11.61     170088...........     00.8815        08.09     180011...........     01.2037        14.69     180103...........     01.9626        16.39     190060..........     01.4071        14.77   
170009...........     01.2528        15.16     170089...........     01.0410        13.16     180012...........     01.3631        15.91     180104...........     01.4442        14.71     190064..........     01.5049        16.13   
170010...........     01.2140        14.80     170090...........     01.0886        09.53     180013...........     01.3290        14.46     180105...........     00.9250        15.54     190065..........     01.4841        15.65   
170011...........     01.4358        14.07     170092...........     00.8092        11.32     180014...........     01.5180        17.45     180106...........     00.8972        11.57     190071..........     00.8860        11.25   
170012...........     01.3653        15.44     170093...........     00.9266        11.25     180015...........     01.1322        14.27     180108...........     00.8945        12.67     190075..........     01.4394        19.38   
170013...........     01.3310        14.02     170094...........     01.0829        13.06     180016...........     01.2643        12.65     180115...........     01.0928        13.33     190077..........     00.9570        10.49   
170014...........     01.0483        14.36     170095...........     01.1164        12.20     180017...........     01.3054        12.52     180116...........     01.3606        14.86     190078..........     01.2344        10.47   
170015...........     01.0032        12.48     170097...........     00.9929        12.19     180018...........     01.1545        12.82     180117...........     01.1925        12.53     190079..........     01.2564        14.38   
170016...........     01.5902        18.86     170098...........     01.0691        13.99     180019...........     01.3038        15.60     180118...........     01.0348        10.98     190081..........     00.8959        09.79   
170017...........     01.1823        15.65     170099...........     01.2531        10.05     180020...........     01.0551        14.24     180120...........     00.9608        11.55     190083..........     00.9142        11.31   
170018...........     01.0319        11.85     170100...........     00.9230        13.52     180021...........     01.2226        12.05     180121...........     01.1327        12.12     190086..........     01.2979        13.80   
170019...........     01.1689        14.86     170101...........     00.9627        12.60     180023...........     00.8355        10.45     180122...........     01.0105        12.03     190088..........     01.2466        15.55   
170020...........     01.2793        14.70     170102...........     01.0024        12.59     180024...........     01.3175        14.92     180123...........     01.4820        17.52     190089..........     01.0499        09.57   
170022...........     01.2493        11.71     170103...........     01.2729        14.43     180025...........     01.1234        13.86     180124...........     01.3518        14.80     190090..........     01.2115        14.18   
170023...........     01.3878        15.44     170104...........     01.4209        18.83     180026...........     01.1979        10.47     180125...........     01.0243        14.88     190092..........     01.2831        16.62   
170024...........     01.1864        11.73     170105...........     00.9760        14.10     180027...........     01.1238        12.56     180126...........     01.0141        10.88     190095..........     01.0352        12.77   
170025...........     01.2580        13.63     170106...........     00.9172        12.06     180028...........     01.0343        15.42     180127...........     01.2163        16.76     190098..........     01.4296        16.69   
170026...........     01.0138        14.25     170108...........     00.9109        10.27     180029...........     01.2894        14.35     180128...........     01.1231        14.91     190099..........     01.1067        14.71   
170027...........     01.1819        15.09     170109...........     01.0816        13.77     180030...........     01.1328        11.60     180129...........     01.1161        11.56     190102..........     01.5012        14.99   
170030...........     00.9624        13.61     170110...........     00.9250        12.28     180031...........     00.9982        11.68     180130...........     01.4178        16.58     190103..........     00.8566        09.80   
170031...........     00.9049        11.54     170112...........     00.8893        11.19     180032...........     01.0611        13.47     180132...........     01.2001        15.26     190106..........     01.1654        15.56   
170032...........     01.0373        13.75     170113...........     01.1303        13.45     180033...........     01.0621        10.45     180133...........     01.2501        17.98     190109..........     01.1975        13.91   
170033...........     01.2529        14.38     170114...........     01.0938        12.12     180034...........     00.9942        13.98     180134...........     00.9838        11.34     190110..........     00.9443        10.81   
170034...........     00.9688        13.48     170115...........     01.0470        11.25     180035...........     01.5181        16.43     180136...........     01.3850        15.97     190111..........     01.5566        15.92   
170035...........     00.9068        12.55     170116...........     01.0983        12.83     180036...........     01.1636        16.05     180137...........     01.6298        17.11     190112..........     01.3948        16.41   
170036...........     00.8756        11.84     170117...........     01.0056        11.90     180037...........     01.2600        17.97     180138...........     01.2788        17.78     190113..........     01.3192        16.22   
170037...........     01.1326        14.83     170119...........     00.9699        10.40     180038...........     01.3309        14.34     180139...........     01.0598        13.66     190114..........     00.9444        12.67   
170038...........     00.9529        11.73     170120...........     01.3053        14.99     180040...........     01.9474        18.16     190001...........     00.9125        14.98     190115..........     01.3570        21.52   
170039...........     01.0578        12.85     170121...........     00.9078        10.42     180041...........     01.0430        13.18     190002...........     01.5696        14.50     190116..........     01.2136        12.23   
170040...........     01.4622        16.84     170122...........     01.8175        19.22     180042...........     01.0832        11.66     190003...........     01.4246        17.42     190118..........     01.0406        11.05   
170041...........     01.0467        10.30     170123...........     01.7339        18.31     180043...........     01.1218        13.52     190004...........     01.3225        13.12     190120..........     00.9204        14.66   
170043...........     00.9950        12.13     170124...........     00.9306        12.74     180044...........     01.0438        12.64     190005...........     01.4287        14.98     190122..........     01.2237        13.84   
170044...........     01.1498        14.13     170126...........     00.9080        10.31     180045...........     01.1992        15.05     190006...........     01.1812        13.93     190124..........     01.4596        18.09   
170045...........     01.0100        12.52     170128...........     00.9733        12.98     180046...........     01.0799        16.50     190007...........     01.0342        12.14     190125..........     01.3178        13.88   
170049...........     01.3269        17.19     170131...........     01.1254        10.65     180047...........     01.0479        12.20     190008...........     01.5379        16.58     190127..........     01.4309        16.72   
170050...........     00.8093        10.65     170133...........     01.1814        13.81     180048...........     01.1443        14.45     190009...........     01.3008        13.82     190128..........     00.9169        15.49   
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                                                                                                              Page 7 of 16                                                                                                              
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
190130...........     00.9897        11.19     190227...........     00.7615    ............  210032...........     01.2550        17.31     220066...........     01.3017        18.54     230020..........     01.6500         18.94  
190131...........     01.2764        13.59     200001...........     01.2675        15.09     210033...........     01.1890        16.07     220067...........     01.2488        19.66     230021..........     01.5772         15.00  
190133...........     01.0466        09.24     200002...........     01.0959        15.46     210034...........     01.3009        17.26     220068...........     00.5948        16.26     230022..........     01.3002         17.34  
190134...........     00.9962        09.28     200003...........     01.0709        15.05     210035...........     01.1828        15.47     220070...........     01.1592        18.15     230024..........     01.5266         22.55  
190135...........     01.3864        16.54     200006...........     01.1750        14.04     210036...........     01.2958        16.68     220071...........     01.8244        23.03     230027..........     01.0726         15.36  
190136...........     01.0609        12.04     200007...........     01.0252        15.37     210037...........     01.2408        15.64     220073...........     01.3051        22.39     230029..........     01.5346         20.32  
190138...........     00.7180        19.68     200008...........     01.2642        17.07     210038...........     01.4206        17.33     220074...........     01.2412        20.16     230030..........     01.2303         16.73  
190140...........     00.9940        11.25     200009...........     01.6710        17.96     210039...........     01.1657        16.17     220075...........     01.1906        20.08     230031..........     01.4695         17.50  
190142...........     00.9929        12.54     200012...........     01.1446        14.30     210040...........     01.3354        21.10     220076...........     01.2112        22.33     230032..........     01.7017         17.85  
190144...........     01.1616        13.35     200013...........     01.0867        14.12     210043...........     01.2498        20.01     220077...........     01.6390        20.92     230034..........     01.1727         14.38  
190145...........     00.9367        14.48     200015...........     01.2450        16.17     210044...........     01.2682        19.24     220079...........     01.1467        20.12     230035..........     01.1001         14.84  
190146...........     01.5476        16.85     200016...........     00.9875        14.92     210045...........     01.0188        09.60     220080...........     01.2307        17.63     230036..........     01.2610         17.94  
190147...........     00.9814        12.33     200017...........     01.2677        16.81     210046...........     01.1376        11.93     220081...........     00.9648        19.63     230037..........     01.2239         15.86  
190148...........     00.9413        11.58     200018...........     01.1585        13.98     210048...........     01.1728        20.49     220082...........     01.2081        19.86     230038..........     01.5850         18.78  
190149...........     00.9773        10.49     200019...........     01.2640        16.59     210049...........     01.1489        15.63     220083...........     01.1173        18.96     230040..........     01.2358         15.59  
190151...........     01.0878        11.17     200020...........     01.1411        18.32     210051...........     01.2971        12.97     220084...........     01.2129        21.51     230041..........     01.1836         17.06  
190152...........     01.3442        19.19     200021...........     01.1384        16.13     210054...........     01.2295        19.77     220086...........     01.5645        22.71     230042..........     01.1251         16.23  
190155...........     00.9496        10.29     200023...........     00.8734        15.51     210055...........     01.2336        20.46     220088...........     01.5483        20.65     230043..........     00.5585    ............
190156...........     00.8924        11.29     200024...........     01.1932        17.76     210056...........     01.4385        16.01     220089...........     01.2499        21.71     230046..........     01.8358         26.35  
190158...........     01.2691        20.28     200025...........     01.1765        17.84     210057...........     01.3054        21.17     220090...........     01.1879        20.89     230047..........     01.2912         18.15  
190160...........     01.1628        14.70     200026...........     01.0475        14.44     210058...........     01.7964        17.16     220092...........     01.2699        19.93     230053..........     01.4884         23.31  
190161...........     00.8949        13.49     200027...........     01.2543        15.03     210059...........     01.3202        20.43     220094...........     01.2251        18.24     230054..........     01.7259         17.38  
190162...........     01.2766        15.63     200028...........     00.9586        13.99     210060...........     01.0637        19.25     220095...........     01.1906        18.77     230055..........     01.1914         15.21  
190164...........     01.1569        14.42     200031...........     01.2786        14.27     210061...........     00.8578    ............  220097...........     01.0471        21.81     230056..........     00.9578         13.41  
190165...........     01.0022        10.72     200032...........     01.2741        16.82     220001...........     01.1827        19.03     220098...........     01.2248        17.36     230058..........     01.0944         15.65  
190166...........     01.0303        11.98     200033...........     01.6726        18.43     220002...........     01.4300        16.57     220099...........     01.1587        19.90     230059..........     01.5400         18.06  
190167...........     01.2759        15.31     200034...........     01.2041        17.47     220003...........     01.0791        15.29     220100...........     01.2435        17.81     230060..........     01.2781         15.46  
190170...........     01.0698        12.52     200037...........     01.1788        15.05     220004...........     01.2327        18.34     220101...........     01.3953        22.74     230062..........     01.1739         13.45  
190173...........     01.4218        17.94     200038...........     01.0132        17.44     220006...........     01.3008        21.22     220102...........     00.7873        19.91     230063..........     01.3800         17.52  
190175...........     01.4664    ............  200039...........     01.2823        15.86     220008...........     01.1506        17.96     220104...........     01.2287        22.48     230065..........     01.4772         17.15  
190176...........     01.5220        17.76     200040...........     01.1005        14.71     220010...........     01.2155        19.85     220105...........     01.1442        19.59     230066..........     01.3538         17.72  
190177...........     01.5268        19.77     200041...........     01.1612        16.52     220011...........     01.1546        25.18     220106...........     01.1348        21.34     230068..........     01.3848         18.28  
190178...........     00.9760        10.27     200043...........     00.6566        15.00     220012...........     01.3073        26.56     220107...........     01.1137        17.08     230069..........     01.1102         16.62  
190182...........     00.9989        20.51     200050...........     01.1424        15.39     220015...........     01.1856        18.89     220108...........     01.1463        19.07     230070..........     01.4860         18.10  
190183...........     01.1795        11.91     200051...........     00.9948        17.08     220016...........     01.2527        19.03     220110...........     01.9872        28.62     230071..........     00.6183         19.34  
190184...........     00.9823        12.28     200052...........     01.0217        13.98     220017...........     01.2575        22.56     220111...........     01.1924        18.46     230072..........     01.2490         17.07  
190185...........     01.2328        22.78     200055...........     01.0681        12.93     220019...........     01.0807        18.15     220114...........     01.0005        18.76     230075..........     01.4762         17.70  
190186...........     00.9004        10.73     200062...........     00.9713        14.24     220020...........     01.1744        17.95     220116...........     01.8113        21.93     230076..........     01.2725         19.48  
190187...........     00.8000        14.06     200063...........     01.2064        16.48     220021...........     01.2659        20.16     220118...........     02.0692        23.05     230077..........     02.0043         17.19  
190189...........     00.4826        15.10     200066...........     01.1903        14.22     220023...........     01.1615        16.29     220119...........     01.3216        22.92     230078..........     01.1477         14.20  
190190...........     00.9966        19.64     210001...........     01.3288        16.34     220024...........     01.1729        18.19     220120...........     01.1817        18.85     230080..........     01.1819         16.42  
190191...........     01.2358        18.16     210002...........     01.9936        14.40     220025...........     01.1064        17.74     220123...........     01.0259        22.50     230081..........     01.2169         15.62  
190193...........     01.2713        21.05     210003...........     01.5027        20.58     220026...........     01.3902        18.69     220126...........     01.2271        19.48     230082..........     01.1432         14.70  
190194...........     01.1266        17.88     210004...........     01.3025        23.87     220028...........     01.3945        19.70     220128...........     01.0800        21.45     230085..........     01.1131         16.73  
190196...........     00.8076        16.52     210005...........     01.2264        15.89     220029...........     01.1478        19.55     220131...........     01.1501        18.18     230086..........     01.0034         12.96  
190197...........     01.2713        16.76     210006...........     01.1117        15.52     220030...........     01.0895        18.23     220133...........     00.8252        30.62     230087..........     01.0416         14.20  
190198...........     01.1387        19.92     210007...........     01.5136        17.96     220031...........     01.6518        24.26     220135...........     01.1525        22.28     230089..........     01.3534         21.44  
190199...........     01.3032        12.07     210008...........     01.3465        19.28     220033...........     01.3347        19.44     220153...........     01.0148        16.24     230092..........     01.2721         17.03  
190200...........     01.5343        18.43     210009...........     01.6689        17.62     220035...........     01.2166        18.93     220154...........     00.9255        19.73     230093..........     01.2452         16.96  
190201...........     01.4033        17.53     210010...........     01.2350        14.61     220036...........     01.5874        22.48     220156...........     01.3006        19.03     230095..........     01.2160         15.30  
190202...........     01.4866        18.80     210011...........     01.2708        18.56     220038...........     01.2392        23.00     220162...........     01.4332    ............  230096..........     01.2437         16.62  
190203...........     01.5366        19.83     210012...........     01.5499        19.80     220041...........     01.1767        16.08     220163...........     01.8442        19.92     230097..........     01.5407         17.27  
190204...........     01.4977        19.33     210013...........     01.2868        21.55     220042...........     01.2723        22.59     220171...........     01.6777        20.19     230099..........     01.2429         17.18  
190205...........     01.7938        16.25     210015...........     01.1959        18.69     220045...........     01.2586        19.58     220173...........     00.6310    ............  230100..........     01.2155         14.52  
190206...........     01.4388        22.87     210016...........     01.8110        17.94     220046...........     01.3809        22.07     220897...........     04.7767    ............  230101..........     01.1076         16.09  
190207...........     01.1993        19.24     210017...........     01.1038        13.97     220049...........     01.2332        21.24     230001...........     01.1929        16.33     230103..........     01.0302         14.19  
190208...........     00.8106        09.75     210018...........     01.2813        19.36     220050...........     00.9715        16.18     230002...........     01.2720        18.31     230104..........     01.6323         19.80  
190211...........     00.5662        11.07     210019...........     01.4084        16.07     220051...........     01.1967        19.14     230003...........     01.1335        16.51     230105..........     01.5472         17.41  
190212...........     00.7211        09.55     210022...........     01.4223        18.96     220052...........     01.1996        20.35     230004...........     01.6992        18.57     230106..........     01.0964         16.22  
190213...........     02.8663        10.83     210023...........     01.3443        22.25     220053...........     01.2845        20.22     230005...........     01.3330        16.98     230107..........     00.8899         10.39  
190214...........     00.4476        11.33     210024...........     01.3323        19.78     220055...........     01.1986        17.22     230006...........     01.0594        14.61     230108..........     01.1687         14.76  
190216...........     00.7557    ............  210025...........     01.3092        15.79     220057...........     01.2909        17.18     230007...........     01.1017        16.37     230110..........     01.2701         14.49  
190217...........     00.9124    ............  210026...........     01.3090        18.97     220058...........     01.1254        18.61     230012...........     00.7063        14.26     230111..........     00.9755         14.47  
190218...........     00.9222    ............  210027...........     01.2362        14.83     220060...........     01.1411        22.02     230013...........     01.3023        19.75     230113..........     01.0302         17.37  
190219...........     00.4818    ............  210028...........     01.0907        14.70     220062...........     00.7215        18.20     230014...........     01.2674        13.29     230114..........     00.6567         20.83  
190220...........     01.9951    ............  210029...........     01.3210        17.16     220063...........     01.2126        17.96     230015...........     01.2414        17.21     230115..........     00.9755         14.26  
190222...........     01.7805    ............  210030...........     01.0931        18.05     220064...........     01.1936        19.68     230017...........     01.5027        19.59     230116..........     00.9372         13.79  
190223...........     00.4818    ............  210031...........     01.7294        21.38     220065...........     01.2442        18.79     230019...........     01.4980        20.62     230117..........     01.9255         20.87  
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
230118...........     01.2338        15.27     230227...........     01.4185        18.92     240061...........     01.5618        19.51     240143...........     00.9224        09.58     250043..........     00.8798         11.24  
230119...........     01.2396        19.41     230228...........     01.3352        17.04     240063...........     01.5302        19.77     240144...........     00.9453        14.36     250044..........     01.0316         11.99  
230120...........     01.1168        16.19     230230...........     01.3544        18.21     240064...........     01.1880        17.45     240145...........     01.0421        10.47     250045..........     01.1840         14.86  
230121...........     01.2757        17.52     230232...........     01.0272        15.35     240065...........     00.9609        11.40     240146...........     00.9853        13.78     250047..........     00.9729         09.06  
230122...........     01.2990        17.18     230235...........     00.9284        12.87     240066...........     01.3773        17.16     240148...........     00.9416        10.13     250048..........     01.4259         13.20  
230124...........     01.1103        15.55     230236...........     01.3262        18.37     240069...........     01.1320        16.35     240150...........     00.9284        10.19     250049..........     00.9219         10.78  
230125...........     01.3711        13.28     230237...........     01.1209        18.78     240071...........     01.1271        16.43     240152...........     00.9627        15.64     250050..........     01.2364         11.37  
230128...........     01.3686        19.81     230239...........     01.1761        15.59     240072...........     01.0464        14.61     240153...........     01.0299        13.43     250051..........     00.9057         09.10  
230129...........     01.9341        19.47     230241...........     01.1425        15.34     240073...........     00.9857        11.34     240154...........     00.9839        14.51     250057..........     01.1363         11.55  
230130...........     01.6172        19.75     230244...........     01.4433        19.18     240075...........     01.2239        17.19     240155...........     00.9697        13.26     250058..........     01.1767         11.42  
230132...........     01.4457        19.35     230253...........     01.2208        16.09     240076...........     01.0824        17.80     240157...........     01.0301        13.38     250059..........     01.0248         10.92  
230133...........     01.2087        14.69     230254...........     01.2122        20.53     240077...........     00.9540        12.78     240160...........     01.0309        13.52     250060..........     00.8100         10.54  
230134...........     01.2076        14.24     230257...........     01.0270        16.29     240078...........     01.3948        20.24     240161...........     00.9932        12.77     250061..........     00.8715         09.07  
230135...........     01.2866        17.71     230259...........     01.1927        18.24     240079...........     01.0466        12.37     240162...........     01.0422        14.61     250063..........     00.8593         09.85  
230137...........     01.1486        16.37     230264...........     01.2970        17.31     240080...........     01.4242        19.24     240163...........     00.9293        12.90     250065..........     00.8981         10.30  
230141...........     01.6035        19.10     230269...........     01.2248        19.90     240082...........     01.1763        13.75     240166...........     01.1619        14.56     250066..........     00.9727         09.70  
230142...........     01.1774        23.19     230270...........     01.2471        18.35     240083...........     01.3177        15.80     240169...........     00.9598        13.10     250067..........     00.9676         11.74  
230143...........     01.1740        13.64     230273...........     01.6899        18.16     240084...........     01.3442        15.28     240170...........     01.0625        13.78     250068..........     00.8957         14.73  
230144...........     01.1892        19.77     230275...........     00.8457        15.29     240085...........     00.8891        12.80     240171...........     00.9856        13.00     250069..........     01.2046         12.20  
230145...........     01.1500        14.34     230276...........     00.9638        14.84     240086...........     01.1768        14.11     240172...........     01.1054        14.02     250071..........     01.0549         10.98  
230146...........     01.2775        18.56     230277...........     01.2066        18.72     240087...........     01.0607        13.50     240173...........     00.9813        14.21     250072..........     01.3410         15.41  
230147...........     01.5686        18.29     230278...........     01.9299    ............  240088...........     01.4600        16.70     240176...........     00.9959        11.09     250073..........     00.9807         09.92  
230149...........     01.2338        14.09     240001...........     01.5708        19.57     240089...........     01.0397        14.41     240179...........     00.9847        13.73     250076..........     00.9532         09.20  
230150...........     01.5566        19.01     240002...........     01.6587        18.05     240090...........     01.0952        13.05     240180...........     00.9750        10.20     250077..........     00.9320         10.22  
230151...........     01.3761        18.80     240003...........     01.2291        22.55     240091...........     01.0392        10.83     240184...........     00.9999        10.98     250078..........     01.3952         13.04  
230153...........     01.0546        14.86     240004...........     01.4562        19.95     240093...........     01.2787        15.33     240187...........     01.2830        17.00     250079..........     00.8734         12.23  
230154...........     01.0176        12.31     240005...........     00.9197        12.75     240094...........     00.9699        15.34     240192...........     01.0375        12.40     250081..........     01.2182         14.37  
230155...........     01.1241        12.02     240006...........     01.1567        18.19     240096...........     01.1091        13.37     240193...........     01.1307        14.01     250082..........     01.2190         11.07  
230156...........     01.6575        20.20     240007...........     01.0728        13.16     240097...........     01.1124        16.27     240196...........     00.6068        18.87     250083..........     00.9395         12.40  
230157...........     01.3277        18.63     240008...........     01.0418        13.25     240098...........     01.0163        13.46     240200...........     00.8798        12.53     250084..........     01.1255         13.12  
230159...........     01.3269        17.40     240009...........     01.1476        12.81     240099...........     01.0461        11.38     240205...........     00.9147    ............  250085..........     01.0526         11.04  
230162...........     00.9652        13.97     240010...........     01.9857        18.94     240100...........     01.2725        16.95     240206...........     00.8253    ............  250086..........     00.9820         12.08  
230165...........     01.7368        18.96     240011...........     01.1006        14.62     240101...........     01.2197        15.26     240207...........     01.1892        21.20     250088..........     00.9881         11.97  
230167...........     01.2135        18.27     240013...........     01.2257        15.49     240102...........     01.0627        12.97     240210...........     01.3000        21.21     250089..........     01.0414         10.86  
230169...........     01.3466        19.72     240014...........     01.0882        16.06     240103...........     01.1331        14.27     250001...........     01.5439        13.55     250091..........     00.9638         10.48  
230171...........     01.0397        12.36     240016...........     01.3880        14.67     240104...........     01.1691        18.89     250002...........     00.8123        11.80     250093..........     01.1498         11.71  
230172...........     01.2647        17.17     240017...........     01.1279        14.24     240105...........     00.9306        13.40     250003...........     00.9311        12.12     250094..........     01.2734         13.27  
230173...........     01.2687        17.18     240018...........     01.2097        15.09     240106...........     01.2295        21.48     250004...........     01.4300        13.66     250095..........     01.0353         11.93  
230174...........     01.2969        16.15     240019...........     01.2969        18.63     240107...........     00.9025        13.16     250005...........     00.9925        08.99     250096..........     01.1196         14.83  
230175...........     02.5647        14.97     240020...........     01.1770        15.82     240108...........     01.0177        10.01     250006...........     00.9777        12.45     250097..........     01.2122         12.30  
230176...........     01.2071        20.13     240021...........     01.1178        13.32     240109...........     00.9590        13.51     250007...........     01.2267        15.01     250098..........     00.8720         09.46  
230178...........     01.0559        14.99     240022...........     01.0736        15.34     240110...........     00.9597        15.43     250008...........     00.9902        11.21     250099..........     01.2539         12.00  
230180...........     01.0827        14.16     240023...........     01.0969        15.19     240111...........     01.0346        11.74     250009...........     01.1391        10.70     250100..........     01.2467         11.80  
230184...........     01.1328        14.57     240025...........     01.1515        14.16     240112...........     00.9898        12.95     250010...........     01.0724        10.06     250101..........     00.8793         08.70  
230186...........     01.0965        14.08     240027...........     01.0245        11.62     240114...........     01.0412        10.60     250012...........     00.9567        11.79     250102..........     01.4922         13.33  
230188...........     01.1139        15.94     240028...........     01.1006        14.99     240115...........     01.6079        21.44     250015...........     01.0553        09.37     250104..........     01.3327         14.08  
230189...........     00.9190        13.54     240029...........     01.2108        14.23     240116...........     00.9269        12.14     250017...........     00.9426        13.08     250105..........     00.8970         11.28  
230190...........     01.3785        18.04     240030...........     01.3302        15.33     240117...........     01.1176        15.35     250018...........     00.9031        10.20     250107..........     00.9562         13.72  
230191...........     00.8901        13.06     240031...........     01.0538        13.01     240119...........     00.8906        14.25     250019...........     01.3868        14.82     250109..........     00.9654         10.30  
230193...........     01.2619        16.40     240036...........     01.4905        17.88     240121...........     00.9077        16.37     250020...........     00.9789        09.05     250112..........     00.9612         11.79  
230194...........     01.1975        13.91     240037...........     01.1006        15.67     240122...........     01.0992        15.27     250021...........     00.9398        07.83     250117..........     01.0646         12.06  
230195...........     01.2950        18.03     240038...........     01.4951        21.20     240123...........     01.0605        13.47     250023...........     00.8531        09.86     250119..........     01.0949         10.32  
230197...........     01.2615        19.21     240040...........     01.2596        16.06     240124...........     01.0520        14.28     250024...........     00.9885        07.74     250120..........     00.9976         10.44  
230199...........     01.1365        15.53     240041...........     01.2683        13.37     240125...........     00.9045        10.46     250025...........     01.0232        13.92     250122..........     01.2226         15.54  
230201...........     01.0721        12.87     240043...........     01.2178        15.65     240127...........     01.0109        11.10     250027...........     01.0456        10.39     250123..........     01.2141         18.71  
230204...........     01.2769        19.02     240044...........     01.1996        15.06     240128...........     01.1626        15.73     250029...........     00.9632        10.16     250124..........     00.9096         10.51  
230205...........     01.0741        14.68     240045...........     01.0166        16.58     240129...........     01.0191        12.94     250030...........     00.9960        10.01     250125..........     01.3020         14.95  
230207...........     01.2234        18.62     240047...........     01.4088        15.84     240130...........     00.9815        13.39     250031...........     01.2568        16.18     250126..........     01.0613         11.53  
230208...........     01.1985        13.74     240048...........     01.3250        20.23     240132...........     01.1821        22.17     250032...........     01.2296        14.64     250127..........     00.7846    ............
230211...........     00.9788        12.38     240049...........     01.7175        19.30     240133...........     01.1217        15.04     250033...........     00.9742        11.82     250128..........     00.9391         11.77  
230212...........     01.0550        18.73     240050...........     01.1360        18.32     240135...........     00.9377        11.11     250034...........     01.4973        11.58     250131..........     01.0142         09.78  
230213...........     01.0806        11.66     240051...........     00.9231        15.59     240136...........     00.8433        12.11     250035...........     00.8641        12.15     250134..........     00.9954         13.69  
230216...........     01.3347        15.22     240052...........     01.2111        15.63     240137...........     01.1811        14.41     250036...........     01.0005        10.69     250136..........     00.8317         14.79  
230217...........     01.1540        16.17     240053...........     01.4962        18.22     240138...........     00.8843        09.63     250037...........     00.9018        10.43     250138..........     01.2888         16.00  
230219...........     01.0239        11.59     240056...........     01.2453        19.37     240139...........     00.9723        14.31     250038...........     00.9987        09.69     250140..........     00.9049         08.90  
230221...........     01.2870        20.08     240057...........     01.7395        20.10     240140...........     00.9074        11.48     250039...........     00.9788        08.23     250141..........     01.2795         14.72  
230222...........     01.3017        16.28     240058...........     01.0076        09.62     240141...........     00.9912        18.54     250040...........     01.2974        14.79     250144..........     00.9225    ............
230223...........     01.3383        18.13     240059...........     01.2110        17.26     240142...........     01.0446        13.02     250042...........     01.1616        13.22     250145..........     00.7146    ............
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                                                                                                              Page 9 of 16                                                                                                              
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
250146...........     01.0102    ............  260091...........     01.6253        18.26     270006...........     00.9746        10.56     280023...........     01.3516        13.27     280110..........     00.9955         10.65  
260001...........     01.6634        14.89     260092...........     01.0280        13.62     270007...........     00.9529        11.48     280024...........     00.9846        11.66     280111..........     01.2922         14.82  
260002...........     01.3747        18.64     260094...........     01.0736        12.66     270009...........     01.0671        18.52     280025...........     01.0234        10.02     280114..........     00.9900         10.45  
260003...........     01.0260        12.20     260095...........     01.3807        15.45     270011...........     01.1025        14.76     280026...........     01.0493        12.16     280115..........     01.0191         12.67  
260004...........     01.0538        12.77     260096...........     01.4959        19.36     270012...........     01.4698        16.27     280028...........     01.0097        11.92     280117..........     01.0875         13.19  
260005...........     01.5572        17.00     260097...........     01.1380        14.13     270013...........     01.2727        15.02     280029...........     00.8928        09.58     280118..........     01.0483         14.77  
260006...........     01.5091        15.71     260100...........     01.0571        12.23     270014...........     01.6079        14.95     280030...........     01.8599        21.75     280119..........     00.8992    ............
260007...........     01.3639        15.19     260102...........     01.0839        14.83     270016...........     00.8118        09.83     280031...........     01.0550        12.06     280123..........     00.8286         13.91  
260008...........     01.2405        14.14     260103...........     01.3972        16.34     270017...........     01.2367        15.69     280032...........     01.2476        14.22     290001..........     01.6571         20.33  
260009...........     01.2538        14.91     260104...........     01.6549        17.70     270019...........     00.9646        11.57     280033...........     01.1094        13.61     290002..........     00.9120         16.20  
260011...........     01.5681        16.81     260105...........     01.8607        17.57     270021...........     01.1244        13.12     280034...........     01.1968        13.55     290003..........     01.6607         20.74  
260012...........     01.0775        10.76     260107...........     01.4024        16.71     270023...........     01.3326        16.04     280035...........     00.9251        11.06     290005..........     01.2603         18.60  
260013...........     01.1781        13.00     260108...........     01.7807        17.07     270024...........     00.9937        12.25     280037...........     00.9898        10.57     290006..........     01.0426         17.56  
260014...........     01.7028        17.03     260109...........     01.0318        10.83     270026...........     00.9270        14.52     280038...........     01.0970        12.32     290007..........     01.8614         19.49  
260015...........     01.1463        13.06     260110...........     01.6186        13.38     270027...........     01.0071        11.19     280039...........     01.1476        11.46     290008..........     01.2834         19.77  
260017...........     01.2235        13.75     260111...........     00.9193        10.33     270028...........     01.0211        14.70     280040...........     01.5884        17.67     290009..........     01.5081         20.23  
260018...........     00.9472        08.71     260112...........     01.4051        17.17     270029...........     01.0373        14.41     280041...........     01.0365        10.18     290010..........     01.1540         16.04  
260019...........     01.0163        12.36     260113...........     01.1657        11.99     270030...........     00.7612    ............  280042...........     01.0350        12.45     290011..........     00.8320         11.94  
260020...........     01.6650        18.13     260115...........     01.1918        13.38     270031...........     00.9295        10.86     280043...........     01.1274        13.48     290012..........     01.3572         18.72  
260021...........     01.4522        16.18     260116...........     01.1505        12.40     270032...........     01.0832        15.20     280045...........     01.1318        12.49     290013..........     00.9998         15.06  
260022...........     01.3955        12.21     260119...........     01.2584        13.25     270033...........     00.9110        15.18     280046...........     01.0010        10.16     290014..........     01.0364         15.84  
260023...........     01.2384        14.14     260120...........     01.2393        14.57     270035...........     01.0121        13.97     280047...........     01.0944        14.84     290015..........     00.9331         14.63  
260024...........     01.0522        11.04     260122...........     01.1817        12.00     270036...........     00.9135        11.20     280048...........     01.0423        10.70     290016..........     01.2080         13.62  
260025...........     01.2423        13.10     260123...........     01.0260        10.37     270039...........     00.9348        17.94     280049...........     01.0269        12.20     290018..........     01.2956         17.15  
260027...........     01.5736        17.97     260127...........     00.9731        13.39     270040...........     01.0844        15.30     280050...........     00.9529        11.49     290019..........     01.2279         17.04  
260029...........     01.1928        16.54     260128...........     00.9679        08.66     270041...........     00.9693        10.47     280051...........     00.9747        12.15     290020..........     01.2483         16.81  
260030...........     01.1710        10.05     260129...........     01.0667        12.87     270044...........     01.2568        12.26     280052...........     01.0435        10.45     290021..........     01.5747         20.63  
260031...........     01.4919        17.49     260131...........     01.2852        13.97     270046...........     00.9215        14.21     280054...........     01.2397        15.23     290022..........     01.6050         20.10  
260032...........     01.6994        18.87     260134...........     01.2865        13.25     270047...........     01.1692        09.98     280055...........     00.9080        11.10     290027..........     01.0024         16.54  
260033...........     01.3247        14.53     260137...........     01.1776        13.58     270048...........     01.1014        13.40     280056...........     01.0481        09.44     290029..........     00.9610    ............
260034...........     01.0205        13.13     260138...........     01.8672        18.90     270049...........     01.7111        15.71     280057...........     01.0131        15.03     290032..........     01.3954         19.64  
260035...........     01.1365        11.06     260141...........     01.9446        15.87     270050...........     01.0065        15.42     280058...........     01.2678        12.49     300001..........     01.3414         19.02  
260036...........     01.0804        14.55     260142...........     01.2021        13.51     270051...........     01.3094        18.46     280060...........     01.5767        17.64     300003..........     01.7495         19.71  
260037...........     01.2511        13.74     260143...........     01.0398        10.03     270052...........     01.0258        19.34     280061...........     01.3436        15.01     300005..........     01.2775         17.05  
260039...........     01.1978        10.70     260146...........     01.5255        14.81     270053...........     01.1220        08.14     280062...........     01.1863        11.55     300006..........     01.1299         15.08  
260040...........     01.4880        14.03     260147...........     01.0243        11.64     270055...........     00.7016    ............  280064...........     01.0380        11.38     300007..........     01.1477         19.46  
260042...........     01.1845        15.65     260148...........     00.9980        14.12     270057...........     01.1710        15.06     280065...........     01.2349        15.65     300008..........     01.2673         15.50  
260044...........     01.0654        13.62     260158...........     01.0835        10.90     270058...........     00.9576        10.74     280066...........     01.0717        10.40     300009..........     01.1600         16.54  
260047...........     01.2900        13.30     260159...........     01.1822        18.22     270059...........     00.8646        12.91     280068...........     00.8976        08.61     300010..........     01.2410         16.90  
260048...........     01.2923        16.57     260160...........     01.1296        12.91     270060...........     00.9063        11.63     280070...........     01.0418        11.22     300011..........     01.2872         20.39  
260050...........     01.0960        12.53     260162...........     01.1213        16.85     270063...........     00.8744        13.29     280073...........     00.9927        13.90     300012..........     01.2920         20.73  
260051...........     01.0852        13.22     260163...........     01.1730        12.84     270067...........     01.1181    ............  280074...........     01.0971        10.62     300013..........     01.2094         15.98  
260052...........     01.2549        15.53     260164...........     01.0734        11.11     270068...........     00.8749        11.69     280075...........     01.2244        11.19     300014..........     01.2542         16.93  
260053...........     01.1330        09.80     260166...........     01.2098        17.16     270072...........     00.8859        15.52     280076...........     01.0942        13.66     300015..........     01.1507         16.69  
260054...........     01.2850        15.62     260172...........     00.9893        11.99     270073...........     01.1510        10.27     280077...........     01.2977        16.26     300016..........     01.2369         17.23  
260055...........     01.0642        12.73     260173...........     00.9923        10.22     270074...........     00.8805    ............  280079...........     00.9809        09.48     300017..........     01.1841         18.38  
260057...........     01.2088        13.64     260175...........     01.1918        13.15     270075...........     00.9436    ............  280080...........     01.2379        10.27     300018..........     01.2221         18.26  
260059...........     01.1065        11.93     260176...........     01.5465        15.91     270076...........     00.7562    ............  280081...........     01.4820        16.98     300019..........     01.2495         17.09  
260061...........     01.1426        09.82     260177...........     01.2941        18.12     270079...........     00.9326        12.66     280082...........     01.3050        09.86     300020..........     01.2377         18.13  
260062...........     01.1629        15.45     260178...........     01.5048        19.22     270080...........     01.1032        13.60     280083...........     01.0240        11.97     300021..........     01.1597         14.84  
260063...........     01.1454        13.06     260179...........     01.5311        20.18     270081...........     00.9698        10.11     280084...........     01.0470        09.83     300022..........     01.1177         15.00  
260064...........     01.3850        15.64     260180...........     01.5518        17.26     270082...........     00.9072        14.85     280085...........     00.8963        13.22     300023..........     01.2391         19.05  
260065...........     01.6779        14.32     260183...........     01.6363        15.05     270083...........     01.0378        12.97     280088...........     01.6710        17.18     300024..........     01.2318         15.72  
260066...........     01.1342        12.00     260186...........     01.1638        14.14     270084...........     00.9212        13.03     280089...........     01.0477        12.85     300028..........     01.2081         16.12  
260067...........     00.9175        12.05     260188...........     01.3866        15.00     280001...........     01.0391        12.18     280090...........     00.9980        11.70     300029..........     01.3292         20.57  
260068...........     01.7836        17.91     260189...........     00.8964        09.49     280003...........     01.8969        16.43     280091...........     01.0899        13.49     300033..........     01.0766         13.25  
260070...........     01.2315        10.32     260190...........     01.2049        20.62     280005...........     01.4381        16.26     280092...........     00.9157        11.14     300034..........     01.7999         20.13  
260073...........     01.0263        10.98     260191...........     01.2302        17.70     280009...........     01.5328        15.40     280094...........     01.1517        12.59     310001..........     01.6349         21.91  
260074...........     01.2177        13.00     260193...........     01.2600        16.35     280011...........     00.9727        10.71     280097...........     00.9588        12.01     310002..........     01.7714         22.69  
260077...........     01.5203        15.46     260195...........     01.1426        14.93     280012...........     01.2184        12.69     280098...........     00.9679        09.84     310003..........     01.2152         20.51  
260078...........     01.1311        13.62     260197...........     01.2209        20.81     280013...........     01.9819        20.17     280101...........     01.1395        12.16     310005..........     01.1891         19.16  
260079...........     01.0080        10.71     260198...........     01.2177        14.62     280014...........     01.0454        10.76     280102...........     00.9735        10.22     310006..........     01.2276         18.73  
260080...........     01.0833        09.00     260200...........     01.2017        19.15     280015...........     01.1047        13.75     280104...........     01.0008        11.74     310008..........     01.3004         18.98  
260081...........     01.4061        17.40     260202...........     01.2953        16.81     280017...........     01.1113        12.92     280105...........     01.2967        14.83     310009..........     01.1509         20.10  
260082...........     01.1213        13.27     260204...........     00.8499    ............  280018...........     00.9974        12.01     280106...........     01.0583        12.09     310010..........     01.2746         19.78  
260085...........     01.5101        17.37     270002...........     01.1900        12.64     280020...........     01.4359        16.53     280107...........     01.0335        10.56     310011..........     01.2395         18.15  
260086...........     01.0323        12.04     270003...........     01.1873        16.85     280021...........     01.1348        13.34     280108...........     01.0946        12.16     310012..........     01.5444         21.45  
260089...........     01.0034        12.53     270004...........     01.6495        16.14     280022...........     00.9490        10.53     280109...........     00.8511        11.14     310013..........     01.2946         17.62  
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                                                                                                              Page 10 of 16                                                                                                             
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
310014...........     01.5742        22.63     310111...........     01.2869        17.58     330016...........     01.0329        14.50     330119...........     01.7325        27.28     330224..........     01.2544         19.24  
310015...........     01.6880        23.19     310112...........     01.2792        17.81     330019...........     01.2647        22.42     330121...........     01.0030        14.55     330225..........     01.1937         23.33  
310016...........     01.2138        20.50     310113...........     01.2522        18.18     330020...........     01.0867        14.84     330122...........     01.2333        19.59     330226..........     01.2657         17.69  
310017...........     01.3453        20.51     310115...........     01.1820        18.75     330023...........     01.1973        19.85     330125...........     01.6953        18.97     330229..........     01.3237         13.56  
310018...........     01.2142        23.43     310116...........     01.2895        19.88     330024...........     01.8216        26.75     330126...........     01.2041        18.28     330230..........     01.5357         24.76  
310019...........     01.6478        19.13     310118...........     01.2904        23.38     330025...........     01.1062        14.30     330127...........     01.3851        24.83     330231..........     01.1533         25.13  
310020...........     01.2427        17.60     310119...........     01.5696        29.88     330027...........     01.5206        28.98     330128...........     01.3925        25.66     330232..........     01.2537         14.83  
310021...........     01.3396        18.25     310120...........     01.0901        17.21     330028...........     01.3460        22.68     330132...........     01.1420        12.27     330233..........     01.5248         27.01  
310022...........     01.2335        18.31     310121...........     01.1334        18.72     330029...........     01.1440        15.76     330133...........     01.3637        26.33     330234..........     02.0302         25.92  
310024...........     01.2387        20.69     310898...........     00.4649    ............  330030...........     01.1835        14.98     330135...........     01.2408        16.49     330235..........     01.1396         16.14  
310025...........     01.1841        19.58     320001...........     01.4496        16.86     330033...........     01.1756        13.16     330136...........     01.2608        21.77     330236..........     01.3256         25.41  
310026...........     01.3100        20.16     320002...........     01.3049        20.26     330034...........     01.0216        28.07     330140...........     01.6509        16.38     330238..........     01.1250         14.95  
310027...........     01.3074        17.63     320003...........     01.2595        13.22     330036...........     01.2544        20.09     330141...........     01.3081        22.13     330239..........     01.2379         13.84  
310028...........     01.1817        18.28     320004...........     01.1589        15.58     330037...........     01.0940        13.75     330144...........     01.0838        12.78     330240..........     01.3051         26.44  
310029...........     01.7744        19.95     320005...........     01.2295        16.12     330038...........     01.1633        14.14     330148...........     00.9882        13.44     330241..........     01.8399         20.10  
310031...........     02.5295        22.82     320006...........     01.3783        13.69     330039...........     00.8375        13.46     330151...........     01.0959        12.81     330242..........     01.3653         19.96  
310032...........     01.2728        19.09     320009...........     01.5035        15.54     330041...........     01.3278        24.26     330152...........     01.4062        26.09     330245..........     01.2087         15.62  
310034...........     01.2211        18.59     320011...........     00.9916        15.22     330043...........     01.2506        23.92     330153...........     01.6330        16.75     330246..........     01.2171         22.26  
310036...........     01.2241        17.56     320012...........     01.0247        14.52     330044...........     01.1678        16.27     330154...........     01.4949    ............  330247..........     00.6914         24.34  
310037...........     01.2154        23.45     320013...........     01.0743        15.84     330045...........     01.4026        22.01     330157...........     01.2590        15.89     330249..........     01.2322         15.40  
310038...........     01.7502        21.86     320014...........     00.9564        13.73     330046...........     01.5346        25.92     330158...........     01.3171        21.63     330250..........     01.2624         16.08  
310039...........     01.2946        18.56     320016...........     01.1382        14.59     330047...........     01.2742        15.31     330159...........     01.3197        17.11     330252..........     00.9602         14.59  
310040...........     01.2409        20.49     320017...........     01.1782        17.22     330048...........     01.2382        14.59     330160...........     01.4179        24.63     330254..........     01.0002         16.38  
310041...........     01.2753        20.49     320018...........     01.4560        16.07     330049...........     01.2828        16.98     330161...........     00.9685        15.29     330258..........     01.3281         23.94  
310042...........     01.1661        21.01     320019...........     01.3960        17.39     330053...........     01.1361        13.82     330162...........     01.3003        22.13     330259..........     01.4208         21.72  
310043...........     01.1877        19.14     320021...........     01.6877        17.70     330055...........     01.4198        27.67     330163...........     01.1410        15.59     330261..........     01.2805         22.00  
310044...........     01.3090        18.52     320022...........     01.2569        16.29     330056...........     01.4146        24.73     330164...........     01.3323        17.75     330263..........     01.0476         15.05  
310045...........     01.2948        22.96     320023...........     01.0783        11.67     330057...........     01.6239        16.34     330166...........     00.9793        13.39     330264..........     01.1805         17.85  
310047...........     01.2846        20.40     320030...........     01.0596        15.83     330058...........     01.2707        14.94     330167...........     01.5606        24.15     330265..........     01.2982         15.23  
310048...........     01.2237        15.96     320031...........     00.9342        12.53     330059...........     01.5561        26.37     330169...........     01.4148        28.56     330267..........     01.3094         21.01  
310049...........     01.3131        19.63     320032...........     00.9508        15.92     330061...........     01.3472        21.49     330171...........     01.2972        22.03     330268..........     01.1150         14.37  
310050...........     01.1859        19.96     320033...........     01.1065        17.04     330062...........     01.0602        14.93     330175...........     01.0774        13.20     330270..........     01.9180         28.30  
310051...........     01.2774        21.27     320035...........     01.3382        13.24     330064...........     01.4069        25.74     330177...........     00.9995        13.24     330273..........     01.3518         20.59  
310052...........     01.2121        20.20     320037...........     01.1481        13.11     330065...........     01.1926        16.20     330179...........     00.8930        12.97     330275..........     01.2238         16.62  
310054...........     01.2732        21.24     320038...........     01.2389        14.38     330066...........     01.2273        17.39     330180...........     01.1892        14.87     330276..........     01.2167         16.70  
310056...........     01.1774        17.32     320046...........     01.0729        15.91     330067...........     01.3189        19.22     330181...........     01.2261        27.37     330277..........     01.1777         15.22  
310057...........     01.2768        16.38     320048...........     01.2320        13.09     330072...........     01.3404        26.08     330182...........     02.3673        25.86     330279..........     01.2864         16.73  
310058...........     01.1326        20.45     320056...........     00.9285    ............  330073...........     01.2135        12.91     330183...........     01.3603        17.43     330281..........     00.5686         20.00  
310060...........     01.1741        15.89     320057...........     01.0146    ............  330074...........     01.2478        15.68     330184...........     01.3576        22.64     330285..........     01.7443         20.83  
310061...........     01.1664        18.01     320058...........     00.7388    ............  330075...........     01.0779        15.62     330185...........     01.1944        22.90     330286..........     01.3377         21.72  
310062...........     01.3059        24.81     320059...........     01.0347    ............  330078...........     01.3808        15.94     330186...........     01.0663        19.28     330288..........     01.0510         15.73  
310063...........     01.3360        20.38     320060...........     00.9396    ............  330079...........     01.2508        14.89     330188...........     01.2364        16.63     330290..........     01.7023         26.56  
310064...........     01.2505        20.41     320061...........     01.3158    ............  330080...........     01.3156        23.40     330189...........     00.7710        13.00     330293..........     01.1870         13.94  
310067...........     01.2732        18.65     320062...........     00.8686    ............  330082...........     01.2583        16.58     330191...........     01.2972        16.96     330304..........     01.2664         25.07  
310069...........     01.1770        18.53     320063...........     01.2972        15.07     330084...........     00.9774        15.00     330193...........     01.3641        24.94     330306..........     01.4010         23.49  
310070...........     01.3208        20.67     320065...........     01.1953        15.47     330085...........     01.3537        17.17     330194...........     01.8095        25.78     330307..........     01.2200         16.06  
310072...........     01.2416        18.95     320067...........     00.9079        10.33     330086...........     01.2408        22.49     330195...........     01.5594        26.38     330308..........     01.2840         24.28  
310073...........     01.4691        19.99     320068...........     00.9861        15.10     330088...........     01.1075        22.93     330196...........     01.3816        24.47     330309..........     01.2121         22.70  
310074...........     01.2527        19.27     320069...........     01.0207        12.54     330090...........     01.6337        15.36     330197...........     01.0421        14.66     330314..........     01.2931         21.13  
310075...........     01.3011        20.64     320070...........     00.8934    ............  330091...........     01.3710        17.28     330198...........     01.3539        26.02     330315..........     01.1666         21.49  
310076...........     01.3398        24.98     320074...........     01.1252        17.10     330092...........     01.0355        13.86     330199...........     01.2781        23.00     330316..........     01.3004         23.18  
310077...........     01.5661        20.65     320076...........     01.1991        14.58     330094...........     01.1760        14.68     330201...........     01.4416        24.55     330327..........     00.9282         14.93  
310078...........     01.2659        21.69     320079...........     01.1341        18.51     330095...........     01.1924        15.53     330202...........     01.4057        25.07     330331..........     01.2040         24.79  
310081...........     01.2485        18.24     320080...........     00.5832    ............  330096...........     01.0555        13.82     330203...........     01.3473        18.97     330332..........     01.2508         22.24  
310083...........     01.2342        20.23     330001...........     01.1730        19.91     330097...........     01.1752        14.78     330204...........     01.3366        23.41     330333..........     01.3186         23.12  
310084...........     01.2000        18.73     330002...........     01.4515        22.56     330100...........     00.7012        22.60     330205...........     01.1999        17.97     330336..........     01.3713         26.05  
310085...........     01.1170        17.90     330003...........     01.2833        17.47     330101...........     01.7094        30.13     330208...........     01.2026        21.83     330338..........     01.1705         20.43  
310086...........     01.1935        18.94     330004...........     01.3082        17.83     330102...........     01.3047        15.59     330209...........     01.2335        18.89     330339..........     00.8063         17.43  
310087...........     01.2476        18.41     330005...........     01.7510        18.22     330103...........     01.1854        15.52     330211...........     01.1957        15.21     330340..........     01.1799         24.08  
310088...........     01.1615        19.42     330006...........     01.3413        21.67     330104...........     01.3488        23.56     330212...........     01.2172        18.85     330350..........     01.7967         26.28  
310090...........     01.2313        20.13     330007...........     01.3744        15.51     330106...........     01.5771        29.39     330213...........     01.1345        15.33     330353..........     01.2966         24.84  
310091...........     01.2164        18.22     330008...........     01.1638        15.29     330107...........     01.1838        21.23     330214...........     01.7319        27.58     330354..........     01.4081    ............
310092...........     01.3774        18.31     330009...........     01.2724        26.03     330108...........     01.2091        16.18     330215...........     01.1507        15.94     330357..........     01.3654         29.57  
310093...........     01.1869        18.84     330010...........     01.2299        13.72     330111...........     01.1419        13.22     330218...........     01.2015        15.84     330359..........     00.9245         19.30  
310096...........     01.8732        21.76     330011...........     01.2145        16.37     330114...........     00.9960        15.08     330219...........     01.6161        18.33     330372..........     01.2703         20.79  
310105...........     01.3449        19.82     330012...........     01.5853        26.43     330115...........     01.2293        13.79     330221...........     01.2905        25.37     330381..........     01.2390         23.70  
310108...........     01.3067        20.29     330013...........     01.9866        16.97     330116...........     00.9653        16.94     330222...........     01.2073        14.02     330383..........     01.5122    ............
310110...........     01.1782        17.88     330014...........     01.3938        25.19     330118...........     01.5909        16.14     330223...........     01.0720        13.45     330385..........     01.4133         29.11  
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                                                                                                              Page 11 of 16                                                                                                             
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
330386...........     01.1675        17.11     340069...........     01.7588        16.62     340166...........     01.3189        17.47     360018...........     01.5088        17.63     360094..........     01.1823         16.44  
330387...........     00.8490        23.22     340070...........     01.2708        15.30     340168...........     00.5454        14.80     360019...........     01.2284        17.21     360095..........     01.2750         14.92  
330389...........     01.8866        27.58     340071...........     01.0354        13.49     350001...........     01.0250        10.83     360020...........     01.4276        16.47     360096..........     01.0974         14.95  
330390...........     01.2979        24.47     340072...........     01.1017        13.40     350002...........     01.6920        16.15     360021...........     01.2159        16.31     360098..........     01.3840         17.84  
330393...........     01.6149        22.41     340073...........     01.4658        18.47     350003...........     01.1473        14.23     360024...........     01.2408        17.03     360099..........     01.0579         15.49  
330394...........     01.4095        16.96     340075...........     01.1544        14.80     350004...........     01.8625        17.07     360025...........     01.1873        17.00     360100..........     01.2965         13.69  
330395...........     01.3571        25.96     340080...........     01.1430        09.88     350005...........     01.1031        11.21     360026...........     01.1842        15.01     360101..........     01.7545         19.63  
330396...........     01.2335        26.91     340084...........     01.0572        13.62     350006...........     01.2701        17.95     360027...........     01.5365        17.37     360102..........     01.2631         17.18  
330397...........     01.5073        26.69     340085...........     01.1941        14.33     350007...........     01.0067        09.21     360028...........     01.3755        15.02     360103..........     01.3973         17.82  
330398...........     01.2600        24.07     340087...........     01.1721        14.86     350008...........     01.0632        13.30     360029...........     01.1183        14.74     360104..........     00.9613         16.76  
330399...........     01.3657        28.62     340088...........     01.1241        14.92     350009...........     01.1441        14.36     360030...........     01.1725        14.51     360106..........     01.1505         12.63  
340001...........     01.3622        17.90     340089...........     00.9772        10.77     350010...........     01.0950        11.07     360031...........     01.2762        16.00     360107..........     01.1847         15.07  
340002...........     01.8205        16.29     340090...........     01.0761        13.47     350011...........     01.7147        16.96     360032...........     01.0787        15.27     360108..........     01.0229         13.97  
340003...........     01.1762        14.86     340091...........     01.6470        17.60     350012...........     01.0658        11.31     360034...........     01.1989        12.84     360109..........     01.0473         16.12  
340004...........     01.4821        15.33     340093...........     01.1219        11.99     350013...........     01.1213        13.52     360035...........     01.4870        18.47     360112..........     01.7694         18.73  
340005...........     01.1959        12.35     340094...........     01.3299        15.81     350014...........     01.1292        10.67     360036...........     01.1943        16.47     360113..........     01.3410         17.59  
340006...........     01.2424        13.41     340096...........     01.2368        14.57     350015...........     01.6105        15.84     360037...........     02.1138        18.67     360114..........     01.0941         14.97  
340007...........     01.1646        13.78     340097...........     01.1140        11.48     350016...........     00.9573        11.10     360038...........     01.4851        16.89     360115..........     01.1422         16.96  
340008...........     01.1839        15.73     340098...........     01.6430        16.25     350017...........     01.3380        14.02     360039...........     01.2839        14.64     360116..........     01.0719         14.50  
340009...........     01.5128        18.76     340099...........     01.1396        11.89     350018...........     01.1529        09.40     360040...........     01.2237        16.01     360118..........     01.2795         15.25  
340010...........     01.3154        14.82     340100...........     01.2221    ............  350019...........     01.5841        17.16     360041...........     01.3393        16.68     360119..........     01.2610         17.14  
340011...........     01.0675        12.63     340101...........     01.0400        09.36     350020...........     01.3945        16.19     360042...........     01.1077        14.26     360120..........     00.7566         17.54  
340012...........     01.1415        14.03     340104...........     01.0198        07.49     350021...........     01.0545        10.29     360044...........     01.0741        14.22     360121..........     01.2385         11.33  
340013...........     01.2007        14.24     340105...........     01.3476        17.54     350023...........     01.0159        11.13     360045...........     01.4664        19.21     360122..........     01.3830         16.72  
340014...........     01.6077        18.79     340106...........     01.1342        15.13     350024...........     01.1481        09.39     360046...........     01.1350        16.35     360123..........     01.2420         16.80  
340015...........     01.2384        14.74     340107...........     01.2490        15.74     350025...........     00.9853        11.59     360047...........     01.0819        12.46     360124..........     01.2029         16.36  
340016...........     01.1034        13.82     340109...........     01.2985        14.37     350027...........     00.9928        12.22     360048...........     01.8354        20.28     360125..........     01.1368         14.91  
340017...........     01.2648        13.87     340111...........     01.1297        12.76     350029...........     00.8784        09.62     360049...........     01.3167        17.96     360126..........     01.3162         15.84  
340018...........     01.1897        13.17     340112...........     01.0327        13.95     350030...........     01.0248        14.92     360050...........     01.1898        12.14     360127..........     01.0841         14.17  
340019...........     01.1047        13.32     340113...........     01.9015        18.50     350033...........     00.9363        13.57     360051...........     01.5031        18.53     360128..........     01.1327         13.72  
340020...........     01.1829        18.53     340114...........     01.4419        18.30     350034...........     00.9722        13.40     360052...........     01.7019        16.61     360129..........     01.0239         13.03  
340021...........     01.3146        13.89     340115...........     01.5012        16.01     350035...........     00.9150        09.26     360054...........     01.2843        14.56     360130..........     01.0624         13.04  
340022...........     01.0912        13.65     340116...........     01.7630        19.73     350036...........     00.9025        09.81     360055...........     01.1905        16.33     360131..........     01.2098         15.01  
340023...........     01.3148        16.32     340119...........     01.2906        13.80     350038...........     01.0242        15.62     360056...........     01.3100        15.51     360132..........     01.2464         17.42  
340024...........     01.2490        13.00     340120...........     01.0998        12.06     350039...........     01.0200        12.62     360057...........     01.0694        12.44     360133..........     01.4563         16.50  
340025...........     01.1582        13.18     340121...........     01.0676        12.96     350041...........     01.0757        11.57     360058...........     01.1471        15.01     360134..........     01.5554         17.39  
340027...........     01.2180        13.68     340122...........     01.0174        10.85     350042...........     01.0638        12.64     360059...........     01.4852        18.80     360135..........     01.2248         14.57  
340028...........     01.3895        15.42     340123...........     01.1561        13.69     350043...........     01.5311        14.64     360062...........     01.5744        17.01     360136..........     01.1219         13.65  
340030...........     01.8664        17.35     340124...........     01.1012        13.00     350044...........     00.8323        08.90     360063...........     01.1006        14.42     360137..........     01.5660         18.00  
340031...........     01.0154        11.45     340125...........     01.4070        16.81     350047...........     01.1836        15.32     360064...........     01.4720        17.53     360139..........     00.9743         12.05  
340032...........     01.2730        15.54     340126...........     01.3373        15.32     350049...........     01.1917        09.83     360065...........     01.2478        15.01     360140..........     01.0793         14.54  
340034...........     01.2689        15.97     340127...........     01.2591        15.55     350050...........     01.0212        11.38     360066...........     01.2254        14.92     360141..........     01.4062         18.14  
340035...........     01.1578        15.17     340129...........     01.2608        17.74     350051...........     00.9812        12.48     360067...........     01.1037        11.39     360142..........     01.0047         13.89  
340036...........     01.1863        15.00     340130...........     01.3277        14.86     350053...........     00.8979        11.10     360068...........     01.5770        18.67     360143..........     01.2457         16.82  
340037...........     01.2307        15.38     340131...........     01.3162        14.95     350055...........     00.9022        11.18     360069...........     01.0222        15.61     360144..........     01.2686         18.65  
340038...........     01.1338        13.31     340132...........     01.2929        12.54     350056...........     00.9607        11.87     360070...........     01.5500        15.73     360145..........     01.5316         15.26  
340039...........     01.2821        16.55     340133...........     01.1581        14.11     350058...........     01.0392        11.33     360071...........     01.2514        13.91     360147..........     01.1993         14.87  
340040...........     01.8095        16.34     340136...........     00.9621        16.24     350060...........     00.9417        07.24     360072...........     01.1888        14.87     360148..........     01.1771         14.28  
340041...........     01.2477        14.67     340137...........     01.4470        12.18     350061...........     00.9998        12.32     360074...........     01.4126        16.37     360149..........     01.1016         15.84  
340042...........     01.1520        13.14     340138...........     01.2082        14.43     350063...........     00.9056    ............  360075...........     01.4333        19.23     360150..........     01.2634         16.63  
340044...........     01.0454        10.39     340141...........     01.5716        17.23     350064...........     00.7266    ............  360076...........     01.3244        15.95     360151..........     01.3429         15.61  
340045...........     01.0313        09.87     340142...........     01.2183        14.37     350065...........     00.9497        10.34     360077...........     01.4127        16.81     360152..........     01.4841         16.22  
340047...........     01.9026        16.64     340143...........     01.3561        17.58     350066...........     00.6282    ............  360078...........     01.2640        17.46     360153..........     01.1808         12.99  
340048...........     01.2550        07.91     340144...........     01.2940        17.53     360001...........     01.2323        15.84     360079...........     01.6740        17.96     360154..........     01.0409         11.51  
340049...........     00.6445        15.08     340145...........     01.2767        17.27     360002...........     01.1529        14.33     360080...........     01.1344        14.11     360155..........     01.3273         17.47  
340050...........     01.1725        14.78     340146...........     01.0482        12.21     360003...........     01.6359        18.41     360081...........     01.3213        17.76     360156..........     01.1358         16.04  
340051...........     01.2111        15.20     340147...........     01.3460        15.44     360006...........     01.7533        18.70     360082...........     01.3202        17.76     360159..........     01.2120         16.45  
340052...........     01.0041        16.81     340148...........     01.4350        15.52     360007...........     01.0844        15.64     360083...........     01.3047        15.91     360161..........     01.2557         18.08  
340053...........     01.5889        17.14     340151...........     01.2065        13.47     360008...........     01.2054        14.53     360084...........     01.6037        16.81     360162..........     01.2704         15.67  
340054...........     01.0834        12.08     340153...........     01.9187        19.72     360009...........     01.3296        17.41     360085...........     01.7484        18.24     360163..........     01.7580         18.19  
340055...........     01.2149        15.33     340154...........     00.7709        14.62     360010...........     01.1670        14.28     360086...........     01.4146        15.83     360164..........     00.8498         13.58  
340060...........     01.1259        14.49     340155...........     01.4503        20.53     360011...........     01.2510        16.40     360087...........     01.3180        15.92     360165..........     01.1135         13.53  
340061...........     01.6405        17.49     340156...........     00.8069    ............  360012...........     01.2347        17.96     360088...........     01.1443        14.18     360166..........     01.1827         15.77  
340063...........     01.0337        11.52     340158...........     01.1022        15.90     360013...........     01.1008        15.33     360089...........     01.0927        15.10     360169..........     01.0869         16.28  
340064...........     01.1706        14.10     340159...........     01.1219        14.10     360014...........     01.1323        14.98     360090...........     01.2451        17.34     360170..........     01.1039         16.93  
340065...........     01.1413        13.03     340160...........     01.1180        11.94     360015...........     01.4740        17.62     360091...........     01.2659        17.38     360172..........     01.3416         15.90  
340067...........     01.1663        12.63     340162...........     01.1545        16.42     360016...........     01.5331        17.03     360092...........     01.1827        16.42     360174..........     01.2014         14.63  
340068...........     01.3545        12.17     340164...........     01.3555        17.07     360017...........     01.7120        18.91     360093...........     01.2196        15.15     360175..........     01.1433         15.64  
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                                                                                                              Page 12 of 16                                                                                                             
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
360176...........     01.2248        12.33     370037...........     01.5493        15.41     370158...........     01.0610        12.52     380069...........     01.1795        15.99     390059..........     01.3066        15.15   
360177...........     01.2818        16.76     370038...........     00.9813        10.14     370159...........     01.3940        14.16     380070...........     01.1738        18.67     390060..........     01.0939        14.69   
360178...........     01.2340        14.42     370039...........     01.3153        17.35     370161...........     01.1890        16.35     380071...........     01.2559        21.69     390061..........     01.3822        17.33   
360179...........     01.2719        17.36     370040...........     01.0392        09.92     370163...........     00.8707        09.85     380072...........     01.0025        13.01     390062..........     01.1696        14.09   
360180...........     02.2227        20.03     370041...........     00.9755        12.74     370165...........     01.1611        10.92     380075...........     01.4450        17.91     390063..........     01.6600        17.69   
360184...........     00.6849        14.70     370042...........     00.8848        10.79     370166...........     01.1740        16.00     380078...........     01.1599        16.41     390064..........     01.4458        15.00   
360185...........     01.2022        15.85     370043...........     00.9379        10.62     370169...........     01.0425        10.00     380081...........     01.0894        15.77     390065..........     01.2254        17.69   
360186...........     01.2431        14.82     370045...........     01.0427        10.20     370170...........     00.9535    ............  380082...........     01.2182        18.63     390066..........     01.2539        16.74   
360187...........     01.3438        16.03     370046...........     00.9964        12.64     370171...........     00.9910    ............  380083...........     01.1281        16.57     390067..........     01.7108        17.24   
360188...........     01.0378        14.70     370047...........     01.2319        12.34     370172...........     00.8426    ............  380084...........     01.2184        19.45     390068..........     01.3492        16.97   
360189...........     01.0691        14.46     370048...........     01.1252        11.45     370173...........     01.3753    ............  380087...........     01.0448        12.17     390069..........     01.2992        16.98   
360192...........     01.3491        17.97     370049...........     01.3454        14.08     370176...........     01.2616        17.68     380088...........     00.9570        14.76     390070..........     01.2744        18.70   
360193...........     01.2861        12.74     370051...........     01.0287        10.47     370177...........     00.9702        09.39     380089...........     01.2714        19.78     390071..........     01.0925        11.99   
360194...........     01.1410        14.46     370054...........     01.2711        14.68     370178...........     01.0643        11.44     380090...........     01.2971        18.73     390072..........     01.0780        14.85   
360195...........     01.1565        16.45     370056...........     01.4481        14.44     370179...........     00.9595        12.90     380091...........     01.1836        22.18     390073..........     01.5312        17.40   
360197...........     01.1633        15.43     370057...........     01.1433        13.92     370180...........     01.0329    ............  380897...........     05.0667    ............  390074..........     01.2080        15.50   
360200...........     01.1548        10.65     370059...........     01.2120        12.34     370183...........     01.1452        11.67     390001...........     01.3135        16.25     390075..........     01.3115        14.60   
360203...........     01.1407        14.52     370060...........     01.1721        11.89     370186...........     00.9872        09.16     390002...........     01.3144        16.65     390076..........     01.2674        18.93   
360204...........     01.2206        15.73     370063...........     01.1624        11.88     370189...........     01.0572        09.26     390003...........     01.2008        15.23     390078..........     01.0362        15.47   
360210...........     01.1403        17.25     370064...........     01.0040        08.92     370190...........     01.7487        18.02     390004...........     01.4013        15.76     390079..........     01.7080        15.49   
360211...........     01.1989        15.45     370065...........     01.0748        13.47     380001...........     01.2783        17.45     390005...........     01.0346        13.42     390080..........     01.2068        17.66   
360212...........     01.4239        17.91     370069...........     01.0292        12.62     380002...........     01.1869        16.54     390006...........     01.7576        16.22     390081..........     01.2676        18.98   
360213...........     01.0787        14.45     370071...........     01.0867        10.25     380003...........     01.1786        16.59     390007...........     01.1965        17.30     390083..........     01.1644        20.49   
360218...........     01.2594        15.21     370072...........     00.9446        11.20     380004...........     01.7910        20.49     390008...........     01.1377        15.38     390084..........     01.1687        14.93   
360230...........     01.2992        18.07     370076...........     01.2250        10.80     380005...........     01.2181        17.60     390009...........     01.6017        16.14     390086..........     01.0781        14.19   
360231...........     01.0940        13.85     370077...........     01.2835        16.00     380006...........     01.3041        16.06     390010...........     01.2448        16.77     390088..........     01.2592        18.26   
360232...........     01.1276        19.54     370078...........     01.6119        15.06     380007...........     01.7992        20.52     390011...........     01.2140        15.72     390090..........     01.7237        18.51   
360234...........     01.3202        17.45     370079...........     00.8642        11.46     380008...........     01.1223        16.10     390012...........     01.1716        17.94     390091..........     01.1489        17.98   
360236...........     01.2249        16.91     370080...........     00.9664        10.78     380009...........     01.7368        21.31     390013...........     01.2016        15.66     390093..........     01.1614        14.74   
360238...........     00.9391        12.13     370082...........     01.1372        11.98     380010...........     01.0468        19.43     390014...........     01.2126        12.81     390095..........     01.2000        12.94   
360239...........     01.1661        18.03     370083...........     01.0324        10.50     380011...........     01.2304        13.31     390015...........     01.1710        11.85     390096..........     01.2556        15.43   
360240...........     00.5874        13.30     370084...........     01.0576        09.02     380013...........     01.2228        18.80     390016...........     01.1682        14.81     390097..........     01.3062        19.40   
360241...........     00.5767        16.05     370085...........     00.9076        12.29     380014...........     01.3457        17.78     390017...........     01.1837        13.52     390098..........     01.7393        18.83   
360242...........     01.4531    ............  370086...........     01.1849        09.55     380017...........     01.7410        20.25     390018...........     01.2111        17.81     390100..........     01.6734        17.60   
360243...........     00.8587        15.30     370089...........     01.2783        11.60     380018...........     01.7734        17.51     390019...........     01.1287        14.54     390101..........     01.2779        15.00   
360244...........     00.8677        15.00     370091...........     01.6317        14.59     380019...........     01.3337        17.00     390022...........     01.3757        19.40     390102..........     01.3177        19.48   
360245...........     00.9312    ............  370092...........     01.1097        11.69     380020...........     01.4100        17.79     390023...........     01.2541        18.52     390103..........     01.0523        14.93   
360246...........     00.7017    ............  370093...........     01.7807        18.82     380021...........     01.2025        18.54     390024...........     00.7674        19.86     390104..........     01.0682        14.28   
370001...........     01.6742        15.99     370094...........     01.4221        16.65     380022...........     01.1506        18.26     390025...........     00.8488        14.06     390106..........     00.9776        14.65   
370002...........     01.2432        12.02     370095...........     00.9134        10.73     380023...........     01.2567        17.05     390026...........     01.2268        18.67     390107..........     01.1971        17.38   
370004...........     01.3488        12.31     370097...........     01.3486        18.53     380025...........     01.2654        19.95     390027...........     01.8595        21.14     390108..........     01.3358        19.07   
370005...........     01.0848        10.63     370099...........     01.1990        12.08     380026...........     01.3532        15.93     390028...........     01.7396        17.66     390109..........     01.1643        13.33   
370006...........     01.1965        14.06     370100...........     01.0402        11.67     380027...........     01.2557        18.02     390029...........     01.6963        20.55     390110..........     01.5632        17.01   
370007...........     01.0943        12.64     370103...........     00.9220        10.13     380029...........     01.1864        15.62     390030...........     01.2227        15.45     390111..........     01.7371        24.12   
370008...........     01.3601        15.20     370105...........     02.0584        13.71     380031...........     01.0185        15.90     390031...........     01.1572        15.91     390112..........     01.1465        11.94   
370011...........     01.1202        12.74     370106...........     01.4756        16.09     380033...........     01.6644        19.92     390032...........     01.1998        16.58     390113..........     01.2458        15.48   
370012...........     00.8876        10.18     370108...........     01.1799        09.27     380035...........     01.3248        16.28     390035...........     01.2755        16.49     390114..........     01.0999        19.32   
370013...........     01.6766        17.44     370110...........     00.9905        12.01     380036...........     01.0851        16.10     390036...........     01.2422        16.78     390115..........     01.2944        20.16   
370014...........     01.2974        16.19     370112...........     01.0396        12.14     380037...........     01.2723        18.94     390037...........     01.2070        17.47     390116..........     01.1704        19.33   
370015...........     01.2134        13.44     370113...........     01.0878        12.37     380038...........     01.2241        20.37     390039...........     01.1191        15.31     390117..........     01.1667        14.44   
370016...........     01.3670        13.98     370114...........     01.5707        14.55     380039...........     01.2874        17.76     390040...........     00.9433        12.20     390118..........     01.2335        15.42   
370017...........     01.0433        10.30     370121...........     01.3274        12.36     380040...........     01.2957        17.85     390041...........     01.2547        17.32     390119..........     01.3588        16.18   
370018...........     01.3079        15.58     370122...........     01.2328        08.56     380042...........     01.1274        15.46     390042...........     01.3011        18.62     390121..........     01.2671        16.71   
370019...........     01.2293        10.56     370123...........     01.2574        13.79     380047...........     01.6528        16.43     390043...........     01.0180        13.85     390122..........     01.0577        14.83   
370020...........     01.2820        11.37     370125...........     01.0120        10.72     380048...........     01.0343        13.09     390044...........     01.5507        16.77     390123..........     01.2262        18.61   
370021...........     00.9875        09.49     370126...........     01.1444        08.72     380050...........     01.2490        15.78     390045...........     01.4345        16.03     390125..........     01.2525        13.82   
370022...........     01.3014        13.75     370131...........     00.9852        11.32     380051...........     01.5054        17.52     390046...........     01.4391        16.75     390126..........     01.2662        19.95   
370023...........     01.3318        13.57     370133...........     01.1343        09.86     380052...........     01.2264        15.01     390047...........     01.6983        19.69     390127..........     01.1644        19.24   
370025...........     01.3973        13.86     370138...........     01.1207        14.59     380055...........     01.1956        22.55     390048...........     01.1614        14.69     390128..........     01.1296        16.84   
370026...........     01.3731        15.30     370139...........     01.0268        11.63     380056...........     01.1050        14.28     390049...........     01.5118        18.00     390130..........     01.1441        15.37   
370028...........     01.6725        15.88     370140...........     01.0131        10.01     380060...........     01.4528        20.35     390050...........     02.0235        19.37     390131..........     01.2126        16.10   
370029...........     01.2138        11.58     370141...........     01.3868        19.42     380061...........     01.5793        19.88     390051...........     02.0975        21.73     390132..........     01.1890        19.58   
370030...........     01.2942        12.91     370146...........     01.1216        10.05     380062...........     01.1231        12.73     390052...........     01.1504        15.00     390133..........     01.7108        19.44   
370032...........     01.3970        14.59     370148...........     01.3444        17.30     380063...........     01.2107        21.13     390054...........     01.1256        12.61     390135..........     01.2409        19.50   
370033...........     01.1186        10.55     370149...........     01.1819        13.75     380064...........     01.3004        18.01     390055...........     01.6914        19.09     390136..........     01.2243        15.15   
370034...........     01.1527        11.98     370153...........     01.1515        13.77     380065...........     01.0301        17.02     390056...........     01.1092        15.26     390137..........     01.1478        15.60   
370035...........     01.4806        14.39     370154...........     00.9920        11.80     380066...........     01.3889        15.59     390057...........     01.2594        17.71     390138..........     01.1888        17.08   
370036...........     00.9836        08.68     370156...........     01.1498        12.70     380068...........     01.0179        18.42     390058...........     01.3011        16.54     390139..........     01.4318        22.12   
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
390142...........     01.6493        23.01     390229...........     01.5597        17.58     400106...........     01.1979        07.10     420062...........     01.4210        16.13     430062..........     00.8312        10.11   
390145...........     01.2560        18.61     390231...........     01.3301        21.13     400109...........     01.5773        08.48     420064...........     01.1426        12.08     430064..........     01.1215        10.40   
390146...........     01.2364        15.78     390233...........     01.3497        16.52     400110...........     01.1538        07.68     420065...........     01.3385        15.64     430065..........     01.0568        10.46   
390147...........     01.2439        17.19     390235...........     01.8225        22.16     400111...........     01.1355        07.53     420066...........     00.9695        13.59     430066..........     00.9866        11.12   
390148...........     01.0515        16.31     390236...........     01.2383        15.25     400112...........     01.1379        06.25     420067...........     01.2428        14.80     430073..........     01.1130        12.81   
390149...........     01.1993        16.23     390237...........     01.5130        18.07     400113...........     01.1794        06.20     420068...........     01.2142        14.59     430076..........     01.0582        08.32   
390150...........     01.2176        17.11     390238...........     01.1068        16.03     400114...........     01.0547        07.18     420069...........     01.1241        12.28     430077..........     01.5249        14.81   
390151...........     01.2336        16.00     390242...........     01.3050        17.49     400115...........     00.9663        06.66     420070...........     01.2769        14.64     430079..........     00.9633        10.06   
390152...........     01.0868        15.09     390244...........     00.8984        12.14     400117...........     01.1815        07.29     420071...........     01.3506        15.13     430080..........     01.2387        09.20   
390153...........     01.2563        20.26     390245...........     01.3528        21.26     400118...........     01.1587        07.27     420072...........     00.9383        09.89     430081..........     00.9166    ............
390154...........     01.1597        13.46     390246...........     01.1839        15.09     400120...........     01.3397        08.45     420073...........     01.3086        17.03     430082..........     00.8013    ............
390155...........     01.2563        20.35     390247...........     01.0549        17.29     400122...........     01.0084    ............  420074...........     00.9685        10.42     430083..........     00.8691    ............
390156...........     01.3401        20.05     390249...........     01.0228        11.44     400123...........     01.1291    ............  420075...........     00.9846        12.37     430084..........     00.8696    ............
390157...........     01.2131        16.84     390256...........     01.7580        18.11     400124...........     02.9908    ............  420076...........     01.2141        20.07     430085..........     00.8846    ............
390158...........     01.2801        17.26     390258...........     01.2812        19.11     410001...........     01.3209        21.02     420078...........     01.7180        18.78     430086..........     00.8381    ............
390159...........     01.3236        19.13     390260...........     01.2477        16.81     410002...........     01.1232        18.61     420079...........     01.4689        15.84     430087..........     00.9519        08.98   
390160...........     01.1792        17.04     390262...........     01.8522        16.06     410004...........     01.4044        18.86     420080...........     01.2119        16.23     430088..........     00.8629        10.78   
390161...........     01.1996        13.09     390263...........     01.4942        18.36     410005...........     01.3453        20.92     420081...........     00.8155        17.83     440001..........     01.0939        11.94   
390162...........     01.2775        17.98     390265...........     01.2981        16.95     410006...........     01.2029        19.91     420082...........     01.4336        16.58     440002..........     01.5976        14.74   
390163...........     01.1488        16.57     390266...........     01.0921        15.78     410007...........     01.6612        19.87     420083...........     01.2220        16.12     440003..........     01.0925        13.69   
390164...........     02.0047        18.51     390267...........     01.2074        18.58     410008...........     01.1993        19.67     420084...........     01.0603        11.81     440006..........     01.3803        16.17   
390166...........     01.1007        16.02     390268...........     01.2848        18.08     410009...........     01.3191        19.81     420085...........     01.2760        16.15     440007..........     01.0239        10.86   
390167...........     01.2698        19.78     390270...........     01.3114        15.08     410010...........     01.0205        23.33     420086...........     01.4183        16.19     440008..........     00.9799        13.98   
390168...........     01.1845        16.49     390272...........     00.5336        21.19     410011...........     01.2089        20.92     420087...........     01.6085        15.15     440009..........     01.0384        11.29   
390169...........     01.1987        16.06     390275...........     00.4818    ............  410012...........     01.6430        18.11     420088...........     01.2268        14.81     440010..........     00.9658        11.46   
390170...........     01.8123        19.75     390277...........     00.5117        17.31     410013...........     01.2305        22.52     420089...........     01.3309        19.45     440011..........     01.2416        14.86   
390171...........     01.1326        15.68     390278...........     00.8304        15.98     420002...........     01.3547        19.58     420091...........     00.5427    ............  440012..........     01.3028        15.12   
390172...........     01.2496        18.70     390279...........     01.0851    ............  420004...........     01.8499        16.90     430004...........     01.0743        13.84     440014..........     01.0875        11.29   
390173...........     01.1593        16.62     400001...........     01.1960        06.55     420005...........     01.1442        12.82     430005...........     01.2615        13.13     440015..........     01.5121        14.85   
390174...........     01.6015        22.20     400002...........     01.3854        07.95     420006...........     01.2264        15.90     430007...........     01.1788        11.22     440016..........     00.9771        10.44   
390176...........     01.1440        15.39     400003...........     01.1694        07.81     420007...........     01.5334        15.37     430008...........     01.2466        13.24     440017..........     01.5485        16.57   
390178...........     01.2716        16.67     400004...........     01.2066        07.64     420009...........     01.2458        14.71     430009...........     01.1238        10.57     440018..........     01.3789        16.57   
390179...........     01.2340        21.06     400005...........     01.0590        05.93     420010...........     01.0673        13.19     430010...........     01.1450        08.61     440019..........     01.5427        17.86   
390180...........     01.4641        21.46     400006...........     01.1799        06.55     420011...........     01.0843        13.76     430011...........     01.3361        12.88     440020..........     01.1773        16.04   
390181...........     01.0502        19.17     400007...........     01.1932        06.70     420014...........     01.0055        11.42     430012...........     01.3001        13.57     440022..........     01.1406        12.73   
390183...........     01.1202        26.56     400008...........     01.2303        06.13     420015...........     01.3023        16.41     430013...........     01.2229        14.39     440023..........     00.9996        10.57   
390184...........     01.1498        16.80     400009...........     00.9715        06.80     420016...........     01.0885        15.23     430014...........     01.3163        15.40     440024..........     01.2947        14.98   
390185...........     01.1490        15.23     400010...........     00.9391        07.03     420018...........     01.5734        16.53     430015...........     01.2045        13.41     440025..........     01.1006        12.43   
390186...........     00.9995        15.14     400011...........     01.0323        07.66     420019...........     01.1590        13.94     430016...........     01.7269        16.10     440026..........     00.8359        15.50   
390189...........     01.1284        20.06     400012...........     01.1224        07.74     420020...........     01.2261        14.85     430018...........     00.9470        12.97     440029..........     01.2470        14.99   
390191...........     01.0646        13.79     400013...........     01.0683        07.16     420022...........     00.9928        15.20     430022...........     00.9728        09.90     440030..........     01.1284        12.38   
390192...........     01.1099        15.96     400014...........     01.3430        07.16     420023...........     01.3542        17.43     430023...........     00.9374        08.41     440031..........     01.0313        12.09   
390193...........     01.1706        14.51     400015...........     01.2899        09.68     420026...........     01.8584        17.53     430024...........     00.9749        11.02     440032..........     00.9747        10.65   
390194...........     01.1110        17.87     400016...........     01.3243        09.18     420027...........     01.3190        14.02     430025...........     01.0084        09.69     440033..........     01.0762        16.12   
390195...........     01.7079        20.83     400017...........     01.1462    ............  420028...........     01.1146        11.11     430026...........     00.9364        10.09     440034..........     01.4203        17.40   
390196...........     01.2085    ............  400018...........     01.2633        09.43     420029...........     01.7580        13.19     430027...........     01.7464        15.94     440035..........     01.2694        14.46   
390197...........     01.2695        18.10     400019...........     01.5561        08.81     420030...........     01.2053        16.33     430028...........     01.0483        11.61     440039..........     01.5723        17.12   
390198...........     01.2348        13.92     400021...........     01.3612        07.76     420031...........     01.0216        10.68     430029...........     01.0118        12.71     440040..........     00.9616        13.60   
390199...........     01.2443        14.43     400022...........     01.3135        08.22     420033...........     01.1545        17.58     430031...........     00.9741        10.28     440041..........     00.8480        13.66   
390200...........     01.0160        14.23     400024...........     01.0605        07.19     420035...........     00.7681        11.27     430033...........     01.0813        12.29     440046..........     01.3210        13.16   
390201...........     01.2887        17.68     400026...........     00.9117        06.70     420036...........     01.2337        14.65     430034...........     01.0273        10.85     440047..........     00.9167        11.74   
390203...........     01.2616        19.27     400027...........     01.1374        07.31     420037...........     01.2435        18.15     430036...........     00.9902        08.36     440048..........     01.7468        15.49   
390204...........     01.2898        17.68     400028...........     01.0796        06.70     420038...........     01.2236        12.41     430037...........     00.9860        11.79     440049..........     01.6463        15.50   
390205...........     01.2590        21.76     400029...........     01.1194        06.21     420039...........     01.1026        13.26     430038...........     00.9967        08.43     440050..........     01.1715        14.53   
390206...........     01.3254        18.69     400031...........     01.0063        07.72     420040...........     01.1984        13.54     430039...........     01.0133        09.15     440051..........     00.9327        12.36   
390209...........     01.0000        13.32     400032...........     01.1308        07.65     420042...........     01.2081        11.67     430040...........     00.9164        11.35     440052..........     01.1899        13.51   
390211...........     01.2337        16.85     400044...........     01.1772        08.60     420043...........     01.2471        15.44     430041...........     00.9265        11.35     440053..........     01.2499        14.72   
390213...........     00.9994        13.22     400048...........     01.0208        07.77     420044...........     01.2187        14.95     430042...........     01.1139        15.25     440054..........     01.0354        13.96   
390215...........     01.1305        18.84     400061...........     01.6026        11.46     420048...........     01.1489        13.91     430043...........     01.1531        13.05     440056..........     01.0828        11.91   
390217...........     01.2153        17.46     400079...........     01.2889        08.92     420049...........     01.2240        14.11     430044...........     00.9339        11.74     440057..........     01.0210        12.82   
390219...........     01.2176        16.47     400087...........     01.2064        06.69     420051...........     01.5558        16.53     430047...........     01.1189        11.70     440058..........     01.1717        14.16   
390220...........     01.1618        17.74     400088...........     00.5413        06.59     420053...........     01.0975        14.06     430048...........     01.2329        14.21     440059..........     01.1602        12.81   
390222...........     01.2537        18.22     400094...........     01.0019        06.74     420054...........     01.2228        16.05     430049...........     00.9176        10.80     440060..........     01.2069        12.90   
390223...........     01.6707        20.96     400098...........     01.2598        07.55     420055...........     01.0796        13.01     430051...........     00.9670        11.03     440061..........     01.2179        13.93   
390224...........     00.9309        12.60     400102...........     01.1275        07.49     420056...........     01.0988        12.61     430054...........     00.9900        11.56     440063..........     01.5118        16.27   
390225...........     01.2201        15.00     400103...........     01.4683        08.79     420057...........     01.1818        12.00     430056...........     00.8828        09.09     440064..........     01.0944        13.98   
390226...........     01.6953        20.96     400104...........     01.2502        07.79     420059...........     01.0068        12.84     430057...........     00.9116        10.70     440065..........     01.1869        15.06   
390228...........     01.2050        17.13     400105...........     01.1836        07.14     420061...........     01.2152        14.38     430060...........     00.9919        08.54     440067..........     01.0942        15.26   
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                                                                                                              Page 14 of 16                                                                                                             
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
440068...........     01.1924        15.49     440184...........     01.4333        18.42     450081...........     01.1267        13.12     450188...........     01.0305        11.94     450337..........     01.1915        13.85   
440069...........     01.1352        13.16     440185...........     01.0961        16.67     450082...........     00.9950        11.00     450190...........     01.1301        18.27     450340..........     01.3291        14.37   
440070...........     00.9900        12.32     440186...........     01.1356        18.57     450083...........     01.6364        16.12     450191...........     01.1551        15.56     450341..........     00.9969        14.42   
440071...........     01.4078        14.54     440187...........     01.1848        15.17     450085...........     01.1237        12.96     450192...........     01.0660        16.37     450346..........     01.3618        15.28   
440072...........     01.3492        11.32     440189...........     01.4962        16.74     450087...........     01.5071        19.75     450193...........     02.0687        18.20     450347..........     01.1741        15.06   
440073...........     01.3062        15.18     440192...........     01.1121        13.88     450090...........     01.1174        11.65     450194...........     01.2573        15.44     450348..........     01.0163        10.55   
440074...........     00.8046        12.15     440193...........     01.2591        17.17     450092...........     01.1998        13.55     450195...........     01.3166        17.30     450349..........     01.1022        23.66   
440078...........     01.0167        11.32     440194...........     01.3015        18.28     450094...........     01.3927        19.86     450196...........     01.4344        14.92     450351..........     01.2671        22.84   
440079...........     00.7294    ............  440196...........     00.9419        14.86     450096...........     01.4510        16.16     450197...........     01.1705        16.99     450352..........     01.2159        15.55   
440081...........     01.1648        12.12     440197...........     01.3731        19.01     450097...........     01.4266        17.31     450200...........     01.4866        14.68     450353..........     01.2255        15.17   
440082...........     01.8422        19.28     440200...........     01.1180        16.36     450098...........     01.2099        12.67     450201...........     00.9941        13.72     450355..........     01.0862        12.14   
440083...........     01.2565        09.96     440203...........     00.9907        13.79     450099...........     01.2034        17.78     450203...........     01.2823        14.24     450358..........     02.0362        17.60   
440084...........     01.1792        09.97     440205...........     01.2429        12.39     450101...........     01.3505        14.37     450209...........     01.4285        15.63     450362..........     01.0606        10.60   
440087...........     01.0550        12.47     440206...........     00.9048        07.60     450102...........     01.6868        17.28     450210...........     01.1085        13.40     450365..........     00.9335    ............
440090...........     01.0419        12.38     450002...........     01.4879        15.52     450104...........     01.2728        12.51     450211...........     01.2519        13.86     450366..........     01.4727        17.50   
440091...........     01.5427        15.71     450004...........     01.1356        11.11     450107...........     01.5365        16.38     450213...........     01.3483        13.57     450369..........     01.1119        11.81   
440095...........     01.0850        19.37     450005...........     01.1437        14.76     450108...........     00.9963        11.41     450214...........     01.4106        17.51     450370..........     01.2054        12.06   
440100...........     01.1012        12.24     450007...........     01.2579        12.30     450109...........     01.2270        13.96     450217...........     01.0888        10.11     450371..........     01.1528        10.89   
440102...........     01.0848        12.02     450008...........     01.3856        14.03     450110...........     01.2151        12.04     450219...........     01.0391        11.49     450372..........     01.3496        16.37   
440103...........     01.2255        16.56     450010...........     01.3304        13.63     450111...........     01.2528        17.62     450221...........     01.0170        13.07     450373..........     01.1627        11.09   
440104...........     01.5383        16.76     450011...........     01.5514        15.71     450112...........     01.2586        12.44     450222...........     01.6899        22.10     450374..........     00.9156        11.01   
440105...........     01.2990        16.68     450014...........     01.1780        12.60     450113...........     01.2399        13.96     450224...........     01.3712        18.01     450376..........     01.4802        10.63   
440109...........     01.1312        11.86     450015...........     01.5222        13.57     450118...........     01.4704        15.64     450229...........     01.4656        14.60     450378..........     01.1188        17.92   
440110...........     00.9537        13.67     450016...........     01.7132        15.62     450119...........     01.3313        14.65     450231...........     01.5167        14.06     450379..........     01.6128        19.58   
440111...........     01.2061        18.15     450018...........     01.5558        18.40     450121...........     01.4436        16.93     450233...........     00.9975        12.70     450381..........     00.9521        10.67   
440114...........     01.0382        11.65     450020...........     01.0126        13.75     450123...........     01.0926        19.97     450234...........     00.9638        10.46     450388..........     01.6247        16.36   
440115...........     01.0509        13.80     450021...........     01.9184        17.59     450124...........     01.4947        16.86     450235...........     00.9574        11.12     450389..........     01.2064        15.73   
440120...........     01.4669        15.49     450023...........     01.3907        13.94     450126...........     01.4006        16.17     450236...........     01.1383        15.95     450393..........     01.2687        18.35   
440121...........     01.0316        11.93     450024...........     01.3103        12.06     450127...........     00.9875        09.55     450237...........     01.4890        14.79     450395..........     01.0503        15.15   
440125...........     01.4769        15.68     450025...........     01.4786        11.79     450128...........     01.2492        12.38     450239...........     01.1694        12.14     450399..........     01.0567        12.15   
440130...........     01.1033        13.75     450027...........     01.4255        18.45     450130...........     01.5034        14.99     450241...........     00.8571        13.09     450400..........     01.1692        14.98   
440131...........     01.0620        12.90     450028...........     01.4594        16.21     450131...........     01.2609        18.39     450243...........     00.8654        10.77     450403..........     01.2576        18.67   
440132...........     01.1099        12.72     450029...........     01.4332        11.79     450132...........     01.4818        14.53     450246...........     00.9884        13.87     450410..........     01.1329        17.45   
440133...........     01.4574        17.01     450031...........     01.6847        16.35     450133...........     01.5462        15.33     450249...........     00.9242    ............  450411..........     00.9858        11.22   
440135...........     01.4142        18.36     450032...........     01.2429        12.31     450135...........     01.7045        16.49     450250...........     01.0123        15.96     450417..........     01.0278        12.26   
440136...........     01.0699        15.73     450033...........     01.6427        14.59     450137...........     01.4311        18.08     450253...........     01.1356        10.67     450418..........     01.3519        15.53   
440137...........     01.0092        11.19     450034...........     01.5016        15.36     450140...........     00.7344        16.53     450258...........     01.1194        10.75     450419..........     01.2387        16.21   
440141...........     01.1491        11.96     450035...........     01.4607        16.70     450142...........     01.3693        18.81     450259...........     01.1507        17.45     450422..........     00.6548        24.82   
440142...........     01.0856        09.45     450037...........     01.5301        16.15     450143...........     01.0250        10.41     450264...........     00.8415        11.39     450423..........     01.3000    ............
440143...........     01.0555        15.56     450039...........     01.4291        16.82     450144...........     01.1483        14.30     450269...........     01.0799        13.62     450424..........     01.2537        15.64   
440144...........     01.1983        16.68     450040...........     01.5737        16.30     450145...........     00.8845        14.64     450270...........     01.0762        08.60     450429..........     01.0341        12.10   
440145...........     01.0552        10.86     450042...........     01.6099        15.48     450146...........     00.9848        15.24     450271...........     01.1226        14.20     450431..........     01.5897        15.79   
440146...........     01.0442        11.21     450043...........     01.4581        12.46     450147...........     01.3446        17.43     450272...........     01.2134        15.57     450438..........     01.0859        16.17   
440147...........     00.8996        14.36     450044...........     01.5896        21.42     450148...........     01.2058        17.15     450276...........     01.0078        08.60     450446..........     00.9648        11.85   
440148...........     01.2042        17.31     450046...........     01.3861        12.38     450149...........     01.3434        16.64     450278...........     01.0542        10.91     450447..........     01.3192        16.08   
440149...........     01.2333        14.70     450047...........     01.1028        10.47     450150...........     00.9529        12.20     450280...........     01.2975        15.07     450450..........     01.0270        12.30   
440150...........     01.2405        16.92     450050...........     01.2011        13.96     450151...........     01.1434        12.24     450283...........     01.0786        11.56     450451..........     01.0230        15.22   
440151...........     01.2866        15.49     450051...........     01.5610        17.57     450152...........     01.2882        14.74     450286...........     01.0253        12.11     450457..........     01.6927        16.01   
440152...........     01.5898        15.64     450052...........     01.1106        12.62     450153...........     01.5697        16.68     450288...........     01.2285        12.61     450460..........     01.0146        13.30   
440153...........     01.2676        14.17     450053...........     01.0770        12.87     450154...........     01.1375        11.46     450289...........     01.3342        15.80     450462..........     01.8283        16.43   
440154...........     00.7750    ............  450054...........     01.6860        18.29     450155...........     01.0677        14.52     450292...........     01.3450        15.96     450464..........     00.9906        16.00   
440156...........     01.4968        18.20     450055...........     01.1119        10.81     450157...........     01.0367        12.65     450293...........     00.9793        14.15     450465..........     01.2348        15.09   
440157...........     01.0510        11.50     450056...........     01.6735        16.56     450160...........     00.8887        16.83     450296...........     01.2606        18.17     450467..........     01.0235        12.74   
440159...........     01.2081        15.33     450058...........     01.5112        13.63     450162...........     01.2822        16.42     450297...........     01.1630        12.08     450469..........     01.3055        15.75   
440160...........     00.8975        12.59     450059...........     01.3682        12.34     450163...........     01.0860        15.46     450299...........     01.4736        16.11     450473..........     00.9937        14.40   
440161...........     01.5956        18.01     450060...........     01.3953        20.85     450164...........     01.0303        12.98     450303...........     00.8890        09.86     450475..........     01.1083        12.45   
440166...........     01.4674        16.87     450063...........     01.0644        09.22     450165...........     01.0299        13.46     450306...........     01.0605        11.18     450484..........     01.5565        18.13   
440168...........     01.0251        13.13     450064...........     01.5477        15.22     450166...........     01.0477        10.59     450307...........     00.9588        12.42     450488..........     01.2262        17.64   
440170...........     01.2996        17.76     450065...........     01.0185        14.74     450169...........     00.8598        13.97     450309...........     01.0837        10.76     450489..........     00.9447        14.79   
440173...........     01.4961        15.39     450068...........     01.7485        17.99     450170...........     01.0853        11.40     450315...........     01.2025        18.72     450497..........     01.1794        10.99   
440174...........     00.9329        13.46     450070...........     01.1750        15.54     450176...........     01.2765        12.94     450320...........     01.4029        15.82     450498..........     01.0338        11.09   
440175...........     01.1863        16.89     450072...........     01.2483        16.10     450177...........     01.1260        12.07     450321...........     00.8595        11.25     450508..........     01.5985        14.80   
440176...........     01.2955        16.07     450073...........     01.1646        11.84     450178...........     01.1507        14.80     450322...........     00.9685        16.67     450514..........     01.1152        16.87   
440178...........     01.2240        18.45     450074...........     01.2961        15.77     450179...........     00.9483        12.39     450324...........     01.5439        15.52     450517..........     00.9483        11.05   
440180...........     01.0623        15.48     450076...........     01.4760    ............  450181...........     00.9540        13.38     450325...........     01.2659        08.99     450518..........     01.4148        16.16   
440181...........     01.0116        10.47     450078...........     01.0118        12.03     450184...........     01.4931        19.38     450327...........     01.0095        10.48     450523..........     01.5408        19.98   
440182...........     00.9546        14.12     450079...........     01.4836        19.22     450185...........     01.0401        08.32     450330...........     01.1748        15.70     450530..........     01.3057        23.01   
440183...........     01.5116        16.14     450080...........     01.2476        14.23     450187...........     01.3040        14.52     450334...........     00.9993        11.28     450534..........     00.9862        13.79   
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                                                                                                              Page 15 of 16                                                                                                             
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
450535...........     01.2010        14.83     450666...........     01.2579        17.39     450775...........     01.2483        15.68     490001...........     01.1080        17.17     490095..........     01.2300        15.14   
450537...........     01.3977        16.04     450668...........     01.5902        16.93     450776...........     00.8654    ............  490002...........     01.0324        13.41     490097..........     01.1434        12.72   
450538...........     01.1933        19.68     450669...........     01.2433        18.67     450777...........     01.0252    ............  490003...........     00.6498        15.73     490098..........     01.3158        10.87   
450539...........     01.2074        15.30     450670...........     01.2989        15.92     450778...........     00.8639    ............  490004...........     01.2172        15.40     490099..........     00.9645        13.59   
450544...........     01.2983        19.62     450672...........     01.6454        18.49     450779...........     01.2592    ............  490005...........     01.4575        15.40     490100..........     01.3164        14.13   
450545...........     01.2482        16.20     450673...........     01.0977        09.93     450780...........     01.8496    ............  490006...........     01.1436        11.75     490101..........     01.1140        20.90   
450546...........     01.2735    ............  450674...........     00.8239        19.25     450781...........     01.4437    ............  490007...........     02.0141        15.29     490104..........     00.9634        14.01   
450547...........     00.9882        12.78     450675...........     01.3922        18.32     450782...........     01.3920    ............  490008...........     01.0542        20.97     490105..........     00.7030        14.74   
450550...........     01.0579        19.47     450677...........     01.3392        14.89     450783...........     01.1159    ............  490009...........     01.6730        17.21     490106..........     00.8216        15.97   
450551...........     01.1708        12.60     450678...........     01.5634        19.52     450785...........     00.7492    ............  490010...........     01.0901        15.40     490107..........     01.2613        19.56   
450558...........     01.7522        17.98     450681...........     01.5777        14.98     450786...........     00.8128    ............  490011...........     01.3316        16.08     490108..........     00.8199        15.00   
450559...........     00.8813        11.92     450682...........     01.2617        17.46     450787...........     01.0967    ............  490012...........     01.1120        13.90     490109..........     00.8839        14.56   
450561...........     01.6573        14.93     450683...........     01.3232        19.60     450897...........     04.8995    ............  490013...........     01.1674        13.67     490110..........     01.1808        16.61   
450563...........     01.2560        19.54     450684...........     01.2661        17.89     460001...........     01.6448        19.60     490014...........     01.6098        19.87     490111..........     01.1888        14.35   
450565...........     01.3346        13.56     450686...........     01.5852        15.83     460003...........     01.5819        17.26     490015...........     01.4066        13.85     490112..........     01.6083        18.29   
450570...........     01.0642        11.27     450688...........     01.3813        17.47     460004...........     01.7181        17.97     490017...........     01.3796        15.60     490113..........     01.2904        19.16   
450571...........     01.4774        13.89     450690...........     01.3717        13.94     460005...........     01.3773        17.46     490018...........     01.2066        15.56     490114..........     01.0637        13.79   
450573...........     00.9893        11.89     450691...........     01.5282        17.57     460006...........     01.2694        17.06     490019...........     01.1141        13.78     490115..........     01.2172        12.44   
450574...........     01.0190        13.95     450694...........     01.2157        16.02     460007...........     01.3061        16.89     490020...........     01.1569        13.14     490116..........     01.1712        16.25   
450575...........     00.9800        20.31     450696...........     01.6328        19.75     460008...........     01.4546        15.99     490021...........     01.4360        15.75     490117..........     01.0851        11.43   
450578...........     00.9339        14.41     450697...........     01.3803        13.76     460009...........     01.6705        16.97     490022...........     01.2403        15.68     490118..........     01.6553        19.99   
450580...........     01.1564        12.24     450698...........     00.9347        10.48     460010...........     02.0520        19.06     490023...........     01.2259        15.65     490119..........     01.3118        15.33   
450583...........     00.9535        11.81     450700...........     00.9252        11.65     460011...........     01.4141        15.56     490024...........     01.6081        15.30     490120..........     01.3684        15.93   
450584...........     01.1623        10.95     450702...........     01.4902        18.26     460013...........     01.5193        14.87     490027...........     01.1680        12.49     490122..........     01.2882        20.07   
450586...........     01.0132        12.39     450703...........     01.4734        19.40     460014...........     01.0277        11.67     490028...........     01.3351        17.29     490123..........     01.1184        14.53   
450587...........     01.2756        17.28     450704...........     01.4047        17.61     460015...........     01.2618        17.61     490030...........     01.2464        10.92     490124..........     01.1835        15.29   
450591...........     01.1456        13.04     450705...........     00.7935        15.32     460016...........     00.8759        12.40     490031...........     01.0948        11.91     490126..........     01.2574        13.61   
450596...........     01.2553        16.69     450706...........     01.2186        21.01     460017...........     01.3138        15.18     490032...........     01.6856        19.11     490127..........     01.0440        13.33   
450597...........     01.0363        14.80     450709...........     01.1486        17.85     460018...........     00.9460        11.56     490033...........     01.1445        14.76     490130..........     01.1862        14.96   
450603...........     00.8683        13.23     450711...........     01.6880        16.47     460019...........     00.9390        13.93     490035...........     01.1308        11.43     490131..........     00.9698        12.94   
450604...........     01.2527        12.31     450712...........     00.9634        12.74     460020...........     00.9137        12.14     490037...........     01.1560        11.92     500001..........     01.2923        18.93   
450605...........     01.2779        18.23     450713...........     01.4156        17.31     460021...........     01.3933        17.13     490038...........     01.2779        12.36     500002..........     01.4081        17.35   
450607...........     00.9751        14.12     450715...........     01.2985        21.28     460022...........     00.9647        17.88     490040...........     01.3651        19.78     500003..........     01.2750        18.17   
450609...........     00.9018        09.27     450716...........     01.2054        16.91     460023...........     01.1799        18.70     490041...........     01.2138        14.32     500005..........     01.7725        21.33   
450610...........     01.4548        16.20     450717...........     01.2345        20.68     460024...........     00.9251        13.00     490042...........     01.3575        14.34     500007..........     01.3302        18.70   
450614...........     01.0623        11.94     450718...........     01.2043        19.69     460025...........     00.7849        11.54     490043...........     01.2384        17.27     500008..........     01.9158        20.34   
450615...........     00.9587        09.07     450723...........     01.2865        17.31     460026...........     00.9363        17.49     490044...........     01.3124        15.46     500009..........     01.2950        19.68   
450617...........     01.3526        17.98     450724...........     01.2186        18.65     460027...........     00.9938        16.41     490045...........     01.1795        16.83     500011..........     01.3334        18.64   
450620...........     01.1012        08.97     450725...........     01.0629        17.55     460029...........     01.0725        16.94     490046...........     01.4632        16.26     500012..........     01.5003        18.44   
450623...........     01.1697        16.27     450726...........     00.9058        11.21     460030...........     01.1697        18.98     490047...........     01.0849        14.15     500014..........     01.7367        20.69   
450626...........     01.0495        14.93     450727...........     00.8975        08.79     460032...........     01.0006        15.30     490048...........     01.4870        15.77     500015..........     01.3113        20.68   
450628...........     00.9443        11.42     450728...........     00.9029        15.06     460033...........     00.9457        20.50     490050...........     01.3532        19.03     500016..........     01.3509        20.11   
450630...........     01.5457        23.91     450730...........     01.4172        19.15     460035...........     00.9211        15.04     490052...........     01.5250        14.03     500019..........     01.2904        18.38   
450631...........     01.6436        16.75     450732...........     01.1630        16.76     460036...........     00.9040        17.97     490053...........     01.2464        12.69     500021..........     01.4452        18.44   
450632...........     01.0114        09.73     450733...........     01.3782        16.49     460037...........     00.9987        15.82     490054...........     01.0612        16.12     500023..........     01.1885        17.72   
450633...........     01.5528        16.84     450734...........     01.5058        15.76     460039...........     00.9376        19.39     490057...........     01.4240        15.34     500024..........     01.6275        20.14   
450634...........     01.3909        20.07     450735...........     00.7508        10.25     460041...........     01.2069        17.85     490059...........     01.5158        16.77     500025..........     01.8013        20.57   
450637...........     01.4227        18.37     450742...........     01.3086        20.55     460042...........     01.5113        14.35     490060...........     01.0745        17.38     500026..........     01.3592        20.11   
450638...........     01.5903        21.27     450743...........     01.4084        18.11     460043...........     01.4203        19.43     490063...........     01.5913        21.01     500027..........     01.5284        20.29   
450639...........     01.4527        19.59     450745...........     00.9400        17.81     460044...........     01.1393        18.06     490066...........     01.2265        16.33     500028..........     01.1173        13.44   
450641...........     00.9828        09.51     450746...........     00.9637        12.33     460046...........     01.3442        10.37     490067...........     01.2791        13.99     500029..........     00.9711        11.90   
450643...........     01.1399        16.08     450747...........     01.3086        15.66     460047...........     01.6639        17.76     490069...........     01.4013        13.22     500030..........     01.3182        20.51   
450644...........     01.6088        20.13     450749...........     01.0677        12.76     460049...........     01.9514    ............  490071...........     01.4827        17.01     500031..........     01.3004        18.25   
450646...........     01.5824        18.06     450750...........     00.9694        10.69     470001...........     01.1507        16.20     490073...........     01.3370        22.24     500033..........     01.2651        16.60   
450647...........     02.0219        20.54     450751...........     01.2764        15.02     470003...........     01.9342        18.36     490074...........     01.3077        15.49     500035..........     01.4790        20.14   
450648...........     01.0880        10.99     450754...........     01.0882        10.22     470004...........     01.0472        13.47     490075...........     01.2757        14.78     500036..........     01.2636        16.85   
450649...........     01.0221        14.87     450755...........     01.1710        14.46     470005...........     01.1866        17.44     490077...........     01.1984        16.35     500037..........     01.1272        16.09   
450651...........     01.8225        19.22     450757...........     00.9495        13.00     470006...........     01.1352        12.40     490079...........     01.3414        13.39     500039..........     01.2969        17.66   
450652...........     00.9740        12.60     450758...........     01.7735        18.93     470008...........     01.1864        15.30     490083...........     00.6505        13.89     500041..........     01.2711        20.31   
450653...........     01.2219        16.37     450760...........     01.2035        18.66     470010...........     01.0838        16.66     490084...........     01.2007        14.87     500042..........     01.3457        18.95   
450654...........     00.9870        11.17     450761...........     01.1076        12.48     470011...........     01.1222        18.12     490085...........     01.1274        11.80     500043..........     01.1929        16.80   
450656...........     01.3287        15.64     450763...........     01.0949        13.74     470012...........     01.2087        15.18     490088...........     01.2401        13.15     500044..........     01.9294        19.80   
450658...........     01.0107        11.01     450765...........     00.9207        16.55     470013...........     01.1467        18.22     490089...........     01.0498        14.04     500045..........     01.0758        17.06   
450659...........     01.4488        18.74     450766...........     01.9990        20.12     470015...........     01.1414        18.87     490090...........     01.1883        13.06     500048..........     00.9024        14.27   
450660...........     01.6132        18.85     450769...........     00.9496        09.57     470018...........     01.1288        18.12     490091...........     01.1775        18.85     500049..........     01.3098        17.10   
450661...........     01.2530        18.21     450770...........     01.0683        12.57     470020...........     01.0126        12.85     490092...........     01.1790        13.48     500050..........     01.4162        19.09   
450662...........     01.3966        17.00     450771...........     01.7335        15.16     470023...........     01.2355        16.33     490093...........     01.2851        14.13     500051..........     01.6664        20.33   
450665...........     00.9821        10.88     450774...........     00.7194    ............  470024...........     01.1330        16.23     490094...........     01.2223        15.14     500052..........     01.2459    ............
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     Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage       Provider      Casemixindex  Avg.hourwage      Provider      Casemixindex  Avg.hourwage
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
500053...........     01.2011        17.77     510016...........     01.0306    ............  520029...........     00.9356        13.66     520120...........     01.0549        16.55                                                 
500054...........     01.8414        19.04     510018...........     01.0635        13.12     520030...........     01.6630        17.90     520121...........     00.9566        13.17                                                 
500055...........     01.0545        17.78     510020...........     01.0645        09.18     520031...........     01.0977        13.75     520122...........     00.9921        12.50                                                 
500057...........     01.3022        14.98     510022...........     01.6731        16.04     520032...........     01.1459        13.19     520123...........     01.0355        14.99                                                 
500058...........     01.5191        17.59     510023...........     01.0358        15.15     520033...........     01.2335        15.10     520124...........     01.1686        13.76                                                 
500059...........     01.1318        18.35     510024...........     01.3729        16.07     520034...........     01.1894        16.57     520130...........     01.0130        11.54                                                 
500060...........     01.3448        19.19     510025...........     00.9358        10.47     520035...........     01.2608        14.62     520131...........     01.0285        14.68                                                 
500061...........     01.0334        17.95     510026...........     00.9756        11.32     520037...........     01.6206        16.75     520132...........     01.1499        12.68                                                 
500062...........     00.9969        13.74     510027...........     01.0578        14.24     520038...........     01.3648        16.08     520134...........     01.0816        13.78                                                 
500064...........     01.5477        19.70     510028...........     01.1631        15.98     520039...........     00.9879        15.17     520135...........     00.9958        12.99                                                 
500065...........     01.3263        16.39     510029...........     01.2526        15.30     520040...........     01.4142        16.73     520136...........     01.5003        17.75                                                 
500068...........     01.0253        14.82     510030...........     01.1206        15.72     520041...........     01.2128        13.13     520138...........     01.8382        18.83                                                 
500069...........     01.0526        16.11     510031...........     01.3039        14.14     520042...........     01.1115        15.88     520139...........     01.2251        16.83                                                 
500071...........     01.3303        18.34     510033...........     01.2757        13.57     520044...........     01.3413        15.51     520140...........     01.4922        17.20                                                 
500072...........     01.1532        18.80     510035...........     00.9763        15.60     520045...........     01.6487        16.77     520141...........     01.1391        15.13                                                 
500073...........     00.9973        17.71     510036...........     00.9689        11.73     520047...........     01.0137        13.50     520142...........     00.9776        11.46                                                 
500074...........     01.1769        13.37     510038...........     01.0385        13.95     520048...........     01.3805        15.97     520144...........     01.0601        14.49                                                 
500075...........     01.1943        18.49     510039...........     01.3985        14.67     520049...........     01.9376        15.82     520145...........     01.0163        14.95                                                 
500076...........     01.3655    ............  510043...........     01.0483        10.44     520051...........     01.8682        17.94     520146...........     01.1569        12.32                                                 
500077...........     01.2935        20.09     510046...........     01.2254        15.91     520053...........     01.0616        14.07     520148...........     01.1022        13.98                                                 
500079...........     01.2866        17.92     510047...........     01.1675        15.81     520054...........     01.0524        15.31     520149...........     00.9330        11.73                                                 
500080...........     00.8630        11.55     510048...........     01.0785        14.71     520056...........     01.3233        17.02     520151...........     01.1306        13.59                                                 
500084...........     01.1285        17.71     510050...........     01.2940        13.72     520057...........     01.0868        14.88     520152...........     01.1344        15.70                                                 
500085...........     01.0811        15.46     510053...........     01.0201        12.16     520058...........     01.0839        16.79     520153...........     00.9402        11.67                                                 
500086...........     01.4099        16.28     510055...........     01.2071        16.99     520059...........     01.2503        16.21     520154...........     01.1091        14.96                                                 
500088...........     01.2684        20.73     510058...........     01.2183        15.08     520060...........     01.2999        14.92     520156...........     01.0589        15.29                                                 
500089...........     01.0373        13.23     510059...........     01.3416        12.59     520062...........     01.2041        14.41     520157...........     00.9530        12.75                                                 
500090...........     00.9397        13.62     510060...........     01.0623        12.88     520063...........     01.1849        15.91     520159...........     00.8973        15.47                                                 
500092...........     01.1574        13.51     510061...........     01.0467        12.53     520064...........     01.6355        18.60     520160...........     01.7831        16.13                                                 
500094...........     00.8988        13.52     510062...........     01.2592        14.06     520066...........     01.2646        16.81     520161...........     01.0448        14.06                                                 
500096...........     00.9675        16.16     510063...........     01.0303        11.09     520068...........     00.9547        14.38     520170...........     01.2356        17.02                                                 
500097...........     01.1526        14.74     510065...........     00.9731        12.11     520069...........     01.2078        15.49     520171...........     01.0174        12.53                                                 
500098...........     00.8519        14.51     510066...........     01.1091        12.88     520070...........     01.4142        15.29     520173...........     01.1189        17.29                                                 
500101...........     00.9811        14.48     510067...........     01.1612        16.64     520071...........     01.0992        15.10     520174...........     01.4126        19.12                                                 
500102...........     00.9767        14.87     510068...........     01.0710        13.52     520074...........     01.1149        14.32     520176...........     00.7496        14.08                                                 
500104...........     01.2490        18.17     510070...........     01.1784        14.68     520075...........     01.4699        16.16     520177...........     01.5483        17.91                                                 
500106...........     01.0010        12.54     510071...........     01.2712        14.60     520076...........     01.0966        14.78     520178...........     01.0875        13.06                                                 
500107...........     01.1098        13.54     510072...........     01.0450        12.56     520077...........     00.9945        13.17     520180...........     00.9439    ............                                              
500108...........     01.6208        19.87     510076...........     01.0756    ............  520078...........     01.4355        14.81     530001...........     01.4675        13.50                                                 
500110...........     01.2003        17.29     510077...........     01.1413        13.24     520082...........     01.2824        14.80     530002...........     01.1585        15.32                                                 
500118...........     01.1182        18.17     510080...........     01.1329        10.16     520083...........     01.5777        19.35     530003...........     00.9243        08.81                                                 
500119...........     01.3361        19.79     510081...........     00.9920        12.98     520084...........     01.0819        15.01     530004...........     00.9555        12.56                                                 
500122...........     01.2703        17.54     510082...........     01.0732        10.95     520087...........     01.5706        15.92     530005...........     01.0749        12.06                                                 
500123...........     00.9858        13.48     510084...........     00.9838        11.17     520088...........     01.2564        16.27     530006...........     01.1664        14.95                                                 
500124...........     01.2764        19.76     510085...........     01.2731        17.35     520089...........     01.5021        17.22     530007...........     01.0341        11.54                                                 
500125...........     00.9817        11.02     510086...........     01.0079        11.50     520090...........     01.1723        14.69     530008...........     01.1909        16.73                                                 
500127...........     00.5815        14.25     520002...........     01.2811        15.62     520091...........     01.2647        15.62     530009...........     01.0330        14.78                                                 
500129...........     01.6456        19.35     520003...........     01.1372        13.96     520092...........     01.1141        15.12     530010...........     01.2997        15.83                                                 
500132...........     00.9544        15.33     520004...........     01.1943        15.11     520094...........     01.0966        15.78     530011...........     01.1438        14.63                                                 
500134...........     00.7358        16.03     520006...........     01.0362        15.92     520095...........     01.3727        16.94     530012...........     01.6828        15.20                                                 
500137...........     00.6391        16.87     520007...........     01.0592        12.43     520096...........     01.5421        15.50     530014...........     01.2755        13.73                                                 
500138...........     11.7584    ............  520008...........     01.4746        17.90     520097...........     01.2858        16.40     530015...........     01.1352        15.80                                                 
500139...........     01.4083        21.58     520009...........     01.6341        16.23     520098...........     01.7645        18.16     530016...........     01.1970        11.83                                                 
500140...........     00.7623        14.50     520010...........     01.1246        16.81     520100...........     01.2513        14.73     530017...........     00.9299        13.78                                                 
500141...........     01.3002        19.75     520011...........     01.1700        16.58     520101...........     01.1174        14.26     530018...........     01.0116        13.10                                                 
500143...........     00.9927        17.55     520013...........     01.3238        16.24     520102...........     01.2034        16.89     530019...........     00.9962        15.03                                                 
500898...........     00.7881    ............  520014...........     01.2286        14.17     520103...........     01.2829        16.41     530022...........     01.1654        15.74                                                 
510001...........     01.6358        16.68     520015...........     01.1845        15.42     520107...........     01.2809        15.17     530023...........     01.0053        15.88                                                 
510002...........     01.3741        16.27     520016...........     01.1159        13.09     520109...........     01.0403        14.86     530024...........     01.0512        12.11                                                 
510004...........     00.9722        10.17     520017...........     01.2080        15.10     520110...........     01.1018        15.27     530025...........     01.2788        16.17                                                 
510005...........     00.9383        13.99     520018...........     01.0659        14.58     520111...........     01.1017        12.09     530026...........     01.1205        13.08                                                 
510006...........     01.2076        15.75     520019...........     01.2888        14.27     520112...........     01.1632        16.29     530027...........     00.9454        09.41                                                 
510007...........     01.4198        15.97     520021...........     01.2952        16.83     520113...........     01.1975        15.62     530029...........     00.9396        13.04                                                 
510008...........     01.1015        15.33     520024...........     01.0655        11.87     520114...........     01.1537        12.45     530031...........     00.8884        13.78                                                 
510009...........     00.9452        10.45     520025...........     01.1316        14.34     520115...........     01.3141        14.47                                                                                                
510012...........     01.0842        14.87     520026...........     01.0683        15.67     520116...........     01.2563        16.13                                                                                                
510013...........     01.1873        14.27     520027...........     01.1591        17.08     520117...........     01.0813        14.87                                                                                                
510015...........     00.9551        11.69     520028...........     01.3516        16.26     520118...........     00.9872        09.46                                                                                                
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Case mix indexes do not include discharges from PPS-exempt units.                                                                                                                                                                 
Note: Case mix indexes include cases received in HCFA central office through Dec. 1993.                                                                                                                                                 


Table 4a.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                              Urban Areas                               
------------------------------------------------------------------------
     Urban area (constituent counties or county         Wage            
                    equivalents)                       index      GAF   
------------------------------------------------------------------------
Abilene, TX.........................................    0.8624    0.9036
Taylor, TX                                                              
Aguadilla, PR.......................................    0.4662    0.5930
Aguada, PR                                                              
Aguadilla, PR                                                           
Moca, PR                                                                
Akron, OH...........................................    0.9694    0.9789
Portage, OH                                                             
Summit, OH                                                              
Albany, GA..........................................    0.8861    0.9205
Dougherty, GA                                                           
Lee, GA                                                                 
Albany-Schenectady-Troy, NY.........................    0.8908    0.9239
Albany, NY                                                              
Montgomery, NY                                                          
Rensselaer, NY                                                          
Saratoga, NY                                                            
Schenectady, NY                                                         
Schoharie, NY                                                           
Albuquerque, NM.....................................    0.9362    0.9559
Bernalillo, NM                                                          
Sandoval, NM                                                            
Valencia, NM                                                            
Alexandria, LA......................................    0.8313    0.8812
Rapides, LA                                                             
Allentown-Bethlehem-Easton, PA......................    1.0158    1.0108
Carbon, PA                                                              
Lehigh, PA                                                              
Northampton, PA                                                         
Altoona, PA.........................................    0.9244    0.9476
Blair, PA                                                               
Amarillo, TX........................................    0.8084    0.8645
Potter, TX                                                              
Randall, TX                                                             
Anchorage, AK.......................................    1.3147    1.2061
Anchorage, AK                                                           
Ann Arbor, MI.......................................    1.2661    1.1754
Lenawee, MI                                                             
Livingston, MI                                                          
Washtenaw, MI                                                           
Anniston, AL........................................    0.7990    0.8576
Calhoun, AL                                                             
Appleton-Oshkosh-Neenah, WI.........................    0.8882    0.9220
Calumet, WI                                                             
Outagamie, WI                                                           
Winnebago, WI                                                           
Arecibo, PR.........................................    0.3815    0.5169
Arecibo, PR                                                             
Camuy, PR                                                               
Hatillo, PR                                                             
Asheville, NC.......................................    0.9212    0.9453
Buncombe, NC                                                            
Madison, NC                                                             
Athens, GA..........................................    0.9093    0.9370
Clarke, GA                                                              
Madison, GA                                                             
Oconee, GA                                                              
*Atlanta, GA........................................    1.0289    1.0197
Barrow, GA                                                              
Bartow, GA                                                              
Carroll, GA                                                             
Cherokee, GA                                                            
Clayton, GA                                                             
Cobb, GA                                                                
Coweta, GA                                                              
De Kalb, GA                                                             
Douglas, GA                                                             
Fayette, GA                                                             
Forsyth, GA                                                             
Fulton, GA                                                              
Gwinnett, GA                                                            
Henry, GA                                                               
Newton, GA                                                              
Paulding, GA                                                            
Pickens, GA                                                             
Rockdale, GA                                                            
Spalding, GA                                                            
Walton, GA                                                              
Atlantic City-Cape May, NJ..........................    1.0919    1.0621
Atlantic City, NJ                                                       
Cape May, NJ                                                            
Augusta-Aiken, GA-SC................................    0.8649    0.9054
Columbia, GA                                                            
McDuffie, GA                                                            
Richmond, GA                                                            
Aiken, SC                                                               
Edgefield, SC                                                           
Austin-San Marcos, TX...............................    0.9031    0.9326
Bastrop, TX                                                             
Caldwell, TX                                                            
Hays, TX                                                                
Travis, TX                                                              
Williamson, TX                                                          
Bakersfield, CA.....................................    1.0966    1.0652
Kern, CA                                                                
*Baltimore, MD......................................    0.9912    0.9940
Anne Arundel, MD                                                        
Baltimore, MD                                                           
Baltimore City, MD                                                      
Carroll, MD                                                             
Harford, MD                                                             
Howard, MD                                                              
Queen Annes, MD                                                         
Bangor, ME..........................................    0.9527    0.9674
Penobscot, ME                                                           
Barnstable-Yarmouth, MA.............................    1.3875    1.2514
Barnstable, MA                                                          
Baton Rouge, LA.....................................    0.8656    0.9059
Ascension, LA                                                           
East Baton Rouge, LA                                                    
Livingston, LA                                                          
West Baton Rouge, LA                                                    
Beaumont-Port Arthur, TX............................    0.8673    0.9071
Hardin, TX                                                              
Jefferson, TX                                                           
Orange, TX                                                              
Bellingham, WA......................................    1.1282    1.0861
Whatcom, WA                                                             
Benton Harbor, MI...................................    0.8209    0.8736
Berrien, MI                                                             
*Bergen-Passaic, NJ.................................    1.1316    1.0884
Bergen, NJ                                                              
Passaic, NJ                                                             
Billings, MT........................................    0.8758    0.9132
Yellowstone, MT                                                         
Biloxi-Gulfport-Pascagoula, MS......................    0.8282    0.8789
Hancock, MS                                                             
Harrison, MS                                                            
Jackson, MS                                                             
Binghamton, NY......................................    0.9220    0.9459
Broome, NY                                                              
Tioga, NY                                                               
Birmingham, AL......................................    0.8772    0.9142
Blount, AL                                                              
Jefferson, AL                                                           
St. Clair, AL                                                           
Shelby, AL                                                              
Bismarck, ND........................................    0.8684    0.9079
 Burleigh, ND                                                           
Morton, ND                                                              
Bloomington, IN.....................................    0.8567    0.8995
Monroe, IN                                                              
Bloomington-Normal, IL..............................    0.8528    0.8967
McLean, IL                                                              
Boise City, ID......................................    0.9067    0.9351
Ada, ID                                                                 
Canyon, ID                                                              
*Boston-Brockton-Nashua, MA-NH......................    1.1564    1.1046
Bristol, MA                                                             
Essex, MA                                                               
Middlesex, MA                                                           
Norfolk, MA                                                             
Plymouth, MA                                                            
Suffolk, MA                                                             
Worcester, MA                                                           
Hillsborough, NH                                                        
Merrimack, NH                                                           
Rockingham, NH                                                          
Strafford, NH                                                           
Boulder-Longmont, CO................................    0.8020    0.8598
Boulder, CO                                                             
Brazoria, TX........................................    0.8300    0.8802
Brazoria, TX                                                            
Bremerton, WA.......................................    0.9666    0.9770
Kitsap, WA                                                              
Brownsville-Harlingen-San Benito, TX................    0.8288    0.8793
Cameron, TX                                                             
Bryan-College Station, TX...........................    0.8712    0.9099
Brazos, TX                                                              
*Buffalo-Niagara Falls, NY..........................    0.9184    0.9434
Erie, NY                                                                
Niagara, NY                                                             
Burlington, VT......................................    0.9983    0.9988
Chittenden, VT                                                          
Franklin, VT                                                            
Grand Isle, VT                                                          
Caguas, PR..........................................    0.4392    0.5692
Caguas, PR                                                              
Cayey, PR                                                               
Cidra, PR                                                               
Gurabo, PR                                                              
San Lorenzo, PR                                                         
Canton-Massillon, OH................................    0.8683    0.9078
Carroll, OH                                                             
Stark, OH                                                               
Casper, WY..........................................    0.8431    0.8897
Natrona, WY                                                             
Cedar Rapids, IA....................................    0.8165    0.8704
Linn, IA                                                                
Champaign-Urbana, IL................................    0.8888    0.9224
Champaign, IL                                                           
Charleston-North Charleston, SC.....................    0.8885    0.9222
Berkeley, SC                                                            
Charleston, SC                                                          
Dorchester, SC                                                          
Charleston, WV......................................    0.8622    0.9035
Kanawha, WV                                                             
Putnam, WV                                                              
*Charlotte-Gastonia-Rock Hill, NC-SC................    0.9593    0.9719
Cabarrus, NC                                                            
Gaston, NC                                                              
Lincoln, NC                                                             
Mecklenburg, NC                                                         
Rowan, NC                                                               
Union, NC                                                               
York, SC                                                                
Charlottesville, VA.................................    0.9402    0.9587
Albemarle, VA                                                           
Charlottesville City, VA                                                
Fluvanna, VA                                                            
Greene, VA                                                              
Chattanooga, TN-GA..................................    0.8998    0.9302
Catoosa, GA                                                             
Dade, GA                                                                
Walker, GA                                                              
Hamilton, TN                                                            
Marion, TN                                                              
Cheyenne, WY........................................    0.7490    0.8204
Laramie, WY                                                             
*Chicago, IL........................................    1.0716    1.0485
Cook, IL                                                                
De Kalb, IL                                                             
Du Page, IL                                                             
Grundy, IL                                                              
Kane, IL                                                                
Kendall, IL                                                             
Lake, IL                                                                
McHenry, IL                                                             
Will, IL                                                                
Chico-Paradise, CA..................................    1.0302    1.0206
Butte, CA                                                               
*Cincinnati, OH-KY-IN...............................    0.9469    0.9633
Dearborn, IN                                                            
Ohio, IN                                                                
Boone, KY                                                               
Campbell, KY                                                            
Gallatin, KY                                                            
Grant, KY                                                               
Kenton, KY                                                              
Pendleton, KY                                                           
Brown, OH                                                               
Clermont, OH                                                            
Hamilton, OH                                                            
Warren, OH                                                              
Clarksville-Hopkinsville, TN-KY.....................    0.7542    0.8243
Christian, KY                                                           
Montgomery, TN                                                          
*Cleveland-Lorain-Elyria, OH........................    0.9870    0.9911
Ashtabula, OH                                                           
Cuyahoga, OH                                                            
Geauga, OH                                                              
Lake, OH                                                                
Lorain, OH                                                              
Medina, OH                                                              
Colorado Springs, CO................................    0.9338    0.9542
El Paso, CO                                                             
Columbia, MO........................................    0.9254    0.9483
Boone, MO                                                               
Columbia, SC........................................    0.8999    0.9303
Lexington, SC                                                           
Richland, SC                                                            
Columbus, GA-AL.....................................    0.7797    0.8433
Russell, AL                                                             
Chattanoochee, GA                                                       
Harris, GA                                                              
Muscogee, GA                                                            
*Columbus, OH.......................................    0.9807    0.9867
Delaware, OH                                                            
Fairfield, OH                                                           
Franklin, OH                                                            
Licking, OH                                                             
Madison, OH                                                             
Pickaway, OH                                                            
Corpus Christi, TX..................................    0.8366    0.8850
Nueces, TX                                                              
San Patricio, TX                                                        
Cumberland, MD-WV...................................    0.8280    0.8788
Allegany, MD                                                            
Mineral, WV                                                             
*Dallas, TX.........................................    0.9600    0.9724
Collin, TX                                                              
Dallas, TX                                                              
Denton, TX                                                              
Ellis, TX                                                               
Henderson, TX                                                           
Hunt, TX                                                                
Kaufman, TX                                                             
Rockwall, TX                                                            
Danville, VA........................................    0.8129    0.8677
Danville City, VA                                                       
Pittsylvania, VA                                                        
Davenport-Rock Island-Moline, IA-IL.................    0.8263    0.8775
Scott, IA                                                               
Henry, IL                                                               
Rock Island, IL                                                         
Dayton-Springfield, OH..............................    0.9199    0.9444
Clark, OH                                                               
Greene, OH                                                              
Miami, OH                                                               
Montgomery, OH                                                          
Daytona Beach, FL...................................    0.8642    0.9049
Flagler, FL                                                             
Volusia, FL                                                             
Decatur, AL.........................................    0.8029    0.8604
Lawrence, AL                                                            
Morgan, AL                                                              
Decatur, IL.........................................    0.7948    0.8545
Macon, IL                                                               
*Denver, CO.........................................    1.0659    1.0447
Adams, CO                                                               
Arapahoe, CO                                                            
Denver, CO                                                              
Douglas, CO                                                             
Jefferson, CO                                                           
Des Moines, IA......................................    0.8669    0.9068
Dallas, IA                                                              
Polk, IA                                                                
Warren, IA                                                              
*Detroit, MI........................................    1.0871    1.0589
Lapeer, MI                                                              
Macomb, MI                                                              
Monroe, MI                                                              
Oakland, MI                                                             
St. Clair, MI                                                           
Wayne, MI                                                               
Dothan, AL..........................................    0.8010    0.8590
Dale, AL                                                                
Houston, AL                                                             
Dover, DE...........................................    0.9143    0.9405
Kent, DE                                                                
Dubuque, IA.........................................    0.7573    0.8267
Dubuque, IA                                                             
Duluth-Superior, MN-WI..............................    0.9303    0.9517
St. Louis, MN                                                           
Douglas, WI                                                             
Dutchess County, NY.................................    1.0586    1.0398
Dutchess, NY                                                            
Eau Claire, WI......................................    0.8516    0.8958
Chippewa, WI                                                            
Eau Claire, WI                                                          
El Paso, TX.........................................    0.8518    0.8960
El Paso, TX                                                             
Elkhart-Goshen, IN..................................    0.8730    0.9112
Elkhart, IN                                                             
Elmira, NY..........................................    0.8615    0.9029
Chemung, NY                                                             
Enid, OK............................................    0.8250    0.8766
Garfield, OK                                                            
Erie, PA............................................    0.8969    0.9282
Erie, PA                                                                
Eugene-Springfield, OR..............................    1.0632    1.0429
Lane, OR                                                                
Evansville-Henderson, IN-KY.........................    0.9071    0.9354
Posey, IN                                                               
Vanderburgh, IN                                                         
Warrick, IN                                                             
Henderson, KY                                                           
Fargo-Moorhead, ND-MN...............................    0.9259    0.9486
Clay, MN                                                                
Cass, ND                                                                
Fayetteville, NC....................................    0.8694    0.9086
Cumberland, NC                                                          
Fayetteville-Springdale-Rogers, AR..................    0.7274    0.8042
Benton, AR                                                              
Washington, AR                                                          
Flint, MI...........................................    1.0411    1.0280
Genesee, MI                                                             
Florence, AL........................................    0.7916    0.8521
Colbert, AL                                                             
Lauderdale, AL                                                          
Florence, SC........................................    0.8565    0.8994
Florence, SC                                                            
Fort Collins-Loveland, CO...........................    0.9772    0.9843
Larimer, CO                                                             
*Ft. Lauderdale, FL.................................    1.0637    1.0432
Broward, FL                                                             
Fort Myers-Cape Coral, FL...........................    0.9613    0.9733
Lee, FL                                                                 
Fort Pierce-Port St. Lucie, FL......................    1.0118    1.0081
Martin, FL                                                              
St. Lucie, FL                                                           
Fort Smith, AR-OK...................................    0.7716    0.8373
Crawford, AR                                                            
Sebastian, AR                                                           
Sequoyah, OK                                                            
Fort Walton Beach, FL...............................    0.8895    0.9229
Okaloosa, FL                                                            
Fort Wayne, IN......................................    0.8875    0.9215
Adams, IN                                                               
Allen, IN                                                               
De Kalb, IN                                                             
Huntington, IN                                                          
Wells, IN                                                               
Whitley, IN                                                             
*Forth Worth-Arlington, TX..........................    0.9169    0.9423
Hood, TX                                                                
Johnson, TX                                                             
Parker, TX                                                              
Tarrant, TX                                                             
Fresno, CA..........................................    1.0368    1.0251
Fresno, CA                                                              
Madera, CA                                                              
Gadsden, AL.........................................    0.8196    0.8726
Etowah, AL                                                              
Gainesville, FL.....................................    0.8867    0.9210
Alachua, FL                                                             
Galveston-Texas City, TX............................    1.0133    1.0091
Galveston, TX                                                           
Gary, IN............................................    0.9376    0.9568
Lake, IN                                                                
Porter, IN                                                              
Glens Falls, NY.....................................    0.9309    0.9521
Warren, NY                                                              
Washington, NY                                                          
Goldsboro, NC.......................................    0.8491    0.8940
Wayne, NC                                                               
Grand Forks, ND-MN..................................    0.9038    0.9331
Polk, MN                                                                
Grand Forks, ND                                                         
Grand Rapids-Muskegon-Holland, MI...................    0.9863    0.9906
Allegan, MI                                                             
Kent, MI                                                                
Muskegon, MI                                                            
Ottawa, MI                                                              
Great Falls, MT.....................................    0.9018    0.9317
Cascade, MT                                                             
Greeley, CO.........................................    1.0531    1.0361
Weld, CO                                                                
Green Bay, WI.......................................    0.8857    0.9202
Brown, WI                                                               
*Greensboro-Winston-Salem-High Point, NC............    0.9206    0.9449
Alamance, NC                                                            
Davidson, NC                                                            
Davie, NC                                                               
Forsyth, NC                                                             
Guilford, NC                                                            
Randolph, NC                                                            
Stokes, NC                                                              
Yadkin, NC                                                              
Greenville, NC......................................    0.8988    0.9295
Pitt, NC                                                                
Greenville-Spartanburg-Anderson, SC.................    0.9149    0.9409
Cherokee, SC                                                            
Greenville, SC                                                          
Pickens, SC                                                             
Spartanburg, SC                                                         
Hagerstown, MD......................................    0.8987    0.9295
Washington, MD                                                          
Hamilton-Middletown, OH.............................    0.8137    0.8683
Butler, OH                                                              
Harrisburg-Lebanon-Carlisle, PA.....................    0.9667    0.9771
Cumberland, PA                                                          
Dauphin, PA                                                             
Lebanon, PA                                                             
Perry, PA                                                               
*Hartford, CT.......................................    1.2429    1.1606
Hartford, CT                                                            
Litchfield, CT                                                          
Middlesex, CT                                                           
Tolland, CT                                                             
Hickory-Morganton, NC...............................    0.7827    0.8455
Alexander, NC                                                           
Burke, NC                                                               
Caldwell, NC                                                            
Catawba, NC                                                             
Honolulu, HI........................................    1.1736    1.1159
Honolulu, HI                                                            
Houma, LA...........................................    0.7732    0.8385
Lafourche, LA                                                           
Terrebonne, LA                                                          
*Houston, TX........................................    0.9829    0.9883
Chambers, TX                                                            
Fort Bend, TX                                                           
Harris, TX                                                              
Liberty, TX                                                             
Montgomery, TX                                                          
Waller, TX                                                              
Huntington-Ashland, WV-KY-OH........................    0.8989    0.9296
Boyd, KY                                                                
Carter, KY                                                              
Greenup, KY                                                             
Lawrence, OH                                                            
Cabell, WV                                                              
Wayne, WV                                                               
Huntsville, AL......................................    0.8118    0.8669
Limestone, AL                                                           
Madison, AL                                                             
*Indianapolis, IN...................................    0.9865    0.9907
Boone, IN                                                               
Hamilton, IN                                                            
Hancock, IN                                                             
Hendricks, IN                                                           
Johnson, IN                                                             
Madison, IN                                                             
Marion, IN                                                              
Morgan, IN                                                              
Shelby, IN                                                              
Iowa City, IA.......................................    0.9100    0.9375
Johnson, IA                                                             
Jackson, MI.........................................    0.9211    0.9453
Jackson, MI                                                             
Jackson, MS.........................................    0.7669    0.8338
Hinds, MS                                                               
Madison, MS                                                             
Rankin, MS                                                              
Jackson, TN.........................................    0.8299    0.8801
Madison, TN                                                             
Jacksonville, FL....................................    0.9043    0.9334
Clay, FL                                                                
Duval, FL                                                               
Nassau, FL                                                              
St. Johns, FL                                                           
Jacksonville, NC....................................    0.7229    0.8007
Onslow, NC                                                              
Jamestown, NY.......................................    0.7565    0.8261
Chautaqua, NY                                                           
Janesville-Beloit, WI...............................    0.8638    0.9046
Rock, WI                                                                
Jersey City, NJ.....................................    1.1100    1.0741
Hudson, NJ                                                              
Johnson City-Kingsport-Bristol, TN-VA...............    0.8667    0.9067
Carter, TN                                                              
Hawkins, TN                                                             
Sullivan, TN                                                            
Unicoi, TN                                                              
Washington, TN                                                          
Bristol City, VA                                                        
Scott, VA                                                               
Washington, VA                                                          
Johnstown, PA.......................................    0.8654    0.9057
Cambria, PA                                                             
Somerset, PA                                                            
Joplin, MO..........................................    0.7828    0.8456
Jasper, MO                                                              
Newton, MO                                                              
Kalamazoo-Battlecreek, MI...........................    1.0507    1.0344
Calhoun, MI                                                             
Kalamazoo, MI                                                           
Van Buren, MI                                                           
Kankakee, IL........................................    0.9423    0.9601
Kankakee, IL                                                            
*Kansas City, KS-MO.................................    0.9513    0.9664
Johnson, KS                                                             
Leavenworth, KS                                                         
Miami, KS                                                               
Wyandotte, KS                                                           
Cass, MO                                                                
Clay, MO                                                                
Clinton, MO                                                             
Jackson, MO                                                             
Lafayette, MO                                                           
Platte, MO                                                              
Ray, MO                                                                 
Kenosha, WI.........................................    0.8849    0.9197
Kenosha, WI                                                             
Killeen-Temple, TX..................................    0.9711    0.9801
Bell, TX                                                                
Coryell, TX                                                             
Knoxville, TN.......................................    0.8588    0.9010
Anderson, TN                                                            
Blount, TN                                                              
Knox, TN                                                                
Loudon, TN                                                              
Sevier, TN                                                              
Union, TN                                                               
Kokomo, IN..........................................    0.9075    0.9357
Howard, IN                                                              
Tipton, IN                                                              
La Crosse, WI-MN....................................    0.8552    0.8984
Houston, MN                                                             
La Crosse, WI                                                           
Lafayette, LA.......................................    0.8011    0.8591
Acadia, LA                                                              
Lafayette, LA                                                           
St. Landry, LA                                                          
St. Martin, LA                                                          
Lafayette, IN.......................................    0.8348    0.8837
Clinton, IN                                                             
Tippecanoe, IN                                                          
Lake Charles, LA....................................    0.8274    0.8783
Calcasieu, LA                                                           
Lakeland-Winter Haven, FL...........................    0.8137    0.8683
Polk, FL                                                                
Lancaster, PA.......................................    0.9387    0.9576
Lancaster, PA                                                           
Lansing-East Lansing, MI............................    1.0067    1.0046
Clinton, MI                                                             
Eaton, MI                                                               
Ingham, MI                                                              
Laredo, TX..........................................    0.6998    0.7831
Webb, TX                                                                
Las Cruces, NM......................................    0.8837    0.9188
Dona Ana, NM                                                            
Las Vegas, NV-AZ....................................    1.0723    1.0490
Mohave, AZ                                                              
Clark, NV                                                               
Nye, NV                                                                 
Lawrence, KS........................................    0.8593    0.9014
Douglas, KS                                                             
Lawton, OK..........................................    0.8532    0.8970
Comanche, OK                                                            
Lewiston-Auburn, ME.................................    0.9705    0.9797
Androscoggin, ME                                                        
Lexington, KY.......................................    0.8471    0.8926
Bourbon, KY                                                             
Clark, KY                                                               
Fayette, KY                                                             
Jessamine, KY                                                           
Madison, KY                                                             
Scott, KY                                                               
Woodford, KY                                                            
Lima, OH............................................    0.8703    0.9093
Allen, OH                                                               
Auglaize, OH                                                            
Lincoln, NE.........................................    0.9026    0.9322
Lancaster, NE                                                           
Little Rock-North Little Rock, AR...................    0.8327    0.8822
Faulkner, AR                                                            
Lonoke, AR                                                              
Pulaski, AR                                                             
Saline, AR                                                              
Longview-Marshall, TX...............................    0.8752    0.9128
Gregg, TX                                                               
Harrison, TX                                                            
Upshur, TX                                                              
*Los Angeles-Long Beach, CA.........................    1.2592    1.1710
Los Angeles, CA                                                         
Louisville, KY-IN...................................    0.9474    0.9637
Clark, IN                                                               
Floyd, IN                                                               
Harrison, IN                                                            
Scott, IN                                                               
Bullitt, KY                                                             
Jefferson, KY                                                           
Oldham, KY                                                              
Lubbock, TX.........................................    0.8717    0.9103
Lubbock, TX                                                             
Lynchburg, VA.......................................    0.8347    0.8836
Amherst, VA                                                             
Bedford City, VA                                                        
Bedford, VA                                                             
Campbell, VA                                                            
Lynchburg City, VA                                                      
Macon, GA...........................................    0.9032    0.9327
Bibb, GA                                                                
Houston, GA                                                             
Jones, GA                                                               
Peach, GA                                                               
Twiggs, GA                                                              
Madison, WI.........................................    0.9954    0.9968
Dane, WI                                                                
Mansfield, OH.......................................    0.8238    0.8757
Crawford, OH                                                            
Richland, OH                                                            
Mayaguez, PR........................................    0.4472    0.5763
Anasco, PR                                                              
Cabo Rojo, PR                                                           
Hormigueros, PR                                                         
Mayaguez, PR                                                            
Sabana Grande, PR                                                       
San German, PR                                                          
McAllen-Edinburg-Mission, TX........................    0.8059    0.8626
Hidalgo, TX                                                             
Medford-Ashland, OR.................................    0.9944    0.9962
Jackson, OR                                                             
Melbourne-Titusville-Palm Bay FL....................    0.8994    0.9300
Brevard, FL                                                             
*Memphis, TN-AR-MS..................................    0.8519    0.8960
Crittenden, AR                                                          
De Soto, MS                                                             
Fayette, TN                                                             
Shelby, TN                                                              
Tipton, TN                                                              
Merced, CA..........................................    1.0250    1.0171
Merced, CA                                                              
*Miami, FL..........................................    0.8543    0.8978
Dade, FL                                                                
*Middlesex-Somerset-Hunterdon, NJ...................    1.0743    1.0503
Hunterdon, NJ                                                           
Middlesex, NJ                                                           
Somerset, NJ                                                            
*Milwaukee, WI......................................    0.9649    0.9758
Milwaukee, WI                                                           
Ozaukee, WI                                                             
Washington, WI                                                          
Waukesha, WI                                                            
*Minneapolis-St Paul, MN-WI.........................    1.0889    1.0601
Anoka, MN                                                               
Carver, MN                                                              
Chisago, MN                                                             
Dakota, MN                                                              
Hennepin, MN                                                            
Isanti, MN                                                              
Ramsey, MN                                                              
Scott, MN                                                               
Sherburne, MN                                                           
Washington, MN                                                          
Wright, MN                                                              
Pierce, WI                                                              
St. Croix, WI                                                           
Mobile, AL..........................................    0.7383    0.8124
Baldwin, AL                                                             
Mobile, AL                                                              
Modesto, CA.........................................    1.1292    1.0868
Stanislaus, CA                                                          
Monmouth-Ocean, NJ..................................    1.0724    1.0490
Monmouth, NJ                                                            
Ocean, NJ                                                               
Monroe, LA..........................................    0.7758    0.8404
Ouachita, LA                                                            
Montgomery, AL......................................    0.8082    0.8643
Autauga, AL                                                             
Elmore, AL                                                              
Montgomery, AL                                                          
Muncie, IN..........................................    0.9543    0.9685
Delaware, IN                                                            
Myrtle Beach, SC....................................    0.7976    0.8565
Horry, SC                                                               
Naples, FL..........................................    0.9770    0.9842
Collier, FL                                                             
*Nashville, TN......................................    0.9379    0.9570
Cheatham, TN                                                            
Davidson, TN                                                            
Dickson, TN                                                             
Robertson, TN                                                           
Rutherford TN                                                           
Sumner, TN                                                              
Williamson, TN                                                          
Wilson, TN                                                              
*Nassau-Suffolk, NY.................................    1.2908    1.1910
Nassau, NY                                                              
Suffolk, NY                                                             
*New Haven-Bridgeport-Stamford-Danbury-Waterbury, CT    1.2289    1.1516
Fairfield, CT                                                           
New Haven, CT                                                           
New London-Norwich, CT..............................    1.1752    1.1169
New London, CT                                                          
*New Orleans, LA....................................    0.9532    0.9677
Jefferson, LA                                                           
Orleans, LA                                                             
Plaquemines, LA                                                         
St. Bernard, LA                                                         
St. Charles, LA                                                         
St. James, LA                                                           
St. John The Baptist, LA                                                
St. Tammany, LA                                                         
*New York, NY.......................................    1.4200    1.2714
Bronx, NY                                                               
Kings, NY                                                               
New York, NY                                                            
Putnam, NY                                                              
Queens, NY                                                              
Richmond, NY                                                            
Rockland, NY                                                            
Westchester, NY                                                         
*Newark, NJ.........................................    1.1146    1.0771
Essex, NJ                                                               
Morris, NJ                                                              
Sussex, NJ                                                              
Union, NJ                                                               
Warren, NJ                                                              
Newburgh, NY-PA.....................................    0.8759    0.9133
Orange, NY                                                              
Pike, PA                                                                
*Norfolk-Virginia Beach-Newport News, VA-NC.........    0.8313    0.8812
Currituck, NC                                                           
Chesapeake City, VA                                                     
Gloucester, VA                                                          
Hampton City, VA                                                        
Isle of Wight, VA                                                       
James City, VA                                                          
Mathews, VA                                                             
Newport News City, VA                                                   
Norfolk City, VA                                                        
Poquoson City, VA                                                       
Portsmouth City, VA                                                     
Suffolk City, VA                                                        
Virginia Beach City VA                                                  
Williamsburg City, VA                                                   
York, VA                                                                
*Oakland, CA........................................    1.4690    1.3013
Alameda, CA                                                             
Contra Costa, CA                                                        
Ocala, FL...........................................    0.8820    0.9176
Marion, FL                                                              
Odessa-Midland, TX..................................    0.8436    0.8901
Ector, TX                                                               
Midland, TX                                                             
Oklahoma City, OK...................................    0.8499    0.8946
Canadian, OK                                                            
Cleveland, OK                                                           
Logan, OK                                                               
McClain, OK                                                             
Oklahoma, OK                                                            
Pottawatomie, OK                                                        
Olympia, WA.........................................    1.1179    1.0793
Thurston, WA                                                            
Omaha, NE-IA........................................    0.9825    0.9880
Pottawattamie, IA                                                       
Cass, NE                                                                
Douglas, NE                                                             
Sarpy, NE                                                               
Washington, NE                                                          
*Orange County, CA..................................    1.4029    1.2609
Orange, CA                                                              
*Orlando, FL........................................    0.9472    0.9635
Lake, FL                                                                
Orange, FL                                                              
Osceola, FL                                                             
Seminole, FL                                                            
Owensboro, KY.......................................    0.7877    0.8492
Daviess, KY                                                             
Panama City, FL.....................................    0.7543    0.8244
Bay, FL                                                                 
Parkersburg-Marietta, WV-OH.........................    0.7957    0.8551
Washington, OH                                                          
Wood, WV                                                                
Pensacola, FL.......................................    0.8248    0.8764
Escambia, FL                                                            
Santa Rosa, FL                                                          
Peoria-Pekin, IL....................................    0.8447    0.8909
Peoria, IL                                                              
Tazewell, IL                                                            
Woodford, IL                                                            
*Philadelphia, PA-NJ................................    1.1115    1.0751
Burlington, NJ                                                          
Camden, NJ                                                              
Gloucester, NJ                                                          
Salem, NJ                                                               
Bucks, PA                                                               
Chester, PA                                                             
Delaware, PA                                                            
Montgomery, PA                                                          
Philadelphia, PA                                                        
*Phoenix-Mesa, AZ...................................    1.0125    1.0085
Maricopa, AZ                                                            
Pinal, AZ                                                               
Pine Bluff, AR......................................    0.8643    0.9050
Jefferson, AR                                                           
*Pittsburgh, PA.....................................    0.9847    0.9895
Allegheny, PA                                                           
Beaver, PA                                                              
Butler, PA                                                              
Fayette, PA                                                             
Washington, PA                                                          
Westmoreland, PA                                                        
Pittsfield, MA......................................    1.1383    1.0928
Berkshire, MA                                                           
Ponce, PR...........................................    0.4415    0.5713
Guayanilla, PR                                                          
Juana Diaz, PR                                                          
Penuelas, PR                                                            
Ponce, PR                                                               
Villalba, PR                                                            
Yauco, PR                                                               
Portland, ME........................................    0.9487    0.9646
Cumberland, ME                                                          
Sagadahoc, ME                                                           
York, ME                                                                
*Portland-Vancouver, OR-WA..........................    1.1231    1.0827
Clackamas, OR                                                           
Columbia, OR                                                            
Multnomah, OR                                                           
Washington, OR                                                          
Yamhill, OR                                                             
Clark, WA                                                               
*Providence-Warwick, RI.............................    1.1143    1.0769
Bristol, RI                                                             
Kent, RI                                                                
Newport, RI                                                             
Providence, RI                                                          
Washington, RI                                                          
Provo-Orem, UT......................................    1.0334    1.0228
Utah, UT                                                                
Pueblo, CO..........................................    0.7805    0.8439
Pueblo, CO                                                              
Punta Gorda, FL.....................................    0.8656    0.9059
Charlotte, FL                                                           
Racine, WI..........................................    0.8366    0.8850
Racine, WI                                                              
Raleigh-Durham-Chapel Hill, NC......................    0.9596    0.9722
Chatham, NC                                                             
Durham, NC                                                              
Franklin, NC                                                            
Johnston, NC                                                            
Orange, NC                                                              
Wake, NC                                                                
Rapid City, SD......................................    0.8147    0.8691
Pennington, SD                                                          
Reading, PA.........................................    0.9199    0.9444
Berks, PA                                                               
Redding, CA.........................................    1.1045    1.0704
Shasta, CA                                                              
Reno, NV............................................    1.1129    1.0760
Washoe, NV                                                              
Richland-Kennewick-Pasco, WA........................    0.9691    0.9787
Benton, WA                                                              
Franklin, WA                                                            
Richmond-Petersburg, VA.............................    0.9381    0.9572
Charles City County, VA                                                 
Chesterfield, VA                                                        
Colonial Heights City, VA                                               
Dinwiddie, VA                                                           
Goochland, VA                                                           
Hanover, VA                                                             
Henrico, VA                                                             
Hopewell City, VA                                                       
New Kent, VA                                                            
Petersburg City, VA                                                     
Powhatan, VA                                                            
Prince George, VA                                                       
Richmond City, VA                                                       
*Riverside-San Bernardino, CA.......................    1.1661    1.1110
Riverside, CA                                                           
San Bernardino, CA                                                      
Roanoke, VA.........................................    0.8398    0.8873
Botetourt, VA                                                           
Roanoke, VA                                                             
Roanoke City, VA                                                        
Salem City, VA                                                          
Rochester, MN.......................................    1.0500    1.0340
Olmsted, MN                                                             
*Rochester, NY......................................    0.9850    0.9897
Genesee, NY                                                             
Livingston, NY                                                          
Monroe, NY                                                              
Ontario, NY                                                             
Orleans, NY                                                             
Wayne, NY                                                               
Rockford, IL........................................    0.8709    0.9097
Boone, IL                                                               
Ogle, IL                                                                
Winnebago, IL                                                           
Rocky Mount, NC.....................................    0.8576    0.9001
Edgecombe, NC                                                           
Nash, NC                                                                
*Sacramento, CA.....................................    1.1330    1.0893
El Dorado, CA                                                           
Placer, CA                                                              
Sacramento, CA                                                          
Saginaw-Bay City-Midland, MI........................    0.9419    0.9598
Bay, MI                                                                 
Midland, MI                                                             
Saginaw, MI                                                             
St. Cloud, MN.......................................    0.9591    0.9718
Benton, MN                                                              
Stearns, MN                                                             
St. Joseph, MO......................................    0.8641    0.9048
Andrews, MO                                                             
Buchanan, MO                                                            
*St. Louis, MO-IL...................................    0.9150    0.9410
Clinton, IL                                                             
Jersey, IL                                                              
Madison, IL                                                             
Monroe, IL                                                              
St. Clair, IL                                                           
Franklin, MO                                                            
Jefferson, MO                                                           
Lincoln, MO                                                             
St. Charles, MO                                                         
St. Louis, MO                                                           
St. Louis City, MO                                                      
Warren, MO                                                              
Salem, OR...........................................    0.9595    0.9721
Marion, OR                                                              
Polk, OR                                                                
Salinas, CA.........................................    1.3746    1.2434
Monterey, CA                                                            
*Salt Lake City-Ogden, UT...........................    0.9645    0.9756
Davis, UT                                                               
Salt Lake, UT                                                           
Weber, UT                                                               
San Angelo, TX......................................    0.7164    0.7958
Tom Green, TX                                                           
*San Antonio, TX....................................    0.8083    0.8644
Bexar, TX                                                               
Comal, TX                                                               
Guadalupe, TX                                                           
Wilson, TX                                                              
*San Diego, CA......................................    1.2094    1.1391
San Diego, CA                                                           
*San Francisco, CA..................................    1.4103    1.2655
Marin, CA                                                               
San Francisco, CA                                                       
San Mateo, CA                                                           
*San Jose, CA.......................................    1.4353    1.2808
Santa Clara, CA                                                         
*San Juan-Bayamon, PR...............................    0.4379    0.5681
Aguas Buenas, PR                                                        
Barceloneta, PR                                                         
Bayamon, PR                                                             
Canovanas, PR                                                           
Carolina, PR                                                            
Catano, PR                                                              
Ceiba, PR                                                               
Comerio, PR                                                             
Corozal, PR                                                             
Dorado, PR                                                              
Fajardo, PR                                                             
Florida, PR                                                             
Guaynabo, PR                                                            
Humacao, PR                                                             
Juncos, PR                                                              
Los Piedras, PR                                                         
Loiza, PR                                                               
Luguillo, PR                                                            
Manati, PR                                                              
Naranjito, PR                                                           
Rio Grande, PR                                                          
San Juan, PR                                                            
Toa Alta, PR                                                            
Toa Baja, PR                                                            
Trujillo Alto, PR                                                       
Vega Alta, PR                                                           
Vega Baja, PR                                                           
Yabucoa, PR                                                             
San Luis Obispo-Atascadero-Paso Robles, CA..........    1.2308    1.1528
San Luis Obispo, CA                                                     
Santa Barbara-Santa Maria-Lompoc, CA................    1.1669    1.1115
Santa Barbara, CA                                                       
Santa Cruz-Watsonville, CA..........................    0.9788    0.9854
Santa Cruz, CA                                                          
Santa Fe, NM........................................    1.0830    1.0561
Los Alamos, NM                                                          
Santa Fe, NM                                                            
Santa Rosa, CA......................................    1.3020    1.1981
Sonoma, CA                                                              
Sarasota-Bradenton, FL..............................    0.9717    0.9805
Manatee, FL                                                             
Sarasota, FL                                                            
Savannah, GA........................................    0.8880    0.9219
Bryan, GA                                                               
Chatham, GA                                                             
Effingham, GA                                                           
Scranton--Wilkes-Barre--Hazleton, PA................    0.8668    0.9067
Columbia, PA                                                            
Lackawanna, PA                                                          
Luzerne, PA                                                             
Wyoming, PA                                                             
*Seattle-Bellevue-Everett, WA.......................    1.1026    1.0692
Island, WA                                                              
King, WA                                                                
Snohomish, WA                                                           
Sharon, PA..........................................    0.8965    0.9279
Mercer, PA                                                              
Sheboygan, WI.......................................    0.8082    0.8643
Sheboygan, WI                                                           
Sherman-Denison, TX.................................    0.8876    0.9216
Grayson, TX                                                             
Shreveport-Bossier City, LA.........................    0.9077    0.9358
Bossier, LA                                                             
Caddo, LA                                                               
Webster, LA                                                             
Sioux City, IA-NE...................................    0.8530    0.8968
Woodbury, IA                                                            
Dakota, NE                                                              
Sioux Falls, SD.....................................    0.8697    0.9088
Lincoln, SD                                                             
Minnehaha, SD                                                           
South Bend, IN......................................    0.9664    0.9769
St. Joseph, IN                                                          
Spokane, WA.........................................    1.0665    1.0451
Spokane, WA                                                             
Springfield, IL.....................................    0.8764    0.9136
Menard, IL                                                              
Sangamon, IL                                                            
Springfield, MO.....................................    0.7922    0.8526
Christian, MO                                                           
Greene, MO                                                              
Webster, MO                                                             
Springfield, MA.....................................    1.0600    1.0407
Hampden, MA                                                             
Hampshire, MA                                                           
State College, PA...................................    0.9947    0.9964
Centre, PA                                                              
Steubenville-Weirton, OH-WV.........................    0.8511    0.8955
Jefferson, OH                                                           
Brooke, WV                                                              
Hancock, WV                                                             
Stockton-Lodi, CA...................................    1.1653    1.1104
San Joaquin, CA                                                         
Sumter, SC..........................................    0.8052    0.8621
Sumter, SC                                                              
Syracuse, NY........................................    0.9736    0.9818
Cayuga, NY                                                              
Madison, NY                                                             
Onondaga, NY                                                            
Oswego, NY                                                              
Tacoma, WA..........................................    0.9666    0.9770
Pierce, WA                                                              
Tallahassee, FL.....................................    0.8244    0.8761
Gadsden, FL                                                             
Leon, FL                                                                
*Tampa-St. Petersburg-Clearwater, FL................    0.9319    0.9528
Hernando, FL                                                            
Hillsborough, FL                                                        
Pasco, FL                                                               
Pinellas, FL                                                            
Terre Haute, IN.....................................    0.8619    0.9032
Clay, IN                                                                
Vermillion, IN                                                          
Vigo, IN                                                                
Texarkana, AR-Texarkana, TX.........................    0.8336    0.8828
Miller, AR                                                              
Bowie, TX                                                               
Toledo, OH..........................................    0.9812    0.9871
Fulton, OH                                                              
Lucas, OH                                                               
Wood, OH                                                                
Topeka, KS..........................................    0.9928    0.9951
Shawnee, KS                                                             
Trenton, NJ.........................................    1.0257    1.0175
Mercer, NJ                                                              
Tucson, AZ..........................................    0.9435    0.9610
Pima, AZ                                                                
Tulsa, OK...........................................    0.8253    0.8768
Creek, OK                                                               
Osage, OK                                                               
Rogers, OK                                                              
Tulsa, OK                                                               
Wagoner, OK                                                             
Tuscaloosa, AL......................................    0.8197    0.8727
Tuscaloosa, AL                                                          
Tyler, TX...........................................    0.8594    0.9014
Smith, TX                                                               
Utica-Rome, NY......................................    0.8506    0.8951
Herkimer, NY                                                            
Oneida, NY                                                              
Vallejo-Fairfield-Napa, CA..........................    1.2590    1.1708
Napa, CA                                                                
Solano, CA                                                              
Ventura, CA.........................................    0.9788    0.9854
Ventura, CA                                                             
Victoria, TX........................................    0.8743    0.9121
Victoria, TX                                                            
Vineland-Millville-Bridgeton, NJ....................    1.0340    1.0232
Cumberland, NJ                                                          
Visalia-Tulare-Porterville, CA......................    1.0344    1.0234
Tulare, CA                                                              
Waco, TX............................................    0.8055    0.8623
McLennan, TX                                                            
*Washington, DC-MD-VA-WV............................    1.1010    1.0681
District of Columbia, DC                                                
Calvert, MD                                                             
Charles, MD                                                             
Frederick, MD                                                           
Montgomery, MD                                                          
Prince Georges, MD                                                      
Alexandria City, VA                                                     
Arlington, VA                                                           
Clarke, VA                                                              
Culpepper, VA                                                           
Fairfax, VA                                                             
Fairfax City, VA                                                        
Falls Church City, VA                                                   
Fauquier, VA                                                            
Fredericksburg City, VA                                                 
King George, VA                                                         
Loudoun, VA                                                             
Manassas City, VA                                                       
Manassas Park City, VA                                                  
Prince William, VA                                                      
Spotsylvania, VA                                                        
Stafford, VA                                                            
Warren, VA                                                              
Berkeley, WV                                                            
Jefferson, WV                                                           
Waterloo-Cedar Falls, IA............................    0.8681    0.9077
Black Hawk, IA                                                          
Wausau, WI..........................................    0.9847    0.9895
Marathon, WI                                                            
West Palm Beach-Boca Raton, FL......................    0.9868    0.9909
Palm Beach, FL                                                          
Wheeling, OH-WV.....................................    0.7633    0.8311
Belmont, OH                                                             
Marshall, WV                                                            
Ohio, WV                                                                
Wichita, KS.........................................    1.0037    1.0025
Butler, KS                                                              
Harvey, KS                                                              
Sedgwick, KS                                                            
Wichita Falls, TX...................................    0.6885    0.7745
Archer, TX                                                              
Wichita, TX                                                             
Williamsport, PA....................................    0.8463    0.8920
Lycoming, PA                                                            
Wilmington-Newark, DE-MD............................    1.0764    1.0517
New Castle, DE                                                          
Cecil, MD                                                               
Wilmington, NC......................................    0.9179    0.9430
New Hanover, NC                                                         
Brunswick, NC                                                           
Yakima, WA..........................................    0.9538    0.9681
Yakima, WA                                                              
Yolo, CA............................................    1.1897    1.1263
Yolo, CA                                                                
York, PA............................................    0.9044    0.9335
York, PA                                                                
Youngstown-Warren, OH...............................    0.9405    0.9589
Columbiana, OH                                                          
Mahoning, OH                                                            
Trumbull, OH                                                            
Yuba City, CA.......................................    1.0238    1.0162
Sutter, CA                                                              
Yuba, CA                                                                
Yuma, AZ............................................    0.8714    0.9100
Yuma, AZ                                                                
------------------------------------------------------------------------


Table 4b.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                               Rural Areas                              
------------------------------------------------------------------------
                                                     Wageindex          
                   Nonurban area                                   GAF  
------------------------------------------------------------------------
Alabama............................................     0.7051    0.7872
Alaska.............................................     1.2556    1.1687
Arizona............................................     0.8315    0.8813
Arkansas...........................................     0.6817    0.7692
California.........................................     0.9788    0.9854
Colorado...........................................     0.8020    0.8598
Connecticut........................................     1.2289    1.1516
Delaware...........................................     0.8468    0.8924
Florida............................................     0.8543    0.8978
Georgia............................................     0.7555    0.8253
Hawaii.............................................     0.9563    0.9699
Idaho..............................................     0.8406    0.8879
Illinois...........................................     0.7444    0.8170
Indiana............................................     0.7963    0.8556
Iowa...............................................     0.7325    0.8080
Kansas.............................................     0.7286    0.8051
Kentucky...........................................     0.7520    0.8227
Louisiana..........................................     0.7349    0.8098
Maine..............................................     0.8429    0.8896
Maryland...........................................     0.8504    0.8950
Massachusetts......................................     1.0818    1.0553
Michigan...........................................     0.8732    0.9113
Minnesota..........................................     0.8154    0.8696
Mississippi........................................     0.6689    0.7593
Missouri...........................................     0.7250    0.8023
Montana............................................     0.8191    0.8723
Nebraska...........................................     0.7334    0.8087
Nevada.............................................     0.9119    0.9388
New Hampshire......................................     0.9809    0.9869
New Jersey\1\                                                           
New Mexico.........................................     0.8107    0.8661
New York...........................................     0.8759    0.9133
North Carolina.....................................     0.7827    0.8455
North Dakota.......................................     0.7322    0.8078
Ohio...............................................     0.8137    0.8683
Oklahoma...........................................     0.6876    0.7738
Oregon.............................................     0.9270    0.9494
Pennsylvania.......................................     0.8625    0.9037
Puerto Rico........................................     0.4402    0.5701
Rhode Island\1\                                                         
South Carolina.....................................     0.7644    0.8320
South Dakota.......................................     0.6981    0.7818
Tennessee..........................................     0.7413    0.8147
Texas..............................................     0.7485    0.8201
Utah...............................................     0.8840    0.9190
Vermont............................................     0.8934    0.9257
Virginia...........................................     0.7832    0.8459
Washington.........................................     0.9666    0.9770
West Virginia......................................     0.8138    0.8684
Wisconsin..........................................     0.8366    0.8850
Wyoming............................................     0.8014    0.8593
------------------------------------------------------------------------
\1\All counties within the State are classified urban.                  


Table 4c.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                    Hospitals That are Reclassified                     
------------------------------------------------------------------------
                                                     Wageindex          
               Area Reclassified to                               GAF   
------------------------------------------------------------------------
Albuquerque, NM....................................     0.9362    0.9559
Alexandria, LA.....................................     0.8313    0.8812
Amarillo, TX.......................................     0.8084    0.8645
Anchorage, AK......................................     1.3147    1.2061
Appleton-Oshkosh-Neenah, WI........................     0.8882    0.9220
Asheville, NC......................................     0.9212    0.9453
Atlanta, GA........................................     1.0289    1.0197
Baton Rouge, LA....................................     0.8656    0.9059
Benton Harbor, MI..................................     0.8209    0.8736
Benton Harbor, MI (Rural Michigan Hosp.)...........     0.8732    0.9133
Bergen-Passaic, NJ.................................     1.1316    1.0884
Biloxi-Gulfport, MS................................     0.7968    0.8559
Birmingham, AL.....................................     0.8772    0.9142
Bismarck, ND.......................................     0.8684    0.9079
Boise City, ID.....................................     0.9067    0.9351
Boston-Brockton-Nashua, MA-NH......................     1.1564    1.1046
Brazoria, TX.......................................     0.8300    0.8802
Bremerton, WA......................................     0.7557    0.8255
Bremerton, WA (Rural Wahington Hosp.)..............     0.9666    0.9770
Bryan-College Station, TX..........................     0.8712    0.9099
Casper, WY.........................................     0.8431    0.8897
Charlotte-Gastonia-Rock Hill, NC-SC................     0.9593    0.9719
Charlottesville, VA................................     0.9242    0.9475
Chattanooga, TN-GA.................................     0.8998    0.9302
Chicago, IL........................................     1.0716    1.0485
Cincinnati, OH-KY-IN...............................     0.9469    0.9633
Cleveland-Lorain-Elyria, OH........................     0.9870    0.9911
Columbia, MO.......................................     0.8950    0.9268
Columbus, GA-AL....................................     0.7797    0.8433
Columbus, OH.......................................     0.9807    0.9867
Cumberland, MD-WV..................................     0.8280    0.8788
Dallas, TX.........................................     0.9600    0.9724
Davenport-Rock Island-Moline, IA-IL................     0.8263    0.8775
Dayton-Springfield, OH.............................     0.9199    0.9444
Denver, CO.........................................     1.0659    1.0447
Des Moines, IA.....................................     0.8669    0.9068
Detroit, MI........................................     1.0871    1.0589
Dothan, AL.........................................     0.8010    0.8590
Duluth-Superior, MN-WI.............................     0.9303    0.9517
Dutchess County, NY................................     1.0470    1.0320
Eau Claire, WI.....................................     0.8516    0.8958
El Paso, TX........................................     0.8518    0.8960
Eugene-Springfield, OR.............................     1.0632    1.0429
Fargo-Moorhead, ND-MN..............................     0.9091    0.9368
Fayetteville, NC...................................     0.8423    0.8891
Flint, MI..........................................     1.0411    1.0280
Florence, AL.......................................     0.7916    0.8521
Fort Lauderdale, FL................................     1.0361    1.0246
Fort Pierce-Port St. Lucie, FL.....................     1.0118    1.0081
Fort Smith, AR.....................................     0.7716    0.8373
Fort Walton Beach, FL..............................     0.8747    0.9124
Fort Wayne, IN.....................................     0.8875    0.9215
Fort Worth-Arlington, TX...........................     0.9169    0.9423
Gadsden, AL........................................     0.8196    0.8726
Gainesville, FL....................................     0.8867    0.9210
Glens Falls, NY....................................     0.9309    0.9521
Grand Forks, ND-MN.................................     0.9038    0.9331
Great Falls, MT....................................     0.9018    0.9317
Greenville-Spartanburg-Anderson, SC................     0.9149    0.9409
Harrisburg-Lebanon-Carlisle, PA....................     0.9667    0.9771
Hartford, CT.......................................     1.2269    1.1503
Houston, TX........................................     0.9829    0.9883
Huntington-Ashland, WV-KY-OH.......................     0.8989    0.9296
Huntsville, AL.....................................     0.7933    0.8534
Indianapolis, IN...................................     0.9865    0.9907
Jackson, MS........................................     0.7669    0.8338
Jackson, TN........................................     0.8299    0.8801
Johnson City-Kingsport-Bristol, TN-VA..............     0.8667    0.9067
Joplin, MO.........................................     0.7828    0.8456
Kalamazoo-Battlecreek, MI..........................     1.0507    1.0344
Kansas City, KS-MO.................................     0.9513    0.9664
Knoxville, TN......................................     0.8588    0.9010
Lafayette, LA......................................     0.8011    0.8591
Lansing-East Lansing, MI...........................     1.0067    1.0046
Las Cruces, NM.....................................     0.8837    0.9188
Las Vegas, NV-AZ...................................     1.0723    1.0490
Lexington, KY......................................     0.8471    0.8926
Lima, OH...........................................     0.8703    0.9093
Lincoln, NE........................................     0.8790    0.9155
Little Rock-North Little Rock, AR..................     0.8327    0.8822
Longview-Marshall, TX..............................     0.8546    0.8980
Los Angeles-Long Beach, CA.........................     1.2592    1.1710
Louisville, KY-IN..................................     0.9474    0.9637
Lubbock, TX........................................     0.8717    0.9103
Macon, GA..........................................     0.8639    0.9047
Madison, WI........................................     0.9954    0.9968
Mansfield, OH......................................     0.8238    0.8757
Medford-Ashland, OR................................     0.9944    0.9962
Memphis, TN-AR-MS..................................     0.8412    0.8883
Merced, CA.........................................     1.0250    1.0171
Middlesex-Somerset-Hunterdon, NJ...................     1.0579    1.0393
Milwaukee, WI......................................     0.9537    0.9681
Minneapolis-St. Paul, MN-WI........................     1.0889    1.0601
Modesto, CA........................................     1.1292    1.0868
Monroe, LA.........................................     0.7758    0.8404
Montgomery, AL.....................................     0.8082    0.8643
Nashville, TN......................................     0.9235    0.9470
New London-Norwich, CT.............................     1.1752    1.1169
New Orleans, LA....................................     0.9532    0.9677
New York, NY.......................................     1.4200    1.2714
Newark, NJ.........................................     1.0936    1.0632
Newburgh, NY-PA....................................     0.9496    0.9652
Oakland, CA........................................     1.4690    1.3013
Oklahoma City, OK..................................     0.8499    0.8946
Omaha, NE-IA.......................................     0.9825    0.9880
Orange County, CA..................................     1.4029    1.2609
Peoria-Pekin, IL...................................     0.8447    0.8909
Philadelphia, PA-NJ................................     1.1115    1.0751
Pittsburgh, PA.....................................     0.9847    0.9895
Portland-Vancouver, OR-WA..........................     1.1231    1.0827
Provo-Orem, UT.....................................     0.9858    0.9903
Raleigh-Durham-Chapel Hill, NC.....................     0.9596    0.9722
Roanoke, VA........................................     0.8398    0.8873
Rochester, MN......................................     1.0363    1.0247
Rockford, IL.......................................     0.8709    0.9097
Rocky Mount, NC....................................     0.8576    0.9001
Saginaw-Bay City-Midland, MI,......................     0.9419    0.9598
St. Cloud, MN......................................     0.9591    0.9718
St. Louis, MO-IL...................................     0.9150    0.9410
Salem, OR..........................................     0.9595    0.9721
Salt Lake City-Ogden, UT...........................     0.9645    0.9756
San Antonio, TX....................................     0.8083    0.8644
San Francisco, CA..................................     1.4103    1.2655
San Jose, CA.......................................     1.4353    1.2808
Sarasota-Bradenton, FL.............................     0.9717    0.9805
Scranton-Wilkes-Barre-Hazelton, PA.................     0.8668    0.9067
Seattle-Bellevue-Everett, WA.......................     1.0839    1.0567
Sherman-Denison, TX................................     0.8876    0.9216
Sioux City, IA-NE..................................     0.8377    0.8858
Sioux Falls, SD....................................     0.8697    0.9088
South Bend, IN.....................................     0.9664    0.9769
Springfield, IL....................................     0.8764    0.9136
Syracuse, NY.......................................     0.9736    0.9818
Tampa-St. Petersburg-Clearwater, FL................     0.9319    0.9528
Texarkana, TX-Texarkana, AR........................     0.8336    0.8828
Topeka, KS.........................................     0.9928    0.9951
Trenton, NJ........................................     1.2552    1.1684
Tucson, AZ.........................................     0.9435    0.9610
Tulsa, OK..........................................     0.8253    0.8768
Tyler, TX..........................................     0.8594    0.9014
Ventura, CA........................................     1.2864    1.1882
Waco, TX...........................................     0.8055    0.8623
Washington, DC-MD-VA-WV............................     1.1010    1.0681
Waterloo-Cedar Falls, IA...........................     0.8681    0.9077
Wausau, WI.........................................     0.9427    0.9604
Wichita, KS........................................     0.9742    0.9823
Rural Alabama......................................     0.7051    0.7872
Rural Louisiana....................................     0.7349    0.8098
Rural Missouri.....................................     0.7250    0.8023
Rural New Hampshire................................     0.9809    0.9869
Rural Ohio.........................................     0.8137    0.8683
Rural Virginia.....................................     0.7832    0.8459
Rural West Virginia................................     0.8138    0.8684
Rural Wyoming......................................     0.8014   0.8593 
------------------------------------------------------------------------


             Table 4d.--Average Hourly Wage for Urban Areas             
------------------------------------------------------------------------
                                                                Average 
                         Urban area                              hourly 
                                                                 wage   
------------------------------------------------------------------------
Abilene, TX..................................................    15.6799
Aguadilla, PR................................................     8.4764
Akron, OH....................................................    17.2298
Albany, GA...................................................    16.1099
Albany-Schenectady-Troy, NY..................................    16.1957
Albuquerque, NM..............................................    17.0208
Alexandria, LA...............................................    15.1130
Allentown-Bethlehem-Easton, PA-NJ............................    18.4674
Altoona, PA..................................................    16.8070
Amarillo, TX.................................................    14.6970
Anchorage, AK................................................    23.8324
Ann Arbor, MI................................................    23.0180
Anniston, AL.................................................    14.5274
Appleton-Oshkosh-Neenah, WI..................................    16.1474
Arecibo, PR..................................................     6.9358
Asheville, NC................................................    16.7477
Athens, GA...................................................    16.5317
Atlanta, GA..................................................    18.7055
Atlantic City-Cape May, NJ...................................    19.8522
Augusta-Aiken, GA-SC.........................................    15.7238
Austin-San Marcos, TX........................................    16.4196
Bakersfield, CA..............................................    19.9373
Baltimore, MD................................................    18.0216
Bangor, ME...................................................    17.3217
Barnstable-Yarmouth, MA......................................    25.2260
Baton Rouge, LA..............................................    15.7376
Beaumont-Port Arthur, TX.....................................    15.7684
Bellingham, WA...............................................    20.5119
Benton Harbor, MI............................................    14.8759
Bergen-Passaic, NJ...........................................    20.5959
Billings, MT.................................................    15.9221
Biloxi-Gulfport-Pascagoula, MS...............................    15.0572
Binghamton, NY...............................................    16.7629
Birmingham, AL...............................................    15.9479
Bismarck, ND.................................................    15.7880
Bloomington, IN..............................................    15.5760
Bloomington-Normal, IL.......................................    15.5045
Boise City, ID...............................................    16.4848
Boston-Boston-Nashua, MA-NH..................................    21.0242
Boulder-Longmont, CO.........................................    18.1601
Brazoria, TX.................................................    15.9482
Bremerton, WA................................................    17.6611
Brownsville-Harlingen-San Benito, TX.........................    15.0688
Bryan-College Station, TX....................................    15.8389
Buffalo-Niagara Falls, NY....................................    16.6972
Burlington, VT...............................................    18.1503
Caguas, PR...................................................     7.9854
Canton-Massillon, OH.........................................    15.7864
Casper, WY...................................................    15.1989
Cedar Rapids, IA.............................................    14.8441
Champaign-Urbana, IL.........................................    16.1590
Charleston-North Charleston, SC..............................    16.1537
Charleston, WV...............................................    15.6757
Charlotte-Gastonia-Rock Hill, NC-SC..........................    17.3740
Charlottesville, VA..........................................    17.0943
Chattanooga, TN-GA...........................................    16.3584
Cheyenne, WY.................................................    13.6175
Chicago, IL..................................................    19.4830
Chico-Paradise, CA...........................................    18.7297
Cincinnati, OH-KY-IN.........................................    17.2034
Clarksville-Hopkinsville, TN-KY..............................    13.7119
Cleveland-Lorain-Elyria, OH..................................    17.9437
Colorado Springs, CO.........................................    16.9767
Columbia, MO.................................................    16.8243
Columbia, SC.................................................    16.3607
Columbus, GA-AL..............................................    14.1755
Columbus, OH.................................................    17.8306
Corpus Christi, TX...........................................    15.2095
Cumberland, MD-WV............................................    14.9137
Dallas, TX...................................................    17.4528
Danville, VA.................................................    14.7798
Davenport-Moline-Rock Island, IA-IL..........................    15.0227
Dayton-Springfield, OH.......................................    17.0612
Daytona Beach, FL............................................    15.7116
Decatur, AL..................................................    14.5969
Decatur, IL..................................................    14.4506
Denver, CO...................................................    19.3789
Des Moines, IA...............................................    15.7603
Detroit, MI..................................................    19.7641
Dothan, AL...................................................    14.5621
Dover, DE....................................................    16.6236
Dubuque, IA..................................................    13.7683
Duluth-Superior, MN-WI.......................................    16.8727
Dutchess County, NY..........................................    19.2454
Eau Claire, WI...............................................    15.3631
El Paso, TX..................................................    15.4859
Elkhart-Goshen, IN...........................................    15.8724
Elmira, NY...................................................    15.6636
Enid, OK.....................................................    14.9984
Erie, PA.....................................................    16.3068
Eugene-Springfield, OR.......................................    19.3300
Evansville, Henderson, IN-KY.................................    16.4926
Fargo-Moorhead, ND-MN........................................    16.8334
Fayetteville, NC.............................................    15.8069
Fayetteville-Springdale-Rogers, AR...........................    13.2254
Flint, MI....................................................    18.9698
Florence, AL.................................................    13.9337
Florence, SC.................................................    15.5718
Fort Collins-Loveland, CO....................................    17.7671
Fort Lauderdale, FL..........................................    19.3381
Fort Myers-Cape Coral, FL....................................    17.4771
Fort Pierce-Fort St. Lucie, FL...............................    18.1523
Fort Smith, AR-OK............................................    14.0151
Fort Walton Beach, FL........................................    16.1725
Fort Wayne, IN...............................................    16.1351
Fort Worth-Arlington, TX.....................................    16.6281
Fresno, CA...................................................    18.8501
Gadsden, AL..................................................    14.9006
Gainesville, FL..............................................    16.1053
Galveston-Texas City, TX.....................................    18.4232
Gary, IN.....................................................    17.5613
Glens Falls, NY..............................................    16.6860
Goldsboro, NC................................................    15.4377
Grand Forks, ND-MN...........................................    16.2914
Grand Rapids-Muskegon-Holland, MI............................    17.9324
Great Falls, MT..............................................    15.7732
Greeley, CO..................................................    19.1455
Green Bay, WI................................................    16.1023
Greensboro-Winston-Salem-High Point, NC......................    16.7368
Greenville, NC...............................................    16.3414
Greenville-Spartanburg-Anderson, SC..........................    16.6335
Hagerstown, MD...............................................    16.3387
Hamilton-Middletown, OH......................................    16.1746
Harrisburg-Lebanon-Carlisle, PA..............................    17.5461
Hartford, CT.................................................    22.5979
Hickory-Morganton, NC........................................    15.9128
Honolulu, HI.................................................    21.3363
Houma, LA....................................................    14.0576
Houston, TX..................................................    17.8660
Huntington-Ashland, WV-KY-OH.................................    16.3419
Huntsville, AL...............................................    14.7596
Indianapolis, IN.............................................    17.9355
Iowa City, IA................................................    16.5438
Jackson, MI..................................................    16.7467
Jackson, MS..................................................    13.8228
Jackson, TN..................................................    15.0882
Jacksonville, FL.............................................    16.4406
Jacksonville, NC.............................................    13.1433
Jamestown, NY................................................    13.7544
Janesville-Beloit, WI........................................    15.7055
Jersey City, NJ..............................................    20.1808
Johnson City-Kingsport-Bristol, TN-VA........................    15.7582
Johnstown, PA................................................    15.7335
Joplin, MO...................................................    14.1473
Kalamazoo-Battle Creek, MI...................................    19.1022
Kankakee, IL.................................................    17.1314
Kansas City, KS-MO...........................................    17.2955
Kenosha, WI..................................................    16.0882
Killeen-Temple, TX...........................................    17.6560
Knoxville, TN................................................    15.6051
Kokomo, IN...................................................    16.4989
LaCrosse, WI.................................................    15.5484
Lafayette, LA................................................    14.4264
Lafayette, IN................................................    15.1766
Lake Charles, LA.............................................    15.0433
Lakeland-Winter Haven, FL....................................    14.7941
Lancaster, PA................................................    17.0658
Lansing-East Lansing, MI.....................................    18.3031
Laredo, TX...................................................    12.7235
Las Cruces, NM...............................................    16.0660
Las Vegas, NV-AZ.............................................    19.4913
Lawrence, KS.................................................    15.6222
Lawton, OK...................................................    15.5118
Lewiston-Auburn, ME..........................................    17.6436
Lexington, KY................................................    15.3463
Lima, OH.....................................................    15.8233
Lincoln, NE..................................................    16.4101
Little Rock-North Little Rock, AR............................    15.1390
Longview-Marshall, TX........................................    15.9127
Los Angeles-Long Beach, CA...................................    22.8969
Louisville, KY-IN............................................    17.2240
Lubbock, TX..................................................    15.8490
Lynchburg, VA................................................    15.1754
Macon, GA....................................................    16.4206
Madison, WI..................................................    18.0981
Mansfield, OH................................................    14.9778
Mayaguez, PR.................................................     8.1304
McAllen-Edinburg-Mission, TX.................................    14.6517
Medford-Ashland, OR..........................................    17.6432
Melbourne-Titusville-Palm Bay, FL............................    16.3510
Memphis, TN-AR-MS............................................    15.4887
Merced, CA...................................................    17.9930
Miami, FL....................................................    18.5575
Middlesex-Somerset-Hunterdon, NJ.............................    19.5314
Milwaukee-Waukesha, WI.......................................    17.5426
Minneapolis-St. Paul, MN-WI..................................    19.7966
Mobile, AL...................................................    13.7051
Modesto, CA..................................................    20.4129
Monmouth-Ocean, NJ...........................................    19.4962
Monroe, LA...................................................    13.9777
Montgomery, AL...............................................    14.6928
Muncie, IN...................................................    17.3507
Myrtle Beach, SC.............................................    14.5015
Naples, FL...................................................    17.7633
Nashville, TN................................................    17.0518
Nassau-Suffolk, NY...........................................    24.6970
New Haven-Bridgeport-Stamford-Danbury-Waterbury, CT..........    22.5646
New London-Norwich, CT.......................................    21.1702
New Orleans, LA..............................................    17.3291
New York, NY.................................................    25.6447
Newark, NJ...................................................    21.7897
Newburgh, NY-PA..............................................    18.6043
Norfolk-Virginia Beach-Newport News, VA......................    15.1146
Oakland, CA..................................................    26.6653
Ocala, FL....................................................    16.0357
Odessa-Midland, TX...........................................    15.3382
Oklahoma City, OK............................................    15.4527
Olympia, WA..................................................    20.3246
Omaha, NE-IA.................................................    17.8621
Orange County, CA............................................    22.2936
Orlando, FL..................................................    17.2217
Owensboro, KY................................................    14.3219
Panama City, FL..............................................    13.7129
Parkersburg-Marietta, WV-OH..................................    14.4674
Pensacola, FL................................................    14.9950
Peoria-Pekin, IL.............................................    15.3566
Philadelphia, PA-NJ..........................................    20.2418
Phoenix-Mesa, AZ.............................................    18.4081
Pine Bluff, AR...............................................    15.7140
Pittsburgh, PA...............................................    17.9035
Pittsfield, MA...............................................    20.6961
Ponce, PR....................................................     8.0275
Portland, ME.................................................    17.2961
Portland-Vancouver, OR-WA....................................    20.4183
Providence-Warwick, RI.......................................    20.2583
Provo-Orem, UT...............................................    18.7888
Pueblo, CO...................................................    14.1899
Punta Gorda, FL..............................................    15.9683
Racine, WI...................................................    15.7220
Raleigh-Durham-Chapel Hill, NC...............................    17.4465
Rapid City, SD...............................................    14.8116
Reading, PA..................................................    16.7253
Redding, CA..................................................    20.0800
Reno, NV.....................................................    20.2340
Richland-Kennewick-Pasco, WA.................................    17.6183
Richmond-Petersburg, VA......................................    17.0553
Riverside-San Bernardino, CA.................................    21.3851
Roanoke, VA..................................................    15.0995
Rochester, MN................................................    19.0900
Rochester, NY................................................    17.9083
Rockford, IL.................................................    15.8339
Rocky Mount, NC..............................................    15.5922
Sacramento, CA...............................................    20.5987
Saginaw-Bay City-Midland, MI.................................    17.0890
St. Cloud, MN................................................    17.4372
St. Joseph, MO...............................................    15.7097
St. Louis, MO-IL.............................................    16.6361
Salem, OR....................................................    17.4562
Salinas, CA..................................................    24.9907
Salt Lake City-Ogden, UT.....................................    17.5358
San Angelo, TX...............................................    13.0251
San Antonio, TX..............................................    14.6955
San Diego, CA................................................    21.9881
San Francisco, CA............................................    25.6122
San Jose, CA.................................................    26.0941
San Juan-Bayamon, PR.........................................     7.9610
San Luis Obispo-Atascadero-Paso Robles, CA...................    22.3764
Santa Barbara-Santa Maria-Lompoc, CA.........................    21.2153
Santa Cruz-Watsonville, CA...................................    24.5190
Santa Fe, NM.................................................    19.6904
Santa Rosa, CA...............................................    23.4906
Sarasota-Bradenton, FL.......................................    17.6658
Savannah, GA.................................................    16.1442
Scranton-Wilkes Barre-Hazleton, PA...........................    15.5977
Seattle-Bellevue-Everett, WA.................................    20.0458
Sharon, PA...................................................    16.2992
Sheboygan, WI................................................    14.6933
Sherman-Denison, TX..........................................    16.1308
Shreveport-Bossier City, LA..................................    16.5027
Sioux City, IA-NE............................................    15.5079
Sioux Falls, SD..............................................    15.8117
South Bend, IN...............................................    17.5707
Spokane, WA..................................................    19.3897
Springfield, IL..............................................    15.9339
Springfield, MO..............................................    14.4034
Springfield, MA..............................................    19.2715
State College, PA............................................    18.0846
Steubenville-Weirton, OH-WV..................................    15.4737
Stockton-Lodi, CA............................................    21.2618
Sumter, SC...................................................    14.6395
Syracuse, NY.................................................    17.7012
Tacoma, WA...................................................    18.9982
Tallahassee, FL..............................................    14.9889
Tampa-St. Petersburg-Clearwater, FL..........................    16.9475
Terre Haute, IN..............................................    15.6697
Texarkana, TX-Texarkana, AR..................................    14.8819
Toledo, OH...................................................    18.1171
Topeka, KS...................................................    18.0500
Trenton, NJ..................................................    18.6489
Tucson, AZ...................................................    17.1274
Tulsa, OK....................................................    15.0046
Tuscaloosa, AL...............................................    14.9033
Tyler, TX....................................................    15.6242
Utica-Rome, NY...............................................    15.4642
Vallejo-Fairfield-Napa, CA...................................    23.8150
Ventura, CA..................................................    21.2819
Victoria, TX.................................................    15.8948
Vineland-Millville-Bridgeton, NJ.............................    18.7995
Visalia-Tulare-Porterville, CA...............................    18.8058
Waco, TX.....................................................    14.6442
Washington, DC-MD-VA-WV......................................    20.0174
Waterloo-Cedar Falls, IA.....................................    15.7836
Wausau, WI...................................................    17.9018
West Palm Beach-Boca Raton, FL...............................    18.3519
Wheeling, WV-OH..............................................    13.8778
Wichita, KS..................................................    18.2479
Wichita Falls, TX............................................    12.5172
Williamsport, PA.............................................    15.3868
Wilmington-Newark, DE-MD.....................................    19.5698
Wilmington, NC...............................................    16.6887
Yakima, WA...................................................    17.3416
Yolo, CA.....................................................    21.6301
York, PA.....................................................    16.4426
Youngstown-Warren, OH........................................    17.0986
Yuba City, CA................................................    18.6136
Yuma, AZ.....................................................   15.8434 
------------------------------------------------------------------------


             Table 4e.--Average Hourly Wage for Rural Areas             
------------------------------------------------------------------------
                                                                Average 
                        Nonurban area                            hourly 
                                                                 wage   
------------------------------------------------------------------------
Alabama......................................................    12.7907
Alaska.......................................................    22.8273
Arizona......................................................    15.1182
Arkansas.....................................................    12.3940
California...................................................    17.7961
Colorado.....................................................    14.5806
Connecticut..................................................    22.3424
Delaware.....................................................    15.3947
Florida......................................................    15.5317
Georgia......................................................    13.7365
Hawaii.......................................................    17.3871
Idaho........................................................    15.2823
Illinois.....................................................    13.5345
Indiana......................................................    14.4777
Iowa.........................................................    13.3171
Kansas.......................................................    13.2473
Kentucky.....................................................    13.6720
Louisiana....................................................    13.3198
Maine........................................................    15.3246
Maryland.....................................................    15.4619
Massachusetts................................................    19.6679
Michigan.....................................................    15.8762
Minnesota....................................................    14.8248
Mississippi..................................................    12.1611
Missouri.....................................................    13.1806
Montana......................................................    14.8911
Nebraska.....................................................    13.3346
Nevada.......................................................    16.5787
New Hampshire................................................    17.8203
New Jersey\1\................................................           
New Mexico...................................................    14.7398
New York.....................................................    15.9245
North Carolina...............................................    14.2303
North Dakota.................................................    13.3117
Ohio.........................................................    14.7840
Oklahoma.....................................................    12.5019
Oregon.......................................................    16.8541
Pennsylvania.................................................    15.6802
Puerto Rico..................................................     8.0041
Rhode Island\1\                                                         
South Carolina...............................................    13.8973
South Dakota.................................................    12.6925
Tennessee....................................................    13.4771
Texas........................................................    13.6078
Utah.........................................................    16.0721
Vermont......................................................    16.2419
Virginia.....................................................    14.2279
Washington...................................................    17.5732
West Virginia................................................    14.7082
Wisconsin....................................................    15.2103
Wyoming......................................................   14.4787 
------------------------------------------------------------------------
\1\All counties within the State are classified urban.                  


  Table 5.--List of Diagnosis Related Groups (DRGS), Relative Weighting Factors, Geometric Mean Length of Stay, 
                and Length of Stay Outlier Cutoff Points Used in the Prospective Payment System                 
----------------------------------------------------------------------------------------------------------------
                                                                   Relative    Geometric  Arithmetic    Outlier 
                                                                   weights     mean LOS    mean LOS   threshold 
----------------------------------------------------------------------------------------------------------------
1.......       01  SURG          CRANIOTOMY AGE >17 EXCEPT FOR        3.1583         9.6        13.5          32
                                  TRAUMA.                                                                       
2.......       01  SURG          CRANIOTOMY FOR TRAUMA AGE >17..      3.0986         9.8        13.9          32
3.......       01  SURG          *CRANIOTOMY AGE 0-17...........      3.0370        12.7        12.7          35
4.......       01  SURG          SPINAL PROCEDURES..............      2.3196         7.2        11.0          29
5.......       01  SURG          EXTRACRANIAL VASCULAR                1.5615         4.4         5.6          26
                                  PROCEDURES.                                                                   
6.......       01  SURG          CARPAL TUNNEL RELEASE..........       .6360         2.2         3.2          24
7.......       01  SURG          PERIPH & CRANIAL NERVE & OTHER       2.3641         9.6        16.7          32
                                  NERV SYST PROC WITH CC.                                                       
8.......       01  SURG          PERIPH & CRANIAL NERVE & OTHER        .8845         2.8         4.5          25
                                  NERV SYST PROC W/O CC.                                                        
9.......       01  MED           SPINAL DISORDERS & INJURIES....      1.2468         6.0         8.8          28
10......       01  MED           NERVOUS SYSTEM NEOPLASMS WITH        1.2626         6.7         9.6          29
                                  CC.                                                                           
11......       01  MED           NERVOUS SYSTEM NEOPLASMS W/O CC       .7736         3.8         5.5          26
12......       01  MED           DEGENERATIVE NERVOUS SYSTEM           .9576         6.3         9.0          28
                                  DISORDERS.                                                                    
13......       01  MED           MULTIPLE SCLEROSIS & CEREBELLAR       .7846         5.7         7.2          28
                                  ATAXIA.                                                                       
14......       01  MED           SPECIFIC CEREBROVASCULAR             1.1962         6.4         8.7          28
                                  DISORDERS EXCEPT TIA.                                                         
15......       01  MED           TRANSIENT ISCHEMIC ATTACK &           .6915         3.8         4.9          26
                                  PRECEREBRAL OCCLUSIONS.                                                       
16......       01  MED           NONSPECIFIC CEREBROVASCULAR          1.0468         5.8         7.7          28
                                  DISORDERS W CC.                                                               
17......       01  MED           NONSPECIFIC CEREBROVASCULAR           .6197         3.5         4.6          26
                                  DISORDERS W/O CC.                                                             
18......       01  MED           CRANIAL & PERIPHERAL NERVE            .9138         5.5         7.2          27
                                  DISORDERS WITH CC.                                                            
19......       01  MED           CRANIAL & PERIPHERAL NERVE            .5941         3.7         4.8          26
                                  DISORDERS W/O CC.                                                             
20......       01  MED           NERVOUS SYSTEM INFECTION EXCEPT      2.0898         8.3        11.7          30
                                  VIRAL MENINGITIS.                                                             
21......       01  MED           VIRAL MENINGITIS...............      1.4489         6.5         8.7          28
22......       01  MED           HYPERTENSIVE ENCEPHALOPATHY....       .7809         4.2         5.4          26
23......       01  MED           NONTRAUMATIC STUPOR & COMA.....       .8018         4.0         5.6          26
24......       01  MED           SEIZURE & HEADACHE AGE >17 WITH       .9661         4.8         6.6          27
                                  CC.                                                                           
25......       01  MED           SEIZURE & HEADACHE AGE >17 W/O        .5524         3.2         4.1          25
                                  CC.                                                                           
26......       01  MED           SEIZURE & HEADACHE AGE 0-17....       .6294         2.8         4.4          25
27......       01  MED           TRAUMATIC STUPOR & COMA, COMA        1.3456         4.0         7.1          26
                                  >1 HR.                                                                        
28......       01  MED           TRAUMATIC STUPOR & COMA, COMA        1.2155         5.5         8.2          27
                                  <1 HR AGE >17 WITH CC.                                                        
29......       01  MED           TRAUMATIC STUPOR & COMA, COMA         .6215         3.3         4.6          25
                                  <1 HR AGE >17 W/O CC.                                                         
30......       01  MED           *TRAUMATIC STUPOR & COMA, COMA        .3684         2.0         2.0          17
                                  <1 HR AGE 0-17.                                                               
31......       01  MED           CONCUSSION AGE >17 WITH CC.....       .7551         3.9         5.6          26
32......       01  MED           CONCUSSION AGE >17 W/O CC......       .4598         2.5         3.4          23
33......       01  MED           *CONCUSSION AGE 0-17...........       .2556         1.6         1.6           9
34......       01  MED           OTHER DISORDERS OF NERVOUS           1.0876         5.3         7.4          28
                                  SYSTEM WITH CC.                                                               
35......       01  MED           OTHER DISORDERS OF NERVOUS            .5857         3.5         4.9          27
                                  SYSTEM W/O CC.                                                                
36......       02  SURG          RETINAL PROCEDURES.............       .6000         1.5         1.8           8
37......       02  SURG          ORBITAL PROCEDURES.............       .8124         2.7         3.9          25
38......       02  SURG          PRIMARY IRIS PROCEDURES........       .3997         2.0         2.7          16
39......       02  SURG          LENS PROCEDURES WITH OR WITHOUT       .5079         1.5         1.9           9
                                  VITRECTOMY.                                                                   
40......       02  SURG          EXTRAOCULAR PROCEDURES EXCEPT         .6020         2.3         3.6          24
                                  ORBIT AGE >17.                                                                
41......       02  SURG          *EXTRAOCULAR PROCEDURES EXCEPT        .3806         1.6         1.6           7
                                  ORBIT AGE 0-17.                                                               
42......       02  SURG          INTRAOCULAR PROCEDURES EXCEPT         .5783         1.7         2.3          13
                                  RETINA, IRIS & LENS.                                                          
43......       02  MED           HYPHEMA........................       .3405         3.0         3.6          20
44......       02  MED           ACUTE MAJOR EYE INFECTIONS.....       .5780         5.0         6.0          27
45......       02  MED           NEUROLOGICAL EYE DISORDERS.....       .6214         3.5         4.3          25
46......       02  MED           OTHER DISORDERS OF THE EYE AGE        .7573         4.5         6.0          26
                                  >17 W CC.                                                                     
47......       02  MED           OTHER DISORDERS OF THE EYE AGE        .4330         3.0         3.9          25
                                  >17 W/O CC.                                                                   
48......       02  MED           *OTHER DISORDERS OF THE EYE AGE       .4182         2.9         2.9          25
                                  0-17.                                                                         
49......       03  SURG          MAJOR HEAD & NECK PROCEDURES...      1.7155         4.9         6.8          27
50......       03  SURG          SIALOADENECTOMY................       .7151         1.9         2.3          11
51......       03  SURG          SALIVARY GLAND PROCEDURES             .6850         2.0         3.0          22
                                  EXCEPT SIALOADENECTOMY.                                                       
52......       03  SURG          CLEFT LIP & PALATE REPAIR......       .9160         2.3         3.0          20
53......       03  SURG          SINUS & MASTOID PROCEDURES AGE        .8624         2.2         3.4          24
                                  >17.                                                                          
54......       03  SURG          *SINUS & MASTOID PROCEDURES AGE       .7170         3.2         3.2          22
                                  0-17.                                                                         
55......       03  SURG          MISCELLANEOUS EAR, NOSE, MOUTH        .6451         1.8         2.8          20
                                  & THROAT PROCEDURES.                                                          
56......       03  SURG          RHINOPLASTY....................       .7719         2.2         3.1          24
57......       03  SURG          T&A PROC, EXCEPT TONSILLECTOMY       1.0215         3.4         5.2          25
                                  &/OR ADENOIDECTOMY ONLY, AGE                                                  
                                  >17.                                                                          
58......       03  SURG          *T&A PROC, EXCEPT TONSILLECTOMY       .3224         1.5         1.5           4
                                  &/OR ADENOIDECTOMY ONLY, AGE 0-                                               
                                  17.                                                                           
59......       03  SURG          TONSILLECTOMY &/OR                    .4603         1.5         1.9           9
                                  ADENOIDECTOMY ONLY, AGE >17.                                                  
60......       03  SURG          *TONSILLECTOMY &/OR                   .2721         1.5         1.5           4
                                  ADENOIDECTOMY ONLY, AGE 0-17.                                                 
61......       03  SURG          MYRINGOTOMY W TUBE INSERTION         1.0048         2.9         5.1          25
                                  AGE >17.                                                                      
62......       03  SURG          *MYRINGOTOMY W TUBE INSERTION         .3215         1.3         1.3           5
                                  AGE 0-17.                                                                     
63......       03  SURG          OTHER EAR, NOSE, MOUTH & THROAT      1.1087         3.4         5.1          25
                                  O.R. PROCEDURES.                                                              
64......       03  MED           EAR, NOSE, MOUTH & THROAT            1.1440         5.0         8.4          27
                                  MALIGNANCY.                                                                   
65......       03  MED           DYSEQUILIBRIUM.................       .5066         3.0         3.8          22
66......       03  MED           EPISTAXIS......................       .5070         3.1         3.9          24
67......       03  MED           EPIGLOTTITIS...................       .8395         3.8         4.8          26
68......       03  MED           OTITIS MEDIA & URI AGE >17 WITH       .7109         4.4         5.4          26
                                  CC.                                                                           
69......       03  MED           OTITIS MEDIA & URI AGE >17 W/O        .5137         3.5         4.2          22
                                  CC.                                                                           
70......       03  MED           OTITIS MEDIA & URI AGE 0-17....       .5674         3.5         4.3          25
71......       03  MED           LARYNGOTRACHEITIS..............       .6500         3.5         4.2          22
72......       03  MED           NASAL TRAUMA & DEFORMITY.......       .6037         3.1         4.3          25
73......       03  MED           OTHER EAR, NOSE, MOUTH & THROAT       .7607         4.1         5.5          26
                                  DIAGNOSES AGE >17.                                                            
74......       03  MED           *OTHER EAR, NOSE, MOUTH &             .3568         2.1         2.1          20
                                  THROAT DIAGNOSES AGE 0-17.                                                    
75......       04  SURG          MAJOR CHEST PROCEDURES.........      3.0728         9.9        12.4          32
76......       04  SURG          OTHER RESP SYSTEM O.R.               2.5091        10.0        13.8          32
                                  PROCEDURES W CC.                                                              
77......       04  SURG          OTHER RESP SYSTEM O.R.               1.0561         4.0         6.0          26
                                  PROCEDURES W/O CC.                                                            
78......       04  MED           PULMONARY EMBOLISM.............      1.4217         7.8         9.2          30
79......       04  MED           RESPIRATORY INFECTIONS &             1.6968         8.3        10.7          30
                                  INFLAMMATIONS AGE >17 WITH CC.                                                
80......       04  MED           RESPIRATORY INFECTIONS &              .9243         5.9         7.3          28
                                  INFLAMMATIONS AGE >17 W/O CC.                                                 
81......       04  MED           RESPIRATORY INFECTIONS &             1.1138         5.6         7.0          28
                                  INFLAMMATIONS AGE 0-17.                                                       
82......       04  MED           RESPIRATORY NEOPLASMS..........      1.3249         6.3         8.9          28
83......       04  MED           MAJOR CHEST TRAUMA WITH CC.....       .9473         5.5         7.2          28
84......       04  MED           MAJOR CHEST TRAUMA W/O CC......       .4934         3.2         4.3          25
85......       04  MED           PLEURAL EFFUSION WITH CC.......      1.1910         6.2         8.2          28
86......       04  MED           PLEURAL EFFUSION W/O CC........       .6744         3.8         4.9          26
87......       04  MED           PULMONARY EDEMA & RESPIRATORY        1.3319         5.5         7.5          27
                                  FAILURE.                                                                      
88......       04  MED           CHRONIC OBSTRUCTIVE PULMONARY        1.0062         5.6         6.9          28
                                  DISEASE.                                                                      
89......       04  MED           SIMPLE PNEUMONIA & PLEURISY AGE      1.1325         6.5         8.0          29
                                  >17 WITH CC.                                                                  
90......       04  MED           SIMPLE PNEUMONIA & PLEURISY AGE       .6923         4.9         5.7          26
                                  >17 W/O CC.                                                                   
91......       04  MED           SIMPLE PNEUMONIA & PLEURISY AGE       .5790         3.6         4.2          18
                                  0-17.                                                                         
92......       04  MED           INTERSTITIAL LUNG DISEASE WITH       1.2097         6.4         8.1          28
                                  CC.                                                                           
93......       04  MED           INTERSTITIAL LUNG DISEASE W/O         .7706         4.5         5.7          26
                                  CC.                                                                           
94......       04  MED           PNEUMOTHORAX WITH CC...........      1.2406         6.5         8.5          28
95......       04  MED           PNEUMOTHORAX W/O CC............       .6191         4.0         5.0          26
96......       04  MED           BRONCHITIS & ASTHMA AGE >17           .8494         5.2         6.2          27
                                  WITH CC.                                                                      
97......       04  MED           BRONCHITIS & ASTHMA AGE >17 W/O       .6122         4.1         4.8          24
                                  CC.                                                                           
98......       04  MED           BRONCHITIS & ASTHMA AGE 0-17...       .5396         3.1         4.1          25
99......       04  MED           RESPIRATORY SIGNS & SYMPTOMS          .7034         3.2         4.1          25
                                  WITH CC.                                                                      
100.....       04  MED           RESPIRATORY SIGNS & SYMPTOMS W/       .5052         2.3         2.8          15
                                  O CC.                                                                         
101.....       04  MED           OTHER RESPIRATORY SYSTEM              .9052         4.6         6.2          27
                                  DIAGNOSES WITH CC.                                                            
102.....       04  MED           OTHER RESPIRATORY SYSTEM              .5320         3.0         3.9          25
                                  DIAGNOSES W/O CC.                                                             
103.....       05  SURG          HEART TRANSPLANT...............     13.0713        24.3        34.2          46
104.....       05  SURG          CARDIAC VALVE PROCEDURES W           7.6122        15.1        17.9          37
                                  CARDIAC CATH.                                                                 
105.....       05  SURG          CARDIAC VALVE PROCEDURES W/O         5.7785        11.0        13.0          33
                                  CARDIAC CATH.                                                                 
106.....       05  SURG          CORONARY BYPASS W CARDIAC CATH.      5.6745        12.1        13.6          34
107.....       05  SURG          CORONARY BYPASS W/O CARDIAC          4.2105         9.3        10.4          31
                                  CATH.                                                                         
108.....       05  SURG          OTHER CARDIOTHORACIC PROCEDURES      6.1158        11.4        14.7          33
109.....  .......  ............  NO LONGER VALID................       .0000          .0          .0           0
110.....       05  SURG          MAJOR CARDIOVASCULAR PROCEDURES      4.0832         9.1        12.2          31
                                  WITH CC.                                                                      
111.....       05  SURG          MAJOR CARDIOVASCULAR PROCEDURES      2.3065         6.5         7.5          28
                                  W/O CC.                                                                       
112.....       05  SURG          PERCUTANEOUS CARDIOVASCULAR          1.9910         3.9         5.3          26
                                  PROCEDURES.                                                                   
113.....       05  SURG          AMPUTATION FOR CIRC SYSTEM           2.7751        12.7        17.1          35
                                  DISORDERS EXCEPT UPPER LIMB &                                                 
                                  TOE.                                                                          
114.....       05  SURG          UPPER LIMB & TOE AMPUTATION FOR      1.5388         7.9        10.9          30
                                  CIRC SYSTEM DISORDERS.                                                        
115.....       05  SURG          PERM CARDIAC PACEMAKER IMPLANT       3.5971        10.4        12.7          32
                                  W AMI, HEART FAILURE OR SHOCK.                                                
116.....       05  SURG          OTH PERM CARDIAC PACEMAKER           2.4510         4.7         6.5          27
                                  IMPLANT OR AICD LEAD OR GEN                                                   
                                  PROC.                                                                         
117.....       05  SURG          CARDIAC PACEMAKER REVISION           1.1670         3.3         4.8          25
                                  EXCEPT DEVICE REPLACEMENT.                                                    
118.....       05  SURG          CARDIAC PACEMAKER DEVICE             1.5643         2.3         3.5          24
                                  REPLACEMENT.                                                                  
119.....       05  SURG          VEIN LIGATION & STRIPPING......       .9981         3.3         5.6          25
120.....       05  SURG          OTHER CIRCULATORY SYSTEM O.R.        1.9541         6.2        10.6          28
                                  PROCEDURES.                                                                   
121.....       05  MED           CIRCULATORY DISORDERS W AMI &        1.6042         7.0         8.6          29
                                  C.V. COMP DISCH ALIVE.                                                        
122.....       05  MED           CIRCULATORY DISORDERS W AMI W/O      1.1310         4.9         6.0          27
                                  C.V. COMP DISCH ALIVE.                                                        
123.....       05  MED           CIRCULATORY DISORDERS W AMI,         1.4292         2.9         5.1          25
                                  EXPIRED.                                                                      
124.....       05  MED           CIRCULATORY DISORDERS EXCEPT         1.2680         4.2         5.5          26
                                  AMI, W CARD CATH & COMPLEX                                                    
                                  DIAG.                                                                         
125.....       05  MED           CIRCULATORY DISORDERS EXCEPT          .8460         2.4         3.2          23
                                  AMI, W CARD CATH W/O COMPLEX                                                  
                                  DIAG.                                                                         
126.....       05  MED           ACUTE & SUBACUTE ENDOCARDITIS..      2.7676        13.6        18.3          36
127.....       05  MED           HEART FAILURE & SHOCK..........      1.0244         5.5         7.1          27
128.....       05  MED           DEEP VEIN THROMBOPHLEBITIS.....       .7814         6.7         7.5          29
129.....       05  MED           CARDIAC ARREST, UNEXPLAINED....      1.1312         2.1         3.8          24
130.....       05  MED           PERIPHERAL VASCULAR DISORDERS         .9089         5.8         7.4          28
                                  WITH CC.                                                                      
131.....       05  MED           PERIPHERAL VASCULAR DISORDERS W/      .5871         4.6         5.6          27
                                  O CC.                                                                         
132.....       05  MED           ATHEROSCLEROSIS WITH CC........       .7295         3.6         4.7          26
133.....       05  MED           ATHEROSCLEROSIS W/O CC.........       .5369         2.7         3.5          21
134.....       05  MED           HYPERTENSION...................       .5765         3.5         4.4          25
135.....       05  MED           CARDIAC CONGENITAL & VALVULAR         .8488         4.2         5.8          26
                                  DISORDERS AGE >17 WITH CC.                                                    
136.....       05  MED           CARDIAC CONGENITAL & VALVULAR         .5616         3.0         3.7          23
                                  DISORDERS AGE >17 W/O CC.                                                     
137.....       05  MED           *CARDIAC CONGENITAL & VALVULAR        .6572         3.3         3.3          25
                                  DISORDERS AGE 0-17.                                                           
138.....       05  MED           CARDIAC ARRHYTHMIA & CONDUCTION       .7971         3.9         5.2          26
                                  DISORDERS WITH CC.                                                            
139.....       05  MED           CARDIAC ARRHYTHMIA & CONDUCTION       .4942         2.6         3.3          20
                                  DISORDERS W/O CC.                                                             
140.....       05  MED           ANGINA PECTORIS................       .6267         3.2         4.0          23
141.....       05  MED           SYNCOPE & COLLAPSE WITH CC.....       .7028         3.9         5.1          26
142.....       05  MED           SYNCOPE & COLLAPSE W/O CC......       .5178         2.9         3.6          21
143.....       05  MED           CHEST PAIN.....................       .5173         2.4         3.0          16
144.....       05  MED           OTHER CIRCULATORY SYSTEM             1.0667         4.5         6.4          27
                                  DIAGNOSES W CC.                                                               
145.....       05  MED           OTHER CIRCULATORY SYSTEM              .6230         2.8         3.7          25
                                  DIAGNOSES W/O CC.                                                             
146.....       06  SURG          RECTAL RESECTION WITH CC.......      2.5374        10.7        12.2          33
147.....       06  SURG          RECTAL RESECTION W/O CC........      1.5514         7.4         8.0          28
148.....       06  SURG          MAJOR SMALL & LARGE BOWEL            3.2219        12.2        14.6          34
                                  PROCEDURES WITH CC.                                                           
149.....       06  SURG          MAJOR SMALL & LARGE BOWEL            1.5038         7.6         8.2          26
                                  PROCEDURES W/O CC.                                                            
150.....       06  SURG          PERITONEAL ADHESIOLYSIS WITH CC      2.5637        10.5        12.7          32
151.....       06  SURG          PERITONEAL ADHESIOLYSIS W/O CC.      1.1849         5.5         6.8          27
152.....       06  SURG          MINOR SMALL & LARGE BOWEL            1.7740         8.2         9.6          30
                                  PROCEDURES WITH CC.                                                           
153.....       06  SURG          MINOR SMALL & LARGE BOWEL            1.1154         6.0         6.7          26
                                  PROCEDURES W/O CC.                                                            
154.....       06  SURG          STOMACH, ESOPHAGEAL & DUODENAL       4.1774        13.3        17.0          35
                                  PROCEDURES AGE >17 WITH CC.                                                   
155.....       06  SURG          STOMACH, ESOPHAGEAL & DUODENAL       1.3927         6.1         7.2          28
                                  PROCEDURES AGE >17 W/O CC.                                                    
156.....       06  SURG          *STOMACH, ESOPHAGEAL & DUODENAL       .8724         6.0         6.0          28
                                  PROCEDURES AGE 0-17.                                                          
157.....       06  SURG          ANAL & STOMAL PROCEDURES WITH        1.0322         4.4         6.1          26
                                  CC.                                                                           
158.....       06  SURG          ANAL & STOMAL PROCEDURES W/O CC       .5446         2.3         3.0          18
159.....       06  SURG          HERNIA PROCEDURES EXCEPT             1.1081         4.3         5.6          26
                                  INGUINAL & FEMORAL AGE >17                                                    
                                  WITH CC.                                                                      
160.....       06  SURG          HERNIA PROCEDURES EXCEPT              .6582         2.5         3.1          18
                                  INGUINAL & FEMORAL AGE >17 W/O                                                
                                  CC.                                                                           
161.....       06  SURG          INGUINAL & FEMORAL HERNIA             .9060         3.2         4.6          25
                                  PROCEDURES AGE >17 WITH CC.                                                   
162.....       06  SURG          INGUINAL & FEMORAL HERNIA             .5169         1.8         2.2          11
                                  PROCEDURES AGE >17 W/O CC.                                                    
163.....       06  SURG          HERNIA PROCEDURES AGE 0-17.....       .7290         3.9         4.8          24
164.....       06  SURG          APPENDECTOMY W COMPLICATED           2.1664         8.8        10.2          31
                                  PRINCIPAL DIAG WITH CC.                                                       
165.....       06  SURG          APPENDECTOMY W COMPLICATED           1.2002         5.7         6.3          24
                                  PRINCIPAL DIAG W/O CC.                                                        
166.....       06  SURG          APPENDECTOMY W/O COMPLICATED         1.3522         5.2         6.3          27
                                  PRINCIPAL DIAG WITH CC.                                                       
167.....       06  SURG          APPENDECTOMY W/O COMPLICATED          .7843         3.2         3.7          16
                                  PRINCIPAL DIAG W/O CC.                                                        
168.....       03  SURG          MOUTH PROCEDURES WITH CC.......      1.0920         3.5         5.4          26
169.....       03  SURG          MOUTH PROCEDURES W/O CC........       .6176         2.1         2.7          16
170.....       06  SURG          OTHER DIGESTIVE SYSTEM O.R.          2.7634         9.7        14.4          32
                                  PROCEDURES WITH CC.                                                           
171.....       06  SURG          OTHER DIGESTIVE SYSTEM O.R.          1.0576         4.3         5.8          26
                                  PROCEDURES W/O CC.                                                            
172.....       06  MED           DIGESTIVE MALIGNANCY WITH CC...      1.3010         6.5         9.4          29
173.....       06  MED           DIGESTIVE MALIGNANCY W/O CC....       .6325         3.2         4.6          25
174.....       06  MED           G.I. HEMORRHAGE WITH CC........       .9735         4.9         6.2          27
175.....       06  MED           G.I. HEMORRHAGE W/O CC.........       .5366         3.3         3.9          19
176.....       06  MED           COMPLICATED PEPTIC ULCER.......      1.0447         5.3         6.9          27
177.....       06  MED           UNCOMPLICATED PEPTIC ULCER WITH       .8070         4.6         5.6          27
                                  CC.                                                                           
178.....       06  MED           UNCOMPLICATED PEPTIC ULCER W/O        .5829         3.3         3.9          19
                                  CC.                                                                           
179.....       06  MED           INFLAMMATORY BOWEL DISEASE.....      1.1147         6.4         8.2          28
180.....       06  MED           G.I. OBSTRUCTION WITH CC.......       .9134         5.2         6.8          27
181.....       06  MED           G.I. OBSTRUCTION W/O CC........       .4978         3.4         4.2          23
182.....       06  MED           ESOPHAGITIS, GASTROENT & MISC         .7687         4.3         5.6          26
                                  DIGEST DISORDERS AGE >17 WITH                                                 
                                  CC.                                                                           
183.....       06  MED           ESOPHAGITIS, GASTROENT & MISC         .5360         3.1         3.8          22
                                  DIGEST DISORDERS AGE >17 W/O                                                  
                                  CC.                                                                           
184.....       06  MED           ESOPHAGITIS, GASTROENT & MISC         .4135         2.6         3.2          18
                                  DIGEST DISORDERS AGE 0-17.                                                    
185.....       03  MED           DENTAL & ORAL DIS EXCEPT              .8339         4.1         5.7          26
                                  EXTRACTIONS & RESTORATIONS,                                                   
                                  AGE >17.                                                                      
186.....       03  MED           *DENTAL & ORAL DIS EXCEPT             .4278         2.9         2.9          23
                                  EXTRACTIONS & RESTORATIONS,                                                   
                                  AGE 0-17.                                                                     
187.....       03  MED           DENTAL EXTRACTIONS &                  .6465         2.8         3.8          25
                                  RESTORATIONS.                                                                 
188.....       06  MED           OTHER DIGESTIVE SYSTEM               1.0203         4.9         6.8          27
                                  DIAGNOSES AGE >17 WITH CC.                                                    
189.....       06  MED           OTHER DIGESTIVE SYSTEM                .5025         2.7         3.7          25
                                  DIAGNOSES AGE >17 W/O CC.                                                     
190.....       06  MED           OTHER DIGESTIVE SYSTEM                .6263         3.1         4.4          25
                                  DIAGNOSES AGE 0-17.                                                           
191.....       07  SURG          PANCREAS, LIVER & SHUNT              4.4048        13.6        18.1          36
                                  PROCEDURES WITH CC..                                                          
192.....       07  SURG          PANCREAS, LIVER & SHUNT              1.7647         6.8         8.8          29
                                  PROCEDURES W/O CC.                                                            
193.....       07  SURG          BILIARY TRACT PROC W CC EXCEPT       3.1449        12.9        15.6          35
                                  ONLY CHOLECYST W OR W/O C.D.E..                                               
194.....       07  SURG          BILIARY TRACT PROC W/O CC            1.6602         7.3         9.2          29
                                  EXCEPT ONLY CHOLECYST W OR W/O                                                
                                  C.D.E.                                                                        
195.....       07  SURG          CHOLECYSTECTOMY W C.D.E. WITH        2.4631         9.7        11.4          32
                                  CC.                                                                           
196.....       07  SURG          CHOLECYSTECTOMY W C.D.E. W/O CC      1.4811         6.5         7.4          28
197.....       07  SURG          CHOLECYSTECTOMY EXCEPT BY            2.0800         8.1         9.7          30
                                  LAPAROSCOPE W/O C.D.E. WITH CC.                                               
198.....       07  SURG          CHOLECYSTECTOMY EXCEPT BY            1.0967         4.6         5.3          24
                                  LAPAROSCOPE W/O C.D.E. W/O CC.                                                
199.....       07  SURG          HEPATOBILIARY DIAGNOSTIC             2.3638         9.8        13.2          32
                                  PROCEDURE FOR MALIGNANCY.                                                     
200.....       07  SURG          HEPATOBILIARY DIAGNOSTIC             2.9766         8.4        13.1          30
                                  PROCEDURE FOR NON-MALIGNANCY.                                                 
201.....       07  SURG          OTHER HEPATOBILIARY OR PANCREAS      3.2257        12.1        17.0          34
                                  O.R. PROCEDURES.                                                              
202.....       07  MED           CIRRHOSIS & ALCOHOLIC HEPATITIS      1.3126         6.4         8.7          28
203.....       07  MED           MALIGNANCY OF HEPATOBILIARY          1.2401         6.3         8.8          28
                                  SYSTEM OR PANCREAS.                                                           
204.....       07  MED           DISORDERS OF PANCREAS EXCEPT         1.1365         5.6         7.3          28
                                  MALIGNANCY.                                                                   
205.....       07  MED           DISORDERS OF LIVER EXCEPT            1.2275         6.1         8.4          28
                                  MALIG, CIRR, ALC HEPA WITH CC.                                                
206.....       07  MED           DISORDERS OF LIVER EXCEPT             .6075         3.4         4.6          25
                                  MALIG, CIRR, ALC HEPA W/O CC.                                                 
207.....       07  MED           DISORDERS OF THE BILIARY TRACT       1.0081         4.9         6.4          27
                                  WITH CC.                                                                      
208.....       07  MED           DISORDERS OF THE BILIARY TRACT        .5661         2.9         3.7          23
                                  W/O CC.                                                                       
209.....       08  SURG          MAJOR JOINT & LIMB REATTACHMENT      2.3181         7.7         8.6          29
                                  PROCEDURES - LOWER EXTREMITY.                                                 
210.....       08  SURG          HIP & FEMUR PROCEDURES EXCEPT        1.8427         9.0        10.6          31
                                  MAJOR JOINT AGE >17 WITH CC.                                                  
211.....       08  SURG          HIP & FEMUR PROCEDURES EXCEPT        1.3000         7.0         7.8          29
                                  MAJOR JOINT AGE >17 W/O CC.                                                   
212.....       08  SURG          HIP & FEMUR PROCEDURES EXCEPT         .8759         3.4         3.8          17
                                  MAJOR JOINT AGE 0-17.                                                         
213.....       08  SURG          AMPUTATION FOR MUSCULOSKELETAL       1.7182         8.2        11.2          30
                                  SYSTEM & CONN TISSUE DISORDERS.                                               
214.....       08  SURG          BACK & NECK PROCEDURES WITH CC.      1.9223         6.5         8.2          28
215.....       08  SURG          BACK & NECK PROCEDURES W/O CC..      1.0974         3.9         4.8          24
216.....       08  SURG          BIOPSIES OF MUSCULOSKELETAL          2.1005         9.2        13.2          31
                                  SYSTEM & CONNECTIVE TISSUE.                                                   
217.....       08  SURG          WND DEBRID & SKN GRFT EXCEPT         2.9904        12.2        18.7          34
                                  HAND, FOR MUSCSKELET & CONN                                                   
                                  TISS DIS.                                                                     
218.....       08  SURG          LOWER EXTREM & HUMER PROC            1.3959         5.7         7.4          28
                                  EXCEPT HIP, FOOT, FEMUR AGE                                                   
                                  >17 WITH CC.                                                                  
219.....       08  SURG          LOWER EXTREM & HUMER PROC             .9120         3.6         4.4          23
                                  EXCEPT HIP, FOOT, FEMUR AGE                                                   
                                  >17 W/O CC.                                                                   
220.....       08  SURG          *LOWER EXTREM & HUMER PROC            .9618         5.3         5.3          27
                                  EXCEPT HIP, FOOT, FEMUR AGE 0-                                                
                                  17.                                                                           
221.....       08  SURG          KNEE PROCEDURES WITH CC........      1.7897         6.6         9.3          29
222.....       08  SURG          KNEE PROCEDURES W/O CC.........       .9898         3.5         4.7          25
223.....       08  SURG          MAJOR SHOULDER/ELBOW PROC, OR         .8163         2.5         3.2          18
                                  OTHER UPPER EXTREMITY PROC W                                                  
                                  CC.                                                                           
224.....       08  SURG          SHOULDER, ELBOW OR FOREARM            .6923         2.2         2.7          13
                                  PROC, EXC MAJOR JOINT PROC, W/                                                
                                  O CC.                                                                         
225.....       08  SURG          FOOT PROCEDURES................       .9056         3.4         5.1          25
226.....       08  SURG          SOFT TISSUE PROCEDURES WITH CC.      1.3345         5.0         7.6          27
227.....       08  SURG          SOFT TISSUE PROCEDURES W/O CC..       .6994         2.4         3.2          19
228.....       08  SURG          MAJOR THUMB OR JOINT PROC, OR         .8431         2.3         3.5          24
                                  OTH HAND OR WRIST PROC W CC.                                                  
229.....       08  SURG          HAND OR WRIST PROC, EXCEPT            .5991         1.9         2.5          15
                                  MAJOR JOINT PROC, W/O CC.                                                     
230.....       08  SURG          LOCAL EXCISION & REMOVAL OF INT       .9155         3.5         5.5          26
                                  FIX DEVICES OF HIP & FEMUR.                                                   
231.....       08  SURG          LOCAL EXCISION & REMOVAL OF INT      1.1300         3.5         5.4          25
                                  FIX DEVICES EXCEPT HIP & FEMUR.                                               
232.....       08  SURG          ARTHROSCOPY....................      1.1591         3.2         5.8          25
233.....       08  SURG          OTHER MUSCULOSKELET SYS & CONN       1.9004         7.4        10.6          29
                                  TISS O.R. PROC WITH CC.                                                       
234.....       08  SURG          OTHER MUSCULOSKELET SYS & CONN        .9497         3.5         4.8          26
                                  TISS O.R. PROC W/O CC.                                                        
235.....       08  MED           FRACTURES OF FEMUR.............       .8958         5.7         8.8          28
236.....       08  MED           FRACTURES OF HIP & PELVIS......       .7760         5.5         7.6          27
237.....       08  MED           SPRAINS, STRAINS, &                   .5538         3.7         5.0          26
                                  DISLOCATIONS OF HIP, PELVIS &                                                 
                                  THIGH.                                                                        
238.....       08  MED           OSTEOMYELITIS..................      1.4971         9.1        12.4          31
239.....       08  MED           PATHOLOGICAL FRACTURES &             1.0333         6.8         9.0          29
                                  MUSCULOSKELETAL & CONN TISS                                                   
                                  MALIGNANCY.                                                                   
240.....       08  MED           CONNECTIVE TISSUE DISORDERS          1.1883         6.4         8.7          28
                                  WITH CC.                                                                      
241.....       08  MED           CONNECTIVE TISSUE DISORDERS W/O       .5835         4.0         5.2          26
                                  CC.                                                                           
242.....       08  MED           SEPTIC ARTHRITIS...............      1.1433         7.0         9.3          29
243.....       08  MED           MEDICAL BACK PROBLEMS..........       .7120         4.9         6.4          27
244.....       08  MED           BONE DISEASES & SPECIFIC              .7334         4.9         6.6          27
                                  ARTHROPATHIES WITH CC.                                                        
245.....       08  MED           BONE DISEASES & SPECIFIC              .4814         3.4         4.7          25
                                  ARTHROPATHIES W/O CC.                                                         
246.....       08  MED           NON-SPECIFIC ARTHROPATHIES.....       .5531         3.8         4.8          26
247.....       08  MED           SIGNS & SYMPTOMS OF                   .5544         3.3         4.5          25
                                  MUSCULOSKELETAL SYSTEM & CONN                                                 
                                  TISSUE.                                                                       
248.....       08  MED           TENDONITIS, MYOSITIS & BURSITIS       .7124         4.4         5.8          26
249.....       08  MED           AFTERCARE, MUSCULOSKELETAL            .6485         3.4         5.0          25
                                  SYSTEM & CONNECTIVE TISSUE.                                                   
250.....       08  MED           FX, SPRN, STRN & DISL OF              .6922         4.1         5.7          26
                                  FOREARM, HAND, FOOT AGE >17                                                   
                                  WITH CC.                                                                      
251.....       08  MED           FX, SPRN, STRN & DISL OF              .4521         2.5         3.4          23
                                  FOREARM, HAND, FOOT AGE >17 W/                                                
                                  O CC.                                                                         
252.....       08  MED           *FX, SPRN, STRN & DISL OF             .3638         1.8         1.8          15
                                  FOREARM, HAND, FOOT AGE 0-17.                                                 
253.....       08  MED           FX, SPRN, STRN & DISL OF UPARM,       .7615         5.0         7.0          27
                                  LOWLEG EX FOOT AGE >17 WITH CC.                                               
254.....       08  MED           FX, SPRN, STRN & DISL OF UPARM,       .4314         3.2         4.3          25
                                  LOWLEG EX FOOT AGE >17 W/O CC.                                                
255.....       08  MED           *FX, SPRN, STRN & DISL OF             .4827         2.9         2.9          25
                                  UPARM, LOWLEG EX FOOT AGE 0-17.                                               
256.....       08  MED           OTHER MUSCULOSKELETAL SYSTEM &        .6418         3.4         4.7          25
                                  CONNECTIVE TISSUE DIAGNOSES.                                                  
257.....       09  SURG          TOTAL MASTECTOMY FOR MALIGNANCY       .8842         3.5         4.2          20
                                  WITH CC.                                                                      
258.....       09  SURG          TOTAL MASTECTOMY FOR MALIGNANCY       .6992         2.7         3.1          12
                                  W/O CC.                                                                       
259.....       09  SURG          SUBTOTAL MASTECTOMY FOR               .8270         2.8         4.1          25
                                  MALIGNANCY WITH CC.                                                           
260.....       09  SURG          SUBTOTAL MASTECTOMY FOR               .5841         1.9         2.2          10
                                  MALIGNANCY W/O CC.                                                            
261.....       09  SURG          BREAST PROC FOR NON-MALIGNANCY        .7428         2.0         2.5          12
                                  EXCEPT BIOPSY & LOCAL EXCISION.                                               
262.....       09  SURG          BREAST BIOPSY & LOCAL EXCISION        .6475         2.5         3.9          25
                                  FOR NON-MALIGNANCY.                                                           
263.....       09  SURG          SKIN GRAFT &/OR DEBRID FOR SKN       2.3497        12.5        17.5          34
                                  ULCER OR CELLULITIS WITH CC.                                                  
264.....       09  SURG          SKIN GRAFT &/OR DEBRID FOR SKN       1.1657         7.1         9.6          29
                                  ULCER OR CELLULITIS W/O CC.                                                   
265.....       09  SURG          SKIN GRAFT &/OR DEBRID EXCEPT        1.3926         5.3         8.3          27
                                  FOR SKIN ULCER OR CELLULITIS W                                                
                                  CC.                                                                           
266.....       09  SURG          SKIN GRAFT &/OR DEBRID EXCEPT         .7371         2.9         4.0          25
                                  FOR SKIN ULCER OR CELLULITIS W/                                               
                                  O CC.                                                                         
267.....       09  SURG          PERIANAL & PILONIDAL PROCEDURES       .6903         2.6         4.2          25
268.....       09  SURG          SKIN, SUBCUTANEOUS TISSUE &           .8341         2.5         3.9          25
                                  BREAST PLASTIC PROCEDURES.                                                    
269.....       09  SURG          OTHER SKIN, SUBCUT TISS &            1.7009         7.4        10.9          29
                                  BREAST PROCEDURE WITH CC.                                                     
270.....       09  SURG          OTHER SKIN, SUBCUT TISS &             .6619         2.5         3.6          25
                                  BREAST PROCEDURE W/O CC.                                                      
271.....       09  MED           SKIN ULCERS....................      1.1340         7.6         9.9          30
272.....       09  MED           MAJOR SKIN DISORDERS WITH CC...      1.0050         6.3         8.2          28
273.....       09  MED           MAJOR SKIN DISORDERS W/O CC....       .6315         4.6         6.1          27
274.....       09  MED           MALIGNANT BREAST DISORDERS WITH      1.1070         5.9         9.2          28
                                  CC.                                                                           
275.....       09  MED           MALIGNANT BREAST DISORDERS W/O        .4950         2.6         4.0          25
                                  CC.                                                                           
276.....       09  MED           NON-MALIGANT BREAST DISORDERS..       .6132         4.0         5.4          26
277.....       09  MED           CELLULITIS AGE >17 WITH CC.....       .8806         6.2         7.6          28
278.....       09  MED           CELLULITIS AGE >17 W/O CC......       .5853         4.8         5.7          27
279.....       09  MED           CELLULITIS AGE 0-17............       .6514         3.7         4.3          24
280.....       09  MED           TRAUMA TO THE SKIN, SUBCUT TISS       .6734         4.2         5.8          26
                                  & BREAST AGE >17 WITH CC.                                                     
281.....       09  MED           TRAUMA TO THE SKIN, SUBCUT TISS       .4345         3.0         3.9          25
                                  & BREAST AGE >17 W/O CC.                                                      
282.....       09  MED           *TRAUMA TO THE SKIN, SUBCUT           .3563         2.2         2.2          19
                                  TISS & BREAST AGE 0-17.                                                       
283.....       09  MED           MINOR SKIN DISORDERS WITH CC...       .7142         4.8         6.3          27
284.....       09  MED           MINOR SKIN DISORDERS W/O CC....       .4358         3.3         4.3          25
285.....       10  SURG          AMPUTAT OF LOWER LIMB FOR            2.5371        12.6        17.5          35
                                  ENDOCRINE, NUTRIT, & METABOL                                                  
                                  DISORDERS.                                                                    
286.....       10  SURG          ADRENAL & PITUITARY PROCEDURES.      2.2668         7.6         9.3          30
287.....       10  SURG          SKIN GRAFTS & WOUND DEBRID FOR       2.1030        11.4        16.3          33
                                  ENDOC, NUTRIT & METAB                                                         
                                  DISORDERS.                                                                    
288.....       10  SURG          O.R. PROCEDURES FOR OBESITY....      1.9349         5.8         8.1          28
289.....       10  SURG          PARATHYROID PROCEDURES.........      1.0017         3.1         4.6          25
290.....       10  SURG          THYROID PROCEDURES.............       .7926         2.4         3.0          15
291.....       10  SURG          THYROGLOSSAL PROCEDURES........       .5115         1.6         2.0           9
292.....       10  SURG          OTHER ENDOCRINE, NUTRIT & METAB      2.7349        10.3        15.0          32
                                  O.R. PROC WITH CC.                                                            
293.....       10  SURG          OTHER ENDOCRINE, NUTRIT & METAB      1.1756         4.7         6.7          27
                                  O.R. PROC W/O CC.                                                             
294.....       10  MED           DIABETES AGE >35...............       .7458         5.2         6.5          27
295.....       10  MED           DIABETES AGE 0-35..............       .7494         4.0         5.2          26
296.....       10  MED           NUTRITIONAL & MISC METABOLIC          .9182         5.4         7.3          27
                                  DISORDERS AGE >17 WITH CC.                                                    
297.....       10  MED           NUTRITIONAL & MISC METABOLIC          .5300         3.7         4.7          26
                                  DISORDERS AGE >17 W/O CC.                                                     
298.....       10  MED           NUTRITIONAL & MISC METABOLIC          .5367         2.7         4.3          25
                                  DISORDERS AGE 0-17.                                                           
299.....       10  MED           INBORN ERRORS OF METABOLISM....       .8087         4.3         6.1          26
300.....       10  MED           ENDOCRINE DISORDERS WITH CC....      1.0989         6.3         8.3          28
301.....       10  MED           ENDOCRINE DISORDERS W/O CC.....       .6044         3.7         5.0          26
302.....       11  SURG          KIDNEY TRANSPLANT..............      4.1738        12.6        14.6          35
303.....       11  SURG          KIDNEY, URETER & MAJOR BLADDER       2.5762         9.7        11.6          32
                                  PROCEDURES FOR NEOPLASM.                                                      
304.....       11  SURG          KIDNEY, URETER & MAJOR BLADDER       2.3271         8.7        11.6          31
                                  PROC FOR NON-NEOPL WITH CC.                                                   
305.....       11  SURG          KIDNEY, URETER & MAJOR BLADDER       1.1348         4.5         5.6          26
                                  PROC FOR NON-NEOPL W/O CC.                                                    
306.....       11  SURG          PROSTATECTOMY WITH CC..........      1.2108         5.4         7.3          27
307.....       11  SURG          PROSTATECTOMY W/O CC...........       .6609         3.0         3.6          18
308.....       11  SURG          MINOR BLADDER PROCEDURES WITH        1.4472         5.4         8.1          27
                                  CC.                                                                           
309.....       11  SURG          MINOR BLADDER PROCEDURES W/O CC       .7978         2.6         3.4          22
310.....       11  SURG          TRANSURETHRAL PROCEDURES WITH         .9169         3.5         5.0          25
                                  CC.                                                                           
311.....       11  SURG          TRANSURETHRAL PROCEDURES W/O CC       .5395         2.0         2.5          13
312.....       11  SURG          URETHRAL PROCEDURES, AGE >17          .8451         3.5         5.2          26
                                  WITH CC.                                                                      
313.....       11  SURG          URETHRAL PROCEDURES, AGE >17 W/       .4775         1.9         2.6          16
                                  O CC.                                                                         
314.....       11  SURG          *URETHRAL PROCEDURES, AGE 0-17.       .4499         2.3         2.3          24
315.....       11  SURG          OTHER KIDNEY & URINARY TRACT         2.0361         6.0        10.7          28
                                  O.R. PROCEDURES.                                                              
316.....       11  MED           RENAL FAILURE..................      1.2859         5.9         8.4          28
317.....       11  MED           ADMIT FOR RENAL DIALYSIS.......       .5151         2.8         3.9          25
318.....       11  MED           KIDNEY & URINARY TRACT               1.1169         5.5         8.1          28
                                  NEOPLASMS WITH CC.                                                            
319.....       11  MED           KIDNEY & URINARY TRACT                .5531         2.4         3.3          24
                                  NEOPLASMS W/O CC.                                                             
320.....       11  MED           KIDNEY & URINARY TRACT                .9452         5.9         7.4          28
                                  INFECTIONS AGE >17 WITH CC.                                                   
321.....       11  MED           KIDNEY & URINARY TRACT                .6109         4.4         5.2          26
                                  INFECTIONS AGE >17 W/O CC.                                                    
322.....       11  MED           KIDNEY & URINARY TRACT                .5438         3.8         4.6          25
                                  INFECTIONS AGE 0-17.                                                          
323.....       11  MED           URINARY STONES WITH CC, &/OR          .7218         2.9         3.9          25
                                  ESW LITHOTRIPSY.                                                              
324.....       11  MED           URINARY STONES W/O CC..........       .3869         1.9         2.3          11
325.....       11  MED           KIDNEY & URINARY TRACT SIGNS &        .6490         3.9         5.2          26
                                  SYMPTOMS AGE >17 WITH CC.                                                     
326.....       11  MED           KIDNEY & URINARY TRACT SIGNS &        .4191         2.6         3.4          22
                                  SYMPTOMS AGE >17 W/O CC.                                                      
327.....       11  MED           *KIDNEY & URINARY TRACT SIGNS &       .7215         3.1         3.1          25
                                  SYMPTOMS AGE 0-17.                                                            
328.....       11  MED           URETHRAL STRICTURE AGE >17 WITH       .6741         3.5         4.8          26
                                  CC.                                                                           
329.....       11  MED           URETHRAL STRICTURE AGE >17 W/O        .4317         1.9         2.5          15
                                  CC.                                                                           
330.....       11  MED           *URETHRAL STRICTURE AGE 0-17...       .2901         1.6         1.6           9
331.....       11  MED           OTHER KIDNEY & URINARY TRACT          .9950         5.1         7.0          27
                                  DIAGNOSES AGE >17 WITH CC.                                                    
332.....       11  MED           OTHER KIDNEY & URINARY TRACT          .5587         2.9         4.1          25
                                  DIAGNOSES AGE >17 W/O CC.                                                     
333.....       11  MED           OTHER KIDNEY & URINARY TRACT         1.0095         4.8         7.0          27
                                  DIAGNOSES AGE 0-17.                                                           
334.....       12  SURG          MAJOR MALE PELVIC PROCEDURES W       1.7203         6.8         7.5          24
                                  CC.                                                                           
335.....       12  SURG          MAJOR MALE PELVIC PROCEDURES W/      1.3462         5.6         6.1          19
                                  O CC.                                                                         
336.....       12  SURG          TRANSURETHRAL PROSTATECTOMY           .8537         4.0         4.8          23
                                  WITH CC.                                                                      
337.....       12  SURG          TRANSURETHRAL PROSTATECTOMY W/O       .6142         3.0         3.3          12
                                  CC.                                                                           
338.....       12  SURG          TESTES PROCEDURES, FOR                .9747         3.7         5.6          26
                                  MALIGNANCY.                                                                   
339.....       12  SURG          TESTES PROCEDURES, NON-               .8266         3.1         4.4          25
                                  MALIGNANCY AGE >17.                                                           
340.....       12  SURG          *TESTES PROCEDURES, NON-              .4512         2.4         2.4          13
                                  MALIGNANCY AGE 0-17.                                                          
341.....       12  SURG          PENIS PROCEDURES...............      1.0214         2.9         3.8          24
342.....       12  SURG          CIRCUMCISION AGE >17...........       .6732         2.7         4.2          25
343.....       12  SURG          *CIRCUMCISION AGE 0-17.........       .3941         1.7         1.7           6
344.....       12  SURG          OTHER MALE REPRODUCTIVE SYSTEM        .9940         2.7         3.6          25
                                  O.R. PROCEDURES FOR MALIGNANCY.                                               
345.....       12  SURG          OTHER MALE REPRODUCTIVE SYSTEM        .7528         3.1         4.5          25
                                  O.R. PROC EXCEPT FOR                                                          
                                  MALIGNANCY.                                                                   
346.....       12  MED           MALIGNANCY, MALE REPRODUCTIVE         .9616         5.3         7.7          27
                                  SYSTEM, WITH CC.                                                              
347.....       12  MED           MALIGNANCY, MALE REPRODUCTIVE         .4931         2.6         3.7          25
                                  SYSTEM, W/O CC.                                                               
348.....       12  MED           BENIGN PROSTATIC HYPERTROPHY          .6740         3.7         5.1          26
                                  WITH CC.                                                                      
349.....       12  MED           BENIGN PROSTATIC HYPERTROPHY W/       .4112         2.4         3.2          23
                                  O CC.                                                                         
350.....       12  MED           INFLAMMATION OF THE MALE              .6793         4.5         5.4          27
                                  REPRODUCTIVE SYSTEM.                                                          
351.....       12  MED           *STERILIZATION, MALE...........       .3469         1.3         1.3           5
352.....       12  MED           OTHER MALE REPRODUCTIVE SYSTEM        .5835         3.2         4.3          25
                                  DIAGNOSES.                                                                    
353.....       13  SURG          PELVIC EVISCERATION, RADICAL         1.8885         8.0         9.8          30
                                  HYSTERECTOMY & RADICAL                                                        
                                  VULVECTOMY.                                                                   
354.....       13  SURG          UTERINE & ADNEXA PROC FOR NON-       1.3744         5.9         6.9          28
                                  OVARIAN/ADNEXAL MALIG WITH CC.                                                
355.....       13  SURG          UTERINE & ADNEXA PROC FOR NON-        .8790         4.0         4.3          12
                                  OVARIAN/ADNEXAL MALIG W/O CC.                                                 
356.....       13  SURG          FEMALE REPRODUCTIVE SYSTEM            .7168         3.2         3.6          14
                                  RECONSTRUCTIVE PROCEDURES.                                                    
357.....       13  SURG          UTERINE & ADNEXA PROC FOR            2.2838         8.9        10.9          31
                                  OVARIAN OR ADNEXAL MALIG.                                                     
358.....       13  SURG          UTERINE & ADNEXA PROC FOR NON-       1.1045         4.7         5.4          20
                                  MALIGNANCY WITH CC.                                                           
359.....       13  SURG          UTERINE & ADNEXA PROC FOR NON-        .7993         3.5         3.8          11
                                  MALIGNANCY W/O CC.                                                            
360.....       13  SURG          VAGINA, CERVIX & VULVA                .8205         3.5         4.3          22
                                  PROCEDURES.                                                                   
361.....       13  SURG          LAPAROSCOPY & INCISIONAL TUBAL       1.1147         3.2         4.9          25
                                  INTERRUPTION.                                                                 
362.....       13  SURG          *ENDOSCOPIC TUBAL INTERRUPTION.       .5184         1.4         1.4           5
363.....       13  SURG          D&C, CONIZATION & RADIO-              .6472         2.8         3.7          21
                                  IMPLANT, FOR MALIGNANCY.                                                      
364.....       13  SURG          D&C, CONIZATION EXCEPT FOR            .6260         2.6         3.7          25
                                  MALIGNANCY.                                                                   
365.....       13  SURG          OTHER FEMALE REPRODUCTIVE            1.7149         6.3         9.1          28
                                  SYSTEM O.R. PROCEDURES.                                                       
366.....       13  MED           MALIGNANCY, FEMALE REPRODUCTIVE      1.2085         5.9         9.1          28
                                  SYSTEM WITH CC.                                                               
367.....       13  MED           MALIGNANCY, FEMALE REPRODUCTIVE       .4488         2.3         3.3          24
                                  SYSTEM W/O CC.                                                                
368.....       13  MED           INFECTIONS, FEMALE REPRODUCTIVE       .9716         5.6         7.3          28
                                  SYSTEM.                                                                       
369.....       13  MED           MENSTRUAL & OTHER FEMALE              .5119         2.9         4.0          25
                                  REPRODUCTIVE SYSTEM DISORDERS.                                                
370.....       14  SURG          CESAREAN SECTION W CC..........       .9020         4.9         5.8          24
371.....       14  SURG          CESAREAN SECTION W/O CC........       .6323         3.6         3.8           9
372.....       14  MED           VAGINAL DELIVERY W COMPLICATING       .4798         2.7         3.3          16
                                  DIAGNOSES.                                                                    
373.....       14  MED           VAGINAL DELIVERY W/O                  .3378         1.9         2.1           8
                                  COMPLICATING DIAGNOSES.                                                       
374.....       14  SURG          VAGINAL DELIVERY W                    .6135         2.4         3.2          17
                                  STERILIZATION &/OR D&C.                                                       
375.....       14  SURG          *VAGINAL DELIVERY W O.R. PROC         .7094         4.4         4.4          26
                                  EXCEPT STERIL &/OR D&C.                                                       
376.....       14  MED           POSTPARTUM & POST ABORTION            .3286         2.3         3.2          19
                                  DIAGNOSES W/O O.R. PROCEDURE.                                                 
377.....       14  SURG          POSTPARTUM & POST ABORTION            .9805         3.4         5.8          25
                                  DIAGNOSES W O.R. PROCEDURE.                                                   
378.....       14  MED           ECTOPIC PREGNANCY..............       .7065         2.6         3.0          15
379.....       14  MED           THREATENED ABORTION............       .3197         2.0         2.8          18
380.....       14  MED           ABORTION W/O D&C...............       .3515         1.6         2.1          11
381.....       14  SURG          ABORTION W D&C, ASPIRATION            .4061         1.7         2.2          12
                                  CURETTAGE OR HYSTEROTOMY.                                                     
382.....       14  MED           FALSE LABOR....................       .1860         1.2         1.4           5
383.....       14  MED           OTHER ANTEPARTUM DIAGNOSES W          .4039         3.0         4.0          25
                                  MEDICAL COMPLICATIONS.                                                        
384.....       14  MED           OTHER ANTEPARTUM DIAGNOSES W/O        .2947         1.9         2.6          15
                                  MEDICAL COMPLICATIONS.                                                        
385.....       15  MED           *NEONATES, DIED OR TRANSFERRED       1.2729         1.8         1.8          24
                                  TO ANOTHER ACUTE CARE FACILITY.                                               
386.....       15  MED           *EXTREME IMMATURITY OR               3.7965        17.9        17.9          40
                                  RESPIRATORY DISTRESS SYNDROME,                                                
                                  NEONATE.                                                                      
387.....       15  MED           *PREMATURITY W MAJOR PROBLEMS..      1.9011        13.3        13.3          35
388.....       15  MED           *PREMATURITY W/O MAJOR PROBLEMS      1.2042         8.6         8.6          31
389.....       15  MED           FULL TERM NEONATE W MAJOR            1.2894         5.6         7.7          28
                                  PROBLEMS.                                                                     
390.....       15  MED           NEONATE W OTHER SIGNIFICANT           .5396         3.1         4.8          25
                                  PROBLEMS.                                                                     
391.....       15  MED           *NORMAL NEWBORN................       .2309         3.1         3.1          11
392.....       16  SURG          SPLENECTOMY AGE >17............      3.2008        10.2        13.2          32
393.....       16  SURG          *SPLENECTOMY AGE 0-17..........      1.5824         9.1         9.1          31
394.....       16  SURG          OTHER O.R. PROCEDURES OF THE         1.5735         5.0         8.7          27
                                  BLOOD AND BLOOD FORMING ORGANS.                                               
395.....       16  MED           RED BLOOD CELL DISORDERS AGE          .8123         4.3         6.0          26
                                  >17.                                                                          
396.....       16  MED           RED BLOOD CELL DISORDERS AGE 0-       .2697         1.6         2.1          13
                                  17.                                                                           
397.....       16  MED           COAGULATION DISORDERS..........      1.2487         5.0         6.9          27
398.....       16  MED           RETICULOENDOTHELIAL & IMMUNITY       1.2141         5.8         7.4          28
                                  DISORDERS WITH CC.                                                            
399.....       16  MED           RETICULOENDOTHELIAL & IMMUNITY        .6756         3.8         4.8          26
                                  DISORDERS W/O CC.                                                             
400.....       17  SURG          LYMPHOMA & LEUKEMIA W MAJOR          2.5572         7.6        11.7          30
                                  O.R. PROCEDURE.                                                               
401.....       17  SURG          LYMPHOMA & NON-ACUTE LEUKEMIA W      2.4034         9.2        13.6          31
                                  OTHER O.R. PROC W CC.                                                         
402.....       17  SURG          LYMPHOMA & NON-ACUTE LEUKEMIA W       .9229         3.2         4.8          25
                                  OTHER O.R. PROC W/O CC.                                                       
403.....       17  MED           LYMPHOMA & NON-ACUTE LEUKEMIA W      1.6925         7.4        10.7          29
                                  CC.                                                                           
404.....       17  MED           LYMPHOMA & NON-ACUTE LEUKEMIA W/      .7567         3.7         5.2          26
                                  O CC.                                                                         
405.....       17  MED           *ACUTE LEUKEMIA W/O MAJOR O.R.       1.0830         4.9         4.9          27
                                  PROCEDURE AGE 0-17.                                                           
406.....       17  SURG          MYELOPROLIF DISORD OR POORLY         2.6478         9.4        12.8          31
                                  DIFF NEOPL W MAJ O.R.PROC W CC.                                               
407.....       17  SURG          MYELOPROLIF DISORD OR POORLY         1.1314         4.1         5.3          26
                                  DIFF NEOPL W MAJ O.R.PROC W/O                                                 
                                  CC.                                                                           
408.....       17  SURG          MYELOPROLIF DISORD OR POORLY         1.5561         5.0         8.4          27
                                  DIFF NEOPL W OTHER O.R.PROC.                                                  
409.....       17  MED           RADIOTHERAPY...................       .9823         5.4         7.7          27
410.....       17  MED           CHEMOTHERAPY WITHOUT ACUTE            .6762         2.7         3.3          20
                                  LEUKEMIA AS SECONDARY                                                         
                                  DIAGNOSIS.                                                                    
411.....       17  MED           HISTORY OF MALIGNANCY W/O             .4503         2.7         3.7          25
                                  ENDOSCOPY.                                                                    
412.....       17  MED           HISTORY OF MALIGNANCY W               .4497         2.1         3.0          21
                                  ENDOSCOPY.                                                                    
413.....       17  MED           OTHER MYELOPROLIF DIS OR POORLY      1.3591         6.8         9.9          29
                                  DIFF NEOPL DIAG WITH CC.                                                      
414.....       17  MED           OTHER MYELOPROLIF DIS OR POORLY       .6645         3.7         5.4          26
                                  DIFF NEOPL DIAG W/O CC.                                                       
415.....       18  SURG          O.R. PROCEDURE FOR INFECTIOUS &      3.5035        13.4        18.6          35
                                  PARASITIC DISEASES.                                                           
416.....       18  MED           SEPTECEMIA AGE >17.............      1.4936         6.9         9.5          29
417.....       18  MED           SEPTECEMIA AGE 0-17............      1.4510         5.2         7.5          27
418.....       18  MED           POSTOPERATIVE & POST-TRAUMATIC        .9619         6.0         7.6          28
                                  INFECTIONS.                                                                   
419.....       18  MED           FEVER OF UNKNOWN ORIGIN AGE >17       .9263         5.2         6.6          27
                                  WITH CC.                                                                      
420.....       18  MED           FEVER OF UNKNOWN ORIGIN AGE >17       .6390         4.0         4.9          26
                                  W/O CC.                                                                       
421.....       18  MED           VIRAL ILLNESS AGE >17..........       .6860         4.0         5.1          26
422.....       18  MED           VIRAL ILLNESS & FEVER OF              .5893         3.4         4.3          25
                                  UNKNOWN ORIGIN AGE 0-17.                                                      
423.....       18  MED           OTHER INFECTIOUS & PARASITIC         1.5811         7.1         9.9          29
                                  DISEASES DIAGNOSES.                                                           
424.....       19  SURG          O.R. PROCEDURE W PRINCIPAL           2.5481        13.5        22.3          35
                                  DIAGNOSES OF MENTAL ILLNESS.                                                  
425.....       19  MED           ACUTE ADJUST REACT &                  .7092         4.1         5.7          26
                                  DISTURBANCES OF PSYCHOSOCIAL                                                  
                                  DYSFUNCTION.                                                                  
426.....       19  MED           DEPRESSIVE NEUROSES............       .5956         4.6         6.5          27
427.....       19  MED           NEUROSES EXCEPT DEPRESSIVE.....       .5939         4.4         6.4          26
428.....       19  MED           DISORDERS OF PERSONALITY &            .7355         5.7         9.2          28
                                  IMPULSE CONTROL.                                                              
429.....       19  MED           ORGANIC DISTURBANCES & MENTAL         .9239         7.0        10.3          29
                                  RETARDATION.                                                                  
430.....       19  MED           PSYCHOSES......................       .8977         8.0        11.4          30
431.....       19  MED           CHILDHOOD MENTAL DISORDERS.....       .6358         5.3         7.7          27
432.....       19  MED           OTHER MENTAL DISORDER DIAGNOSES       .7580         4.7         7.3          27
433.....       20  MED           ALCOHOL/DRUG ABUSE OR                 .3350         2.8         4.1          25
                                  DEPENDENCE, LEFT AMA.                                                         
434.....       20  MED           ALC/DRUG ABUSE OR DEPENDENCE,         .7210         4.9         6.6          27
                                  DETOX OR OTHER SYMPT TRT WITH                                                 
                                  CC.                                                                           
435.....       20  MED           ALC/DRUG ABUSE OR DEPENDENCE,         .4364         4.1         5.5          26
                                  DETOX OR OTHER SYMPT TRT W/O                                                  
                                  CC.                                                                           
436.....       20  MED           ALC/DRUG DEPENDENCE W                 .9175        14.5        17.2          36
                                  REHABILITATION THERAPY.                                                       
437.....       20  MED           ALC/DRUG DEPENDENCE, COMBINED         .9003        11.5        13.6          33
                                  REHAB & DETOX THERAPY.                                                        
438.....  .......  ............  NO LONGER VALID................       .0000          .0          .0           0
439.....       21  SURG          SKIN GRAFTS FOR INJURIES.......      1.3129         5.6         8.8          28
440.....       21  SURG          WOUND DEBRIDEMENTS FOR INJURIES      1.7578         7.0        11.2          29
441.....       21  SURG          HAND PROCEDURES FOR INJURIES...       .7762         2.3         3.4          24
442.....       21  SURG          OTHER O.R. PROCEDURES FOR            2.0112         5.8         9.4          28
                                  INJURIES WITH CC.                                                             
443.....       21  SURG          OTHER O.R. PROCEDURES FOR             .7544         2.4         3.3          24
                                  INJURIES W/O CC.                                                              
444.....       21  MED           TRAUMATIC INJURY AGE >17 W CC..       .7379         4.6         6.2          27
445.....       21  MED           TRAUMATIC INJURY AGE >17 W/O CC       .4621         3.1         4.0          25
446.....       21  MED           *TRAUMATIC INJURY AGE 0-17.....       .4991         2.4         2.4          22
447.....       21  MED           ALLERGIC REACTIONS AGE >17.....       .4693         2.3         3.1          20
448.....       21  MED           *ALLERGIC REACTIONS AGE 0-17...       .3611         2.9         2.9          17
449.....       21  MED           POISONING & TOXIC EFFECTS OF          .7798         3.5         5.1          26
                                  DRUGS AGE >17 WITH CC.                                                        
450.....       21  MED           POISONING & TOXIC EFFECTS OF          .4155         2.0         2.7          17
                                  DRUGS AGE >17 W/O CC.                                                         
451.....       21  MED           *POISONING & TOXIC EFFECTS OF        1.0332         2.1         2.1          17
                                  DRUGS AGE 0-17.                                                               
452.....       21  MED           COMPLICATIONS OF TREATMENT WITH       .8584         4.0         5.6          26
                                  CC.                                                                           
453.....       21  MED           COMPLICATIONS OF TREATMENT W/O        .4343         2.6         3.4          22
                                  CC.                                                                           
454.....       21  MED           OTHER INJURY, POISONING & TOXIC       .8879         4.1         6.4          26
                                  EFF DIAG WITH CC.                                                             
455.....       21  MED           OTHER INJURY, POISONING & TOXIC       .4404         2.3         3.3          24
                                  EFF DIAG W/O CC.                                                              
456.....       22  MED           BURNS, TRANSFERRED TO ANOTHER        2.0638         5.3        10.2          27
                                  ACUTE CARE FACILITY.                                                          
457.....       22  MED           EXTENSIVE BURNS W/O O.R.             1.7231         3.1         5.6          25
                                  PROCEDURE.                                                                    
458.....       22  SURG          NON-EXTENSIVE BURNS W SKIN           3.5371        14.0        19.8          36
                                  GRAFT.                                                                        
459.....       22  SURG          NON-EXTENSIVE BURNS W WOUND          1.7448         8.4        12.3          30
                                  DEBRIDEMENT OR OTHER O.R. PROC.                                               
460.....       22  MED           NON-EXTENSIVE BURNS W/O O.R.         1.0164         5.6         8.0          28
                                  PROCEDURE.                                                                    
461.....       23  SURG          O.R. PROC W DIAGNOSES OF OTHER        .9430         2.5         5.2          24
                                  CONTACT W HEALTH SERVICES.                                                    
462.....       23  MED           REHABILITATION.................      1.6505        13.3        16.6          35
463.....       23  MED           SIGNS & SYMPTOMS W CC..........       .7167         4.5         6.0          26
464.....       23  MED           SIGNS & SYMPTOMS W/O CC........       .4746         3.1         4.1          25
465.....       23  MED           AFTERCARE W HISTORY OF                .4421         2.0         3.2          23
                                  MALIGNANCY AS SECONDARY                                                       
                                  DIAGNOSIS.                                                                    
466.....       23  MED           AFTERCARE W/O HISTORY OF              .5346         2.3         4.8          24
                                  MALIGNANCY AS SECONDARY                                                       
                                  DIAGNOSIS.                                                                    
467.....       23  MED           OTHER FACTORS INFLUENCING             .3726         2.6         5.0          25
                                  HEALTH STATUS.                                                                
468.....  .......  ............  EXTENSIVE O.R. PROCEDURE             3.5712        12.4        17.7          34
                                  UNRELATED TO PRINCIPAL                                                        
                                  DIAGNOSIS.                                                                    
469.....  .......  ............  **PRINCIPAL DIAGNOSIS INVALID         .0000          .0          .0           0
                                  AS DISCHARGE DIAGNOSIS.                                                       
470.....  .......  ............  **UNGROUPABLE..................       .0000          .0          .0           0
471.....       08  SURG          BILATERAL OR MULTIPLE MAJOR          3.7407         9.3        10.9          31
                                  JOINT PROCS OF LOWER EXTREMITY.                                               
472.....       22  SURG          EXTENSIVE BURNS W O.R.              11.9304        16.2        30.5          38
                                  PROCEDURE.                                                                    
473.....       17  MED           ACUTE LEUKEMIA W/O MAJOR O.R.        3.5993         9.3        16.2          31
                                  PROCEDURE AGE >17.                                                            
474.....       04                NO LONGER VALID................       .0000          .0          .0           0
475.....       04  MED           RESPIRATORY SYSTEM DIAGNOSIS         3.6978         9.5        13.7          31
                                  WITH VENTILATOR SUPPORT.                                                      
476.....  .......  ............  PROSTATIC O.R. PROCEDURE             2.2306        12.3        15.5          34
                                  UNRELATED TO PRINCIPAL                                                        
                                  DIAGNOSIS.                                                                    
477.....  .......  ............  NON-EXTENSIVE O.R. PROCEDURE         1.5262         5.9         9.5          28
                                  UNRELATED TO PRINCIPAL                                                        
                                  DIAGNOSIS.                                                                    
478.....       05  SURG          OTHER VASCULAR PROCEDURES W CC.      2.2254         6.3         9.5          28
479.....       05  SURG          OTHER VASCULAR PROCEDURES W/O        1.3496         3.9         5.1          26
                                  CC.                                                                           
480.....  .......  SURG          LIVER TRANSPLANT...............     17.2203        26.3        33.3          48
481.....  .......  SURG          BONE MARROW TRANSPLANT.........     15.0471        34.9        38.7          57
482.....  .......  SURG          TRACHEOSTOMY FOR FACE, MOUTH         3.6765        13.0        17.3          35
                                  AND NECK DIAGNOSES.                                                           
483.....  .......  SURG          TRACHEOSTOMY EXCEPT FOR FACE,       16.7255        41.5        53.1          63
                                  MOUTH AND NECK DIAGNOSES.                                                     
484.....       24  SURG          CRANIOTOMY FOR MULTIPLE              5.8382        12.7        20.2          35
                                  SIGNIFICANT TRAUMA.                                                           
485.....       24  SURG          LIMB REATTACH., HIP AND FEMUR        3.0833        11.3        14.2          33
                                  PROCS FOR MULTI SIGN TRAUMA.                                                  
486.....       24  SURG          OTHER O.R. PROCEDURES FOR            5.0175        10.7        16.9          33
                                  MULTIPLE SIGNIFICANT TRAUMA.                                                  
487.....       24  MED           OTHER MULTIPLE SIGNIFICANT           1.9044         6.9        10.1          29
                                  TRAUMA.                                                                       
488.....       25  SURG          HIV W EXTENSIVE O.R. PROCEDURE.      4.3726        15.0        21.1          37
489.....       25  MED           HIV W MAJOR RELATED CONDITION..      1.8234         8.3        12.4          30
490.....       25  MED           HIV W OR W/O OTHER RELATED           1.0610         5.1         8.0          27
                                  CONDITION.                                                                    
491.....       08  SURG          MAJOR JOINT & LIMB REATTACHMENT      1.6254         4.4         5.3          24
                                  PROCEDURES--UPPER EXTREMITY.                                                  
492.....       17  MED           CHEMOTHERAPY WITH ACUTE              3.6498        10.7        16.8          33
                                  LEUKEMIA AS SECONDARY                                                         
                                  DIAGNOSIS.                                                                    
493.....       07  SURG          LAPAROSCOPIC CHOLECYSTECTOMY W/      1.5832         4.3         6.1          26
                                  O C.D.E. WITH CC.                                                             
494.....       07  SURG          LAPAROSCOPIC CHOLECYSTECTOMY W/       .8466         1.7         2.3          14
                                  O C.D.E. W/O CC.                                                              
----------------------------------------------------------------------------------------------------------------
* Medicare data have been supplemented by data from Maryland and Michigan for low volume DRGS.                  
** DRGS 469 and 470 contain cases which could not be assigned to valid DRGS.                                    
Note: Geometric mean is used only to determine payment for transfer cases.                                      
Note: Arithmetic mean is used only to determine payment for outlier cases.                                      
Note: Relative weights are based on Medicare patient data and may not be appropriate for other patients.        


                                         Table 6a.--New Diagnosis Codes                                         
----------------------------------------------------------------------------------------------------------------
Diagnosis code                  Description                      CC           MDC                 DRG           
----------------------------------------------------------------------------------------------------------------
042...........  Human immunodeficiency virus [HIV] disease  Y                     25  489, 490                  
070.22........  Chronic viral hepatitis B with hepatic      Y                     07  205, 206                  
                 coma without mention of hepatitis delta.                         15  387, 389\1\               
070.23........  Chronic viral hepatitis B with hepatic      Y                     07  205, 206                  
                 coma with hepatitis delta.                                       15  387, 389\1\               
070.32........  Chronic viral hepatitis B without mention   Y                     07  205, 206                  
                 of hepatic coma without mention of                               15  387, 389\1\               
                 hepatitis delta.                                                                               
070.33........  Chronic viral hepatitis B without mention   Y                     07  205, 206                  
                 of hepatic coma with hepatitis delta.                            15  387, 389\1\               
070.44........  Chronic hepatitis C with hepatic coma.....  Y                     07  205, 206                  
                                                                                  15  387, 389\1\               
070.54........  Chronic hepatitis C without mention of      Y                     07  205, 206                  
                 hepatic coma.                                                    15  387, 389\1\               
312.81........  Conduct disorder, childhood onset type....  N                     19  431                       
312.82........  Conduct disorder, adolescent onset type...  N                     19  431                       
312.89........  Other specified conduct disorder, not       N                     19  431                       
                 elsewhere classified.                                                                          
333.92........  Neuroleptic malignant syndrome............  N                     01  34, 35                    
333.93........  Benign shuddering attacks.................  N                     01  34, 35                    
342.00........  Flaccid hemiplegia and hemiparesis          N                     01  12                        
                 affecting unspecified side.                                                                    
342.01........  Flaccid hemiplegia and hemiparesis          N                     01  12                        
                 affecting dominant side.                                                                       
342.02........  Flaccid hemiplegia and hemiparesis          N                     01  12                        
                 affecting nondominant side.                                                                    
342.10........  Spastic hemiplegia and hemiparesis          N                     01  12                        
                 affecting unspecified side.                                                                    
342.11........  Spastic hemiplegia and hemiparesis          N                     01  12                        
                 affecting dominant side.                                                                       
342.12........  Spastic hemiplegia and hemiparesis          N                     01  12                        
                 affecting nondominant side.                                                                    
342.80........  Other specified hemiplegia and hemiparesis  N                     01  12                        
                 affecting unspecified side.                                                                    
342.81........  Other specified hemiplegia and hemiparesis  N                     01  12                        
                 affecting dominant side.                                                                       
342.82........  Other specified hemiplegia and hemiparesis  N                     01  12                        
                 affecting nondominant side.                                                                    
342.90........  Unspecified hemiplegia and hemiparesis      N                     01  12                        
                 affecting unspecified side.                                                                    
342.91........  Unspecified hemiplegia and hemiparesis      N                     01  12                        
                 affecting dominant side.                                                                       
342.92........  Unspecified hemiplegia and hemiparesis      N                     01  12                        
                 affecting nondominant side.                                                                    
344.00........  Quadriplegia, unspecified.................  Y                     01  9                         
344.01........  Quadriplegia, C1-C4, complete.............  Y                     01  9                         
344.02........  Quadriplegia, C1-C4, incomplete...........  Y                     01  9                         
344.03........  Quadriplegia, C5-C7, complete.............  Y                     01  9                         
344.04........  Quadriplegia, C5-C7, incomplete...........  Y                     01  9                         
344.09........  Other quadriplegia........................  Y                     01  9                         
344.30........  Monoplegia of lower limb affecting          N                     01  34, 35                    
                 unspecified side.                                                                              
344.31........  Monoplegia of lower limb affecting          N                     01  34, 35                    
                 dominant side.                                                                                 
344.32........  Monoplegia of lower limb affecting          N                     01  34, 35                    
                 nondominant side.                                                                              
344.40........  Monoplegia of upper limb affecting          N                     01  34, 35                    
                 unspecified side.                                                                              
344.41........  Monoplegia of upper limb affecting          N                     01  34, 35                    
                 dominant side.                                                                                 
344.42........  Monoplegia of upper limb affecting          N                     01  34, 35                    
                 nondominant side.                                                                              
414.00........  Coronary atherosclerosis of unspecified     N                     05  132, 133                  
                 vessel.                                                                                        
414.01........  Coronary atherosclerosis of native          N                     05  132, 133                  
                 coronary vessel.                                                                               
414.02........  Coronary atherosclerosis of autologous      N                     05  132, 133                  
                 vein bypass graft.                                                                             
414.03........  Coronary atherosclerosis of nonautologous   N                     05  132, 133                  
                 biological bypass graft.                                                                       
440.30........  Atherosclerosis of unspecified bypass       N                     05  130, 131                  
                 graft of the extremities.                                                                      
440.31........  Atherosclerosis of autologous vein bypass   N                     05  130, 131                  
                 graft of the extremities.                                                                      
440.32........  Atherosclerosis of nonautologous            N                     05  130, 131                  
                 biological bypass graft of the                                                                 
                 extremities.                                                                                   
441.00........  Dissecting aortic aneurysm of unspecified   Y                     05  121, 130, 131             
                 site.                                                                                          
441.01........  Dissecting thoracic aortic aneurysm.......  Y                     05  121, 130, 131             
441.02........  Dissecting abdominal aortic aneurysm......  Y                     05  121, 130, 131             
441.03........  Dissecting thoracoabdominal aortic          Y                     05  121, 130, 131             
                 aneurysm.                                                                                      
512.1.........  Iatrogenic pneumothorax...................  Y                     04  94, 95                    
536.3.........  Gastroparesis.............................  N                     06  182, 183, 184             
556.0.........  Ulcerative enterocolitis..................  N                     06  179                       
556.1.........  Ulcerative ileocolitis....................  N                     06  179                       
556.2.........  Ulcerative proctitis......................  N                     06  179                       
556.3.........  Ulcerative proctosigmoiditis..............  N                     06  179                       
556.4.........  Pseudopolyposis of colon..................  N                     06  179                       
556.5.........  Left-sided ulcerative colitis.............  N                     06  179                       
556.6.........  Universal ulcerative colitis..............  N                     06  179                       
556.8.........  Other ulcerative colitis..................  N                     06  179                       
556.9.........  Ulcerative colitis, unspecified...........  N                     06  179                       
593.70........  Vesicoureteral reflux unspecified or        N                     11  331, 332, 333             
                 without reflux nephropathy.                                                                    
593.71........  Vesicoureteral reflux with reflux           N                     11  331, 332, 333             
                 nephropathy, unilateral.                                                                       
593.72........  Vesicoureteral reflux with reflux           N                     11  331, 332, 333             
                 nephropathy, bilateral.                                                                        
593.73........  Other vesicoureteral reflux with reflux     N                     11  331, 332, 333             
                 nephropathy.                                                                                   
669.43........  Other complications of obstetrical surgery  N                     14  383, 384                  
                 and procedures, antepartum condition or                                                        
                 complication.                                                                                  
677...........  Late effect of complication of pregnancy,   N                     14  469                       
                 childbirth, the puerperium.                                                                    
702.11........  Inflamed seborrheic keratosis.............  N                     09  283, 284                  
702.19........  Other seborrheic keratosis................  N                     09  283, 284                  
709.00........  Dyschromia, unspecified...................  N                     09  283, 284                  
709.01........  Vitiglio..................................  N                     09  283, 284                  
709.09........  Other dyschromia..........................  N                     09  283, 284                  
759.83........  Fragile X syndrome........................  N                     15  390                       
760.76........  Diethylstilbestrol (DES) exposure           N                     15  390                       
                 affecting fetus or newborn via placenta                                                        
                 or breast milk.                                                                                
781.8.........  Neurologic neglect syndrome...............  N                     01  34, 35                    
787.01........  Nausea with vomiting......................  N                     06  182, 183, 184             
787.02........  Nausea alone..............................  N                     06  182, 183, 184             
787.03........  Vomiting alone............................  N                     06  182, 183, 184             
789.00........  Abdominal pain, unspecified site..........  N                     06  182, 183, 184             
789.01........  Abdominal pain, right upper quadrant......  N                     06  182, 183, 184             
789.02........  Abdominal pain, left upper quadrant.......  N                     06  182, 183, 184             
789.03........  Abdominal pain, right lower quadrant......  N                     06  182, 183, 184             
789.04........  Abdominal pain, left lower quadrant.......  N                     06  182, 183, 184             
789.05........  Abdominal pain, periumbilic...............  N                     06  182, 183, 184             
789.06........  Abdominal pain, epigastric................  N                     06  182, 183, 184             
789.07........  Abdominal pain, generalized...............  N                     06  182, 183, 184             
789.09........  Abdominal pain, other specified site......  N                     06  182, 183, 184             
789.30........  Abdominal or pelvic swelling, mass, or      N                     06  182, 183, 184             
                 lump, unspecified site.                                                                        
789.31........  Abdominal or pelvic swelling, mass, or      N                     06  182, 183, 184             
                 lump, right upper quadrant.                                                                    
789.32........  Abdominal or pelvic swelling, mass, or      N                     06  182, 183, 184             
                 lump, left upper quadrant.                                                                     
789.33........  Abdominal or pelvic swelling, mass, or      N                     06  182, 183, 184             
                 lump, right lower quadrant.                                                                    
789.34........  Abdominal or pelvic swelling, mass, or      N                     06  182, 183, 184             
                 lump, left lower quadrant.                                                                     
789.35........  Abdominal or pelvic swelling, mass, or      N                     06  182, 183, 184             
                 lump, periumbilic.                                                                             
789.36........  Abdominal or pelvic swelling, mass, or      N                     06  182, 183, 184             
                 lump, epigastric.                                                                              
789.37........  Abdominal or pelvic swelling, mass, or      N                     06  182, 183, 184             
                 lump, generalized.                                                                             
789.39........  Abdominal or pelvic swelling, mass, or      N                     06  182, 183, 184             
                 lump, other specified site.                                                                    
789.40........  Abdominal rigidity, unspecified site......  N                     06  188, 189, 190             
789.41........  Abdominal rigidity, right upper quadrant..  N                     06  188, 189, 190             
789.42........  Abdominal rigidity, left upper quadrant...  N                     06  188, 189, 190             
789.43........  Abdominal rigidity, right lower quadrant..  N                     06  188, 189, 190             
789.44........  Abdominal rigidity, left lower quadrant...  N                     06  188, 189, 190             
789.45........  Abdominal rigidity, periumbilic...........  N                     06  188, 189, 190             
789.46........  Abdominal rigidity, epigastric............  N                     06  188, 189, 190             
789.47........  Abdominal rigidity, generalized...........  N                     06  188, 189, 190             
789.49........  Abdominal rigidity, other specified site..  N                     06  188, 189, 190             
789.60........  Abdominal tenderness, unspecified site....  N                     06  182, 183, 184             
789.61........  Abdominal tenderness, right upper quadrant  N                     06  182, 183, 184             
789.62........  Abdominal tenderness, left upper quadrant.  N                     06  182, 183, 184             
789.63........  Abdominal tenderness, right lower quadrant  N                     06  182, 183, 184             
789.64........  Abdominal tenderness, left lower quadrant.  N                     06  182, 183, 184             
789.65........  Abdominal tenderness, periumbilic.........  N                     06  182, 183, 184             
789.66........  Abdominal tenderness, epigastric..........  N                     06  182, 183, 184             
789.67........  Abdominal tenderness, generalized.........  N                     06  182, 183, 184             
789.69........  Abdominal tenderness, other specified site  N                     06  182, 183, 184             
795.71........  Nonspecific serologic evidence of human     N                     16  398, 399                  
                 immunodeficiency virus [HIV].                                                                  
795.79........  Other and unspecified nonspecific           N                     16  398, 399                  
                 immunological findings.                                                                        
909.5.........  Late effect of adverse effect of drug,      N                     21  454, 455                  
                 medicinal or biological substance.                                                             
996.04........  Complications due to automatic implantable  Y                     05  138, 139                  
                 cardiac defibrillator.                                                                         
998.81........  Emphysema (subcutaneous) resulting from     N                     21  452, 453                  
                 procedure.                                                                                     
998.82........  Cataract fragments in eye following         N                     02  46, 47, 48                
                 cataract surgery.                                                                              
998.89........  Other specified complications of            Y                     21  452, 453                  
                 procedures not elsewhere classified.                                                           
V03.81........  Prophylactic vaccination against            N                     23  467                       
                 Hemophilus influenza, type B [Hib].                                                            
V03.82........  Prophylactic vaccination against            N                     23  467                       
                 Streptococcus pneumoniae.                                                                      
V03.89........  Other specified prophylactic vaccination    N                     23  467                       
                 against single bacterial disease.                                                              
V06.5.........  Prophylactic vaccination against Tetanus-   N                     23  467                       
                 diphtheria [Td].                                                                               
V06.6.........  Prophylactic vaccination against            N                     23  467                       
                 Streptococcus pneumoniae and influenza.                                                        
V07.31........  Prophylactic fluoride administration......  N                     23  467                       
V07.39........  Other prophylactic chemotherapy...........  N                     23  467                       
V08...........  Asymptomatic human immunodeficiency virus   N                     18  421, 422                  
                 [HIV] infection status.                                                                        
V12.00........  Personal history of other unspecified       N                     23  467                       
                 infectious and parasitic disease.                                                              
V12.01........  Personal history of tuberculosis..........  N                     23  467                       
V12.02........  Personal history of poliomyelitis.........  N                     23  467                       
V12.03........  Personal history of malaria...............  N                     23  467                       
V12.09........  Personal history of other specified         N                     23  467                       
                 infectious and parasitic disease.                                                              
V12.70........  Personal history of unspecified digestive   N                     23  467                       
                 disease.                                                                                       
V12.71........  Personal history of peptic ulcer disease..  N                     23  467                       
V12.72........  Personal history of colonic polyps........  N                     23  467                       
V12.79........  Personal history of other specified         N                     23  467                       
                 digestive system diseases.                                                                     
V13.00........  Personal history of unspecified urinary     N                     23  467                       
                 disorder.                                                                                      
V13.01........  Personal history of urinary calculi.......  N                     23  467                       
V13.09........  Personal history of other specified         N                     23  467                       
                 urinary system disorders.                                                                      
V15.82........  History of tobacco use....................  N                     23  467                       
V29.2.........  Observation and evaluation of newborn for   N                     23  467                       
                 suspected respiratory condition.                                                               
V43.60........  Unspecified joint replacement status......  N                     08  256                       
V43.61........  Shoulder joint replacement status.........  N                     08  256                       
V43.62........  Elbow joint replacement status............  N                     08  256                       
V43.63........  Wrist joint replacement status............  N                     08  256                       
V43.64........  Hip joint replacement status..............  N                     08  256                       
V43.65........  Knee joint replacement status.............  N                     08  256                       
V43.66........  Ankle joint replacement status............  N                     08  256                       
V43.69........  Other joint replacement status............  N                     08  256                       
V45.00........  Unspecified cardiac device in situ........  N                     23  467                       
V45.01........  Cardiac pacemaker in situ.................  N                     23  467                       
V45.02........  Automatic implantable cardiac               N                     23  467                       
                 defibrillator in situ.                                                                         
V45.09........  Other specified cardiac device in situ....  N                     23  467                       
V45.51........  Presence of intrauterine contraceptive      N                     23  467                       
                 device.                                                                                        
V45.52........  Presence of subdermal contraceptive         N                     23  467                       
                 implant.                                                                                       
V45.59........  Presence of other contraceptive device....  N                     23  467                       
V45.82........  Percutaneous transluminal coronary          N                     23  467                       
                 angioplasty status.                                                                            
V49.60........  Unspecified level upper limb amputation     N                     23  467                       
                 status.                                                                                        
V49.61........  Thumb amputation status...................  N                     23  467                       
V49.62........  Other finger(s) amputation status.........  N                     23  467                       
V49.63........  Hand amputation status....................  N                     23  467                       
V49.64........  Wrist amputation status...................  N                     23  467                       
V49.65........  Below elbow amputation status.............  N                     23  467                       
V49.66........  Above elbow amputation status.............  N                     23  467                       
V49.67........  Shoulder amputation status................  N                     23  467                       
V49.70........  Unspecified level lower limb amputation     N                     23  467                       
                 status.                                                                                        
V49.71........  Great toe amputation status...............  N                     23  467                       
V49.72........  Other toe(s) amputation status............  N                     23  467                       
V49.73........  Foot amputation status....................  N                     23  467                       
V49.74........  Ankle amputation status...................  N                     23  467                       
V49.75........  Below knee amputation status..............  N                     23  467                       
V49.76........  Above knee amputation status..............  N                     23  467                       
V49.77........  Hip amputation status.....................  N                     23  467                       
V50.41........  Prophylactic breast removal...............  N                     09  276                       
V50.42........  Prophylactic ovary removal................  N                     13  358, 359, 369             
V50.49........  Other prophylactic organ removal..........  N                     23  467                       
V53.31........  Fitting and adjustment of cardiac           N                     05  144, 145                  
                 pacemaker.                                                                                     
V53.32........  Fitting and adjustment of automatic         N                     05  144, 145                  
                 implantable cardiac defibrillator.                                                             
V53.39........  Fitting and adjustment of other cardiac     N                     05  144, 145                  
                 device.                                                                                        
V57.21........  Encounter for occupational therapy........  N                     23  462                       
V57.22........  Encounter to vocational therapy...........  N                     23  462                       
V58.41........  Encounter for planned post-operative wound  N                     23  465, 466                  
                 closure.                                                                                       
V58.49........  Other specified aftercare following         N                     23  465, 466                  
                 surgery.                                                                                       
V58.81........  Encounter for removal of vascular catheter  N                     23  465, 466                  
V58.89........  Other specified aftercare.................  N                     23  465, 466                  
V65.40........  Other unspecified counseling..............  N                     23  467                       
V65.41........  Exercise counseling.......................  N                     23  467                       
V65.42........  Counseling on substance use and abuse.....  N                     23  467                       
V65.43........  Counseling on injury prevention...........  N                     23  467                       
V65.44........  Human immunodeficiency virus [HIV]          N                     23  467                       
                 counseling.                                                                                    
V65.45........  Counseling on other sexually transmitted    N                     23  467                       
                 diseases.                                                                                      
V65.49........  Other specified counseling................  N                     23  467                       
V69.0.........  Lack of physical exercise.................  N                     23  467                       
V69.1.........  Inappropriate diet and eating habits......  N                     23  467                       
V69.2.........  High-risk sexual behavior.................  N                     23  467                       
V69.3.........  Gambling and betting......................  N                     23  467                       
V69.8.........  Other problems related to lifestyle.......  N                     23  467                       
V69.9.........  Unspecified problem related to lifestyle..  N                     23  467                       
----------------------------------------------------------------------------------------------------------------
\1\Diagnosis code is classified as a ``major problem'' in these DRGs.                                           


                                         Table 6b.--New Procedure Codes                                         
----------------------------------------------------------------------------------------------------------------
Procedure code                  Description                      OR           MDC                 DRG           
----------------------------------------------------------------------------------------------------------------
34.05.........  Creation of pleuroperitoneal shunt........  N                                                   
41.04.........  Autologous hematopoietic stem cell          N                    Pre  481                       
                 transplant.                                                                                    
99.28.........  Injection or infusion of biological         N                                                   
                 response modifier [BRM] as an                                                                  
                 antineoplastic agent.                                                                          
----------------------------------------------------------------------------------------------------------------


                                      Table 6c.--Invalid Diagnosis Codes\1\                                     
----------------------------------------------------------------------------------------------------------------
Diagnosis code                  Description                      CC           MDC                 DRG           
----------------------------------------------------------------------------------------------------------------
042.0.........  Human immunodeficiency virus infection      Y                     25  489, 490                  
                 with specified infections.                                                                     
042.1.........  Human immunodeficiency virus infection      Y                     25  489, 490                  
                 causing other specified infections.                                                            
042.2.........  Human immunodeficiency virus infection      Y                     25  489, 490                  
                 with specified malignant neoplasms.                                                            
042.9.........  Human immunodeficiency virus infection      Y                     25  489, 490                  
                 with acquired immunodeficiency syndrome,                                                       
                 unspecified.                                                                                   
043.0.........  Human immunodeficiency virus infection      Y                     25  489, 490                  
                 causing lymphadenopathy.                                                                       
043.1.........  Human immunodeficiency virus infection      Y                     25  489, 490                  
                 causing specified diseases of the central                                                      
                 nervous system.                                                                                
043.2.........  Human immunodeficiency virus infection      Y                     25  489, 490                  
                 causing other disorders involving the                                                          
                 immune mechanism.                                                                              
043.3.........  Human immunodeficiency virus infection      Y                     25  489, 490                  
                 causing other specified conditions.                                                            
043.9.........  Human immunodeficiency virus infection      Y                     25  489, 490                  
                 causing acquired immunodeficiency                                                              
                 syndrome-related complex, unspecified.                                                         
044.0.........  Other human immunodeficiency virus          Y                     25  489, 490                  
                 infection causing specified acute                                                              
                 infections.                                                                                    
044.9.........  Human immunodeficiency virus infection,     Y                     25  489, 490                  
                 unspecified.                                                                                   
312.8.........  Other specified disturbances of conduct,    N                     19  431                       
                 not elsewhere classified.                                                                      
342.0.........  Flaccid hemiplegia........................  N                     01  12                        
342.1.........  Spastic hemiplegia........................  N                     01  12                        
342.9.........  Hemiplegia, unspecified...................  N                     01  12                        
344.0.........  Quadriplegia, unspecified.................  Y                     01  9                         
344.3.........  Monoplegia of lower limb..................  N                     01  34, 35                    
344.4.........  Monoplegia of upper limb..................  N                     01  34, 35                    
414.0.........  Coronary atherosclerosis..................  N                     05  132, 133                  
441.0.........  Dissecting aortic aneurysm................  Y                     05  121, 144, 145             
556...........  Idiopathic proctocolitis..................  N                     06  179                       
593.7.........  Vesicoureteral reflux.....................  N                     11  331, 332, 333             
702.1.........  Seborrheic keratosis......................  N                     09  283, 284                  
709.0.........  Dyschromia................................  N                     09  283, 284                  
787.0.........  Nausea and vomiting.......................  N                     06  182, 183, 184             
789.0.........  Abdominal pain............................  N                     06  182, 183, 184             
789.3.........  Abdominal or pelvic swelling, mass, or      N                     06  182, 183, 184             
                 lump.                                                                                          
789.4.........  Abdominal rigidity........................  N                     06  188, 189, 190             
795.7.........  Other nonspecific immunological findings..  N                     16  398, 399                  
795.8.........  Positive serological or viral culture       N                     18  421, 422                  
                 findings for human immunodeficiency virus                                                      
                 (HIV).                                                                                         
998.8.........  Other specified complications of            Y                     21  452, 453                  
                 procedures, not elsewhere classified.                                                          
V03.8.........  Other specified vaccinations against        N                     23  467                       
                 single bacterial diseases.                                                                     
V07.3.........  Other prophylactic chemotherapy...........  N                     23  467                       
V12.0.........  Personal history of infectious and          N                     23  467                       
                 parasitic diseases.                                                                            
V12.7.........  Personal history of diseases of the         N                     23  467                       
                 digestive system.                                                                              
V13.0.........  Personal history of disorders of the        N                     23  467                       
                 urinary system.                                                                                
V43.6.........  Joint replacement status..................  N                     08  256                       
V45.0.........  Cardiac pacemaker in situ.................  N                     23  467                       
V45.5.........  Presence of intrauterine contraceptive      N                     23  467                       
                 device.                                                                                        
V53.3.........  Fitting and adjustment of cardiac           N                     05  144, 145                  
                 pacemaker.                                                                                     
V57.2.........  Occupational therapy and vocational         N                     23  462                       
                 rehabilitation.                                                                                
V58.4.........  Other aftercare following surgery.........  N                     23  465, 466                  
V58.8.........  Other specified aftercare.................  N                     23  465, 466                  
V65.4.........  Other counseling..........................  N                     23  467                       
----------------------------------------------------------------------------------------------------------------
\1\See Table 6a for new diagnosis codes that will be considered valid by the FY 1995 GROUPER.                   


                                    Table 6d.--Revised Diagnosis Code Titles                                    
----------------------------------------------------------------------------------------------------------------
 Diagnosiscode                  Description                      CC           MDC                 DRG           
----------------------------------------------------------------------------------------------------------------
070.20........  Viral hepatitis B with hepatic coma, acute  Y                     07  205, 206                  
                 or unspecified, without mention of                               15  387, 389\1\               
                 hepatitis delta.                                                                               
070.21........  Viral hepatitis B with hepatic coma, acute  Y                     07  205, 206                  
                 or unspecified, with hepatitis delta.                            15  387, 389\1\               
070.30........  Viral hepatitis B without mention of        Y                     07  205, 206                  
                 hepatic coma, acute or unspecified,                              15  387, 389\1\               
                 without mention of hepatitis delta.                                                            
070.31........  Viral hepatitis B without mention of        Y                     07  205, 206                  
                 hepatic coma, acute or unspecified, with                         15  387, 389\1\               
                 hepatitis delta.                                                                               
070.41........  Acute or unspecified hepatitis C with       Y                     07  205, 206                  
                 hepatic coma.                                                    15  387, 389\1\               
070.42........  Hepatitis delta without mention of active   Y                     07  205, 206                  
                 hepatitis B disease with hepatic coma.                           15  387, 389\1\               
070.43........  Hepatitis E with hepatic coma.............  Y                     07  205, 206                  
                                                                                  15  387, 389\1\               
070.49........  Other specified viral hepatitis with        Y                     07  205, 206                  
                 hepatic coma.                                                    15  387, 389\1\               
070.51........  Acute or unspecified hepatitis C without    Y                     07  205, 206                  
                 mention of hepatic coma.                                         15  387 389\1\                
070.52........  Hepatitis delta without mention of active   Y                     07  205, 206                  
                 hepatitis B disease or hepatic coma.                             15  387, 389\1\               
070.53........  Hepatitis E without mention of hepatic      Y                     07  205, 206                  
                 coma.                                                            15  387, 389\1\               
070.59........  Other specified viral hepatitis without     Y                     07  205, 206                  
                 mention of hepatic coma.                                         15  387, 389\1\               
440.20........  Atherosclerosis of native arteries of       N                     05  130, 131                  
                 extremities, unspecified.                                                                      
440.21........  Atherosclerosis of native arteries of       N                     05  130, 131                  
                 extremities with intermittent                                                                  
                 claudication.                                                                                  
440.22........  Atherosclerosis of native arteries of       N                     05  130, 131                  
                 extremities with rest pain.                                                                    
440.23........  Atherosclerosis of native arteries of       N                     05  130, 131                  
                 extremities with ulceration.                                                                   
440.24........  Atherosclerosos of native arteries of       Y                     05  130, 131                  
                 extremities with gangrene.                                                                     
440.29........  Other atherosclerosos of native arteries    N                     05  130, 131                  
                 of extremities.                                                                                
770.1.........  Meconium aspiration syndrome..............  Y                     15  387, 389\1\               
----------------------------------------------------------------------------------------------------------------
\1\Diagnosis code is classified as a ``major problem'' in these DRGs.                                           


                                    Table 6e.--Revised Procedure Code Titles                                    
----------------------------------------------------------------------------------------------------------------
Procedure code                  Description                      OR           MDC                 DRG           
----------------------------------------------------------------------------------------------------------------
36.01.........  Single vessel percutaneous transluminal     Y                     05  106, 112                  
                 coronary angioplasty [PTCA] or coronary                                                        
                 atherectomy without mention of                                                                 
                 thrombolytic agent.                                                                            
36.02.........  Single vessel percutaneous transluminal     Y                     05  106, 112                  
                 coronary angioplasty [PTCA] or coronary                                                        
                 atherectomy with mention of thrombolytic                                                       
                 agent.                                                                                         
36.05.........  Multiple vessel percutaneous transluminal   Y                     05  106, 112                  
                 coronary angioplasty [PTCA] or coronary                                                        
                 atherectomy performed during the same                                                          
                 operation with or without mention of                                                           
                 thrombolytic agent.                                                                            
----------------------------------------------------------------------------------------------------------------


             Table 6f.--Additions to the CC Exclusions List             
                            Page 1 of 3 Pages                           
   CCs that are added to the list are in Table 6f--Additions to the CC  
    Exclusions List. Each of the principal diagnoses is shown with an   
asterisk, and the revisions to the CC Exclusions List are provided in an
 indented column immediately following the affected principal diagnosis.
*042      07052     *07041   07032    07054    *25072   34402    29583  
042       07053     07022    07033    *07989   44100    34403    29584  
*0700     07054     07023    07044    07022    44101    34404    29590  
07022     07059     07032    07054    07023    44102    34409    29591  
07023     0706      07033    *07054   07032    44103    44100    29592  
07032     0709      07044    07020    07033    *25073   44101    29593  
07033     78001     07054    07021    07044    44100    44102    29594  
07044     78003     *07042   07022    07054    44101    44103    29604  
07054     *07030    07022    07023    *07998   44102    *25092   29614  
*0701     07022     07023    07030    07022    44103    34400    29634  
07022     07023     07032    07031    07023    *25080   34401    29644  
07023     07032     07033    07032    07032    34400    34402    29654  
07032     07033     07044    07033    07033    34401    34403    29664  
07033     07044     07054    07041    07044    34402    34404    2980   
07044     07054     *07043   07042    07054    34403    34409    2983   
07054     *07031    07022    07043    *07999   34404    44100    2984   
*07020    07022     07023    07044    07022    34409    44101    29900  
07022     07023     07032    07049    07023    44100    44102    29910  
07023     07032     07033    07051    07032    44101    44103    29980  
07032     07033     07044    07052    07033    44102    *25093   29990  
07033     07044     07054    07053    07044    44103    34400    *31282 
07044     07054     *07044   07054    07054    *25081   34401    29500  
07054     *07032    07020    07059    *1398    34400    34402    29501  
*07021    07020     07021    0706     042      34401    34403    29502  
07022     07021     07022    0709     07022    34402    34404    29503  
07023     07022     07023    78001    07023    34403    34409    29504  
07032     07023     07030    78003    07032    34404    44100    29510  
07033     07030     07031    *07059   07033    34409    44101    29511  
07044     07031     07032    07022    07044    44100    44102    29512  
07054     07032     07033    07023    07054    44101    44103    29513  
*07022    07033     07041    07032    *25060   44102    *31281   29514  
07020     07041     07042    07033    34400    44103    29500    29521  
07021     07042     07043    07044    34401    *25082   29501    29522  
07022     07043     07044    07054    34402    34400    29502    29523  
07023     07044     07049    *0706    34403    34401    29503    29524  
07030     07049     07051    07022    34404    34402    29504    29530  
07031     07051     07052    07023    34409    34403    29510    29531  
07032     07052     07053    07032    *25061   34404    29511    29532  
07033     07053     07054    07033    34400    34409    29512    29533  
07041     07054     07059    07044    34401    44100    29513    29534  
07042     07059     0706     07054    34402    44101    29514    29540  
07043     0706      0709     *0709    34403    44102    29521    29541  
07044     0709      78001    07022    34404    44103    29522    29542  
07049     78001     78003    07023    34409    *25083   29523    29543  
07051     78003     *07049   07032    *25062   34400    29524    29544  
07052     *07033    07022    07033    34400    34401    29530    29560  
07053     07020     07023    07044    34401    34402    29531    29561  
07054     07021     07032    07054    34402    34403    29532    29562  
07059     07022     07033    *07888   34403    34404    29533    29563  
0706      07023     07044    07022    34404    34409    29534    29564  
0709      07030     07054    07023    34409    44100    29540    29570  
78001     07031     *07051   07032    *25063   44101    29541    29571  
78003     07032     07022    07033    34400    44102    29542    29572  
*07023    07033     07023    07044    34401    44103    29543    29573  
07020     07041     07032    07054    34402    *25090   29544    29574  
07021     07042     07033    *07889   34403    34400    29560    29580  
07022     07043     07044    07022    34404    34401    29561    29581  
07023     07044     07054    07023    34409    34402    29562    29582  
07030     07049     *07052   07032    *25070   34403    29563    29583  
07031     07051     07022    07033    44100    34404    29564    29584  
07032     07052     07023    07044    44101    34409    29570    29590  
07033     07053     07032    07054    44102    44100    29571    29591  
07041     07054     07033    *07988   44103    44101    29572    29592  
07042     07059     07044    07022    *25071   44102    29573    29593  
07043     0706      07054    07023    44100    44103    29574    29594  
07044     0709      *07053   07032    44101    *25091   29580    29604  
07049     78001     07022    07033    44102    34400    29581    29614  
07051     78003     07023    07044    44103    34401    29582    29634  


                            Page 2 of 3 Pages                           
29644     3432      34409    34409    34400    *3449    *4411    63411  
29654     34400     *34290   *34400   34401    34400    44100    63412  
29664     34401     3432     3432     34402    34401    44101    63420  
2980      34402     34400    34400    34403    34402    44102    63421  
2983      34403     34401    34401    34404    34403    44103    63422  
2984      34404     34402    34402    34409    34404    *4412    63430  
29900     34409     34403    34403    *34432   34409    44100    63431  
29910     *34201    34404    34404    3432     *3488    44101    63432  
29980     3432      34409    34409    34400    34400    44102    63440  
29990     34400     *34291   *34401   34401    34401    44103    63441  
*31289    34401     3432     3432     34402    34402    *4413    63442  
29500     34402     34400    34400    34403    34403    44100    63450  
29501     34403     34401    34401    34404    34404    44101    63451  
29502     34404     34402    34402    34409    34409    44102    63452  
29503     34409     34403    34403    *34440   *3489    44103    63460  
29504     *34202    34404    34404    3432     34400    *4414    63461  
29510     3432      34409    34409    34400    34401    44100    63462  
29511     34400     *34292   *34402   34401    34402    44101    63470  
29512     34401     3432     3432     34402    34403    44102    63471  
29513     34402     34400    34400    34403    34404    44103    63472  
29514     34403     34401    34401    34404    34409    *4415    63480  
29521     34404     34402    34402    34409    *34989   44100    63481  
29522     34409     34403    34403    *34441   34400    44101    63482  
29523     *34210    34404    34404    3432     34401    44102    63490  
29524     3432      34409    34409    34400    34402    44103    63491  
29530     34400     *3430    *34403   34401    34403    *4416    63492  
29531     34401     34400    3432     34402    34404    44100    6390   
29532     34402     34401    34400    34403    34409    44101    6391   
29533     34403     34402    34401    34404    *3499    44102    6392   
29534     34404     34403    34402    34409    34400    44103    6393   
29540     34409     34404    34403    *34442   34401    *4417    6394   
29541     7817      34409    34404    3432     34402    44100    6395   
29542     *34211    *3431    34409    34400    34403    44101    6396   
29543     3432      34400    *34404   34401    34404    44102    6398   
29544     34400     34401    3432     34402    34409    44103    6399   
29560     34401     34402    34400    34403    *44023   *4419    64000  
29561     34402     34403    34401    34404    7071     44100    64001  
29562     34403     34404    34402    34409    *44100   44101    64003  
29563     34404     34409    34403    *3445    44100    44102    64080  
29564     34409     *3432    34404    34400    44101    44103    64081  
29570     7817      34400    34409    34401    44102    *45989   64083  
29571     *34212    34401    *34409   34402    44103    44100    64090  
29572     3432      34402    3432     34403    4411     44101    64091  
29573     34400     34403    34400    34404    4413     44102    64093  
29574     34401     34404    34401    34409    4415     44103    64100  
29580     34402     34409    34402    *34460   4416     *4599    64101  
29581     34403     *3433    34403    34400    *44101   44100    64103  
29582     34404     34400    34404    34401    44100    44101    64110  
29583     34409     34401    34409    34402    44101    44102    64111  
29584     7817      34402    *3441    34403    44102    44103    64113  
29590     *34280    34403    34400    34404    44103    *5120    64130  
29591     3432      34404    34401    34409    4411     5121     64131  
29592     34400     34409    34402    *34461   4413     *5121    64133  
29593     34401     *3434    34403    34400    4415     5120     64180  
29594     34402     34400    34404    34401    4416     5121     64181  
29604     34403     34401    34409    34402    *44102   5128     64183  
29614     34404     34402    *3442    34403    44100    *5128    64190  
29634     34409     34403    34400    34404    44101    5121     64191  
29644     *34281    34404    34401    34409    44102    *5178    64193  
29654     3432      34409    34402    *34481   44103    5121     64240  
29664     34400     *3438    34403    34400    4411     *51889   64241  
2980      34401     34400    34404    34401    4413     5121     64242  
2983      34402     34401    34409    34402    4415     *5198    64243  
2984      34403     34402    *34430   34403    4416     5121     64244  
29900     34404     34403    3432     34404    *44103   *5199    64250  
29910     34409     34404    34400    34409    44100    5121     64251  
29980     *34282    34409    34401    *34489   44101    *5363    64252  
29990     3432      *3439    34402    34400    44102    5370     64253  
*33392    34400     34400    34403    34401    44103    *66943   64254  
7817      34401     34401    34404    34402    4411     63400    64260  
*33393    34402     34402    34409    34403    4413     63401    64261  
7817      34403     34403    *34431   34404    4415     63402    64262  
*34200    34404     34404    3432     34409    4416     63410    64263  


                            Page 3 of 3 Pages                           
64264     66820     67511    *78931   9582     99602                    
64270     66821     67512    7895     9583     99603                    
64271     66822     *7100    *78932   9584     99604                    
64272     66823     7100     7895     9585     99609                    
64273     66824     *7101    *78933   9587     9961                     
64274     66880     7101     7895     9954     9962                     
64400     66881     *7103    *78934   99600    99630                    
64403     66882     7103     7895     99601    99639                    
64410     66883     *7104    *78935   99602    9964                     
64413     66884     7104     7895     99603    99660                    
64660     66890     *7108    *78936   99604    99661                    
64661     66891     7108     7895     99609    99662                    
64662     66892     *74259   *78937   9961     99663                    
64663     66893     34400    7895     9962     99664                    
64664     66894     34401    *78939   99630    99665                    
64670     66910     34402    7895     99639    99666                    
64671     66911     34403    *78940   9964     99667                    
64673     66912     34404    7895     99660    99669                    
64730     66913     34409    *78941   99661    99670                    
64731     66914     *7428    7895     99662    99671                    
64732     66930     34400    *78942   99663    99672                    
64733     66932     34401    7895     99664    99673                    
64734     66934     34402    *78943   99665    99674                    
64740     67000     34403    7895     99666    99675                    
64741     67002     34404    *78944   99667    99676                    
64742     67004     34409    7895     99669    99677                    
64743     67120     *7429    *78945   99670    99678                    
64744     67121     34400    7895     99671    99679                    
64800     67122     34401    *78946   99672    99690                    
64801     67123     34402    7895     99673    99691                    
64802     67124     34403    *78947   99674    99692                    
64803     67130     34404    7895     99675    99693                    
64804     67131     34409    *78949   99676    99694                    
64820     67133     *75983   7895     99677    99695                    
64821     67140     42971    *99604   99678    99696                    
64822     67142     42979    99600    99679    99699                    
64823     67144     74100    99604    99690    9970                     
64824     67300     74101    99660    99691    9971                     
64830     67301     74102    99661    99692    9972                     
64831     67302     74103    99662    99693    9973                     
64832     67303     74190    99669    99694    9974                     
64833     67304     74191    99670    99695    9975                     
64834     67310     74192    99672    99696    99762                    
64850     67311     74193    99674    99699    9979                     
64851     67312     7450     99679    9970     9980                     
64852     67313     74510    *99671   9971     9981                     
64853     67314     74511    V422     9972     9982                     
64854     67320     74512    *99680   9973     9983                     
64860     67321     74519    V420     9974     9984                     
64861     67322     7452     V421     9975     9985                     
64862     67323     7453     V426     99762    9986                     
64863     67324     7454     V427     9979     9987                     
64864     67330     74560    V428     9980     99889                    
65930     67331     74569    V432     9981     9989                     
65931     67332     7457     *99681   9982     *9989                    
65933     67333     74601    V420     9983     99604                    
66500     67334     74602    *99682   9984     99889                    
66501     67380     7461     V427     9985     *V421                    
66503     67381     7462     *99683   9986     V432                     
66510     67382     7463     V421     9987                              
66511     67383     7464     V432     99889                             
66632     67384     7465     *99684   9989                              
66634     67400     7466     V426     *99889                            
66800     67401     7467     *99686   9580                              
66801     67402     74681    V428     9581                              
66802     67403     74682    *99689   9582                              
66803     67404     74683    V428     9583                              
66804     67410     74684    *9979    9584                              
66810     67412     74686    99604    9585                              
66811     67420     74711    99889    9587                              
66812     67422     74722    *99881   9954                              
66813     67424     *78930   9580     99600                             
66814     67510     7895     9581     99601                             


             Table 6g.--Deletions to the CC Exclusions List             
                            Page 1 of 1 Pages                           
 CCs that are deleted from the list are in Table 6G-Deletions to the CC 
    Exclusions List. Each of the principal diagnoses is shown with an   
asterisk, and the revisions to the CC Exclusions List are provided in an
 indented column immediately following the affected principal diagnosis.
                                                                        
                                                                        
*0420        0433         0429        29540       3440        9582      
0420         0439         0430        29541       *3443       9583      
0421         0440         0431        29542       3432        9584      
0422         0449         0432        29543       3440        9585      
0429         *0432        0433        29544       *3444       9587      
0430         0420         0439        29560       3432        9954      
0431         0421         0440        29561       3440        99600     
0432         0422         0449        29562       *3445       99601     
0433         0429         *25060      29563       3440        99602     
0439         0430         3440        29564       *34460      99603     
0440         0431         *25061      29570       3440        99609     
0449         0432         3440        29571       *34461      9961      
*0421        0433         *25062      29572       3440        9962      
0420         0439         3440        29573       *34481      99630     
0421         0440         *25063      29574       3440        99639     
0422         0449         3440        29580       *34489      9964      
0429         *0433        *25070      29581       3440        99660     
0430         0420         4410        29582       *3449       99661     
0431         0421         *25071      29583       3440        99662     
0432         0422         4410        29584       *3488       99663     
0433         0429         *25072      29590       3440        99664     
0439         0430         4410        29591       *3489       99665     
0440         0431         *25073      29592       3440        99666     
0449         0432         4410        29593       *34989      99667     
*0422        0433         *25080      29594       3440        99669     
0420         0439         3440        29604       *3499       99670     
0421         0440         4410        29614       3440        99671     
0422         0449         *25081      29634       *4410       99672     
0429         *0439        3440        29644       4410        99673     
0430         0420         4410        29654       4411        99674     
0431         0421         *25082      29664       4413        99675     
0432         0422         3440        2980        4415        99676     
0433         0429         4410        2983        4416        99677     
0439         0430         *25083      2984        *4411       99678     
0440         0431         3440        29900       4410        99679     
0449         0432         4410        29910       *4412       99690     
*0429        0433         *25090      29980       4410        99691     
0420         0439         3440        29990       *4413       99692     
0421         0440         4410        *3420       4410        99693     
0422         0449         *25091      3432        *4414       99694     
0429         *0440        3440        3440        4410        99695     
0430         0420         4410        *3421       *4415       99696     
0431         0421         *25092      3432        4410        99699     
0432         0422         3440        3440        *4416       9970      
0433         0429         4410        7817        4410        9971      
0439         0430         *25093      *3429       *4417       9972      
0440         0431         3440        3432        4410        9973      
0449         0432         4410        3440        *4419       9974      
*0430        0433         *3128       *3430       4410        9975      
0420         0439         29500       3440        *45989      99762     
0421         0440         29501       *3431       4410        9979      
0422         0449         29502       3440        *4599       9980      
0429         *0449        29503       *3432       4410        9981      
0430         0420         29504       3440        *74259      9982      
0431         0421         29510       *3433       3440        9983      
0432         0422         29511       3440        *7428       9984      
0433         0429         29512       *3434       3440        9985      
0439         0430         29513       3440        *7429       9986      
0440         0431         29514       *3438       3440        9987      
0449         0432         29521       3440        *7893       9988      
*0431        0433         29522       *3439       7895        9989      
0420         0439         29523       3440        *7894       *9989     
0421         0440         29524       *3440       7895        9988      
0422         0449         29530       3432        *9979                 
0429         *1398        29531       3440        9988                  
0430         0420         29532       *3441       *9988                 
0431         0421         29533       3440        9580                  
0432         0422         29534       *3442       9581                  


                                   Table 7a.--Medicare Prospective Payment System Selected Percentile Lengths of Stay                                   
                                                        [FY93 Medpar Update 12/93 Grouper V11.0]                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Number        Arithmetic         10th            25th            50th            75th            90th     
                   DRG                      discharges       mean LOS       percentile      percentile      percentile      percentile      percentile  
--------------------------------------------------------------------------------------------------------------------------------------------------------
001.....................................           30373         13.5498               3               6              10              17              27
002.....................................            5861         13.9686               4               6              10              17              27
003.....................................               2         41.5000              17              17              66              66              66
004.....................................            5387         11.0787               2               4               7              14              23
005.....................................           64233          5.8124               2               3               4               7              11
006.....................................             517          3.2128               1               1               2               4               7
007.....................................            6847         17.1151               2               5              10              18              35
008.....................................            2226          4.5022               1               1               3               5              10
009.....................................            1605          9.2299               2               4               6              11              17
010.....................................           20587          9.6795               2               4               7              12              20
011.....................................            3219          5.5902               1               2               4               7              11
012.....................................           21670          9.2853               2               4               6              11              17
013.....................................            6125          7.5703               3               4               6               9              13
014.....................................          353384          8.9247               2               4               7              11              17
015.....................................          131428          5.0837               2               2               4               6               9
016.....................................           11066          8.2622               2               4               6              10              15
017.....................................            3630          4.7063               1               2               4               6               9
018.....................................           18584          7.2969               2               3               6               9              14
019.....................................            7122          4.8655               1               2               4               6               9
020.....................................            7553         11.7304               3               5               9              15              23
021.....................................            1026          8.7320               2               4               7              11              17
022.....................................            3809          5.5547               2               3               4               7              10
023.....................................            4708          5.8180               1               2               4               7              11
024.....................................           55140          6.8617               2               3               5               8              13
025.....................................           21162          4.2204               1               2               3               5               8
026.....................................              40          4.3750               1               1               2               4               9
027.....................................            2974          7.5790               1               1               4               9              17
028.....................................            8995          8.4404               2               3               6              10              18
029.....................................            3289          4.6722               1               2               3               6               9
031.....................................            3616          5.8462               1               2               4               7              12
032.....................................            2071          3.4843               1               1               2               4               7
034.....................................           14911          7.7272               2               3               5               9              15
035.....................................            3437          4.9674               1               2               4               6               9
036.....................................           16091          1.8704               1               1               1               2               3
037.....................................            2305          4.0638               1               1               3               5               8
038.....................................             477          2.7317               1               1               2               3               5
039.....................................            5224          2.0312               1               1               1               2               4
040.....................................            2126          3.6350               1               1               2               4               8
042.....................................           13425          2.3924               1               1               1               3               5
043.....................................             145          4.2552               1               2               3               5               8
044.....................................            1684          6.0653               2               3               5               8              11
045.....................................            2423          4.3120               1               2               4               6               8
046.....................................            2954          6.1852               1               3               5               8              12
047.....................................            1485          3.8774               1               2               3               5               8
049.....................................            2255          6.9929               2               3               5               8              13
050.....................................            4034          2.3406               1               1               2               3               4
051.....................................             409          3.0831               1               1               2               3               6
052.....................................              97          3.3402               1               1               2               4               7
053.....................................            4556          3.5435               1               1               2               4               8
054.....................................               1          1.0000               1               1               1               1               1
055.....................................            2531          3.0217               1               1               1               3               7
056.....................................             826          3.1695               1               1               2               4               7
057.....................................             617          5.3485               1               2               3               6              11
059.....................................             124          2.3468               1               1               1               2               4
060.....................................               2          2.5000               2               2               3               3               3
061.....................................             297          5.2256               1               1               2               7              12
063.....................................            4419          5.3220               1               2               3               6              10
064.....................................            3707          8.3663               1               2               5              10              18
065.....................................           34105          3.8732               1               2               3               5               7
066.....................................            7569          4.0285               1               2               3               5               7
067.....................................             458          4.7576               2               3               4               6               9
068.....................................           12495          5.4854               2               3               4               7              10
069.....................................            3688          4.2573               2               2               4               5               7
070.....................................              35          4.2571               1               2               4               5               8
071.....................................             138          4.2174               2               2               3               5               8
072.....................................             600          4.3200               1               2               3               5               8
073.....................................            6282          5.6492               1               2               4               7              11
075.....................................           36514         12.6075               5               7               9              15              24
076.....................................           38214         14.1313               3               6              11              17              27
077.....................................            2808          5.9822               1               2               4               8              13
078.....................................           26921          9.2896               4               6               8              11              15
079.....................................          174836         10.7988               3               5               8              13              20
080.....................................            8572          7.4425               3               4               6               9              13
081.....................................              10          7.0000               1               4               6              10              13
082.....................................           68268          8.9293               2               4               7              11              18
083.....................................            7079          7.4091               2               3               6               9              14
084.....................................            1576          4.3331               1               2               3               5               8
085.....................................           17127          8.2495               2               4               7              10              16
086.....................................            1510          4.9192               1               2               4               6              10
087.....................................           51460          7.5282               1               3               6              10              14
088.....................................          332295          7.0044               3               4               6               8              12
089.....................................          410720          8.0987               3               4               7              10              14
090.....................................           40769          5.7490               2               3               5               7              10
091.....................................              38          4.2105               2               3               4               4               7
092.....................................           10341          8.1339               3               4               6              10              15
093.....................................            1377          5.9092               2               3               5               7              11
094.....................................            9789          8.6530               3               4               7              11              17
095.....................................            1095          4.9726               2               3               4               6               9
096.....................................           78494          6.3363               2               4               5               8              11
097.....................................           28088          4.8754               2               3               4               6               8
098.....................................              29          4.1034               1               2               3               4               7
099.....................................           27359          4.2464               1               2               3               5               8
100.....................................           10912          2.8235               1               1               2               3               5
101.....................................           18549          6.3481               2               3               5               8              12
102.....................................            3083          4.0642               1               2               3               5               8
103.....................................             348         35.3218               9              14              22              43              77
104.....................................           20448         18.0558               8              11              15              22              31
105.....................................           17984         13.3331               7               8              10              15              23
106.....................................           85552         13.8702               7               9              12              16              22
107.....................................           56763         10.6400               6               7               9              12              17
108.....................................            6318         14.6399               5               8              12              18              27
110.....................................           55626         12.2737               3               7              10              15              23
111.....................................            5508          7.5882               3               6               7               9              11
112.....................................          165207          5.3375               1               2               4               7              11
113.....................................           41056         17.3678               5               8              13              21              35
114.....................................            8732         11.0470               3               5               8              14              22
115.....................................            9395         12.7986               5               7              11              16              23
116.....................................           73442          6.5117               2               3               5               8              13
117.....................................            3705          4.9970               1               2               3               6              10
118.....................................            7591          3.5381               1               1               2               4               8
119.....................................            2413          5.7791               1               1               3               7              14
120.....................................           36642         10.6624               1               3               6              14              24
121.....................................          159546          8.7209               3               5               7              11              15
122.....................................           94506          6.0345               2               3               6               8              10
123.....................................           53142          5.0944               1               1               3               6              12
124.....................................          133965          5.5625               1               2               4               7              11
125.....................................           68339          3.2111               1               1               2               4               7
126.....................................            4359         18.2292               5               8              14              25              38
127.....................................          679157          7.1974               2               4               6               9              14
128.....................................           22137          7.6946               4               5               7               9              12
129.....................................            5385          3.8375               1               1               1               4              10
130.....................................           78977          7.5326               2               4               6               9              13
131.....................................           24242          5.6644               1               3               5               7               9
132.....................................           16994          4.8000               1               2               4               6               9
133.....................................            3780          3.5124               1               2               3               4               6
134.....................................           30568          4.4913               1               2               3               5               8
135.....................................            6195          5.9711               2               3               4               7              11
136.....................................            1205          3.8556               1               2               3               5               7
138.....................................          196966          5.3070               2               2               4               6              10
139.....................................           67986          3.3770               1               2               3               4               6
140.....................................          318042          4.0906               1               2               3               5               7
141.....................................           76022          5.2772               2               2               4               6              10
142.....................................           35107          3.6827               1               2               3               4               7
143.....................................          133200          3.0817               1               2               2               4               6
144.....................................           60798          6.5142               1               3               5               8              13
145.....................................            7253          3.7740               1               2               3               5               7
146.....................................            8127         12.3116               6               8              10              14              20
147.....................................            1471          7.9844               4               6               8               9              11
148.....................................          145108         14.9089               7               8              12              17              27
149.....................................           14666          8.3034               5               6               8               9              12
150.....................................           22651         12.8981               5               7              11              15              23
151.....................................            4308          6.8271               2               4               6               9              12
152.....................................            4894          9.8733               4               6               8              11              16
153.....................................            1760          6.7545               3               5               6               8              10
154.....................................           36532         17.1556               6               9              13              21              33
155.....................................            3705          7.3665               3               4               7               9              12
156.....................................               4         11.5000               2               2               9              13              22
157.....................................           12499          6.3625               2               3               4               8              13
158.....................................            7092          3.0451               1               1               2               4               6
159.....................................           17371          5.7938               2               3               4               7              11
160.....................................           10912          3.1574               1               2               3               4               6
161.....................................           18202          4.8049               1               2               3               6              10
162.....................................           11663          2.2115               1               1               2               3               4
163.....................................              16          4.7500               2               2               3               6               8
164.....................................            4964         10.3342               5               6               9              12              17
165.....................................            1512          6.2890               3               4               6               8              10
166.....................................            3190          6.4994               2               3               5               8              12
167.....................................            2206          3.7040               2               2               3               5               6
168.....................................            1851          5.6018               1               2               3               7              12
169.....................................            1185          2.6962               1               1               2               3               6
170.....................................           12853         14.7068               3               6              10              18              30
171.....................................            1199          5.8507               1               3               5               8              11
172.....................................           30862          9.4698               2               4               7              12              19
173.....................................            2449          4.6991               1               2               3               6               9
174.....................................          225891          6.3539               2               3               5               8              12
175.....................................           25401          3.9307               2               2               3               5               7
176.....................................           14812          7.0485               2               3               5               8              13
177.....................................           12916          5.6722               2               3               5               7              10
178.....................................            4944          3.9606               2               2               3               5               7
179.....................................            9686          8.3931               3               4               6              10              16
180.....................................           77950          6.9772               2               3               5               8              13
181.....................................           20494          4.2234               1               2               4               5               7
182.....................................          231480          5.7533               2               3               4               7              11
183.....................................           71521          3.8393               1               2               3               5               7
184.....................................              67          3.8358               1               2               3               4               5
185.....................................            3615          5.9422               1               2               4               7              12
186.....................................               5          4.0000               1               1               3               6               8
187.....................................             860          3.8558               1               1               3               5               8
188.....................................           53223          6.9469               2               3               5               8              14
189.....................................            7789          3.7621               1               1               3               5               8
190.....................................              54          4.4074               1               2               3               4               6
191.....................................           10304         18.2203               6               8              14              22              35
192.....................................             820          8.8305               2               5               8              11              16
193.....................................           10321         15.8257               6               9              13              19              28
194.....................................             904          9.1040               3               5               8              11              16
195.....................................           12380         11.7961               5               7              10              14              20
196.....................................            1026          7.3899               4               5               7               9              12
197.....................................           33963          9.9541               4               6               8              12              17
198.....................................           10346          5.2905               2               3               5               7               9
199.....................................            2660         13.3534               4               6              10              17              26
200.....................................            1683         13.2133               2               5              10              17              28
201.....................................            1677         17.0030               4               7              12              22              35
202.....................................           20872          8.7625               2               4               7              11              17
203.....................................           29280          8.8699               2               4               7              11              18
204.....................................           44310          7.5089               2               4               6               9              14
205.....................................           21520          8.4757               2               4               6              10              17
206.....................................            1779          4.6549               1               2               4               6               9
207.....................................           36615          6.5464               2               3               5               8              12
208.....................................           11419          3.6754               1               2               3               5               7
209.....................................          303651          8.7652               5               6               8              10              13
210.....................................          129230         10.9177               5               6               9              12              18
211.....................................           25020          7.9683               4               5               7               9              12
212.....................................              10          3.8000               1               3               4               5               5
213.....................................            6329         11.6949               3               5               8              14              23
214.....................................           48908          8.3508               3               4               6              10              15
215.....................................           39409          4.7896               2               3               4               6               8
216.....................................            6597         13.2759               3               6              10              17              26
217.....................................           17833         18.9865               4               7              13              23              40
218.....................................           21393          7.6410               2               4               6               9              14
219.....................................           18645          4.4635               2               2               4               5               8
220.....................................               5          6.2000               2               2               6               7              10
221.....................................            4727          9.4007               2               4               7              11              19
222.....................................            3985          4.6979               1               2               4               6               9
223.....................................           18602          3.3396               1               2               2               4               6
224.....................................            8372          2.6646               1               1               2               3               5
225.....................................            7483          5.2232               1               2               3               6              12
226.....................................            5574          7.8281               2               3               5               9              17
227.....................................            5634          3.2157               1               1               2               4               6
228.....................................            3492          3.6904               1               1               2               4               8
229.....................................            1775          2.5228               1               1               2               3               5
230.....................................            2838          5.8439               1               2               3               7              12
231.....................................           10537          5.6445               1               2               3               7              13
232.....................................             775          5.9277               1               1               3               6              16
233.....................................            4860         10.7298               2               4               8              13              22
234.....................................            2420          4.8157               1               2               4               6              10
235.....................................            6120          8.9845               2               3               6              10              18
236.....................................           38386          7.8166               2               3               6               9              15
237.....................................            1605          5.3234               1               2               4               6              10
238.....................................            6734         12.7251               3               6               9              15              26
239.....................................           60904          9.1849               3               4               7              11              18
240.....................................           11208          8.9697               2               4               7              11              17
241.....................................            3260          5.2215               1               3               4               6              10
242.....................................            2281          9.4638               3               4               7              11              18
243.....................................           88697          6.5167               2               3               5               8              12
244.....................................           11351          6.8297               2               3               5               8              13
245.....................................            4564          4.9634               1               2               3               6               9
246.....................................            1431          4.8595               2               2               4               6               9
247.....................................            9989          4.6786               1               2               3               6               9
248.....................................            6510          6.0246               2               3               4               7              11
249.....................................            9415          5.2349               1               2               3               6              11
250.....................................            3290          6.1280               1               2               4               7              12
251.....................................            2507          3.5548               1               1               2               4               7
252.....................................               2          6.0000               2               2              10              10              10
253.....................................           17261          7.2853               2               3               5               8              14
254.....................................           10298          4.4081               1               2               3               5               8
255.....................................               1         10.0000              10              10              10              10              10
256.....................................            9475          4.7850               1               2               3               6               9
257.....................................           26630          4.2972               2               2               3               5               7
258.....................................           21946          3.1009               1               2               3               4               5
259.....................................            4351          4.3691               1               2               2               4               9
260.....................................            5570          2.2197               1               1               2               3               4
261.....................................            2585          2.5455               1               1               2               3               4
262.....................................             868          3.9124               1               1               2               5               8
263.....................................           30392         17.7629               5               7              12              21              36
264.....................................            3875          9.7752               3               4               7              12              20
265.....................................            4819          8.6777               1               3               6              10              18
266.....................................            3324          4.0884               1               1               3               5               8
267.....................................             232          4.1595               1               1               2               5              10
268.....................................            1219          4.2231               1               1               2               5               9
269.....................................           11374         11.0770               2               4               8              14              23
270.....................................            4423          3.6878               1               1               2               4               8
271.....................................           20737         10.3003               3               5               8              12              19
272.....................................            6755          8.3843               3               4               6              10              16
273.....................................            1752          6.0736               2               3               5               7              12
274.....................................            2582          9.1971               2               3               6              11              18
275.....................................             251          4.0956               1               1               2               5               9
276.....................................             859          5.7334               1               2               4               7              10
277.....................................           74776          7.8329               3               4               6               9              14
278.....................................           26182          5.7631               2               3               5               7              10
279.....................................              10          4.3000               1               3               4               6               7
280.....................................           13247          6.0380               1               3               4               7              11
281.....................................            6270          4.0675               1               2               3               5               8
282.....................................               1          1.0000               1               1               1               1               1
283.....................................            5385          6.5441               2               3               5               8              13
284.....................................            1955          4.4123               1               2               3               5               8
285.....................................            4930         17.6406               4               8              13              21              34
286.....................................            1891          9.7324               4               5               7              11              18
287.....................................            6466         16.6157               4               7              11              19              33
288.....................................             653          8.3629               3               4               6               8              15
289.....................................            4563          4.9001               1               2               3               4              10
290.....................................            9202          3.1564               1               2               2               3               5
291.....................................             111          1.9730               1               1               1               2               4
292.....................................            5170         15.1474               3               6              11              19              31
293.....................................             395          6.8557               1               2               5               9              14
294.....................................           80666          6.7243               2               3               5               8              12
295.....................................            3224          5.4100               2               2               4               6              10
296.....................................          227107          7.5655               2               3               5               9              15
297.....................................           40135          4.8183               2               2               4               6               9
298.....................................              81          4.2963               1               1               2               4              10
299.....................................             905          6.3901               1               2               4               8              13
300.....................................           12698          8.5099               2               4               6              10              16
301.....................................            1891          4.9804               1               2               4               6              10
302.....................................            6980         14.9606               7               9              12              18              26
303.....................................           18216         11.8073               5               7               9              14              21
304.....................................           13382         11.8629               3               5               9              14              23
305.....................................            2692          5.6118               2               3               5               7              10
306.....................................           11838          7.5201               2               3               5              10              15
307.....................................            3299          3.7014               1               2               3               4               6
308.....................................            9917          8.2603               2               3               6              10              17
309.....................................            3783          3.4335               1               2               3               4               7
310.....................................           32915          5.1680               1               2               3               6              10
311.....................................           14111          2.5038               1               1               2               3               5
312.....................................            2543          5.3917               1               2               4               7              11
313.....................................            1154          2.6023               1               1               2               3               5
314.....................................               1          8.0000               8               8               8               8               8
315.....................................           29182         10.9542               1               3               7              14              24
316.....................................           57588          8.4956               2               3               6              11              17
317.....................................             690          4.3174               1               2               3               4               8
318.....................................            6220          8.2323               2               3               6              10              17
319.....................................             544          3.2831               1               1               2               4               7
320.....................................          168207          7.5966               3               4               6               9              14
321.....................................           26158          5.3687               2               3               4               6               9
322.....................................              72          4.5833               2               2               4               5               9
323.....................................           19232          4.0182               1               2               3               5               8
324.....................................           10858          2.3119               1               1               2               3               4
325.....................................            8572          5.3898               1               2               4               6              10
326.....................................            2823          3.4307               1               2               3               4               7
327.....................................               3          3.0000               1               1               4               4               4
328.....................................            1023          5.0205               1               2               4               6              10
329.....................................             197          2.6701               1               1               2               3               5
331.....................................           33508          7.1297               2               3               5               9              14
332.....................................            4698          4.1350               1               2               3               5               8
333.....................................             299          7.0368               1               3               5              10              15
334.....................................           28600          7.6310               4               5               7               8              11
335.....................................           12704          6.0778               4               5               6               7               9
336.....................................           81940          4.9549               2               3               4               6               9
337.....................................           58596          3.3036               2               2               3               4               5
338.....................................            8839          5.8370               1               2               4               7              13
339.....................................            3107          4.7023               1               2               3               5              10
340.....................................               3          2.3333               1               1               2               4               4
341.....................................            9209          4.0488               1               2               3               4               7
342.....................................             307          4.1564               1               1               2               5              10
344.....................................            6604          3.8139               1               1               3               4               7
345.....................................            1808          4.8623               1               2               3               6              10
346.....................................            6645          7.7943               2               3               5               9              16
347.....................................             554          3.7365               1               1               3               5               8
348.....................................            3661          5.1478               1               2               4               6              10
349.....................................            1010          3.3426               1               1               2               4               6
350.....................................            7431          5.5438               2               3               5               7              10
352.....................................             756          4.6019               1               2               3               6               9
353.....................................            2445         10.1877               4               5               8              12              19
354.....................................            9943          7.2639               3               4               6               8              12
355.....................................            5537          4.3150               3               3               4               5               6
356.....................................           34772          3.7010               2               2               3               4               6
357.....................................            6736         11.1651               4               6               9              13              21
358.....................................           26416          5.5984               3               4               4               6               9
359.....................................           26404          3.7891               2               3               4               4               5
360.....................................            9475          4.5882               2               3               3               5               8
361.....................................             511          5.0431               1               2               3               5              11
362.....................................               3          1.3333               1               1               1               2               2
363.....................................            5120          3.9785               1               2               3               4               7
364.....................................            2078          3.7671               1               1               2               5               8
365.....................................            2643          9.4813               2               3               6              12              20
366.....................................            4656          9.1016               2               3               6              11              19
367.....................................             625          3.3776               1               1               2               4               7
368.....................................            1750          7.3937               2               4               6               9              15
369.....................................            2330          4.0159               1               1               3               5               8
370.....................................             857          6.1680               3               3               4               6              10
371.....................................             864          3.9699               3               3               3               4               5
372.....................................             586          3.5256               1               2               3               4               6
373.....................................            3116          2.2073               1               1               2               2               3
374.....................................             120          3.2167               1               2               2               3               5
375.....................................               4         51.5000               2               2               3              11             190
376.....................................             173          3.3410               1               2               2               3               7
377.....................................              32          5.7813               1               1               3              10              13
378.....................................             137          3.0438               1               2               3               4               5
379.....................................             338          2.8639               1               1               2               3               6
380.....................................              67          2.1045               1               1               1               3               4
381.....................................             225          2.6578               1               1               1               3               5
382.....................................              48          1.4167               1               1               1               1               2
383.....................................            1178          4.1061               1               2               3               5               8
384.....................................             126          2.7619               1               1               2               3               5
385.....................................               2          2.5000               1               1               4               4               4
389.....................................              12          7.6667               1               2               7              10              15
390.....................................              11          4.8182               1               1               3               4               8
391.....................................               1          4.0000               4               4               4               4               4
392.....................................            2421         13.2978               5               6              10              16              26
393.....................................               1          3.0000               3               3               3               3               3
394.....................................            1845          9.3176               1               2               6              11              20
395.....................................           66925          6.0837               1               3               4               7              12
396.....................................              14          2.0714               1               1               1               4               5
397.....................................           13735          6.9771               2               3               5               9              14
398.....................................           16149          7.4775               3               4               6               9              14
399.....................................            1442          4.7961               1               2               4               6               9
400.....................................            8087         11.8312               2               4               8              15              26
401.....................................            6407         13.6969               3               5              10              17              29
402.....................................            1880          4.7899               1               2               3               6              10
403.....................................           31756         10.7486               2               4               8              14              22
404.....................................            4324          5.1859               1               2               4               7              10
406.....................................            3656         13.0126               3               6               9              16              26
407.....................................             816          5.3223               1               2               4               7              10
408.....................................            3620          8.5298               1               2               5              10              20
409.....................................            6885          7.9063               2               4               5               8              17
410.....................................          115896          3.4291               1               2               3               4               6
411.....................................              89          3.7079               1               1               3               4               6
412.....................................              87          3.2299               1               1               2               4               6
413.....................................            8628          9.9350               2               4               7              12              20
414.....................................            1111          5.4851               1               2               4               7              11
415.....................................           34634         18.7088               5               8              14              23              37
416.....................................          165302          9.5625               2               5               8              12              18
417.....................................              34          7.5294               2               3               5               7              17
418.....................................           15792          7.7252               3               4               6               9              14
419.....................................           16751          6.7324               2               3               5               8              12
420.....................................            3070          4.9896               2               3               4               6               9
421.....................................           13327          5.2403               2               3               4               6              10
422.....................................              92          4.3261               1               2               3               5               8
423.....................................            8045         10.0675               3               4               7              12              20
424.....................................            2342         23.0478               3               8              15              26              46
425.....................................           17532          5.9067               1               2               4               7              12
426.....................................            5260          6.6293               2               3               5               8              13
427.....................................            1916          6.4541               1               2               4               8              13
428.....................................            1022          9.3875               1               3               6              11              20
429.....................................           32989         10.9768               2               4               7              12              21
430.....................................           55906         11.5219               2               5               8              15              23
431.....................................             185          7.6595               2               3               5               9              17
432.....................................             473          7.4038               1               3               5               9              16
433.....................................            6970          4.1164               1               1               3               5               9
434.....................................           19096          6.8571               2               3               5               8              13
435.....................................           13108          5.5738               1               3               4               6              11
436.....................................            2435         17.0119               5              10              16              24              28
437.....................................           12492         13.5556               5               8              12              18              25
439.....................................             862          9.5186               1               3               6              12              21
440.....................................            4409         11.5321               2               4               7              14              25
441.....................................             660          3.8167               1               1               2               4               7
442.....................................           12872          9.6969               1               3               6              12              20
443.....................................            4362          3.3304               1               1               2               4               7
444.....................................            3259          6.5170               2               3               5               8              12
445.....................................            1547          4.1261               1               2               3               5               8
447.....................................            3349          3.1400               1               1               2               4               6
448.....................................               1          2.0000               2               2               2               2               2
449.....................................           28599          5.3042               1               2               4               6              11
450.....................................            6390          2.7858               1               1               2               3               5
451.....................................               6          2.0000               1               1               1               3               3
452.....................................           18951          5.8673               1               2               4               7              12
453.....................................            4193          3.4226               1               2               2               4               7
454.....................................            4519          6.5499               1               2               4               7              14
455.....................................            1093          3.6075               1               1               2               4               7
456.....................................             180         10.2056               1               2               5              12              25
457.....................................             126          5.6032               1               1               3               8              13
458.....................................            1603         19.8047               5               9              15              25              39
459.....................................             573         12.2792               3               5               9              15              27
460.....................................            2269          8.3486               2               3               6              10              16
461.....................................            4302          5.4547               1               1               2               4              14
462.....................................           10139         16.5278               6               8              14              21              30
463.....................................            9139          6.2674               2               3               5               7              12
464.....................................            2247          4.1081               1               2               3               5               8
465.....................................             313          3.1502               1               1               2               3               6
466.....................................            2816          5.3612               1               1               2               4               9
467.....................................            2945          5.0156               1               1               2               5               9
468.....................................           64052         17.6626               4               8              13              22              35
471.....................................            8311         11.2860               5               7               9              13              18
472.....................................             149         30.5101               2               8              21              39              63
473.....................................            8348         16.2351               2               4               9              25              39
475.....................................           80231         13.6842               2               6              11              18              27
476.....................................            8720         15.5812               5               9              13              19              27
477.....................................           35266          9.8103               1               3               7              12              20
478.....................................          111354          9.6146               2               4               7              12              20
479.....................................           16210          5.1031               1               2               4               7              10
480.....................................             269         33.8141              12              15              25              44              66
481.....................................             115         38.1304              21              26              35              43              58
482.....................................            7201         17.6463               6               8              13              20              34
483.....................................           35287         52.6801              17              27              42              64              97
484.....................................             296         20.1284               3               8              14              26              42
485.....................................            2791         14.4643               6               7              11              17              26
486.....................................            1960         16.8240               2               7              12              22              34
487.....................................            3242         10.1875               2               4               8              13              20
488.....................................             876         21.1039               6               9              15              25              39
489.....................................            9289         12.4757               3               5               8              15              25
490.....................................            3042          8.1190               2               3               5               9              16
491.....................................            8218          5.3304               2               3               4               6               9
492.....................................            1545         16.7851               3               5               8              27                
493.....................................           49835          6.2719               1               2               5               8              13
494.....................................           31647          2.3298               1               1               1               3               5
                                         ----------------                                                                                               
                                                10544650  ..............  ..............  ..............  ..............  ..............  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                   Table 7b.--Medicare Prospective Payment System Selected Percentile Lengths of Stay                                   
                                                        [FY93 Medpar Update 12/93 Grouper V12.0]                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Arithmetic         10th            25th            50th            75th            90th     
                  DRG                   Numberdischarges     mean LOS       percentile      percentile      percentile      percentile      percentile  
--------------------------------------------------------------------------------------------------------------------------------------------------------
001...................................            30373          13.5498               3               6              10              17              27
002...................................             5861          13.9686               4               6              10              17              27
003...................................                2          41.5000              17              17              66              66              66
004...................................             5387          11.0787               2               4               7              14              23
005...................................            64233           5.8124               2               3               4               7              11
006...................................              517           3.2128               1               1               2               4               7
007...................................             6847          17.1151               2               5              10              18              35
008...................................             2226           4.5022               1               1               3               5              10
009...................................             1605           9.2299               2               4               6              11              17
010...................................            20587           9.6795               2               4               7              12              20
011...................................             3219           5.5902               1               2               4               7              11
012...................................            21670           9.2853               2               4               6              11              17
013...................................             6125           7.5703               3               4               6               9              13
014...................................           353384           8.9247               2               4               7              11              17
015...................................           131428           5.0837               2               2               4               6               9
016...................................            11066           8.2622               2               4               6              10              15
017...................................             3630           4.7063               1               2               4               6               9
018...................................            18584           7.2969               2               3               6               9              14
019...................................             7122           4.8655               1               2               4               6               9
020...................................             7553          11.7304               3               5               9              15              23
021...................................             1026           8.7320               2               4               7              11              17
022...................................             3809           5.5547               2               3               4               7              10
023...................................             4708           5.8180               1               2               4               7              11
024...................................            55140           6.8617               2               3               5               8              13
025...................................            21162           4.2204               1               2               3               5               8
026...................................               40           4.3750               1               1               2               4               9
027...................................             2974           7.5790               1               1               4               9              17
028...................................             8995           8.4404               2               3               6              10              18
029...................................             3289           4.6722               1               2               3               6               9
031...................................             3616           5.8462               1               2               4               7              12
032...................................             2071           3.4843               1               1               2               4               7
034...................................            14911           7.7272               2               3               5               9              15
035...................................             3437           4.9674               1               2               4               6               9
036...................................            16091           1.8704               1               1               1               2               3
037...................................             2305           4.0638               1               1               3               5               8
038...................................              477           2.7317               1               1               2               3               5
039...................................             5224           2.0312               1               1               1               2               4
040...................................             2126           3.6350               1               1               2               4               8
042...................................            13425           2.3924               1               1               1               3               5
043...................................              145           4.2552               1               2               3               5               8
044...................................             1684           6.0653               2               3               5               8              11
045...................................             2423           4.3120               1               2               4               6               8
046...................................             2944           6.1695               1               3               5               7              12
047...................................             1480           3.8770               1               2               3               5               8
049...................................             2255           6.9929               2               3               5               8              13
050...................................             4034           2.3406               1               1               2               3               4
051...................................              409           3.0831               1               1               2               3               6
052...................................               97           3.3402               1               1               2               4               7
053...................................             4556           3.5435               1               1               2               4               8
054...................................                1           1.0000               1               1               1               1               1
055...................................             2531           3.0217               1               1               1               3               7
056...................................              826           3.1695               1               1               2               4               7
057...................................              617           5.3485               1               2               3               6              11
059...................................              124           2.3468               1               1               1               2               4
060...................................                2           2.5000               2               2               3               3               3
061...................................              297           5.2256               1               1               2               7              12
063...................................             4419           5.3220               1               2               3               6              10
064...................................             3707           8.3663               1               2               5              10              18
065...................................            34105           3.8732               1               2               3               5               7
066...................................             7569           4.0285               1               2               3               5               7
067...................................              458           4.7576               2               3               4               6               9
068...................................            12495           5.4854               2               3               4               7              10
069...................................             3688           4.2573               2               2               4               5               7
070...................................               35           4.2571               1               2               4               5               8
071...................................              138           4.2174               2               2               3               5               8
072...................................              600           4.3200               1               2               3               5               8
073...................................             6282           5.6492               1               2               4               7              11
075...................................            36514          12.6075               5               7               9              15              24
076...................................            38214          14.1313               3               6              11              17              27
077...................................             2808           5.9822               1               2               4               8              13
078...................................            26921           9.2896               4               6               8              11              15
079...................................           174836          10.7988               3               5               8              13              20
080...................................             8572           7.4425               3               4               6               9              13
081...................................               10           7.0000               1               4               6              10              13
082...................................            68268           8.9293               2               4               7              11              18
083...................................             7079           7.4091               2               3               6               9              14
084...................................             1576           4.3331               1               2               3               5               8
085...................................            17127           8.2495               2               4               7              10              16
086...................................             1510           4.9192               1               2               4               6              10
087...................................            51460           7.5282               1               3               6              10              14
088...................................           332295           7.0044               3               4               6               8              12
089...................................           410720           8.0987               3               4               7              10              14
090...................................            40769           5.7490               2               3               5               7              10
091...................................               38           4.2105               2               3               4               4               7
092...................................            10341           8.1339               3               4               6              10              15
093...................................             1377           5.9092               2               3               5               7              11
094...................................             9789           8.6530               3               4               7              11              17
095...................................             1095           4.9726               2               3               4               6               9
096...................................            78494           6.3363               2               4               5               8              11
097...................................            28088           4.8754               2               3               4               6               8
098...................................               29           4.1034               1               2               3               4               7
099...................................            27359           4.2464               1               2               3               5               8
100...................................            10912           2.8235               1               1               2               3               5
101...................................            18549           6.3481               2               3               5               8              12
102...................................             3083           4.0642               1               2               3               5               8
103...................................              348          35.3218               9              14              22              43              77
104...................................            20448          18.0558               8              11              15              22              31
105...................................            17984          13.3331               7               8              10              15              23
106...................................            85552          13.8702               7               9              12              16              22
107...................................            56763          10.6400               6               7               9              12              17
108...................................             6318          14.6399               5               8              12              18              27
110...................................            55626          12.2737               3               7              10              15              23
111...................................             5508           7.5882               3               6               7               9              11
112...................................           165207           5.3375               1               2               4               7              11
113...................................            41056          17.3678               5               8              13              21              35
114...................................             8732          11.0470               3               5               8              14              22
115...................................             9395          12.7986               5               7              11              16              23
116...................................            73442           6.5117               2               3               5               8              13
117...................................             3705           4.9970               1               2               3               6              10
118...................................             7591           3.5381               1               1               2               4               8
119...................................             2413           5.7791               1               1               3               7              14
120...................................            39194          10.8284               1               3               7              14              24
121...................................           159547           8.7209               3               5               7              11              15
122...................................            94506           6.0345               2               3               6               8              10
123...................................            53142           5.0944               1               1               3               6              12
124...................................           133965           5.5625               1               2               4               7              11
125...................................            68339           3.2111               1               1               2               4               7
126...................................             4359          18.2292               5               8              14              25              38
127...................................           679158           7.1974               2               4               6               9              14
128...................................            22137           7.6946               4               5               7               9              12
129...................................             5385           3.8375               1               1               1               4              10
130...................................            78977           7.5326               2               4               6               9              13
131...................................            24242           5.6644               1               3               5               7               9
132...................................            16994           4.8000               1               2               4               6               9
133...................................             3780           3.5124               1               2               3               4               6
134...................................            30568           4.4913               1               2               3               5               8
135...................................             6195           5.9711               2               3               4               7              11
136...................................             1205           3.8556               1               2               3               5               7
138...................................           196966           5.3070               2               2               4               6              10
139...................................            67986           3.3770               1               2               3               4               6
140...................................           318042           4.0906               1               2               3               5               7
141...................................            76022           5.2772               2               2               4               6              10
142...................................            35107           3.6827               1               2               3               4               7
143...................................           133200           3.0817               1               2               2               4               6
144...................................            60798           6.5142               1               3               5               8              13
145...................................             7253           3.7740               1               2               3               5               7
146...................................             8127          12.3116               6               8              10              14              20
147...................................             1471           7.9844               4               6               8               9              11
148...................................           145108          14.9089               7               8              12              17              27
149...................................            14666           8.3034               5               6               8               9              12
150...................................            22651          12.8981               5               7              11              15              23
151...................................             4308           6.8271               2               4               6               9              12
152...................................             4894           9.8733               4               6               8              11              16
153...................................             1760           6.7545               3               5               6               8              10
154...................................            36532          17.1556               6               9              13              21              33
155...................................             3705           7.3665               3               4               7               9              12
156...................................                4          11.5000               2               2               9              13              22
157...................................            12499           6.3625               2               3               4               8              13
158...................................             7092           3.0451               1               1               2               4               6
159...................................            17371           5.7938               2               3               4               7              11
160...................................            10912           3.1574               1               2               3               4               6
161...................................            18202           4.8049               1               2               3               6              10
162...................................            11663           2.2115               1               1               2               3               4
163...................................               16           4.7500               2               2               3               6               8
164...................................             4964          10.3342               5               6               9              12              17
165...................................             1512           6.2890               3               4               6               8              10
166...................................             3190           6.4994               2               3               5               8              12
167...................................             2206           3.7040               2               2               3               5               6
168...................................             1851           5.6018               1               2               3               7              12
169...................................             1185           2.6962               1               1               2               3               6
170...................................            12853          14.7068               3               6              10              18              30
171...................................             1199           5.8507               1               3               5               8              11
172...................................            30862           9.4698               2               4               7              12              19
173...................................             2449           4.6991               1               2               3               6               9
174...................................           225891           6.3539               2               3               5               8              12
175...................................            25401           3.9307               2               2               3               5               7
176...................................            14812           7.0485               2               3               5               8              13
177...................................            12916           5.6722               2               3               5               7              10
178...................................             4944           3.9606               2               2               3               5               7
179...................................             9686           8.3931               3               4               6              10              16
180...................................            77950           6.9772               2               3               5               8              13
181...................................            20494           4.2234               1               2               4               5               7
182...................................           231480           5.7533               2               3               4               7              11
183...................................            71521           3.8393               1               2               3               5               7
184...................................               67           3.8358               1               2               3               4               5
185...................................             3615           5.9422               1               2               4               7              12
186...................................                5           4.0000               1               1               3               6               8
187...................................              860           3.8558               1               1               3               5               8
188...................................            53223           6.9469               2               3               5               8              14
189...................................             7789           3.7621               1               1               3               5               8
190...................................               54           4.4074               1               2               3               4               6
191...................................            10304          18.2203               6               8              14              22              35
192...................................              820           8.8305               2               5               8              11              16
193...................................            10321          15.8257               6               9              13              19              28
194...................................              904           9.1040               3               5               8              11              16
195...................................            12380          11.7961               5               7              10              14              20
196...................................             1026           7.3899               4               5               7               9              12
197...................................            33963           9.9541               4               6               8              12              17
198...................................            10346           5.2905               2               3               5               7               9
199...................................             2660          13.3534               4               6              10              17              26
200...................................             1683          13.2133               2               5              10              17              28
201...................................             1677          17.0030               4               7              12              22              35
202...................................            20872           8.7625               2               4               7              11              17
203...................................            29280           8.8699               2               4               7              11              18
204...................................            44310           7.5089               2               4               6               9              14
205...................................            21520           8.4757               2               4               6              10              17
206...................................             1779           4.6549               1               2               4               6               9
207...................................            36615           6.5464               2               3               5               8              12
208...................................            11419           3.6754               1               2               3               5               7
209...................................           303651           8.7652               5               6               8              10              13
210...................................           129230          10.9177               5               6               9              12              18
211...................................            25020           7.9683               4               5               7               9              12
212...................................               10           3.8000               1               3               4               5               5
213...................................             6329          11.6949               3               5               8              14              23
214...................................            48908           8.3508               3               4               6              10              15
215...................................            39409           4.7896               2               3               4               6               8
216...................................             6597          13.2759               3               6              10              17              26
217...................................            17833          18.9865               4               7              13              23              40
218...................................            21393           7.6410               2               4               6               9              14
219...................................            18645           4.4635               2               2               4               5               8
220...................................                5           6.2000               2               2               6               7              10
221...................................             4727           9.4007               2               4               7              11              19
222...................................             3985           4.6979               1               2               4               6               9
223...................................            18602           3.3396               1               2               2               4               6
224...................................             8372           2.6646               1               1               2               3               5
225...................................             7483           5.2232               1               2               3               6              12
226...................................             5574           7.8281               2               3               5               9              17
227...................................             5634           3.2157               1               1               2               4               6
228...................................             3492           3.6904               1               1               2               4               8
229...................................             1775           2.5228               1               1               2               3               5
230...................................             2838           5.8439               1               2               3               7              12
231...................................            10537           5.6445               1               2               3               7              13
232...................................              775           5.9277               1               1               3               6              16
233...................................             4860          10.7298               2               4               8              13              22
234...................................             2420           4.8157               1               2               4               6              10
235...................................             6120           8.9845               2               3               6              10              18
236...................................            38386           7.8166               2               3               6               9              15
237...................................             1605           5.3234               1               2               4               6              10
238...................................             6734          12.7251               3               6               9              15              26
239...................................            60904           9.1849               3               4               7              11              18
240...................................            11208           8.9697               2               4               7              11              17
241...................................             3260           5.2215               1               3               4               6              10
242...................................             2281           9.4638               3               4               7              11              18
243...................................            88697           6.5167               2               3               5               8              12
244...................................            11351           6.8297               2               3               5               8              13
245...................................             4564           4.9634               1               2               3               6               9
246...................................             1431           4.8595               2               2               4               6               9
247...................................             9989           4.6786               1               2               3               6               9
248...................................             6510           6.0246               2               3               4               7              11
249...................................             9415           5.2349               1               2               3               6              11
250...................................             3290           6.1280               1               2               4               7              12
251...................................             2507           3.5548               1               1               2               4               7
252...................................                2           6.0000               2               2              10              10              10
253...................................            17261           7.2853               2               3               5               8              14
254...................................            10298           4.4081               1               2               3               5               8
255...................................                1          10.0000              10              10              10              10              10
256...................................             9475           4.7850               1               2               3               6               9
257...................................            26630           4.2972               2               2               3               5               7
258...................................            21946           3.1009               1               2               3               4               5
259...................................             4351           4.3691               1               2               2               4               9
260...................................             5570           2.2197               1               1               2               3               4
261...................................             2585           2.5455               1               1               2               3               4
262...................................              868           3.9124               1               1               2               5               8
263...................................            30392          17.7629               5               7              12              21              36
264...................................             3875           9.7752               3               4               7              12              20
265...................................             4819           8.6777               1               3               6              10              18
266...................................             3324           4.0884               1               1               3               5               8
267...................................              232           4.1595               1               1               2               5              10
268...................................             1219           4.2231               1               1               2               5               9
269...................................            11374          11.0770               2               4               8              14              23
270...................................             4423           3.6878               1               1               2               4               8
271...................................            20737          10.3003               3               5               8              12              19
272...................................             6755           8.3843               3               4               6              10              16
273...................................             1752           6.0736               2               3               5               7              12
274...................................             2582           9.1971               2               3               6              11              18
275...................................              251           4.0956               1               1               2               5               9
276...................................              859           5.7334               1               2               4               7              10
277...................................            74776           7.8329               3               4               6               9              14
278...................................            26182           5.7631               2               3               5               7              10
279...................................               10           4.3000               1               3               4               6               7
280...................................            13247           6.0380               1               3               4               7              11
281...................................             6270           4.0675               1               2               3               5               8
282...................................                1           1.0000               1               1               1               1               1
283...................................             5395           6.5520               2               3               5               8              13
284...................................             1960           4.4112               1               2               3               5               8
285...................................             4930          17.6406               4               8              13              21              34
286...................................             1891           9.7324               4               5               7              11              18
287...................................             6466          16.6157               4               7              11              19              33
288...................................              653           8.3629               3               4               6               8              15
289...................................             4563           4.9001               1               2               3               4              10
290...................................             9202           3.1564               1               2               2               3               5
291...................................              111           1.9730               1               1               1               2               4
292...................................             5170          15.1474               3               6              11              19              31
293...................................              395           6.8557               1               2               5               9              14
294...................................            80666           6.7243               2               3               5               8              12
295...................................             3224           5.4100               2               2               4               6              10
296...................................           227107           7.5655               2               3               5               9              15
297...................................            40135           4.8183               2               2               4               6               9
298...................................               81           4.2963               1               1               2               4              10
299...................................              905           6.3901               1               2               4               8              13
300...................................            12698           8.5099               2               4               6              10              16
301...................................             1891           4.9804               1               2               4               6              10
302...................................             6980          14.9606               7               9              12              18              26
303...................................            18216          11.8073               5               7               9              14              21
304...................................            13382          11.8629               3               5               9              14              23
305...................................             2692           5.6118               2               3               5               7              10
306...................................            11838           7.5201               2               3               5              10              15
307...................................             3299           3.7014               1               2               3               4               6
308...................................             9917           8.2603               2               3               6              10              17
309...................................             3783           3.4335               1               2               3               4               7
310...................................            32915           5.1680               1               2               3               6              10
311...................................            14111           2.5038               1               1               2               3               5
312...................................             2543           5.3917               1               2               4               7              11
313...................................             1154           2.6023               1               1               2               3               5
314...................................                1           8.0000               8               8               8               8               8
315...................................            29182          10.9542               1               3               7              14              24
316...................................            57588           8.4956               2               3               6              11              17
317...................................              690           4.3174               1               2               3               4               8
318...................................             6220           8.2323               2               3               6              10              17
319...................................              544           3.2831               1               1               2               4               7
320...................................           168207           7.5966               3               4               6               9              14
321...................................            26158           5.3687               2               3               4               6               9
322...................................               72           4.5833               2               2               4               5               9
323...................................            19232           4.0182               1               2               3               5               8
324...................................            10858           2.3119               1               1               2               3               4
325...................................             8572           5.3898               1               2               4               6              10
326...................................             2823           3.4307               1               2               3               4               7
327...................................                3           3.0000               1               1               4               4               4
328...................................             1023           5.0205               1               2               4               6              10
329...................................              197           2.6701               1               1               2               3               5
331...................................            33508           7.1297               2               3               5               9              14
332...................................             4698           4.1350               1               2               3               5               8
333...................................              299           7.0368               1               3               5              10              15
334...................................            28600           7.6310               4               5               7               8              11
335...................................            12704           6.0778               4               5               6               7               9
336...................................            81940           4.9549               2               3               4               6               9
337...................................            58596           3.3036               2               2               3               4               5
338...................................             8839           5.8370               1               2               4               7              13
339...................................             3107           4.7023               1               2               3               5              10
340...................................                3           2.3333               1               1               2               4               4
341...................................             9209           4.0488               1               2               3               4               7
342...................................              307           4.1564               1               1               2               5              10
344...................................             6604           3.8139               1               1               3               4               7
345...................................             1808           4.8623               1               2               3               6              10
346...................................             6645           7.7943               2               3               5               9              16
347...................................              554           3.7365               1               1               3               5               8
348...................................             3661           5.1478               1               2               4               6              10
349...................................             1010           3.3426               1               1               2               4               6
350...................................             7431           5.5438               2               3               5               7              10
352...................................              756           4.6019               1               2               3               6               9
353...................................             2445          10.1877               4               5               8              12              19
354...................................             9943           7.2639               3               4               6               8              12
355...................................             5537           4.3150               3               3               4               5               6
356...................................            34772           3.7010               2               2               3               4               6
357...................................             6736          11.1651               4               6               9              13              21
358...................................            26416           5.5984               3               4               4               6               9
359...................................            26404           3.7891               2               3               4               4               5
360...................................             9475           4.5882               2               3               3               5               8
361...................................              511           5.0431               1               2               3               5              11
362...................................                3           1.3333               1               1               1               2               2
363...................................             5120           3.9785               1               2               3               4               7
364...................................             2078           3.7671               1               1               2               5               8
365...................................             2643           9.4813               2               3               6              12              20
366...................................             4656           9.1016               2               3               6              11              19
367...................................              625           3.3776               1               1               2               4               7
368...................................             1750           7.3937               2               4               6               9              15
369...................................             2330           4.0159               1               1               3               5               8
370...................................              857           6.1680               3               3               4               6              10
371...................................              864           3.9699               3               3               3               4               5
372...................................              586           3.5256               1               2               3               4               6
373...................................             3116           2.2073               1               1               2               2               3
374...................................              120           3.2167               1               2               2               3               5
375...................................                4          51.5000               2               2               3              11             190
376...................................              173           3.3410               1               2               2               3               7
377...................................               32           5.7813               1               1               3              10              13
378...................................              137           3.0438               1               2               3               4               5
379...................................              338           2.8639               1               1               2               3               6
380...................................               67           2.1045               1               1               1               3               4
381...................................              225           2.6578               1               1               1               3               5
382...................................               48           1.4167               1               1               1               1               2
383...................................             1178           4.1061               1               2               3               5               8
384...................................              126           2.7619               1               1               2               3               5
385...................................                2           2.5000               1               1               4               4               4
389...................................               12           7.6667               1               2               7              10              15
390...................................               11           4.8182               1               1               3               4               8
391...................................                1           4.0000               4               4               4               4               4
392...................................             2421          13.2978               5               6              10              16              26
393...................................                1           3.0000               3               3               3               3               3
394...................................             1845           9.3176               1               2               6              11              20
395...................................            66925           6.0837               1               3               4               7              12
396...................................               14           2.0714               1               1               1               4               5
397...................................            13735           6.9771               2               3               5               9              14
398...................................            16149           7.4775               3               4               6               9              14
399...................................             1442           4.7961               1               2               4               6               9
400...................................             8087          11.8312               2               4               8              15              26
401...................................             6407          13.6969               3               5              10              17              29
402...................................             1880           4.7899               1               2               3               6              10
403...................................            31756          10.7486               2               4               8              14              22
404...................................             4324           5.1859               1               2               4               7              10
406...................................             3656          13.0126               3               6               9              16              26
407...................................              816           5.3223               1               2               4               7              10
408...................................             3620           8.5298               1               2               5              10              20
409...................................             6885           7.9063               2               4               5               8              17
410...................................           115896           3.4291               1               2               3               4               6
411...................................               89           3.7079               1               1               3               4               6
412...................................               87           3.2299               1               1               2               4               6
413...................................             8628           9.9350               2               4               7              12              20
414...................................             1111           5.4851               1               2               4               7              11
415...................................            34634          18.7088               5               8              14              23              37
416...................................           165302           9.5625               2               5               8              12              18
417...................................               34           7.5294               2               3               5               7              17
418...................................            15792           7.7252               3               4               6               9              14
419...................................            16751           6.7324               2               3               5               8              12
420...................................             3070           4.9896               2               3               4               6               9
421...................................            13327           5.2403               2               3               4               6              10
422...................................               92           4.3261               1               2               3               5               8
423...................................             8045          10.0675               3               4               7              12              20
424...................................             2342          23.0478               3               8              15              26              46
425...................................            17532           5.9067               1               2               4               7              12
426...................................             5260           6.6293               2               3               5               8              13
427...................................             1916           6.4541               1               2               4               8              13
428...................................             1022           9.3875               1               3               6              11              20
429...................................            32989          10.9768               2               4               7              12              21
430...................................            55906          11.5219               2               5               8              15              23
431...................................              185           7.6595               2               3               5               9              17
432...................................              473           7.4038               1               3               5               9              16
433...................................             6970           4.1164               1               1               3               5               9
434...................................            19096           6.8571               2               3               5               8              13
435...................................            13108           5.5738               1               3               4               6              11
436...................................             2435          17.0119               5              10              16              24              28
437...................................            12492          13.5556               5               8              12              18              25
439...................................              862           9.5186               1               3               6              12              21
440...................................             4409          11.5321               2               4               7              14              25
441...................................              660           3.8167               1               1               2               4               7
442...................................            12872           9.6969               1               3               6              12              20
443...................................             4362           3.3304               1               1               2               4               7
444...................................             3259           6.5170               2               3               5               8              12
445...................................             1547           4.1261               1               2               3               5               8
447...................................             3349           3.1400               1               1               2               4               6
448...................................                1           2.0000               2               2               2               2               2
449...................................            28599           5.3042               1               2               4               6              11
450...................................             6390           2.7858               1               1               2               3               5
451...................................                6           2.0000               1               1               1               3               3
452...................................            18951           5.8673               1               2               4               7              12
453...................................             4193           3.4226               1               2               2               4               7
454...................................             4519           6.5499               1               2               4               7              14
455...................................             1093           3.6075               1               1               2               4               7
456...................................              180          10.2056               1               2               5              12              25
457...................................              126           5.6032               1               1               3               8              13
458...................................             1603          19.8047               5               9              15              25              39
459...................................              573          12.2792               3               5               9              15              27
460...................................             2269           8.3486               2               3               6              10              16
461...................................             4302           5.4547               1               1               2               4              14
462...................................            10139          16.5278               6               8              14              21              30
463...................................             9139           6.2674               2               3               5               7              12
464...................................             2247           4.1081               1               2               3               5               8
465...................................              313           3.1502               1               1               2               3               6
466...................................             2816           5.3612               1               1               2               4               9
467...................................             2945           5.0156               1               1               2               5               9
468...................................            61688          17.8246               4               8              14              22              35
471...................................             8311          11.2860               5               7               9              13              18
472...................................              149          30.5101               2               8              21              39              63
473...................................             8348          16.2351               2               4               9              25              39
475...................................            80231          13.6842               2               6              11              18              27
476...................................             8720          15.5812               5               9              13              19              27
477...................................            35078           9.8071               1               3               7              12              20
478...................................           111354           9.6146               2               4               7              12              20
479...................................            16210           5.1031               1               2               4               7              10
480...................................              269          33.8141              12              15              25              44              66
481...................................              115          38.1304              21              26              35              43              58
482...................................             7201          17.6463               6               8              13              20              34
483...................................            35287          52.6801              17              27              42              64              97
484...................................              296          20.1284               3               8              14              26              42
485...................................             2791          14.4643               6               7              11              17              26
486...................................             1960          16.8240               2               7              12              22              34
487...................................             3242          10.1875               2               4               8              13              20
488...................................              876          21.1039               6               9              15              25              39
489...................................             9289          12.4757               3               5               8              15              25
490...................................             3042           8.1190               2               3               5               9              16
491...................................             8218           5.3304               2               3               4               6               9
492...................................             1545          16.7851               3               5               8              27              37
493...................................            49835           6.2719               1               2               5               8              13
494...................................            31647           2.3298               1               1               1               3               5
                                       ------------------                                                                                               
                                               10544652                                                                                                 
--------------------------------------------------------------------------------------------------------------------------------------------------------


 Table 8a.--Statewide Average Operating Cost-To-Charge Ratios for Urban 
             and Rural Hospitals (Case Weighted) April 1994             
------------------------------------------------------------------------
                         State                           Urban    Rural 
------------------------------------------------------------------------
ALABAMA...............................................    0.447    0.518
ALASKA................................................    0.515    0.801
ARIZONA...............................................    0.484    0.637
ARKANSAS..............................................    0.585    0.516
CALIFORNIA............................................    0.458    0.566
COLORADO..............................................    0.549    0.619
CONNECTICUT...........................................    0.574    0.596
DELAWARE..............................................    0.603    0.527
DISTRICT OF COLUMBIA..................................    0.533         
FLORIDA...............................................    0.462    0.464
GEORGIA...............................................    0.555    0.553
HAWAII................................................    0.547    0.632
IDAHO.................................................    0.599    0.667
ILLINOIS..............................................    0.537    0.613
INDIANA...............................................    0.615    0.677
IOWA..................................................    0.573    0.741
KANSAS................................................    0.549    0.702
KENTUCKY..............................................    0.541    0.573
LOUISIANA.............................................    0.506    0.561
MAINE.................................................    0.688    0.605
MARYLAND..............................................    0.764    0.807
MASSACHUSETTS.........................................    0.702    0.602
MICHIGAN..............................................    0.546    0.668
MINNESOTA.............................................    0.597    0.686
MISSISSIPPI...........................................    0.578    0.547
MISSOURI..............................................    0.498    0.555
MONTANA...............................................    0.553    0.659
NEBRASKA..............................................    0.559    0.711
NEVADA................................................    0.423    0.521
NEW HAMPSHIRE.........................................    0.610    0.644
NEW JERSEY............................................    0.691         
NEW MEXICO............................................    0.549    0.556
NEW YORK..............................................    0.635    0.730
NORTH CAROLINA........................................    0.579    0.536
NORTH DAKOTA..........................................    0.660    0.693
OHIO..................................................    0.616    0.656
OKLAHOMA..............................................    0.529    0.583
OREGON................................................    0.601    0.663
PENNSYLVANIA..........................................    0.469    0.598
PUERTO RICO...........................................    0.554    0.876
RHODE ISLAND..........................................    0.606         
SOUTH CAROLINA........................................    0.537    0.537
SOUTH DAKOTA..........................................    0.569    0.653
TENNESSEE.............................................    0.545    0.568
TEXAS.................................................    0.509    0.609
UTAH..................................................    0.596    0.655
VERMONT...............................................    0.619    0.616
VIRGINIA..............................................    0.553    0.575
WASHINGTON............................................    0.663    0.759
WEST VIRGINIA.........................................    0.585    0.528
WISCONSIN.............................................    0.655    0.705
WYOMING...............................................    0.616    0.760
------------------------------------------------------------------------


    Table 8b.--Statewide Average Capital Cost-To-Charge Ratios (Case    
                          Weighted) April 1994                          
------------------------------------------------------------------------
                             State                                Ratio 
------------------------------------------------------------------------
ALABAMA........................................................    0.059
ALASKA.........................................................    0.093
ARIZONA........................................................    0.063
ARKANSAS.......................................................    0.050
CALIFORNIA.....................................................    0.045
COLORADO.......................................................    0.055
CONNECTICUT....................................................    0.046
DELAWARE.......................................................    0.055
DISTRICT OF COLUMBIA...........................................    0.043
FLORIDA........................................................    0.059
GEORGIA........................................................    0.050
HAWAII.........................................................    0.056
IDAHO..........................................................    0.074
ILLINOIS.......................................................    0.049
INDIANA........................................................    0.065
IOWA...........................................................    0.060
KANSAS.........................................................    0.067
KENTUCKY.......................................................    0.055
LOUISIANA......................................................    0.076
MAINE..........................................................    0.043
MASSACHUSETTS..................................................    0.065
MICHIGAN.......................................................    0.060
MINNESOTA......................................................    0.056
MISSISSIPPI....................................................    0.057
MISSOURI.......................................................    0.058
MONTANA........................................................    0.073
NEBRASKA.......................................................    0.060
NEVADA.........................................................    0.036
NEW HAMPSHIRE..................................................    0.064
NEW JERSEY.....................................................    0.058
NEW MEXICO.....................................................    0.062
NEW YORK.......................................................    0.062
NORTH CAROLINA.................................................    0.050
NORTH DAKOTA...................................................    0.073
OHIO...........................................................    0.063
OKLAHOMA.......................................................    0.062
OREGON.........................................................    0.054
PENNSYLVANIA...................................................    0.050
PUERTO RICO....................................................    0.090
RHODE ISLAND...................................................    0.027
SOUTH CAROLINA.................................................    0.068
SOUTH DAKOTA...................................................    0.068
TENNESSEE......................................................    0.061
TEXAS..........................................................    0.065
UTAH...........................................................    0.052
VERMONT........................................................    0.052
VIRGINIA.......................................................    0.064
WASHINGTON.....................................................    0.072
WEST VIRGINIA..................................................    0.058
WISCONSIN......................................................    0.048
WYOMING........................................................    0.075
------------------------------------------------------------------------


 Table 9.--1993 Transfer Adjusted Case Mix Index and Transfer Adjustment
    to Discharges for Capital Hospital-Specific Rate Redeterminations   
------------------------------------------------------------------------
                                 Cost reporting     Transfer   Transfer 
                                     period         adjusted  adjustment
        Provider No.         ---------------------- case mix      to    
                                Begin       End       index   discharges
------------------------------------------------------------------------
010006......................   07/01/92   06/30/93    1.3887     0.9953 
010011......................   07/01/92   06/30/93    1.4491     0.9986 
010012......................   07/01/92   06/30/93    1.3102     0.9590 
010015......................   04/01/92   04/01/93    1.0044     0.9386 
010018......................   07/01/92   06/30/93    0.8498     0.9956 
010022......................   07/01/92   06/30/93    0.9653     0.9655 
010023......................   07/01/92   06/30/93    1.3674     0.9923 
010024......................   07/01/92   06/30/93    1.3014     0.9908 
010025......................   07/01/92   06/30/93    1.2180     0.9727 
010031......................   07/01/92   06/30/93    1.2311     0.9952 
010034......................   07/01/92   06/30/93    1.0516     0.9721 
010036......................   04/01/92   03/31/93    1.1597     0.9715 
010038......................   07/01/92   06/30/93    1.2305     0.9861 
010039......................   07/01/92   06/30/93    1.6295     0.9982 
010050......................   07/01/92   06/30/93    0.9415     0.9667 
010054......................   07/01/92   06/30/93    1.2386     0.9738 
010055......................   06/01/92   06/30/93    1.3649     0.9986 
010056......................   07/01/92   06/30/93    1.3739     0.9986 
010058......................   07/01/92   06/30/93    1.0171     0.9494 
010064......................   07/01/92   06/30/93    1.7873     0.9987 
010066......................   07/01/92   06/30/93    0.9014     0.9384 
010068......................   07/01/92   06/30/93    1.2743     0.9755 
010072......................   07/01/92   06/30/93    1.1717     0.9653 
010078......................   07/01/92   06/30/93    1.2109     0.9900 
010080......................   04/01/92   03/31/93    1.0051     0.9715 
010085......................   07/01/92   06/30/93    1.2290     0.9756 
010086......................   07/01/92   06/30/93    1.0039     0.9665 
010089......................   07/01/92   06/30/93    1.1344     0.9836 
010090......................   07/01/92   06/30/93    1.5855     0.9987 
010091......................   07/01/92   06/30/93    0.9824     0.9367 
010098......................   07/01/92   06/30/93    0.9434     0.9763 
010101......................   07/01/92   06/30/93    1.0809     0.9737 
010103......................   07/01/92   06/30/93    1.6520     0.9994 
010104......................   07/01/92   06/30/93    1.5769     0.9988 
010113......................   04/01/92   03/31/93    1.6265     0.9990 
010114......................   07/01/92   06/30/93    1.2621     0.9827 
010118......................   07/01/92   06/30/93    1.2150     0.9772 
010121......................   07/01/92   06/30/93    1.1506     0.9790 
010128......................   07/01/92   06/30/93    0.9296     0.9451 
010131......................   07/01/92   06/30/93    1.2393     0.9827 
010134......................   04/01/92   03/31/93    0.8266     0.9450 
010136......................   05/01/92   04/30/93    0.9613     1.0000 
010138......................   07/01/92   06/30/93    0.9694     0.9343 
010148......................   07/01/92   06/30/93    0.9598     0.9457 
010150......................   04/01/92   03/31/93    1.0504     0.9834 
020002......................   06/30/92   06/30/93    0.9910     0.9426 
020004......................   06/30/92   06/30/93    1.0881     0.9726 
020007......................   06/30/92   06/30/93    0.9008     0.8928 
020008......................   06/30/92   06/30/93    1.0836     0.9619 
020009......................   06/30/92   06/30/93    1.0013     0.9389 
020010......................   06/30/92   06/30/93    1.0549     1.0000 
020011......................   06/30/92   06/30/93    1.0259     0.8910 
020013......................   06/30/92   06/30/93    1.0187     0.9821 
020014......................   06/30/92   06/30/93    1.0401     0.9811 
020024......................   06/30/92   06/30/93    1.0609     0.9645 
030003......................   07/01/92   06/30/93    1.3932     0.9787 
030006......................   07/01/92   06/30/93    1.5915     0.9982 
030007......................   07/01/92   06/30/93    1.2449     0.9747 
030009......................   07/01/92   06/30/93    1.2010     0.9849 
030010......................   07/01/92   06/30/93    1.4099     0.9981 
030011......................   07/01/92   06/30/93    1.4530     0.9959 
030016......................   07/01/92   06/30/93    1.3142     0.9904 
030017......................   07/01/92   06/30/93    1.4177     0.9994 
030019......................   07/01/92   06/30/93    1.2348     0.9905 
030022......................   07/01/92   06/30/93    1.5141     0.9925 
030024......................   07/01/92   06/30/93    1.6643     0.9991 
030027......................   07/01/92   06/30/93    1.1036     0.9684 
030033......................   07/01/92   06/30/93    1.2370     0.9570 
030034......................   04/01/92   03/31/93    1.1662     0.9722 
030037......................   07/01/92   06/30/93    1.9171     0.9953 
030040......................   07/01/92   06/30/93    0.9815     0.9335 
030043......................   07/01/92   06/30/93    1.2198     0.9486 
030049......................   07/01/92   06/30/93    0.9968     0.9659 
030054......................   07/01/92   06/30/93    0.8844     0.9126 
030055......................   07/01/92   06/30/93    1.2598     0.9767 
030059......................   07/01/92   06/30/93    1.2755     0.9894 
030064......................   07/01/92   06/30/93    1.5156     0.9905 
040001......................   04/01/92   03/31/93    1.1441     0.9669 
040002......................   07/01/92   06/30/93    1.2325     0.9818 
040003......................   07/01/92   06/30/93    0.9818     0.9762 
040008......................   07/01/92   06/30/93    1.0941     0.9700 
040011......................   07/01/92   06/30/93    0.9698     0.9681 
040015......................   07/01/92   06/30/93    1.1194     0.9441 
040016......................   07/01/92   06/30/93    1.5806     0.9978 
040017......................   04/01/92   04/01/93    1.3143     0.9754 
040019......................   07/01/92   06/30/93    1.2152     0.9544 
040022......................   07/01/92   06/30/93    1.7959     0.9925 
040025......................   07/01/92   06/30/93    0.9581     0.9780 
040026......................   07/01/92   06/30/93    1.5925     0.9966 
040030......................   07/01/92   06/30/93    0.8883     0.9489 
040032......................   07/01/92   06/30/93    0.9579     0.9684 
040035......................   07/01/92   06/30/93    0.9364     0.9695 
040039......................   07/01/92   06/30/93    1.2626     0.9800 
040040......................   07/01/92   06/30/93    1.1053     0.9558 
040047......................   07/01/92   06/30/93    1.0086     0.9851 
040048......................   07/01/92   06/30/93    1.1903     0.9820 
040051......................   04/01/92   03/31/93    1.0813     0.9654 
040053......................   07/01/92   06/30/93    1.1473     0.9264 
040054......................   07/01/92   06/30/93    1.0399     0.9742 
040055......................   07/01/92   06/30/93    1.3618     0.9994 
040058......................   07/01/92   06/30/93    1.1303     0.9797 
040060......................   02/01/92   01/31/93    0.9352     0.9203 
040062......................   07/01/92   06/30/93    1.4976     0.9981 
040063......................   07/01/92   06/30/93    1.5569     0.9953 
040069......................   07/01/92   06/30/93    1.0296     0.9580 
040070......................   07/01/92   06/30/93    0.9996     0.9413 
040071......................   07/01/92   06/30/93    1.3957     0.9964 
040074......................   07/01/92   06/30/93    1.2156     0.9894 
040076......................   07/01/92   06/30/93    1.1169     0.9528 
040077......................   07/01/92   06/30/93    0.9376     0.9517 
040080......................   07/01/92   06/30/93    1.0356     0.9475 
040082......................   04/01/92   03/31/93    1.2767     0.9604 
040084......................   07/01/92   06/30/93    1.0897     0.9782 
040088......................   07/01/92   06/30/93    1.2869     0.9857 
040091......................   07/01/92   06/30/93    1.3335     0.9582 
040093......................   07/01/92   06/30/93    0.9728     0.9497 
040095......................   07/01/92   06/30/93    0.8456     0.9644 
040109......................   07/01/92   06/30/93    1.0851     0.9714 
040116......................   03/01/92   02/28/93    1.4142     0.9969 
040124......................   07/01/92   06/30/93    1.1749     0.9699 
040126......................   07/01/92   06/30/93    0.9786     0.9552 
050006......................   07/01/92   06/30/93    1.3219     0.9869 
050009......................   07/01/92   06/30/93    1.5026     0.9919 
050015......................   07/01/92   06/30/93    1.3137     0.9808 
050017......................   04/01/92   03/31/93    2.0390     0.9985 
050025......................   07/01/92   06/30/93    1.5989     0.9973 
050026......................   07/01/92   06/30/93    1.4759     0.9923 
050028......................   07/01/92   06/30/93    1.3235     0.9846 
050029......................   07/01/92   06/30/93    1.2636     0.9813 
050033......................   07/01/92   06/30/93    1.4640     0.9956 
050036......................   07/01/92   06/30/93    1.7510     0.9907 
050038......................   07/01/92   06/30/93    1.4405     0.9905 
050039......................   07/01/92   06/30/93    1.6376     0.9962 
050040......................   07/01/92   06/30/93    1.2973     0.9744 
050041......................   06/01/92   06/01/93    1.2922     0.9596 
050042......................   07/01/92   06/30/93    1.2613     0.9801 
050045......................   07/01/92   06/30/93    1.2888     0.9802 
050046......................   05/01/92   04/30/93    1.1699     0.9734 
050051......................   07/01/92   06/30/93    1.0882     0.9748 
050054......................   07/01/92   06/30/93    1.3047     0.9791 
050055......................   07/01/92   06/30/93    1.2551     0.9897 
050056......................   07/01/92   06/30/93    1.4266     0.9955 
050057......................   07/01/92   06/30/93    1.4707     0.9929 
050063......................   07/01/92   06/30/93    1.3880     0.9886 
050065......................   04/01/92   03/31/93    1.6010     0.9950 
050066......................   04/01/92   03/31/93    1.2635     0.9967 
050067......................   07/01/92   06/30/93    1.3440     0.9821 
050068......................   07/01/92   06/30/93    1.0850     0.9925 
050069......................   07/01/92   06/30/93    1.6511     0.9987 
050077......................   07/01/92   06/30/93    1.6054     0.9973 
050079......................   07/01/92   06/30/93    1.4330     0.9952 
050082......................   07/01/92   06/30/93    1.4949     0.9980 
050088......................   07/01/92   06/30/93    1.1183     0.9908 
050089......................   07/01/92   06/30/93    1.3358     0.9899 
050090......................   07/01/92   06/30/93    1.2798     0.9795 
050092......................   07/01/92   06/30/93    0.8834     0.9638 
050093......................   06/01/92   05/31/93    1.5283     0.9991 
050095......................   07/01/92   06/30/93    1.0690     0.9058 
050104......................   07/01/92   06/30/93    1.3920     0.9961 
050110......................   07/01/92   06/30/93    1.2016     0.9633 
050113......................   07/01/92   06/30/93    1.1460     0.9826 
050114......................   05/01/92   04/30/93    1.4470     0.9810 
050115......................   07/01/92   06/30/93    1.5445     0.9986 
050116......................   07/01/92   06/30/93    1.4447     0.9955 
050118......................   06/01/92   06/01/93    1.1834     0.9791 
050124......................   07/01/92   06/30/93    1.2043     0.9865 
050128......................   07/01/92   06/30/93    1.5394     0.9953 
050129......................   07/01/92   06/30/93    1.4937     0.9953 
050133......................   07/01/92   06/30/93    1.2980     0.9682 
050136......................   07/01/92   06/30/93    1.4183     0.9898 
050147......................   06/01/92   06/01/93    0.7090     0.9619 
050148......................   07/01/92   06/30/93    1.0925     0.9700 
050152......................   07/01/92   06/30/93    1.3928     0.9952 
050153......................   07/01/92   06/30/93    1.6196     0.9977 
050159......................   07/01/92   06/30/93    1.3053     0.9928 
050167......................   07/01/92   06/30/93    1.3960     0.9950 
050168......................   07/01/92   06/30/93    1.6246     0.9938 
050170......................   07/01/92   06/30/93    1.4427     0.9937 
050172......................   07/01/92   06/30/93    1.3713     0.9838 
050174......................   07/01/92   06/30/93    1.6712     0.9972 
050175......................   07/01/92   06/30/93    1.3284     0.9927 
050177......................   04/01/92   03/31/93    1.2171     0.9960 
050179......................   02/01/92   01/31/93    1.2380     0.9811 
050181......................   07/01/92   06/30/93    1.2282     0.9663 
050183......................   07/01/92   06/30/93    1.1831     0.9925 
050188......................   06/01/92   06/01/93    1.4088     0.9894 
050191......................   07/01/92   06/30/93    1.4382     0.9903 
050192......................   07/01/92   06/30/93    1.2205     0.9823 
050193......................   07/01/92   06/30/93    1.3554     0.9845 
050194......................   07/01/92   06/30/93    1.2223     0.9848 
050195......................   07/01/92   06/30/93    1.6004     0.9969 
050196......................   01/01/92   01/31/93    1.3659     0.9837 
050197......................   07/01/92   06/30/93    1.9446     0.9976 
050199......................   07/01/92   06/30/93    1.0950     0.9936 
050207......................   07/01/92   06/30/93    1.2976     0.9907 
050213......................   07/01/92   06/30/93    1.3163     0.9856 
050215......................   07/01/92   06/30/93    1.5123     0.9987 
050228......................   07/01/92   06/30/93    1.3447     0.9777 
050230......................   03/01/92   02/28/93    1.4256     0.9610 
050232......................   07/01/92   06/30/93    1.8463     0.9970 
050240......................   07/01/92   06/30/93    1.5014     0.9885 
050242......................   07/01/92   06/30/93    1.4062     0.9971 
050243......................   07/01/92   06/30/93    1.5181     0.9915 
050245......................   07/01/92   06/30/93    1.4081     0.9929 
050248......................   07/01/92   06/30/93    1.1376     0.9706 
050258......................   07/01/92   06/30/93    1.3360     0.9873 
050260......................   07/01/92   06/30/93    1.0049     0.9487 
050261......................   07/01/92   06/30/93    1.1734     0.9890 
050262......................   07/01/92   06/30/93    1.7774     0.9960 
050263......................   05/01/92   04/30/93    1.2593     0.9862 
050267......................   07/01/92   06/30/93    1.5506     0.9970 
050274......................   07/01/92   06/30/93    1.1300     0.9675 
050276......................   07/01/92   06/30/93    1.2055     0.9872 
050277......................   07/01/92   06/30/93    1.3938     0.9941 
050278......................   06/01/92   05/31/93    1.4379     0.9855 
050279......................   07/01/92   06/30/93    1.2385     0.9851 
050280......................   07/01/92   06/30/93    1.5586     0.9979 
050283......................   07/01/92   06/30/93    1.2721     0.9794 
050289......................   07/01/92   06/30/93    1.7713     0.9965 
050290......................   06/01/92   05/31/93    1.6454     0.9975 
050291......................   07/01/92   06/30/93    1.2432     0.9914 
050292......................   07/01/92   06/30/93    1.0866     0.9921 
050293......................   07/01/92   06/30/93    1.2437     0.8748 
050295......................   07/01/92   06/30/93    1.4227     0.9943 
050296......................   07/01/92   06/30/93    1.1787     0.9682 
050298......................   01/01/92   01/13/93    1.2101     0.9724 
050299......................   04/01/92   03/31/93    1.3082     0.9932 
050307......................   06/01/92   05/31/93    1.4722     0.9911 
050312......................   06/01/92   06/01/93    1.8112     0.9973 
050315......................   07/01/92   06/30/93    1.3059     0.9872 
050320......................   07/01/92   06/30/93    1.4047     0.9959 
050325......................   07/01/92   06/30/93    1.2668     0.9737 
050331......................   03/01/92   02/28/93    1.3679     0.9798 
050333......................   07/01/92   06/30/93    0.9448     0.9491 
050334......................   07/01/92   06/30/93    1.5545     0.9995 
050337......................   05/01/92   04/30/93    1.3333     0.9663 
050342......................   07/01/92   06/30/93    1.4699     0.9891 
050343......................   07/01/92   06/30/93    1.0441     0.9994 
050348......................   07/01/92   06/30/93    1.5973     0.9975 
050349......................   07/01/92   06/30/93    0.9337     0.9761 
050350......................   07/01/92   06/30/93    1.4012     0.9946 
050353......................   07/01/92   06/30/93    1.5474     0.9977 
050355......................   07/01/92   06/30/93    0.9592     0.9460 
050359......................   07/01/92   06/30/93    1.0815     0.9975 
050373......................   07/01/92   06/30/93    1.3025     0.9778 
050376......................   07/01/92   06/30/93    1.3313     0.9904 
050377......................   07/01/92   06/30/93    0.8532     0.9797 
050378......................   05/01/92   04/30/93    1.1442     0.9867 
050379......................   07/01/92   06/30/93    1.1120     0.9594 
050380......................   07/01/92   06/30/93    1.6360     0.9980 
050382......................   07/01/92   06/30/93    1.4092     0.9999 
050388......................   07/01/92   06/30/93    0.8767     0.8843 
050390......................   07/01/92   06/30/93    1.3113     0.9918 
050392......................   07/01/92   06/30/93    0.9971     0.9728 
050393......................   07/01/92   06/30/93    1.4216     0.9963 
050397......................   07/01/92   06/30/93    1.0700     0.9926 
050401......................   05/01/92   04/30/93    1.1840     0.9969 
050406......................   07/01/92   06/30/93    1.1086     0.9819 
050414......................   04/01/92   03/31/93    1.3348     0.9595 
050418......................   06/01/92   05/31/93    1.3255     0.9890 
050419......................   07/01/92   06/30/93    1.3320     0.9736 
050430......................   07/01/92   06/30/93    0.9840     0.9563 
050432......................   06/01/92   06/01/93    1.5102     0.9938 
050433......................   07/01/92   06/30/93    1.0371     0.9742 
050434......................   04/01/92   03/31/93    1.0993     0.9438 
050435......................   07/01/92   06/30/93    1.2445     0.9848 
050436......................   07/01/92   06/30/93    1.0137     0.9635 
050443......................   07/01/92   06/30/93    0.9322     0.9607 
050444......................   07/01/92   06/30/93    1.2646     0.9896 
050446......................   07/01/92   06/30/93    0.9086     0.9235 
050448......................   02/01/92   01/31/93    1.2446     0.9783 
050449......................   07/01/92   06/30/93    1.2948     0.9916 
050454......................   07/01/92   06/30/93    1.8566     0.9960 
050457......................   07/01/92   06/30/93    1.8974     0.9953 
050459......................   07/01/92   06/30/93    1.2253     0.9784 
050464......................   06/01/92   06/01/93    1.8761     0.9985 
050470......................   07/01/92   06/30/93    1.1447     0.9580 
050476......................   07/01/92   06/30/93    1.2985     0.9738 
050477......................   07/01/92   06/30/93    1.3934     0.9923 
050482......................   07/01/92   06/30/93    0.9619     0.9722 
050485......................   07/01/92   06/30/93    1.6529     0.9994 
050488......................   07/01/92   06/30/93    1.3094     0.9875 
050491......................   07/01/92   06/30/93    1.3725     1.0000 
050494......................   07/01/92   06/30/93    1.0640     0.9623 
050496......................   07/01/92   06/30/93    1.7850     0.9970 
050497......................   07/01/92   06/30/93    0.8830     0.9483 
050502......................   07/01/92   06/30/93    1.6628     0.9991 
050516......................   04/01/92   03/31/93    1.6488     0.9951 
050522......................   06/01/92   06/01/93    1.3492     0.9917 
050528......................   07/01/92   06/30/93    1.2203     0.9832 
050534......................   06/01/92   06/01/93    1.4091     0.9864 
050535......................   05/01/92   04/30/93    1.3630     0.9800 
050539......................   07/01/92   06/30/93    1.1774     0.9663 
050542......................   07/01/92   06/30/93    1.1053     0.9565 
050545......................   07/01/92   06/30/93    0.8775     0.9761 
050546......................   07/01/92   06/30/93    0.9002     1.0000 
050547......................   07/01/92   06/30/93    0.9777     0.9858 
050551......................   06/01/92   06/01/93    1.3227     0.9891 
050559......................   07/01/92   06/30/93    1.3525     0.9679 
050560......................   05/01/92   04/30/93    1.3589     0.9926 
050565......................   07/01/92   06/30/93    1.2083     0.9864 
050566......................   07/01/92   06/30/93    0.9220     0.9718 
050568......................   07/01/92   06/30/93    1.3413     0.9889 
050569......................   07/01/92   06/30/93    1.1891     0.9691 
050573......................   07/01/92   06/30/93    1.6729     0.9978 
050577......................   07/01/92   06/30/93    1.2490     0.9935 
050578......................   07/01/92   06/30/93    1.3816     0.9722 
050579......................   06/01/92   06/01/93    1.3668     0.9880 
050581......................   06/01/92   06/01/93    1.4450     0.9703 
050583......................   06/01/92   06/01/93    1.7185     0.9962 
050584......................   06/01/92   06/01/93    1.2628     0.9681 
050589......................   06/01/92   06/01/93    1.3041     0.9778 
050594......................   07/01/92   06/30/93    2.0107     0.9835 
050599......................   07/01/92   06/30/93    1.6233     0.9967 
050603......................   07/01/92   06/30/93    1.4287     0.9951 
050613......................   07/01/92   06/30/93    1.0557     0.9687 
050615......................   05/01/92   04/30/93    1.4088     0.9983 
050618......................   07/01/92   06/30/93    1.2387     0.9742 
050623......................   07/01/92   06/30/93    1.2689     1.0000 
050625......................   04/01/92   04/01/93    1.5100     0.9980 
050633......................   06/01/92   06/01/93    1.2686     0.9857 
050636......................   07/01/92   06/30/93    1.3734     0.9709 
050637......................   05/01/92   04/30/93    1.1883     0.9990 
050638......................   07/01/92   06/30/93    0.9394     1.0000 
050641......................   07/01/92   06/30/93    1.1739     0.9919 
050661......................   02/01/92   01/31/93    0.9010     0.9830 
050662......................   07/01/92   06/30/93    0.8019     0.9925 
050666......................   07/01/92   06/30/93    1.1122     0.9796 
050667......................   07/01/92   06/30/93    1.0778     0.8992 
050668......................   07/01/92   06/30/93    1.1637     0.9715 
050671......................   07/01/92   06/30/93    1.1480     1.0000 
050672......................   07/01/92   06/30/93    0.6476     0.9937 
050675......................   02/01/92   01/31/93    1.5323     0.9929 
050676......................   07/01/92   06/30/93    1.0095     0.8493 
050678......................   07/01/92   06/30/93    1.1000     0.9936 
050682......................   07/01/92   06/30/93    0.9150     0.9781 
050684......................   07/01/92   06/30/93    1.2051     0.9878 
050685......................   07/01/92   06/30/93    1.1556     0.9796 
050688......................   07/01/92   06/30/93    1.2475     0.9833 
050689......................   06/01/92   06/01/93    1.4617     0.9742 
050694......................   07/01/92   06/30/93    1.3062     0.9754 
050700......................   07/01/92   06/30/93    1.3902     0.9868 
060008......................   06/30/92   06/30/93    1.0146     0.9731 
060012......................   06/30/92   06/30/93    1.4368     0.9969 
060013......................   06/30/92   06/30/93    1.2758     0.9888 
060015......................   06/30/92   06/30/93    1.5408     0.9952 
060016......................   06/30/92   06/30/93    1.1932     0.9711 
060020......................   06/30/92   06/30/93    1.5386     0.9952 
060023......................   05/31/92   05/31/93    1.4694     0.9972 
060024......................   06/30/92   06/30/93    1.6441     0.9914 
060026......................   07/01/92   06/30/93    1.4552     0.9962 
060028......................   05/31/92   05/31/93    1.3930     0.9980 
060031......................   06/30/92   06/30/93    1.4921     0.9970 
060032......................   06/30/92   06/30/93    1.4334     0.9968 
060036......................   04/01/92   03/31/93    1.1897     0.9816 
060054......................   05/01/92   04/30/93    1.2515     0.9872 
060104......................   06/30/92   06/30/93    1.2690     0.9802 
080001......................   07/01/92   06/30/93    1.6160     0.9995 
080002......................   07/01/92   06/30/93    1.1956     0.9871 
080003......................   07/01/92   06/30/93    1.3182     0.9906 
080004......................   07/01/92   06/30/93    1.3426     0.9880 
080006......................   07/01/92   06/30/93    1.1986     0.9837 
080007......................   07/01/92   06/30/93    1.2274     0.9838 
090001......................   07/01/92   06/30/93    1.4054     0.9992 
090003......................   07/01/92   06/30/93    1.3516     0.9990 
090004......................   07/01/92   06/30/93    1.5368     0.9996 
090010......................   07/01/92   06/30/93    0.9566     0.9972 
090011......................   07/01/92   06/30/93    1.9483     0.9987 
100001......................   07/01/92   06/30/93    1.4829     0.9980 
100010......................   07/01/92   06/30/93    1.4149     0.9951 
100027......................   06/01/92   05/31/93    0.8377     0.9815 
100032......................   07/01/92   06/30/93    1.8719     0.9979 
100038......................   05/01/92   04/30/93    1.6635     0.9990 
100039......................   07/01/92   06/30/93    1.6848     0.9932 
100060......................   01/01/92   01/03/93    1.7598     0.9969 
100067......................   07/01/92   06/30/93    1.4262     0.9964 
100068......................   04/01/92   03/31/93    1.5047     0.9985 
100070......................   07/01/92   06/30/93    1.4039     0.9815 
100075......................   07/01/92   06/30/93    1.6701     0.9992 
100076......................   04/01/92   03/31/93    1.4902     0.9953 
100079......................   06/01/92   05/31/93    1.0775     0.9805 
100084......................   07/01/92   06/30/93    1.4791     0.9788 
100086......................   07/01/92   06/30/93    1.3997     0.9917 
100106......................   05/15/92   05/31/93    1.0240     0.9656 
100113......................   07/01/92   06/30/93    2.0728     0.9979 
100114......................   04/01/92   03/31/93    1.4689     0.9946 
100122......................   07/01/92   06/30/93    1.3765     0.9853 
100126......................   06/01/92   06/01/93    1.4760     0.9935 
100129......................   07/01/92   06/30/93    1.3626     0.9846 
100160......................   07/01/92   06/30/93    1.2342     0.9533 
100161......................   06/01/92   05/31/93    1.4640     0.9909 
100168......................   07/01/92   06/30/93    1.3185     0.9856 
100172......................   06/01/92   05/31/93    1.3486     1.0000 
100179......................   05/01/92   04/30/93    1.6536     0.9980 
100191......................   07/01/92   06/30/93    1.3251     0.9895 
100200......................   07/01/92   06/30/93    1.3297     0.9913 
100204......................   03/01/92   02/28/93    1.5702     0.9987 
100207......................   04/01/92   03/31/93    1.4361     0.9911 
100213......................   05/01/92   04/30/93    1.6340     0.9974 
100225......................   06/01/92   06/01/93    1.3288     0.9926 
100231......................   06/01/92   05/31/93    1.7343     0.9991 
100240......................   06/01/92   05/31/93    0.8139     1.0000 
100242......................   02/01/92   01/31/93    1.3248     0.9928 
100244......................   07/01/92   06/30/93    1.3628     0.9853 
100249......................   06/01/92   06/01/93    1.2782     0.9815 
100252......................   02/01/92   01/31/93    1.2137     0.9827 
100254......................   05/01/92   04/30/93    1.6057     0.9995 
100256......................   03/01/92   02/28/93    1.9054     0.9977 
100258......................   06/01/92   06/01/93    1.7092     0.9860 
100264......................   03/01/92   02/28/93    1.4358     0.9742 
100268......................   06/01/92   06/01/93    1.2440     0.9733 
100270......................   06/01/92   05/31/93    0.8651     0.9601 
100271......................   07/01/92   06/30/93    1.5784     0.9977 
100276......................   07/01/92   06/30/93    1.3458     0.9898 
100277......................   07/01/92   06/30/93    1.0666     0.9925 
110003......................   03/01/92   02/28/93    1.3332     0.9810 
110008......................   04/01/92   03/31/93    1.1237     0.9794 
110011......................   07/01/92   06/30/93    1.1562     0.9885 
110015......................   07/01/92   06/30/93    1.0947     0.9648 
110017......................   07/01/92   06/30/93    0.9512     0.9598 
110026......................   07/01/92   06/30/93    1.1392     0.9717 
110027......................   07/01/92   06/30/93    1.0310     0.9809 
110031......................   04/01/92   03/31/93    1.2713     0.9902 
110034......................   07/01/92   06/30/93    1.4742     0.9973 
110035......................   07/01/92   06/30/93    1.3192     0.9845 
110039......................   07/01/92   06/30/93    1.3681     0.9905 
110040......................   07/01/92   06/30/93    1.0531     0.9815 
110041......................   07/01/92   06/30/93    1.1271     0.9670 
110042......................   07/01/92   06/30/93    1.0619     0.9796 
110043......................   07/01/92   06/30/93    1.5408     0.9991 
110051......................   05/01/92   04/30/93    0.9895     0.9610 
110052......................   07/01/92   06/30/93    0.9219     0.9650 
110054......................   07/01/92   06/30/93    1.2399     0.9905 
110056......................   07/01/92   06/30/93    0.8805     0.9393 
110062......................   04/01/92   03/31/93    0.9656     0.9331 
110064......................   07/01/92   06/30/93    1.2624     0.9924 
110066......................   07/01/92   06/30/93    1.2997     0.9905 
110069......................   03/01/92   02/28/93    1.1982     0.9854 
110071......................   07/01/92   06/30/93    1.0206     0.9707 
110093......................   07/01/92   06/30/93    0.9423     0.9789 
110094......................   07/01/92   06/30/93    1.0000     0.9633 
110098......................   07/01/92   06/30/93    1.0274     0.9618 
110101......................   07/01/92   06/30/93    1.0655     0.9778 
110103......................   07/01/92   06/30/93    0.9505     0.9422 
110104......................   07/01/92   06/30/93    1.1358     0.9764 
110108......................   07/01/92   06/30/93    0.9785     0.9296 
110109......................   07/01/92   06/30/93    1.1235     0.9750 
110113......................   06/01/92   05/31/93    1.0279     0.9778 
110124......................   07/01/92   06/30/93    1.0887     0.9798 
110125......................   05/01/92   04/30/93    1.1888     0.9829 
110127......................   07/01/92   06/30/93    0.8709     0.9567 
110128......................   07/01/92   06/30/93    1.1518     0.9856 
110132......................   04/01/92   03/31/93    1.0981     0.9695 
110134......................   07/01/92   06/30/93    0.8493     0.9689 
110135......................   05/01/92   04/30/93    1.0841     0.9769 
110136......................   07/01/92   06/30/93    1.1815     0.9946 
110141......................   07/01/92   06/30/93    0.8829     0.9659 
110143......................   06/01/92   05/31/93    1.2715     0.9895 
110149......................   07/01/92   06/30/93    1.0546     0.9878 
110152......................   07/01/92   06/30/93    1.1233     0.9707 
110153......................   03/01/92   02/28/93    1.0190     0.9709 
110154......................   07/01/92   06/30/93    0.9686     0.9729 
110155......................   04/01/92   03/31/93    1.1090     0.9760 
110156......................   07/01/92   06/30/93    0.9236     0.9507 
110157......................   04/01/92   03/31/93    1.0901     0.9921 
110163......................   05/01/92   04/30/93    1.3806     0.9933 
110164......................   04/01/92   03/31/93    1.3352     0.9962 
110168......................   07/01/92   06/30/93    1.6688     0.9988 
110169......................   07/01/92   06/30/93    0.7823     0.9974 
110174......................   07/01/92   06/30/93    1.0370     0.9567 
110176......................   07/01/92   06/30/93    1.1320     0.9894 
110178......................   07/01/92   06/30/93    1.5789     0.9913 
110181......................   04/01/92   03/31/93    1.0083     0.9755 
110183......................   02/01/92   01/31/93    1.3175     0.9914 
110184......................   04/01/92   03/31/93    1.1037     0.9749 
110185......................   07/01/92   06/30/93    1.0728     0.9688 
110188......................   04/01/92   03/31/93    1.3897     0.9938 
110191......................   07/01/92   06/30/93    1.2703     0.9880 
110194......................   07/01/92   06/30/93    0.9879     0.9568 
110204......................   07/01/92   06/30/93    0.7727     0.9675 
110205......................   07/01/92   06/30/93    1.0314     0.9637 
110208......................   04/01/92   03/31/93    0.9881     0.9885 
120001......................   06/28/92   06/26/93    1.7092     0.9906 
120002......................   07/01/92   06/30/93    1.2330     0.9734 
120003......................   07/01/92   06/30/93    0.9867     0.9444 
120004......................   07/01/92   06/30/93    1.3034     0.9904 
120005......................   07/01/92   06/30/93    1.2975     0.9920 
120007......................   07/01/92   06/30/93    1.6118     0.9988 
120009......................   06/28/92   06/26/93    1.0000     0.9226 
120010......................   07/01/92   06/30/93    1.6902     0.9992 
120012......................   07/01/92   06/30/93    0.9123     0.9785 
120014......................   07/01/92   06/30/93    1.2188     0.9796 
120015......................   07/01/92   06/30/93    0.7376     1.0000 
120016......................   07/01/92   06/30/93    1.0103     0.9231 
120018......................   07/01/92   06/30/93    0.8888     0.9195 
120019......................   07/01/92   06/30/93    1.1844     0.9709 
120021......................   07/01/92   06/30/93    0.9131     0.9682 
120024......................   07/01/92   06/30/93    1.0150     1.0000 
120026......................   07/01/92   06/30/93    1.2967     0.9910 
120027......................   07/01/92   06/30/93    1.4104     0.9886 
130003......................   07/01/92   06/30/93    1.2129     0.9844 
130007......................   06/01/92   05/31/93    1.5029     0.9915 
130008......................   07/01/92   06/30/93    0.9360     0.9643 
130013......................   07/01/92   06/30/93    1.2825     0.9841 
130017......................   07/01/92   06/30/93    1.0174     0.9347 
130022......................   07/01/92   06/30/93    1.1228     0.9644 
130029......................   07/01/92   06/30/93    1.0360     0.9486 
130035......................   07/01/92   06/30/93    0.9833     0.9476 
130048......................   07/01/92   06/30/93    1.0838     0.9569 
140001......................   07/01/92   06/30/93    1.2746     0.9795 
140003......................   03/01/92   02/28/93    1.0204     0.9438 
140005......................   04/01/92   03/31/93    0.9191     0.9736 
140011......................   04/01/92   03/31/93    1.0792     0.9752 
140014......................   07/01/92   06/30/93    1.1164     0.9655 
140016......................   03/01/92   02/28/93    0.9979     0.9608 
140018......................   07/01/92   06/30/93    1.4274     0.9954 
140024......................   07/01/92   06/30/93    1.0095     0.9769 
140025......................   04/01/92   03/31/93    1.1226     0.9759 
140026......................   07/01/92   06/30/93    1.1211     0.9804 
140027......................   05/01/92   04/30/93    1.1363     0.9826 
140030......................   05/01/92   04/30/93    1.5206     0.9966 
140032......................   07/01/92   06/30/93    1.3006     0.9745 
140035......................   07/01/92   06/30/93    1.1300     0.9770 
140037......................   07/01/92   06/30/93    1.0244     0.9534 
140038......................   05/01/92   04/30/93    1.1015     0.9781 
140040......................   05/01/92   04/30/93    1.2499     0.9793 
140041......................   06/01/92   05/31/93    1.1589     0.9803 
140042......................   04/01/92   03/31/93    1.0532     0.9692 
140043......................   05/01/92   04/30/93    1.2634     0.9794 
140045......................   07/01/92   06/30/93    0.9957     0.9664 
140047......................   05/01/92   04/30/93    1.2064     0.9693 
140053......................   07/01/92   06/30/93    1.7775     0.9988 
140055......................   05/01/92   04/30/93    0.9066     0.9600 
140059......................   07/01/92   06/30/93    1.0718     0.9751 
140061......................   07/01/92   06/30/93    1.1241     0.9609 
140068......................   04/01/92   03/31/93    1.3897     0.9904 
140069......................   05/01/92   04/30/93    1.0697     0.9574 
140070......................   05/01/92   04/30/93    1.3186     0.9810 
140077......................   05/01/92   04/30/93    1.1646     0.9856 
140081......................   07/01/92   06/30/93    1.1405     0.9515 
140082......................   07/01/92   06/30/93    1.3525     0.9956 
140083......................   07/01/92   06/30/93    1.2786     0.9921 
140086......................   07/01/92   06/30/93    1.1195     0.9560 
140088......................   07/01/92   06/30/93    1.4810     0.9974 
140089......................   07/01/92   06/30/93    1.2304     0.9720 
140091......................   07/01/92   06/30/93    1.6710     0.9938 
140100......................   07/01/92   06/30/93    1.3850     0.9874 
140102......................   07/01/92   06/30/93    1.0073     0.9572 
140109......................   07/01/92   06/30/93    1.0849     0.9572 
140110......................   05/01/92   04/30/93    1.2910     0.9750 
140114......................   02/01/92   01/31/93    1.3010     0.9944 
140115......................   07/01/92   06/30/93    1.2133     0.9952 
140116......................   07/01/92   06/30/93    1.3128     0.9896 
140117......................   07/01/92   06/30/93    1.2829     0.9925 
140119......................   07/01/92   06/30/93    1.6534     0.9971 
140120......................   05/01/92   04/30/93    1.4041     0.9869 
140121......................   07/01/92   06/30/93    1.5159     0.9900 
140127......................   07/01/92   06/30/93    1.2954     0.9854 
140133......................   07/01/92   06/30/93    1.3612     0.9887 
140138......................   07/01/92   06/30/93    1.0364     0.9522 
140140......................   07/01/92   06/30/93    1.0876     0.9811 
140144......................   04/01/92   03/31/93    1.0275     0.9762 
140145......................   07/01/92   06/30/93    1.1482     0.9750 
140146......................   05/01/92   04/30/93    0.9843     0.9353 
140150......................   07/01/92   06/30/93    1.4534     0.9990 
140151......................   07/01/92   06/30/93    1.0973     0.9988 
140158......................   07/01/92   06/30/93    1.3970     0.9979 
140164......................   04/01/92   03/31/93    1.2625     0.9854 
140165......................   04/01/92   03/31/93    1.0784     0.9528 
140166......................   07/01/92   06/30/93    1.2057     0.9793 
140168......................   07/01/92   06/30/93    1.1798     0.9622 
140170......................   07/01/92   06/30/93    0.9756     0.9729 
140171......................   07/01/92   06/30/93    0.9552     0.9748 
140172......................   07/01/92   06/30/93    1.4750     0.9902 
140173......................   07/01/92   06/30/93    1.0277     0.9410 
140174......................   07/01/92   06/30/93    1.4701     0.9965 
140176......................   07/01/92   06/30/93    1.2771     0.9877 
140177......................   04/01/92   03/31/93    1.4408     0.9905 
140179......................   07/01/92   06/30/93    1.2653     0.9928 
140184......................   05/01/92   04/30/93    1.1662     0.9677 
140187......................   07/01/92   06/30/93    1.3984     0.9920 
140189......................   07/01/92   06/30/93    1.1338     0.9825 
140190......................   05/01/92   04/30/93    1.1182     0.9588 
140193......................   07/01/92   06/30/93    1.0145     0.9656 
140199......................   07/01/92   06/30/93    1.0483     0.9647 
140200......................   07/01/92   06/30/93    1.4022     0.9982 
140205......................   06/01/92   05/31/93    0.8890     0.9526 
140210......................   05/01/92   04/30/93    1.0522     0.9774 
140213......................   04/01/92   03/31/93    1.1911     0.9881 
140215......................   07/01/92   06/30/93    1.1272     0.9843 
140218......................   07/01/92   06/30/93    0.9415     0.9792 
140223......................   07/01/92   06/30/93    1.5070     0.9974 
140224......................   07/01/92   06/30/93    1.3175     0.9988 
140228......................   06/01/92   05/31/93    1.5758     0.9981 
140229......................   05/01/92   04/30/93    0.9146     0.9321 
140230......................   07/01/92   06/30/93    0.9576     0.9579 
140231......................   07/01/92   06/30/93    1.5479     0.9949 
140234......................   07/01/92   06/30/93    1.2225     0.9828 
140239......................   03/01/92   02/28/93    1.5959     0.9988 
140242......................   07/01/92   06/30/93    1.5165     0.9965 
140245......................   07/01/92   06/30/93    1.0639     0.9657 
140246......................   07/01/92   06/30/93    1.0438     0.9689 
140250......................   05/01/92   04/30/93    1.1929     0.9915 
140251......................   07/01/92   06/30/93    1.3057     0.9917 
140275......................   04/01/92   03/31/93    1.2335     0.9932 
140276......................   07/01/92   06/30/93    2.0541     0.9990 
140286......................   05/01/92   04/30/93    1.1350     0.9679 
140297......................   06/01/92   05/31/93    1.2604     0.9914 
140299......................   07/01/92   06/30/93    0.8625     0.8291 
150011......................   07/01/92   06/30/93    1.2124     0.9855 
150012......................   06/01/92   05/31/93    1.6088     0.9926 
150019......................   07/01/92   06/30/93    1.0902     0.9746 
150025......................   07/01/92   06/30/93    1.5465     0.9974 
150032......................   07/01/92   06/30/93    1.7618     0.9968 
150043......................   07/01/92   06/30/93    1.1048     0.9568 
150056......................   03/01/92   02/28/93    1.7098     0.9993 
150076......................   06/01/92   05/31/93    1.0727     0.9757 
150077......................   07/01/92   06/30/93    1.2517     0.9790 
150082......................   05/01/92   04/30/93    1.4578     0.9995 
150084......................   07/01/92   06/30/93    1.8344     0.9998 
150085......................   06/01/92   05/31/93    0.9754     0.9886 
150088......................   06/01/92   05/31/93    1.1451     0.9803 
150089......................   07/01/92   06/30/93    1.3676     0.9998 
150099......................   07/01/92   06/30/93    1.2253     0.9939 
150100......................   07/01/92   06/30/93    1.7098     0.9929 
150103......................   07/01/92   06/30/93    1.0148     0.9555 
150110......................   05/01/92   04/30/93    0.8928     0.9601 
150115......................   07/01/92   06/30/93    1.3451     0.9871 
150125......................   07/01/92   06/30/93    1.3714     0.9982 
150126......................   07/01/92   06/30/93    1.5227     0.9954 
150130......................   07/01/92   06/30/93    1.1604     0.9841 
160005......................   07/01/92   06/30/93    1.0906     0.9738 
160007......................   07/01/92   06/30/93    0.9553     0.9420 
160009......................   07/01/92   06/30/93    1.2723     0.9542 
160012......................   07/01/92   06/30/93    1.1126     0.9658 
160013......................   07/01/92   06/30/93    1.2513     0.9819 
160014......................   07/01/92   06/30/93    0.9294     0.9589 
160016......................   07/01/92   06/30/93    1.2660     0.9784 
160018......................   07/01/92   06/30/93    0.8704     0.9494 
160020......................   07/01/92   06/30/93    1.1080     0.9854 
160021......................   07/01/92   06/30/93    1.0546     0.9670 
160023......................   07/01/92   06/30/93    1.0868     0.9655 
160025......................   07/01/92   06/30/93    1.8610     0.9972 
160026......................   07/01/92   06/30/93    1.1397     0.9656 
160027......................   07/01/92   06/30/93    1.1263     0.9447 
160028......................   07/01/92   06/30/93    1.2226     0.9802 
160029......................   07/01/92   06/30/93    1.5142     0.9974 
160030......................   07/01/92   06/30/93    1.3394     0.9878 
160031......................   07/01/92   06/30/93    1.1329     0.9526 
160032......................   07/01/92   06/30/93    1.1616     0.9705 
160033......................   07/01/92   06/30/93    1.4688     0.9900 
160034......................   07/01/92   06/30/93    0.9717     0.9415 
160035......................   07/01/92   06/30/93    0.9060     0.9519 
160036......................   07/01/92   06/30/93    1.0741     0.9577 
160037......................   07/01/92   06/30/93    1.1075     0.9699 
160039......................   07/01/92   06/30/93    1.0768     0.9524 
160040......................   07/01/92   06/30/93    1.2978     0.9802 
160041......................   07/01/92   06/30/93    1.1383     0.9590 
160043......................   07/01/92   06/30/93    1.0192     0.9609 
160046......................   07/01/92   06/30/93    1.0308     0.9576 
160048......................   07/01/92   06/30/93    1.0747     0.9601 
160049......................   07/01/92   06/30/93    0.9325     0.9585 
160050......................   07/01/92   06/30/93    1.0246     0.9595 
160052......................   07/01/92   06/30/93    1.0144     0.9540 
160054......................   07/01/92   06/30/93    1.1122     0.9637 
160055......................   07/01/92   06/30/93    0.9604     0.9294 
160056......................   07/01/92   06/30/93    1.0295     0.9508 
160057......................   07/01/92   06/30/93    1.3597     0.9849 
160058......................   07/01/92   06/30/93    1.6921     0.9992 
160059......................   07/01/92   06/30/93    1.2827     0.9749 
160060......................   07/01/92   06/30/93    1.0190     0.9474 
160061......................   07/01/92   06/30/93    0.9606     0.9721 
160062......................   07/01/92   06/30/93    0.9648     0.9364 
160063......................   07/01/92   06/30/93    1.1306     0.9841 
160064......................   07/01/92   06/30/93    1.6260     0.9976 
160066......................   07/01/92   06/30/93    1.0987     0.9533 
160067......................   07/01/92   06/30/93    1.3107     0.9897 
160068......................   07/01/92   06/30/93    1.0002     0.9463 
160069......................   07/01/92   06/30/93    1.3957     0.9956 
160070......................   07/01/92   06/30/93    1.0579     0.9657 
160073......................   07/01/92   06/30/93    0.9694     0.9477 
160074......................   07/01/92   06/30/93    1.0148     0.9690 
160075......................   07/01/92   06/30/93    1.0625     0.9662 
160076......................   07/01/92   06/30/93    1.0028     0.9716 
160077......................   07/01/92   06/30/93    0.9863     0.9500 
160079......................   07/01/92   06/30/93    1.3509     0.9938 
160080......................   07/01/92   06/30/93    1.1602     0.9772 
160081......................   07/01/92   06/30/93    1.1022     0.9617 
160083......................   07/01/92   06/30/93    1.5011     0.9992 
160085......................   07/01/92   06/30/93    1.0764     0.9645 
160086......................   07/01/92   06/30/93    0.9801     0.9713 
160088......................   07/01/92   06/30/93    1.1179     0.9284 
160089......................   04/01/92   03/31/93    1.1702     0.9824 
160090......................   07/01/92   06/30/93    1.0557     0.9665 
160091......................   07/01/92   06/30/93    1.0738     0.9682 
160093......................   07/01/92   06/30/93    1.0676     0.9631 
160094......................   07/01/92   06/30/93    1.1235     0.9619 
160095......................   07/01/92   06/30/93    1.0834     0.9539 
160097......................   07/01/92   06/30/93    1.1226     0.9654 
160098......................   07/01/92   06/30/93    1.0186     0.9432 
160101......................   07/01/92   06/30/93    1.0908     0.9698 
160102......................   07/01/92   06/30/93    1.4131     0.9973 
160103......................   07/01/92   06/30/93    0.9646     0.9672 
160106......................   07/01/92   06/30/93    1.0670     0.9647 
160107......................   07/01/92   06/30/93    1.1944     0.9504 
160108......................   07/01/92   06/30/93    1.1254     0.9500 
160109......................   07/01/92   06/30/93    0.9733     0.9508 
160112......................   07/01/92   06/30/93    1.4173     0.9742 
160113......................   07/01/92   06/30/93    0.9989     0.9672 
160114......................   07/01/92   06/30/93    0.9976     0.9666 
160115......................   07/01/92   06/30/93    1.0502     0.9657 
160116......................   07/01/92   06/30/93    1.1957     0.9772 
160117......................   07/01/92   06/30/93    1.2994     0.9952 
160118......................   07/01/92   06/30/93    1.0073     0.9692 
160120......................   07/01/92   06/30/93    0.9889     0.9595 
160123......................   07/01/92   06/30/93    1.0528     0.9733 
160124......................   07/01/92   06/30/93    1.2288     0.9666 
160126......................   05/01/92   04/30/93    1.0915     0.9662 
160134......................   07/01/92   06/30/93    1.0239     0.9163 
160135......................   07/01/92   06/30/93    0.9839     0.9674 
160140......................   07/01/92   06/30/93    1.0374     0.9550 
160142......................   07/01/92   06/30/93    1.0478     0.9359 
160143......................   07/01/92   06/30/93    1.0786     0.9478 
160145......................   07/01/92   06/30/93    1.0124     0.9488 
160146......................   07/01/92   06/30/93    1.3758     0.9927 
160151......................   07/01/92   06/30/93    1.1261     0.9924 
160152......................   07/01/92   06/30/93    0.9949     0.9388 
160153......................   07/01/92   06/30/93    1.6632     0.9980 
170009......................   06/01/92   05/31/93    1.1910     0.9680 
170010......................   07/01/92   06/30/93    1.1979     0.9659 
170011......................   07/01/92   06/30/93    1.4290     0.9876 
170013......................   07/01/92   06/30/93    1.2943     0.9859 
170015......................   04/01/92   03/31/93    0.9484     0.9770 
170016......................   06/01/92   05/31/93    1.6015     0.9977 
170020......................   07/01/92   06/30/93    1.2509     0.9794 
170025......................   07/01/92   06/30/93    1.2481     0.9926 
170037......................   07/01/92   06/30/93    1.1325     0.9626 
170040......................   07/01/92   06/30/93    1.4352     0.9950 
170044......................   07/01/92   06/30/93    1.1346     0.9888 
170045......................   07/01/92   06/30/93    1.0349     0.9609 
170051......................   05/01/92   04/30/93    0.9916     0.9282 
170052......................   05/01/92   04/30/93    1.0721     0.9745 
170053......................   04/01/92   03/31/93    0.8402     0.9537 
170056......................   04/01/92   03/31/93    0.9708     0.9722 
170057......................   07/01/92   06/30/93    1.0341     0.9650 
170058......................   07/01/92   06/30/93    1.0917     0.9783 
170061......................   04/01/92   03/31/93    1.1704     0.9599 
170067......................   07/01/92   06/30/93    0.8778     0.8856 
170069......................   07/01/92   06/30/93    0.9886     0.9728 
170072......................   04/01/92   03/31/93    0.9719     0.9656 
170074......................   05/01/92   04/30/93    1.0960     0.9921 
170084......................   07/01/92   06/30/93    0.8706     0.9711 
170085......................   07/01/92   06/30/93    0.8833     0.9222 
170089......................   07/01/92   06/30/93    1.0005     0.9599 
170093......................   04/01/92   03/31/93    0.9303     0.9554 
170095......................   07/01/92   06/30/93    1.1447     0.9827 
170100......................   05/01/92   04/30/93    0.8854     0.9557 
170103......................   07/01/92   06/30/93    1.2695     0.9752 
170105......................   07/01/92   06/30/93    0.9734     0.9482 
170115......................   07/01/92   06/30/93    1.0182     0.9769 
170133......................   07/01/92   06/30/93    1.1577     0.9790 
170140......................   07/01/92   06/30/93    1.0322     0.9821 
170142......................   07/01/92   06/30/93    1.3252     0.9799 
170171......................   06/01/92   05/31/93    1.1737     0.9614 
180002......................   06/30/92   06/30/93    1.0800     0.9799 
180005......................   06/30/92   06/30/93    1.0410     0.9766 
180006......................   04/30/92   04/30/93    0.9102     0.9860 
180007......................   06/30/92   06/30/93    1.4712     0.9934 
180012......................   06/30/92   06/30/93    1.3442     0.9900 
180013......................   03/31/92   03/31/93    1.3186     0.9935 
180018......................   06/30/92   06/30/93    1.1516     0.9888 
180020......................   06/30/92   06/30/93    1.0576     0.9752 
180021......................   06/30/92   06/30/93    1.2329     0.9786 
180024......................   06/30/92   06/30/93    1.3193     0.9633 
180027......................   03/31/92   03/31/93    1.1578     0.9816 
180028......................   06/30/92   06/30/93    1.0586     0.9431 
180029......................   06/30/92   06/30/93    1.3030     0.9863 
180032......................   06/30/92   06/30/93    1.0285     0.9621 
180033......................   04/30/92   04/30/93    1.0399     0.9388 
180034......................   06/30/92   06/30/93    0.9945     0.9682 
180038......................   05/31/92   05/31/93    1.3356     0.9961 
180042......................   06/30/92   06/30/93    1.0899     0.9710 
180046......................   06/30/92   06/30/93    1.0670     0.9667 
180047......................   06/30/92   06/30/93    1.0224     0.9322 
180049......................   06/30/92   06/30/93    1.3710     0.9742 
180050......................   06/30/92   06/30/93    1.3148     0.9635 
180053......................   06/30/92   06/30/93    1.2756     0.9688 
180054......................   06/30/92   06/30/93    1.0134     0.9767 
180055......................   06/30/92   06/30/93    1.0387     0.9720 
180056......................   06/30/92   06/30/93    1.0840     0.9832 
180065......................   06/30/92   06/30/93    0.9510     0.9735 
180067......................   06/30/92   06/30/93    1.8683     0.9942 
180069......................   06/30/92   06/30/93    1.0467     0.9795 
180070......................   06/30/92   06/30/93    1.0467     0.9826 
180075......................   04/30/92   04/30/93    0.9790     0.9856 
180087......................   06/30/92   06/30/93    1.0665     0.9750 
180092......................   06/30/92   06/30/93    1.1258     0.9782 
180101......................   02/29/92   02/28/93    1.2598     0.9737 
180105......................   02/29/92   02/28/93    0.9336     0.9773 
180108......................   06/30/92   06/30/93    0.9174     0.9738 
180117......................   05/19/92   05/31/93    1.1621     0.9830 
180118......................   06/30/92   06/30/93    0.9970     0.9772 
180122......................   06/30/92   06/30/93    0.9805     0.9525 
180125......................   06/30/92   06/30/93    0.9949     0.9467 
180129......................   04/30/92   04/30/93    1.0956     0.9549 
180134......................   06/30/92   06/30/93    0.9960     0.9472 
190001......................   07/01/92   06/30/93    0.8982     0.9904 
190007......................   07/01/92   06/30/93    1.0510     0.9714 
190008......................   04/01/92   03/31/93    1.5377     0.9992 
190009......................   07/01/92   06/30/93    1.2843     0.9975 
190010......................   07/01/92   06/30/93    1.0161     0.9927 
190015......................   07/01/92   06/30/93    1.1620     0.9950 
190017......................   07/01/92   06/30/93    1.2184     0.9857 
190019......................   07/01/92   06/30/93    1.4775     0.9984 
190020......................   07/01/92   06/30/93    1.1977     0.9843 
190027......................   07/01/92   06/30/93    1.4563     0.9974 
190029......................   07/01/92   06/30/93    1.2305     0.9599 
190033......................   06/01/92   05/31/93    0.9134     0.9773 
190036......................   05/01/92   04/30/93    1.6749     0.9985 
190037......................   07/01/92   06/30/93    1.0618     0.9510 
190041......................   07/01/92   06/30/93    1.5466     0.9989 
190045......................   07/01/92   06/30/93    1.2729     0.9903 
190047......................   07/01/92   06/30/93    1.1397     0.9707 
190048......................   07/01/92   06/30/93    1.1169     0.9615 
190064......................   07/01/92   06/30/93    1.5051     0.9984 
190071......................   07/01/92   06/30/93    0.8723     0.9805 
190075......................   07/01/92   06/30/93    1.4181     0.9989 
190081......................   07/01/92   06/30/93    0.8873     0.9291 
190086......................   05/01/92   04/30/93    1.3069     0.9843 
190098......................   07/01/92   06/30/93    1.4155     0.9997 
190102......................   07/01/92   06/30/93    1.5231     0.9978 
190110......................   07/01/92   06/30/93    0.9222     0.9718 
190112......................   06/01/92   05/31/93    1.3659     0.9854 
190114......................   07/01/92   06/30/93    0.9428     0.9791 
190124......................   07/01/92   06/30/93    1.4849     1.0000 
190125......................   07/01/92   06/30/93    1.3422     0.9976 
190138......................   05/01/92   04/30/93    0.6983     0.9945 
190140......................   05/01/92   04/30/93    1.0316     0.9767 
190148......................   06/01/92   05/31/93    0.9498     0.9765 
190152......................   06/01/92   05/31/93    1.3474     0.9918 
190155......................   07/01/92   06/30/93    0.9280     0.9810 
190156......................   07/01/92   06/30/93    0.8642     0.9711 
190158......................   06/01/92   05/31/93    1.2631     0.9984 
190161......................   07/01/92   06/30/93    0.8860     0.9956 
190164......................   07/01/92   06/30/93    1.1555     0.9823 
190165......................   05/01/92   05/31/93    1.0039     0.9549 
190166......................   07/01/92   06/30/93    1.0353     0.9629 
190170......................   04/01/92   03/31/93    1.0189     0.9752 
190173......................   06/01/92   05/31/93    1.4031     0.9944 
190176......................   07/01/92   06/30/93    1.5290     0.9976 
190182......................   03/01/92   02/28/93    1.0443     1.0000 
190196......................   05/01/92   04/30/93    0.8641     1.0000 
190199......................   07/01/92   06/30/93    1.2198     0.9541 
190204......................   06/01/92   05/31/93    1.5161     0.9967 
200002......................   04/30/92   04/30/93    1.0876     0.9641 
200008......................   06/30/92   06/30/93    1.2598     0.9958 
200012......................   06/30/92   06/30/93    1.1625     0.9869 
200013......................   06/30/92   06/30/93    1.0847     0.9824 
200015......................   06/30/92   06/30/93    1.2462     0.9884 
200016......................   06/30/92   06/30/93    0.9845     0.9502 
200019......................   04/30/92   04/30/93    1.2423     0.9825 
200020......................   06/30/92   06/30/93    1.1301     0.9819 
200023......................   03/31/92   03/31/93    0.8445     0.9811 
200024......................   06/30/92   06/30/93    1.1864     0.9851 
200037......................   06/30/92   06/30/93    1.1980     0.9697 
200038......................   04/30/92   04/30/93    1.0131     0.9863 
200039......................   03/31/92   03/31/93    1.3095     0.9921 
200040......................   05/31/92   05/31/93    1.0575     0.9719 
200050......................   06/30/92   06/30/93    1.1318     0.9773 
200051......................   06/30/92   06/30/93    0.9970     0.9579 
200063......................   03/31/92   03/31/93    1.2171     0.9841 
210001......................   07/01/92   06/30/93    1.3159     0.9883 
210002......................   07/01/92   06/30/93    1.9614     0.9988 
210003......................   07/01/92   06/30/93    1.5118     0.9952 
210004......................   07/01/92   06/30/93    1.2997     0.9921 
210005......................   07/01/92   06/30/93    1.2135     0.9845 
210007......................   07/01/92   06/30/93    1.5117     1.0000 
210008......................   07/01/92   06/30/93    1.3395     0.9961 
210009......................   07/01/92   06/30/93    1.6879     0.9974 
210010......................   07/01/92   06/30/93    1.2358     0.9830 
210012......................   07/01/92   06/30/93    1.5520     0.9962 
210013......................   07/01/92   06/30/93    1.2745     0.9965 
210015......................   07/01/92   06/30/93    1.2021     0.9936 
210016......................   07/01/92   06/30/93    1.8524     0.9978 
210017......................   07/01/92   06/30/93    1.1037     0.9806 
210018......................   07/01/92   06/30/93    1.2695     0.9879 
210019......................   07/01/92   06/30/93    1.4117     0.9973 
210022......................   07/01/92   06/30/93    1.4108     0.9910 
210023......................   07/01/92   06/30/93    1.3535     0.9825 
210024......................   07/01/92   06/30/93    1.3235     0.9947 
210025......................   07/01/92   06/30/93    1.3010     0.9943 
210026......................   07/01/92   06/30/93    1.3218     0.9915 
210027......................   07/01/92   06/30/93    1.2215     0.9941 
210028......................   07/01/92   06/30/93    1.0700     0.9696 
210029......................   07/01/92   06/30/93    1.3210     0.9833 
210030......................   07/01/92   06/30/93    1.0716     0.9881 
210031......................   07/01/92   06/30/93    1.7487     0.9989 
210032......................   07/01/92   06/30/93    1.2557     0.9923 
210033......................   07/01/92   06/30/93    1.1706     0.9995 
210034......................   07/01/92   06/30/93    1.2674     0.9959 
210035......................   07/01/92   06/30/93    1.1768     0.9930 
210037......................   07/01/92   06/30/93    1.2369     0.9911 
210038......................   07/01/92   06/30/93    1.3975     0.9956 
210039......................   07/01/92   06/30/93    1.1742     0.9867 
210040......................   07/01/92   06/30/93    1.3177     0.9931 
210043......................   07/01/92   06/30/93    1.2663     0.9946 
210044......................   07/01/92   06/30/93    1.2581     0.9953 
210045......................   07/01/92   06/30/93    1.0172     0.9713 
210048......................   07/01/92   06/30/93    1.1730     0.9894 
210051......................   07/01/92   06/30/93    1.2849     0.9934 
210054......................   07/01/92   06/30/93    1.2401     0.9871 
210055......................   07/01/92   06/30/93    1.2299     0.9911 
210056......................   07/01/92   06/30/93    1.4479     0.9850 
210057......................   07/01/92   06/30/93    1.2920     0.9950 
210058......................   07/01/92   06/30/93    1.8195     0.9773 
210059......................   07/01/92   06/30/93    1.3155     0.9930 
220011......................   07/01/92   06/30/93    1.1433     0.9945 
220041......................   07/01/92   06/30/93    1.1638     0.9928 
220083......................   07/01/92   06/30/93    1.1315     0.9899 
220133......................   07/01/92   06/30/93    0.8219     0.9543 
220153......................   07/01/92   06/30/93    1.0036     0.9671 
220154......................   07/01/92   06/30/93    0.9156     0.9654 
220163......................   07/01/92   06/30/93    1.8781     0.9990 
230001......................   07/01/92   06/30/93    1.1711     0.9650 
230002......................   07/01/92   06/30/93    1.2684     0.9874 
230004......................   07/01/92   06/30/93    1.6987     0.9968 
230005......................   07/01/92   06/30/93    1.2847     0.9660 
230006......................   04/01/92   03/31/93    1.0471     0.9668 
230019......................   07/01/92   06/30/93    1.5147     0.9987 
230024......................   07/01/92   06/30/93    1.5146     0.9987 
230027......................   07/01/92   06/30/93    1.0650     0.9817 
230029......................   07/01/92   06/30/93    1.5466     0.9989 
230030......................   07/01/92   06/30/93    1.2279     0.9718 
230031......................   07/01/92   06/30/93    1.4553     0.9882 
230032......................   07/01/92   06/30/93    1.7423     0.9967 
230034......................   04/01/92   03/31/93    1.1637     0.9792 
230035......................   07/01/92   06/30/93    1.1612     0.9677 
230036......................   07/01/92   06/30/93    1.2684     0.9794 
230037......................   07/01/92   06/30/93    1.2282     0.9747 
230038......................   07/01/92   06/30/93    1.5807     0.9992 
230041......................   07/01/92   06/30/93    1.1962     0.9966 
230046......................   07/01/92   06/30/93    1.8310     0.9994 
230054......................   07/01/92   06/30/93    1.7246     0.9974 
230058......................   07/01/92   06/30/93    1.0843     0.9590 
230059......................   07/01/92   06/30/93    1.5298     0.9973 
230060......................   07/01/92   06/30/93    1.1834     0.9924 
230062......................   07/01/92   06/30/93    1.1577     0.9338 
230066......................   04/01/92   03/31/93    1.3459     0.9895 
230068......................   07/01/92   06/30/93    1.3720     0.9981 
230069......................   07/01/92   06/30/93    1.1250     0.9714 
230070......................   07/01/92   06/30/93    1.4443     0.9940 
230072......................   04/01/92   03/31/93    1.2301     0.9919 
230075......................   07/01/92   06/30/93    1.4437     0.9872 
230077......................   07/01/92   06/30/93    2.0371     0.9972 
230081......................   07/01/92   06/30/93    1.2221     0.9912 
230082......................   07/01/92   06/30/93    1.1657     0.9735 
230085......................   07/01/92   06/30/93    1.1080     0.9744 
230086......................   07/01/92   06/30/93    1.0134     0.9655 
230092......................   07/01/92   06/30/93    1.2768     0.9831 
230093......................   07/01/92   06/30/93    1.2125     0.9678 
230095......................   04/01/92   03/31/93    1.2099     0.9716 
230097......................   07/01/92   06/30/93    1.5235     0.9989 
230099......................   07/01/92   06/30/93    1.2303     0.9886 
230100......................   07/01/92   06/30/93    1.2060     0.9684 
230106......................   07/01/92   06/30/93    1.1123     0.9806 
230108......................   07/01/92   06/30/93    1.1609     0.9695 
230111......................   07/01/92   06/30/93    0.9743     0.9536 
230113......................   07/01/92   06/30/93    0.9994     0.9463 
230116......................   04/01/92   03/31/93    0.9012     0.9554 
230117......................   07/01/92   06/30/93    1.9259     0.9987 
230124......................   04/01/92   03/31/93    1.0817     0.9791 
230132......................   07/01/92   06/30/93    1.4465     0.9970 
230133......................   07/01/92   06/30/93    1.2163     0.9614 
230147......................   07/01/92   06/30/93    1.5527     0.9965 
230153......................   07/01/92   06/30/93    1.0579     0.9611 
230154......................   07/01/92   06/30/93    1.0167     0.9677 
230156......................   07/01/92   06/30/93    1.6562     0.9995 
230157......................   07/01/92   06/30/93    1.3351     0.9927 
230159......................   04/01/92   03/31/93    1.2687     0.9969 
230162......................   04/01/92   03/31/93    1.0075     0.8302 
230172......................   04/01/92   03/31/93    1.2020     0.9772 
230174......................   07/01/92   06/30/93    1.3192     0.9866 
230178......................   04/01/92   03/31/93    1.0435     0.9625 
230180......................   07/01/92   06/30/93    1.0952     0.9875 
230188......................   04/01/92   03/31/93    1.1123     0.9745 
230189......................   07/01/92   06/30/93    0.9108     0.9679 
230199......................   07/01/92   06/30/93    1.1519     0.9804 
230201......................   07/01/92   06/30/93    1.0435     0.9794 
230207......................   07/01/92   06/30/93    1.2446     0.9939 
230212......................   07/01/92   06/30/93    1.0641     0.9751 
230219......................   04/01/92   03/31/93    0.9656     0.9520 
230221......................   04/01/92   03/31/93    1.2799     0.9974 
230222......................   07/01/92   06/30/93    1.3153     0.9939 
230232......................   07/01/92   06/30/93    1.0226     0.9575 
230241......................   04/01/92   03/31/93    1.1993     0.9736 
230264......................   07/01/92   06/30/93    1.1922     0.9743 
240002......................   07/01/92   06/30/93    1.6643     0.9928 
240005......................   07/01/92   06/30/93    0.9198     0.9331 
240009......................   07/01/92   06/30/93    1.1490     0.9429 
240017......................   05/01/92   04/30/93    1.1185     0.9694 
240036......................   07/01/92   06/30/93    1.4719     0.9960 
240037......................   07/01/92   06/30/93    1.0881     0.9672 
240040......................   07/01/92   06/30/93    1.2540     0.9625 
240044......................   05/01/92   04/30/93    1.1919     0.9711 
240049......................   07/01/92   06/30/93    1.7207     0.9976 
240075......................   07/01/92   06/30/93    1.2324     0.9807 
240077......................   07/01/92   06/30/93    0.9704     0.9447 
240089......................   04/01/92   03/31/93    1.0887     0.9768 
240099......................   06/01/92   05/31/93    1.0278     0.9617 
240101......................   07/01/92   06/30/93    1.2726     0.9647 
240104......................   07/01/92   06/30/93    1.1736     0.9733 
240110......................   07/01/92   06/30/93    1.0189     0.9510 
240125......................   06/01/92   05/31/93    0.8969     0.9673 
240129......................   06/01/92   05/31/93    1.0200     0.9544 
240137......................   04/01/92   03/31/93    1.1594     0.9574 
240145......................   03/01/92   02/28/93    0.9962     0.9326 
240160......................   07/01/92   06/30/93    0.9996     0.9702 
240171......................   05/01/92   04/30/93    0.9866     0.9269 
250001......................   07/01/92   06/30/93    1.5537     0.9971 
250006......................   07/01/92   06/30/93    0.9840     0.9802 
250017......................   07/01/92   06/30/93    0.9604     0.9662 
250031......................   06/01/92   05/31/93    1.2012     0.9938 
250032......................   07/01/92   06/30/93    1.2320     0.9925 
250033......................   04/01/92   03/31/93    0.9808     0.9335 
250034......................   07/01/92   06/30/93    1.4846     0.9960 
250044......................   07/01/92   06/30/93    1.0228     0.9842 
250094......................   04/01/92   03/31/93    1.2505     0.9913 
250102......................   07/01/92   06/30/93    1.4815     0.9993 
250123......................   03/01/92   02/28/93    1.2418     0.9954 
250126......................   04/01/92   03/31/93    1.0522     0.9611 
250128......................   05/01/92   04/30/93    0.9637     0.9540 
250134......................   07/01/92   06/30/93    0.9584     0.9964 
250138......................   05/01/92   04/30/93    1.2494     0.9974 
250141......................   07/01/92   06/30/93    1.2507     0.9865 
260001......................   07/01/92   06/30/93    1.6185     0.9990 
260002......................   06/01/92   06/01/93    1.3868     0.9861 
260006......................   07/01/92   06/30/93    1.5103     0.9953 
260007......................   04/01/92   03/31/93    1.3530     0.9928 
260008......................   07/01/92   06/30/93    1.2444     0.9978 
260009......................   06/01/92   05/31/93    1.2463     0.9802 
260013......................   05/01/92   04/30/93    1.1793     0.9930 
260020......................   07/01/92   06/30/93    1.6679     0.9985 
260022......................   06/01/92   06/01/93    1.4172     0.9856 
260037......................   02/01/92   01/31/93    1.2465     0.9899 
260042......................   07/01/92   06/30/93    1.1939     0.9919 
260048......................   05/01/92   04/30/93    1.3108     0.9954 
260051......................   06/01/92   06/01/93    1.0678     0.9989 
260052......................   07/01/92   06/30/93    1.2382     0.9813 
260055......................   07/01/92   06/30/93    1.0799     0.9565 
260059......................   07/01/92   06/30/93    1.0945     0.9725 
260061......................   07/01/92   06/30/93    1.1782     0.9814 
260065......................   07/01/92   06/30/93    1.6805     0.9989 
260066......................   07/01/92   06/30/93    1.1133     0.9723 
260067......................   07/01/92   06/30/93    0.9187     0.9341 
260077......................   07/01/92   06/30/93    1.5023     0.9933 
260079......................   07/01/92   06/30/93    1.0157     0.9570 
260081......................   07/01/92   06/30/93    1.4241     0.9983 
260082......................   04/01/92   03/31/93    1.1231     0.9735 
260085......................   07/01/92   06/30/93    1.5508     0.9978 
260086......................   04/01/92   03/31/93    1.0914     0.9716 
260094......................   05/01/92   04/30/93    1.1018     0.9781 
260095......................   07/01/92   06/30/93    1.3783     0.9970 
260096......................   07/01/92   06/30/93    1.4791     0.9989 
260104......................   07/01/92   06/30/93    1.6872     0.9983 
260105......................   07/01/92   06/30/93    1.9174     0.9974 
260108......................   07/01/92   06/30/93    1.7827     0.9989 
260109......................   04/01/92   03/31/93    1.0219     0.9091 
260112......................   05/01/92   04/30/93    1.4241     0.9995 
260115......................   07/01/92   06/30/93    1.1610     0.9444 
260127......................   07/01/92   06/30/93    0.9732     0.9691 
260128......................   07/01/92   06/30/93    0.9836     0.9695 
260129......................   06/01/92   05/31/93    1.0649     0.9869 
260131......................   04/01/92   03/31/93    1.2287     0.9788 
260137......................   06/01/92   05/31/93    1.1816     0.9956 
260141......................   07/01/92   06/30/93    2.0078     0.9957 
260142......................   05/01/92   04/30/93    1.1816     0.9858 
260143......................   07/01/92   06/30/93    1.0365     0.9508 
260146......................   07/01/92   06/30/93    1.5485     0.9929 
260147......................   07/01/92   06/30/93    1.0168     0.9763 
260164......................   05/01/92   04/30/93    1.1337     0.9801 
260172......................   07/01/92   06/30/93    0.9953     0.9777 
260173......................   07/01/92   06/30/93    1.0036     0.9424 
260175......................   04/01/92   03/31/93    1.1435     0.9775 
260177......................   07/01/92   06/30/93    1.2867     0.9897 
260183......................   07/01/92   06/30/93    1.6066     0.9962 
260186......................   05/01/92   04/30/93    1.1777     0.9713 
260189......................   07/01/92   06/30/93    0.8986     0.9625 
260197......................   02/01/92   01/31/93    1.2084     0.9876 
270003......................   06/01/92   05/31/93    1.1685     0.9860 
270004......................   07/01/92   06/30/93    1.6598     0.9991 
270009......................   06/01/92   05/31/93    1.0707     0.9581 
270011......................   07/01/92   06/30/93    1.0779     0.9476 
270012......................   07/01/92   06/30/93    1.4717     0.9975 
270016......................   07/01/92   06/30/93    0.8515     0.9738 
270017......................   06/01/92   05/31/93    1.2325     0.9796 
270023......................   07/01/92   06/30/93    1.3435     0.9919 
270024......................   07/01/92   06/30/93    0.9706     0.9772 
270026......................   07/01/92   06/30/93    0.9522     0.9490 
270027......................   07/01/92   06/30/93    0.9947     0.9785 
270028......................   07/01/92   06/30/93    1.0445     0.9711 
270031......................   07/01/92   06/30/93    0.9487     0.9407 
270032......................   07/01/92   06/30/93    1.1274     0.9582 
270035......................   04/01/92   03/31/93    1.0040     0.9756 
270036......................   07/01/92   06/30/93    0.9006     0.9763 
270040......................   07/01/92   06/30/93    1.1161     0.9791 
270041......................   07/01/92   06/30/93    0.9374     0.9476 
270044......................   07/01/92   06/30/93    1.2216     0.9739 
270046......................   05/01/92   04/30/93    0.9138     0.9626 
270049......................   06/01/92   05/31/93    1.6721     0.9979 
270050......................   07/01/92   06/30/93    1.0259     0.9506 
270051......................   04/01/92   03/31/93    1.2706     0.9821 
270052......................   07/01/92   06/30/93    1.0091     0.9772 
270053......................   07/01/92   06/30/93    1.0513     0.9547 
270055......................   07/01/92   06/30/93    0.6625     0.9910 
270058......................   07/01/92   06/30/93    0.9352     0.9902 
270060......................   07/01/92   06/30/93    0.9392     0.9623 
270068......................   07/01/92   06/30/93    0.8829     0.9324 
270072......................   07/01/92   06/30/93    0.8541     0.9525 
270073......................   07/01/92   06/30/93    1.1727     0.9559 
270079......................   07/01/92   06/30/93    0.9214     0.9562 
270080......................   07/01/92   06/30/93    1.0836     0.9672 
270081......................   07/01/92   06/30/93    0.9391     0.9678 
270082......................   07/01/92   06/30/93    0.9112     0.9792 
280003......................   06/01/92   05/31/93    1.9252     0.9989 
280009......................   07/01/92   06/30/93    1.4789     0.9879 
280011......................   07/01/92   06/30/93    0.9932     0.9785 
280013......................   07/01/92   06/30/93    1.9595     0.9964 
280014......................   07/01/92   06/30/93    1.0682     0.9700 
280018......................   07/01/92   06/30/93    0.9823     0.9841 
280020......................   07/01/92   06/30/93    1.4512     0.9893 
280021......................   07/01/92   06/30/93    1.1094     0.9606 
280022......................   07/01/92   06/30/93    0.9502     0.9543 
280023......................   07/01/92   06/30/93    1.3389     0.9786 
280024......................   07/01/92   06/30/93    0.9477     0.9797 
280026......................   07/01/92   06/30/93    1.1405     0.9516 
280028......................   05/01/92   04/30/93    1.0078     0.9697 
280029......................   07/01/92   06/30/93    0.9316     0.9755 
280033......................   07/01/92   06/30/93    1.1245     0.9738 
280035......................   07/01/92   06/30/93    0.9331     0.9536 
280037......................   07/01/92   06/30/93    0.9727     0.9545 
280042......................   05/01/92   04/30/93    0.9349     0.9715 
280043......................   07/01/92   06/30/93    1.1269     0.9685 
280045......................   07/01/92   06/30/93    1.1421     0.9836 
280049......................   05/01/92   04/30/93    1.0441     0.9715 
280050......................   07/01/92   06/30/93    0.9936     0.9746 
280051......................   07/01/92   06/30/93    0.9720     0.9915 
280052......................   07/01/92   06/30/93    1.0553     0.9595 
280055......................   07/01/92   06/30/93    0.9297     0.9762 
280056......................   07/01/92   06/30/93    1.0227     0.9821 
280060......................   07/01/92   06/30/93    1.5731     0.9994 
280062......................   07/01/92   06/30/93    1.1412     0.9742 
280064......................   05/01/92   04/30/93    1.0629     0.9643 
280066......................   07/01/92   06/30/93    1.1077     0.9026 
280068......................   04/01/92   03/31/93    0.9310     0.9240 
280070......................   05/01/92   04/30/93    1.1207     0.9620 
280073......................   07/01/92   06/30/93    1.0316     0.9634 
280075......................   07/01/92   06/30/93    1.2022     0.9807 
280077......................   07/01/92   06/30/93    1.2984     0.9824 
280080......................   07/01/92   06/30/93    1.1971     0.9218 
280082......................   03/01/92   02/28/93    1.4528     0.9867 
280084......................   07/01/92   06/30/93    1.0239     0.9663 
280090......................   07/01/92   06/30/93    0.9978     0.9907 
280091......................   07/01/92   06/30/93    1.0909     0.9669 
280092......................   07/01/92   06/30/93    0.9065     0.9200 
280094......................   04/01/92   03/31/93    1.0786     0.9779 
280097......................   07/01/92   06/30/93    0.9617     0.9430 
280098......................   07/01/92   06/30/93    0.9681     0.9616 
280104......................   07/01/92   06/30/93    1.0033     0.9172 
280105......................   07/01/92   06/30/93    1.2791     0.9859 
280110......................   07/01/92   06/30/93    0.9830     0.9581 
280111......................   05/01/92   04/30/93    1.2500     0.9732 
280117......................   07/01/92   06/30/93    1.1003     0.9749 
280118......................   07/01/92   06/30/93    1.0522     0.9831 
290001......................   07/01/92   06/30/93    1.6528     0.9995 
290002......................   04/01/92   03/31/93    0.9373     0.9446 
290007......................   07/01/92   06/30/93    1.8723     0.9931 
290008......................   07/01/92   06/30/93    1.3094     0.9751 
290011......................   07/01/92   06/30/93    0.8714     0.9731 
290012......................   07/01/92   06/30/93    1.3328     0.9776 
290013......................   07/01/92   06/30/93    0.9745     0.8662 
290014......................   07/01/92   06/30/93    1.0135     0.9693 
290015......................   07/01/92   06/30/93    0.9335     0.9512 
290016......................   07/01/92   06/30/93    1.1854     0.9815 
290019......................   07/01/92   06/30/93    1.2347     0.9884 
290020......................   07/01/92   06/30/93    1.3102     0.9526 
290027......................   07/01/92   06/30/93    1.0704     0.9639 
300003......................   06/30/92   06/30/93    1.7362     0.9950 
300010......................   06/30/92   06/30/93    1.2483     0.9631 
300015......................   06/30/92   06/30/93    1.1486     0.9691 
300019......................   06/30/92   06/30/93    1.2454     0.9875 
300029......................   02/29/92   02/28/93    1.2868     0.9841 
300034......................   06/30/92   06/30/93    1.8268     0.9972 
310119......................   07/01/92   06/30/93    1.5219     0.9980 
320001......................   06/30/92   06/30/93    1.4686     0.9895 
320002......................   06/30/92   06/30/93    1.2753     0.9911 
320003......................   06/30/92   06/30/93    1.2376     0.9760 
320004......................   06/30/92   06/30/93    1.1610     0.9826 
320005......................   06/30/92   06/30/93    1.2493     0.9766 
320006......................   06/30/92   06/30/93    1.3841     0.9883 
320009......................   06/30/92   06/30/93    1.5059     0.9967 
320011......................   03/31/92   03/31/93    0.9680     0.9681 
320012......................   03/31/92   03/31/93    1.0149     0.9695 
320013......................   05/31/92   05/31/93    1.0601     0.9646 
320014......................   06/30/92   06/30/93    0.9392     0.9606 
320016......................   06/30/92   06/30/93    1.1359     0.9673 
320017......................   06/30/92   06/30/93    1.2042     0.9791 
320018......................   06/30/92   06/30/93    1.4326     0.9923 
320021......................   03/31/92   03/31/93    1.7378     0.9946 
320022......................   03/31/92   03/31/93    1.2852     0.9686 
320030......................   07/01/92   06/30/93    1.0282     0.9533 
320031......................   06/30/92   06/30/93    0.9178     0.9920 
320032......................   04/01/92   03/31/93    0.9760     0.9440 
320037......................   06/30/92   06/30/93    1.1064     0.9044 
320046......................   03/31/92   03/31/93    1.0802     0.9558 
320065......................   04/01/92   03/31/93    1.1911     0.9721 
320068......................   06/30/92   06/30/93    0.9798     0.9432 
320069......................   06/30/92   06/30/93    1.0300     0.9444 
320074......................   06/30/92   06/30/93    1.1289     0.9824 
320076......................   03/31/92   03/31/93    1.2042     0.9872 
320079......................   03/31/92   03/31/93    1.1822     0.9856 
320080......................   06/01/92   06/01/93    0.6077     0.9811 
330080......................   07/01/92   06/30/93    1.2835     0.9920 
330127......................   07/01/92   06/30/93    1.3479     0.9780 
330128......................   07/01/92   06/30/93    1.4632     0.9892 
330196......................   07/01/92   06/30/93    1.3875     0.9952 
330199......................   07/01/92   06/30/93    1.2686     0.9973 
330202......................   07/01/92   06/30/93    1.3911     0.9650 
330204......................   07/01/92   06/30/93    1.3488     0.9972 
330231......................   07/01/92   06/30/93    1.1203     0.9923 
330240......................   07/01/92   06/30/93    1.3268     0.9965 
330385......................   07/01/92   06/30/93    1.3892     0.9821 
330396......................   07/01/92   06/30/93    1.2395     0.9956 
340014......................   07/01/92   06/30/93    1.6448     0.9996 
340020......................   06/01/92   05/31/93    1.1836     0.9743 
340030......................   07/01/92   06/30/93    1.8932     0.9980 
340032......................   07/01/92   06/30/93    1.2821     0.9878 
340047......................   07/01/92   06/30/93    1.8979     0.9989 
340052......................   07/01/92   06/30/93    1.0331     0.9733 
340061......................   07/01/92   06/30/93    1.6531     0.9994 
340073......................   07/01/92   06/30/93    1.4410     0.9905 
340116......................   05/01/92   04/30/93    1.7855     0.9940 
340136......................   07/01/92   06/30/93    0.9395     0.9847 
340137......................   07/01/92   06/30/93    1.3521     0.9970 
340138......................   07/01/92   06/30/93    1.2125     0.9858 
340143......................   07/01/92   06/30/93    1.3619     0.9853 
340144......................   03/01/92   02/28/93    1.3009     0.9842 
340148......................   07/01/92   06/30/93    1.4328     0.9958 
340153......................   03/01/92   02/28/93    1.8547     0.9922 
340154......................   07/01/92   06/30/93    0.8184     0.9096 
340155......................   07/01/92   06/30/93    1.4549     0.9973 
340158......................   07/01/92   06/30/93    1.0785     0.9681 
340160......................   07/01/92   06/30/93    1.0984     0.9703 
340164......................   06/01/92   05/31/93    1.3438     0.9945 
350001......................   07/01/92   06/30/93    1.0514     0.9757 
350002......................   07/01/92   06/30/93    1.7127     0.9986 
350003......................   07/01/92   06/30/93    1.1517     0.9806 
350005......................   07/01/92   06/30/93    1.1014     0.9550 
350006......................   07/01/92   06/30/93    1.2565     0.9843 
350008......................   07/01/92   06/30/93    1.0572     0.9612 
350009......................   07/01/92   06/30/93    1.1496     0.9754 
350010......................   04/01/92   03/31/93    1.0668     0.9888 
350011......................   07/01/92   06/30/93    1.7301     0.9998 
350012......................   07/01/92   06/30/93    1.0846     0.9788 
350013......................   07/01/92   06/30/93    1.1304     0.9783 
350014......................   07/01/92   06/30/93    1.0976     0.9952 
350017......................   07/01/92   06/30/93    1.3269     0.9884 
350021......................   07/01/92   06/30/93    1.0627     0.9876 
350025......................   07/01/92   06/30/93    0.9811     0.9573 
350029......................   07/01/92   06/30/93    0.9055     0.9685 
350030......................   07/01/92   06/30/93    1.0165     0.9791 
350034......................   07/01/92   06/30/93    0.9431     0.9814 
350035......................   07/01/92   06/30/93    0.9575     0.9347 
350036......................   07/01/92   06/30/93    0.9062     0.9573 
350039......................   07/01/92   06/30/93    1.0077     0.9616 
350043......................   07/01/92   06/30/93    1.5640     0.9978 
350044......................   07/01/92   06/30/93    0.8428     0.9818 
350047......................   07/01/92   06/30/93    1.2006     0.9689 
350049......................   07/01/92   06/30/93    1.1705     0.9849 
350050......................   07/01/92   06/30/93    1.0334     0.9748 
350053......................   07/01/92   06/30/93    0.9177     0.9503 
350056......................   07/01/92   06/30/93    0.9388     0.9407 
350058......................   04/01/92   03/31/93    1.0556     0.9548 
350060......................   07/01/92   06/30/93    0.9732     0.9437 
350061......................   04/01/92   03/31/93    0.9773     0.9809 
350065......................   03/01/92   02/28/93    0.9930     0.9132 
360003......................   06/30/92   06/30/93    1.6387     0.9984 
360006......................   06/30/92   06/30/93    1.7618     0.9993 
360008......................   06/30/92   06/30/93    1.2175     0.9745 
360011......................   06/30/92   06/30/93    1.2324     0.9830 
360014......................   06/30/92   06/30/93    1.1551     0.9670 
360017......................   07/01/92   06/30/93    1.7054     0.9986 
360028......................   07/01/92   06/30/93    1.3681     0.9889 
360029......................   06/30/92   06/30/93    1.1280     0.9862 
360035......................   05/31/92   05/31/93    1.4862     0.9984 
360040......................   06/30/92   06/30/93    1.2404     0.9732 
360048......................   06/30/92   06/30/93    1.8617     0.9973 
360050......................   06/30/92   06/30/93    1.1901     0.9429 
360052......................   07/01/92   06/30/93    1.6911     0.9984 
360054......................   06/30/92   06/30/93    1.2883     0.9778 
360058......................   04/01/92   03/31/93    1.1324     0.9759 
360085......................   07/01/92   06/30/93    1.7255     0.9960 
360090......................   06/30/92   06/30/93    1.2526     0.9920 
360134......................   07/01/92   06/30/93    1.5733     0.9991 
360161......................   06/30/92   06/30/93    1.2240     0.9874 
360178......................   06/30/92   06/30/93    1.2489     0.9758 
360185......................   06/30/92   06/30/93    1.2036     0.9878 
360187......................   06/30/92   06/30/93    1.3570     0.9889 
360238......................   06/30/92   06/30/93    0.8991     0.9719 
360243......................   06/30/92   06/30/93    0.8598     0.9718 
360244......................   05/31/92   05/31/93    0.8028     1.0000 
360245......................   06/30/92   06/30/93    0.9667     0.9637 
370004......................   07/01/92   06/30/93    1.3255     0.9771 
370005......................   07/01/92   06/30/93    1.0698     0.9769 
370008......................   07/01/92   06/30/93    1.3876     0.9984 
370011......................   07/01/92   06/30/93    1.0771     0.9694 
370012......................   07/01/92   06/30/93    0.8856     0.9436 
370013......................   07/01/92   06/30/93    1.6748     0.9997 
370015......................   07/01/92   06/30/93    1.2197     0.9690 
370016......................   07/01/92   06/30/93    1.3893     0.9961 
370019......................   07/01/92   06/30/93    1.2653     0.9823 
370022......................   07/01/92   06/30/93    1.3011     0.9839 
370023......................   07/01/92   06/30/93    1.3601     0.9762 
370026......................   07/01/92   06/30/93    1.4078     0.9874 
370028......................   07/01/92   06/30/93    1.6764     0.9985 
370029......................   07/01/92   06/30/93    1.2087     0.9389 
370030......................   07/01/92   06/30/93    1.2752     0.9644 
370034......................   07/01/92   06/30/93    1.1381     0.9840 
370035......................   07/01/92   06/30/93    1.4667     0.9983 
370036......................   07/01/92   06/30/93    0.9581     0.9620 
370038......................   07/01/92   06/30/93    0.9680     0.9620 
370041......................   07/01/92   06/30/93    1.0112     0.9704 
370042......................   07/01/92   06/30/93    0.8783     0.9609 
370043......................   07/01/92   06/30/93    0.9371     0.9719 
370045......................   07/01/92   06/30/93    1.0500     0.9671 
370046......................   07/01/92   06/30/93    1.0085     0.9089 
370047......................   07/01/92   06/30/93    1.2211     0.9918 
370048......................   07/01/92   06/30/93    1.1440     0.9438 
370056......................   07/01/92   06/30/93    1.4542     0.9957 
370059......................   07/01/92   06/30/93    1.2405     0.9757 
370060......................   07/01/92   06/30/93    1.1472     0.9690 
370063......................   07/01/92   06/30/93    1.1109     0.9908 
370064......................   05/01/92   04/30/93    0.9992     0.9533 
370065......................   07/01/92   06/30/93    1.0637     0.9603 
370072......................   07/01/92   06/30/93    0.9402     0.9647 
370076......................   07/01/92   06/30/93    1.2432     0.9720 
370079......................   07/01/92   06/30/93    0.8918     0.9770 
370080......................   07/01/92   06/30/93    0.9759     0.9499 
370082......................   07/01/92   06/30/93    1.0867     0.9608 
370083......................   04/01/92   03/31/93    1.0187     0.9826 
370084......................   07/01/92   06/30/93    1.0427     0.9570 
370085......................   04/01/92   03/31/93    0.9027     0.9711 
370086......................   07/01/92   06/30/93    1.1989     0.9786 
370089......................   07/01/92   06/30/93    1.2758     0.9752 
370091......................   07/01/92   06/30/93    1.6171     0.9993 
370097......................   04/01/92   03/31/93    1.3427     0.9951 
370099......................   07/01/92   06/30/93    1.1751     0.9792 
370100......................   07/01/92   06/30/93    1.0380     0.9617 
370103......................   07/01/92   06/30/93    0.9206     0.9554 
370112......................   04/01/92   03/31/93    1.0238     0.9618 
370113......................   07/01/92   06/30/93    1.0897     0.9806 
370122......................   04/01/92   03/31/93    1.1641     0.9543 
370123......................   07/01/92   06/30/93    1.2660     0.9923 
370125......................   07/01/92   06/30/93    0.9998     0.9732 
370126......................   07/01/92   06/30/93    1.1368     0.9738 
370131......................   05/01/92   04/30/93    1.0006     0.9792 
370133......................   07/01/92   06/30/93    1.1415     0.9460 
370138......................   07/01/92   06/30/93    1.1038     0.9719 
370139......................   07/01/92   06/30/93    1.0054     0.9845 
370140......................   07/01/92   06/30/93    1.0293     0.9675 
370153......................   07/01/92   06/30/93    1.1787     0.9636 
370154......................   07/01/92   06/30/93    0.9905     0.9424 
370156......................   07/01/92   06/30/93    1.1328     0.9468 
370158......................   07/01/92   06/30/93    1.0416     0.9474 
370163......................   07/01/92   06/30/93    0.8611     0.9537 
370166......................   02/01/92   01/31/93    1.1306     0.9749 
370178......................   07/01/92   06/30/93    1.0305     0.9454 
370183......................   07/01/92   06/30/93    1.1166     0.9635 
370186......................   07/01/92   06/30/93    0.9621     0.9591 
380001......................   07/01/92   06/30/93    1.2869     0.9761 
380002......................   07/01/92   06/30/93    1.1920     0.9778 
380003......................   07/01/92   06/30/93    1.1764     0.9685 
380005......................   07/01/92   06/30/93    1.1703     0.9685 
380007......................   04/01/92   03/31/93    1.7673     0.9951 
380008......................   04/01/92   03/31/93    1.0775     0.9755 
380009......................   07/01/92   06/30/93    1.6977     0.9962 
380011......................   07/01/92   06/30/93    1.2002     0.9900 
380013......................   07/01/92   06/30/93    1.2882     0.9526 
380017......................   04/01/92   03/31/93    1.7694     0.9968 
380023......................   07/01/92   06/30/93    1.2982     0.9719 
380025......................   04/01/92   03/31/93    1.2571     0.9805 
380027......................   07/01/92   06/30/93    1.2605     0.9831 
380031......................   07/01/92   06/30/93    1.0279     0.9841 
380033......................   07/01/92   06/30/93    1.6523     0.9985 
380035......................   05/01/92   04/30/93    1.2898     0.9757 
380037......................   07/01/92   06/30/93    1.2941     0.9667 
380040......................   07/01/92   06/30/93    1.3225     0.9671 
380048......................   07/02/92   06/30/93    1.0469     0.9374 
380062......................   07/01/92   06/30/93    1.0837     0.9014 
380063......................   07/01/92   06/30/93    1.2123     0.9891 
380065......................   07/01/92   06/30/93    1.0024     0.9367 
380066......................   07/01/92   06/30/93    1.3532     0.9659 
380069......................   07/01/92   06/30/93    1.2363     1.0000 
380071......................   05/01/92   04/30/93    1.2746     0.9602 
380072......................   07/01/92   06/30/93    0.9778     0.9510 
380078......................   07/01/92   06/30/93    1.2209     0.9442 
380081......................   07/01/92   06/30/93    1.1384     0.9568 
380083......................   07/01/92   06/30/93    1.1293     0.9751 
380084......................   05/01/92   04/30/93    1.2451     0.9648 
380087......................   07/01/92   06/30/93    1.0345     0.9330 
380088......................   07/01/92   06/30/93    0.9602     0.9762 
380089......................   04/01/92   03/31/93    1.2756     0.9883 
380090......................   07/01/92   06/30/93    1.3049     0.9812 
390001......................   07/01/92   06/30/93    1.3158     0.9937 
390002......................   07/01/92   06/30/93    1.3254     0.9972 
390003......................   07/01/92   06/30/93    1.1874     0.9900 
390004......................   07/01/92   06/30/93    1.3731     0.9966 
390005......................   07/01/92   06/30/93    1.0259     0.9579 
390006......................   07/01/92   06/30/93    1.7515     0.9995 
390007......................   07/01/92   06/30/93    1.2186     0.9871 
390008......................   07/01/92   06/30/93    1.1426     0.9672 
390009......................   07/01/92   06/30/93    1.5933     0.9980 
390010......................   07/01/92   06/30/93    1.2406     0.9878 
390011......................   07/01/92   06/30/93    1.2049     0.9928 
390012......................   07/01/92   06/30/93    1.1965     0.9899 
390013......................   07/01/92   06/30/93    1.1910     0.9911 
390014......................   07/01/92   06/30/93    1.2126     1.0000 
390015......................   07/01/92   06/30/93    1.1682     0.9564 
390016......................   07/01/92   06/30/93    1.1726     0.9914 
390017......................   07/01/92   06/30/93    1.1914     0.9854 
390018......................   07/01/92   06/30/93    1.2140     0.9893 
390019......................   07/01/92   06/30/93    1.1170     0.9789 
390022......................   07/01/92   06/30/93    1.3655     0.9855 
390023......................   07/01/92   06/30/93    1.2347     0.9954 
390024......................   07/01/92   06/30/93    0.7668     0.9962 
390025......................   07/01/92   06/30/93    0.8310     1.0000 
390026......................   07/01/92   06/30/93    1.2454     0.9891 
390027......................   07/01/92   06/30/93    1.8758     0.9967 
390029......................   07/01/92   06/30/93    1.7372     0.9974 
390030......................   07/01/92   06/30/93    1.2064     0.9867 
390031......................   07/01/92   06/30/93    1.1617     0.9864 
390032......................   07/01/92   06/30/93    1.2017     0.9907 
390035......................   07/01/92   06/30/93    1.2954     0.9899 
390036......................   07/01/92   06/30/93    1.2432     0.9893 
390037......................   07/01/92   06/30/93    1.2067     0.9884 
390039......................   07/01/92   06/30/93    1.1414     0.9720 
390040......................   07/01/92   06/30/93    0.9423     0.9892 
390041......................   07/01/92   06/30/93    1.2454     0.9748 
390042......................   07/01/92   06/30/93    1.2906     0.9823 
390043......................   07/01/92   06/30/93    1.0379     0.9802 
390044......................   07/01/92   06/30/93    1.5769     0.9994 
390045......................   07/01/92   06/30/93    1.4113     0.9921 
390046......................   07/01/92   06/30/93    1.4413     0.9987 
390047......................   07/01/92   06/30/93    1.6752     0.9951 
390048......................   07/01/92   06/30/93    1.1553     0.9889 
390049......................   07/01/92   06/30/93    1.5229     0.9988 
390050......................   07/01/92   06/30/93    2.0247     0.9978 
390051......................   07/01/92   06/30/93    2.1329     0.9987 
390052......................   07/01/92   06/30/93    1.1557     0.9740 
390055......................   07/01/92   06/30/93    1.6897     0.9988 
390056......................   07/01/92   06/30/93    1.0886     0.9813 
390057......................   07/01/92   06/30/93    1.2812     0.9916 
390058......................   07/01/92   06/30/93    1.3074     0.9800 
390061......................   07/01/92   06/30/93    1.3415     0.9914 
390062......................   07/01/92   06/30/93    1.1464     0.9870 
390063......................   07/01/92   06/30/93    1.6702     0.9984 
390064......................   07/01/92   06/30/93    1.4676     0.9986 
390065......................   07/01/92   06/30/93    1.2253     0.9789 
390066......................   07/01/92   06/30/93    1.2485     0.9891 
390067......................   07/01/92   06/30/93    1.7101     0.9990 
390068......................   07/01/92   06/30/93    1.3035     0.9911 
390069......................   07/01/92   06/30/93    1.2848     0.9902 
390070......................   07/01/92   06/30/93    1.2512     0.9903 
390071......................   07/01/92   06/30/93    1.0718     0.9811 
390072......................   07/01/92   06/30/93    1.0750     0.9768 
390073......................   07/01/92   06/30/93    1.5510     0.9967 
390074......................   07/01/92   06/30/93    1.1962     0.9917 
390075......................   07/01/92   06/30/93    1.3071     0.9915 
390076......................   07/01/92   06/30/93    1.2633     0.9928 
390078......................   07/01/92   06/30/93    1.0587     0.9872 
390079......................   07/01/92   06/30/93    1.6864     0.9989 
390080......................   07/01/92   06/30/93    1.2043     0.9886 
390081......................   07/01/92   06/30/93    1.2499     0.9942 
390083......................   07/01/92   06/30/93    1.1671     0.9880 
390084......................   07/01/92   06/30/93    1.1506     0.9947 
390086......................   07/01/92   06/30/93    1.1057     0.9657 
390088......................   07/01/92   06/30/93    1.2720     0.9951 
390090......................   07/01/92   06/30/93    1.7434     0.9981 
390091......................   07/01/92   06/30/93    1.1383     0.9889 
390093......................   07/01/92   06/30/93    1.1884     0.9829 
390095......................   07/01/92   06/30/93    1.2039     0.9901 
390096......................   07/01/92   06/30/93    1.2121     0.9919 
390097......................   07/01/92   06/30/93    1.2872     0.9873 
390098......................   07/01/92   06/30/93    1.7055     0.9990 
390100......................   07/01/92   06/30/93    1.6822     0.9983 
390101......................   07/01/92   06/30/93    1.2718     0.9930 
390102......................   07/01/92   06/30/93    1.3139     0.9901 
390103......................   07/01/92   06/30/93    1.0711     0.9902 
390104......................   07/01/92   06/30/93    1.0524     0.9751 
390106......................   07/01/92   06/30/93    0.9731     0.9787 
390107......................   07/01/92   06/30/93    1.1853     0.9878 
390108......................   07/01/92   06/30/93    1.3330     0.9885 
390109......................   07/01/92   06/30/93    1.1771     0.9856 
390110......................   07/01/92   06/30/93    1.5573     0.9955 
390111......................   07/01/92   06/30/93    1.7255     0.9984 
390112......................   07/01/92   06/30/93    1.1518     0.9856 
390113......................   07/01/92   06/30/93    1.2535     0.9889 
390114......................   07/01/92   06/30/93    1.0698     0.9988 
390115......................   07/01/92   06/30/93    1.2912     0.9831 
390116......................   07/01/92   06/30/93    1.1817     0.9872 
390117......................   07/01/92   06/30/93    1.1704     0.9759 
390118......................   07/01/92   06/30/93    1.2138     0.9920 
390119......................   07/01/92   06/30/93    1.3431     0.9975 
390121......................   07/01/92   06/30/93    1.2155     0.9964 
390122......................   07/01/92   06/30/93    1.0559     0.9633 
390123......................   07/01/92   06/30/93    1.2329     0.9910 
390125......................   07/01/92   06/30/93    1.2175     0.9920 
390126......................   07/01/92   06/30/93    1.2517     0.9897 
390127......................   07/01/92   06/30/93    1.1743     0.9927 
390130......................   07/01/92   06/30/93    1.1382     0.9611 
390131......................   07/01/92   06/30/93    1.2000     0.9933 
390132......................   07/01/92   06/30/93    1.1819     0.9953 
390133......................   07/01/92   06/30/93    1.7159     0.9983 
390135......................   07/01/92   06/30/93    1.2360     0.9938 
390136......................   07/01/92   06/30/93    1.2006     0.9934 
390137......................   07/01/92   06/30/93    1.1607     0.9956 
390138......................   07/01/92   06/30/93    1.1752     0.9753 
390139......................   07/01/92   06/30/93    1.4335     0.9977 
390142......................   07/01/92   06/30/93    1.6545     0.9997 
390145......................   07/01/92   06/30/93    1.2364     0.9923 
390146......................   07/01/92   06/30/93    1.2349     0.9798 
390147......................   07/01/92   06/30/93    1.2353     0.9900 
390148......................   07/01/92   06/30/93    1.0990     0.9932 
390149......................   07/01/92   06/30/93    1.1934     0.9839 
390150......................   07/01/92   06/30/93    1.1865     0.9737 
390151......................   07/01/92   06/30/93    1.2403     0.9920 
390152......................   07/01/92   06/30/93    1.0836     0.9936 
390153......................   07/01/92   06/30/93    1.2394     0.9899 
390154......................   07/01/92   06/30/93    1.1601     0.9766 
390155......................   07/01/92   06/30/93    1.2085     0.9821 
390156......................   07/01/92   06/30/93    1.3432     0.9920 
390157......................   07/01/92   06/30/93    1.2125     0.9912 
390158......................   07/01/92   06/30/93    1.2654     0.9908 
390159......................   07/01/92   06/30/93    1.3033     0.9838 
390160......................   07/01/92   06/30/93    1.1741     0.9834 
390161......................   07/01/92   06/30/93    1.2248     0.9752 
390162......................   07/01/92   06/30/93    1.2829     0.9963 
390163......................   07/01/92   06/30/93    1.1542     0.9879 
390164......................   07/01/92   06/30/93    2.1777     0.9916 
390166......................   07/01/92   06/30/93    1.1112     0.9761 
390167......................   07/01/92   06/30/93    1.2712     0.9908 
390168......................   07/01/92   06/30/93    1.1686     0.9843 
390170......................   07/01/92   06/30/93    1.7674     0.9989 
390171......................   07/01/92   06/30/93    1.1298     0.9861 
390172......................   07/01/92   06/30/93    1.2168     0.9880 
390173......................   07/01/92   06/30/93    1.1585     0.9830 
390174......................   07/01/92   06/30/93    1.6330     0.9986 
390176......................   07/01/92   06/30/93    1.1420     0.9904 
390178......................   07/01/92   06/30/93    1.2913     0.9886 
390179......................   07/01/92   06/30/93    1.2548     0.9940 
390180......................   07/01/92   06/30/93    1.4527     0.9955 
390181......................   07/01/92   06/30/93    1.0497     0.9853 
390183......................   07/01/92   06/30/93    1.1095     0.9709 
390184......................   07/01/92   06/30/93    1.1507     0.9767 
390185......................   07/01/92   06/30/93    1.1334     0.9772 
390189......................   07/01/92   06/30/93    1.1572     0.9791 
390191......................   07/01/92   06/30/93    1.0685     0.9766 
390192......................   07/01/92   06/30/93    1.1040     0.9779 
390193......................   07/01/92   06/30/93    1.1559     0.9955 
390194......................   07/01/92   06/30/93    1.1247     0.9810 
390195......................   07/01/92   06/30/93    1.7174     0.9990 
390197......................   07/01/92   06/30/93    1.2667     0.9937 
390198......................   07/01/92   06/30/93    1.2078     0.9952 
390199......................   07/01/92   06/30/93    1.2579     0.9800 
390200......................   07/01/92   06/30/93    1.0244     0.9554 
390201......................   07/01/92   06/30/93    1.2861     0.9852 
390203......................   07/01/92   06/30/93    1.2389     0.9916 
390204......................   07/01/92   06/30/93    1.2899     0.9887 
390205......................   07/01/92   06/30/93    1.2691     0.9811 
390206......................   07/01/92   06/30/93    1.3436     0.9935 
390209......................   07/01/92   06/30/93    0.9599     0.9509 
390211......................   07/01/92   06/30/93    1.2153     0.9880 
390213......................   07/01/92   06/30/93    1.0399     0.9892 
390215......................   07/01/92   06/30/93    1.1271     0.9861 
390217......................   07/01/92   06/30/93    1.2120     0.9838 
390219......................   07/01/92   06/30/93    1.2197     0.9767 
390220......................   07/01/92   06/30/93    1.1666     0.9877 
390222......................   07/01/92   06/30/93    1.2312     0.9919 
390223......................   07/01/92   06/30/93    1.7151     0.9969 
390225......................   07/01/92   06/30/93    1.2323     0.9800 
390226......................   07/01/92   06/30/93    1.6795     0.9987 
390228......................   07/01/92   06/30/93    1.2042     0.9931 
390229......................   07/01/92   06/30/93    1.4986     0.9944 
390231......................   07/01/92   06/30/93    1.3378     0.9946 
390233......................   07/01/92   06/30/93    1.3214     0.9917 
390235......................   07/01/92   06/30/93    1.8300     0.9969 
390236......................   07/01/92   06/30/93    1.2787     0.9826 
390238......................   07/01/92   06/30/93    1.0505     0.9616 
390242......................   07/01/92   06/30/93    1.3191     0.9910 
390244......................   07/01/92   06/30/93    0.8874     0.9454 
390245......................   07/01/92   06/30/93    1.3451     0.9920 
390246......................   07/01/92   06/30/93    1.2021     0.9785 
390247......................   07/01/92   06/30/93    1.0646     0.9865 
390249......................   04/01/92   04/01/93    1.0138     0.9810 
390252......................   07/01/92   06/30/93    0.4732     1.0000 
390256......................   07/01/92   06/30/93    1.7536     0.9983 
390258......................   07/01/92   06/30/93    1.2830     0.9938 
390260......................   07/01/92   06/30/93    1.2642     0.9889 
390261......................   07/01/92   06/30/93    2.9828     0.7079 
390262......................   07/01/92   06/30/93    1.8488     0.9966 
390263......................   07/01/92   06/30/93    1.5023     0.9920 
390265......................   07/01/92   06/30/93    1.2943     0.9905 
390266......................   07/01/92   06/30/93    1.1197     0.9815 
390267......................   07/01/92   06/30/93    1.1940     0.9908 
390268......................   07/01/92   06/30/93    1.2930     0.9887 
390270......................   07/01/92   06/30/93    1.3133     0.9892 
390275......................   07/01/92   06/30/93    0.4866     1.0000 
390277......................   07/01/92   06/30/93    0.5078     0.9911 
390278......................   07/01/92   06/30/93    0.8636     0.9790 
400001......................   07/01/92   06/30/93    1.1794     0.9988 
400003......................   07/01/92   06/30/93    1.1670     0.9984 
400004......................   07/01/92   06/30/93    1.1947     0.9989 
400006......................   07/01/92   06/30/93    1.2191     0.9980 
400009......................   07/01/92   06/30/93    0.9768     0.9993 
400012......................   07/01/92   06/30/93    1.0846     0.9989 
400013......................   04/01/92   03/31/93    1.0349     0.9979 
400015......................   07/01/92   06/30/93    1.2595     0.9993 
400018......................   04/01/92   03/31/93    1.2494     0.9971 
400021......................   06/01/92   05/31/93    1.3496     0.9992 
400026......................   07/01/92   06/30/93    0.9066     0.9865 
400027......................   04/01/92   03/31/93    1.1394     0.9991 
400028......................   07/01/92   06/30/93    1.0538     1.0000 
400031......................   07/01/92   06/30/93    1.0346     0.9803 
400044......................   07/01/92   06/30/93    1.1728     0.9962 
400048......................   07/01/92   06/30/93    1.0302     0.9968 
400061......................   07/01/92   06/30/93    1.6316     0.9982 
400079......................   07/01/92   06/30/93    1.2840     0.9969 
400088......................   05/01/92   04/30/93    0.5187     1.0000 
400102......................   07/01/92   06/30/93    1.1382     0.9970 
400103......................   07/01/92   06/30/93    1.4768     0.9986 
400104......................   07/01/92   06/30/93    1.2669     0.9986 
400105......................   07/01/92   06/30/93    1.1923     0.9983 
400110......................   07/01/92   06/30/93    1.1652     0.9963 
400114......................   07/01/92   06/30/93    1.0306     0.9981 
400121......................   07/01/92   06/30/93    0.5303     1.0000 
400123......................   06/01/92   06/30/93    1.1224     0.9951 
420002......................   05/01/92   04/30/93    1.3307     0.9861 
420004......................   07/01/92   06/30/93    1.9096     0.9975 
420006......................   07/01/92   06/30/93    1.2234     0.9846 
420035......................   07/01/92   06/30/93    0.7510     0.9824 
420053......................   07/01/92   06/30/93    1.0757     0.9710 
420062......................   03/01/92   02/28/93    1.4748     0.9643 
420079......................   04/01/92   03/31/93    1.5133     0.9991 
420080......................   07/01/92   06/30/93    1.2817     0.9644 
420082......................   03/01/92   02/28/93    1.3818     0.9928 
420083......................   07/01/92   06/30/93    1.2119     0.9930 
420084......................   07/01/92   06/30/93    1.2160     1.0000 
420085......................   05/01/92   04/30/93    1.2855     0.9678 
430004......................   03/01/92   02/28/93    1.1441     0.9718 
430005......................   06/01/92   05/31/93    1.2176     0.9706 
430007......................   07/01/92   06/30/93    1.1774     0.9523 
430010......................   07/01/92   06/30/93    1.1655     0.9843 
430011......................   07/01/92   06/30/93    1.3364     0.9701 
430012......................   07/01/92   06/30/93    1.3191     0.9832 
430018......................   07/01/92   06/30/93    0.9192     0.9502 
430022......................   03/01/92   02/28/93    0.9614     0.9330 
430025......................   03/01/92   02/28/93    0.9854     0.9421 
430027......................   05/01/92   04/30/93    1.7075     0.9982 
430029......................   05/01/92   04/30/93    1.0371     0.9550 
430033......................   07/01/92   06/30/93    1.0833     0.9717 
430037......................   07/01/92   06/30/93    0.9511     0.9742 
430039......................   06/01/92   05/31/93    1.0682     0.9918 
430042......................   02/01/92   01/31/93    1.0647     0.9741 
430054......................   05/01/92   04/30/93    0.9771     0.9601 
430062......................   06/01/92   05/31/93    0.8533     0.9719 
430066......................   07/01/92   06/30/93    0.9785     0.9694 
430077......................   07/01/92   06/30/93    1.5036     0.9971 
440001......................   07/01/92   06/30/93    1.0915     0.9766 
440002......................   07/01/92   06/30/93    1.6048     0.9983 
440003......................   06/01/92   05/31/93    1.0884     0.9871 
440006......................   07/01/92   06/30/93    1.3765     0.9978 
440007......................   07/01/92   06/30/93    1.0196     0.9665 
440009......................   07/01/92   06/30/93    1.0404     0.9718 
440010......................   07/01/92   06/30/93    0.9436     0.9474 
440011......................   07/01/92   06/30/93    1.2341     0.9873 
440012......................   07/01/92   06/30/93    1.3046     0.9983 
440014......................   07/01/92   06/30/93    1.0571     0.9538 
440015......................   07/02/92   06/30/93    1.5169     0.9992 
440016......................   07/01/92   06/30/93    0.9759     0.9825 
440017......................   07/01/92   06/30/93    1.5511     0.9991 
440019......................   07/01/92   06/30/93    1.5567     0.9996 
440022......................   07/01/92   06/30/93    1.1395     0.9677 
440023......................   07/01/92   06/30/93    0.9822     0.9635 
440024......................   07/01/92   06/30/93    1.3110     0.9815 
440025......................   07/01/92   06/30/93    1.1388     0.9832 
440029......................   07/01/92   06/30/93    1.2412     0.9900 
440030......................   07/01/92   06/30/93    1.1445     0.9627 
440031......................   07/01/92   06/30/93    1.0411     0.9732 
440032......................   07/01/92   06/30/93    0.9645     0.9682 
440033......................   07/01/92   06/30/93    1.0660     0.9687 
440035......................   07/01/92   06/30/93    1.2612     0.9866 
440038......................   07/01/92   06/30/93    1.0009     0.9369 
440039......................   07/01/92   06/30/93    1.5805     0.9968 
440040......................   07/01/92   06/30/93    0.9473     0.9616 
440051......................   07/01/92   06/30/93    0.9295     0.9836 
440052......................   07/01/92   06/30/93    1.1913     0.9783 
440053......................   07/01/92   06/30/93    1.2054     0.9794 
440054......................   07/01/92   06/30/93    1.0314     0.9846 
440056......................   07/01/92   06/30/93    1.0915     0.9703 
440057......................   07/01/92   06/30/93    1.0077     0.9791 
440059......................   07/01/92   06/30/93    1.1741     0.9641 
440060......................   07/01/92   06/30/93    1.2047     0.9788 
440063......................   07/01/92   06/30/93    1.5053     0.9974 
440065......................   07/01/92   06/30/93    1.1591     0.9703 
440069......................   07/01/92   06/30/93    1.1398     0.9964 
440070......................   07/01/92   06/30/93    0.9806     0.9282 
440073......................   07/01/92   06/30/93    1.3145     0.9863 
440082......................   07/01/92   06/30/93    1.8562     0.9994 
440084......................   07/01/92   06/30/93    1.1718     0.9778 
440090......................   07/01/92   06/30/93    1.0750     0.9611 
440102......................   07/01/92   06/30/93    1.0764     0.9717 
440104......................   07/01/92   06/30/93    1.5395     0.9989 
440109......................   07/01/92   06/30/93    1.1185     0.9452 
440111......................   07/01/92   06/30/93    1.2333     0.9885 
440114......................   07/01/92   06/30/93    1.0445     0.9732 
440115......................   07/01/92   06/30/93    1.0482     0.9743 
440121......................   07/01/92   06/30/93    1.0026     0.9839 
440130......................   07/01/92   06/30/93    1.1325     0.9840 
440131......................   07/01/92   06/30/93    1.0631     0.9661 
440132......................   07/01/92   06/30/93    1.1203     0.9618 
440133......................   07/01/92   06/30/93    1.4404     0.9987 
440135......................   07/01/92   06/30/93    1.4303     0.9877 
440137......................   07/01/92   06/30/93    1.0117     0.9667 
440141......................   07/01/92   06/30/93    1.1723     0.9761 
440142......................   07/01/92   06/30/93    1.0742     0.9772 
440143......................   06/01/92   06/01/93    1.0227     0.9668 
440144......................   06/01/92   06/01/93    1.2084     0.9678 
440147......................   07/01/92   06/30/93    1.0362     1.0000 
440151......................   05/01/92   04/30/93    1.2788     0.9627 
440152......................   07/01/92   06/30/93    1.5562     0.9942 
440153......................   07/01/92   06/30/93    1.2164     0.9693 
440156......................   04/01/92   03/31/93    1.5440     0.9970 
440160......................   07/01/92   06/30/93    0.8799     0.9809 
440166......................   07/01/92   06/30/93    1.4280     0.9985 
440170......................   06/01/92   06/01/93    1.3149     0.9890 
440175......................   03/01/92   02/28/93    1.1675     0.9506 
440176......................   03/01/92   02/28/93    1.2951     0.9934 
440180......................   07/01/92   06/30/93    1.0799     0.9629 
440183......................   03/01/92   02/28/93    1.5257     0.9993 
440187......................   06/01/92   06/01/93    1.1850     0.9666 
440192......................   05/01/92   04/30/93    1.1088     0.9263 
440193......................   06/01/92   05/31/93    1.2509     0.9815 
440197......................   06/01/92   05/31/93    1.3517     0.9878 
440206......................   07/01/92   06/30/93    0.9041     0.9558 
450004......................   07/01/92   06/30/93    1.1536     0.9905 
450007......................   07/01/92   06/30/93    1.2710     0.9788 
450008......................   04/01/92   03/31/93    1.3600     0.9893 
450021......................   07/01/92   06/30/93    1.8807     0.9992 
450023......................   07/01/92   06/30/93    1.3891     0.9977 
450029......................   07/01/92   06/30/93    1.4218     0.9957 
450031......................   04/01/92   03/31/93    1.7666     0.9949 
450034......................   07/01/92   06/30/93    1.5010     0.9989 
450035......................   07/01/92   06/30/93    1.4778     0.9992 
450040......................   07/01/92   06/30/93    1.5594     0.9989 
450042......................   07/01/92   06/30/93    1.6063     0.9962 
450043......................   07/01/92   06/30/93    1.4497     0.9985 
450044......................   07/01/92   06/30/93    1.5926     0.9985 
450051......................   07/01/92   06/30/93    1.5383     0.9988 
450052......................   07/01/92   06/30/93    1.1133     0.9811 
450056......................   07/01/92   06/30/93    1.6473     0.9992 
450060......................   07/01/92   06/30/93    1.3819     0.9890 
450064......................   06/01/92   05/31/93    1.5531     0.9990 
450078......................   04/01/92   03/31/93    0.9998     0.9849 
450079......................   07/01/92   06/30/93    1.4714     0.9974 
450090......................   07/01/92   06/30/93    1.1003     0.9837 
450092......................   07/01/92   06/30/93    1.1585     0.9781 
450096......................   07/01/92   06/30/93    1.4190     0.9975 
450099......................   05/01/92   04/30/93    1.2020     0.9831 
450102......................   07/01/92   06/30/93    1.6760     0.9971 
450109......................   07/01/92   06/30/93    1.1462     0.9888 
450113......................   06/01/92   05/31/93    1.2476     0.9897 
450115......................   04/01/92   03/31/93    1.0520     0.9824 
450126......................   03/01/92   02/28/93    1.3964     0.9704 
450128......................   07/01/92   06/30/93    1.2333     0.9797 
450143......................   07/01/92   06/30/93    1.0248     0.9524 
450147......................   07/01/92   06/30/93    1.3569     0.9958 
450157......................   03/01/92   02/28/93    1.0234     0.9783 
450170......................   07/01/92   06/30/93    1.1074     0.9740 
450177......................   07/01/92   06/30/93    1.1283     0.9712 
450184......................   07/01/92   06/30/93    1.4709     0.9958 
450188......................   04/01/92   03/31/93    1.0314     0.9639 
450190......................   07/01/92   06/30/93    1.1661     0.9903 
450192......................   06/01/92   05/31/93    1.0854     0.9690 
450217......................   07/01/92   06/30/93    1.1092     0.9542 
450219......................   06/01/92   05/31/93    1.0746     0.9641 
450221......................   07/01/92   06/30/93    1.0233     0.9837 
450222......................   04/01/92   03/31/93    1.7222     0.9959 
450235......................   07/01/92   06/30/93    0.9603     0.9701 
450241......................   06/01/92   05/31/93    0.8591     0.9336 
450258......................   06/01/92   05/31/93    1.1491     0.9532 
450269......................   05/01/92   04/30/93    1.0450     0.9543 
450270......................   04/01/92   03/31/93    1.0889     0.9201 
450278......................   07/01/92   06/30/93    1.0790     0.9728 
450288......................   04/01/92   03/31/93    1.1797     0.9807 
450289......................   04/01/92   03/31/93    1.3291     0.9958 
450307......................   05/01/92   04/30/93    1.0674     0.9313 
450309......................   06/01/92   05/31/93    1.0568     0.9369 
450324......................   07/01/92   06/30/93    1.5651     0.9968 
450325......................   07/01/92   06/30/93    1.2791     0.9739 
450341......................   04/01/92   03/31/93    0.9691     0.9596 
450349......................   07/01/92   06/30/93    1.1059     0.9719 
450362......................   07/01/92   06/30/93    1.0115     0.9528 
450365......................   07/01/92   06/30/93    0.8899     0.9805 
450372......................   07/01/92   06/30/93    1.3187     0.9695 
450376......................   07/01/92   06/30/93    1.4758     0.9966 
450379......................   06/01/92   05/31/93    1.5684     0.9953 
450381......................   04/01/92   03/31/93    0.9276     0.9707 
450393......................   03/01/92   02/28/93    1.2805     0.9932 
450395......................   07/01/92   06/30/93    1.0546     0.9566 
450400......................   02/01/92   01/31/93    1.0925     0.9695 
450411......................   07/01/92   06/30/93    0.9917     0.9469 
450447......................   05/01/92   04/30/93    1.3034     0.9735 
450451......................   07/01/92   06/30/93    1.0099     0.9515 
450457......................   06/01/92   05/31/93    1.6648     0.9996 
450460......................   07/01/92   06/30/93    1.0118     0.9677 
450467......................   07/01/92   06/30/93    1.0175     0.9819 
450469......................   07/01/92   06/30/93    1.2687     0.9951 
450489......................   04/01/92   03/31/93    0.9594     0.9315 
450497......................   07/01/92   06/30/93    1.1800     0.9834 
450498......................   07/01/92   06/30/93    1.0240     0.9627 
450508......................   07/01/92   06/30/93    1.5649     0.9956 
450517......................   07/01/92   06/30/93    0.9498     0.9863 
450537......................   06/01/92   05/31/93    1.3479     0.9827 
450539......................   05/16/92   05/31/93    1.1952     0.9579 
450545......................   07/01/92   06/30/93    1.2387     0.9911 
450551......................   04/01/92   03/31/93    1.0443     0.9747 
450563......................   07/01/92   06/30/93    1.2322     0.9864 
450573......................   07/01/92   06/30/93    0.9766     0.9506 
450586......................   07/01/92   06/30/93    1.0357     0.9867 
450603......................   04/01/92   03/31/93    0.7893     0.9303 
450610......................   04/01/92   03/31/93    1.4347     0.9970 
450630......................   05/01/92   04/30/93    1.5186     0.9976 
450638......................   06/01/92   05/31/93    1.5470     0.9973 
450641......................   07/01/92   06/30/93    0.9676     0.9796 
450643......................   07/01/92   06/30/93    1.1223     0.9933 
450649......................   07/01/92   06/30/93    1.0213     0.9434 
450651......................   04/01/92   03/31/93    1.8800     0.9972 
450653......................   05/01/92   04/30/93    1.2438     0.9642 
450658......................   07/01/92   06/30/93    1.0017     0.9797 
450660......................   03/01/92   02/28/93    1.6422     0.9964 
450665......................   07/01/92   06/30/93    0.9885     0.9778 
450668......................   06/01/92   06/01/93    1.5576     0.9960 
450669......................   07/01/92   06/30/93    1.2616     0.9860 
450670......................   07/01/92   06/30/93    1.2937     0.9943 
450674......................   03/01/92   02/28/93    0.8404     0.9908 
450675......................   04/01/92   03/31/93    1.3580     0.9976 
450678......................   06/01/92   06/01/93    1.5359     0.9974 
450681......................   07/01/92   06/30/93    1.5801     0.9984 
450683......................   05/01/92   04/30/93    1.3217     0.9745 
450684......................   07/01/92   06/30/93    1.2727     0.9866 
450688......................   06/01/92   05/31/93    1.3938     0.9845 
450691......................   07/01/92   06/30/93    1.5692     0.9841 
450704......................   07/01/92   06/30/93    1.3992     0.9858 
450709......................   07/01/92   06/30/93    1.1264     0.9956 
450723......................   07/01/92   06/30/93    1.2706     0.9913 
450730......................   06/01/92   06/01/93    1.4356     0.9930 
450732......................   07/01/92   06/30/93    1.1813     0.9651 
450743......................   07/01/92   06/30/93    1.3875     0.9890 
450749......................   07/01/92   06/30/93    1.0661     0.9742 
450750......................   07/01/92   06/30/93    0.9770     0.9799 
450755......................   06/01/92   05/31/93    1.1608     0.9720 
450758......................   06/01/92   06/01/93    1.9720     0.9459 
450765......................   01/01/92   01/07/93    0.9849     0.9858 
450768......................   02/01/92   01/30/93    0.9866     0.9561 
450770......................   07/01/92   06/30/93    1.0799     0.9963 
450777......................   05/01/92   04/30/93    0.9897     0.9629 
460003......................   06/01/92   05/31/93    1.5671     0.9974 
460005......................   06/01/92   05/31/93    1.3665     0.9832 
460008......................   03/01/92   02/28/93    1.3637     0.9765 
460009......................   07/01/92   06/30/93    1.6864     0.9970 
460030......................   02/01/92   01/31/93    1.1552     0.9708 
460032......................   07/01/92   06/30/93    0.9708     0.9444 
460035......................   07/01/92   06/30/93    0.9262     0.9665 
460037......................   07/01/92   06/30/93    0.9978     0.9747 
490007......................   05/01/92   04/30/93    2.0064     0.9987 
490009......................   07/01/92   06/30/93    1.6661     0.9974 
490010......................   06/30/92   06/30/93    1.0830     0.9734 
490022......................   07/01/92   06/30/93    1.2419     0.9896 
490028......................   04/01/92   03/31/93    1.3215     0.9912 
490032......................   07/01/92   06/30/93    1.6777     0.9980 
490035......................   07/01/92   06/30/93    1.1231     0.9911 
490043......................   07/01/92   06/30/93    1.2379     0.9886 
490046......................   05/01/92   04/30/93    1.4315     0.9886 
490053......................   07/01/92   06/30/93    1.2728     0.9687 
490090......................   07/01/92   06/30/93    1.2207     0.9874 
490093......................   05/01/92   04/30/93    1.2643     0.9964 
490094......................   05/01/92   04/30/93    1.2157     0.9983 
490098......................   07/01/92   06/30/93    1.3142     0.9800 
490104......................   07/01/92   06/30/93    0.9386     0.9832 
490105......................   07/01/92   06/30/93    0.6961     1.0000 
490106......................   07/01/92   06/30/93    0.8337     0.9874 
490108......................   07/01/92   06/30/93    0.8341     0.9798 
490109......................   07/01/92   06/30/93    0.8459     0.9903 
490111......................   07/01/92   06/30/93    1.1800     0.9752 
490114......................   07/01/92   06/30/93    1.0656     0.9806 
490118......................   04/01/92   03/31/93    1.6885     0.9993 
490119......................   05/01/92   04/30/93    1.3510     0.9881 
490120......................   07/01/92   06/30/93    1.3402     0.9882 
490123......................   04/01/92   03/31/93    1.1586     0.9662 
490124......................   07/01/92   06/30/93    1.1936     0.9958 
490127......................   07/01/92   06/30/93    1.0392     0.9828 
490131......................   07/01/92   06/30/93    0.9756     0.9578 
500008......................   07/01/92   06/30/93    1.9026     0.9968 
500021......................   06/30/92   06/30/93    1.4523     0.9743 
500023......................   06/30/92   06/30/93    1.2184     0.9738 
500030......................   07/01/92   06/30/93    1.3254     0.9898 
500039......................   04/30/92   04/30/93    1.2836     0.9930 
500041......................   07/01/92   06/30/93    1.2695     0.9824 
500064......................   06/30/92   06/30/93    1.5758     0.9852 
500086......................   07/01/92   06/30/93    1.3654     0.9875 
500104......................   04/01/92   03/31/93    1.2517     0.9747 
500108......................   06/30/92   06/30/93    1.6495     0.9976 
500127......................   07/01/92   06/30/93    0.6565     0.9917 
500137......................   05/31/92   05/31/93    0.7430     0.9842 
500139......................   02/01/92   01/31/93    1.3796     0.9802 
500141......................   06/30/92   06/30/93    1.3345     0.9851 
510015......................   07/01/92   06/30/93    0.9473     0.9613 
510020......................   07/01/92   06/30/93    1.0912     0.9765 
510023......................   07/01/92   06/30/93    1.0458     0.9886 
510024......................   07/01/92   06/30/93    1.3772     0.9970 
510025......................   07/01/92   06/30/93    0.9382     0.9591 
510026......................   07/01/92   06/30/93    0.9843     0.9722 
510027......................   07/01/92   06/30/93    1.0453     0.9606 
510035......................   06/30/92   06/30/93    0.9781     0.9602 
510036......................   07/01/92   06/30/93    0.9717     0.9456 
510043......................   07/01/92   06/30/93    1.0250     0.9721 
510046......................   07/01/92   06/30/93    1.2387     0.9936 
510058......................   07/01/92   06/30/93    1.2040     0.9941 
510061......................   07/01/92   06/30/93    1.0451     0.9662 
510062......................   06/30/92   06/30/93    1.2588     0.9789 
510070......................   06/01/92   05/31/93    1.1771     0.9895 
510071......................   07/01/92   06/30/93    1.2677     0.9883 
510072......................   07/01/92   06/30/93    1.0404     0.9784 
510080......................   07/01/92   06/30/93    1.0998     0.9741 
510086......................   07/01/92   06/30/93    1.0268     0.9817 
520004......................   07/01/92   06/30/93    1.2064     0.9952 
520006......................   02/29/92   02/28/93    1.0614     0.9635 
520007......................   07/01/92   06/30/93    1.0769     0.9773 
520009......................   07/01/92   06/30/93    1.6359     0.9975 
520011......................   03/31/92   03/31/93    1.1708     0.9771 
520013......................   07/01/92   06/30/93    1.3203     0.9896 
520015......................   07/01/92   06/30/93    1.1714     0.9576 
520016......................   07/01/92   06/30/93    1.0954     0.9568 
520017......................   07/01/92   06/30/93    1.2136     0.9805 
520025......................   07/01/92   06/30/93    1.1169     0.9771 
520027......................   07/01/92   06/30/93    1.1780     0.9706 
520028......................   07/01/92   06/30/93    1.3518     0.9867 
520030......................   07/01/92   06/30/93    1.6482     0.9950 
520040......................   07/01/92   06/30/93    1.3951     0.9949 
520041......................   07/01/92   06/30/93    1.2040     0.9606 
520044......................   07/01/92   06/30/93    1.3641     0.9842 
520047......................   03/31/92   03/31/93    0.9911     0.9423 
520051......................   07/01/92   06/30/93    1.9318     0.9991 
520063......................   07/01/92   06/30/93    1.1796     0.9754 
520066......................   07/01/92   06/30/93    1.2811     0.9883 
520068......................   07/01/92   06/30/93    0.9665     0.9626 
520074......................   07/01/92   06/30/93    1.1130     0.9379 
520075......................   07/01/92   06/30/93    1.4633     0.9965 
520076......................   07/01/92   06/30/93    1.1256     0.9816 
520087......................   04/12/92   04/11/93    1.5710     0.9988 
520088......................   07/01/92   06/30/93    1.2548     0.9640 
520091......................   03/31/92   03/31/93    1.2669     0.9686 
520092......................   04/30/92   04/30/93    1.1171     0.9635 
520094......................   07/01/92   06/30/93    1.1033     0.9756 
520096......................   07/01/92   06/30/93    1.5581     0.9973 
520097......................   07/01/92   06/30/93    1.3035     0.9884 
520098......................   07/01/92   06/30/93    1.7623     0.9963 
520111......................   07/01/92   06/30/93    1.1029     0.9636 
520112......................   07/01/92   06/30/93    1.1911     0.9584 
520114......................   07/01/92   06/30/93    1.1236     0.9674 
520120......................   07/01/92   06/30/93    1.0263     0.9769 
520121......................   07/01/92   06/30/93    0.9624     0.9611 
520122......................   07/01/92   06/30/93    1.0255     0.9772 
520124......................   03/31/92   03/31/93    1.1282     0.9533 
520134......................   07/01/92   06/30/93    1.0756     0.9643 
520136......................   07/01/92   06/30/93    1.5163     0.9979 
520141......................   07/01/92   06/30/93    1.1473     0.9573 
520142......................   07/01/92   06/30/93    0.9741     0.9726 
520151......................   02/29/92   02/28/93    1.1121     0.9570 
520159......................   03/31/92   03/31/93    0.8914     0.9376 
520161......................   03/31/92   03/31/93    1.0449     0.9532 
520170......................   07/01/92   06/30/93    1.2388     0.9838 
520176......................   07/01/92   06/30/93    0.7693     0.9956 
520178......................   07/01/92   06/30/93    1.1122     0.9777 
530001......................   06/01/92   06/01/93    1.4372     0.9965 
530002......................   07/01/92   06/30/93    1.1496     0.9787 
530003......................   07/01/92   06/30/93    0.8946     0.9557 
530004......................   07/01/92   06/30/93    0.9446     0.9597 
530005......................   07/01/92   06/30/93    1.0813     0.9601 
530006......................   07/01/92   06/30/93    1.1766     0.9805 
530009......................   07/01/92   06/30/93    1.0409     0.9861 
530011......................   07/01/92   06/30/93    1.1362     0.9732 
530012......................   07/01/92   06/30/93    1.6426     0.9980 
530014......................   07/01/92   06/30/93    1.2638     0.9942 
530015......................   07/01/92   06/30/93    1.1491     0.9822 
530016......................   07/01/92   06/30/93    1.1933     0.9675 
530017......................   07/01/92   06/30/93    0.9340     0.9600 
530018......................   07/01/92   06/30/93    0.9974     0.9544 
530019......................   07/01/92   06/30/93    1.0261     0.9833 
530022......................   07/01/92   06/30/93    1.1367     0.9395 
530025......................   07/01/92   06/30/93    1.2699     0.9846 
530026......................   07/01/92   06/30/93    1.0857     0.9567 
530027......................   07/01/92   06/30/93    0.9347     0.9304 
530029......................   07/01/92   06/30/93    0.9317     0.8996 
530031......................   07/01/92   06/30/93    0.8887     0.9511 
------------------------------------------------------------------------

Appendix A--Regulatory Impact Analysis

I. Introduction

    We generally prepare a regulatory flexibility analysis that is 
consistent with the Regulatory Flexibility Act (RFA)(5 U.S.C. 601 
through 612), unless the Secretary certifies that a proposed rule would 
not have a significant economic impact on a substantial number of small 
entities. For purposes of the RFA, we consider all hospitals to be 
small entities.
    Also, section 1102(b) of the Act requires the Secretary to prepare 
a regulatory impact analysis for any proposed rule that may have a 
significant impact on the operations of a substantial number of small 
rural hospitals. Such an analysis must conform to the provisions of 
section 603 of the RFA. With the exception of hospitals located in 
certain New England counties, for purposes of section 1102(b) of the 
Act, we define a small rural hospital as a hospital with fewer than 100 
beds that is located outside of a Metropolitan Statistical Area or New 
England County Metropolitan Area.
    Section 601(g) of the Social Security Amendments of 1983 (Pub. L. 
98-21) designated hospitals in certain New England counties as 
belonging to the adjacent New England County Metropolitan Area. Thus, 
for purposes of the prospective payment system, we classified these 
hospitals as urban hospitals.
    It is clear that the changes being proposed in this document would 
affect both a substantial number of small rural hospitals as well as 
other classes of hospitals, and the effects on some may be significant. 
Therefore, the discussion below, in combination with the rest of this 
proposed rule, constitutes a combined regulatory impact analysis and 
regulatory flexibility analysis.

II. Objectives

    The primary objective of the prospective payment system is to 
create incentives for hospitals to operate efficiently and minimize 
unnecessary costs and at the same time ensure that payments are 
sufficient to adequately compensate hospitals for their legitimate 
costs. In addition, we share national goals of deficit reduction and 
restraints on government spending in general.
    We believe the proposed changes would further each of these goals 
while maintaining the financial viability of the hospital industry and 
ensuring access to high quality care for beneficiaries. We expect that 
these proposed changes would ensure that the outcomes of this payment 
system are, in general, reasonable and equitable while avoiding or 
minimizing unintended adverse consequences.

III. Limitations of Our Analysis

    As has been the case in previously published regulatory impact 
analyses, the following quantitative analysis presents the projected 
effects of our proposed policy changes, as well as statutory changes 
effective for FY 1995, on various hospital groups. We estimate the 
effects of each policy change by estimating payments while holding all 
other payment variables constant. We use the best data available, but 
we do not attempt to predict behavioral responses to our policy 
changes, and we do not make adjustments for future changes in such 
variables as admissions, lengths of stay, or case mix.
    As we have done in previous proposed rules, we are soliciting 
comments and information about the anticipated effects of these changes 
on the prospective payment system, and our methodology for estimating 
them.

IV. Hospitals Included In and Excluded From the Prospective Payment 
System

    The prospective payment systems for hospital inpatient operating 
and capital-related costs encompass nearly all general, short-term, 
acute care hospitals that participate in the Medicare program. We have 
included in our analysis only hospitals paid under these systems. There 
were 47 Indian Health Service Hospitals in our database, which we 
excluded from the analysis due to the special characteristics of the 
payment method for these hospitals. Only 55 short-term, acute care 
hospitals remain excluded from the prospective payment system under 
section 1814(b)(3) of the Act (in Maryland) or a demonstration project 
(in the Finger Lakes region of New York State). Thus, as of April 1994, 
just over 5,200 hospitals were receiving prospectively based payments 
for furnishing inpatient services. This represents about 81 percent of 
all Medicare-participating hospitals. The majority of this impact 
analysis focuses on this set of hospitals.
    The remaining 19 percent are specialty hospitals that are excluded 
from the prospective payment system and continue to be paid on the 
basis of their reasonable costs, subject to a rate-of-increase ceiling 
on their inpatient operating costs per discharge. These hospitals 
include psychiatric, rehabilitation, long-term care, children's 
hospitals, and cancer hospitals. The impacts of our proposed policy 
changes on these hospitals is discussed below.

V. Impact on Excluded Hospitals and Units

    As of April 1994, just under 2,000 specialty hospitals are excluded 
from the prospective payment system and are instead paid on a 
reasonable cost basis subject to the rate-of-increase ceiling under 
Sec. 413.40. In addition, 1,932 psychiatric and rehabilitation units in 
hospitals that are subject to the prospective payment system and 9 
hospitals extensively involved either in the treatment of cancer or in 
cancer research are also excluded from the prospective payment system 
and paid in accordance with Sec. 413.40.
    In accordance with section 13502 of Public Law 103-66, the update 
factor applicable to the rate-of-increase limit for excluded hospitals 
and units for FY 1995 would be the hospital market basket minus 1.0 
percentage point, adjusted to account for the relationship between the 
hospital's allowable operating cost per case and its target amounts. We 
are projecting an increase in the excluded hospital market basket of 
3.7 percent.
    The impact on excluded hospitals and units of the proposed update 
in the rate-of-increase limit depends on the cumulative cost increases 
experienced by each excluded hospital and excluded unit since its 
applicable base period. For excluded hospitals and units that have 
maintained their cost increases at a level below the percentage 
increases in the rate-of-increase limits since their base period, the 
major effect will be on the level of incentive payments these hospitals 
and units receive. Conversely, for excluded hospitals and units with 
per-case cost increases above the cumulative update in their rate-of-
increase limit, the major effect will be the amount of excess costs 
that the hospitals would have to absorb.
    In this context, we note that Sec. 413.40(d)(3) allows an excluded 
hospital or unit whose costs exceed the rate-of-increase limit to 
receive the lower of its rate-of-increase ceiling plus 50 percent of 
reasonable costs in excess of the ceiling, or 110 percent of its 
ceiling. In addition, under the various provisions set forth in 
Sec. 413.40, excluded hospitals and units can obtain substantial relief 
from the rate-of-increase limit for significant, yet justifiable, 
increases in operating costs that exceed the limit. At the same time, 
however, by generally limiting payment increases to the growth rate in 
the hospital market basket, we continue to provide an incentive for 
excluded hospitals and units to restrain the growth in their spending 
for patient services.
    In this proposed rule, we would establish new exclusion criteria 
for long-term care hospitals that define a minimum level of 
independence a new hospital must have to qualify for exclusion from the 
prospective payment system (see section VI.A. of the preamble). We 
anticipate that this change would slow the proliferation of such 
hospitals in the future. The likely result of this change is that some 
patients who might otherwise have been treated in long-term care 
hospitals that are excluded from the prospective payment system will 
instead be treated in prospective payment hospitals. Thus, their care 
will be paid for under the prospective payment system rather than under 
the TEFRA provisions of section 1886(b) of the Act. Although we cannot 
quantify the impact of this change on Medicare payments to hospitals, 
we anticipate that it would result in a small decrease in aggregate 
payment levels.
    We are proposing to remove from the regulations the ``1986 
malpractice rule'' as explained in section VI.B of the preamble. This 
proposal is a technical change that is necessary to conform the 
codified Medicare regulations to the various authorities that have 
previously established that the malpractice rule is invalid. This 
proposed conforming change would not, standing alone, have significant 
economic effects.

VI. Quantitative Impact Analysis of the Proposed Policy Changes Under 
Prospective Payment System for Operating Costs

A. Basis and Methodology of Estimates

    In this proposed rule, we are announcing policy changes and payment 
rate updates for the prospective payment systems for operating and 
capital-related costs. We have prepared separate analyses of the 
proposed changes to each system, beginning with changes to the 
operating prospective payment system.
    The data used in developing the quantitative analyses presented 
below are taken from the FY 1993 MedPAR file and the most current 
provider-specific file that is used for payment purposes. Although the 
analyses of the changes to the operating prospective payment system do 
not incorporate any actual cost data, the most recently available 
hospital cost report data were used to create some of the variables by 
which hospitals are categorized. Our analysis has several 
qualifications. First, we do not make adjustments for behavioral 
changes that hospitals may adopt in response to these proposed policy 
changes. Second, due to the interdependent nature of the prospective 
payment system, it is very difficult to precisely quantify the impact 
associated with each proposed change. Third, we draw upon various 
sources for the data used to categorize hospitals in the tables. In 
some cases, particularly the number of beds, there is a fair degree of 
variation in the data from different sources. We have attempted to 
construct these variables with the best available source overall. For 
individual hospitals, however, some miscategorizations are possible.
    The simulations estimate total payments under the operating 
prospective payment system given various combinations of payment 
parameters. Any short-term, acute care hospitals not paid under the 
general prospective payment systems (Indian Health Service Hospitals, 
hospitals in the New York Finger Lakes demonstration project, and 
hospitals in Maryland) are excluded from the simulations. Payments 
under the capital prospective payment system, or payments for costs 
other than inpatient operating costs, are not estimated here. Estimated 
payment impacts of proposed FY 1995 changes to the capital prospective 
payment system are discussed later in this impact analysis.
    The proposed changes discussed separately below are the following:
     The effects of eliminating the separate rural standardized 
amount by setting it equal to the other urban amount, as required by 
section 1886(b)(3)(B)(i)(X) of the Act.
     The effects of the annual reclassification of diagnoses 
and procedures and the recalibration of the DRG relative weights 
required by section 1886(d)(4)(C) of the Act.
     The effects of changes in hospitals' wage index values 
reflecting the FY 1991 wage data.
     The effects of changing the transfer payment policy to a 
graduated per diem and revising the definition of transfers to include 
cases going from hospitals or units paid under the prospective payment 
system to hospitals or units that are excluded from the prospective 
payment system.
     The effects of geographic reclassifications by the 
Medicare Geographic Classification Review Board that are effective in 
FY 1995.
     The effects of phasing out payments for extraordinarily 
lengthy cases (day outlier cases) by 25 percent (with a corresponding 
increase in payments for extraordinarily costly cases (cost outliers)) 
and establishing a fixed-loss threshold for cost outliers, in 
accordance with section 13501(c) of Public Law 103-66, as well as the 
effects of increasing the marginal cost factor applicable to cost 
outlier payments from 75 to 80 percent.
     The total change in payments based on estimated FY 1995 
total payments relative to estimated FY 1994 total payments.
    To illustrate the impacts of the FY 1995 proposed changes, our FY 
1995 baseline simulation model uses: the FY 1994 GROUPER (version 
11.0); wage indexes based on FY 1990 wage data; the current transfer 
payment policy; no effects of FY 1995 reclassifications; and current 
outlier policy. To illustrate the effects of eliminating the rural 
standardized amount, the rural amount in the FY 1995 baseline is 
updated by the same update applied to the urban amounts (1.1 percent), 
to maintain the current differential. The FY 1995 baseline also 
includes the higher disproportionate share hospital (DSH) payments as 
described above and the elimination of the special protection for 
Medicare-dependent, small rural hospitals (MDHs). Outliers are 
estimated to be 5.1 percent of total DRG payments.
    Each policy change is then added incrementally to this baseline, 
finally arriving at an FY 1995 model incorporating all of the proposed 
changes. This analysis then compares the percent changes in payments 
per case due to each change. This allows us to isolate the effects of 
each change from the overall change in payments from FY 1994 to FY 
1995.
    Several policy changes that would occur during FY 1995 are not 
modeled separately but are shown as combined changes from FY 1994 to FY 
1995. These changes are:
     The proposed update factor applied to the standardized 
amounts (other than the differential update to the rural amount that is 
modeled in Column 1).
     Effective for discharges occurring on or after October 1, 
1994, section 1886(d)(5)(F)(vii)(I)(d) of the Act requires an increase 
in the DSH payment adjustment to urban hospitals with 100 or more beds 
and for rural hospitals with 500 or more beds, that have a DSH patient 
percentage greater than 20.2.
     The special payment protection for MDHs is not applicable 
after FY 1994. (Section 1886(d)(5)(G)(i) of the Act as amended by 
section 13501(e) of Pub. L. 103-66).
    Finally, when comparing our estimated FY 1994 payments to FY 1995 
payments, another significant consideration is that we currently 
estimate that outlier payments during FY 1994 will be 4.0 percent of 
total DRG payments. When the FY 1994 final rules were published 
September 1, 1993 (58 FR 46270), we estimated FY 1994 outlier payments 
would be 5.1 percent of total DRG payments. The effects of the lower 
than expected outlier payments during FY 1994 are reflected in the 
analyses below comparing our current estimates of FY 1994 total 
payments to estimated FY 1995 payments.
    Finally, we also compare the changes in payments from FY 1994 to FY 
1995. In this comparison, our FY 1994 baseline reflects payment 
policies during the current year. The FY 1995 simulation similarly 
reflects the combination of the statutory and proposed changes to go 
into effect during FY 1995.
    Table I demonstrates the results of our analysis. The table 
categorizes hospitals by various geographic and special payment 
consideration groups to illustrate the varying impacts on different 
types of hospitals. The top row of the table shows the overall impact 
on the 5,248 hospitals included in the analysis. This is 54 fewer 
hospitals than were included in the impact analysis in the FY 1994 
final rule (58 FR 46270). (Data for 80 hospitals that were included in 
last year's analysis were not available for analysis this year; 
however, data were available this year for 26 hospitals for which data 
were not available last year.) The next four rows of Table I contain 
hospitals categorized according to their geographic location (all 
urbans as well as large urban and other urban or rural). There are 
2,947 hospitals located in urban areas (MSAs) included in our analysis. 
Among these, there are 1,616 hospitals located in large urban areas 
(populations over 1 million), and 1,331 hospitals in other urban areas 
(populations of 1 million or fewer). In addition, there are 2,301 
hospitals in rural areas. The next two groupings are by bed size 
categories, shown separately for urban and rural hospitals. The final 
groupings by geographic location are by census divisions, also shown 
separately for urban and rural hospitals.
    The second part of Table I shows changes in payments based on 
hospitals' FY 1995 payment classifications, including any 
reclassifications under sections 1886(d)(10) of the Act. For example, 
the rows labeled urban, large urban, other urban, and rural, show the 
numbers of hospitals being paid based on these categorizations, after 
consideration of geographic reclassifications, are 3,252, 1,830, 1,422, 
and 1,996, respectively.
    The next three groupings examine the impacts of the proposed 
changes on hospitals grouped by whether or not they have residency 
programs (teaching hospitals that receive an indirect medical education 
(IME) adjustment), receive DSH payments, or some combination of these 
two adjustments. There are 4,197 nonteaching hospitals in our analysis, 
829 with fewer than 100 residents, and 222 with 100 or more residents.
    In the DSH categories, hospitals are grouped according to their DSH 
payment status based on how they will be paid during FY 1995. That is, 
hospitals located in rural counties that have been reclassified as 
urban by the MGCRB for purposes of assigning the standardized amount 
are categorized here as urban, since they are considered urban in 
determining the amount of their DSH adjustment. The rural DSH 
hospitals, therefore, including those in the rural referral center and 
sole community hospital categories, represent hospitals that were not 
reclassified for purposes of the standardized amount. The next category 
groups hospitals paid on the basis of the urban standardized amount in 
terms of whether they receive the IME adjustment, the DSH adjustment, 
both, or neither.
    The next six rows examine the impacts of the proposed changes on 
rural hospitals by special payment groups (sole community hospitals, 
rural referral centers, and MDHs). Rural hospitals reclassified for FY 
1995 for purposes of the standardized amount are not included here with 
the exception of the MDH row. This row includes all hospitals that were 
paid under the MDH provision during FY 1994 in order to isolate the 
impact of ending this provision. Of the 415 hospitals shown in this 
row, 3 are located in a county now designated as urban under the 1993 
MSA definitions, and 39 others have been reclassified for either the 
standardized amount, the wage index, or both.
    The rural referral centers (138), sole community hospitals (578), 
and rural referral center/sole community hospitals (54) shown here were 
not reclassified for purposes of the standardized amount. There are 19 
rural referral centers and 27 sole community hospitals that would be 
reclassified for the standardized amount in FY 1995 and are therefore 
not included in these columns. In addition, one hospital that is both a 
rural referral center and a sole community hospital will be 
reclassified for the standardized amount.
    The next two groupings are based on type of ownership and the 
hospital's Medicare utilization expressed as a percent of total patient 
days. These data are taken from the Medicare cost report files, the 
latest available being FY 1992. Data needed to calculate Medicare 
utilization percentages were unavailable for 66 hospitals. For the most 
part, these are either new hospitals or hospitals filing manual cost 
reports that are not yet entered into the data base.
    The next series of groupings concern the geographic 
reclassification status of hospitals. The first three rows display 
hospitals that were reclassified by the MGCRB for either FY 1994 or FY 
1995, or for both years. One effect of eliminating the separate rural 
standardized amount in FY 1995 is to reduce the number of standardized 
amount reclassifications. The next rows illustrate the overall number 
of reclassifications, as well as the numbers of reclassified hospitals 
grouped by urban and rural location. The final row in Table I contains 
hospitals located in rural counties but deemed to be urban under 
section 1886(d)(8)(B) of the Act.

                             Table I.--Impact Analysis of Proposed Changes for FY 1995 Operating Prospective Payment System                             
                                                         [Percent Changes in Payments per case]                                                         
                                                                                                                                                        
                                                         Eliminate                                                                                      
                                                No. of     rural           DRG         New wage   Transfer          MGCRB           OBRA 93    All FY95 
                                              hosps.\1\   standard  recalibration\3\   data\4\     policy    reclassification\6\    outlier   changes\8\
                                                         amount\2\                               changes\5\                       changes\7\            
                                                               (1)            (2)           (3)         (4)             (5)              (6)         (7)
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
           By Geographic Location                                                                                                                       
                                                                                                                                                        
All hospitals...............................      5,248        0.7            0.0           0.0         0.0             0.0              0.0         3.0
Urban hospitals.............................      2,947        0.4            0.1          -0.1        -0.1            -0.4              0.0         2.9
    Large urban.............................      1,616        0.4            0.0           0.0        -0.2            -0.6             -0.1         2.9
    Other urban.............................      1,331        0.3            0.1          -0.1        -0.1            -0.1              0.1         3.0
Rural areas.................................      2,301        2.9           -0.1           0.0         0.5             2.3             -0.1         3.8
                                                                                                                                                        
              Bed Size (urban)                                                                                                                          
                                                                                                                                                        
0-99 beds...................................        733        0.4           -0.1          -0.4         0.3            -0.4             -0.1         2.4
100-199 beds................................        922        0.4            0.0          -0.3         0.0            -0.4             -0.1         2.6
200-299 beds................................        610        0.4            0.0          -0.2        -0.1            -0.3              0.0         2.7
300-499 beds................................        493        0.4            0.1           0.0        -0.2            -0.5              0.1         3.0
500 or more beds............................        189        0.4            0.1           0.2        -0.2            -0.3              0.0         3.4
                                                                                                                                                        
              Bed Size (rural)                                                                                                                          
                                                                                                                                                        
0-49 beds...................................      1,187        4.6           -0.2          -0.1         0.9            -0.1              0.0         4.5
50-99 beds..................................        687        4.1           -0.1          -0.1         0.6             0.7             -0.1         4.1
100-149 beds................................        227        3.0           -0.1          -0.1         0.4             3.2             -0.1         3.5
150-199 beds................................        106        1.8            0.0           0.0         0.2             3.6             -0.1         3.6
200 or more beds............................         94        1.0            0.1           0.1         0.1             4.7             -0.1         3.3
                                                                                                                                                        
               Urban by Region                                                                                                                          
                                                                                                                                                        
New England.................................        170        0.4            0.1           1.0        -0.2            -0.3             -0.2         3.3
Middle Atlantic.............................        440        0.4            0.1           0.3        -0.2            -0.5             -0.5         2.8
South Atlantic..............................        436        0.3            0.1           0.1         0.0            -0.4              0.0         3.3
East North Central..........................        491        0.3            0.0           0.2        -0.1            -0.2              0.1         3.2
East South Central..........................        167        0.3            0.1          -0.1         0.0            -0.5              0.3         3.2
West North Central..........................        198        0.3            0.1          -0.2        -0.2            -0.5              0.1         2.6
West South Central..........................        383        0.3            0.0          -1.1        -0.3            -0.5              0.4         2.3
Mountain....................................        120        0.3            0.1          -1.1        -0.3            -0.4              0.2         1.5
Pacific.....................................        493        0.4            0.0          -0.3         0.0            -0.2              0.1         3.0
Puerto Rico.................................         49        0.8            0.1          -7.7         0.1            -0.5              0.3        -4.7
                                                                                                                                                        
               Rural by Region                                                                                                                          
                                                                                                                                                        
New England.................................         53        1.8            0.1           0.0         0.4             1.6             -0.2         2.9
Middle Atlantic.............................         85        1.6            0.1           0.2         0.2             0.8             -0.3         1.9
South Atlantic..............................        298        3.2           -0.1           0.1         0.5             3.2             -0.1         5.4
East North Central..........................        310        3.1            0.0           0.3         0.5             1.8             -0.1         3.1
East South Central..........................        286        3.5           -0.1          -0.4         0.5             3.4             -0.1         5.3
West North Central..........................        536        3.2           -0.1           0.0         0.6             2.5              0.0         3.6
West South Central..........................        359        3.5           -0.1          -0.3         0.5             2.4              0.0         2.4
Mountain....................................        224        1.7           -0.1          -0.2         0.4             0.6              0.0         3.3
Pacific.....................................        145        2.1           -0.1           0.1         0.4             1.8              0.0         3.6
Puerto Rico.................................          5       18.0           -0.2         -10.7         0.1            -0.6              0.1        -0.8
                                                                                                                                                        
            By Payment Categories                                                                                                                       
                                                                                                                                                        
Urban hospitals.............................      3,252        0.4            0.1           0.0        -0.1            -0.2              0.0         2.9
    Large urban.............................      1,830        0.5            0.0           0.0        -0.1            -0.2             -0.1         3.0
    Other urban.............................      1,422        0.4            0.1          -0.2        -0.1            -0.2              0.1         2.8
Rural hospitals.............................      1,996        2.8           -0.1          -0.1         0.5             1.6             -0.1         3.7
                                                                                                                                                        
               Teaching Status                                                                                                                          
                                                                                                                                                        
Non-teaching................................      4,197        1.0            0.0          -0.2         0.1             0.3              0.0         3.1
Less than 100 res...........................        829        0.4            0.1           0.0        -0.2            -0.3              0.0         2.8
100+ residents..............................        222        0.4            0.1           0.3        -0.2            -0.3             -0.1         3.3
                                                                                                                                                        
   Disproportionate Share Hospitals (DSH)                                                                                                               
                                                                                                                                                        
Non-DSH.....................................      3,341        0.8            0.0          -0.1         0.0             0.0              0.1         3.0
Urban DSH:                                                                                                                                              
    100 beds or more........................      1,355        0.4            0.0           0.0        -0.1            -0.1             -0.1         3.0
    Fewer than 100 beds.....................        143        1.6           -0.3          -0.4         0.4             0.3              0.0         3.1
Rural DSH:                                                                                                                                              
    Sole Community (SCH)....................        133        3.3           -0.2          -0.4         0.8            -0.2             -0.1         3.8
    Referral Centers (RRC)..................         47        0.1            0.0           0.0         0.2             3.4             -0.1         3.0
                                                                                                                                                        
Other Rural DSH Hosp:                                                                                                                                   
    100 beds or more........................         66        5.9           -0.1          -0.3         0.6             0.6             -0.1         4.4
    Fewer than 100 beds.....................        163        6.0           -0.2          -0.3         0.8             0.2              0.0         6.4
                                                                                                                                                        
Urban teaching and DSH:                                                                                                                                 
Both teaching and DSH.......................        645        0.4            0.1           0.1        -0.2            -0.4             -0.1         3.0
Teaching and no DSH.........................        361        0.4            0.1           0.1        -0.2            -0.4              0.2         3.1
No teaching and DSH.........................        853        0.5            0.0          -0.3         0.0             0.3              0.0         3.0
No teaching and no DSH......................      1,393        0.5            0.0          -0.3         0.0            -0.2              0.0         2.7
                                                                                                                                                        
Rural Hospital Types:                                                                                                                                   
Nonspecial status hospitals.................        845        5.7           -0.1          -0.2         0.6             0.7             -0.1         5.3
RRC.........................................        138        0.2            0.1           0.1         0.1             4.3             -0.1         2.7
SCH.........................................        578        1.8           -0.2          -0.3         0.7             0.1              0.0         3.9
Medicare-dependent hospital.................        415        5.7           -0.1          -0.1         0.8             0.1             -0.1         0.9
SCH and RRC.................................         54        0.0           -0.1           0.0         0.2             1.9             -0.1         2.9
                                                                                                                                                        
Type of Ownership:                                                                                                                                      
Voluntary...................................      3,282        0.6            0.1           0.0        -0.1            -0.1              0.0         3.0
Proprietary.................................        753        0.7           -0.1          -0.6         0.0             0.2              0.1         3.0
Government..................................      1,213        1.2            0.0           0.0         0.1             0.1             -0.1         3.3
                                                                                                                                                        
    Medicare Utilization as a Percent of                                                                                                                
               Inpatient Days                                                                                                                           
                                                                                                                                                        
0-25........................................        305        0.5            0.0          -0.3         0.0            -0.3              0.0         2.9
25-50.......................................      1,471        0.5            0.1           0.0        -0.1            -0.2              0.0         3.1
50-65.......................................      2,244        0.8            0.0          -0.1         0.0             0.2              0.0         3.1
Over 65.....................................      1,162        1.1            0.0          -0.1         0.1            -0.2             -0.1         2.7
Unknown.....................................         66        0.6           -0.1           0.3        -0.6            -0.2             -1.4         2.2
                                                                                                                                                        
   Hospitals Reclassified by the Medicare                                                                                                               
           Geographic Review Board                                                                                                                      
                                                                                                                                                        
Reclassification Status During FY 94 and FY                                                                                                             
 95:                                                                                                                                                    
Reclassified during both FY 94 and FY 95....        484        1.2            0.0          -0.1         0.1             4.3              0.1         2.9
    Urban...................................        189        0.4            0.0          -0.3         0.0             2.3              0.1         3.0
    Rural...................................        295        3.0            0.0           0.1         0.3             8.5             -0.1         2.7
Reclassified during FY 95 only..............        215        1.2            0.1           0.1         0.2             4.1              0.1         9.3
    Urban...................................         47        0.4            0.1           0.1         0.1             2.5              0.3         8.4
    Rural...................................        168        2.1            0.0           0.0         0.3             6.0             -0.1        10.3
Reclassified during FY 94 only..............        209        1.4            0.0           0.0         0.1            -0.8             -0.3        -2.1
    Urban...................................         60        0.4            0.1           0.1         0.0            -1.1             -0.4        -0.9
    Rural...................................        149        2.6           -0.1          -0.2         0.4            -0.5             -0.1        -3.6
FY 95 Reclassifications:                                                                                                                                
All reclassified hosp.......................        699        1.2            0.0          -0.1         0.1             4.2              0.1         4.5
    Urban...................................        236        0.4            0.1          -0.2         0.0             2.3              0.2         4.2
    Rural...................................        463        2.7            0.0           0.1         0.3             7.7             -0.1         5.0
All nonreclassified hospitals...............      4,522        0.6            0.0           0.0        -0.1            -0.6              0.0         2.8
    Urban...................................      2,711        0.4            0.1           0.0        -0.1            -0.6              0.0         2.8
    Rural...................................      1,811        3.1           -0.1          -0.1         0.5            -0.5             -0.1         3.2
Other reclassified hospitals (Section                                                                                                                   
 1886(d)(8)(B)).............................         27        0.5            0.0          -0.6         0.3             0.4             -0.2         2.1
\1\Because data necessary to classify some hospitals by category were missing, the total number of hospitals in each category may not equal the national
  total. Hospital-specific data and discharges data are from FY 1993, and hospital cost report data are from reporting periods beginning in FY 1992.    
\2\This column illustrates the changes in FY 1995 payments due to the elimination of the separate rural standardized amount by adjusting the rural      
  amount to equal the other urban amount, in accordance with section 1886(d)(3)(A) of the Act.                                                          
\3\This column displays the payment impacts of the recalibration of the DRG weights and classification changes, based on FY 1993 MedPAR data, in        
  accordance with section 1886(d)(4)(C) of the Act.                                                                                                     
\4\This column shows the payment effects of updating the data used to calculate the wage index with data from the FY 1991 cost reports.                 
\5\This column displays the effects of the changes to transfer policy. It compares payments under our current policy with those resulting by changing   
  the per diem methodology and revising the definition of transfers to include cases going to excluded hospitals or units.                              
\6\Shown here are the combined effects of geographic reclassification by the Medicare Geographic Classification Review Board (MGCRB). The effects shown 
  here are exclusive of payment changes from FY 1994 to FY 1995, and therefore do not factor into the percent changes shown in Column 7.                
\7\This column displays the impacts of the outlier change in accordance with section 13501(c) of Pub. L. 103-66.                                        
\8\This column shows changes in payments from FY 1994 to FY 1995. It incorporates all of the changes displayed in columns 1 through 6. It also displays 
  the updates to the FY 1995 standardized amounts, change in hospitals' reclassification status in FY 1995 compared to FY 1994, the effects of the      
  higher DSH payments for urban hospitals with 100 or more beds and rural hospitals with 500 or more beds, the elimination of the Medicare-dependent,   
  small rural hospital provision, and the difference in projected outlier payments from FY 1994 to FY 1995. The sum of the first six columns plus these 
  effects may be slightly different from the percentage changes shown here, due to rounding errors and interactive effects.                             

B. The Elimination of the Separate Rural Standardized Amount (Column 1)

    Section 1886(d)(3)(A) of the Act provides that, beginning in FY 
1995, the rural standardized amount is equal to the other urban 
standardized amount. Section 1886(b)(3)(B)(i)(X) of the Act, as amended 
by section 13501(a)(1) of Public Law 103-66, provides that the update 
to the urban standardized amounts for FY 1995 will equal the market 
basket rate of increase minus 2.5 percentage points, and the update to 
the rural standardized amount is the amount necessary to set the rural 
amount equal to the other urban amount. We project the market basket 
increase to be 3.6 percent, so the proposed update to the large and 
other urban standardized amounts is 1.1 percent and the proposed update 
to the rural standardized amount is 8.4 percent (the market basket rate 
of increase of 3.6 percent plus 4.8 percent).
    The process undertaken to set the rural amount equal to the other 
urban amount, as well as the overall methodology used to determine the 
FY 1995 proposed standardized payment amounts, is described in the 
Addendum to this proposed rule. As described there, the net increase in 
rural hospitals' FY 1995 standardized payment amount compared to FY 
1994 is less than 8.4 percent. The difference between the proposed FY 
1995 payment rate for rural hospitals and their FY 1994 amount is 4.6 
percent. This smaller net increase can be attributed to changing from 
separate urban and rural outlier offsets (applicable to the previously 
separate rates) to a single offset after the rural rate is eliminated.
    To illustrate, for FY 1994, the difference between the other urban 
and rural final standardized amounts was 3.0 percent. These amounts 
reflected the differential outlier adjustment factors applied to the 
urban and rural standardized amounts of 0.945960 and 0.977157, 
respectively (See the September 1, 1993 final rule (58 FR 46349.) 
Similarly, section 1886(d)(8)(D) of the Act necessitated different 
urban and rural budget neutrality factors for geographic 
reclassification. Removing these differential adjustments from the FY 
1994 standardized amounts, and updating the urban amounts by 1.1 
percent, increases the difference between the other urban and rural 
amounts from 3.0 percent to 8.4 percent.
    Section 1886(d)(3)(B) requires the Secretary to adjust both the 
large urban and other national standardized amounts by the same outlier 
adjustment factor beginning in FY 1995. Estimated outlier payments 
equal 5.1 percent of estimated total DRG payments, so a 5.1 percent 
offset is applied to the standardized amounts. For FY 1994, the rural 
outlier offset was 2.3 percent, 2.8 percent smaller than the 5.1 
percent offset for FY 1995. For FY 1995, the increase in the size of 
the outlier offset for rural hospitals reduces the effect of the higher 
standardized amount.
    The FY 1995 baseline employs differential outlier offsets to the 
separate urban and rural amounts. The net difference between the rural 
and other urban amounts after applying these differential offsets to 
the FY 1995 baseline rates (without any of the other budget neutrality 
factors) is 4.3 percent. Because the urban amount increases by 0.3 
percent when the 5.1 national outlier offset is applied rather than the 
larger urban outlier offset, the net increase in the rural standardized 
amount to bring it up to the other urban amount is 4.6 percent.
    Finally, in addition to equating the other urban and rural amounts 
through a higher rural update and a single outlier offset, a national 
labor share (the portion of the standardized amounts adjusted by the 
wage index) is necessary to maintain the elimination of the separate 
amounts. For FY 1994, the rural labor share represents 75.6 percent of 
the rural standardized amount, while the urban labor share comprises 
about 70.8 percent of the large and other urban amounts. For FY 1995, 
we are proposing to determine the labor portion of the standardized 
amounts based on a national average labor share of 71.4 percent.
    Column 1 displays the payment changes resulting from eliminating 
the rural amount, modeled by comparing payments simulated using our FY 
1995 baseline model described earlier to simulated payments after 
eliminating the separate rural amount. The impacts of the higher update 
to the standardized amount for rural hospitals are evident. Overall, 
hospitals located in rural counties experience a 2.9 percent increase 
in payments from this change, compared to a 0.4 percent rise in 
payments to urban hospitals. Nationally, payments per case are 
estimated to rise 0.7 percent as a result of this change.
    The 2.9 percent increase for hospitals in rural areas is below the 
4.6 percent increase in the standardized amount for several reasons. 
First, this row includes all hospitals that are located in rural areas, 
but some rural hospitals receive a higher urban payment rate. This is 
reflected in the ``Rural Hospital Types'' rows. Rural referral centers 
(RRCs) have only a 0.2 percent payment effect resulting from this 
change. These hospitals currently receive the other urban amount and, 
therefore, do not gain directly from the elimination of the rural 
amount. They do apparently benefit slightly from the smaller outlier 
offset applied to the urban standardized amounts. Another rural 
hospital group experiencing only a relatively small impact from this 
change is sole community hospitals (SCHs). Their payments rise 1.8 
percent, well below that for most other rural hospital groups. Because 
these hospitals are paid based on the greater of their applicable 
Federal rate or their hospital-specific rate, increasing the Federal 
rate has an impact upon only those SCHs that would be paid based on 
that rate. Of the 578 SCHs in this row, 435 are paid on the basis of 
their hospital-specific rate in our FY 1995 baseline model. When the 
rural amount is eliminated by making it equal to the other urban 
amount, only 66 SCHs switch from their hospital-specific rate to the 
Federal rate. This explains the below average payment change compared 
to other rural hospitals.
    Conversely, nonspecial status rural hospitals, and rural hospitals 
receiving DSH all experience above average payment gains (between 5.7 
percent and 6.0 percent). This effect appears to be primarily 
attributable to the decrease in the labor share of the standardized 
amount. In fact, substituting the current higher rural labor share on 
both models in this comparison reduces the payment gains for these 
hospital groups to 4.6 percent (except for MDHs, which fall to 4.4 
percent).
    The row demonstrating the largest benefit from this change is rural 
Puerto Rico, with an 18.0 percent increase. This stems from the 
calculation of separate payment rates for Puerto Rico's hospitals, 
which are equal to 75 percent of the Puerto Rico rate plus 25 percent 
of the discharge-weighted average of the urban and rural national 
prospective payment system rates. For FY 1994, for example, the Puerto 
Rico rate for other urban areas was 26.6 percent greater than the 
Puerto Rico rural rate. The increase in the national Puerto Rico amount 
is much smaller, however, so that the payment effect is less than the 
full increase in the rural Puerto Rico rate. Urban hospitals in Puerto 
Rico also receive an added increase in payments above those of other 
urban hospitals, due to the higher national portion. It is far below 
the rural Puerto Rico increase, however.
    For urban hospitals nationally, the change in payments is slightly 
above the percentage change in the outlier offsets when moving to a 
single 5.1 percent offset. The FY 1994 urban outlier adjustment factor 
was 0.945960, which results in a 5.404 percent offset. To lower the 
offset to 5.1 percent, an adjustment factor of 0.949 is applied to the 
standardized amounts. The difference between these two factors is 0.3 
percent. The increase in the labor share also has a generally favorable 
impact on urban hospitals due to their above average wage index values.
    Eliminating the separate rural amount also has the effect of 
redistributing outlier payments, primarily due to the higher 
standardized amount paid to rural hospitals. The average rural outlier 
payment per case falls by 3.0 percent after eliminating the separate 
rural amount, and the average urban outlier payment per case rises by 
0.4 percent. This occurs because fewer rural cases qualify for outlier 
payments due to the higher DRG payments per case; thus, the outlier 
thresholds must be revised to maintain the outlier pool at 5.1 percent 
of total DRG and outlier payments. This leads to additional outlier 
payments going to outlier cases in urban hospitals.
    The fact that many of these cases are also in teaching hospitals 
and DSH hospitals leads to what we consider an anomalous impact on 
total payments. Pursuant to section 1886(d)(5)(A)(iv) of the Act, we 
set outlier payment policies so that estimated outlier payments are 5.1 
percent of estimated total DRG payments. Under the statute, estimated 
outlier payments do not encompass IME and DSH payments made for outlier 
cases. The amounts of IME and DSH payments are affected by the level of 
outlier payments so a redistribution of outlier payments to teaching 
and DSH hospitals has the effect of generating a net increase in total 
payments.

C. The Impact of the Proposed Changes to the DRG Weights (Column 2)

    In column 2 of Table I, we present the combined effects of the 
revised DRG classification system, and the subsequent recalibration of 
the DRG weights incorporating these revised DRGs, as discussed in 
section II of the preamble to this proposed rule. Section 
1886(d)(4)(C)(i) of the Act requires us each year to make appropriate 
classification changes and to recalibrate the DRG weights in order to 
reflect changes in treatment patterns, technology, and any other 
factors that may change the relative use of hospital resources. The 
impact of reclassification and recalibration on aggregate payments is 
required by section 1886(d)(4)(C)(iii) of the Act to be budget neutral.
    The first row of Table I shows that the overall effect of these 
proposed changes is budget neutral. That is, the percentage change when 
adding the proposed FY 1995 GROUPER (version 12.0) to the FY 1995 
baseline is 0.0. Since the changes illustrated in the columns of Table 
I are cumulative, this column reflects the elimination of the separate 
rural amount in both simulations. Only the version of the GROUPER is 
different.
    Consistent with the minor changes we are proposing for the FY 1995 
GROUPER, the redistributional impacts across hospital groups are very 
small (an increase of 0.1 for urban hospitals and a decrease of 0.1 for 
rural hospitals). Among other hospital categories, the net effects are 
slightly negative changes for small hospitals and slightly positive 
changes for larger hospitals. The largest single effect on any of the 
hospital categories examined is a 0.3 percent decrease in payments for 
rural DSH hospitals with fewer than 100 beds.

D. The Impact of Updating the Wage Data (Column 3)

    Section 1886(d)(3)(E) of the Act requires that, beginning October 
1, 1993, we annually update the wage data used to calculate the wage 
index. In accordance with this requirement, the wage index for FY 1995 
is based on data submitted for hospital cost reporting periods 
beginning on or after October 1, 1990 and before October 1, 1991.
    As with the previous two columns, the impact of the new data on 
hospital payments is isolated by holding the other payment parameters 
constant in the two simulations. That is, the table shows the 
percentage changes in payments when going from our FY 1995 baseline--
using the FY 1994 wage index before geographic reclassifications based 
on 1990 wage survey data, eliminating the separate rural rate and 
incorporating the FY 1995 GROUPER--to a model substituting the FY 1995 
pre-reclassification wage index based on 1991 data as described above.
    Section 1886(d)(3)(E) of the Act also requires that any updates or 
adjustments to the wage index be made in a manner that ensures that 
aggregate payments to hospitals are not affected by the change in the 
wage index. To comply with the requirements that the DRG and wage index 
changes must be implemented in a budget neutral manner, we compute a 
budget neutrality adjustment factor to apply to the standardized 
amounts. For the FY 1995 proposed amounts, this adjustment factor is 
0.997647. This factor is applied to the standardized amounts in this 
column to ensure that the overall effect of the wage index changes are 
budget neutral.
    The results indicate that the new wage data do not have a 
significant overall impact on urban and rural hospitals. As discussed 
in section III of the preamble to this proposed rule, 86.4 percent of 
all prospective payment system hospitals would experience a change in 
their wage index of less than 5 percent. This column demonstrates that 
hospitals with significant changes in their wage indexes are not 
concentrated within any particular hospital group. In contrast, the 
impact analysis of the final FY 1994 operating prospective payment 
system changes displayed numerous hospital groups with payment changes 
in excess of 2.0 percent due to the new wage survey data (58 FR 46459). 
For FY 1995, some of the largest changes are evident among urban 
hospitals grouped by census division. New England urban hospitals' 
payments rise 1.0 percent, while payments per case for urban hospitals 
in the West North Central and Mountain census divisions fall by 1.1 
percent. The most dramatic shifts occur in Puerto Rico, where payments 
decline by 10.7 percent in rural hospitals and 7.7 percent in urban 
hospitals. These effects are attributable to data corrections. We note 
that the FY 1994 payment effect of the new wage data was an 11.6 
percent increase for rural Puerto Rico hospitals.
    This decline in the wage index values for Puerto Rico hospitals 
also appears to be the main cause for the 0.6 percent drop in payments 
among proprietary hospitals. The 20 hospitals with the greatest drop in 
their wage index within this category are all located in Puerto Rico. 
Also experiencing a 0.6 percent decline in payments per case are 
hospitals in rural counties deemed to be urban under section 
1886(d)(8)(B) of the Act. This impact appears to be primarily related 
to 2 hospitals experiencing nearly 20 percent declines in their wage 
index values.

E. Transfer Changes (Column 4)

    In column 4 of Table I, the impacts of the changes we are proposing 
in transfer payment policy are shown. These changes would revise our 
methodology for payment for transfer cases under the prospective 
payment system to more appropriately compensate transferring hospitals 
for the higher costs they incur, on average, on the first day of a 
hospital stay prior to transfer. Our current transfer policy pays a 
flat per diem amount for each day prior to transfer up to the full DRG 
amount. The per diem is calculated by dividing the amount that would be 
paid for a patient assigned to the same DRG who is discharged from the 
hospital, and dividing that amount by the geometric mean length of stay 
for that DRG. Our proposal is to replace this flat per diem methodology 
with a graduated methodology that would pay twice the per diem amount 
for the first day, and the per diem amount for each day beyond the 
first.
    In addition, we are proposing to expand our definition of transfer 
cases to include patients transferred from a hospital or unit paid 
under the prospective payment system to a hospital or unit excluded 
from the prospective payment system. Currently, these case are 
considered to be discharges. Under this proposed change, these cases 
would be paid in accordance with our transfer policy, including the 
proposed change to the graduated payment methodology described above.
    The payment impacts shown in column 4 illustrate the combined 
effects of these two changes, relative to the baseline simulation based 
on current policy (a flat per diem transfer payment methodology and 
cases transferred to excluded hospitals and units are paid as 
discharges). In order to simulate the effects of the proposed changes, 
it was necessary to identify current transfer cases, as well as current 
discharges going to an excluded hospital or unit. Current transfers are 
identifiable by the discharge destination code on the patient bill (see 
``Transfers of Medicare Hospital Patients Under the Prospective Payment 
System'', RAND, PM-191-HCFA, January 1994, for a thorough discussion of 
identifying transfer cases on the MedPAR file).
    Next, to determine whether payment would be made under the per diem 
methodology, we compared the actual length of stay prior to transfer to 
the geometric mean length of stay for the DRG to which the case is 
assigned. A full discharge or a transfer case that received the full 
discharge payment would be counted as 1.0, while, under our current 
transfer policy, a transfer case that stayed 2 days in a DRG with a 
geometric mean length of stay of 5 days would count as 0.4 of a 
discharge. To determine the transfer adjustment factor, we then added 
together these adjusted discharges and divided by total discharges, 
including transfers. In this manner, transfer cases are counted only to 
the extent that the transferring hospital received payment for them. To 
simulate our proposed change to the per diem payment methodology, we 
added 1 day to the actual length of stay for transfer cases, thereby 
replicating paying double the per diem for the first stay and the flat 
per diem, up to the full DRG amount, for subsequent days.
    Finally, we calculated transfer-adjusted case-mix indexes for each 
hospital. The adjusted case-mix indexes are calculated by summing the 
transfer-adjusted DRG weights and dividing by the transfer-adjusted 
number of cases. The transfer-adjusted DRG weights are calculated by 
multiplying the DRG weight by the lesser of 1 or the fraction of the 
length of stay for the case divided by the geometric mean length of 
stay for the DRG. By adjusting the DRG weights, nontransfer cases and 
transfer cases that have a length of stay at least as long as the 
geometric mean length of stay will be represented by the full DRG 
weight, while transfer cases with lengths of stay below the geometric 
mean length of stay for the DRG will be represented by a lower number, 
reflective of their payment.
    The FY 1995 baseline model reflected in columns 1 through 3 
incorporates transfer-adjusted discharges and case-mix indexes based on 
current law. That is, cases transferred prior to reaching the geometric 
mean length of stay received payments based on the flat per diem and 
cases discharged to excluded hospitals and units received the full DRG 
amount. In column 4, our model substitutes transfer-adjusted discharges 
and case-mix indexes that reflect our proposed policy changes.
    The first row in column 4 shows that the net effect of our proposed 
changes is budget neutral compared to total payments under current 
transfer policy. RAND estimated the number of transfers under the 
prospective payment system during FY 1991 to be about 230,000. Our 
analysis indicates that, applying current policy, the number of cases 
during FY 1993 counted as discharges to excluded hospitals or units is 
approximately 190,000. Our preliminary analysis indicates that these 
latter cases are more likely to be surgical cases, and thus are more 
expensive on average than cases that are currently defined as 
transfers. Thus, redefining discharges to excluded hospitals as 
transfers and paying them accordingly generates savings sufficient to 
offset the higher per diem payments for the first day of all transfer 
cases.
    The distributional effects of theses changes are to increase 
payments to rural hospitals by 0.5 percent and decrease urban 
hospitals' payments by 0.1 percent (that is, -0.2 percent for large 
urban and -0.1 percent for other urban). Rural hospitals clearly 
benefit from changing the per diem payment methodology. RAND found that 
rural hospitals as a whole transfer 4.5 percent of their patients, 
compared to 1.7 percent in large urban hospitals and 1.6 percent in 
other urban hospitals. Therefore, one would expect rural hospitals to 
benefit disproportionately from the change to the per diem payment 
methodology.
    The impact on small hospitals is also positive, consistent with 
RAND's finding that hospitals with fewer than 50 beds transfer 6.1 
percent of their cases, and hospitals with 50 to 99 beds transfer 4.9 
percent of cases. These groups also benefit relative to larger 
hospitals. Rural hospitals with fewer than 50 beds receive a 0.9 
percent increase in per case payments, and rural hospitals with 50 to 
99 beds receive a 0.6 percent increase. Urban hospitals with fewer than 
100 beds experience a 0.3 percent rise in payments. Among rural 
hospital groups, SCHs and current MDHs realize increases of 0.7 and 0.8 
percent, respectively.
    Due to the much larger proportion of overall payments that go to 
urban hospitals, a smaller percentage change in their payments is 
enough to offset the higher payments going to hospitals that send out a 
relatively higher percentage of transfers. The reduction in payments 
for urban hospitals comes from the proposed change in the definition of 
transfers to include cases going to excluded hospitals and units, as 
well as other hospital settings such as Veterans Administration 
hospitals and nonparticipating hospitals. The hospital group with the 
largest single negative impact is the ``Unknown'' Medicare utilization 
category, a 0.6 percent decline. This is primarily due to two or three 
hospitals with 5.0 to 8.0 percent decreases in their per case payment 
level. The next largest negative impacts are among urban hospitals in 
the West North Central and West South Central census divisions, each 
with a -0.3 percent change.

F. Impacts of MGCRB Reclassifications (Column 5)

    By March 30 of each year, the MGCRB makes reclassification 
determinations that will be effective for the next fiscal year, which 
begins on October 1. The MGCRB may reclassify a hospital to an adjacent 
urban area or to a rural area with which it has a close proximity for 
the purposes of using the other area's standardized amount, wage index 
value, or both. (An RRC or an SCH may be redesignated to an area that 
is not an adjacent county.)
    To this point, all of the simulation models have assumed hospitals 
are paid on the basis of their geographic location (with the exception 
of ongoing policies that provide that certain hospitals receive 
payments on bases other than where they are geographically located, 
such as RRCs and hospitals in rural counties that are deemed urban 
under section 1886(d)(8)(B) of the Act). The changes in column 5 
reflect the per case payment impact of moving from this baseline to a 
simulation incorporating the MGCRB decisions for FY 1995. As noted 
above, these decisions affect hospitals' standardized amount and wage 
index area assignments. In addition, hospitals reclassified for the 
standardized amount also qualify to be treated as urban for purposes of 
the DSH adjustment.
    The proposed FY 1995 standardized payment amounts and wage index 
values incorporate all of the MGCRB's reclassification decisions that 
will be effective for FY 1995. The wage index values also reflect any 
decisions made by the HCFA Administrator through the appeals and review 
process for MGCRB decisions as of March 30, 1994. Additional changes 
that result from the Administrator's review of MGCRB decisions will be 
incorporated into the wage index values and standardized payment 
amounts published in the final rule implementing changes to the 
prospective payment system for FY 1995.
    The overall effect of geographic reclassification is required to be 
budget neutral by section 1886(d)(8)(D) of the Act. Prior to FY 1995, 
the Secretary was required to adjust the urban standardized amounts so 
as to ensure that total aggregate payments under the prospective 
payment system after geographic reclassification were equal to the 
aggregate payments that would have been made absent these provisions. 
The rural standardized amounts were also adjusted to ensure that 
aggregate payments to rural hospitals were not affected by 
reclassifications. Due to the elimination of the separate rural amount 
beginning October 1, 1994, the Secretary is required to provide a 
single budget neutrality adjustment to the standardized amounts for the 
effects of reclassification. We applied an adjustment of 0.993814 to 
ensure that the effects of reclassification are budget neutral.
    Rural hospitals benefit disproportionately from geographic 
reclassification. Their payments rise 2.3 percent, while payments to 
urban hospitals decline 0.4 percent. Rural referral centers experience 
a 4.3 percent increase overall as a result of reclassification. Of the 
138 hospitals in this category, 52 are reclassified for the wage index. 
This positive impact on RRCs also appears in the category of rural 
hospitals with 200 or more beds, which have a 4.7 increase in payments.
    Large urban hospitals lose 0.6 percent because, as a group, they 
have the smallest percentage of hospitals that are reclassified, fewer 
than 6 percent. There are enough hospitals in other urban areas that 
are reclassified to limit the decline in payments to this groups to 0.1 
percent. Consequently, their payments are reduced by the budget 
neutrality factor. Among urban hospital groups generally, payments fall 
between 0.3 and 0.5 percent.
    Among hospitals grouped by reclassification status during FY 1994 
and FY 1995, the changes are predictable. Hospitals reclassified for FY 
1994 but not for FY 1995 experience lower payments when 
reclassification is taken into account compared to the previous column. 
Because the rural payment rate now equals the other urban amount, the 
loss of reclassification is not as detrimental in rural areas. Payments 
to formerly reclassified rural hospitals fall by 0.5 percent, compared 
to a decline of 1.1 percent for urban hospitals reclassified in FY 1994 
but not in FY 1995. Significant positive impacts are evident for 
hospitals reclassified for FY 1995. Rural hospitals reclassified for FY 
1995 that were not reclassified for FY 1994 experience a 6.0 percent 
payment increase, and rural hospitals reclassified during both years 
experience an 8.5 percent increase.
    Table II compares reclassified hospital payments for FY 1995 with 
payment levels that assume reclassified hospitals are paid on the basis 
of their geographic location rather than reclassified location. The 
difference between Table II and Column 5 in Table I is that the 
simulations in Table II incorporate all of the policy changes we are 
proposing for FY 1995, as well as the statutory changes, before and 
after reclassification. Specifically, Column 5 in Table I does not 
include the outlier change enacted by section 13501(c) of Public Law 
103-66. This change is reflected in the simulations in Table II.

        Table II.--Effects on Payments per Case of Geographic Reclassification of Hospitals Under Current       
                                            Reclassification Policies                                           
----------------------------------------------------------------------------------------------------------------
                                                                                                   (c)Percent   
                                                                                                    change in   
                                             Number of   (a)Payment per case   (b)Payment per   payment per case
                                             hospitals         without           case after          due to     
                                                         reclassification\1\  reclassification  reclassification
                                                                                                     only\2\    
----------------------------------------------------------------------------------------------------------------
FY 95 reclassifications...................          699            5,560               5,793               4.2  
All reclassified hospitals:                                                                                     
    Standardized amount only..............          298            5,034               5,118               1.7  
    Wage index only.......................          203            5,263               5,670               7.7  
    Both..................................          198            6,264               6,489               3.6  
All urban reclassified hospitals..........          236            6,691               6,842               2.3  
    Standardized amount only..............           61            6,253               6,285               0.5  
    Wage index only.......................           24            8,180               8,646               5.7  
    Both..................................          151            6,613               6,760               2.2  
All reclassified rural hospitals..........          463            4,263               4,588               7.6  
    Standardized amount only..............          237            3,987               4,115               3.2  
    Wage index only.......................          179            4,496               4,888               8.7  
    Both..................................           47            4,161               4,851              16.6  
All nonreclassified hospitals.............        4,522            6,350               6,312              -0.6  
    Urban non-reclassified hospitals......        2,711            6,771               6,729              -0.6  
    Rural non-reclassified hospitals......        1,811            3,958               3,940              -0.5  
----------------------------------------------------------------------------------------------------------------
\1\This column shows payments without regard to any previous MGCRB reclassification decision. All other FY 1995 
  policy changes are included.                                                                                  
\2\This column only shows the percentage change in payments resulting from decisions of the MGCRB for FY 1995.  
  All other FY 1995 policy changes are included in both simulation models.                                      

    Table II shows the changes in payments per case for all FY 1995 
reclassified and nonreclassified hospitals in urban and rural locations 
for each of the three reclassification categories (standardized amount 
only, wage index only, or both). It illustrates that the large impact 
for reclassified rural hospitals is due to reclassifications for both 
the standardized amount and the wage index. These hospitals receive a 
16.6 percent increase. In addition, rural hospitals reclassified for 
the wage index only receive an 8.7 percent payment increase. The 
overall impact on reclassified hospitals would be to increase their 
payments per case by an average of 4.2 percent for FY 1995.
    The reclassification of hospitals primarily affects payment to 
nonreclassified hospitals through changes in the wage index and the 
geographic reclassification budget neutrality adjustment required by 
section 1886(d)(8)(D) of the Act. Among hospitals that were not 
reclassified, the overall impact of hospital reclassifications would be 
an average decrease in payments per case of about 0.6 percent, 
approximately the geographic reclassification budget neutrality factor. 
Rural nonreclassified hospitals decrease slightly less, experiencing a 
0.5 percent decrease. This occurs because the wage index values in some 
rural areas increase after reclassified hospitals are excluded from the 
calculation of those index values.
    The number of reclassifications for the standardized amount have 
not declined from FY 1994. This is surprising because, with the 
elimination of the separate rural amount, rural hospitals would seem to 
have less to gain from reclassifying for the standardized amount. Of 
course, some of them are hospitals reclassifying for the large urban 
amount, thereby receiving a payment rate even higher than they would 
receive from the other national amount. Rural hospitals also may wish 
to reclassify for the standardized amount even though they are only 
eligible to reclassify to an other urban area in order to either meet 
the lower eligibility requirements for DSH payments, or to receive 
higher DSH payments. The payment impact upon hospitals reclassified for 
the standardized amount only, however, is significantly lower than it 
is for hospitals reclassifying for either the wage index alone, or for 
both the wage index and the standardized amount.
    The foregoing analysis was based on MGCRB and HCFA Administrator 
decisions made by March 30 of this year. As previously noted, there 
will be changes to some MGCRB decisions through the appeals and review 
process. The outcome of these cases may affect the final results of our 
analysis, which we will present in the final rule.

G. Outlier Changes (Column 6)

    Medicare provides extra payment in addition to the regular DRG 
payment amount for extremely costly or extraordinarily lengthy cases 
(cost outliers and day outliers, respectively). Section 13501(c) of 
Public Law 103-66 requires the Secretary to phase out payment for day 
outliers in 25 percent increments beginning in FY 1995. This reduction 
in day outlier payments will be offset by an increase in payments for 
cost outliers. The statute also requires the Secretary to establish a 
fixed loss per case threshold for cost outliers instead of a threshold 
based on a fixed multiple of the DRG payment amount or other fixed 
dollar amount. For FY 1995, we are proposing that a case would receive 
cost outlier payment if costs exceed the DRG amount plus $23,300. We 
are also proposing to increase the marginal cost factor for cost 
outliers from 75 to 80 percent.
    The payment impacts of this change are minimal. The largest impacts 
appear to be related to geographic location in terms of census 
divisions. Urban hospitals in the Middle Atlantic census division have 
payment reductions of 0.5 percent per case. Rural Middle Atlantic 
hospitals have a 0.3 percent decline. In New England, both urban and 
rural hospitals experience decreases of 0.2 percent. Since the changes 
to outlier policy result in a shift in payments from cases paid as day 
outliers to cases paid as cost outliers, this indicates that these 
areas have higher percentages of day outliers. This is consistent with 
our previous analysis indicating above average impacts related to day 
outlier policy changes in the northeastern portion of the country (see 
the June 4, 1992 proposed rule, 57 FR 23824).
    The largest negative impact occurs among hospitals for which we 
could not determine Medicare utilization rates. This group experiences 
a 1.4 percent fall in payments per case. This appears to be primarily 
attributable to 9 hospitals whose outlier payment percentages fall by 
more than 20 percent.

H. All Changes (Column 7)

    Column 7 compares our estimate of payments per case for FY 1995 to 
our estimate of payments per case in FY 1994. It includes all of the 
changes discussed in the previous columns. It also includes the impacts 
of statutory differences from FY 1994 to FY 1995. These differences 
were noted in the introduction. Specifically, they are: an increase in 
DSH payments to urban hospitals with 100 or more beds and to rural 
hospitals with 500 or more beds, and the elimination of the MDH 
provision. This column also displays the impact of the 1.1 percent 
lower than estimated outlier payments during FY 1994, also described in 
the introduction and the Addendum.
    Another change from FY 1994 is that there is no budget neutrality 
adjustment to account for midyear wage index corrections. Last year's 
adjustment factor was 0.998188. In addition, a single geographic 
reclassification budget neutrality factor was applied to the proposed 
FY 1995 standardized amounts of 0.993814. The FY 1994 factors applied 
to the urban and rural amounts, respectively, were 0.992529 and 
0.999472. Finally, the budget neutrality adjustment factor for the 
updated wage index and the DRG recalibration is 0.997647, compared to 
the FY 1994 factor of 0.999003. Although the net effect of these 
changes are small, they have an effect on the payment differences shown 
in this column.
    Column 7 also reflects the 1.1 percent updates to the urban 
standardized amounts. The increase in differential payments to rural 
hospitals that results from eliminating the rural amount is shown in 
Column 1. There may also be interactive effects among the various 
factors comprising the payment system that we are not able to isolate. 
For these reasons, the values in column 7 may not equal the sum of the 
previous columns plus the other impacts that we are able to identify. 
We also note that the percent changes associated with geographic 
reclassification decisions by the MGCRB shown in Column 5 are not 
included in the percent changes shown here, since Column 5 reflects the 
impacts of geographic reclassifications relative to the FY 1995 
baseline rather than the FY 1994 reclassifications. The impacts of FY 
1994 geographic reclassifications relative to the payment impacts of FY 
1995 reclassifications are shown in Column 5.
    The impact on all hospitals is a 3.0 percent increase in payments 
from FY 1994. The net change in total payments due to the proposed 
changes for FY 1995 shown in columns 1 through 6 is 0.7 percent, due to 
the elimination of the rural standardized amount. After accounting for 
the 1.1 percent update to the urban standardized amounts, the move to a 
single outlier offset, and a smaller overall geographic 
reclassification budget neutrality factor, the difference between the 
FY 1994 final standardized amounts and the FY 1995 proposed 
standardized amounts is 1.5 percent. As described in the discussion of 
the impacts of eliminating the rural amount, the portion of this 
increase due to the smaller outlier offset is already reflected in the 
changes shown in Column 1. In addition, the update to the hospital-
specific rate for SCHs is 1.4 percent in FY 1995. The average increase 
in payments due to updates that is shown in Column 7 and not in Column 
1 is about 1.2 percent.
    Other significant changes that have not been isolated in the 
previous columns include the following:
     A 1.1 percent higher level of outlier payments is 
estimated for FY 1995.
     The increase in the DSH formula for FY 1995 results in 
approximately a 0.1 percent increase in total payments.
     The effect of eliminating the MDH provision is a 3.1 
percent decline in payments for this group of hospitals, and a 0.2 
percent decline for rural hospitals. The impact on total payments is 
essentially zero.
    As a geographic group, hospitals in rural areas experience the 
largest payment increase, a 3.8 percent rise in payments per case over 
FY 1994. The increase in estimated outlier payments over FY 1994 for 
rural hospitals is 0.4 percent, below the 1.1 percent difference for 
all hospitals. As we noted in the discussion of Column 5, eliminating 
the rural amount would be expected to reduce the numbers and effects of 
geographic reclassification. While the number of FY 1995 
reclassifications does not appear to have fallen, however, the payment 
effects are less than they would have been without eliminating the 
rural amount. One sees this effect in Column 7 when examing the rows 
containing rural hospitals reclassified during both FY 1994 and FY 1995 
and rural hospitals reclassified during FY 1994 only. The 295 hospitals 
in the former category experience an overall increase of 2.7 percent, 
closer to that of urban hospitals, and the 149 hospitals in the latter 
category experience a 3.6 percent decline in payments per case.
    Hospitals in large and other urban areas experience 2.9 percent and 
3.0 percent increases, respectively. Urban hospitals are affected the 
most by the change in outlier payments from FY 1994 to FY 1995, a 1.2 
percent increase. They also receive the bulk of the increase in DSH 
payments, a 0.1 percent increase. Urban hospitals receive a net 
increase due to FY 1995 geographic reclassifications relative to FY 
1994 reclassifications. Again, examining the rows grouping hospitals by 
their reclassification status for FY 1994 and FY 1995, urban hospitals 
reclassified for both years have payment increases above those of rural 
hospitals, and urban hospitals reclassified for FY 1994 but not FY 1995 
do not lose as much as rural hospitals.
    Among urban bed size groups, Column 7 shows changes in payments 
ranging from 2.4 percent for the smallest hospitals to 3.4 percent for 
the largest hospitals. The relatively smaller increases for the smaller 
urban hospitals appears to be due to the negative impacts of the new 
wage data, as shown in Column 3. Larger urban hospitals appear to 
benefit from the large increase due to geographic reclassifications in 
FY 1995 for 4 hospitals that were not reclassified in FY 1994.
    The reverse occurs for rural hospitals. Among the smallest rural 
hospitals (fewer than 50 beds), the effects of changes in 
reclassification from FY 1994 to FY 1995 are negated by similar numbers 
of hospitals gaining and losing reclassification from one year to the 
next. The payment changes for larger rural hospitals are smaller 
primarily because they do not benefit to the same extent from the 
elimination of the rural standardized amount. They do, however, tend to 
benefit from geographic reclassification in FY 1995 compared to FY 
1994.

 Table III.--Impact Analysis of Final Operating Cost Prospective Payment
                       System Changes for FY 1995                       
------------------------------------------------------------------------
                                      Average FY   Average FY           
                            No. of       1994         1995        All   
                          hospitals  payment per  payment per   changes 
                                         case         case              
------------------------------------------------------------------------
                                (1)          (2)          (3)        (4)
                                                                        
------------------------------------------------------------------------
(By Geographic                                                          
 Location):                                                             
    All Hospitals.......      5,248        6,051        6,235        3.0
    Urban Hospitals.....      2,947        6,549        6,739        2.9
    Large Urban Areas                                                   
     (Populations Over 1                                                
     Million)...........      1,616        7,064        7,268        2.9
    Other Urban Areas                                                   
     (Populations of 1                                                  
     Million or Fewer)..      1,331        5,877        6,050        3.0
    Rural Areas.........      2,301        4,005        4,158        3.8
Bed Size (Urban):                                                       
    0-99 Beds...........        733        4,476        4,586        2.4
    100-199 Beds........        922        5,555        5,699        2.6
    200-299 Beds........        610        6,049        6,213        2.7
    300-499 Beds........        493        6,925        7,130        3.0
    500 or More Beds....        189        8,468        8,754        3.4
Bed Size (Rural):                                                       
    0-49 Beds...........      1,187        3,326        3,475        4.5
    50-99 Beds..........        687        3,717        3,870        4.1
    100-149 Beds........        227        4,159        4,304        3.5
    150-199 Beds........        106        4,212        4,364        3.6
    200 or More Beds....         94        4,893        5,054        3.3
Urban by Region:                                                        
    New England.........        170        6,855        7,084        3.3
    Middle Atlantic.....        440        7,278        7,484        2.8
    South Atlantic......        436        6,207        6,414        3.3
    East North Central..        491        6,301        6,504        3.2
    East South Central..        167        5,728        5,913        3.2
    West North Central..        198        6,216        6,379        2.6
    West South Central..        383        6,037        6,175        2.3
    Mountain............        120        6,399        6,496        1.5
    Pacific.............        493        7,443        7,669        3.0
    Puerto Rico.........         49        2,582        2,461       -4.7
Rural by Region:                                                        
    New England.........         53        4,747        4,887        2.9
    Middle Atlantic.....         85        4,530        4,616        1.9
    South Atlantic......        298        4,096        4,318        5.4
    East North Central..        310        4,017        4,142        3.1
    East South Central..        286        3,651        3,843        5.3
    West North Central..        536        3,749        3,886        3.6
    West South Central..        359        3,702        3,789        2.4
    Moutain.............        224        4,276        4,418        3.3
    Pacific.............        145        4,888        5,065        3.6
    Puerto Rico.........          5        1,899        1,885       -0.8
(By Payment Categories):                                                
    Urban Hospitals.....      3,252        6,450        6,640        2.9
    Large Urban Areas                                                   
     (Populations Over 1                                                
     Million)...........      1,830        6,910        7,118        3.0
    Other Urban Areas                                                   
     (Populations of 1                                                  
     Million or Fewer)..      1,422        5,723        5,884        2.8
    Rural Areas.........      1,996        3,978        4,126        3.7
Teaching Status:                                                        
    Non-Teaching........      4,197        5,002        5,156        3.1
    Fewer Than 100                                                      
     Residents..........        829        6,497        6,680        2.8
    100 or More                                                         
     Residents..........        222       10,037       10,367        3.3
Disproportionate Share                                                  
 Hospitals (DSH):                                                       
    Non-DSH.............      3,341        5,355        5,517        3.0
Urban DSH:                                                              
    100 Beds or More....      1,355        7,111        7,323        3.0
    Fewer Than 100 Beds.        143        4,257        4,389        3.1
Rural DSH:                                                              
    Sole Community (SCH)        133        3,826        3,972        3.8
    Referral Centers                                                    
     (RRC)..............         47        4,915        5,063        3.0
Other Rural DSH Hosp.:                                                  
    100 Beds or More....         66        3,724        3,886        4.4
    Fewer Than 100 Beds.        163        3,168        3,371        6.4
Urban Teaching and DSH:                                                 
    Both Teaching and                                                   
     DSH................        645        8,106        8,347        3.0
    Teaching and no DSH.        361        6,685        6,894        3.1
    No Teaching and DSH.        853        5,669        5,841        3.0
    No Teaching and no                                                  
     DSH................      1,393        5,192        5,331        2.7
Rural Hospital Types:                                                   
    Nonspecial Status                                                   
     Hospitals..........        845        3,493        3,678        5.3
    RRC.................        138        4,701        4,826        2.7
    SCH.................        578        4,040        4,199        3.9
    Medicare-Dependent                                                  
     Hospitals (MDH)....        415        3,357        3,389        0.9
    SCH and RRC.........         54        4,760        4,899        2.9
Type of Ownership:                                                      
    Voluntary...........      3,282        6,177        6,362        3.0
    Proprietary.........        753        5,523        5,688        3.0
    Government..........      1,213        5,769        5,961        3.3
Medicare Utilization as                                                 
 a Percent of Inpatient                                                 
 Days                                                                   
    0-25................        305        8,114        8,351        2.9
    25-50...............      1,471        7,150        7,373        3.1
    50-65...............      2,244        5,479        5,648        3.1
    Over 65.............      1,162        4,827        4,955        2.7
    Unknown.............         66        9,367        9,572        2.2
Hospitals Reclassified                                                  
 by the Medicare                                                        
 Geographic Review                                                      
 Board:                                                                 
Reclassification Status                                                 
 During FY94 and FY95:                                                  
    Reclassified During                                                 
     Both FY94 and FY95.        484        5,714        5,882        2.9
    Urban...............        189        6,639        6,841        3.0
    Rural...............        295        4,499        4,621        2.7
    Reclassified During                                                 
     FY 95 Only.........        215        5,076        5,547        9.3
    Urban...............         47        6,315        6,846        8.4
    Rural...............        168        4,093        4,516       10.3
    Reclassified During                                                 
     FY94 Only..........        209        5,588        5,473       -2.1
    Urban...............         60        7,173        7,112       -0.9
    Rural...............        149        4,375        4,218       -3.6
FY 95 Reclassifications:                                                
    All Reclassified                                                    
     Hosp...............        699        5,544        5,792        4.5
    Urban...............        236        6,568        6,842        4.2
    Rural...............        463        4,370        4,588        5.0
    All Nonreclassified                                                 
     Hospitals..........      4,522        6,138        6,312        2.8
    Urban...............      2,711        6,547        6,729        2.8
    Rural...............      1,811        3,818        3,940        3.2
    Other Reclassified                                                  
     Hospitals (Section                                                 
     1886(d)(8)(B)).....         27        4,314        4,407        2.1
------------------------------------------------------------------------

    Table III presents the projected average payments per case under 
the changes for FY 1995 for urban and rural hospitals and for the 
different categories of hospitals shown in Table I. It compares the 
projected payments for FY 1995 with the average estimated per case 
payments for FY 1994. Thus, this table presents, in terms of the 
average dollar amounts paid per discharge, the combined effects of the 
changes presented in Table I. That is, the percentage changes shown in 
the last column of Table I equal the percentage changes in average 
payments from October 1, 1993 to October 1, 1994.

VII. Impact of Changes in the Capital Prospective Payment System

A. General Considerations

    We now have data that were unavailable in previous impact analyses. 
Specifically, we have cost report data for the first year of the 
capital prospective payment system (cost reports beginning in FY 1992) 
available through the December 1993 update of the Hospital Cost Report 
Information System (HCRIS). We also have information on the aggregate 
amount of obligated capital approved by the fiscal intermediaries. 
However, our impact analysis of payment changes for capital-related 
costs is still limited by the lack of hospital-specific data on several 
items. These are the hospital's projected new capital costs for each 
year, its projected old capital costs for each year, and the actual 
amounts of obligated capital that will be put in use for patient care 
and recognized as Medicare old capital costs in each year. The lack of 
such information affects our impact analysis in the following ways:
     Major investment in hospital capital assets (for example 
in building and major fixed equipment) occurs at irregular intervals. 
As a result, there can be significant variation in the growth rates of 
Medicare capital-related costs per case among hospitals. We do not have 
the necessary hospital-specific budget data to project the hospital 
capital growth rate for an individual hospital.
     Moreover, our policy of recognizing certain obligated 
capital as old capital complicates the problem of projecting future 
capital-related costs for individual hospitals. Under Sec. 412.302(c), 
a hospital was required to notify its intermediary that it has 
obligated capital, no later than the later of October 1, 1992 or 90 
days after the beginning of the hospital's first cost reporting period 
under the capital prospective payment system. The intermediary must 
then notify the hospital of its determination whether the criteria for 
recognition of obligated capital have been met by the later of the end 
of the hospital's first cost reporting period subject to the capital 
prospective payment system or 9 months after the receipt of the 
hospital's notification. The amount that is recognized as old capital 
is limited to the lesser of the actual allowable costs when the asset 
is put in use for patient care or the estimated costs of the capital 
expenditure at the time it was obligated. We have substantial 
information regarding intermediary determinations of aggregate 
projected obligated capital amounts. However, we still do not know when 
these projects will actually be put into use for patient care, the 
amount that will be recognized as obligated capital when the project is 
put into use, or the Medicare share of the recognized costs. Therefore, 
we do not know actual obligated capital commitments to be used in the 
FY 1995 capital cost projections. We discuss in Appendix B the 
assumptions and computations we employ to generate the amount of 
obligated capital commitments for use in the FY 1995 capital cost 
projections.
    In Table IV of this appendix, we present the redistributive effects 
that are expected to occur between ``hold-harmless'' hospitals and 
``fully prospective'' hospitals in FY 1995. In addition, we have 
integrated sufficient hospital-specific information into our actuarial 
model to project the impact of FY 1995 capital payment policies by the 
standard prospective payment system hospital groupings. We caution that 
while we now have actual information on the effects of the transition 
payment methodology and interim payments under the capital prospective 
payment system and cost report data for most hospitals, we need to 
generate randomly numbers for the change in old capital costs, new 
capital costs for each year, and obligated amounts that will be put in 
use for patient care services and recognized as old capital each year. 
This means that we continue to be unable to predict accurately an 
individual hospital's FY 1995 capital costs; however, with the more 
recent data on the experience to date under the capital prospective 
payment system, there is adequate information to estimate the aggregate 
impact on most hospital groupings.
    We present the transition payment methodology by hospital grouping 
in Table V. In Table VI we present the results of the cross-sectional 
analysis using the results of our actuarial model. This table presents 
the aggregate impact of the FY 1995 payment policies. In Table VII, we 
present a simulation of payments based on 100 percent of the Federal 
rate. This simulation shows the average percentage change in the 
Federal rate attributable to the updated rate and changes in payment 
adjustments.

B. Projected Impact Based on the Proposed FY 1995 Actuarial Model

1. Assumptions
    In this impact analysis, we model dynamically the impact of the 
capital prospective payment system from FY 1994 to FY 1995 using a 
capital acquisition model. The FY 1995 model, described in Appendix B 
of this proposed rule, integrates actual data from individual hospitals 
with randomly generated capital cost amounts. We have available capital 
cost data from cost reports beginning in FY 1989, FY 1990, FY 1991 and 
FY 1992 received through the December 1993 update of the Hospital Cost 
Reporting Information System (HCRIS), interim payment data for 
hospitals already receiving capital prospective payments through 
PRICER, and data reported by the intermediaries that include the 
hospital-specific rate determinations that have been made through 
January 1, 1994 in the Provider-Specific file. We used this data to 
determine the proposed FY 1995 capital rates. However, we do not have 
individual hospital data on old capital changes, new capital formation, 
and actual obligated capital costs. We have data on costs for capital 
in use in FY 1992, and we age that capital by a formula described in 
Appendix B. We therefore need to generate randomly only new capital 
acquisitions for any year after FY 1992. All Federal rate payment 
parameters are assigned to the applicable hospital.
    For purposes of this impact analysis, the FY 1995 actuarial model 
includes the following assumptions:
     Medicare inpatient capital costs per discharge will 
increase at the following rates during these periods: 

                 Average Percentage Increase in Capital                 
------------------------------------------------------------------------
                                                              Costs per 
                        Fiscal year                           discharge 
------------------------------------------------------------------------
1994.......................................................         4.65
1995.......................................................         5.70
------------------------------------------------------------------------


     The Medicare case-mix index will increase by 1.5 percent 
in FY 1994 and FY 1995, and 2.0 percent in FY 1996 and later.
     The Federal capital rate as well as the hospital-specific 
rate will be updated by the 2-year moving average increase in Medicare 
capital costs per case, net of case-mix change increase, between FY 
1990 and FY 1992. The proposed FY 1995 update for inflation is 2.22 
percent (see Addendum, Part III).
     Consistent with the budget neutrality constraints provided 
in section 1886(g)(1)(A) of the Act, estimated aggregate Medicare 
payments for capital costs in FY 1995 will equal 90 percent of the 
amount that would have been payable on a reasonable cost basis. The 
budget neutrality adjustment factor will be applied to the Federal and 
hospital-specific rates only and not to the hold-harmless state payment 
for old capital.
2. Results
    We have used the actuarial model to estimate the change in payment 
for capital-related costs from FY 1994 to FY 1995. To show the effect 
of the capital prospective payment system on low capital cost hospitals 
and high capital cost hospitals, we are presenting separately in Table 
IV the results of our simulation for these hospitals. We consider a 
hospital to be a low capital cost hospital if, based on a comparison of 
its initial hospital-specific rate and the applicable Federal rate, it 
will be paid under the fully prospective payment methodology. A high 
capital cost hospital is a hospital that, based on its initial 
hospital-specific rate, will be paid under the hold-harmless payment 
methodology. Based on our actuarial model, the breakdown of hospitals 
is as follows: 

                 Capital Transition Payment Methodology                 
------------------------------------------------------------------------
                                                  FY 1995      FY 1995  
                       Percent of    FY 1995     percent of   percent of
  Type of hospital     hospitals    percent of    capital      capital  
                                    discharges     costs       payments 
------------------------------------------------------------------------
Low Cost Hospital...           64           59           48           50
High Cost Hospital..           36           41           52           50
------------------------------------------------------------------------


    A low capital cost hospital may request to have its hospital-
specific rate redetermined based on old capital costs in the current 
year, through the later of the hospital's cost reporting period 
beginning in FY 1994 or the first cost reporting period beginning after 
obligated capital comes into use (within the limits established in 
Sec. 412.302(e) for putting obligated capital in use for patient care). 
If the redetermined hospital-specific rate is greater than the adjusted 
Federal rate, these hospitals will be paid under the hold-harmless 
payment methodology. Regardless of whether the hospital became a hold-
harmless payment hospital as a result of a redetermination, we have 
continued to show these hospitals as low capital cost hospitals in 
Table IV.
    Assuming no behavioral changes in capital expenditures, Table IV 
displays the percentage change in payments from FY 1994 to FY 1995 
using the above described actuarial model.

                                               Table IV.--NPRM Capital Budget Neutrality for FY 1994-1995                                               
                                       [Impact of Proposed Changes for FY 1995 on Capital Payments per Discharge]                                       
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Adjusted     Average      Hospital      Hold-                             
                                                   Number of    Discharges    federal      federal      specific     harmless    Exceptions     Total   
                                                   hospitals                  payment      percent      payment      payment      payment      payment  
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 1994 Payments Per Discharge                                                                                                                          
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Cost Hospitals..............................        3,331    6,075,449      $188.43        31.44      $256.05       $38.19        $4.79      $487.46
    Fully Prospective...........................        1,983    3,674,477       180.29        30.00       379.22  ...........         1.75       461.26
    Rebase--Fully Prospective...................        1,065    1,889,463       178.10        30.00       280.31  ...........        10.98       469.38
    Rebase--100% Federal Rate...................          113      201,450       587.19       100.00  ...........  ...........  ...........       587.19
    Rebase--Hold Harmless.......................          170      310,059        88.75        14.29  ...........       748.25         6.28       843.28
High Cost Hospitals.............................        1,893    4,176,293       317.53        51.81  ...........       410.64         3.43       731.60
    100% Federal Rate...........................          737    1,722,137       622.83       100.00  ...........  ...........  ...........       622.98
    Hold Harmless...............................        1,156    2,454,156       103.30        17.05  ...........       698.79         5.74       807.83
        Total hospitals.........................        5,224   10,251,742       241.02        39.85       151.74       189.91         4.24       586.92
--------------------------------------------------------------------------------------------------------------------------------------------------------


--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Adjusted   Average    Hospital    Hold-                                    
                                                    Number of   Discharges   federal    federal    specific   harmless  Exceptions    Total     Percent 
                                                    hospitals                payment    percent    payment    payment     payment    payment     change 
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 1995 Payments Per Discharge                                                                                                                          
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Cost Hospitals................................      3,331    6,075,449    $233.89      40.06    $209.78     $48.20      $10.66    $502.54       3.09
    Fully Prospective.............................      1,983    3,674,477     230.42      40.00     228.76  .........        3.07     462.25       0.21
    Rebase--Fully Prospective.....................      1,065    1,889,463     228.05      40.00     229.67  .........       26.82     484.54       3.23
    Rebase--100% Federal Rate.....................        115      204,758     564.42     100.00  .........  .........        1.90     566.32      -3.55
    Rebase--Hold Harmless.........................        168      306,752      90.90      15.03  .........     954.72        7.87   1,053.48      24.93
High Cost Hospitals...............................      1,893    4,176,293     329.84      54.88  .........     407.48        4.67     742.00       1.42
    100% Federal Rate.............................        758    1,788,585     611.51     100.00  .........  .........        0.14     611.65      -1.82
    Hold Harmless.................................      1,135    2,387,708     118.85      20.04  .........     712.72        8.07     839.64       3.94
        Total hospitals...........................      5,224   10,251,742     272.98      46.60     124.32     194.56        8.22     600.09       2.24
--------------------------------------------------------------------------------------------------------------------------------------------------------


    Under section 1886(g)(1)(A) of the Act, aggregate payments under 
the capital prospective payment system for FY 1992 through 1995 
respectively, are to equal 90 percent of what would have been payable 
on a reasonable cost basis in each year. (See Addendum, Part III for a 
full discussion of the capital budget neutrality provision.) Currently, 
we project that in FY 1994 aggregate payments under the capital 
prospective payment system will be 93.05 percent of reasonable costs, 
or 3.05 percentage points higher than the 90 percent target. We also 
estimate an increase in capital cost per case of 5.70 percent from FY 
1994 to FY 1995. To achieve budget neutrality in FY 1995, we estimate 
there would be an aggregate 2.24 percent increase in FY 1995 Medicare 
capital payments over the FY 1994 payments.
    We project that low capital cost hospitals paid under the fully 
prospective payment methodology will experience an average case-
weighted increase in payments of 3.09 percent, and high capital cost 
hospitals will experience an average increase of 1.42 percent.
    For hospitals paid under the fully prospective payment methodology, 
the Federal rate payment percentage will increase from 30 percent to 40 
percent and the hospital-specific rate payment percentage will decrease 
from 70 to 60 percent in FY 1995.
    The Federal rate payment percentage for a hospital paid under the 
hold-harmless payment methodology is based on the hospital's ratio of 
new capital costs to total capital costs. The average Federal rate 
payment percentage for those hospitals receiving a hold-harmless 
payment for old capital will increase from 17.05 percent to 20.04 
percent. We estimate the percentage of hold-harmless hospitals paid 
based on 100 percent of the Federal rate will increase from 39 percent 
to 40 percent.
    The average hospital-specific rate payment per discharge falls from 
$151.74 in FY 1994 to $124.32 in FY 1995. A decline in the average 
hospital-specific rate payment per discharge from FY 1994 to FY 1995 is 
to be expected because of the reduction in the hospital-specific rate 
blend percentage and the 5.76 percent decrease in the hospital-specific 
rate from FY 1994 to FY 1995.
    We are proposing no changes in our exceptions policies for FY 1995. 
As a result, the minimum payment levels would be:
     90 percent for sole community hospitals;
     80 percent for urban hospitals with 100 or more beds and a 
disproportionate share patient percentage of 20.2 percent or more; or,
     70 percent for all other hospitals.
    We estimate that exceptions payments will increase from 0.7 percent 
of payments in FY 1994 to 1.37 percent of payments in FY 1995. The 
projected distribution of the payments is shown in the table below: 

                 Estimated FY 1995 Exceptions Payments                  
------------------------------------------------------------------------
                                                              Percent of
               Type of hospital                    No. of     exceptions
                                                 hospitals     payments 
------------------------------------------------------------------------
Low Capital Cost..............................          280           77
High Capital Cost.............................          100           23
    Total.....................................          380         100 
------------------------------------------------------------------------

C. Cross-Sectional Comparison of Capital Prospective Payment 
Methodologies

    Table V presents a cross-sectional summary of hospital groupings by 
capital prospective payment methodology. This distribution is generated 
by our actuarial model.

  Table V.--Distribution by Method of Payment (Hold-Harmless/Fully Prospective) of Hospitals Receiving Capital  
                                                    Payments                                                    
----------------------------------------------------------------------------------------------------------------
                                                                         (2) Hold-harmless                      
                                                                 -------------------------------- (3) Percentage
                                                   (1) Total No.    Percentage      Percentage      paid fully  
                                                   of hospitals     paid hold-      paid fully      prospective 
                                                                   harmless (A)     federal (B)        rate     
----------------------------------------------------------------------------------------------------------------
             By Geographic Location                                                                             
                                                                                                                
All hospitals...................................           5,224            24.9            16.7            58.3
Large urban areas (populations over 1 million)..           1,603            29.1            21.6            49.2
Other urban areas (populations of 1 million or                                                                  
 fewer).........................................           1,322            31.4            19.2            49.4
Rural areas.....................................           2,299            18.3            11.8            69.9
Urban hospitals.................................           2,925            30.2            20.5            49.3
    0-99 beds...................................             713            28.6            19.6            51.8
    100-199 beds................................             920            36.4            20.1            43.5
    200-299 beds................................             610            29.5            20.5            50.0
    300-499 beds................................             493            24.3            22.9            52.7
    500 or more beds............................             189            22.8            20.1            57.1
Rural hospitals.................................           2,299            18.3            11.8            69.9
    0-49 beds...................................           1,185            13.1             9.4            77.6
    50-99 beds..................................             687            22.6            13.0            64.5
    100-149 beds................................             227            26.4            18.9            54.6
    150-199 beds................................             106            22.6            15.1            62.3
    200 or more beds............................              94            28.7            13.8            57.4
                                                                                                                
                    By Region                                                                                   
                                                                                                                
Urban by Region.................................           2,925            30.2            20.5            49.3
    New England.................................             170            12.9            20.0            67.1
    Middle Atlantic.............................             440            18.6            24.8            56.6
    South Atlantic..............................             436            37.8            22.7            39.4
    East North Central..........................             489            23.1            14.9            62.0
    East South Central..........................             167            43.7            13.8            42.5
    West North Central..........................             197            32.0            17.3            50.8
    West South Central..........................             371            49.9            25.3            24.8
    Mountain....................................             120            28.3            31.7            40.0
    Pacific.....................................             487            27.9            18.7            53.4
    Puerto Rico.................................              48            18.8            12.5            68.8
Rural by Region.................................           2,299            18.3            11.8            69.9
    New England.................................              53            17.0            11.3            71.7
    Middle Atlantic.............................              85            12.9            20.0            67.1
    South Atlantic..............................             298            23.2            10.7            66.1
    East North Central..........................             310            16.8             8.1            75.2
    East South Central..........................             285            24.2            16.8            58.9
    West North Central..........................             536            12.3             9.7            78.0
    West South Central..........................             358            18.2            17.0            64.8
    Mountain....................................             224            20.5             9.8            69.6
    Pacific.....................................             145            22.8             5.5            71.7
            By Payment Classification                                                                           
                                                                                                                
All hospitals...................................           5,224            24.9            16.7            58.3
Large urban areas (populations over 1 million)..           1,817            29.2            21.0            49.9
Other urban areas (populations of 1 million or                                                                  
 fewer).........................................           1,413            30.2            17.9            51.9
Rural areas.....................................           1,994            17.4            12.0            70.7
Teaching Status:................................                                                                
    Non-teaching................................           4,174            25.3            16.2            58.5
    Fewer than 100 Residents....................             828            24.9            19.0            56.2
    100 or more Residents.......................             222            17.6            18.0            64.4
Disproportionate share hospitals (DSH):                                                                         
    Non-DSH.....................................           3,320            24.1            15.2            60.8
Urban DSH:                                                                                                      
    100 or more beds............................           1,355            29.0            21.5            49.4
    Less than 100 beds..........................             140            28.6            17.1            54.3
Rural DSH:                                                                                                      
    Sole Community (SCH)........................             133            14.3             6.8            78.9
    Referral Center (RRC).......................              47            17.0            19.1            63.8
Other Rural:                                                                                                    
    100 or more beds............................              66            24.2            18.2            57.6
    Less than 100 beds..........................             163            16.6            14.7            68.7
Urban teaching and DSH:                                                                                         
    Both teaching and DSH.......................             645            22.5            19.1            58.4
    Teaching and no DSH.........................             360            23.9            19.4            56.7
    No teaching and DSH.........................             850            33.9            22.7            43.4
    No teaching and no DSH......................           1,375            31.9            18.0            50.1
Rural Hospital Types:                                                                                           
    Non special status hospitals................             843            16.8            13.0            70.1
    RRC.........................................             138            25.4            15.9            58.7
    SCH.........................................              54            27.8            13.0            59.3
    Medicare-dependent hospitals (MDH)..........             415             8.4            11.3            80.2
    SCH and MDH.................................              54            27.8            13.0            59.3
Type of Ownership:                                                                                              
    Voluntary...................................           3,260            24.1            16.6            59.3
    Proprietary.................................             751            43.9            26.1            30.0
    Government..................................           1,213            15.4            11.3            73.3
Medicare Utilization as a Percent of Inpatient                                                                  
 Days:                                                                                                          
    0-25........................................             305            32.5            18.7            48.9
    25-50.......................................           1,471            29.0            17.9            53.2
    50-65.......................................           2,244            23.6            16.8            59.6
    Over 65.....................................           1,162            20.8            14.5            64.6
----------------------------------------------------------------------------------------------------------------

    As we explain in Appendix B, we were not able to determine a 
hospital-specific rate for 24 of the 5,248 hospitals in our data base. 
Consequently, the payment methodology distribution is based on 5,224 
hospitals. This data should be fully representative of the payment 
methodologies that will be applicable to hospitals.
    The cross-sectional distribution of hospital by payment methodology 
is presented by: (1) geographic location, (2) region, and (3) payment 
classification. This provides an indication of the percentage of 
hospitals within a particular hospital grouping that will be paid under 
the fully prospective payment methodology and under the hold-harmless 
methodology.
    Table V indicates that 58.3 percent of hospitals are paid under the 
fully prospective payment methodology. (This figure, unlike the figure 
of 64 percent for low cost capital hospitals in the previous section, 
takes account of the effects of redeterminations. In other words, this 
figure does not include low cost hospitals that, following a hospital-
specific rate redetermination, are now paid under the hold-harmless 
methodology.) As expected, a relatively higher percentage of rural and 
governmental hospitals (69.9 percent and 73.3 percent, respectively) 
are being paid under the fully prospective methodology. This is a 
reflection of their lower than average capital costs per case. In 
contrast, only 30 percent of proprietary hospitals are being paid under 
the fully prospective methodology. This is a reflection of their higher 
than average capital costs per case. (We found at the time of the 
August 30, 1991 final rule (56 FR 43430) that 62.7 percent of 
proprietary hospitals had a capital cost per case above the national 
average cost per case.)

D. Cross-Sectional Analysis of Changes in Aggregate Payments

    We used our FY 1995 actuarial model to estimate the potential 
impact of our proposed changes for FY 1995 on total capital payments 
per case, using a universe of 5,224 hospitals. The individual hospital 
payment parameters are taken from the best available data, including: 
the January 1, 1994 update to the Provider-Specific file, cost report 
data, and audit information supplied by intermediaries. Table VI 
presents a comparison of payments per case for FY 1994 and FY 1995. It 
also presents the portion of total percentage change in payments that 
can be attributed to Federal rate changes alone. Federal rate changes 
include the 6.47 percent decrease in the Federal rate, a 1.5 percent 
increase in case mix, changes in the adjustments to the Federal rate 
(for example, the effect of the new hospital wage index on the 
geographic adjustment factor), and reclassifications by the Medicare 
Geographic Classification Review Board. The residual increase over the 
change attributable to the Federal rate changes can be attributed to 
the effects of transition changes, which include: the change from 30 
percent to 40 percent in the portion of the Federal rate for fully 
prospective hospitals, the hospital-specific rate update, changes in 
the proportion of new to total capital for hold-harmless hospitals, 
changes in old capital (for example, obligated capital put in use), 
hospital-specific rate redeterminations, and exceptions. The 
comparisons are provided by: (1) geographic location and (2) payment 
classification and payment region.
    The simulation results show that, on average, payments per case can 
be expected to increase 2.2 percent in FY 1995. The results show that 
the effect of the Federal rate changes alone is to decrease payments by 
1.3 percent. However, the decrease attributable to the Federal rate 
changes is more than offset by a 3.5 percent increase attributable to 
the effects of transition changes and budget neutrality.
    Our comparison by geographic location shows that urban and rural 
hospitals experience similar rates of increase (2.2 percent and 2.3 
percent, respectively). Urban hospitals will lose slightly less than 
rural hospitals (-1.3 percent compared to -1.6 percent) from the 
Federal rate changes. Urban hospitals will also gain slightly less than 
rural hospitals (3.5 percent compared to 3.9 percent) from the effects 
of transition changes.
    By region, rural hospitals of the New England region have the 
highest rate of increase (12.3 percent, of which -1.9 percent is due to 
Federal rate changes and 14.2 percent to the effects of transition 
changes). Puerto Rico hospitals fare worst: these hospitals will 
experience a 2.5 percent decline in payments, of which -3.4 percent is 
attributable to Federal rate changes and 0.9 percent to the effects of 
transition changes.
    By type of ownership, government hospitals are projected to have 
the highest rate of increase (3.3 percent, of which -1.5 percent is due 
to Federal rate changes and 4.8 percent to the effects of transition 
changes). Payments to proprietary hospitals will decrease 0.2 percent 
(-1.2 percent due to the Federal rate changes and 1.0 percent 
attributable to the effects of transition changes) and payments to 
voluntary hospitals will increase 2.5 percent (-1.3 percent due to 
Federal rate changes and 3.8 percent to the effects of transition 
changes).
    Section 1886(d)(10) of the Act established the Medicare Geographic 
Review Board (MGCRB). Hospitals may apply for reclassification for the 
purpose of the wage index, standardized payment amount, or both. 
Although there is no difference with respect to the Federal capital 
rate, a hospital's geographic classification for purposes of the 
operating standardized amount does affect a hospital's capital payments 
as a result of the large urban adjustment factor and the 
disproportionate share adjustment for urban hospitals with 100 or more 
beds. Reclassification for wage index purposes affects the geographic 
adjustment factor since that factor is constructed from the hospital 
wage index.
    To present the effects of the hospitals being reclassified for FY 
1995 compared to the FY 1994 effects of reclassification, we show the 
average payment percentage increase for hospitals reclassified in each 
fiscal year and in total. For FY 1995 reclassifications, we are 
indicating those hospitals reclassified for standardized amount 
purposes only, for wage index purposes only, and for both purposes. The 
reclassified groups are compared to all other nonreclassified 
hospitals. These categories are further identified by urban and rural 
designation.
    Hospitals reclassified during FY 1995 as a whole are projected to 
experience a 2.3 percent increase in payments (-1.0 attributable to 
Federal rate changes and 3.3 percent attributable to the effects of 
transition changes). Nonreclassified hospitals will gain slightly less 
(2.2 percent) than reclassified hospitals (2.3 percent) overall. While 
nonreclassified hospitals will lose slightly more (-1.4 percent 
compared to -1.0 percent) than reclassified hospitals from the Federal 
rate changes, they will gain more (3.6 percent to 3.3 percent) from the 
effects of transition changes.

                                Table VI.--Comparison of Total Payments Per Case                                
                                 [FY 1994 Payments Compared to FY 1995 Payments]                                
----------------------------------------------------------------------------------------------------------------
                                                                            Average FY                          
                                                               Average FY      1995                    Portion  
                                                  Number of       1994      payments/   All changes  attibutable
                                                  hospitals    payments/    case after                to Federal
                                                                  case         OBRA                  rate change
----------------------------------------------------------------------------------------------------------------
By Geographic Location:                                                                                         
    All hospitals..............................        5,224          587          600          2.2         -1.3
    Large urban areas (populations over 1                                                                       
     million)..................................        1,603          673          688          2.4         -1.4
    Other urban areas (populations of 1 million                                                                 
     of fewer).................................        1,322          588          600          2.1         -1.1
    Rural areas................................        2,299          385          394          2.3         -1.6
    Urban hospitals............................        2,925          636          650          2.2         -1.3
        0-99 beds..............................          713          480          487          1.3         -1.6
        100-199 beds...........................          920          581          589          1.4         -1.4
        200-299 beds...........................          610          604          611          1.2         -1.4
        300-499 beds...........................          493          646          660          2.2         -1.4
        500 or more beds.......................          189          780          815          4.4         -0.8
    Rural hospitals............................        2,299          385          394          2.3         -1.6
        0-49 beds..............................        1,185          279          286          2.2         -2.1
        50-99 beds.............................          687          356          359          0.8         -1.8
        100-149 beds...........................          227          426          439          3.1         -1.7
        150-199 beds...........................          106          397          402          1.1         -1.7
        200 or more beds.......................           94          493          513          4.0         -0.9
By Region:                                                                                                      
    Urban by Region............................        2,925          636          650          2.2         -1.3
        New England............................          170          589          616          4.6         -1.5
        Middle Atlantic........................          440          662          681          2.8         -1.7
        South Atlantic.........................          436          650          661          1.7         -1.0
        East North Central.....................          489          582          590          1.3         -1.1
        East South Central.....................          167          595          612          2.8         -0.7
        West North Central.....................          197          627          639          2.0         -1.1
        West South Central.....................          371          675          681          0.9         -0.8
        Mountain...............................          120          664          654         -1.5         -2.3
        Pacific................................          487          701          731          4.2         -1.5
        Puerto Rico............................           48          235          229         -2.5         -3.4
    Rural by Region............................        2,299          385          394          2.3         -1.6
        New England............................           53          523          587         12.3         -1.9
        Middle Atlantic........................           85          397          408          2.8         -2.1
        South Atlantic.........................          298          402          405          0.9         -1.1
        East North Central.....................          310          374          388          3.7         -1.3
        East South Central.....................          285          366          370          1.0         -1.3
        West North Central.....................          536          351          359          2.3         -2.3
        West South Central.....................          358          369          373          1.1         -2.2
        Mountain...............................          224          423          425          0.5         -1.3
        Pacific................................          145          428          444          3.6         -1.4
By Payment Classification:                                                                                      
    All hospitals..............................        5,224          587          600          2.2         -1.3
    Large Urban areas (populations over 1                                                                       
     million)..................................        1,817          663          678          2.4         -1.3
    Other urban areas (populations of 1 million                                                                 
     or fewer).................................        1,413          571          582          1.9         -1.2
    Rural areas................................        1,994          378          388          2.6         -1.6
    Teaching Status:...........................                                                                 
        Non-teaching...........................        4,174          515          520          0.8         -1.5
        Fewer than 100 Residents...............          828          619          636          2.7         -1.1
        100 or more Residents..................          222          854          901          5.5         -1.2
Disproportionate share hospitals (DSH):                                                                         
    Non-DSH....................................        3,320          549          561          2.1         -1.3
    Urban DSH:                                                                                                  
        100 or more beds.......................        1,355          657          673          2.5         -1.3
        Less than 100 beds.....................          140          410          408         -0.6         -1.9
    Rural DSH:                                                                                                  
        Sole Community (SCH)...................          133          339          338         -0.3         -1.9
        Referral Center (RRC)..................           47          425          433          1.8         -1.4
        Other Rural:...........................                                                                 
            100 or more beds...................           66          366          363         -0.6         -2.3
            Less than 100 beds.................          163          288          290          0.6         -2.0
Urban Teaching and DSH:                                                                                         
    Both teaching and DSH......................          645          713          738          3.5         -1.3
    Teaching and no DSH........................          360          652          678          3.9         -1.0
    No teaching and DSH........................          850          572          577          0.8         -1.4
    No teaching and no DSH.....................        1,375          564          567          0.4         -1.4
Rural Hospital Types:                                                                                           
    Non special status hospitals...............          843          335          341          1.8         -2.0
    RRC........................................          138          463          474          2.3         -1.3
    SCH........................................          578          372          380          2.1         -1.7
    Medicare-dependent hospitals (MDH).........          415          282          283          0.2         -2.3
    SCH and MDH................................           54          476          514          8.0         -0.9
Hospitals Reclassified by the Medicare                                                                          
 Geographic Classification Review Board:                                                                        
    Reclassification Status During FY94 and                                                                     
     FY95:                                                                                                      
        Reclassified During Both FY94 and FY95.          484          586          592          1.1         -1.6
        Reclassified During FY95 Only..........          215          500          532          6.4          0.8
        Reclassified During FY94 Only..........          189          508          514          1.2         -3.5
    FY95 Reclassifications:                                                                                     
        All Reclassified Hospitals.............          699          563          576          2.3         -1.0
        All Nonreclassified Hospitals..........        4,498          591          605          2.2         -1.4
        All Urban Reclassified Hospitals.......          236          671          687          2.4         -1.1
        Urban Nonreclassified Hospitals........        2,689          632          647          2.2         -1.3
        All Reclassified Rural Hospitals.......          463          439          448          2.2         -0.8
        Rural Nonreclassified Hospitals........        1,809          358          366          2.4         -2.1
    Other Reclassified Hospitals (Section                                                                       
     1886(D)(8)(B))............................           27          421          424          0.8         -1.7
Type of Ownership:                                                                                              
    Voluntary..................................        3,260          599          614          2.5         -1.3
    Proprietary................................          751          619          618         -0.2         -1.2
    Government.................................        1,213          481          496          3.3         -1.5
Medicare Utilization as a Percent of Inpatient                                                                  
 Days:                                                                                                          
    0-25.......................................          305          667          699          4.8         -1.6
    25-50......................................        1,471          680          704          3.4         -1.2
    50-65......................................        2,244          542          549          1.3         -1.3
    Over 65....................................        1,162          504          510          1.3         -1.5
----------------------------------------------------------------------------------------------------------------

E. Cross-Sectional Analysis of Changes in the Federal Rate

    The analysis in Table VII examines the impact of the following 
changes in the Federal rate set forth in section III of the addendum to 
this proposed rule--
     The effects of eliminating the separate operating 
prospective payment system rural standardized amount, as required under 
section 1886(d)(3)(A) of the Act (column 3).
     The effects of the annual reclassification of DRGs and 
recalibration of the DRG weights required by section 1886(d)(4)(C) of 
the Act (column 4).
     The effects of the annual update of wage survey data on 
the capital geographic adjustment factor (column 5).
     The effects of the proposed changes in transfer policy 
(column 6).
     The effects of FY 1995 reclassifications by the MGCRB 
(column 7).
     The effects of changes in outlier policy (column 8).
     The effects of all proposed FY 1995 changes affecting the 
Federal rate, including those displayed in columns 3 through 8, 
compared to FY 1994 payments based on the Federal rate (column 9).
    To estimate the effects of these changes, we simulated payments 
based on 100 percent of the Federal rate. As a result, the simulation 
in Table VII has two significant limitations. The simulation 
necessarily employs the FY 1994 and the proposed FY 1995 Federal rates. 
However, the FY 1994 and FY 1995 Federal rates were determined on the 
basis of the transition rules in which hospitals are paid various 
portions of the Federal rate. (Fully prospective hospitals receive 30 
percent of the Federal rate in FY 1994 and 40 percent in FY 1995. Hold-
harmless hospitals receive a portion of the Federal rate based on the 
hospital-specific ratio of new Medicare capitals costs to total 
Medicare capital costs. Approximately 16.7 percent of hospitals will be 
paid 100 percent of the Federal rate in FY 1995.) In particular, the 
budget neutrality adjustment required to assure that aggregate payments 
equal 90 percent of reasonable costs would require revision if all 
hospitals were paid 100 percent of the Federal rate. Thus, the 
simulation of 100 percent Federal rate payments is based on rates that 
would be different if payments were actually based on 100 percent of 
the Federal rate.
    Furthermore, the simulation does not necessarily reflect accurately 
changes in capital prospective payment system payments from FY 1994 to 
FY 1995. Rather, it reflects the percentage change in payments that 
hospitals would experience if all hospitals were paid 100 percent of 
the Federal rate. In fact, as previously noted, hospitals will receive 
varying portions of their amounts on the basis of the Federal rate in 
FY 1995. Section 412.308(c)(4)(ii) requires that estimated aggregate 
payments based on the Federal rate for any year after any changes from 
DRG reclassification and recalibration and the geographic adjustment 
factor equal the estimated aggregate payments based on the Federal rate 
that would have been made without such changes. Appendix B explains 
that the varying portions of the Federal rate paid to each hospital are 
taken into account in determining the aggregate Federal rate payment 
amounts used to compute the DRG/GAF budget neutrality adjustment. The 
aggregate Federal rate payments used to determine the budget neutrality 
adjustment would be different if all hospitals were paid based on 100 
percent of the Federal rate. Thus, Table VII represents the change in 
payments under circumstances unlike those for which the DRG/GAF budget 
neutrality adjustment is computed. As a result, it is to be expected 
that the full effects of that budget neutrality requirement will not be 
precisely reflected in Table VII.
    The simulation in Table VII is not representative of changes in 
capital prospective payment system payments from FY 1994 to FY 1995. 
Rather, it reflects the percentage change in payments for hospitals 
receiving 100 percent of the Federal rate. For other hospitals, it 
reflects the percentage change in the Federal rate portion of payments, 
holding the Federal rate portion constant. (Of course, for those other 
hospitals, the Federal rate portion changes in almost all cases from FY 
1994 to FY 1995.) Unlike the Federal rate payment change in Table VI, 
the analysis in Table VII also does not include any increase in Federal 
rate payments attributable to anticipated increases in the case-mix 
index.
    Because of the limitations on the simulation presented in Table 
VII, we are considering whether to omit this table in future impact 
statements. We welcome comments on the utility of this table and its 
continued use in future impact statements.
    The table shows that Federal rate payments can be expected to 
decrease 4.5 percent overall prior to consideration of any increase in 
the case-mix index. This decrease is due to the 6.5 percent decrease in 
the Federal rate, which is partially offset by the 1.9 percent increase 
in outlier payments.
    The table also shows the distributional effects of the changes in 
Federal rate payments from the changes noted above. We modeled the 
effects of the changes in all columns, except column 7, in the same 
manner as in Table I above. Thus, column 3 displays the payment changes 
resulting from eliminating the rural standardized amount, modeled by 
comparing simulated 100 percent Federal rate payments using our FY 1995 
baseline model (as described in the operating portion of this impact 
analysis) to simulated payments after eliminating the separate rural 
amount. The changes in Federal rate payments from eliminating the rural 
standardized amount are, as is to be expected, insignificant. The 0.1 
percent gain for other urban hospitals reflects the spillover effect of 
an increase in outlier payments for urban hospitals.
    Column 4 presents the change in Federal rate payments of the 
combined effects of the revised DRG classification system, and the 
subsequent recalibration of DRG weights incorporating these revised 
DRGs, as discussed in section II of this proposed rule. The DRG changes 
are expected to produce only minimal effects on the distribution of 
Federal rate payments. The highest gain from DRG reclassification and 
recalibration is projected at 0.1 percent (for several classes of 
hospitals), while the largest loss is projected at -0.3 percent (for 
urban disproportionate share hospitals with 100 beds or less).
    As with the previous two columns, the impact of the new wage data 
in Federal rate payments is isolated in column 5 by holding the other 
payment parameters constant in the two comparison simulations. That is, 
the percentage changes demonstrate the changes in Federal rate payments 
from our FY 1995 baseline--using the FY 1994 wage index before 
geographic reclassifications based on 1990 wage survey data, after 
elimination of the separate rural rate and incorporating the FY 1995 
GROUPER--to a model substituting the FY 1995 pre-reclassification wage 
index based on data submitted for hospital cost reporting periods 
beginning in FY 1991. The only significant changes from the use of new 
wage data on the capital geographic adjustment factor are on hospitals 
in Puerto Rico. Urban Puerto Rico hospitals experience a decrease of 
7.4 percent and rural Puerto Rico hospitals experience a decrease of 
10.7 percent. As is the case with similar decreases in operating 
prospective payment system payments, these effects are attributable to 
improved reporting by hospitals.]
    Column 6 illustrates the effects of the proposed transfer policy 
changes relative to a baseline simulation based on current transfer 
policy. The effects of the changes in transfer policy are similar to 
those in operating prospective payment system payments. The transfer 
changes increase Federal rate payments to rural hospitals by 0.5 
percent, and decrease Federal rate payments to urban hospitals by 0.1 
percent. As is the case with operating prospective payments, this 
result is due to the fact that rural hospitals benefit from changing 
the per diem methodology.
    Column 7 displays the impact of the FY 1995 decisions by the MGCRB 
compared to FY 1994 reclassification decisions. It includes all of the 
changes proposed for FY 1995 discussed up to this point. Therefore, in 
examining the changes for particular hospital groups, the impacts 
discussed previously appear here as well (for example, the large 
decreases in Puerto Rico due to the new wage data). This comparison 
corresponds with the methodology used to determine the GAF/DRG budget 
neutrality adjustment factor. To accomplish this comparison, we have 
replaced the FY 1995 proposed capital Federal rate with the FY 1994 
Federal rate adjusted by the 1.00115 proposed GAF/DRG budget neutrality 
factor.
    Column 8 shows the incremental effects of outlier changes alone. 
The changes shown in this column closely reflect the changes in 
operating prospective payments shown in Table 1.
    Column 9 displays the combined changes from the previous columns, 
as well as the effects of other factors affecting Federal rate 
payments, compared to FY 1994 Federal rate payments. The other factors 
include: the change in the standard Federal rate from FY 1994, the 
effect of geographic reclassifications on large urban status, and a 1.9 
percent increase in outlier payments. As noted in the previous 
discussion, the effects of changes in geographic reclassification 
decisions from FY 1994 to FY 1995, in addition to the changes discussed 
in columns 3 through 6, are shown in column 7. These effects are 
included in column 9 as well, along with the changes in outlier policy 
and the changes in the Federal rate and outlier payments. Thus, only 
the last column reflects the effects of all quantifiable policy changes 
on simulated FY 1995 Federal rate payments.

                             Table VII.--Impact Analysis of Proposed Changes for FY 1995 Capital Prospective Payment System                             
                                                     [Percent Changes in Federal Payments Per Case]                                                     
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Pymt.    Pymt.    Elim.                                                         OBRA          
                                                No. of     per      per     rural        DRG         New    Transfer        MGCRB         1993    All FY
                                              Hosps.\1\  case FY  case FY   stand.  recalibration    wage    policy   reclassification  outlier    1995 
                                                           1994     1995    amount                   data    changes                    changes  changes
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   (0)       (1)      (2)      (3)         (4)         (5)       (6)           (7)          (8)      (9)
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
 (By Geographic Location):                                                                                                                              
    All Hospitals...........................     5,248       595      569      0.0         0.0         0.1      -0.1           0.0          0.0     -4.5
    Urban Hospitals.........................     2,947       643      615      0.0         0.1         0.1      -0.1          -0.1          0.0     -4.4
        Large Urban.........................     1,616       687      655      0.0         0.0         0.2      -0.2          -0.1          0.0     -4.6
        Other Urban.........................     1,331       586      561      0.1         0.1         0.0      -0.1          -0.1          0.2     -4.2
    Rural Areas.............................     2,301       400      380      0.0         0.0         0.3       0.5           0.7         -0.2     -4.8
Bed Size (Urban):                                                                                                                                       
    0-99 Beds...............................       733       462      440      0.1        -0.1        -0.3       0.4           0.1          0.0     -4.7
    100-199 Beds............................       922       558      532      0.0         0.0        -0.2       0.0          -0.2          0.1     -4.6
    200-299 Beds............................       610       609      581      0.0         0.0         0.0      -0.1          -0.2         -0.1     -4.6
    300-499 Beds............................       493       676      645      0.0         0.1         0.2      -0.2          -0.2          0.0     -4.5
    500 or More Beds........................       189       796      764      0.0         0.1         0.3      -0.4           0.1          0.2     -3.9
Bed Size (Rural):                                                                                                                                       
    0-49 Beds...............................     1,187       333      316      0.0        -0.1         0.4       1.0           1.1         -0.2     -5.0
    50-99 Beds..............................       687       374      355      0.0        -0.1         0.2       0.7           0.5         -0.1     -5.1
    100-149 Beds............................       227       418      396      0.0         0.0         0.3       0.5           0.1         -0.2     -5.2
    150-199 Beds............................       106       423      403      0.0         0.0         0.4       0.3           0.9         -0.3     -4.7
    200 or More Beds........................        94       476      458      0.0         0.1         0.3       0.1           1.0         -0.1     -3.9
Urban by Region:                                                                                                                                        
    New England.............................       170       668      636      0.0         0.1         1.1      -0.2           0.7         -0.4     -4.8
    Middle Atlantic.........................       440       695      660      0.0         0.1         0.4      -0.2          -0.3         -0.6     -5.1
    South Atlantic..........................       436       615      592      0.0         0.1         0.2       0.0           0.3          0.2     -3.7
    East North Central......................       491       620      594      0.0         0.0         0.4      -0.1           0.3          0.1     -4.3
    East South Central......................       167       568      548      0.1         0.1         0.0      -0.1           0.0          0.6     -3.5
    West North Central......................       198       628      599      0.0         0.1        -0.1      -0.1          -0.2          0.1     -4.6
    West South Central......................       383       605      584      0.1         0.0        -1.0      -0.3          -1.3          0.9     -3.5
    Mountain................................       120       648      611      0.0         0.1        -0.9      -0.3          -1.5         -0.1     -5.7
    Pacific.................................       493       726      693      0.0         0.0        -0.1      -0.1           0.1          0.1     -4.6
    Puerto Rico.............................        49       268      239      0.0         0.1        -7.4       0.2          -8.6          0.7    -10.6
Rural by Region:                                                                                                                                        
    New England.............................        53       467      439      0.0         0.1         0.3       0.4          -0.2         -0.5     -6.0
    Middle Atlantic.........................        85       445      422      0.0         0.1         0.4       0.3           0.3         -0.5     -5.1
    South Atlantic..........................       298       411      396      0.0         0.0         0.3       0.5           1.5          0.0     -3.7
    East North Central......................       310       402      383      0.0         0.0         0.9       0.6           1.2         -0.2     -4.6
    East South Central......................       286       364      348      0.0        -0.1         0.0       0.5           1.2          0.0     -4.4
    West North Central......................       536       378      357      0.0         0.0         0.4       0.7           0.5         -0.2     -5.4
    West South Central......................       359       374      350      0.1        -0.1        -0.1       0.5          -1.1          0.0     -6.3
    Mountain................................       224       414      395      0.1         0.0         0.2       0.5           0.2         -0.2     -4.5
    Pacific.................................       145       479      455      0.0         0.0         0.2       0.5           0.5         -0.2     -5.0
    Puerto Rico.............................         5       218      184      0.0        -0.2       -10.7       0.3         -11.4          0.3    -15.6
(By Payment Categories):                                                                                                                                
    Urban Hospitals.........................     3,252       634      606      0.0         0.1         0.1      -0.1          -0.1          0.0     -4.4
        Large Urban.........................     1,830       675      645      0.0         0.0         0.2      -0.2          -0.1          0.0     -4.5
        Other Urban.........................     1,422       569      545      0.1         0.1        -0.1       0.0          -0.1          0.1     -4.3
    Rural Hospitals.........................     1,996       395      375      0.0         0.0         0.3       0.5           0.4         -0.2     -5.0
Teaching Status:                                                                                                                                        
    Non-Teaching............................     4,197       509      486      0.0         0.0         0.0       0.2           0.0          0.0     -4.6
    Less Than 100 Res.......................       829       644      615      0.0         0.1         0.2      -0.2          -0.1          0.0     -4.4
    100+ Residents..........................       222       895      856      0.0         0.1         0.5      -0.6           0.1          0.1     -4.3
Disproportionate Share Hospitals (DSH):                                                                                                                 
    Non-DSH.................................     3,341       552      527      0.0         0.1         0.1       0.2           0.0         -0.1     -4.6
    Urban DSH:                                                                                                                                          
        100 Beds or More....................     1,355       671      641      0.0         0.0         0.2      -0.3           0.0          0.1     -4.4
        Fewer Than 100 Beds.................       143       422      403      0.1        -0.3        -0.1       0.4           0.4          0.1     -4.6
    Rural DSH:                                                                                                                                          
        Sole Community (SCH)................       133       352      331      0.0        -0.1         0.2       0.7          -0.2          0.0     -5.9
        Referral Centers (RRC)..............        47       455      439      0.0         0.0         0.2       0.0           1.5          0.2     -3.6
    Other Rural DSH Hosp:                                                                                                                               
        100 Beds or More....................        66       380      356      0.0        -0.1         0.1       0.6          -0.9         -0.3     -6.3
        Fewer Than 100 Beds.................       163       325      309      0.0        -0.2         0.2       0.9           0.8          0.1     -4.9
Urban Teaching and DSH:                                                                                                                                 
    Both Teaching and DSH...................       645       746      713      0.0         0.1         0.3      -0.4          -0.1          0.1     -4.5
    Teaching and no DSH.....................       361       680      651      0.0         0.1         0.2      -0.1          -0.1          0.0     -4.3
    No Teaching and DSH.....................       853       561      537      0.0         0.0        -0.1      -0.1           0.0          0.2     -4.3
    No Teaching and no DSH..................     1,393       545      520      0.0         0.0        -0.1       0.2          -0.2         -0.1     -4.6
Rural Hospital Types:                                                                                                                                   
    Nonspecial Status Hospitals.............       845       366      346      0.0        -0.1         0.3       0.7           0.1         -0.2     -5.5
    RRC.....................................       138       469      448      0.0         0.1         0.3       0.1           0.4         -0.1     -4.7
    SCH.....................................       578       374      355      0.0         0.0         0.2       0.8           0.4         -0.2     -5.2
    Medicare-Dependent Hospital.............       415       336      319      0.0        -0.1         0.4       0.9           0.9         -0.1     -5.1
    SCH and RRC.............................        54       447      429      0.0         0.1         0.5       0.2           1.2         -0.3     -4.0
Type of Ownership:                                                                                                                                      
    Voluntary...............................     3,282       610      582      0.0         0.1         0.2      -0.1           0.0          0.0     -4.5
    Proprietary.............................       753       562      540      0.1        -0.1        -0.5       0.0          -0.4          0.3     -3.8
    Government..............................     1,213       539      513      0.0         0.0         0.3       0.0           0.4         -0.1     -4.8
Medicare Utilization as a Percent of                                                                                                                    
 Inpatient Days:                                                                                                                                        
    0-25....................................       305       723      688      0.0         0.0        -0.1      -0.4          -0.3          0.3     -4.9
    25-50...................................     1,471       682      652      0.0         0.1         0.2      -0.3           0.0          0.1     -4.4
    50-65...................................     2,244       555      530      0.0         0.1         0.1       0.1           0.0          0.0     -4.5
    Over 65.................................     1,162       496      473      0.0         0.0         0.1       0.2           0.1         -0.1     -4.7
    Unknown.................................        66       767      716     -0.1        -0.1         0.5      -0.5          -0.4         -1.7     -6.7
Hospitals Reclassified by the Medicare                                                                                                                  
 Geographic Review Board:                                                                                                                               
Reclassification Status During FY94 and                                                                                                                 
 FY95:                                                                                                                                                  
    Reclassified During Both FY94 and FY95..       484       571      543      0.0         0.0         0.1       0.1          -0.5          0.0     -4.9
        Urban...............................       189       659      627      0.0         0.0         0.0      -0.1          -0.9          0.1     -4.8
        Rural...............................       295       455      432      0.0         0.0         0.4       0.3           0.2         -0.2     -5.1
    Reclassified During FY95 Only...........       215       504      511      0.0         0.1         0.4       0.1           6.8          0.0      1.3
        Urban...............................        47       632      635      0.1         0.1         0.3      -0.1           5.2          0.1      0.6
        Rural...............................       168       403      412      0.0         0.0         0.5       0.4           8.6         -0.2      2.2
    Reclassified During FY94 Only...........       209       551      497      0.0         0.0         0.1       0.2          -5.4         -0.3     -9.8
        Urban...............................        60       699      643      0.0         0.1         0.2       0.0          -3.4         -0.4     -8.0
        Rural...............................       149       438      386      0.0         0.0         0.0       0.4          -7.8         -0.2    -12.0
FY 95 Reclassifications:                                                                                                                                
    All Reclassified Hosp...................       699       553      534      0.0         0.0         0.2       0.1           1.2          0.0     -3.4
        Urban...............................       236       653      629      0.0         0.1         0.0      -0.1           0.4          0.1     -3.7
        Rural...............................       463       439      426      0.0         0.0         0.4       0.4           2.7         -0.2     -3.0
    All Nonreclassified Hospitals...........     4,522       603      575      0.0         0.0         0.1      -0.1          -0.2          0.0     -4.6
        Urban...............................     2,711       642      613      0.0         0.1         0.1      -0.2          -0.2          0.0     -4.5
        Rural...............................     1,811       379      357      0.0         0.0         0.3       0.6          -0.4         -0.2     -5.8
    Other Reclassified Hospitals (Section                                                                                                               
     1886(d)(8)(B)).........................        27       444      418      0.1         0.0         0.3       0.5          -0.2         -0.3     -5.7
--------------------------------------------------------------------------------------------------------------------------------------------------------

Appendix B: Technical Appendix on the Capital Acquisition Model and 
Budget Neutrality Adjustment

    Section 1886(g)(1)(A) of the Act requires that for FY 1992 through 
FY 1995 aggregate prospective payments for operating costs under 
section 1886(d) of the Act and prospective payments for capital costs 
under section 1886(g) of the Act be reduced each year in a manner that 
results in a 10 percent reduction of the amount that would have been 
payable on a reasonable cost basis for capital-related costs in that 
year. Under Sec. 412.352, the 10 percent reduction is generated 
entirely from the capital prospective payments. A budget neutrality 
adjustment factor is applied to the Federal rate and hospital-specific 
rate so that total capital payments for each year from FY 1992 through 
FY 1995 equal 90 percent of Medicare inpatient capital costs in each 
year.
    To calculate the budget neutrality adjustment, we must project the 
rate at which old capital will be depreciated and written off and at 
which new capital will be acquired and depreciated. (Old capital costs 
include depreciation, lease, interest expenses, and other capital-
related costs defined in Sec. 412.302 for depreciable assets that are 
in use for patient care or obligated on or before December 31, 1990.)
    In developing the FY 1992 prospective payment rates, there were 
limited capital data available that could be used to project payments 
under the capital prospective payment system and develop the budget 
neutrality adjustment factor. Consequently, we developed a capital 
acquisition model that relied on Monte Carlo random simulation 
techniques to project capital costs for 6000 hypothetical hospitals. 
This model is described in detail in the August 30, 1991 final rule (56 
FR 43517-43522).
    We now have cost report data for the first year of the capital 
prospective payment system. These cost reports begin in FY 1992 (PPS-9) 
and provide a break-out of old and new capital for the first time. We 
used the December 1993 update of the PPS-9 cost reports, the January 1, 
1994 update of the provider specific file, and the December 1993 update 
of the intermediary audit file as data sources.
    The available data still lack certain items that are required for 
the determination of budget neutrality, including a hospital's 
projected new capital costs for each year, its projected old capital 
costs for each year, and the projected obligated capital amounts that 
will be put in use for patient care services and recognized as old 
capital each year.
    For FY 1993 and FY 1994, we implemented an integrated model that 
starts with the available data for existing hospitals and back-fills 
the missing items with results from the capital acquisition model that 
was used to develop the FY 1992 payment rates. Since we now have data 
for FY 1992, we no longer need to use the integrated model, and, 
consequently, we are no longer using the model that developed the FY 
1992 rates.
    Since hospitals under alternative payment system waivers (that is, 
hospitals in Maryland and hospitals in the Finger Lakes Area Hospital 
Corporation in New York) are currently excluded from the capital 
prospective payment system, we excluded these hospitals from our model.
    We first developed FY 1992, FY 1993, and FY 1994 hospital-specific 
rates using the provider-specific file, the intermediary audit file, 
and when available, cost reports. (We used the cumulative provider-
specific file, which includes all updates to each hospital's records, 
and chose the latest record for each fiscal year.) We checked the 
consistency between the provider-specific file and the intermediary 
audit file. We also ensured that the FY 1993 increase in the hospital-
specific rate was at least 0.62 percent (the net FY 1993 update) and 
that the FY 1994 hospital-specific rate was at least as large as the FY 
1993 hospital-specific rate decreased by 2.16 percent (the net FY 1994 
update). We were able to match hospitals to the files as shown in the 
following table. 

------------------------------------------------------------------------
                                                                 No. of 
                           Source                              hospitals
                                                                        
------------------------------------------------------------------------
Provider Specific File Only..................................        47 
Provider Specific and Audit File.............................     5201  
                                                              ----------
      Total..................................................     5248  
------------------------------------------------------------------------

    Forty-five of these hospitals had unusable or missing data. We were 
able to back-fill a hospital-specific rate for 21 of these hospitals 
from the cost reports as shown in the following table. 

------------------------------------------------------------------------
                                                                 No. of 
                           Source                              hospitals
                                                                        
------------------------------------------------------------------------
PPS-5 Cost Reports...........................................         1 
PPS-7 Cost Reports...........................................         2 
PPS-8 Cost Reports...........................................         1 
PPS-9 Cost Reports...........................................       17  
                                                              ----------
      Total..................................................       21  
------------------------------------------------------------------------

    We did not have data for 24 hospitals, and had to drop them from 
the capital analysis. Most of these dropped hospitals are new hospitals 
or hospitals with very few Medicare admissions. This leaves us with 
5224 hospitals and should not affect the precision of the budget 
neutrality determination.
    We then determined old and new capital amounts for FY 1992 using 
the PPS-9 cost reports as the first source of data. Since we matched 
only 4,653 PPS-9 cost reports, we also used the provider-specific file 
for old capital information. Even in cases where a cost report was 
available, the break out of old and new capital was not always 
available. In these cases, we used the old capital amounts and new 
capital ratios from the provider-specific file. If these were missing 
we derived the old capital amount from the hospital specific rate.
    Finally, we used the intermediary audit file to develop obligated 
capital amounts. Some hospitals had indicated that they could not bring 
the obligated capital on line before the expiration of this provision, 
so we excluded the obligated amounts for these hospitals from the 
budget neutrality determination. Since the obligated amounts are 
aggregate projected amounts, we computed a Medicare capital cost per 
admission associated with these amounts. We adjusted the aggregate 
amounts by the following factors:
    (1) Medicare inpatient share of capital. This was derived from cost 
reports and was limited to the Medicare share of total inpatient days. 
It was necessary to limit the Medicare share because of data integrity 
problems. Medicare share of inpatient days is a reasonably good proxy 
for allocating capital. However, it may be understated if Medicare 
utilization is high, and may be overstated because it ignores the 
outpatient share of capital.
    (2) Capitalization factor. This factor allocates the aggregate 
amount of obligated capital to depreciation and interest amounts. 
Consistent with the assumptions in the capital input price index, we 
used a 25-year life for fixed capital and a 10-year life for movable 
capital, and an average projected interest rate of 6.7 percent. We also 
assumed that fixed capital acquisitions are about one-half of total 
capital. In conjunction with the useful life and interest rate 
assumptions, the resulting capitalized fixed capital is about one-half 
of total capitalization. This is consistent with the allocations 
between fixed and movable capital found on the cost reports. The ratio 
we developed is 0.137, which produces the first year capitalization 
based on the aggregate amount.
    (3) A divisor of Medicare admissions to derive the capital per 
discharge amount. Since we must project capital amounts for each 
hospital, we continued to use a Monte Carlo simulation to develop these 
amounts. The Monte Carlo simulation is now used only to project capital 
costs per discharge amounts for each hospital. We analyzed the 
distributions of capital increases, and noted a slightly negative 
correlation between the dollar level of capital per admission, and the 
rate of increase in capital. To determine the rate of increase in 
capital cost per admission, we multiplied the lesser of $3,000 or the 
capital cost per admission by .00006 and subtracted this result from 
1.2. (Increases for capital levels over $3,000 were not influenced by 
the level of capital, so this part of the calculation was capped at 
$3,000.) We selected a random number from the normal distribution, 
multiplied it by 0.17 (the standard deviation) and added it to -0.04 
(the mean) and then added 1 to create a multiplier. This random result 
was multiplied by the previous result to assign a rate of increase 
factor which was multiplied by the prior year's capital per discharge 
amount to develop a capital per discharge amount for the projected 
year.
    To model a projected year, we used the old and new capital for the 
prior year multiplied by 0.96 (aging factor). The 0.96 aging factor is 
the average of changes in capital over its life. The aged new and old 
capital is subtracted from the projected capital described in the 
previous paragraph. The difference represents newly acquired capital. 
We assume that the hospital would accrue only a half year of costs for 
newly acquired capital in the year in which the capital comes on line. 
This is because, on average, new capital will come on line in the 
middle of the year. We make the same assumption for obligated capital. 
If the hospital has obligated capital, the lesser of one half of the 
adjusted costs (as described in the succeeding paragraph) for newly 
acquired capital or one half of the costs for obligated capital are 
deemed to apply to the current year. The full year's costs for new or 
obligated capital are assumed to apply for the following year. For FY 
1994, one half of the costs for any outstanding obligated capital were 
deemed to apply to FY 1994; a full year's costs were deemed to apply to 
FY 1995. With the exception of certain hospitals about whom we have 
information to the contrary, we assume that hospitals would meet the 
expiration dates provided under the obligated capital provision. The 
on-line obligated amounts are added to old capital and subtracted from 
the newly acquired capital to yield residual newly acquired capital, 
which is then added to new capital. The residual newly acquired capital 
is never permitted to be less than zero.
    Next, we computed the average total capital cost per discharge from 
the capital costs that were generated by the model and compared the 
results to total capital costs per discharge that we had projected 
independently of the model. We adjusted the newly acquired capital 
amounts proportionately, so that the total capital costs per discharge 
generated by the model match the independently projected capital costs 
per discharge.
    Once each hospital's capital-related costs are generated, the model 
projects capital payments. We use the actual payment parameters (for 
example, the case-mix index and the geographic adjustment factor), that 
are applicable to the specific hospital.
    To project capital payments, the model first assigns the applicable 
payment methodology (fully prospective or hold-harmless) to the 
hospital. If available, the model uses the payment methodology 
indicated in the PPS-9 cost reports or the provider-specific file. 
Otherwise, the model determines the methodology by comparing the 
hospital's FY 1992 hospital-specific rate to the adjusted Federal rate 
applicable to the hospital. The model simulates Federal rate payments 
using the assigned payment parameters and hospital-specific estimated 
outlier payments. The case-mix index for a hospital is derived from the 
1993 MedPAR file using the proposed FY 1995 DRG relative weights 
published in this rule. The case-mix index is increased each year after 
FY 1993 consistent with the continuing trend in case-mix increase.
    We analyzed the case-mix increases for the recent past and found 
that case-mix increases have decelerated to about 1.55 percent in FY 
1992 and 0.83 percent in FY 1993. It is too early to reliably determine 
a case-mix increase for FY 1994 from the discharge data. Since case-mix 
increases appear to be decelerating, we have reduced our projected 
long-term increase of 2 percent to 1.5 percent for both FY 1994 and FY 
1995. We will continue to monitor case-mix increases and make 
appropriate adjustments to our projections. (Since we are using FY 1993 
cases for our analysis, the FY 1993 increase in case mix has no effect 
on the FY 1995 Federal rate. It does affect the estimated update for 
the FY 1996 Federal rate displayed in the projection table in this 
appendix.)
    Changes in geographic classification and corrections in the 
hospital wage data used to establish the hospital wage index affect the 
geographic adjustment factor. Changes in the DRG classification system 
and the relative weights affect the case-mix index.
    Section 13501(a)(3) of Public Law 103-66 requires that, for 
discharges occurring after September 30, 1993, the unadjusted standard 
Federal rate be reduced by 7.4 percent. Consequently, the model reduces 
the unadjusted standard Federal rate by 7.4 percent effective in FY 
1994. Because of the budget neutrality provisions in effect through FY 
1995, this provision does not reduce aggregate payments for capital in 
FY 1994 and FY 1995.
    Section 412.308(c)(4)(ii) requires that the estimated aggregate 
payments for the fiscal year, based on the Federal rate after any 
changes resulting from DRG reclassifications and recalibration and the 
geographic adjustment factor, equal the estimated aggregate payments 
based on the Federal rate that would have been made without such 
changes. For FY 1994, the budget neutrality adjustment factor was 
1.0033. To determine the factor for FY 1995, we first determined the 
portion of the Federal rate that would be paid for each hospital in FY 
1995 based on its applicable payment methodology. We then compared 
estimated aggregate Federal rate payments based on the FY 1994 DRG 
relative weights and FY 1994 geographic adjustment factor to estimated 
aggregate Federal rate payments based on the FY 1995 relative weights 
and the FY 1995 geographic adjustment factor. In making the comparison, 
we held the FY 1995 Federal rate portion constant and set the other 
budget neutrality adjustment factor and exceptions reduction factor to 
1.00. We determined that to achieve budget neutrality for the changes 
in the geographic adjustment factor and DRG classifications and 
relative weights, an incremental budget neutrality adjustment of 
1.00115 for FY 1995 should be applied to the previous cumulative FY 
1994 adjustment of 1.0033 (the product of the FY 1993 incremental 
adjustment of .9980 and the FY 1994 incremental adjustment of 1.0053), 
yielding a cumulative adjustment of 1.00445 through FY 1995.
    The methodology used to determine the recalibration and geographic 
(DRG/GAF) budget neutrality adjustment factor is similar to that used 
in establishing budget neutrality adjustments under the prospective 
payment system for operating costs. One difference is that under the 
operating prospective payment system, the budget neutrality adjustments 
for the effect of geographic reclassifications are determined 
separately from the effects of other changes in the hospital wage index 
and the DRG weights. Under the capital prospective payment system, 
there is a single DRG/GAF budget neutrality adjustment factor for 
changes in the geographic adjustment factor (including geographic 
reclassification) and the DRG relative weights. In addition, there is 
no adjustment for the effects that geographic reclassification has on 
the other payment parameters, such as the payments for serving low 
income patients or the large urban add-on.
    In addition to computing the DRG/GAF budget neutrality adjustment 
factor, we used the model to project total aggregate payments under the 
prospective payment system and to compute the budget neutrality 
adjustment factor that would result in estimated payments under the 
capital prospective payment system equal to 90 percent of the amount 
that would have been payable on a reasonable cost basis. This budget 
neutrality factor is applied to the Federal and hospital-specific 
rates, but not to the hold-harmless payments.
    Additional payments under the exceptions process are accounted for 
through a reduction in the Federal and hospital-specific rates. 
Therefore, we used the model to calculate estimated exceptions payments 
and the exceptions reduction factor. This exceptions reduction factor 
ensures that estimated aggregate payments under the capital prospective 
payment system, including exceptions payments, equal estimated 
aggregate payments under the capital prospective payment system without 
an exceptions process. Since changes in the level of the payment rates 
change the level of payments under the exceptions process, the budget 
neutrality and exceptions adjustments factors must be determined 
through iteration. Further, these two factors interact with each other 
so that they must be determined simultaneously. We successfully 
determined values for these factors so that the exceptions adjustment 
factor is correct, and estimated payments under the capital prospective 
payment system equal 90 percent of estimated Medicare inpatient capital 
costs.
    In the August 30, 1991 final rule (56 FR 43517), we indicated that 
we would publish each year the estimated payment factors generated by 
the model to determine payments for the next 5 years. The table below 
provides the actual factors for FY 1992, FY 1993, and FY 1994, the 
proposed factors for FY 1995, and the estimated factors that would be 
applicable through FY 1999. We caution that, except with respect to FY 
1992, FY 1993, FY 1994, and the proposed FY 1995, these are estimates 
only, and are subject to revisions resulting from continued 
methodological refinements, more recent data, and any payment policy 
changes that may occur. In this regard, we note that in making these 
projections we have assumed that the cumulative DRG/GAF adjustment 
factor will remain at 1.00445 for FY 1995 and later because we do not 
have sufficient information to estimate the change that will occur in 
the factor for years after FY 1995.
    The projections are as follows:

----------------------------------------------------------------------------------------------------------------
                        Increase in cost                       Exceptions          Budget         Federal rate  
     Fiscal year        per discharge\1\   Update factor    reduction factor     neutrality      (after outlier 
                                                                                   factor          reduction)   
----------------------------------------------------------------------------------------------------------------
1992..................              1.87               N/A            0.9813            0.9602            415.59
1993..................              1.17              6.07             .9756             .9162         \2\417.29
1994..................              3.11              3.04             .9485             .8947         \3\378.34
1995..................              4.14              2.22             .9797             .7986         \4\353.87
1996..................              3.87              1.52             .9912               N/A            455.12
1997..................              4.10              2.13             .9844               N/A            461.63
1998..................              4.29              3.62             .9723               N/A            472.46
1999..................              4.36              4.00             .9562               N/A           483.22 
----------------------------------------------------------------------------------------------------------------
\1\Note: Adjusted for estimated 1.55 percent annual increase in case mix for FY 1992, 0.83 percent for FY 1993, 
  1.5 percent for FY 1994 and FY 1995, and 2.0 percent for FY 1996 and later.                                   
\2\Note: Includes the DRG/GAF adjustment factor of 0.9980 and the change in the outlier adjustment from 0.9497  
  in FY 1992 to 0.9496 in FY 1993.                                                                              
\3\Note: Includes the 7.4 percent reduction in the unadjusted standard Federal rate. Also includes the DRG/GAF  
  adjustment factor of 1.0033 and the change in the outlier adjustment from 0.9496 in FY 1993 to 0.9454 in FY   
  1994.                                                                                                         
\4\Note: Includes the DRG/GAF adjustment factor of 1.00445 and the change in the outlier adjustment from 0.9454 
  in FY 1994 to 0.9372 in FY 1995. Future adjustments are, for purposes of this projection, assumed to remain at
  the same level.                                                                                               

Appendix C

May 10, 1994.
The Honorable Albert Gore, Jr.,
President of the Senate, Washington, DC 20510

    Dear Mr. President: Section 1886(e)(3)(B) of the Social Security 
Act (the Act) requires that the Secretary of Health and Human 
Services report to Congress the initial estimate of the applicable 
percentage increase for FY 1995 that she will recommend for 
hospitals subject to the Medicare prospective payment system (PPS) 
and for hospitals and units excluded from PPS. This submission 
constitutes the required report.
    Our recommendations are consistent with the provisions of the 
Omnibus Budget Reconciliation Act (OBRA) of 1993. For FY 1995, we 
recommend an average update for all hospitals subject to PPS equal 
to the percentage increase in the hospital market basket (an index 
of inflation in goods and services used by hospitals) minus 1.4 
percentage points. We currently estimate that the market basket rate 
of increase for FY 1995 will be 3.6 percent. The average update for 
all PPS hospitals would equal 2.2 percent (the market basket 
percentage increase of 3.6 percent minus 1.4 percent).
    We are recommending the updates for urban and rural hospitals 
that are provided under current law. Under our recommendation and 
OBRA 1993, urban PPS hospitals would receive the market basket rate 
of increase minus 2.5 percentage points, or a 1.1 percent increase. 
Rural PPS hospitals would receive the market basket rate of increase 
plus 4.8 percentage points, or 8.4 percent. We currently have 
separate PPS payment rates for large urban, other urban and rural 
hospitals. However, the law requires us to eliminate the separate 
rural rate and to establish a single rate for rural and other urban 
hospitals beginning in FY 1995. The higher update for rural PPS 
hospitals eliminates the difference between the rate paid to other 
urban and rural PPS hospitals.
    Sole community hospitals (SCHs) are the sole source of care in 
their area and are afforded special payment protection to maintain 
access to services for Medicare beneficiaries. SCHs are paid the 
higher of a hospital-specific rate or the Federal rate. Under our 
recommendation and OBRA 1993, the update to hospital-specific rates 
will equal the market basket rate of increase minus 2.2 percentage 
points or 1.4 percent.
    Hospitals and units that are excluded from PPS are paid based on 
reasonable costs subject to a limit under the Tax Equity and Fiscal 
Responsibility Act (TEFRA) of 1982. Consistent with current law, we 
recommend an increase in the TEFRA limit equal to the rate of 
increase in the excluded hospital market basket (3.7 percent) minus 
1.0 percentage points, or 2.7 percent.
    Our recommendation for the updates is based on current 
projections of relevant data, and is consistent with the President's 
budget. A final recommendation on the appropriate percentage 
increases for FY 1995 will be made nearer the beginning of the new 
Federal Fiscal Year based on the most current market basket 
projection available at that time. The final recommendation will 
incorporate our analysis of the latest estimates of all relevant 
factors, including recommendations by the Prospective Payment 
Assessment Commission (ProPAC).
    Section 1886(d)(4)(C)(iv) of the Act requires that the Secretary 
include in her report recommendations with respect to adjustments to 
the diagnosis-related group (DRG) weighting factors. At this time, 
we do not anticipate recommending any adjustment to the DRG 
weighting factors for FY 1995.
    I am pleased to provide my recommendations to you.
      Sincerely,
Donna E. Shalala
May 10, 1994.
The Honorable Thomas S. Foley,
Speaker of the House of Representatives, Washington, DC 20515.

    Dear Mr. Speaker: Section 1886(e)(3)(B) of the Social Security 
Act (the Act) requires that the Secretary of Health and Human 
Services report to Congress the initial estimate of the applicable 
percentage increase for FY 1995 that she will recommend for 
hospitals subject to the Medicare prospective payment system (PPS) 
and for hospitals and units excluded from PPS. This submission 
constitutes the required report.
    Our recommendations are consistent with the provisions of the 
Omnibus Budget Reconciliation Act (OBRA) of 1993. For FY 1995, we 
recommend an average update for all hospitals subject to PPS equal 
to the percentage increase in the hospital market basket (an index 
of inflation in goods and services used by hospitals) minus 1.4 
percentage points. We currently estimate that the market basket rate 
of increase for FY 1995 will be 3.6 percent. The average update for 
all PPS hospitals would equal 2.2 percent (the market basket 
percentage increase of 3.6 percent minus 1.4 percent).
    We are recommending the updates for urban and rural hospitals 
that are provided under current law. Under our recommendation and 
OBRA 1993, urban PPS hospitals would receive the market basket rate 
of increase minus 2.5 percentage points, or a 1.1 percent increase. 
Rural PPS hospitals would receive the market basket rate of increase 
plus 4.8 percentage points, or 8.4 percent. We currently have 
separate PPS payment rates for large urban, other urban and rural 
hospitals. However, the law requires us to eliminate the separate 
rural rate and to establish a single rate for rural and other urban 
hospitals beginning in FY 1995. The higher update for rural PPS 
hospitals eliminates the difference between the rate paid to other 
urban and rural PPS hospitals.
    Sole community hospitals (SCHs) are the sole source of care in 
their area and are afforded special payment protection to maintain 
access to services for Medicare beneficiaries. SCHs are paid the 
higher of a hospital-specific rate or the Federal rate. Under our 
recommendation and OBRA 1993, the update to hospital specific rates 
will equal the market basket rate of increase minus 2.2 percentage 
points or 1.4 percent.
    Hospitals and units that are excluded from PPS are paid based on 
reasonable costs subject to a limit under the Tax Equity and Fiscal 
Responsibility Act (TEFRA) of 1982. Consistent with current law, we 
recommend an increase in the TEFRA limit equal to the rate of 
increase in the excluded hospital market basket (3.7 percent) minus 
1.0 percentage points, or 2.7 percent.
    Our recommendation for the updates is based on current 
projections of relevant data, and is consistent with the President's 
budget. A final recommendation on the appropriate percentage 
increases for FY 1995 will be made nearer the beginning of the new 
Federal Fiscal Year based on the most current market basket 
projection available at that time. The final recommendation will 
incorporate our analysis of the latest estimates of all relevant 
factors, including recommendations by the Prospective Payment 
Assessment Commission (ProPAC).
    Section 1886(d)(4)(C)(iv) of the Act requires that the Secretary 
include in her report recommendations with respect to adjustments to 
the diagnosis-related group (DRG) weighting factors. At this time, 
we do not anticipate recommending any adjustment to the DRG 
weighting factors for FY 1995.
    I am pleased to provide my recommendations to you.
      Sincerely,
Donna E. Shalala

Appendix D: Recommendation of Update Factors for Operating Cost 
Rates of Payment for Inpatient Hospital Services

I. Background

    Several provisions of the Social Security Act (the Act) address the 
setting of update factors for services furnished in FY 1995 by 
hospitals subject to the prospective payment system and those excluded 
from the prospective payment system. Section 1886(b)(3)(B)(i)(X) of the 
Act sets the FY 1995 percentage increases in the operating cost 
standardized amounts equal to the rate of increase in the hospital 
market basket minus 2.5 percentage points for prospective payment 
hospitals located in urban areas. For hospitals located in rural areas, 
section 1886(b)(3)(B)(i)(X) requires the Secretary to apply an update 
so as to make the rural national average standardized amounts equal to 
the other urban national average standardized amount. Section 
1886(b)(3)(B)(iv) sets the FY 1995 percentage increase to the hospital-
specific rate applicable to sole community hospitals equal to the rate 
of increase in the hospital market basket minus 2.2 percentage points. 
Section 1886(b)(3)(B)(ii) of the Act sets the FY 1995 percentage 
increase in the rate-of-increase limits for hospitals excluded from the 
prospective payment system equal to the rate of increase in the 
excluded hospital market basket minus a reduction factor (not to exceed 
1.0 percent) depending on the provider's operating costs and target 
amounts.
    In accordance with section 1886(d)(3)(A) of the Act, we are 
proposing to update the average standardized amounts, the hospital-
specific rates and the rate-of-increase limits for hospitals excluded 
from the prospective payment system as provided in section 
1886(b)(3)(B) of the Act. Based on the currently forecasted market 
basket increase of 3.6 percent for hospitals subject to the prospective 
payment system, the proposed updates in the standardized amounts are 
1.1 percent for hospitals in urban areas and approximately 8.4 percent 
for hospitals in rural areas. The proposed update in the hospital-
specific rate applicable to sole community hospitals is 1.4 percent 
(that is, the market basket rate of increase of 3.6 percent minus 2.2 
percentage points). The proposed update for hospitals excluded from the 
prospective payment system is based on the percentage increase in the 
excluded hospital market basket (currently estimated at 3.7 percent) 
minus a reduction factor (not to exceed 1.0 percent).
    Sections 1886(e)(2)(A) and (3)(A) of the Act require that the 
Prospective Payment Assessment Commission (ProPAC) recommend to the 
Congress by March 1, 1994 an update factor that takes into account 
changes in the market basket rate of increase index, hospital 
productivity, technological and scientific advances, the quality of 
health care provided in hospitals, and long-term cost effectiveness in 
the provision of inpatient hospital services.
    In its March 1, 1994 report, ProPAC recommended update factors to 
the standardized amounts equal to the percentage increase in the market 
basket minus 1.5 percentage points for urban hospitals and the market 
basket rate of increase plus 1.6 percentage points for hospitals 
located in rural areas. Based on its market basket rate of increase 
estimate of 3.7 percent, ProPAC's recommended updates to the 
standardized amounts equal 2.2 percent for hospitals located in urban 
areas and 5.3 percent for hospitals located in rural areas. ProPAC 
recommended that the update for the hospital-specific rates applicable 
to sole community hospitals be equal to the average update for all 
hospitals (that is, equal to the percentage increase in the market 
basket minus 1.0 percentage point, or 2.7 percent based on a market 
basket rate of increase estimate of 3.7 percent). The components of 
ProPAC's update factor recommendations are described in detail in the 
ProPAC report, which is published as Appendix F to this document. We 
discuss ProPAC's recommendations concerning the update factors and our 
responses to those recommendations below.
    Section 1886(e)(4) of the Act requires that the Secretary, taking 
into consideration the recommendations of ProPAC, recommend update 
factors for FY 1995 that take into account the amounts necessary for 
the efficient and effective delivery of medically appropriate and 
necessary care of high quality. Under section 1886(e)(5) of the Act, we 
are required to publish the recommended FY 1995 update factors that are 
provided for under section 1886(e)(4) of the Act. Accordingly, this 
appendix provides our recommendations of appropriate update factors, 
our analysis of the derivation of the amount of the update factors, and 
our responses to the ProPAC recommendations concerning the update 
factors.

II. Secretary's Recommendations

    Under section 1886(e)(4) of the Act, we are recommending that the 
standardized amounts be increased by an average amount equal to the 
market basket rate of increase minus 2.5 percentage points for 
hospitals located in urban areas and the market basket rate of increase 
plus 4.8 percentage points for hospitals located in rural areas (before 
the effects of adjustments for outlier, geographic reclassification and 
recalibration of the DRG relative weights). Our recommendation for a 
higher update to the rural standardized amount is intended to eliminate 
the differential between the standardized amounts for other urban and 
rural hospitals, as required by section 1886(b)(3)(B)(i)(X) of the Act. 
We are also recommending an update of the market basket rate of 
increase minus 2.2 percentage points to the hospital-specific rate for 
sole community hospitals. These figures are consistent with the 
President's budget recommendation, given the new market basket forecast 
of 3.6 percent.
    We recommend that hospitals excluded from the prospective payment 
system receive an update equal to the percentage increase in the market 
basket that measures input price increases for services furnished by 
excluded hospitals minus 1.0 percentage point. That market basket rate 
of increase is currently forecast at 3.7 percent. Subtracting 1.0 
percentage point would result in an update for hospitals excluded from 
the prospective payment system of 2.7 percent.
    As required by section 1886(e)(4) of the Act, we have taken into 
consideration the recommendations of ProPAC in setting these 
recommended update factors. Our responses to the ProPAC recommendations 
concerning the update factors are discussed below.

III. ProPAC Recommendation for Updating the Prospective Payment 
System Standardized Amounts

    For FY 1995, ProPAC recommends that the standardized amount be 
updated by the following factors:
     The projected rate of increase in the hospital market 
basket (which was estimated to be 3.7 percent in ProPAC's March 1, 1994 
report) with an adjustment of 0.0 percentage points to account for the 
different wage and salary price proxies used for the ProPAC market 
basket rate of increase.
     A correction of -1.1 percent to reflect the forecast error 
in the FY 1993 market basket rate of increase.
     A discretionary adjustment factor of -0.4 percent composed 
of an allowance of 0.3 percent for scientific and technological 
advancement and an allowance of -0.7 percent for productivity 
improvement.
     An adjustment for case-mix change of 0.0 percent.
     A differential update of 3.1 percent for hospitals located 
in rural areas to reflect the phasing out of the differential in the 
standardized amounts between rural and other urban hospitals.
    Overall, the net increase employing the above factors is the 
percentage increase in the hospital market basket minus 1.5 percentage 
points for urban hospitals and the market basket percentage increase 
plus 1.6 percentage points for rural hospitals. Based on the market 
basket rate of increase estimate of 3.7 percent used in its March 1, 
1994 report, ProPAC recommends that urban hospitals receive a 2.2 
percent update and rural hospitals receive a 5.3 percent update.
    Response: We are recommending an update that is consistent with the 
Administration's budget proposal and the requirements of section 
1886(b)(3)(B)(i) of the Act, as amended by section 13501(a) of Public 
Law 103-66. Our recommendation is that: 1) the average update for 
prospective payment system hospitals located in urban areas for FY 1995 
be equal to market basket rate of increase forecast minus 2.5 
percentage points, 2) the update to the rural standardized amounts be 
sufficient to equate the rural with the other urban standardized 
amounts. Based on HCFA's current forecast of the market basket rate of 
increase (3.6 percent), we recommend an update for FY 1995 for urban 
hospitals equal to 1.1 percent (the market basket rate of increase 
minus 2.5 percentage points), and for rural hospitals equal to 8.4 
percent (the market basket percentage increase plus 4.8 percentage 
points). Under these recommendations, we now estimate that the average 
update for all prospective payment system hospitals would be the market 
basket minus 1.4 percentage points, or approximately 2.2 percent. As we 
have explained in section II of the Addendum to this proposed rule, our 
recommended updates would be applied to the unadjusted FY 1994 
standardized payment amounts. That is, the FY 1994 standardized payment 
amounts published in our September 1, 1993 final rule (at 58 FR 46362) 
would be increased to remove the effects of adjustments made for 
outliers and geographic reclassification before the recommended updates 
would be applied.
    Our recommendation is supported by the following analyses that 
measure changes in hospital productivity, scientific and technological 
advances, practice pattern changes, and changes in case mix:
     Productivity: Service level productivity is defined as the 
ratio of total service output to full time equivalent employees (FTEs). 
While we recognize that productivity is a function of many variables 
(for example, labor, non-labor material and capital inputs), we use a 
labor productivity measure in our framework, since the current update 
framework applies to operating payment. To recognize that we are 
apportioning the short run output changes to the labor input, we weight 
our productivity measure for operating costs by the appropriate share 
of labor input to total operating input to determine the expected 
effect on cost per case.
    Our recommendation for the service productivity component is based 
on historical trends in productivity and total output for both the 
hospital industry and the general economy, and projected levels of 
future hospital service output. ProPAC has also estimated cumulative 
service productivity growth to be 4.9 percent from 1985-1989 or 1.2 
percent annually. At the same time, they estimate total service growth 
at 3.4 percent annually, implying a ratio of service productivity 
growth to output growth of 0.35. Our MedPAR analysis indicates total 
Medicare service output (charges per admission, adjusted for CPI 
change) increased 20.9 percent from 1985-1993, or an approximate 
average annual increase of 2.4 percent. Since it is not possible at 
this time to develop a productivity measure specific to Medicare 
patients, we examined productivity (output per hour) and output (gross 
domestic product) for the economy. Depending on the exact time period, 
annual changes in productivity range from 0.3 to 0.35 of the change in 
output (that is, a 1.0 percent increase in output would be correlated 
with an 0.3 to 0.35 percent change in output per hour).
    Under our framework, the recommended update is based in part on 
expected productivity--that is, projected service output during the 
year multiplied by the historical ratio of service productivity to 
total service output, multiplied by the share of labor in total 
operating inputs, as calculated in the hospital market basket rate of 
increase. This method estimates an expected labor productivity 
improvement in the same proportion to expected total service growth 
that has occurred in the past and assumes that, at a minimum, growth in 
FTEs changes proportionally to the growth in total service output. 
Thus, the recommendation allows for unit productivity to be smaller 
than the historical averages in years that output growth is relatively 
low, and higher in years that output growth is larger than the 
historical trend. Based on the above estimates from both the hospital 
industry and the economy, we have chosen to employ the range of ratios 
of productivity change to output change of 0.30 to 0.35.
    The expected change in total hospital service output is the product 
of projected growth in total admissions (adjusted for outpatient 
usage), projected real case-mix growth, and expected quality enhancing 
intensity growth, net of expected decline in intensity due to reduction 
of cost ineffective practice. Case-mix growth and intensity numbers for 
Medicare are used as proxies for those of the total hospital, since 
case-mix increases (used in the intensity measure as well) are 
unavailable for non-Medicare patients. Thus, expected output growth is 
simply the product of the expected change in intensity (0.0 percent), 
projected admissions change (3.2 percent for 1995) and projected real 
case-mix growth (1.0 to 1.4 percent for 1995), or 4.2 to 4.6 percent. 
The share of direct labor services in the hospital market basket rate 
of increase (consisting of wages and salaries and employee benefits) is 
61.7 percent. Multiplying the expected change in total hospital service 
output by the ratio of historical service productivity change to total 
service growth of 0.30 to 0.35 and by the direct labor share percentage 
provides our productivity standard of 0.8 to 1.0 percent.
    ProPAC also believes hospitals should be given an incentive for 
additional productivity improvement. ProPAC measures productivity as 
the ratio of hospital admissions (adjusted for case mix and outpatient 
services) per FTE employee (adjusted for changes in skill mix). ProPAC 
includes in its productivity measurement the effect of changes in 
practice patterns. We treat practice pattern changes as a portion of 
our intensity adjustment, described below. This year, ProPAC assumes a 
productivity gain of at least 1.4 percent and recommends a -0.7 
percentage point adjustment on the basis that any productivity gains 
should be shared equally by Medicare and hospitals.
     Intensity: We base our intensity standard on the combined 
effect of three separate factors: changes in the use of quality 
enhancing services, changes in the use of services due to shifts in 
within-DRG severity, and changes in the use of services due to 
reductions of cost-ineffective practices. For 1995, we recommend an 
adjustment of 0.0 percent. The basis of this recommendation is 
discussed below.
    We have no empirical evidence that accurately gauges the level of 
quality-enhancing technology changes. Typically, a specific new 
technology increases costs in some uses and decreases costs in other 
uses. Concurrently, health status is improved in some situations while 
in other situations it may be unaffected or even worsened using the 
same technology. It is difficult to separate out the relative 
significance of each of the cost-increasing effects for individual 
technologies and new technologies.
    The quality enhancing technology component is intended to recognize 
the use of services which increase cost but whose value in terms of 
enhanced health-status is commensurate with these costs. Such services 
may result from technological change, or in some cases, increased use 
of existing technologies. The latter recognizes that as cost and 
medical effectiveness studies become available, some increased use of 
existing, as well as new, services may be warranted.
    The component for reduction of cost-ineffective practice recognizes 
that some improvements in practice patterns could be made so that the 
intensity of services provided is more consistent with the efficient 
use of limited resources. That is, improvements could be made so that 
the number of services provided during an inpatient stay, and their 
complexity, produce an improvement in health status that is consistent 
with the cost of care. This component of our update recommendation is 
intended to encourage both hospitals and physicians to more carefully 
consider the cost-effectiveness of medical care. This component of the 
framework also accounts for real within-DRG change, since that should 
be directly reflected in the CMI- adjusted growth in real charges per 
case.
    We note that, since 1985, the intensity of services per inpatient 
admission has increased, even after adjusting for the growth in real 
case mix each year. These increases, which are similar to pre-
prospective payment system increases, followed intensity decreases in 
both 1984 and 1985. Following methods developed by HCFA's Office of the 
Actuary for deriving hospital output estimates from total hospital 
charges, ProPAC has estimated that case mix constant intensity per 
admission increased at an average of 1.5 percent annually from 1985-
1990. We have developed Medicare-specific intensity measures for 
inpatient services based on a five-year average using FY 1988-1993 
MedPAR billing data. Consistent with ProPAC, case-mix constant 
intensity is calculated as the change in total Medicare charges per 
discharge adjusted for changes in the average charge per unit of 
service as measured by the Medical CPI hospital component, and changes 
in real case-mix. Past studies of case-mix change by the RAND 
Corporation indicate that the change in real case-mix ranges from 1.0 
percent to 1.4 percent per year. If we assume that real case-mix change 
is 1.4 percent per year, we estimate case-mix constant intensity to 
have declined by an average of 0.4 percent each year during the FY 
1988-1993 period, a cumulative decrease of 2.1 percent. If we assume 
that real case-mix has been growing at 1.0 percent annually, case-mix 
constant intensity has declined by an average of 0.1 percent annually, 
for a cumulative decrease of 0.6 percent. We note that regardless of 
which real case-mix number we assume (1.0 or 1.4), we used the observed 
case-mix increase for FY 1993 of 0.8 percent to calculate the real 
case-mix constant intensity. Since we estimate that intensity has 
declined during the FY 1988-1993 period, we are recommending a 0.0 
percent intensity adjustment for FY 1995.
     Quality Enhancing New Science and Technology: Project 
Hope, under contract with ProPAC, annually estimates the incremental 
operating costs of specific cost-increasing technologies. However, we 
know of no definitive studies that establish an appropriate level or 
range for this factor. ProPAC's adjustment is for the cost-increasing 
effect of new technologies only, and this year assumes the estimated 
costs for these technologies at only 0.3 percent.
    We believe there may be several shortcomings with ProPAC's 
recommendations with regard to technology. First, the estimate does not 
account for offsetting changes in revenue due to changes in DRG 
assignment. Second, it is not clear that all of the new technologies 
listed in ProPAC's study significantly enhance health status. To the 
extent the new technologies are not quality enhancing, an adjustment is 
inappropriate. Finally, some of the technologies have considerable 
potential for cost savings relative to the technologies they are 
replacing.
     Change in Case Mix: Our analysis takes into account 
projected changes in case-mix, adjusted for changes attributable to 
improved coding practices. For our FY 1995 update recommendation, we 
are projecting a 1.5 percent increase in the case-mix index. We define 
real case-mix change as actual changes in the mix (and resource 
requirements) of Medicare patients as opposed to changes in coding 
behavior that result in assignment of cases to higher-weighted DRGs but 
do not reflect greater resource requirements. We estimate that 1.0 to 
1.4 percent of the projected case-mix increase of 1.5 percent will be 
real. This estimate is supported by past studies of case-mix change by 
RAND Corporation. The most recent study by the RAND Corporation, ``Has 
DRG Creep Crept Up? Decomposing the Case Mix Index Change Between 1987 
and 1988'' by G.M. Carter, J.P. Newhouse and D.A. Relles, R-4098-HCFA/
ProPAC (1991), uses medical records from subsequent Federal fiscal 
years using consistent standards to determine real case-mix change. The 
study specifically suggests that real case-mix change is not dependent 
on total change, but instead is a fairly steady 1.0 to 1.5 percent per 
year. We use 1.4 percent as the upper bound because the RAND study did 
not take into account that hospitals may have induced doctors to more 
completely document medical records so as to improve payment. The 
resulting adjustment to account for changes in case mix during FY 1993, 
the most recent year for which data are available, is -0.1 to -0.5 
percent (subtracting the projected case-mix of 1.5 percent and adding 
real case mix change of 1.0 to 1.4 percent). The 0.9 percent figure 
used in the ProPAC framework represents ProPAC's projection for 
observed case-mix change, and its projection for real case-mix change, 
including within-DRG case complexity change, during FY 1994. Consistent 
with ProPAC's framework, we are using a projection for case-mix change 
in our recommendation.
     Effect of FY 1993 Reclassification and Recalibration: We 
estimate that DRG reclassification and recalibration for FY 1993 
resulted in a 0.1 percent decrease in the case-mix index when compared 
with the case-mix index that would have resulted if we had not made the 
reclassification and recalibration changes to the GROUPER. ProPAC does 
not make an adjustment for DRG reclassification and recalibration in 
its update recommendation (we note that Congress asks the Secretary for 
an estimate of these effects in our update recommendation).
     Correction for Market Basket Forecast Error: The FY 1993 
estimated market basket percentage increase used to update the payment 
rates was 4.1 percent. Our most recent data indicate the actual FY 1993 
increase was 2.9 percent, reflecting that the actual increase in wages 
was lower than projected. The resulting forecast error in the projected 
FY 1993 market basket rate of increase forecast is 1.2 percentage 
points. Our policy has been to make a forecast error correction if our 
estimate is off by 0.25 percentage points or more. Therefore, we are 
recommending an adjustment of -1.2 percentage points to reflect this 
overestimation of the FY 1993 market basket rate of increase. The 
following is a summary of the update ranges supported by our analyses 
compared to ProPAC's framework.

         Table 1.--Comparison of FY 1995 Update Recommendations         
------------------------------------------------------------------------
                                   HHS                    ProPAC        
------------------------------------------------------------------------
Market Basket..........  MB                       MB                    
Difference Between HCFA  .......................  +0.0                  
 & ProPAC Market                                                        
 Baskets.                                                               
                                                                        
                        ------------------------------------------------
    Subtotal...........  MB                       MB                    
                                                                        
Policy Adjustment                                                       
 Factors:                                                               
Productivity...........  -0.8--1.0                -0.7                  
Intensity..............  0.0                                            
    Science and          .......................  +0.3                  
     Technology.                                                        
    Intensity..........  .......................  (\1\)                 
    Real Within DRG      .......................  (\2\)                 
     Change.                                                            
                                                                        
                        ------------------------------------------------
        Subtotal.......  -0.8--1.0                +0.3                  
Case Mix Adjustment                                                     
 Factors:                                                               
    Projected Case Mix   -1.5                     -0.9                  
     Change.                                                            
    Real Across DRG      1.0-1.4                  +0.7                  
     Change.                                                            
    Real Within DRG      (\3\)                    +0.2                  
     Change.                                                            
                                                                        
                        ------------------------------------------------
        Subtotal.......  -0.1--0.5                0.0                   
Effect of 1993           +0.1                     ......................
 Reclassification and                                                   
 Recalibration.                                                         
Forecast Error           -1.2                     -1.1                  
 Correction.                                                            
                                                                        
                        ------------------------------------------------
    Total Recommended    MB-2.0-MB-2.6            MB-1.5                
     Update.                                                            
------------------------------------------------------------------------
(\1\) Included in ProPAC's Productivity Measure.                        
(\2\) Included in ProPAC's Case Mix Adjustment.                         
(\3\) Included in HHS' Intensity Factor.                                

    The above analysis supports our recommended update to the urban 
standardized amounts of the market basket rate of increase (that is, 
3.6 percent) minus 2.5 percentage points, or 1.1 percent. In addition, 
we believe a differential update for the standardized amount applicable 
to rural hospitals is appropriate in order to phase out the 
differential between the rural and other urban standardized amounts, as 
required by section 1886(d)(3)(A)(iii) of the Act. We are recommending 
that the rural standardized amount be updated by the market basket plus 
4.8 percentage points for a total update of 8.4 percent. This 
recommendation is consistent with the President's budget, which 
includes an update to the standardized amounts for rural hospitals of 
the market basket rate of increase plus the amount necessary to 
eliminate the differential between the rural and other urban 
standardized amounts.
    We recommend that the hospital-specific rates applicable to sole 
community hospitals be increased by the update factor that approximates 
that applicable for urban hospitals. We believe that the considerations 
used to develop the update recommendations for the rural standardized 
amounts that would eliminate the difference between the rural and other 
urban standardized amounts are not a relevant consideration for the 
hospital-specific rates. Therefore, we are recommending an update to 
hospital-specific rates of the market basket rate of increase minus 2.2 
percentage points, which is consistent with current law and the 
President's budget.

IV. ProPAC Recommendation for Updating the Rate-of-Increase Limits 
for Excluded Hospitals

    ProPAC recommends an update factor equal to the market basket rate 
of increase minus 1.0 percentage point for excluded hospitals and 
units. The 1.0 percentage point reduction represents a reduction of 1.0 
percentage point to account for the forecast error in the FY 1993 
market basket rate of increase for excluded units, no increase to 
reflect the different compensation price proxies used by ProPAC, and no 
allowance for new technology. ProPAC no longer recommends an additional 
allowance based on the year the hospital or unit was excluded from the 
prospective payment system, pending our report to Congress on payment 
reform for excluded hospitals and units as mandated by Public Law 101- 
508.
    Response: We recommend that hospitals excluded from the prospective 
payment system receive an update equal to the percentage increase in 
the market basket that measures input price increases for services 
furnished by excluded hospitals minus 1.0 percentage point. The 
reduction is consistent with the updates provided under current law and 
in the President's Budget. The market basket rate of increase for 
excluded hospitals is currently forecast at 3.7 percent. Subtracting 
1.0 percentage point would result in an update of 2.7 for excluded 
hospitals and units.

Appendix E: Development of Update Framework for Prospective Payment 
System for Inpatient Hospital Capital-Related Costs

I. Introduction

    For FY 1992 through FY 1995, Sec. 412.308(c)(1) provides that the 
update for the capital prospective payment rates (Federal rate and 
hospital-specific rate) will be based on a 2-year moving average of 
actual increases in Medicare inpatient capital costs per discharge. The 
regulations provide that, beginning in FY 1996, HCFA will determine the 
update in the capital prospective payment rates based on an analytical 
framework that will take into account (1) changes in the price of 
capital (which we will incorporate into a capital input price index), 
and (2) appropriate changes in capital requirements resulting from 
development of new technologies and other factors (such as the 
diffusion of existing technologies and existing hospital capacity and 
utilization). The objective of the capital update framework is to 
determine a rate of increase in aggregate capital prospective payments 
that, along with a rate of increase in DRG operating payments, ensures 
a joint flow of capital and operating services for efficient and 
effective care for Medicare patients.
    Although the analytical framework will not be employed to determine 
the annual update factor until FY 1996, we are presenting a series of 
preliminary models, using available data and concepts, of an update 
framework for the prospective payment system for hospital inpatient 
capital-related costs. We have presented a series of models in our FY 
1992, FY 1993, and FY 1994 rulemaking documents. We received no 
comments on the most recent model of the framework, which appeared in 
the September 1, 1993 final rule (58 FR 46489). Below we discuss the 
current version of the model, based on our previously published version 
and our continued analysis of the data and concepts incorporated into 
the framework.
    The model update framework includes a capital input price index 
(CIPI) that parallels the operating input price index. The CIPI 
measures the pure price changes associated with changes in capital-
related costs (prices x ``quantities''). The composition of capital-
related costs is maintained at base-year FY 1987 proportions in the 
CIPI. As such, the composition of capital reflects the underlying 
capital acquisition process. We selected FY 1987 as the base year for 
this preliminary CIPI for consistency with the operating input price 
index. We would periodically update both the operating and the capital 
input price indexes to reflect the changing composition of inputs for 
capital and operating costs. We expect to have rebased the capital and 
operating input price indexes by the time we implement the final 
capital update framework for FY 1996. The CIPI below illustrates the 
methodology we propose to employ.
    The model capital update framework, like the revised operating 
update framework, incorporates several policy adjustments in addition 
to the CIPI. We would adjust for case-mix index-related changes, for 
intensity, and for the efficient and cost-effective use of capital 
(such as movable equipment, buildings and fixed equipment) in the 
hospital industry, as well as for error in the capital input price 
index forecast.
    In developing the model framework, we are attempting as much as 
possible to maintain consistency with the current operating framework, 
in order to facilitate the eventual development of a single prospective 
payment system update framework. We are also concerned with promoting 
the goals that motivated the adoption of the capital prospective 
payment system, especially the goals of promoting more effective and 
efficient utilization of capital resources in the hospital industry and 
establishing incentives for hospitals to make cost-effective decisions 
regarding acquisition of new capital resources.
    It is important to emphasize that this presentation represents our 
current thinking, and that we continue to encourage submission of 
comments and recommendations for further improvements. We are 
interested in suggestions regarding the CIPI, the proposed policy 
adjustment factor for intensity, and alternative methodologies for 
deriving the factors. We also welcome information concerning empirical 
studies and sources of data that could be useful in developing the 
framework. We will consider comments and recommendations on any aspect 
of the model framework in making further developments for presentation 
in the next version of the model. Our plan is to consider comments 
received on this model for inclusion in one further preliminary model 
to be included in this year's final rule for the prospective payment 
system. We will then formally propose an analytical update framework 
for implementation in FY 1996 during the rulemaking process for that 
year.

II. ProPAC Recommendation for Updating the Capital Prospective 
Payment System Federal Rate

    ProPAC recommends the use of an update framework that includes a 
capital market basket component that measures 1-year changes in the 
purchase prices of a fixed basket of capital goods purchased by 
hospitals (Recommendation 10). The ProPAC framework also includes 
several policy adjustment factors. A forecast error correction factor 
adjusts payment rates so that the effects of past errors are not 
perpetuated. A financing policy adjustment accounts for the effects of 
substantial deviations from long-term trends in interest rates on 
hospital capital costs. The capital update framework also includes 
adjustments for scientific and technological advances, productivity, 
and case-mix change similar to those employed in the ProPAC operating 
update framework.
    In Recommendation 11, ProPAC also recommends the development and 
use of a combined update framework for the prospective payment systems 
for operating and capital-related costs for FY 1995.
    Response: Our long-term goal is to develop a single prospective 
payment system update framework. Currently, the regulations provide for 
the determination of the capital prospective payment update by means of 
a lagged 2-year average of actual Medicare capital cost increases. Once 
we have completed work on an analytical framework for the capital 
prospective payment update, we will begin to study development of a 
unified framework. In the meantime, we will continue to maintain 
consistency as much as possible with the current operating framework in 
order to facilitate the eventual development of a unified framework.
    The basic objectives of the ProPAC and HCFA update frameworks are 
compatible. The goal of each framework is to provide a rate of increase 
in capital prospective payments that, along with the rate of increase 
in operating prospective payments, will ensure a flow of capital and 
operating resources that will allow for efficient and effective care 
for Medicare patients. Both frameworks are designed to provide 
increases for the purchase of quality-enhancing new technologies. Both 
frameworks provide for case-mix adjustments to remove the effects of 
upcoding and to adjust for changes in within-DRG severity. Both 
frameworks also seek to encourage efficient capital spending behavior 
and to adjust the overall size of capital stock to appropriate levels. 
Although the frameworks adopt different methodologies for promoting 
some of these goals, they are philosophically compatible to the degree 
that they share these goals.
    However, there is one significant philosophical difference between 
the ProPAC and HCFA frameworks. ProPAC's framework is based on the 
premise that capital prospective payments are for future capital 
purchases. Thus, ProPAC's proposed capital market basket reflects the 
projected increase in the purchase price of capital goods from one year 
to the next. To put it another way, the market basket under the ProPAC 
framework reflects the price of replacing current capital stock at 
future prices.
    HCFA's framework is based on the premise that capital prospective 
payments are for hospitals' future capital-related expenses rather than 
for future capital-related purchases. That is, HCFA's framework 
addresses the expenses associated with hospitals' given stock of 
capital in a particular fiscal year; ProPAC's framework ignores 
hospitals' present stock of capital and focuses on costs of capital 
purchases that hospitals will make in a particular fiscal year.
    There is a sound economic reason why the current purchase price of 
capital assets alone is an inadequate measure of the price of capital. 
The crucial distinguishing feature of capital assets is that they are 
consumed over time. A satisfactory measure of the change in capital 
input prices must therefore account for this fact. Consideration of the 
costs for all capital currently in use for patient care, not just the 
costs for current capital purchases, is necessary for this purpose. The 
ProPAC index cannot adequately capture this aspect of changes in 
capital input prices.
    In addition to our disagreement with ProPAC over the basic purpose 
of the CIPI, we also disagree over the treatment of interest. The pure 
price aspects of interest costs (that is, the interest rate and the 
purchase price that is represented in the amount of loan principal) are 
beyond the control of the hospital industry. To be sure, the actual 
decision to purchase capital assets or acquire debt is a ``quantity'' 
decision and typically is discretionary for a particular span of time. 
However, measuring the actual expected price per unit of real capital, 
independently of any evaluation of the propriety of any actual purchase 
decisions, is essential to recognize that the industry has control over 
the amount of capital it purchases but no control over the price it 
pays for capital. Thus, the pure price aspect of interest cost changes 
must be incorporated into the CIPI. Otherwise, the CIPI will not 
accurately reflect the prices faced by hospitals who must borrow to 
finance necessary capital acquisitions. Limitations on the quantity of 
capital are appropriately implemented through policy adjustment 
factors. The ProPAC approach artificially eliminates pure price changes 
related to interest costs from the CIPI and incorporates them into a 
discretionary adjustment factor. The HCFA CIPI retains all price 
components of increase in interest costs as one measure of inflation in 
capital-related expenses. It thereby keeps price and quantity aspects 
distinct, allowing separate analysis of each factor of increases in 
capital expenses.
    We provide further comments on particular ProPAC recommendations in 
sections III and IV of this appendix. The ProPAC recommendations 
concerning the methodology for recognizing increases due to quality-
enhancing new technology and the case-mix index adjustment are 
discussed in Appendix D in the context of the update recommendation for 
the prospective payment system for operating costs.

III. Measurement of Capital Input Price Increases

A. Introduction

    HCFA proposed a capital input price index as one component in 
developing future update factors for the Federal rate in the September 
1, 1992 Federal Register (57 FR 40016). We have presented revised 
versions of the capital input price index in the May 26, 1993 (58 FR 
30448) and September 1, 1993 (58 FR 46490) issues of the Federal 
Register. The developing capital input price index parallels the 
operating input price index. Both the developing capital input price 
index and the operating input price index are designed to measure input 
price changes for hospitals' current year expenses, that is, to 
separate pure price changes from quantity and expenditure changes. The 
operating sector input price index measures input price changes for 
operating-related expenses. The capital input price index measures 
input price changes for capital-related expenses. Capital-related 
expenses include depreciation, interest, and other expenses (taxes and 
insurance related to capital goods.)

B. Review of the HCFA Capital Input Price Index Methodology

    The current version of the CIPI is based on the following 
assumptions:

     The Federal rate is based on the concept of capital-
related expenses of capital assets used for patient care in the 
fiscal year and, therefore, any change in the Federal rate should 
take into account expected changes in the input price aspects of 
capital-related expenses;
     Capital-related expenses are defined as the sum of 
depreciation expense, capital-related interest costs, and other 
capital-related costs, including taxes, insurance, and leases; and
     The input prices related to capital-related expenses 
are beyond the control of the hospital industry (that is, the 
hospital is a price-taker, not a price-setter).

    These assumptions lead directly to a definition of a CIPI that 
takes into account the price aspects of changes in depreciation 
expense, interest costs, and other capital-related costs. Further, the 
assumptions lead directly to input prices for depreciation expense and 
interest costs which, unlike operating costs, have a time dimension 
that must be captured in the CIPI. HCFA includes three categories of 
capital-related expenses in the CIPI: depreciation expense, interest 
costs, and other capital-related costs (taxes and insurance).
    Current depreciation expenses represent the summed depreciation 
charges for all past purchases of fixed capital assets that are still 
depreciable in the current period. The input prices associated with 
these depreciation expenses are the purchase prices attached to all 
past and current capital purchases for capital still depreciable in the 
current period. A weighted average of these purchase prices thus 
represents the input price associated with depreciation expenses in the 
current period. Thus, the depreciation input price for the current 
period measures price aspects of current depreciation expenses for 
capital just as the operating input price index for the current period 
measures price aspects of current operating expenses for labor and non-
capital goods and services. The depreciation input price differs from 
the operating input price in that the depreciation input price is a 
composite of all past capital purchase prices while the operating index 
input price measures purchase prices for current periods only.
    Current interest expenses represent the total interest charges for 
all still-active past debt instruments associated with the purchase of 
fixed capital assets. The input prices associated with these interest 
expenses are the interest rates attached to all past debt instruments 
that are still active in the current period. A weighted average of 
these interest rates thus represents the input price associated with 
interest expenses in the current period. Thus, the interest input price 
for the current period measures price aspects of current interest 
expenses just as the operating input price index for the current period 
measures price aspects of current operating expenses for labor and non-
capital goods and services. The interest input price differs from the 
operating input price in that the depreciation input price is a 
composite of all past interest rates for debt instruments still active 
while the operating index input price measures purchase prices for 
current periods only.
    Current year capital-related expenses for taxes and insurance have 
an annual time dimension and, therefore, prices associated with these 
expenses are, like operating input prices, current year prices only.

C. Revisions to the Depreciation Component of the CIPI

    A commenter on a previous version of the CIPI recommended that 
constant annual weights for capital price proxies be replaced by 
variable annual weights that reflect the vintage purchases of capital. 
The commenter pointed out that annual purchases of real capital tend to 
increase over time. As annual purchases of capital increase, the later 
years in the moving average of depreciation costs should be weighted 
more heavily than the earlier years.
    We agree with this comment. Accordingly, a special data base was 
prepared to provide appropriate historical weights for depreciation and 
interest input prices. The data base starts with financial variables 
from the American Hospital Association (AHA) Panel Survey. These are 
enhanced with data from Medicare cost reports and from the Department 
of Commerce Capital Expenditure Survey. The data base provides annual 
estimates of nominal purchases for building and fixed equipment and for 
movable equipment. Leasing amounts were converted to nominal purchases 
using the same relationships as appear for owner-operated capital. 
Nominal purchases were then converted to annual real (that is, constant 
dollar) purchases by dividing nominal expenditures by an appropriate 
purchase price proxy.
    Expected life for building and fixed equipment and for movable 
equipment were derived from Medicare cost reports by dividing book 
value of assets by current year depreciation amounts. The relative 
distribution of real capital purchases within the respective life for 
building and fixed equipment (25 years) and for movable equipment (10 
years) were derived from the special data base. These relative 
distributions are shown in Table 1. Relative distributions for a number 
of different time periods were averaged to obtain the distributions in 
Table 1. These distributions were all very similar regardless of the 
periods chosen and, therefore, we selected an average of the 
distributions in order to simplify the calculations.

    Table 1.--Relative Weights for Capital Price Proxies Depreciation   
                      Building and Fixed Equipment                      
                        Expected Life: 25 years                         
------------------------------------------------------------------------
                                                                        
1..............................................................    0.015
2..............................................................    0.019
3..............................................................    0.022
4..............................................................    0.024
5..............................................................    0.023
6..............................................................    0.022
7..............................................................    0.020
8..............................................................    0.021
9..............................................................    0.025
10.............................................................    0.030
11.............................................................    0.033
12.............................................................    0.034
13.............................................................    0.034
14.............................................................    0.035
15.............................................................    0.038
16.............................................................    0.043
17.............................................................    0.049
18.............................................................    0.053
19.............................................................    0.056
20.............................................................    0.057
21.............................................................    0.060
22.............................................................    0.066
23.............................................................    0.071
24.............................................................    0.075
25.............................................................   0.077 
                                                                --------
    Total......................................................    1.000
                                                                        
------------------------------------------------------------------------
                            Movable Equipment                           
                         Expected Life: 10 years                        
------------------------------------------------------------------------
                                                                        
1..............................................................    0.064
2..............................................................    0.072
3..............................................................    0.077
4..............................................................    0.085
5..............................................................    0.095
6..............................................................    0.101
7..............................................................    0.109
8..............................................................    0.122
9..............................................................    0.132
10.............................................................    0.142
                                                                --------
    Total......................................................    1.000
                                                                        
------------------------------------------------------------------------
                                 Interest                               
                        Expected Life: 22 years                         
------------------------------------------------------------------------
                                                                        
1..............................................................    0.007
2..............................................................    0.009
3..............................................................    0.010
4..............................................................    0.011
5..............................................................    0.013
6..............................................................    0.015
7..............................................................    0.017
8..............................................................    0.020
9..............................................................    0.023
10.............................................................    0.027
11.............................................................    0.032
12.............................................................    0.038
13.............................................................    0.043
14.............................................................    0.050
15.............................................................    0.057
16.............................................................    0.064
17.............................................................    0.074
18.............................................................    0.083
19.............................................................    0.090
20.............................................................    0.098
21.............................................................    0.105
22.............................................................    0.114
                                                                --------
    otal.......................................................    1.000
Source: Health Care Financing Administration, Office of the Actuary.    

    Table 2 shows the historical percentage changes in the capital 
price proxies employed in the CIPI. These proxies are: the building 
cost index maintained by the Engineering News-Record (ENR) for the 
costs of fixed assets; the machinery and equipment component of the 
Producer Price Index (PPI-11) for moveable equipment; the average yield 
on domestic municipal bonds from the Bond Buyer index of 20 bonds 
(Muni); the average yield on Moody's corporate bonds (AAA); a composite 
of Muni and AAA indexes (Combined Muni/AAA); and the residential rent 
component of the Consumer Price Index (CPI Rent) for other capital 
costs.
    We applied the relative weights from Table 1 to the appropriate 
historical percent changes in capital price proxies listed in Table 2 
to generate the current year prices for the CIPI depreciation sector 
listed in Table 3. For example, the FY 1995 moveable equipment index 
component percentage change of 1.9 percent in Table 3 represents the 
average of the percentage changes in the moveable equipment price proxy 
(PPI-11 in Table 2) for the previous 10 years (that is, FY 1985 through 
1994), weighted by the relative weights listed for movable equipment in 
Table 1.

                Table 2.--Annual Percent Changes for Capital Input Price Proxies, 1949 to 1999\1\               
proxy name: enrbci--building cost index--average of 20 u.s. cities ppi-11--machinery and equipment muni--average
 yield on domestic municipal bonds--bond buyer (20 bonds) aaa--average yield on moody's aaa corporate bonds cpi 
                                          (all urban)--residential rent                                         
----------------------------------------------------------------------------------------------------------------
                                                                                    Percent changes             
                                                                     -------------------------------------------
                  Fiscal year                     ENRBCI     PPI-11                          Combined           
                                                                         Muni       AAA      muni/AAA   CPI rent
----------------------------------------------------------------------------------------------------------------
1949..........................................       5.08       7.35      -4.43      -3.14      -4.20       4.41
1950..........................................       2.79       0.46      -9.36      -4.16      -8.43       3.87
1951..........................................       9.96      13.64      -5.81       7.10      -3.39       3.73
1952..........................................       2.43       1.60      12.93       5.70      11.43       4.25
1953..........................................       4.20       0.79      25.86       7.29      22.21       4.70
1954..........................................       3.67       2.73      -8.20      -6.32      -7.87       4.79
1955..........................................       4.37       1.90      -0.41       1.08      -0.15       1.43
1956..........................................       5.26       7.46       7.82       7.65       7.79       1.69
1957..........................................       3.55       7.99      24.03      18.02      22.96       1.94
1958..........................................       4.55       3.22      -3.73      -1.10      -3.29       1.90
1959..........................................       4.53       1.56      11.54      13.29      11.85       1.33
1960..........................................       2.67       1.53       1.71       4.93       2.28       1.58
1961..........................................       1.49      -0.30      -3.14      -3.24      -3.16       1.30
1962..........................................       1.93       0.00      -6.42       0.81      -5.11       1.28
1963..........................................       2.18       0.00      -3.43      -2.82      -3.31       1.01
1964..........................................       3.21       0.91       3.23       3.30       3.25       1.00
1965..........................................       2.32       0.60      -0.50       1.55      -0.10       0.99
1966..........................................       3.65       2.69      16.52      11.02      15.44       1.23
1967..........................................       2.90       3.78       2.41       8.26       3.51       1.69
1968..........................................       6.22       2.80      14.68      14.50      14.64       2.38
1969..........................................      10.25       3.27      21.50       9.83      19.20       2.79
1970..........................................       5.43       4.22      22.18      17.95      21.41       4.07
1971..........................................      11.52       4.30     -13.93      -4.94     -12.34       4.78
1972..........................................      12.53       2.18      -5.81      -3.77      -5.42       3.53
1973..........................................       8.78       2.61      -1.76       0.81      -1.26       4.01
1974..........................................       5.76       9.95      12.58      12.46      12.56       4.82
1975..........................................       8.04      19.37      19.17       7.95      16.94       5.33
1976..........................................       8.97       6.70      -1.15      -3.23      -1.53       5.24
1977..........................................       8.55       5.95     -15.84      -6.37     -14.13       5.80
1978..........................................       8.74       7.49       1.12       5.59       2.00       6.74
1979..........................................       7.98       8.85       7.27       8.90       7.60       7.05
1980..........................................       8.12      11.47      26.89      22.89      26.07       8.64
1981..........................................       7.04      10.65      32.94      20.74      30.49       8.84
1982..........................................       7.41       7.03      16.17       5.46      14.18       8.00
1983..........................................       6.46       3.23     -22.52     -17.72     -21.69       6.23
1984..........................................       2.83       2.25       4.76       6.85       5.14       5.06
1985..........................................       0.18       2.20      -5.27      -7.13      -5.61       5.87
1986..........................................       1.87       1.50     -18.08     -19.64     -18.36       6.18
1987..........................................       2.42       1.48      -5.49      -5.31      -5.46       4.45
1988..........................................       2.48       2.18       7.12       9.94       7.62       3.85
1989..........................................       1.42       3.47      -6.67      -4.78      -6.33       3.79
1990..........................................       2.67       3.18      -1.19      -2.04      -1.34       4.18
1991..........................................       1.52       2.25      -2.67      -2.60      -2.65       3.87
1992..........................................       2.80       0.49      -7.39      -8.18      -7.54       2.60
1993..........................................       5.10       0.50     -10.60      -8.90      -4.00       2.33
1994..........................................       3.80       1.10      -6.10      -7.50       3.00       3.15
1995..........................................       2.60       2.40       3.80       4.80      -0.56       5.06
1996..........................................       3.20       2.50      -5.30      -0.80      -1.76       3.21
1997..........................................       3.80       2.30       3.10       1.00       2.82       3.23
1998..........................................       3.60       2.20       9.30       6.90       0.18       3.42
1999..........................................       3.00       2.30       5.30       5.50       0.09       2.69
----------------------------------------------------------------------------------------------------------------
Source: Data Resources Inc.                                                                                     


  Table 3.--HCFA Capital Input Price Index Percent Changes, Total and Components, Fiscal Years 1979 to 1999\1\  
----------------------------------------------------------------------------------------------------------------
                                                                   Depreciation                                 
                                                                   building and   Movable                       
                Fiscal Year                    Total      Total        fixed     equipment   Interest    Other  
                                                                     equipment                                  
----------------------------------------------------------------------------------------------------------------
Weight.....................................     1.0000     0.6510       0.3054      0.3456     0.3274     0.0216
                                                                                                                
----------------------------------------------------------------------------------------------------------------
                                                  Price Changes                                                 
----------------------------------------------------------------------------------------------------------------
1979.......................................        6.3        7.8          6.9         8.6        3.4        7.0
1980.......................................        7.3        7.9          7.0         8.7        6.0        8.6
1981.......................................        8.0        7.7          7.0         8.3        8.8        8.8
1982.......................................        8.2        7.5          7.0         7.9        9.6        8.0
1983.......................................        7.0        7.4          7.0         7.6        6.3        6.2
1984.......................................        6.7        6.9          6.8         7.1        6.3        5.1
1985.......................................        5.8        6.2          6.3         6.0        5.0        5.9
1986.......................................        4.5        5.6          6.0         5.2        2.3        6.2
1987.......................................        3.8        5.2          5.7         4.6        1.2        4.5
1988.......................................        3.7        4.8          5.5         4.1        1.6        3.9
1989.......................................        3.1        4.3          5.2         3.5        0.6        3.8
1990.......................................        2.8        4.0          5.1         3.1        0.1        4.2
1991.......................................        2.3        3.7          4.9         2.6       -0.4        3.9
1992.......................................        1.8        3.5          4.7         2.4       -1.4        2.6
1993.......................................        1.4        3.2          4.7         1.8       -2.2        2.4
1994.......................................        1.0        3.0          4.6         1.7       -3.2        1.7
1995.......................................        0.9        3.1          4.4         1.9       -3.6        2.6
1996.......................................        1.1        3.0          4.2         2.0       -3.0        5.4
1997.......................................        0.9        3.0          4.1         2.0       -3.3        2.9
1998.......................................        1.1        2.9          3.9         2.0       -2.6        4.6
1999.......................................        1.6        2.9          3.9         2.1       -1.2        5.5
----------------------------------------------------------------------------------------------------------------
\1\Index prices for 1994 through 1999 projected by Data Resources Inc.                                          
                                                                                                                
Source: Health Care Financing Administration, Office of the Actuary.                                            

    The stability of the HCFA vintage-weighted CIPI compared to annual 
changes in capital purchase prices is portrayed graphically in Figures 
1 and 2. As we have discussed in connection with previous versions of 
the CIPI, stability is an important criterion for evaluating such an 
index. This is because excessive volatility in a price index deprives 
the index of predictability, and thus inhibits the ability of 
institutions to plan for changes in capital payments resulting from 
changes in the CIPI.

TP27MY94.000

BILLING CODE 4120-01-M
    ProPAC recommends a capital input price index based on annual 
changes in current capital purchase prices excluding consideration of 
weighted historical capital purchase prices. We previously argued that 
the ProPAC index was not logically consistent with the operating input 
index that is currently used to assist updating DRG payment rates. We 
would add that the volatility in annual purchase prices shown in 
Figures 1 and 2 would introduce an unacceptable degree of volatility in 
prospective capital payments.

D. Revisions to the Interest Price Component of the CIPI

    Another commenter on a previous version of the CIPI recommended 
that data from Securities Data Inc. be incorporated into the CIPI 
interest computations. This source provides information on hospital 
issuances of municipal and commercial bonds. From this data base, we 
incorporated information that shows that the average expected life of 
hospital bond debt instruments (that is, the time interval between the 
issue date and the maturation date) was about 13 years for municipal 
serial bonds and about 25 years for municipal term bonds. The weighted 
average life for the 2 types of bonds was 22 years.
    The relative nominal capital purchases within various 22-year 
periods provided appropriate annual weights for annual changes in 
interest rates. Not all capital purchases are funded by debt. Medicare 
cost reports suggest that about 80 percent of new capital acquisitions 
are financed by debt and about 20 percent by equity financing. However, 
if the proportion of total purchases financed by debt does not change 
substantially from year to year, then it is irrelevant whether we use 
the full amount or a constant proportion of the full amount of nominal 
capital acquisitions as weights for relative amounts of the debt 
instruments still active in the current period.
    Relative interest weights derived from our procedure are shown in 
Table 1. When combined with percent changes in annual interest rates 
from Table 2, the weights provide a current year estimates of interest 
rate changes in the CIPI in Table 3. Thus, for example, the interest 
rate component change of -3.2 percent in Table 3 for FY 1995 represents 
the average of the previous 22 years in the interest rate proxy 
(Combined Muni/AAA) in Table 2, weighted by the interest weights listed 
in Table 1. We use a percent change in a combined municipal and AAA 
commercial bond interest rate (shown in Table 2 as Combined Muni/AAA), 
giving the municipal rate an 85 percent weight and the AAA rate a 15 
percent weight, reflecting the relative hospital debts of the 
government/non-profit hospital sector and the for-profit sector.
    The stability of HCFA's vintage-weighted interest rate compared to 
annual changes in interest rates is portrayed in Figure 3.

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    As we have discussed in connection with previous versions of the 
model, stability is an important criterion for evaluating the CIPI 
because it provides an important degree of predictability to the index.
    Although Medicare cost reports show that only 60 percent of current 
hospital debt is in the form of notes or bonds (about 40 percent is in 
the form of mortgages), we assumed that the relative annual weights for 
all debt and the relative annual changes in interest rates for all debt 
were the same as bond-related weights and price changes. We are still 
searching for an appropriate source of information on hospital 
commercial mortgage data. We do not expect that the discovery of such 
data will materially alter our current conclusions about trends in 
effective interest rates over time.
    A third commenter on a previous version of the CIPI recommended 
that we investigate the effects on interest rate changes of changing 
structures of hospital bond ratings. If bond ratings are deteriorating, 
hospitals incur higher interest rates; if bond ratings improve, 
hospitals incur lower interest rates. Our CIPI currently recognizes 
only changes in pure interest rates and does not recognize changes in 
effective interest rates due to changes in bond ratings.
    We examined a hospital municipal bond data base from Securities 
Data Inc. to examine this issue. This data showed that serial bonds 
dominated short-term bonds and term bonds dominated long-term bonds 
(Figure 4). We classified all bond amounts by ratings found in the data 
base for the years 1980 to 1992. We defined bonds rated as Baa1 or 
above as ``Investment Grade'' bonds; all others were ``Non-Investment 
Grade''. The percentage distribution of the issuance-amount-rated bonds 
in Figure 5 (percentage amounts applied to dollar amount of debt 
issuance) indicates no discernible trend in upward or downward ratings 
over the period. We conclude that there is no evidence to justify a 
component for deteriorating bond ratings in the CIPI.

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E. Projection of the CIPI for Fiscal Year 1995

    We project a 0.9 percent increase in the CIPI for FY 1995 (Table 3 
and Figure 6). This is the outcome of a 3.1 percent increase in 
projected weighted depreciation prices in FY 1995 offset by a 3.6 
percent decline in vintage- weighted interest rates in FY 1995.

F. ProPAC Input Price Index

1. Introduction
    Three major differences distinguish ProPAC's CIPI from HCFA's CIPI:
     The ProPAC CIPI measures changes in capital asset purchase 
prices in the year the asset is purchased. HCFA's CIPI is designed to 
measure changes in a vintage-weighted composite of capital asset 
purchase prices.
     The ProPAC CIPI uses capital asset purchase price proxies 
that differ from HCFA's.
     The ProPAC CIPI has no interest component. PROPAC treats 
interest rate changes as a separate update factor component. Through 
1995, for example, ProPAC expects that long term interest rates will 
remain stable and, therefore, believes that it is not appropriate to 
adjust capital payments for forecasted changes in interest rates in the 
target year.
    HCFA incorporates a vintage-weighted composite of interest rates in 
its CIPI for the target year.

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2. Depreciation
    ProPAC states that its CIPI is analogous to the prospective payment 
operating price index. We disagree. The components of the operating 
index represent price changes in ongoing hospital expenses for labor 
and non- capital goods and services. The analogous capital expenses in 
this context are current depreciation costs, interest costs and other 
capital-related expenses (taxes and insurance). Current depreciation 
and interest costs are a cumulative composite of segments of expenses 
incurred in current and prior periods. Current interest costs are a 
cumulative composite of segments of past and current year debt costs. 
Since both depreciation and interest costs have a vintage component, 
the price aspect of these costs must have a vintage component as well. 
The HCFA CIPI attempts to capture these vintage components.
    Differences between HCFA and ProPAC with respect to choices for 
annual rates of change in capital purchase price proxies appear to be 
minimal:
     Changes in alternative price proxies for building and 
fixed equipment are nearly coincidental (Table 3 and Figure 7). We are 
still considering adoption of the price proxy recommended by ProPAC, 
but we do not anticipate any material difference in the HCFA CIPI if we 
do adopt this alternative proxy.

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     Changes in alternative price proxies for moveable 
equipment, although not as close as those for building and fixed 
equipment, are nevertheless nearly coincidental for much of the 
historical period (Table 3 and Figure 8).
    As noted in our September 1, 1992 final rule, one basic criterion 
for accepting price proxies is public availability of documentation on 
data sources and methodology (57 FR 40018-40019). Despite repeated 
efforts, neither we nor Data Resources Inc. have been able to obtain 
documentation on the moveable price proxy recommended by ProPAC that 
explains how it is derived and what sampling frame and sampling error 
attach to the estimates. In the absence of such information we cannot 
adopt the ProPAC alternative.
    HCFA's assumption is that prices for hospital moveable equipment 
change at about the same rate as general prices for all machinery and 
equipment. This assumption is justified in part by the fact that not 
all moveable equipment purchased by hospitals is medical equipment: it 
stands to reason that the prices for non-medical equipment purchased by 
hospitals would change at the same rate as prices for all machinery and 
equipment. To examine this assumption further, we measured the rate of 
change in the HCFA moveable price proxy relative to prices for medical 
equipment only by preparing a composite index of medical prices from 
the Bureau of Labor Statistics Producer Price Index (PPI) for two 
commodity categories--medical instruments/equipment and X-ray/electro-
medical equipment.
    The two PPI commodity indexes were then merged using their 
respective PPI weights. Price change trends for the period for which 
information is available are shown in Table 3 and Figure 8 (Inset). 
Price changes for this index are not available for years prior to 1984. 
Annual price changes for medical equipment were less than the annual 
HCFA price proxy in all but the most recent 2 years and were about the 
same as the ProPAC price proxy in the last 2 years. The medical 
equipment price was substantially less than the ProPAC index for most 
of the historical period. We will continue to monitor trends in these 
indexes to ensure that appropriate price proxies are incorporated in 
the CIPI.
3. Interest
    ProPAC has proposed to project annual interest rates to future 
periods and then to decide whether to allow an add-on to the Federal 
capital rate depending on the magnitude of the projection. ProPAC has 
presented no objective criteria for determining when an interest 
adjustment is appropriate. We previously noted that a single-year 
projection for interest rates is conceptually inappropriate since 
interest costs must be vintage-weighted. In addition to this conceptual 
problem, the ProPAC approach is impractical because future annual 
interest rates are volatile, vulnerable to unpredictable market forces, 
and subject to exogenous influences (such as Federal Reserve Board 
decisions) that are difficult to anticipate. Thus, any projection of 
future interest rates is likely to be inaccurate, resulting in 
underpayment or overpayment of the Federal capital rate relative to the 
capital-related expenses that the rate is supposed to compensate. The 
resulting uncertainty in payments under future Federal capital rates 
further complicates future capital expenditure decisions by hospitals. 
On the other hand, the projected HCFA CIPI interest component for the 
target year is the weighted average change over 22 years of interest 
rate history, of which 20 years experience is historical. The projected 
experience in the HCFA index for the most recent 2 years may be as 
inaccurate as any ProPAC projection, but any error will have minimal 
effects on Federal rates due to the appropriately weighted effect of 
the historical data in the HCFA CIPI. This stability in the interest 
rate component of the HCFA CIPI provides hospital planners with a 
degree of certainty about future Federal rate payments, other things 
remaining equal. Annual and weighted annual rates of change are 
compared in Table 3.
4. The Composite HCFA CIPI
    Annual percentage changes in the historical and projected HCFA and 
ProPAC CIPIs differ markedly (Figure 9). The ProPAC CIPI is much more 
volatile than the HCFA CIPI in the historical period through 1993 
because it has no vintage-weighted capital input price factors for 
depreciation.

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    Further, the ProPAC CIPI omits interest rates. The cumulative 
effect of declining interest rates for all debt instruments in recent 
years has driven the rate of change in the HCFA interest rate component 
downward, a trend projected into future rate years. The declining 
interest rate component drags the HCFA CIPI below the ProPAC CIPI in 
the projection period. Other things being equal, the ProPAC index would 
result in overpayment through the Federal rate because anticipated 
actual capital-related expenses will be less than ProPAC projects due 
to the effects of lower interest rates on capital-related expenses.

IV. Case-Mix Adjustment and Adjustment for Forecast Error

    The case-mix index (CMI) is the measure of the average DRG weight 
for cases paid under the prospective payment system. Because the DRG 
weight determines the prospective payment for each case, any percentage 
increase in the CMI corresponds to an equal percentage increase in 
hospital payments.
    The CMI can change for any of several reasons: because the average 
resource use of Medicare patients changes (``real'' case-mix change), 
because changes in hospital coding of patient records result in higher 
weight DRG assignments (``coding effects''), and because the annual DRG 
reclassification and recalibration changes may not be budget neutral 
(``reclassification effect''). In the update framework for the 
prospective payment system for operating costs, we adjust the update 
upwards to allow for real case- mix change, but remove the effects of 
coding changes on the CMI. We also remove the effect on total payments 
of prior changes to the DRG classifications and relative weights, in 
order to retain budget neutrality for all CMI-related changes other 
than patient severity. (For example, we adjusted for the effects of the 
FY 1992 DRG reclassification and recalibration as part of our FY 1994 
update recommendation.) The operating adjustment consists of a 
reduction for total observed case-mix change, an increase for the 
portion of case-mix change that we determine is due to real case-mix 
change rather than coding modifications, and an adjustment for the 
effect of prior DRG reclassification and recalibration changes. We 
proposed to adopt this CMI adjustment as well in the capital update 
framework.
    We received no comments on the proposed CMI adjustment.
    The current operating update framework contains an adjustment for 
forecast error. The input price index forecast is based on historical 
trends and relationships ascertainable at the time the update factor is 
established for the following year. In any given year there can be 
unanticipated price fluctuations that can result in differences between 
the actual increase in prices faced by hospitals and the forecast used 
in calculating the update factors. We continue to believe that the 
capital update framework should include a forecast error adjustment 
factor. In setting a prospective payment rate under the proposed 
framework, we would make an adjustment for forecast error only if our 
estimate of the capital input price index rate of increase for any year 
is off by 0.25 percentage points or more. There is a 2-year lag between 
the forecast and the measurement of the forecast error. Thus, for 
example, we would adjust for a forecast error made in FY 1996 through 
an adjustment to the FY 1998 update.
    We received no comments on the proposed forecasting error 
adjustment.

V. Policy Adjustment Factors

    The capital input price index measures the pure price changes 
associated with changes in capital-related costs (prices x 
``quantities''). The composition of capital-related costs is maintained 
at base-year 1987 proportions in the capital input price index. We 
would address appropriate changes in the amount and composition of 
capital stock through the policy adjustment factors.
    The current update framework for the prospective payment system for 
operating costs includes factors designed to adjust the input price 
index rate of increase for policy considerations. Under the revised 
operating framework, we adjust for service productivity (the efficiency 
with which providers produce individual services such as laboratory 
tests and diagnostic procedures) and intensity (the amount of services 
used to produce a discharge). The service productivity factor for the 
operating update framework reflects a forward-looking adjustment for 
the changes that hospitals can be expected to make in service-level 
productivity during the year. A hospital retains any productivity 
increases above the average.
    The intensity factor for the operating update framework reflects 
how hospital services are utilized to produce the final product, that 
is, the discharge. This component accounts for changes in the use of 
quality-enhancing services, changes in within-DRG severity, and 
expected modification of practice patterns to remove cost-ineffective 
services. We originally proposed that the intensity adjustment factor 
in the revised operating framework be adopted in the capital update 
framework. That factor remains a part of our developing framework. 
Under the revised operating update framework, we calculate case-mix 
constant intensity as the change in total charges per admission, 
adjusted for price level changes (the CPI hospital component) and 
changes in real case mix. The use of total charges in the calculation 
of the proposed intensity factor makes it a total intensity factor, 
that is, charges for capital services are already built into the 
calculation of the factor. We can therefore incorporate the proposed 
intensity adjustment from the operating update framework into the 
capital update framework. In the absence of reliable estimates of the 
proportions of the overall annual intensity increases that are due, 
respectively, to ineffective practice patterns and to the combination 
of quality-enhancing new technologies and within-DRG complexity, we 
would assume, as in the revised operating update framework, that one-
half of the annual increase is due to each of these factors. The 
capital update framework would thus provide an add-on to the input 
price index rate of increase of one-half of the estimated annual 
increase in intensity to allow for within-DRG severity increases and 
the adoption of quality-enhancing technology.
    In our previous discussions of an efficiency adjustment, we 
suggested that the adjustment should take into account two 
considerations. One is that capital inputs, unlike operating inputs, 
are generally fixed in the short run. The productivity target in the 
revised operating framework operates on a short-term, year-to-year 
basis. Targets for capital efficiency and cost-effectiveness, however, 
must operate on a longer term basis. The other consideration is that, 
prior to the adoption of the capital prospective payment system, 
Medicare payment policy for capital-related costs, as well as the 
policies of other payers, did not provide sufficient incentives for 
efficient and cost-effective capital spending. As a result, capital 
costs per case, and therefore base year prospective capital rates, may 
be higher than would have been consistent with capital acquisition 
policy in more efficiency-oriented markets. A guiding principle in 
devising an efficiency adjustment is therefore that Medicare capital 
prospective payment rates should not provide for maintenance of capital 
in excess of the level that would be produced in an efficiency-oriented 
competitive market.
    As a preliminary examination of this issue, we analyzed the change 
in actual Medicare capital cost per case for FYs 1986-1991 in relation 
to the change in the capital input price index (which accounts for 
change in the input prices for capital-related costs), and the other 
adjustment factors that we were then proposing to include in the 
framework. (The other adjustment factors are the increase in real case 
mix and the increase in intensity due to quality-enhancing 
technological change and within-DRG complexity.) We found rates of 
increase in spending per case that exceeded the rate of increase 
attributable to inflation in capital input prices, quality-enhancing 
intensity increases, and real case-mix growth.
    Economic theory suggests that an industry with a guaranteed return 
on capital (such as the hospital industry prior to prospective payment 
for capital-related costs) would have a tendency to be overly 
capitalized relative to more competitive industries. This is because 
the incentive for firms in such an industry is to compete on the basis 
of more capital-intensive production processes than firms in other 
industries. As a result, capital costs per case, and therefore base 
year prospective capital rates, may be higher than would have been 
consistent with capital acquisition policy in more efficiency-oriented 
competitive markets.
    Our analysis was designed to examine whether hospitals had in fact 
responded to the incentives of the cost-based reimbursement system for 
capital by expanding beyond what was necessary for efficient and cost-
effective delivery of services. The analysis confirmed that volume and 
intensity of capital acquisition far outpaced the increase in capital 
input prices during the years between the implementation of the 
prospective payment system for operating costs and the introduction of 
the capital prospective payment system. Even accounting for real CMI 
increases and increases in intensity attributable to cost-increasing 
but quality-enhancing new technologies, there remains a large excess of 
capital-related spending.
    The following table shows the results of our most recent analysis, 
based on the most current data available and the most recent 
projections. Differences between this table and the tables in previous 
discussions in the Federal Register are due to revised figures for 
average capital cost per case increases, based on the most recent data 
and projections, and on our revised CIPI. We have also expanded the 
analysis incorporated in this table to include FY 1985 and FY 1992, 
thus encompassing all but 1 year of the period from the implementation 
of the prospective payment system for operating costs to the 
implementation of the prospective payment system for capitals costs. 
(For FY 1984, sufficient data is not available to compute capital cost 
per case increases and intensity increases.) The results of the 
analysis in Table 4 are substantially similar to the results of 
previous analyses. In Table 4 real case-mix increase is assumed to be 
1.0 percent annually.

     Table 4--Cumulative Percentage Change in Capital-Related Cost Per Case Due to Inflation, Real CMI, and     
                                              Intensity, 1986-1991                                              
----------------------------------------------------------------------------------------------------------------
                                                                                           Percent              
                                                       Real      Allowable    Resulting     change              
                 Year                     CIPI\1\    CMI\2\    Intensity\3\  Increase\4\    Cost/    Residual\6\
                                                                                           Case\5\              
----------------------------------------------------------------------------------------------------------------
1985...................................        6.2        1.0          3.7         11.2        12.6         1.2 
1986...................................        4.3        1.0          2.1          7.5        20.2        11.8 
1987...................................        3.6        1.0          2.5          7.3        15.0         7.2 
1988...................................        3.7        1.0          1.5          6.3         7.2         0.9 
1989...................................        3.1        1.0          0.5          4.7         7.9         3.0 
1990...................................        2.8        1.0          0.2          4.0         6.8         2.6 
1991...................................        2.4        1.0          0.1          3.5         5.1         1.6 
1992...................................        1.6        1.0         -0.7          1.9         3.4         1.5 
                                        ------------------------------------------------------------------------
      Cumulative (compounded)..........  .........  .........  ............        56.5       108.8       33.4  
----------------------------------------------------------------------------------------------------------------
\1\Figures from Table 1, section III.                                                                           
\2\Assuming that real CMI increase is 1.0 percent annually.                                                     
\3\One half of observed intensity increase, as determined by the of the joint operating/capital intensity       
  measure.                                                                                                      
\4\The increase attributable to inflation, real CMI, and allowable intensity, calculated as the product of the  
  rates of increase of those factors (that is, 1.043x1.01x1.021=1.075 for 1986).                                
\5\Figures supplied by HCFA's Office of the Actuary.                                                            
\6\The actual increase in average cost per case divided by the increase attributable to inflation, real CMI, and
  allowable intensity (that is, 1.202/1.075=1.118, an 11.2 percent residual for 1986).                          

    We believe that the adjustment for capital efficiency and cost-
effectiveness should take into account the efficiency and effectiveness 
of the capital resources present in the base year for the capital 
prospective payment system. We do not believe that Medicare capital 
payment rates should provide for maintenance of capital in excess of 
the level that would be produced in an efficiency-oriented competitive 
market. The capital efficiency adjustment should be designed to give 
hospitals an incentive to reduce inefficiency and ineffectiveness in 
capital resources. The analysis in Table 4 suggests that, in order to 
restore the Federal rate to the level at which it would have been if 
capital costs had not been excessive in the years before the 
implementation of capital prospective payment, a cumulative reduction 
in the rate of 28.2 percent (1.565/2.088=.7495, or -25.0 percent) is 
justified.
    We note that the Administration's Health Security Act contains a 
proposal for an annual adjustment to the capital update for FY 1996 
through FY 2003. This proposal is based in part on our previous 
analysis of capital spending in the years prior to the implementation 
of the capital prospective payment system. Section 4103(a)(2)(C) of the 
proposed Health Security Act provides that the annual update factor 
applied to the capital prospective payment system rates be reduced by 
4.9 percent each year during that period (except that the change factor 
can never be negative in any year).
Appendix F

PROSPECTIVE PAYMENT ASSESSMENT COMMISSION

REPORT AND RECOMMENDATIONS TO THE CONGRESS

March 1, 1994.

Prospective Payment Assessment Commission

Stuart H. Altman, Ph.D., Chairman
Richard A. Berman
James D. Bernstein
Clay D. Edmands
William S. Hoffman, Ph.D.
Clerk E. Kerr
James R. Kimmey, M.D.
David A. Kindig, M.D.
Judith R. Lave, Ph.D.
Larry L. Mathis
Robert J. Myers
Donald R. Oder
Elliott C. Roberts, Sr.
J. Michael Sadaj, M.D.
J.B. Silvers, Ph.D.
Roxane B. Spitzer-Lehmann, Ph.D.
Jae L. Wittlich

Staff and Consultants

Donald A. Young, M.D. Executive Director
Laura A. Dummit, Deputy Executive Director
Stuart Guterman, Deputy Executive Director
Sharon B. Arnold, Ph.D.
John L. Ashby
Amy B. Bernstein, Sc.D.
Thomas B. Bradley
Wylene Carlyle
Delores J. Curtis
Karen S. Fisher, J.D.
Gina M. Fortuna
Barbara J. Gage, Ph.D.
Timothy F. Greene
Joy M. Grossman, Ph.D.
Jeff E. Harris
Claudia C. Johnson
Lynn L. Lewis
Craig K. Lisk
Mary Anne Miles
Julian H. Pettengill
Molly Ryan
Claire E. Sharda
Deana L. Stoneman
Colleen M. Tynan
Deborah K. Williams
Jeannette A. Younes

March 1, 1994.
The Honorable Al Gore,
    President of the Senate, United States Senate, Washington, D.C. 
20510.

    Dear Mr. President: I am hereby transmitting to the Congress the 
annual report of the Prospective Payment Assessment Commission as 
required by Section 1886(e)(3) of the Social Security Act as amended 
by Public Law 101-508. This report presents a discussion of major 
factors that have shaped the evolution of the hospital and discusses 
possible changes facing the hospital of the future. The report also 
contains 23 recommendations covering a range of topics, from broad 
issues concerning Medicare and health care reform to updating 
Medicare payment rates and refining certain aspects of Medicare 
payments to hospitals and other facilities. This report reflects the 
Commission's collective judgment about issues of substantial 
importance to beneficiaries, hospitals, other providers, and the 
Medicare program.
      Sincerely,
Stuart H. Altman, Ph.D.,
Chairman.
Enclosure
March 1, 1994.
The Honorable Thomas Foley,
    Speaker, United States House of Representatives, Washington, 
D.C. 20515.

    Dear Mr. Speaker: I am hereby transmitting to the Congress the 
annual report of the Prospective Payment Assessment Commission as 
required by Section 1886(e)(3) of the Social Security Act as amended 
by Public Law 101-508. This report presents a discussion of major 
factors that have shaped the evolution of the hospital and discusses 
possible changes facing the hospital of the future. The report also 
contains 23 recommendations covering a range of topics, from broad 
issues concerning Medicare and health care reform to updating 
Medicare payment rates and refining certain aspects of Medicare 
payments to hospitals and other facilities. This report reflects the 
Commission's collective judgment about issues of substantial 
importance to beneficiaries, hospitals, other providers, and the 
Medicare program.
      Sincerely,
Stuart H. Altman, Ph.D.,
Chairman.
Enclosure

                                                  Capital Costs Per Case Increase From Cost Report Data                                                 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              Average 2-                         Update 
                                                                                                   Increases     year                           (average
                                                                                          Audit        in      increase                CMI      two year
                                              Number     Number     Unadj-    Increase   adjusted   adjusted      in      Observed   adjusted   increase
                Fiscal year                 hospitals  hospitals   capital    in cost    capital    cost per   adjusted     CMI      increase    of CMI 
                                             1st HCR      2nd      cost per   per case   cost per     case     cost per  (Percent)  (Percent)   adjusted
                                                        HCR\1\      case     (Unadj.)    case\2\   (Percent)     case                           rate of 
                                                                                                              (Percent)                        increase)
                                                                                                                                               (Percent)
                                                  (1)        (2)        (3)        (4)        (5)        (6)        (7)        (8)        (9)       (10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1990......................................       4251       5412    $543.27  .........    %540.05  .........  .........  .........  .........  .........
1991......................................       4171       5323     584.69      7.62%     567.92       5.16  .........       2.52       2.57  .........
1992......................................       4098       4733     633.80        8.4     587.53       3.45       4.30       1.55       1.87       2.22
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Columns 1 and 2 represent the numbers of hospital cost reports used in developing capital costs per case figures in column 3. Since hospital cost    
  reporting periods do not all coincide with the Federal fiscal year, data for a given Federal fiscal year must be derived from more than one hospital  
  cost report, allocated proportionately to the Federal fiscal year. For example, for a hospital with a cost reporting period beginning January 1, one  
  quarter of its cost report for the period ending December 31, 1987 would be allocated to Federal fiscal year 1988, and three quarters of its cost     
  report for the period ending December 31, 1988 would be allocated to Federal fiscal year 1987. Column 1 represents the number of cost reports used    
  that ended in the Federal fiscal year in question. Column 2 represents the number of cost reports used that began in the Federal fiscal year in       
  question. Column 2 is greater than Column 1 because Column 2 includes cost reports for hospitals whose cost reporting period coincides with the       
  Federal year along with cost reports for those hospitals whose cost reporting periods do not coincide with the Federal fiscal year. Column 1 includes 
  only cost reports for hospitals whose cost reporting periods do not coincide with the Federal Fiscal year.                                            
\2\Figures in column 5 represent capital costs per case, adjusted for the anticipated effects of cost report audits and reopenings, from the December   
  1993 update of HCRIS. The following factors were used in adjusting capital costs per case figures from column 3 for the effects of audits and         
  reopenings:                                                                                                                                           
Audit Adjustment Applied to As-Submitted Cost Reports                                                                                                   
Cost reporting periods beginning in:                                                                                                                    
FY 19900.9256                                                                                                                                           
FY 19910.9172                                                                                                                                           
FY 19920.9250                                                                                                                                           
Audit Adjustment Applied to Settled Cost Reports                                                                                                        
All years1.0043                                                                                                                                         
The costs per case figures that result after the application of these audit adjustments to submitted and settled cost reports, respectively, are entered
  in Column 5.                                                                                                                                          


'TABLE OF CONTENTS

Executive Summary

Chapter

1. THE FUTURE OF HOSPITALS

Factors Affecting How Hospitals Have Evolved
    Technological Advances
    Financing Changes
    Legal and Regulatory Environments
Hospital Responses to Changes in the Health Care Environment
    Services Provided
    Attempts to Control Growth in Costs
    Arrangements with Other Hospitals, Facilities, and Insurers
    Arrangements with Physicians
Hospitals in the Future

2. RECOMMENDATIONS

Recommentations for Fiscal Year 1995
    Medicare and Health Care Reform
    Recommendation 1: Medicare, Medicaid, and Private Payer Payment 
and Coverage of the Uninsured
    Recommendation 2: Payments to Hospitals Serving a Large Share of 
Low-Income Patients
    Recommendation 3: Payments for Additional Patient Care Costs 
Incurred by Teaching Hospitals
    Recommendation 4: Graduate Medical Education Funding and Payment
    Recommendation 5: Quality of Care
    Recommendation 6: Improvements in Premium Risk Adjustment 
Methods
    Recommendation 7: Controlling Medicare Spending Across All Sites 
of Care
    Recommendation 8: Strengthening Medicare's Risk Contracting 
Program
Payment Updates
    Recommendation 9: Update Factor for Operating Payments to PPS 
Hospitals
    Recommendation 10: Update Factor for Capital Payments to PPS 
Hospitals
    Recommendation 11: Single Operating and Capital Update Factor
    Recommendation 12: Update Factor for Hospitals Paid on the Basis 
of Hospital-Specific Rates
    Recommendation 13: Update Factor for PPS-Excluded Hospitals and 
Distinct-Part Units
    Recommendation 14: Update to the Composite Rate for Dialysis 
Services
Other Payment Policies
    Recommendation 15: Improvements in Hospital Wage Data
    Recommendation 16: Improvements in the PPS Hospital Wage Index
    Recommendation 17: Nursing Facility Wage Index
    Recommendation 18: Improving Outlier Payment Policy
    Recommendation 19: Level of the Indirect Medical Education 
Adjustment to PPS Operating Payments
    Recommendation 20: Prospective Payment Method for Outpatient 
Services
    Recommendation 21: Revision of the Payment Formula for 
Outpatient Services
    Recommendation 22: Beneficiary Liability for Hospital Outpatient 
Services
    Recommendation 23: Limit the Length of Outpatient Observation 
Stays

APPENDIXES

A. Background Material and Analyses
    Fiscal Year 1995 PPS Operating Update
    Fiscal Year 1995 PPS Capital Update
    Fiscal Year 1995 Update for Payments to Dialysis Facilities
    Nursing Facility Wage Index
B. Technical Report Series
C. Biographical Sketches of Commissioners
D. Statutory Mandate of the Commission
E. Change in DRG Relative Weights from Fiscal Year 1993 to Fiscal 
Year 1994

List of Tables

Chapter 1. The Future of Hospitals

1-1  High-Technology Services Provided by Hospitals, Selected Years 
(In Percent)
1-2  Hospital Losses and Gains as a Percentage of Costs, by Payment 
Category, Selected Years
1-3  U.S. Hospitals, by Hospital Category, Selected Years
1-4  Non-Inpatient and Skilled Nursing Services Provided by 
Community Hospitals, by Location, Selected Years (In Percent)
1-5  Hospital Net Patient Care Revenues from Ambulatory Services, by 
Hospital Category, 1993 (In Percent)
1-6  Community Hospital Revenues, by Type of Service, Selected Years 
(In Percent)
1-7  Inpatient and Outpatient Use of Services in Community 
Hospitals, Selected Years
1-8  National Hospital Employee Costs and Personnel in Nonfederal 
Short-Term Hospitals, 1971-1991
1-9  Multihospital Systems, 1979-1992
1-10  Hospitals with Health Maintenance Organization and Preferred 
Provider Organization Contracts, by Hospital Category, Selected 
Years (In Percent)
1-11  Hospital Net Patient Care Revenues from Health Maintenance 
Organizations and Preferred Provider Organizations, by Hospital 
Category, 1993 (In Percent)
1-12  Hospital-Physician Organizations, by Hospital Category, 1993 
(In Percent)

Chapter 2. Recommendations

2-1  Recommended Update Factor for PPS Hospital Operating Payments, 
Fiscal Year 1995
2-2  Recommended Update Factor for Capital Payments, Fiscal Year 
1995
2-3  Estimated Fiscal Year 1995 Average Increase in Per Case 
Payments Under Fully Prospective Rates
2-4  Recommended Update Factors for PPS-Excluded Hospitals, Fiscal 
Year 1995

Appendix A. Background Materials and Analyses

A-1  Comparison of Increases in Hospital Market Basket, PPS Updates, 
and PPS Payments Per Case, Fiscal Years 1984-1994 (In Percent)
A-2  Estimated Impact of Emerging Technologies on Medicare Operating 
Costs for PPS Hospitals, Fiscal Year 1995 (In Millions)
A-3  Change in Aggregate Total Factor Productivity and Its 
Components, 1984-1992 (In Percent)
A-4  Change in the Use of Hospital Inputs, 1984-1992 (In Percent)
A-5  Estimated Impact of Emerging Technologies on Medicare Capital 
Costs for PPS Hospitals, Fiscal Year 1995 (In Millions)
A-6  Estimated Impact of Cost-Increasing Technologies for Dialysis 
Facilities, Fiscal year 1995 (In Millions)
A-7  Productivity Indicators for Hospital-Based and Independent 
Dialysis Facilities, 1990-1992
A-8  Unaudited Cost Per In-Facility Hemodialysis Treatment for 
Hospital-Based and Independent Dialysis Facilities, 1990-1992
A-9  Hospital and Nursing Facility Wage Indexes, by Census Division 
and Urban/Rural Location, Fiscal Year 1991
A-10  Distribution of Nursing Facility Medicare Payment to Cost 
Ratios Under Alternative Payment Scenarios, by Census Division (In 
Percent)

LIST OF FIGURES

Chapter 2. Recommendations

2-1  Current and Corrected Payment Formulas for Hospital Outpatient 
Services

Appendix A. Background Material and Analyses

A-1  Change in Labor Productivity by Industry, 1980-1990 (In 
Percent)
A-2  Annual Medicare Case-Mix Index Change, 1985-1994 (In Percent)

Executive Summary

    In this report, the Prospective Payment Assessment Commission 
(ProPAC) discusses major factors that have influenced how hospitals 
have evolved, looks at how hospitals have responded to changes in the 
health care environment, and suggests the future direction hospitals 
may take. The Commission also presents 23 recommendations covering a 
range of topics, from broad issues concerning Medicare and health care 
reform to updating Medicare payment rates and refining certain aspects 
of Medicare payments to hospitals and other facilities. The report is 
submitted directly to the Congress, although the Secretary of Health 
and Human Services is required to respond to the Commission's 
recommendations.
    ProPAC's responsibilities have expanded from its original mandate 
of advising the Congress and the Secretary on the Medicare prospective 
payment system (PPS) for hospitals. These additional responsibilities 
include analyzing and developing prospective payment policies for all 
facility services furnished to Medicare beneficiaries and examining 
Medicaid hospital payment rates. In the past year, the Commission has 
submitted reports to the Congress on Medicare and the American health 
care system, global budgeting, and Medicaid disproportionate share 
payment adjustments. ProPAC, however, continues to devote substantial 
effort to updating and improving Medicare policies for paying 
hospitals.

The Future of Hospitals

    Hospitals--the central institutions in the American health care 
system--have long been the sole source of technology-oriented acute 
health care for the most complex cases. But because technological 
capabilities were limited, until the last 20 years or so one hospital 
was much like another. Each provided its community with essentially the 
same range of services and was structured in a similar manner. Today, 
hospitals offer a rich mix of complex, intensive services to a variety 
of patients. Relationships among hospitals, other institutional 
providers, and payers have become more complex, characterized by a 
broad range of ownership arrangements and the sharing of financial 
risk. Additionally, the role physicians play in hospitals' operations 
has evolved markedly.
    Two major forces--advances in medical technology and changes in 
financing mechanisms--have profoundly influenced the evolution of 
hospitals. Technological innovations not only have expanded the 
services hospitals furnish, but also have resulted in greater 
competition from other providers. The emergence of third-party payers 
has created a stream of revenues that financed these innovations.
    As health spending has outpaced inflation, both public and private 
payers have sought ways to curb this growth. Medicare, for instance, 
has made radical changes in payment mechanisms to constrain the rise in 
government payments to hospitals. Private payers, too, have used 
various strategies to control the growth in payments, but with mixed 
success. For their part, hospitals have minimized cost-containment 
pressure by generating additional payments from private payers, a 
practice called ``cost shifting.''
    How each hospital has evolved in response to technological 
advances, financing changes, and other developments has depended on its 
internal and external environments. The end result has been significant 
diversification in the hospital industry.
    Hospitals will continue to encounter technological and financing 
changes. The greatest unknown, however, is the outcome of the current 
health care debate and how hospitals will fare under reform. Since they 
account for the largest portion of total health spending, hospitals 
will bear much of the pressure to alter the way care is delivered and 
paid for in the future. Hospitals' responses to these changes will 
differ, depending on the source and stringency of the pressure, and the 
circumstances facing each facility.

Summary of Recommendations

    In Chapter 2, ProPAC presents 23 recommendations reflecting the 
Commission's concerns regarding health reform and Medicare payment 
policies. The Commission believes these proposed changes are necessary 
for maintaining access to quality health care, encouraging productivity 
and cost effectiveness in the provision of care, and improving payment 
equity. The Commission developed its recommendations by setting 
priorities, analyzing information, and deliberating on the implications 
of alternative policies. ProPAC also pays close attention to the 
concerns of the Congress, the Administration, health care providers, 
third-party payers, enrollees, and the public. The Commission's 
recommendations are offered to comply with ProPAC's statutory mandate 
and to contribute to an informed, open debate about Medicare payment 
policies. For fiscal year 1995, the Commission's recommendations 
focused on three broad areas:
     Medicare and health care reform,
     Payment updates, and
     Other payment policies.
    Medicare and Health Care Reform--The health care industry is facing 
major challenges as policy makers and legislators struggle to control 
health care expenditures and expand coverage to people without 
insurance. Several proposals have been introduced to reform the health 
care system. Some of these focus on incremental changes in the 
financing and delivery of health care; others call for fundamental 
restructuring of the existing system. Most include provisions that 
would affect the Medicare program.
    The Health Security Act introduced by the President would 
fundamentally change the financing and delivery of health care. Under 
this proposal, most people under 65 would obtain health insurance 
coverage through regional or corporate alliances that would negotiate 
with health plans to provide medical services. Managed competition 
among plans is expected to control the growth in health care 
expenditures. As a contingency, however, premium rate increases would 
be limited if expenditure growth were not contained. Medicare would be 
retained as a separate program, although it would be subject to a 
number of changes and cost-saving measures.
    In this report, the Commission comments on specific features of the 
Health Security Act and other health reform activities as they pertain 
to the Medicare program. This discussion is found in Recommendations 1 
through 8.

Payment Updates

    Recommendations 9 through 14 present the Commission's recommended 
updates to the payment amounts to various facilities. These include 
operating and capital payments to hospitals paid under PPS, operating 
payments to facilities excluded from PPS, and the composite rate for 
dialysis services.
    In examining each of these Medicare payment systems, the Commission 
recommends to the Congress an appropriate update amount for fiscal year 
1995 payments. In addition, ProPAC considers the appropriateness of the 
base payment rate to which the update factor would be applied.
    The Commission is mandated by law to submit to the Congress each 
year the appropriate update to the inpatient hospital operating payment 
rates under PPS. ProPAC considers several factors in developing this 
update: the hospital market basket index, scientific and technological 
advances, hospital productivity, case-mix change, and the quality and 
long-term cost-effectiveness of health care. For fiscal year 1995, the 
Commission recommends an average update of 2.7 percent to the 
standardized payment amounts: an increase of 2.2 percent for urban 
hospitals and of 5.3 percent for rural hospitals.
    ProPAC's update recommendation for fiscal year 1995 operating 
payments is higher than the update already legislated by the Congress. 
ProPAC used its traditional approach of examining individually the 
factors that contribute to the update. The Commission believes this 
process results in an appropriate percentage to update the standardized 
payment amounts for fiscal year 1995.
    In addition, the Commission recommends an update factor for the 
Federal capital payment rate. ProPAC follows an update framework 
similar to that used for the operating payment update. For fiscal year 
1995, ProPAC recommends a 3.6 percent increase to the Federal capital 
payment rate for both urban and rural hospitals. When the transition to 
fully prospective capital payments is complete, a single update factor 
should be used for adjusting PPS operating and capital payment rates.
    The Commission also considers the update for facilities currently 
excluded from PPS and the update to the composite payment rate for 
dialysis services. The facilities excluded from PPS are subject to the 
payment limitations and incentives established in the Tax Equity and 
Fiscal Responsibility Act of 1982. For fiscal year 1995, ProPAC 
recommends the target rates for these facilities should be updated by 
2.7 percent. Finally, the Commission recommends that the composite 
payment rate for dialysis services should not be increased for fiscal 
year 1995.
    Other Payment Policies--The Commission is concerned with all 
factors that might affect Medicare payments to facilities. In 
Recommendations 15 through 23, ProPAC highlights issues affecting 
Medicare payment specific to the hospital wage index, the nursing 
facility wage index, the outlier payment policy, the indirect medical 
education (IME) adjustment, and payment policies for hospital 
outpatient services.
    ProPAC conducted additional analyses related to improving the 
hospital wage index. It recommends that the wage index be adjusted to 
remove the effect of occupational mix. Moreover, the implementation of 
a new wage index using hospital-specific labor market areas based on 
hospital geographic proximity would improve the accuracy of the wage 
index. The Commission also reexamined the appropriateness of nursing 
facility wage index, and recommends collecting data so that such an 
index can be developed and used to adjust Medicare skilled nursing 
facility payments.
    ProPAC supports the outlier payment provisions of the Omnibus 
Budget Reconciliation Act of 1993 and makes several additional 
recommendations to improve the policy for identifying outlier cases and 
determining outlier payments. The Commission recommends reducing the 
IME adjustment to PPS operating payments from 7.7 percent to 7.0 
percent and retaining the IME adjustment until an alternative system 
for compensating hospital for these costs is adopted.
    The Commission submits four recommendations regarding payment for 
hospital outpatient services. The need for a prospective payment system 
is reiterated. Until such a system can be implemented, the current 
payment formula to calculate hospital payments for ambulatory surgery 
center-approved procedures, radiology services, and diagnostic services 
should be revised. In addition, beneficiary liability for hospital 
outpatient services should be reduced. Finally, the length of hospital 
outpatient observation stays should be limited.

Recommendations for Fiscal Year 1995

Medicare and Health Care Reform

Recommendation 1: Medicare, Medicaid, and Private Payer Payment and 
Coverage of the Uninsured
    Health care reform will have a major effect on the Medicare and 
Medicaid programs and the care beneficiaries receive. The Commission 
believes substantial changes in program policies should be considered 
only with a health care reform plan that covers the uninsured and pays 
comparable rates for similar services. As Medicare and Medicaid have 
constrained payments, providers have obtained additional revenue from 
private payers rather than by reducing their costs. This increasing 
reliance on cost shifting concerns ProPAC because it is likely to have 
a negative effect on access to care for beneficiaries of government 
programs. Further, possible adverse effects on beneficiaries of slower 
growth in payments for hospital and other currently covered services 
must be carefully balanced against desirable effects of increased 
Medicare spending for new benefits proposed in the Health Security Act.
Recommendation 2: Payments to Hospitals Serving a Large Share of Low-
Income Patients
    The Health Security Act would substantially reduce Medicare 
disproportionate share payments, as universal coverage ameliorates many 
of the problems these payments are intended to address. The Commission 
believes the timing of any such reduction in Medicare payments should 
be coordinated with the extension of universal coverage, so that 
hospitals that provide care to low-income populations are not 
disadvantaged. As a result, payments would be targeted more effectively 
to the hospitals that provide care to these populations. Even so, the 
payments received by different hospitals and the balance between 
payment levels for Medicare and other patients may be affected 
significantly. These changes should be structured to ensure that both 
the level and distribution of payments are appropriate. ProPAC intends 
to work with the Congress and the Secretary of Health and Human 
Services to monitor and study this issue.
Recommendation 3: Payments for Additional Patient Care Costs Incurred 
by Teaching Hospitals
    ProPAC supports the explicit recognition by all payers of the 
higher patient care costs teaching institutions incur. The Commission 
believes such payments should be separated from patient care rates and 
paid through a fund similar to the Academic Health Center Account 
proposed in the Health Security Act. ProPAC is concerned, however, that 
a sharp reduction in the payments teaching hospitals receive from 
government payers may result in financial hardships for some of the 
nation's major hospitals. Constraints on payments from private payers 
may exacerbate this problem. Therefore, ProPAC recommends that the 
total level of funding and the formula for distributing payments 
through such a mechanism should be based on careful analysis of the 
costs teaching institutions incur in carrying out their functions and 
how these payments will affect graduate medical education and access to 
the care these facilities provide.
Recommendation 4: Graduate Medical Education Funding and Payment
    ProPAC supports efforts to establish a funding mechanism for 
graduate medical education training programs that encompasses all 
payers, including Medicare. The Commission believes this mechanism 
should be separate from the payment received for patient care services. 
The level of funding and the distribution of payments should be 
determined according to the following principles:
     Funding for graduate medical education should be 
consistent with national work force goals, with respect to both the 
number of residents trained and their specialty distribution.
     Funding should support training for physician and certain 
non-physicians medical personnel who contribute to attaining these 
goals.
     Payment should be made to the training program, whether it 
is based in a hospital inpatient, hospital outpatient, or other 
ambulatory setting. The optimal method for allocating and distributing 
such payments needs to be determined.
     Payment for graduate medical education should be based on 
a national per resident amount, adjusted to recognize regional 
differences in residents' salaries and other factors that, upon further 
study, are found to be appropriate.
    In addition, funds should be available to recognize the additional 
personnel costs of hospitals that operate programs that lose specialty 
training positions as a result of the process described above.
Recommendation 5: Quality of Care
    The Commission believes there must be an effective quality 
assurance program for Medicare enrollees, especially given health 
reform's emphasis on cost control and proposed cutbacks in Medicare 
spending. The Peer Review Organization program should be continued but 
thoroughly evaluated. It should be replaced only by a program that has 
been determined to be more effective.
Recommendation 6: Improvement in Premium Risk Adjustment Methods
    The Commission recommends that the Secretary undertake the research 
necessary to substantially improve current risk adjustment methods. 
Risk adjustment will be needed under many health reform proposals to 
ensure that the premiums paid to competing health plans accurately 
reflect the risk composition of their enrollees. Until major 
improvements can be made, some other mechanism may be needed to limit 
the potential impact of enrolling individuals whose care proves to be 
exceptionally costly.
Recommendation 7: Controlling Medicare Spending Across All Sites of 
Care
    Medicare should continue to develop policies to monitor and control 
total expenditure growth across all sites of care. Payment methods 
should not unduly favor the choice of one site over another. They 
should also provide consistent incentives to constrain increases in 
volume and service intensity across physicians and other providers.
Recommendation 8: Strengthening Medicare's Risk Contracting Program
    The Commission recommends that the Secretary improve Medicare's 
risk-based, managed care program to give more Medicare beneficiaries 
the option of enrolling in managed care plans. To increase plan 
participation, deficiencies related to the risk adjustment formula and 
local differences in payments need to be corrected.

Payment Updates

Recommendation 9: Update Factor for Operating Payments to PPS Hospitals
    For fiscal year 1995, the PPS standardized payment amounts should 
be updated to account for the following:
     The projected increase in the HCFA PPS market basket 
index, currently estimated at 3.7 percent;
     An adjustment of zero percentage points for the difference 
between the projected ProPAC and HCFA market baskets;
     A negative adjustment of 1.1 percentage points for 
substantial error in the fiscal year 1993 market basket forecast;
     A positive adjustment of 0.3 percentage points to reflect 
the cost-increasing effects of scientific and technological advances;
     A negative adjustment of 0.7 percentage points to 
encourage hospital productivity improvements; and
     A net adjustment of zero percentage points for case-mix 
change.

In addition, a positive adjustment of 3.1 percentage points should be 
made for hospitals in rural areas to complete the phaseout of the 
differential in standardized amounts between rural and other urban 
hospitals. ProPAC's recommendation would result in an estimated average 
update factor of 2.7 percent for fiscal year 1995: an increase of 2.2 
percent for urban hospitals and of 5.3 percent for rural hospitals.
Recommendation 10: Update Factor for Capital Payment to PPS Hospitals
    For fiscal year 1995, the Commission recommends that a formula-
based approach be used to update capital payment rates. The capital 
update should include the following:
     The projected increase in a capital market basket index 
that measures one-year changes in a fixed basket of capital goods 
hospitals purchase, currently estimated at 3.4 percent;
     An adjustment of zero percentage points to correct for 
past forecast errors;
     An adjustment of zero percentage points to reflect changes 
in financing costs:
     A positive adjustment of 0.9 percentage points for 
scientific and technological advances;
    A negative adjustment of 0.7 percentage points to encourage 
hospital productivity; and
     A net adjustment of zero percentage points for case-mix 
change.

The Commission's recommendation would result in a 3.6 percent increase 
in the Federal capital payment rate for both urban and rural hospitals.
Recommendation 11: Single Operating and Capital Update Factor
    The Commission recommends that when the transition to fully 
prospective capital payments is complete, a single update factor be 
used for adjusting PPS operating and capital payment rates. Based on 
ProPAC's recommended updates to the operating and capital payment 
rates, the total increase to a fully prospective combined payment rate 
would be 2.8 percent for fiscal year 1995.
Recommendation 12: Update Factor for Hospitals Paid on the Basis of 
Hospital-Specific Rates
    The Commission believes payments based on hospital-specific base-
year costs for sole community hospitals should be updated by the 
average update given to all hospitals.
Recommendation 13: Update Factor for PPS-Excluded Hospitals and 
Distinct-Part Units
    For fiscal year 1995, the target rates for PPS-excluded hospitals 
and distinct-part units should be updated by 2.7 percent. This 
recommendation accounts for the following:
     The projected increase in the HCFA PPS-excluded hospital 
market basket, currently estimated at 3.7 percent;
     An adjustment of zero percentage points for the difference 
between the projected ProPAC and HCFA market baskets;
     A negative adjustment of 1.0 percentage points for 
substantial error in the fiscal year 1993 market basket forecast; and
     An adjustment of zero percentage points for scientific and 
technological advances.
Recommendation 14: Update to the Composite Rate for Dialysis Services
    The fiscal year 1995 update recommendation for the composite rate 
for dialysis services accounts for the following:
     The projected increase in the market basket for dialysis 
services in fiscal year 1995, estimated at 4.3 percent;
     A positive adjustment of 0.7 percentage points to reflect 
the additional costs associated with scientific and technological 
advances;
     A negative adjustment of 1.0 percentage points to 
encourage productivity improvements; and
     A negative discretionary adjustment of 4.0 percentage 
points to reflect the relationship between payments and estimated 
fiscal year 1994 costs.

This results in a net update recommendation of zero percent.

Other Payment Policies

Recommendation 15: Improvements in Hospital Wage Data
    The Secretary should develop and implement improved methods for 
collecting data on employee compensation and paid hours of employment 
for hospital workers by occupational category. Once these data become 
available, the Secretary should implement an adjustment to the hospital 
wage index under PPS. This adjustment would correct the wage index for 
the inappropriate effects of including geographic differences in the 
mix of occupations employed.
Recommendation 16: Improvements in the PPS Hospital Wage Index
    The Secretary should substantially revise the hospital wage index 
under PPS for fiscal year 1995. The revised wage index should be 
calculated using hospital-specific labor market definitions based on 
hospital geographic proximity measured by the air-mile distances 
between nearby hospitals. The Congress should repeal the current 
statutory provisions relating to geographic reclassification for the 
wage index.
Recommendation 17: Nursing Facility Wage Index
    The Secretary should collect data on employee compensation and paid 
hours of employment for employees of nursing facilities that care for 
Medicare skilled nursing facility patients. Once these data become 
available, the Secretary should develop a nursing facility wage index 
and use it to adjust Medicare skilled nursing facility payments.
Recommendation 18: Improving Outlier Payment Policy
    The Commission believes the outlier payment provisions of the 
Omnibus Budget Reconciliation Act of 1993 will improve the current 
policy for identifying outlier cases and determining outlier payments 
under PPS. However, the following changes also should be implemented 
for fiscal year 1995:
     The estimated cost of the case and the outlier payment 
amount should no longer be adjusted to reflect the hospital's indirect 
medical education and disproportionate share status.
     The marginal cost factor for cost outliers should be 
increased to 80 percent.

These changes would further increase the effectiveness of outlier 
payment in protecting against the risk of large losses on some cases. 
They would also improve the distribution of outlier payments across 
hospitals, including hospitals that receive a large number of transfer 
cases.
Recommendation 19: Level of the Indirect Medical Education Adjustment 
to PPS Operating Payments
    The Commission recommends that the indirect medical education 
adjustment to PPS operating payments be reduced from its current level 
of 7.7 percent to 7.0 percent for fiscal year 1995. This reduction 
should be implemented with the anticipated decrease in indirect medical 
education payments returned to all hospitals through a proportionate 
increase in the standardized payment amounts. The Commission also 
recommends continuation of the indirect medical education adjustment to 
PPS payments until an alternative system of compensating appropriately 
for the higher costs of patient care in teaching institutions is fully 
operational.
Recommendation 20: Prospective Payment Method for Outpatient Services
    The Commission believes a prospective payment system for outpatient 
services should be implemented. Outpatient payment reform should result 
in consistent policies across all sites and providers. Payment should 
be based on a prospective price per unit of service until other methods 
can be developed that would appropriately control the volume of 
services. The payment rate should be adjusted to reflect justifiable 
cost differences across settings.
Recommendation 21: Revision of the Payment Formula for Outpatient 
Services
    Until prospective payment systems can be implemented for hospital 
outpatient services, the blend formula used to calculate hospital 
payments for ambulatory surgery center-approved procedures, radiology 
services, and diagnostic services should be revised. The formula should 
subtract beneficiary copayment after the total payment has been 
calculated. The resulting reduction in Medicare program payments to 
hospitals should be used to partially offset increases in program 
expenditures due to reducing beneficiary liability.
Recommendation 22: Beneficiary Liability for Hospital Outpatient 
Services
    Beneficiary coinsurance for hospital outpatient services should be 
limited to 20 percent of the Medicare-allowed payment, as it is in 
other settings. For services not paid on a prospective basis, 
beneficiary copayment would need to be estimated because it is not 
known at the time of service delivery.
Recommendation 23: Limit the Length of Outpatient Observation Stays
    The Commission recommends limiting the length of hospital 
outpatient observation stays. Further, these changes should be 
coordinated with Peer Review Organizations so that appropriate short 
stay admissions are not denied. ProPAC supports HCFA's efforts in this 
regard.

CHAPTER 1

THE FUTURE OF HOSPITALS

    Hospitals--the central institutions in the American health care 
system--have long been the sole source of technology-oriented acute 
health care for the most complex cases. But because the capabilities of 
technology were limited, until the last 20 years or so one hospital was 
much like another. Each provided its community with essentially the 
same range of services and was structured in a similar manner.
    This is no longer the case. Changes in medical science and 
technology and the financing of services have required hospitals to 
become very different entities. Today, hospitals offer a rich mix of 
complex, intensive services to a variety of patients. Relationships 
among hospitals, other institutional providers, and payers have become 
more complex as well, incorporating jointly produced services and 
financial risk sharing. The role of physicians in hospitals' operations 
has also evolved. Because of the wider range of services, patients, and 
institutional arrangements, hospitals are now a much more diverse group 
of medical care facilities, with as many differences as similarities.
    The Prospective Payment Assessment Commission (ProPAC), created in 
1983 by the legislation that established the Medicare prospective 
payment system (PPS) for inpatient hospital services, advises the 
Congress and the Secretary of Health and Human Services on policies 
affecting payment for Medicare services in hospitals and other 
institutional settings. It is thus appropriate that the Commission look 
at changes that have affected hospitals in recent years and how 
hospitals have responded. This chapter does just that, providing a 
context for the recommendations in Chapter 2 on changes to Medicare 
payment policy. The chapter concludes by examining what lies ahead for 
hospitals, as government and private payers attempt to curb health care 
spending and as comprehensive health reform is debated by the Congress.
    Several major factors have influenced how hospitals have evolved. 
The continuous introduction of new technological capabilities has led 
to increases in the intensity of inpatient services for the acutely 
ill. These advances have also allowed services formerly provided only 
to hospital inpatients to be furnished in ambulatory settings. 
Consequently, new providers have entered the health care market, 
competing with hospitals for clients.
    Changes in financing, limitations by insurers on using specific 
services, and increased competition have contributed to unprecedented 
declines in inpatient hospital utilization. In 1992, for instance, 
there were 5.5 million fewer hospital admissions than in 1982, despite 
a 10 percent population increase. The average length of a hospital stay 
also fell to 6.4 days from 7.2 days, even though the average case was 
more complex. Total health care expenditures, however, have continued 
to rise at a dramatic rate, consuming 14 percent of the nation's gross 
domestic product in 1992. As a result, payers have been pressed to 
reevaluate their cost-based and charge-based payment practices and to 
find ways to reduce their financial risk.
    Hospitals have responded to the marked declines in inpatient 
service use and constrained payments from public and private payers by 
actively seeking new sources of revenue. They have expanded their 
capacity to furnish ambulatory surgery and other outpatient services 
and developed specialized units to provide inpatient psychiatric, 
rehabilitation, and subacute nursing care. In addition, many have begun 
to offer home health and various community-based services. Others have 
concentrated on eliminating unprofitable cost centers or turned to more 
revenue-enhancing activities. Some, for instance, have become 
specialized facilities like psychiatric or rehabilitation hospitals, 
while in rural areas, some small hospitals have eliminated inpatient 
beds and become outpatient centers. Over time, hospitals have modified 
their relationships with insurers, other providers, and physicians and 
have attempted to curb expenses to strengthen their market position.
    The configuration of the hospital represents a complex interaction 
between financing, organizing, and providing specific services in a 
local environment. Recently, for example, insurers and other payers 
have strengthened efforts to reduce payments to hospitals and other 
providers, and implemented utilization control activities. These 
financial pressures have forced hospitals to assume more risk than was 
the case under charge-based or cost-based reimbursement. Additionally, 
hospitals have had to take a closer look at whether to add new 
technologies and services.
    Although for the past decade hospitals have been a major target of 
government cost control--primarily through Medicare and Medicaid 
payment policy--spending for the services they provide almost tripled 
between 1980 and 1991, from $102 billion to $289 billion. Total health 
care expenditures, however, have risen even more rapidly. Consequently, 
policy makers are currently debating how to reform the health care 
system to rein in the growth of public and private spending, while also 
expanding coverage to the nearly 39 million Americans who are 
uninsured. Even if reform is gradual and not comprehensive, hospitals 
will be pressured to reduce costs and generate new revenues by 
expanding service capacity. If comprehensive reform is enacted, the 
fundamental relationships among payers, physicians, and other types of 
providers may change markedly. The evolution of individual hospital 
swill depend heavily on how health reform affects each facility's local 
market, patient population, payer mix, and regulatory environment.

Factors Affecting how Hospitals Have Evolved

    The health care environment has undergone radical changes over the 
past two decades and is on the threshold of even greater ones. Two 
major forces--advances in medical technology and financing mechanisms--
have profoundly influenced hospitals. Technological innovations have 
expanded the services hospitals furnish and led to increased 
competition from other providers. Until recently, a steady stream of 
revenues from third-party cost-based and charge-based payers financed 
these innovations. Increasingly, as payment policies have changed 
hospitals have used higher payments from some payers to cover losses 
created by lower payments from others. This has allowed the continued 
expansion of services even as certain payers have attempted to limit 
expenditures.

Technological Advances

    Recent technological advances affecting the hospital industry range 
from the development of new pharmaceutical and surgical instruments to 
expensive diagnostic equipment like magnetic resonance imaging devices 
(MRIs).
    During the 1970s and early 1980s, hospitals were quick to adopt new 
technologies even when clinical indications for their appropriate use 
were still largely unstudied.\1\ Computerized tomography (CT) scanners 
are illustrative. This technology first appeared in 1973; by 1985, 
almost all community hospitals with more than 300 beds had a CT unit, 
even though purchase prices averaged about $500,000.\2\ Similarly, in 
1981, 14.8 percent of hospitals had cardiac catheterization capacity; 
by 1992, this had risen to 27.6 percent (see Table 1-1). Hospitals have 
also increased their magnetic resonance imaging, megavolt radiation 
therapy, and open-heart surgery capabilities since the beginning of the 
1980s.
    Because it was so costly, most state-of-the-art equipment 
traditionally was purchased only by hospitals. But new technological 
developments, along with advances in medical expertise, have expanded 
the ability of outpatient providers to offer services in competing 
sites. The number of ambulatory surgery centers, for example, 
mushroomed from 239 in 1983 to 1,556 in 1991.\3\
    Technological developments not only have allowed hospitals and 
other providers to offer a broader array of services, but also have 
enabled more people and conditions to be treated. The expanded volume 
that accompanies both new and existing technologies contributes more to 
the rise in health care expenditures than does the cost of the 
technological devices, themselves. Consequently, if frequently used, 
even relatively inexpensive innovations can contribute substantially to 
health care spending. As the supply of technology extends beyond 
hospitals and the demand for these services increases, utilization may 
grow more rapidly, thus driving up health care expenditures.

                                 Table 1-1.--High-Technology Services Provided by Hospitals, Selected Years (In Percent)                                
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Magnetic        Megavolt                                   
                  year                       Cardiac          CT scan       Lithotripsy      resonance       radiation      Ocean-heart        SPECT    
                                         catheterization                      (ESWL)          imaging         therapy         surgery                   
--------------------------------------------------------------------------------------------------------------------------------------------------------
1981...................................            14.8%           21.4%                                           14.5%            9.6%                
1985...................................             16.8            48.5            0.8%                            15.2            11.1                
1990...................................             24.1            61.1             5.4           15.6%            17.0            14.7           16.2%
1992...................................             27.6            65.9             7.2            21.3            17.5            16.0            24.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: CT = computerized tomography. ESWL = extracorporeal shock wave lithotripsy. SPECT = single photon emission computerized tomography. Includes all  
  Federal, nonfederal, general acute care, long-term care, and psychiatric hospitals as well as hospital units of institutions.                         
                                                                                                                                                        
Source: American Hospital Association, Hospital Statics. 1981, and Annual Survey of Hospitals, 1985, 1990, and 1992.                                    

Financing Changes

    Advances in technology have raised the cost of medical care because 
they have permitted the treatment of more complex cases. As the cost of 
providing such care exceeded the ability of most individuals to pay, a 
third party joined the hospital-patient relationship. This third party 
initially was a private insurance plan that helped individuals share 
the risk of costly illness. In 1965, the government joined the payer 
mix with the creation of the Medicare and Medicaid programs. For many 
years, government and private payers collected funds and distributed 
payments to hospitals for the care of their beneficiaries, but did not 
become involved in decisions relating to the services that were 
provided, the site of care, or the type of provider. Payments to 
providers were made on the basis of costs or charges, which allowed 
revenues to increase directly as costs rose.
    But with health care expenditures accelerating much more rapidly 
than general inflation, insurance premiums grew markedly. This not only 
threatened the ability and willingness of employers to fund higher 
premiums, but also affected individuals by driving up out-of-pocket 
payments for many services. Third-party payers responded by seeking 
ways to slow the growth--particularly that in hospitals because they 
had high costs per case and accounted for a major share of total health 
care spending. Responding to skyrocketing government payments. Medicare 
in the early 1980s replaced cost-based hospital payment with the 
prospective payment system. This system allowed Medicare to reduce the 
growth of its hospital payments. While some private insurers were also 
able to control payment growth, most were not.
    Hospitals have attempted to generate revenue to cover losses from 
uncompensated care and below-cost payments for Medicaid and Medicare 
patients by raising charges to private insurers. This practice is 
called ``cost shifting.'' In addition, hospitals have actively sought 
other sources of revenue. In 1981 net revenue gains from private 
insurers equaled 5.0 percent of total hospital costs, while in 1991 
this figure had risen to 11.6 percent (see Table 1-2). This largely 
offset losses from Medicare, which increased from 1.0 percent to 4.4 
percent, and from Medicaid, which rose from 0.7 percent to 2.3 percent 
of total costs. Depending on their payer mix, however, hospitals differ 
in their ability to cost shift. Those with large uncompensated care 
patient populations and few generously paying privately insured 
patients, for example, have had limited ability to cost shift. By 
contrast, other types of hospitals--particularly those with a large 
proportion of privately insured patients--have found it easier to cost 
shift.

   Table 1-2.--Hospital Losses and Gains as a Percentage of Costs, by   
                    Payment Category, Selected Years                    
------------------------------------------------------------------------
                                              Uncompensated    Private  
       Year           Medicare     Medicaid        care         payers  
------------------------------------------------------------------------
1981..............        -1.0%        -0.7%         -3.3%          5.0%
1983..............         -1.2         -0.8          -3.6           7.0
1985..............          0.4         -1.0          -4.4           6.7
1987..............         -0.7         -1.7          -4.4           8.2
1989..............         -3.3         -2.5          -4.4           8.9
1991..............         -4.4         -2.3          -4.4          11.6
------------------------------------------------------------------------
Note: For each payment category, losses or gains are the difference     
  between the cost of providing care and the payment received. Operating
  subsidies from state and local governments are considered payments for
  uncompensated care patents.                                           
                                                                        
Source: ProPac analysis of data from the American Hospital Association  
  Annual Survey of Hospitals.                                           

    The array of providers and payers and the lack of adequate 
coordination among them also encourages shifts in site of care by 
driving up use and expanding capacity in those settings that are not 
experiencing as much pressure to contain costs. For example while 
prospective payments has slowed the growth of Medicare payments for 
inpatient care, service utilization in post-acute and ambulatory 
settings has exploded, with a corresponding increase in expenditures.
    Questioning the medical appropriateness and need for many hospital 
admissions, third-party payers have adopted policies to encourage the 
use of less costly providers and settings. Many private insurers have 
turned to managed care arrangements, using financial incentives, 
preferred provider agreements, and increased utilization review to curb 
the use of inpatient hospital care. Private payers are also 
increasingly regulating and limiting what they will cover and how much 
they will reimburse, giving hospitals incentives to change the mix of 
services they provide. Government, on the other hand, has focused its 
efforts on evaluating, through utilization review, whether specific 
services should be furnished and determining the setting in which 
services must be provided. Medicare, for example, requires performance 
of almost all cataract surgery on an outpatient basis. Both public and 
private payers have attempted to influence the site and provision of 
services through preadmission certification and retrospective claims 
review with possible denial of payment.

Legal and Regulatory Environments

    The legal and regulatory environments that hospitals face at both 
the Federal and state levels also affect their financial condition and 
organization of service delivery. The Federal government influences 
hospitals, for example, through antitrust and tax laws. These 
regulations significantly affect hospitals' ability to respond to 
financial pressures by acquiring or contracting with other health care 
providers.
    Many states are considering or in the process of enacting 
comprehensive health reform legislation that will influence how 
hospitals are paid and which services are provided, even in the absence 
of Federal health reform.\4\ Several states--among them Vermont, North 
Dakota, Florida, and Minnesota--are crafting cost-containment 
strategies that include expenditure targets or global caps on health 
care spending and encourage or mandate the development of managed care 
networks. Minnesota has established state boards to oversee major 
capital expenditures and to foster collaboration among providers. 
Vermont is preparing to implement payment limits for all providers 
within the state, while providing health insurance to all its 
residents. Hawaii has had universal health insurance coverage for 20 
years. If states successfully lower the rates of increase in health 
care expenditures, hospitals will see their revenues constrained and 
their ability to cost shift among payers limited.

Hospital Responses to Changes in the Health Care Environment

    How an individual hospital has evolved in response to technological 
advances, financing changes, and legal or regulatory developments has 
depended on the hospital's internal and external environments. Among 
their responses are changes in the services provided; attempts to 
control cost growth; and innovative arrangements among hospitals, other 
providers, and insurers. The end result has been significant 
diversification in the hospital industry.

Services Provided

    A combination of fewer admissions and shorter stays has encouraged 
hospitals to seek alternative sources of revenue. Inpatient admissions 
for the population 65 and over decreased with the implementation of PPS 
in 1983, but began growing again in 1986. Among the nonelderly, both 
the number and rate of inpatient admissions have continued to drop. 
Average length of stay fell considerably after PPS was introduced and 
has shown only modest changes since then.
    Some hospitals have responded to the decline in acute patient 
admissions by targeting different patient populations. If hospitals 
convert to specialty status, they also may be shielded from stringent 
cost containment. In particular, they are exempt from PPS. Since 1980, 
the number of general medical and surgical hospitals has decreased by 
11.2 percent, while the number of psychiatric hospitals has accelerated 
by 41.8 percent and the number of other specialty hospitals has grown 
by 7.3 percent (see Table 1-3).

    Table 1.3.--U.S. Hospitals, by Hospital Category, Selected Years    
------------------------------------------------------------------------
                                                                Percent 
Hospital category     1980       1985       1990       1992      change 
                                                               1980-1992
------------------------------------------------------------------------
Short term.......      6,407      6,339      6,141      6,092       -4.9
Long term........        558        533        508        447      -19.9
General medical                                                         
 and surgical....      6,105      5,961      5,566      5,424      -11.2
Psychiatric......        558        629        774        791       41.8
Tuberculosis and                                                        
 other specialty.        302        282        309        324        7.3
Community*.......      5,830      5,732      5,384      5,292       -9.2
Noncommunity.....      1,135      1,140      1,265      1,247        9.9
6-24 beds........        327        267        301        294      -10.1
25-49 beds.......      1,209      1,134      1,095      1,078      -18.8
50-99 beds.......      1,674      1,666      1,633      1,595       -4.7
100-199 beds.....      1,567      1,618      1,562      1,572        0.3
200-299 beds.....        802        848        830        823        2.6
300-399 beds.....        484        507        503        489        1.0
400-499 beds.....        334        301        276        256      -23.4
500+ beds........        568        531        449        432      -23.9
Voluntary........      3,505      3,544      3,388      3,363       -4.1
Proprietary......        891      1,052      1,139      1,134       27.3
Federal                                                                 
 government......        359        343        337        325       -9.5
Nonfederal                                                              
 government......      2,210      1,933      1,785      1,717      -22.3
Residency                                                               
 training........      1,257      1,232      1,249      1,223       -2.7
Medical school                                                          
 affiliation.....        997      1,120      1,238      1,154       15.7
Council of                                                              
 Teaching                                                               
 Hospitals member        406        454        387        381       -6.2
Urban............      3,791      3,959      3,937      4,030        1.8
Rural............      3,174      2,913      2,712      2,509      -20.5
New England......        373        361        341        331      -11.3
Middle Atlantic..        800        761        726        710      -11.3
South Atlantic...      1,026      1,037      1,050      1,043        1.7
East North                                                              
 Central.........      1,060      1,022        959        957       -9.7
East South                                                              
 Central.........        548        547        532        523       -4.6
West North                                                              
 Central.........        896        883        846        820       -8.5
West South                                                              
 Central.........        955        972        943        919       -3.8
Mountain.........        448        462        464        464        3.6
Pacific..........        859        827        788        772      -10.1
    All hospitals      6,965      6,872      6,649      6,539      -6.1%
------------------------------------------------------------------------
*Community hospitals include nonfederal short-term general and some     
  specialty hospitals.Q                                                 
Source: American Hospital Association Annual Survey of Hospitals.       

    The significance of non-inpatient and skilled nursing services also 
has increased, although it varies by hospital location (see Table 1-4). 
In 1985 about 40 percent of rural community hospitals reported having 
any organized outpatient service; by 1992, more than 84 percent had 
this capability. While 17 percent of rural hospitals surveyed derived 
more than half of net patient care revenues in 1993 from ambulatory 
services, this was true for only about 6 percent of urban hospitals 
(see Table 1-5). These revenues were also a larger share of net patient 
care revenues for non-teaching than for teaching hospitals.
    Skilled nursing services were provided by 34 percent of community 
hospitals in 1992, compared with 18.8 percent in 1985. Further, a 
significantly higher proportion of rural, compared with urban, 
hospitals furnished this care. This may partly reflect the attempts of 
rural institutions to compensate for reduced inpatient utilization by 
expanding skilled nursing care capacity. The percentage of rural 
hospitals with swing beds (beds certified by Medicare as either acute 
care or skilled nursing beds) has also risen.

  Table 1-4.--Non-Inpatient and Skilled Nursing Services Provided by Community Hospitals, by Location, Selected 
                                               Years (In Percent)                                               
----------------------------------------------------------------------------------------------------------------
                        Any                                                                                     
                     organized                               Alcohol/                                  Skilled  
   Location year     outpatient    Surgeryb   Psychiatric      drug     Rehabilitation  Home health    nursingc 
                     servicesa                              dependency                                          
----------------------------------------------------------------------------------------------------------------
All hospitals:....                                                                                              
    1985..........         54.1         93.4         15.3         16.1           39.3          29.7         18.8
    1990..........         85.2         94.7         19.6         20.5           51.5          35.6         22.3
    1992..........         88.9         94.4         21.9         21.0           55.0          38.0         34.0
Urban:............                                                                                              
    1985..........         66.9         95.7         23.6         22.9           54.9          31.8         11.1
    1990..........         90.0         95.0         29.0         28.6           66.2          34.4         18.7
    1992..........         92.6         94.7         31.2         28.8           67.3          35.8         26.0
Rural:............                                                                                              
    1985..........         39.3         90.7          5.8          8.2           21.3          27.4         27.6
    1990..........         79.6         94.4          8.4         10.8           34.2          37.1         26.4
    1992..........         84.1         94.1          9.9         10.9           39.0          40.9         44.4
----------------------------------------------------------------------------------------------------------------
aTrends in responses may reflect, in part, a change in the survey question between 1985 and 1990.               
bHospitals may provide outpatient surgery without having an organized outpatient department.                    
cData for 1985 reflect the presence of skilled nursing services anywhere in the hospital. Data for 1990 and 1992
  reflect the presence of a separate skilled nursing unit.                                                      
                                                                                                                
Source: American Hospital Association Annual Survey of Hospitals.                                               


Talbe 1-5.--Hospital Net Patient Care Revenues from Ambulatory Services,
                 by Hospital Category, 1993 (In Percent)                
------------------------------------------------------------------------
                               Net patient care revenues from ambulatory
    Hospital      Number of              services (in percent)          
   category*      hospitals  -------------------------------------------
                                 0-10      11-25      26-50     Over 50 
------------------------------------------------------------------------
Atlantic.......          400       11.0       37.8       42.0        5.8
East Central...          391        6.6       24.0       54.7       11.8
West Central...          404        8.9       23.8       50.5       14.4
Far West.......          300        8.0       24.0       49.3       14.7
Urban..........          736        9.5       39.8       41.6        5.7
Rural..........          759        7.9       15.8       56.4       17.0
Teaching.......          233       13.3       54.0       27.0        3.9
Non-teaching...        1,262        7.8       22.7       53.2       12.8
                --------------------------------------------------------
    Total......        1,495        8.7       27.6       49.1       11.4
------------------------------------------------------------------------
Note: Rows may not add to 100 due to survey item non-response.          
                                                                        
*Atlantic includes the New England, Middle Atlantic, and South Atlantic 
  Census Division. East Central includes the East North Central and East
  South Central Census divisions. West Central includes the West North  
  Central and West South Central Census divisions. Far West includes the
  Mountain and Pacific Census divisions. Teaching hospitals are those   
  with more than 5 percent professional time spent teaching.            
                                                                        
Source: Survey of Hospital-Physician Relations conducted by MACRO       
  International Inc., under contract to ProPac.                         

    Hospitals have increasingly added home care capacity as well. 
Hospital home care visits doubled between 1980 and 1990, from 6.2 
million to 12.3 million.\5\ Compared with smaller hospitals, larger 
ones had more visits.\6\ The percentage of community hospitals 
operating home care programs, however, is not growing as rapidly as the 
use of home care services.
    During the 1970s and 1980s, many hospitals expanded their 
outpatient departments and added ambulatory surgery centers. On 
average, 37 percent of hospital equipment is devoted to meeting 
outpatient demand.\7\ This expansion has had a major impact on hospital 
revenues. About 25 percent of hospital revenues, on average, now come 
from out-patient services (see Table 1-6). While inpatient admissions 
have declined by about 14 percent since 1980, nonemergency outpatient 
visits have more than doubled (see Table 1-7). Similarly, more than 
half of hospital surgical procedures in 1992 were performed on an 
outpatient basis, compared with only 16.3 percent in 1980.
    Along with expanding their service capacity, hospitals have also 
increased their labor pool to administer the new services. The number 
of full-time equivalent personnel (FTEs) per patient has grown steadily 
since the 1970s (see Table 1-8). In part this reflects the surge in 
outpatient hospital services, since FTEs employed by hospitals may work 
in either inpatient or outpatient departments. Nonetheless, labor costs 
as a percentage of total hospital costs have been decreasing, while 
capital costs are increasing as a percentage of total costs.

Attempts to Control Growth in Costs

    Financial pressures on hospitals have spurred the growth in 
services to augment revenues and have fostered a greater reliance on 
cost shifting. As a result of these efforts, in aggregate, hospitals 
have maintained positive total revenue margins. In 1991, the total 
margin was 4.3 percent--higher than at any time before the introduction 
of PPS.
    However, as government and private insurers have stepped-up their 
cost-containment efforts, hospitals are less able to compensate for 
losses. Therefore, hospitals must increase efforts to reduce costs and 
indeed have done so. After peaking at 5.0 percent in 1992, annual real 
growth (above general inflation) in hospital costs per case dropped to 
3.2 percent in the first quarter of 1993 and to 1.0 percent in the 
third quarter. Whether this is a one-time phenomenon or the beginning 
of a trend is uncertain.

  Table 1-6.--Community Hospital Revenues, by Type of Service, Selected 
                                  Years                                 
                              [In Percent]                              
------------------------------------------------------------------------
               Year                 Inpatient    Outpatient     Other   
------------------------------------------------------------------------
1980.............................         83.2         12.5          4.3
1985.............................         79.3         16.1          4.6
1990.............................         72.5         22.5          5.0
1992.............................         69.8         25.3          4.9
------------------------------------------------------------------------
Source: American Hospital Association National Hospital Panel Survey    

Arrangements With Other Hospitals, Facilities, and Insurers

    Hospitals have adopted a number of organizational strategies to 
respond to changes in their operating environment. They have, for 
instance, merged with, acquired, or contracted with other hospitals and 
providers. They have also developed more complex relationships with 
insurers.
    During the 1980s, hospitals tended to diversify by acquiring 
facilities or businesses (such as parking lots or non-health care 
businesses) that often were unrelated to their basic mission. Many of 
these investments were unprofitable, partly because hospital 
administrators lacked the skills to manage non-acute care ventures.\8\ 
In the 1990s, however, hospital diversification efforts have focused on 
reducing costs and offering a wider range of services to large 
employers and purchasing coalitions through managed care contracts.\9\
    Extensive mergers and acquisitions during the 1980s led to the 
growth in the number of multihospital systems and in the percentage of 
institutions that belonged to these systems (see Table 1-9). Between 
1979 and 1992, the proportion of hospitals that were members of 
multihospital systems increased from 27.1 percent to 43.2 percent. 
These systems were thought to produce economies of scale and scope, but 
whether they are more efficient is debatable.\10\ The fact that the 
number of formal multihospital systems actually declined between 1990 
and 1992 may reflect a trend toward the use of less formal contractual 
arrangements, as well as mergers of existing systems.

           Table 1-7.--Inpatient and Outpatient Use of Services in Community Hospitals, Selected Years          
----------------------------------------------------------------------------------------------------------------
                      Inpatient services (in           Outpatient visits (in          Surgical procedures (in   
                            thousands)                      thousands)                       percent)           
      Year       -----------------------------------------------------------------------------------------------
                    Admissions         Days         Emergency          Other        Inpatient       Outpatient  
----------------------------------------------------------------------------------------------------------------
1980............          36,143         273,085          77,245         125,064            83.7            16.3
1985............          33,449         236,619          74,547         144,169            65.4            34.6
1990............          31,181         225,972          86,693         214,636            49.5            50.5
1992............          31,034         221,047          90,769         254,772            46.2            53.8
Percent change                                                                                                  
 1980-1992......           -14.1           -19.1            17.5           103.7  ..............  ..............
----------------------------------------------------------------------------------------------------------------
AASource: American Hospital Association Annual Survey of Hospitals.                                             

    Hospitals have also developed innovative contractual arrangements 
with other providers. Some rural hospitals, for example, have dealt 
with declining population bases and the inability to provide high-
technology services to the communities they serve by setting up rural 
networks or establishing telemedicine or computer information linkages 
with large urban hospitals and other providers. Such linkages have 
changed the configuration of the rural hospital.
    Financial pressures have also stimulated the growth of managed 
care, which has substantially altered the nature of relationships 
between hospitals and insurers. For example, hospitals may assume more 
financial risk under a capitated payment system. Types of managed care 
arrangements differ substantially, however; the degree of control over 
physician and other providers decision making--and this utilization--
consequently differs. Health maintenance organizations (HMOs) in 
particular attempt to control expenditures primarily by reducing the 
use of inpatient hospital care. Staff and group model HMOs exercise 
more control over their employees than do independent practice 
associations or preferred provider organizations (PPOs).

    Table 1-8.--National Hospital Employee Costs and Personnel in Nonfederal Short-Term Hospitals, 1971-1991    
----------------------------------------------------------------------------------------------------------------
                                                                                         Personnelb             
                                       Total costs for   Employee costs as -------------------------------------
                Year                    inpatient care    a percentage of       Total (in        Number per 100 
                                        (in billions)       total costsa        thousands)          patients    
----------------------------------------------------------------------------------------------------------------
1971................................              $22.4               63.9              1,999                272
1972................................               25.5               62.6              2,056                278
1973................................               28.5               61.8              2,149                280
1974................................               32.8               60.7              2,289                289
1975................................               39.1               59.4              2,399                298
1976................................               45.4               57.9              2,483                304
1977................................               51.8               57.5              2,581                315
1978................................               58.3               57.2              2,662                323
1979................................               66.2               57.0              2,762                328
1980................................               77.0               56.4              2,879                334
1981................................               90.7               56.7              3,039                347
1982................................              105.1               56.7              3,110                353
1983................................              116.6               56.5              3,102                357
1984................................              123.6               56.1              3,023                367
1985................................              130.7               55.2              3,003                385
1986................................              140.9               53.9              3,032                392
1987................................              152.9               53.1              3,120                400
1988................................              168.9               52.9              3,209                404
1989................................              185.2               53.0              3,307                411
1991................................              225.2               53.8              3,539                427
----------------------------------------------------------------------------------------------------------------
aIncludes employee payroll and benefit costs; excludes contracted labor services.                               
bFull-time equivalent personnel.                                                                                
cSource: National Center for Health Statistics, Health, United States, 1992 (Hyattsville, Maryland: Public      
  Health Service, 1993).                                                                                        


              Table 1-9.--Multihospital Systems, 1979-1992              
------------------------------------------------------------------------
                                                 Number of    Percent of
               Year                 Number of    hospitals       all    
                                     systems     in systems   hospitals 
------------------------------------------------------------------------
1979.............................          267        1,797         27.1
1980.............................          256        1,877         28.4
1981.............................          256        1,924         29.2
1982.............................          243        1,958         29.8
1983.............................          249        2,050         31.3
1984.............................          250        2,208         33.8
1985.............................          268        2,477         37.9
1986.............................          278        2,514         38.7
1987.............................          303        2,567         39.6
1988.............................          303        2,572         40.0
1989.............................          307        2,901         43.2
1990.............................          311        2,906         43.7
1991.............................          309        2,873         43.3
1992.............................          300        2,826         43.2
Percent change 1979-1992.........         12.4         57.3  ...........
------------------------------------------------------------------------
Note: Increases between 1988 and 1989 reflect, in part, inclusion of    
  Federal hospitals in 1989 and thereafter.                             
Source: American Hospital Association, Directory of Multihospital       
  Systems, 1980-1987, AHA Guide, 1988-1993, Financial Growth and        
  Diversification of Hospitals and Multihospital Systems, 1988, Data    
  Book on Multihospital Systems, 1980-1985, Hospital Statistics, 1992-  
  93, and Annual Survey of Hospitals, 1992.                             

    The growth in the managed care industry has been well-documented, 
although the rate of growth has not been uniform throughout the 
country.\11\ In the West Census region in 1992, for instance, 25 
percent of the population was enrolled in some sort of HMO, compared 
with 7.8 percent in the South. The implementation of managed care plans 
has also differed throughout the country. The average managed care plan 
in the Pacific Census division contracts with 60 hospitals, while that 
in New England contracts with 22 hospitals.
    As managed care market power has grown, more hospitals have begun 
contracting with HMOs and PPOs (see Table 1-10). This trend is 
reflected in the increased importance of managed care as a source of 
revenue. In 1993, 15.6 percent of hospitals in the Far West and 7.2 
percent of hospitals in the East Central part of the country reported 
that more than 25 percent of their net patient care revenues came from 
HMOs or PPOs (see Table 1-11). Urban hospitals received more, on 
average, from HMOs and PPOs than did rural hospitals, although 13.6 
percent of rural hospitals reported receiving more than 10 percent of 
revenues from these sources.

Arrangements With Physicians

    While hospitals provide the buildings, equipment, and staff 
necessary to furnish complex inpatient (and other) services, they 
cannot operate without the cooperation of physicians, who admit, treat, 
and discharge patients. Evidence suggests that a large portion of total 
health care expenditures (an estimated 50 percent to 80 percent or 
more) are directly influenced--if not directly controlled--by 
physicians.\12\ In addition, physicians may influence hospitals' 
nonoperating expenditures by advocating particular types of capital 
investments.
    As hospitals have assumed more financial risk, they have 
increasingly pressured physicians to control their costs and use of 
hospital services through internal management strategies and 
contractual relationships that call for shared financial risk with 
doctors. How well hospitals and physicians work together to control 
costs and improve quality is unclear. Reluctant to surrender their 
autonomy, physicians have largely been able to resist hospitals' 
efforts to modify their practice styles. Therefore, many hospital 
administrators concentrated more on maximizing revenues during the 
1980s than on engaging physicians as partners in helping them curtail 
spending. This strategy seems to be changing in the 1990s as hospitals 
and physicians increasingly recognize their interrelated roles and 
responsibilities.
    The ability of hospitals and physicians to set up joint financial 
arrangements--in particular to contract with managed care 
organizations--has affected the way some hospitals deal with doctors. 
One recent trend is for hospitals to acquire physician practices and 
try to integrate physicians into hospital management to some degree. In 
1993, almost 14 percent of hospitals surveyed had a formal physician/
hospital organization (PHO), 7 percent had a management services 
organization (MSO), and 4 percent had a foundation that negotiated 
managed care contracts on behalf of the hospital and physicians as a 
unit (see Table 1-12).\13\ Such practice arrangements are less popular 
in the West Central region than in other parts of the country, and are 
more common in urban and teaching hospitals. These arrangements, 
however, are not unheard of in rural hospitals, where 14 percent of 
hospitals surveyed reported having some type of joint venture with 
physicians.

     Table 1-10.--Hospitals with Health Maintenance Organization and Preferred Provider Organization Contracts, by Hospital Category, Selected Years    
                                                                      [In Percent]                                                                      
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              HMO                                 PPO                           HOM and/or PPO          
              Hospital Category              -----------------------------------------------------------------------------------------------------------
                                                 1985        1990        1992        1985        1990        1992        1985        1990        1992   
--------------------------------------------------------------------------------------------------------------------------------------------------------
Community...................................        33.1        48.1        51.9        25.3        52.9        60.4        40.4        62.5        67.9
    Urban...................................        52.9        70.8        73.8        39.7        70.3        76.1        61.5        81.3        83.8
    Rural...................................        30.6        43.6        47.1        23.1        48.3        55.1        37.2        57.0        61.8
New England.................................        54.7        70.3        71.0        18.2        46.4        56.6        56.7        71.6        72.9
Middle Atlantic.............................        37.3        56.9        64.8         9.3        37.2        48.9        40.5        64.8        72.0
South Atlantic..............................        30.6        42.0        45.6        25.2        56.7        65.4        35.5        60.1        67.7
East North Central..........................        48.8        67.9        69.2        37.2        72.0        76.8        57.0        82.2        84.2
East South Central..........................        14.3        30.0        37.6        27.1        56.9        63.8        32.2        60.1        67.0
West North Central..........................        25.4        37.3        37.4        13.1        34.2        44.2        28.7        45.9        52.8
West South Central..........................        16.5        30.5        35.3        14.8        44.9        54.0        22.6        48.5        56.0
Mountain....................................        25.7        39.9        44.6        27.7        45.4        49.8        34.4        48.5        53.5
Pacific.....................................        50.2        66.9        71.0        52.2        74.7        76.8        62.7        81.9        83.2
Voluntary...................................        40.0        57.3        59.9        28.3        56.9        64.3        47.2        69.0        73.7
Proprietary.................................        34.1        46.2        57.8        33.5        62.9        70.7        44.4        67.5        73.7
Government..................................        17.3        28.0        30.4        15.1        39.0        46.7        23.7        45.4        51.5
      All hospitals.........................        30.6        43.6        47.1        23.1        48.3        55.1        37.2        57.0        61.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: HMO = health maintenance organization. PPO = preferred provider organization. Trends in responses may reflect, in part, hospitals increasing      
  familiarity with HMO and PPO contracting over time; this may have increased the likelihood of positive survey responses.                              
                                                                                                                                                        
Source: American Hospital Association Annual Survey of Hospitals.                                                                                       

Hospitals in the Future

    The health care reform debate now under way focuses on the need for 
and types of reforms necessary to stem runaway health spending and 
provide universal health insurance coverage. The uncertain outcome of 
this debate could have a dramatic effect on the hospital of the future. 
Already, hospitals have responded in a variety of ways to the pressures 
they face, diversifying the services they offer, pursuing different 
avenues to control costs, and adopting new strategies that govern their 
relationships with other providers and physicians. Existing pressures 
to reduce spending and adapt to changing medical practices will 
continue. Federal, state, and local governments will further their 
efforts to bring health care expenditures under control and extend 
services to vulnerable populations. Private payers will exert similar 
pressures. Medical practice will advance, adding new treatments and 
expanding the populations that could benefit from medical services.
    The anticipation of health care reform and its ultimate nature, 
though, will further affect hospitals and their role in health care 
delivery. Comprehensive reform that alters the structure of financing 
and delivery systems to control expenditure growth and expand coverage 
would bring the most dramatic changes. Incremental reforms that modify 
the existing relationships among payers and providers would likely 
continue the adaptations hospitals are making now. Regardless of the 
shape of reform, the critical features that will affect hospitals 
relate to the type, strength, and source of pressure to control 
spending.
    Health care expenditure control can be achieved through slowing the 
growth in costs per unit of service, reducing the number and intensity 
of services provided, managing the mix of services, or all three. 
Hospitals will be affected differently, depending on which strategy is 
followed and the strength of the pressure to respond. Likewise, the 
source of the pressure to control expenditures will affect hospital 
responses. The impact of the efforts of individual payers--either in 
the government or private sector--would be quite different from a 
government mandate for expenditure control applied to all payers. 
Similarly, whether hospitals are singled out or all health care 
facilities are subject to controls will affect the response.

 Table 1-11.--Hospital Net Patient Care Revenues from Health Maintenance
     Organizations and Preferred Provider Organizations, by Hospital    
                             Category, 1993                             
                              [In Percent]                              
------------------------------------------------------------------------
                                Net patient care revenues from HMOs and 
    Hospital      Number of                PPOs (in percent)            
   category*      hospitals  -------------------------------------------
                                 0-10      11-25      26-50     Over 50 
------------------------------------------------------------------------
    Total......        1,495       64.1       24.5        7.8        0.9
                --------------------------------------------------------
Atlantic.......          400       65.5       25.5        6.0        2.0
East Central...          391       60.6       30.2        7.2           
West Central...          404       75.4       14.9        5.9        1.0
Far West.......          300       51.7       29.0       13.3        2.3
Urban..........          736       43.6       37.8       14.1        1.5
Rural..........          759       84.1       11.7        1.6        0.3
Teaching.......          233       59.7       33.0        3.9        0.9
Non-teaching...        1,262       65.0       22.7        8.5        0.9
------------------------------------------------------------------------
Note: HMO=health maintenance organization. PPO=preferred provider       
  organization. Rows may not add to 100 due to survey item non-response.
                                                                        
*Atlantic includes the New England, Middle Atlantic, and South Atlantic 
  Census divisions. East Central includes the East North Central and    
  East South Central Census divisions. West Central includes the West   
  North Central and West South Central Census divisions. Far West       
  includes the Mountain and Pacific Census divisions. Teaching hospitals
  are those with more than 5 percent professional time spent teaching.  
                                                                        
Source: Survey of Hospital-Physician Relations conducted by MACRO       
  international Inc., under contract to ProPAC.                         


    Rate-setting approaches to expenditure control involve imposing a 
payment per unit of service. These rates could be used by all or some 
payers and could be applied to a range of services and providers. Rate 
setting would force institutions to gain control over the cost of 
producing individual services by improving production efficiency. If 
rates were imposed only for some services or provider types, or only by 
some payers, shifts among types of services and across settings would 
continue as a way to avoid cost-containment pressure. Hospitals may 
also respond to these efforts by focusing on providing those services 
that are relatively better paid. This could put some services or 
populations at risk.
    A system of global budgets or insurance premium caps could 
accelerate the movement of hospitals to gain control over the continuum 
of care. Global budgets are expenditure limits or targets that could be 
applied to types of providers or services. Premium caps are similar 
limits that would be enforced by insurers. Hospitals may respond by 
forming health care networks to control expenditures for an episode of 
care. Alternatively, hospitals may concentrate on providing a narrow 
range of services efficiently and marketing these to established 
networks or payers. Hospitals that fail to coordinate their services 
with those offered by other providers would be the most vulnerable 
under this scenario. Unless quality of care is carefully considered, 
however, needed services could be eliminated in order to stay within 
the limits.
    Under any type of reform, less stringent cost-control efforts would 
not be as disruptive to health care delivery patterns. Besides having a 
greater impact on spending growth, intense expenditure control efforts 
would likely alter institutional arrangements and service delivery 
patterns.
    The sources of pressure to control expenditures may also affect the 
outcome of reform initiatives, as demonstrated by the responses to the 
implementation of PPS. Cost shifting from less generous payers 
(including most public ones) to more generous (largely private) payers 
has had two major results. First, the gains from private-pay patients 
have enabled the hospital sector to alleviate the pressure to control 
costs that public programs have attempted to create. Second, the 
ability to cost shift has, for many patients, maintained access to 
services they overwise might not have received.

                    Table 1-12. Hospital-Physician Organizations, by Hospital Category, 1993                    
                                                  [In Percent]                                                  
----------------------------------------------------------------------------------------------------------------
                                                                    Organization (in percent)                   
                                     Number of  ----------------------------------------------------------------
        Hospital category*           hospitals    Any joint                                                     
                                                   venture        PHO          MSO       Foundation      IHO    
----------------------------------------------------------------------------------------------------------------
Atlantic..........................          400         33.3         18.3          6.5          5.3          2.3
East Central......................          391         34.8         13.8          7.2          4.6          2.8
West Central......................          404         24.3         10.3          5.1          2.4          2.0
Far West..........................          300         32.7         11.3          9.3          4.3          4.3
Urban.............................          736         47.0         21.5         10.7          6.4          4.6
Rural.............................          759         14.0          5.9          3.2          2.0          0.9
Teaching..........................          233         41.2         18.5          6.9          7.7          6.0
Non-teaching......................        1,262         28.2         12.6          6.8          3.5          2.1
                                   -----------------------------------------------------------------------------
    Total.........................        1,495         30.2         13.6          6.9          4.1          2.7
----------------------------------------------------------------------------------------------------------------
Note: PHO=physician/hospital organization. MSO=management services organization. IHO=integrated health          
  organization.                                                                                                 
*Atlantic includes the New England, Middle Atlantic, and South Atlantic Census divisions. East Central includes 
  the East North Central and East South Central Census divisions. West Central includes the West North Central  
  and West South Central Census divisions. Far West includes the Mountain and Pacific Census divisions. Teaching
  hospitals are those with more than 5 percent professional time spent teaching.                                
Source: Survey of Hospital-Physician Relations conducted by MACRO International Inc., under contract to ProPAC. 


    Cost-containment pressure in any form that is applied by some 
payers but not by others would exacerbate the current disparity in 
relative payment levels across payers. This would put certain hospitals 
at a financial disadvantage because of their inability to compete for 
patients with more generous private insurance coverage. Increasingly, a 
hospital's financial condition would be determined by its payer mix 
rather than its efficiency. If the gap in relative payment levels is 
widened because of different cost-containment measures across payers, 
many hospitals that provide important services to specific segments of 
the population may curtail their operations.
    Within this climate of health reform to control expenditures and 
expand coverage, medical technology continues to evolve. New threats to 
the public's health (such as acquired immune deficiency syndrome) and 
medical advances in areas like biotechnology and diagnostic imaging 
will lead to the ongoing development of expensive new drugs, equipment, 
and procedures. Better understanding of disease processes and medical 
techniques for combating illness will continue. This will add to the 
momentum to modify the mix of services and site of delivery. Such 
changes may enhance the hospital's role, if it has control over the 
continuum of service delivery. To the extent that these changes allow 
more providers to compete with the hospital or substitute for some of 
its functions, its role could diminish.
    It is unclear how health care reform will affect the development 
and diffusion of new technology and the application of medical 
advances. Cost control may concentrate on innovations that reduce the 
cost of care. Reform that incorporates rate setting would be more 
likely to promote innovations that lower the cost of providing 
services. Global budget or premium cap reform approaches would focus 
attention on technologies or procedures that diminish costs over an 
episode of care. Under any reform scenario, public and private payers 
will continue their efforts to curb spending associated with new or 
diffusing technologies and the expanded ability to provide services.
    The hospital's traditional role as the center of the health care 
delivery system has changed dramatically and is continuing to evolve. 
Hospital spending still makes up the largest part of total health 
expenditures, despite the increasing availability of services outside 
the inpatient setting and the proliferation of ambulatory care 
providers. As a result, hospitals will bear much of the pressure to 
alter the way health care is delivered and paid for in the future. How 
much of this pressure falls on different hospitals will vary, depending 
on each hospital's current situation. how each hospital chooses to 
respond, and how well the hospital can implement its response, will 
differ as well. What the future holds for each hospital therefore will 
be determined by a mix of internal and external forces. Facilities thus 
will be further differentiated in the services they provide and their 
relationships with other components of the health care financing and 
delivery system.

Notes to Chapter 1

    1. Louise B. Russell and Jane E. Sisk, ``Medical Technology in the 
United States: The Last Decade,'' International Journal of Technology 
Assessment in Health Care 4(2):269-88, 1988.
    2. Ibid.
    3. Prospective Payment Assessment Commission, Medicare and the 
American Health Care System: Report to the Congress, June 1993, 93.
    4. ``State Health Reform: Five Trends That Will Transform 
Hospitals,'' Hospitals 66(19):26-38, October 5, 1992.
    5. Sandy Lutz, ``Hospitals Continue Move Into Home Care,'' Modern 
Healthcare 23(4):28-32, January 25, 1993.
    6. Frank Cerne, ``Homeward Bound: Hospitals See Solid Future for 
Home Health Care,`` Hospitals 67(4):52-54, February 20, 1993.
    7. Howard J. Andersen, ``Survey: Equipment Budgets Up; Use in 
Outpatient Areas Growing,'' Hospitals 66(18):38-44, September 20, 1992.
    8. Jay Greene, ``Diversification, Take Two,'' Modern Healthcare 
23(28):28-32, July 12, 1993.
    9. Ibid.
    10. Paul Starr, The Social Transformation of American Medicine 
(BasicBooks: 1982); Larry Manheim, Stephen M. Shortell, and Stephanie 
McFall, ``The Effect of Investor-Owned Chain Acquisitions on Hospital 
Expenses and Staffing,'' Health Services Research 24(4):461-84, October 
1989.
    Prospective Payment Assessment Commission, Medicare and the 
American Health Care System, June 1993, 139.
    12. Jeffrey A. Alexander and Michael A. Morrisey, ``Hospital-
Physician Integration and Hospital Costs,'' Inquiry 25(3):388-401, Fall 
1988; Jeffrey A. Alexander, Michael A. Morrisey, and Stephen M. 
Shortell, ``Physician Participation in the Administration and 
Governance of System and Freestanding Hospitals: A Comparison by Type 
of Ownership'' in For-Profit Enterprise in Health Care, ed. Bradford H. 
Gray (Washington, DC: National Academy Press, 1986); Stephen Shortell, 
Michael A. Morrisey, and Douglas A . Conrad, ``Economic Regulation and 
Hospital Behavior: The Effects on Medical Staff Organization and 
Hospital-Physician Relationships,'' Health Services Research 20(5):597-
628, December 1985.
    13. The survey conducted by MACRO International Inc., defined a PHO 
as a joint venture between a hospital and physicians to own and operate 
ambulatory or ancillary care projects or act as an agent for managed 
care contracts. A subcategory of a PHO, and MSO is a separate entity; 
is owned by physicians, the hospital or both; and contracts with solo 
and group practice physicians to provide administrative services, 
purchase physician practice assets, and act as the agent of the 
hospital and physicians in managed care contracts. A foundation is a 
corporation, usually a hospital affiliate of subsidiary, which acquires 
all assets of medical group practices. It negotiates and executes 
managed care contracts on behalf of both the hospital and physicians.

Chapter 2

RECOMMENDATIONS

    When the Prospective Payment Assessment Commission (ProPAC) was 
created by the Congress in 1983, its primary responsibility was to 
examine issues related to the Medicare prospective payment system (PPS) 
and make recommendations for updating and improving it. The Congress 
gradually has expanded ProPAC's mandate to include payment policies for 
all facility services furnished to Medicare beneficiaries. Accordingly, 
the Commission has conducted analyses of Medicare payments for skilled 
nursing facility (SNF), home health agency, and endstage renal disease 
(ESRD) dialysis facility services.
    In addition, at the request of the Congress, the Commission has 
examined the adequacy of Medicaid hospital payment rates and the use of 
Medicare payment methods for other payers. It has also analyzed issues 
related to the design and implementation of a global budgeting system 
to restrain health care spending. ProPAC continues to devote 
substantial effort, however, to updating and improving payment for 
hospitals under PPS and for those hospitals and distinct-part units 
excluded from PPS.
    Although this report is submitted to the Congress, the Secretary of 
Health and Human Services is required to consider ProPAC's 
recommendations and respond to them in the annual notice of PPS 
rulemaking published in the Federal Register. The Commission is always 
pleased to work with the Secretary to provide additional analysis and 
information on its recommendations.
    ProPAC's recommendations reflect the collective judgment of the 17 
Commissioners. By the nature of their subject, some recommendations are 
reviewed each year, such as the annual update factors. Others address 
new issues or modify previous recommendations. All incorporate recent 
research findings. For fiscal year 1995, the Commission's 
recommendations address broader issues related to Medicare and health 
care reform, in addition to the recommendations that relate more 
specifically to Medicare facility payments.

Recommendations for Fiscal Year 1995

    The Commission's recommendations center on three areas of concern:
     Medicare and health care reform,
     Payment updates, and
     Other payment policies.
    ProPAC's recommendations are intended to improve the equity and 
effectiveness of Medicare's payments for health care services. In this 
report, the Commission has considered certain aspects of health care 
reform that may affect the Medicare program. The recommendations that 
address payment updates reflect the Commission's view on aggregate 
spending levels. Finally, other recommendations concern the 
distribution of Medicare payments or the equity of Medicare's payment 
formulas.

Medicare and Health Care Reform

    The health care industry is facing major challenges this year as 
legislators and policy makers struggle to control health expenditures 
and expand coverage to people without insurance. Several legislative 
proposals have been introduced to reform the health care system. Some 
of these focus on incremental changes that would affect the financing 
and delivery of health care. Others call for fundamental restructuring 
of the existing systems. Most include provisions affecting the Medicare 
program.
    The Health Security Act introduced by the President would 
fundamentally change the financing and delivery of health care. Under 
this proposal, most people under 65 would obtain health insurance 
coverage through regional or corporate alliances. These alliances would 
negotiate with health plans to provide medical services. The health 
plans would compete for patients on the basis of quality and costs. 
This managed competition among plans is expected to control the growth 
in health expenditures. As a contingency, however, premium rate 
increases would be limited if expenditure growth were not contained.
    Medicare would be retained as a separate program under the 
President's proposal, although it would be subject to a number of cost-
saving measures. Reductions in hospital payment updates are proposed. 
The disproportionate share (DSH) adjustment would be substantially 
reduced; however, universal coverage may ameliorate many of the 
problems this adjustment is intended to address. Medicare's indirect 
medical education (IME) adjustment would be replaced by an Academic 
Health Center Account to which Medicare and the alliances would 
contribute. Medicare's direct medical education payments for the cost 
of training medical residents would also be replaced by a special 
account funded by all payers. Although the Act incorporates mechanisms 
to ensure the quality of health care provided to those enrolled through 
the alliances, the oversight provided by Medicare's Peer Review 
Organizations (PROs) would be discontinued.
    The Commission believes health care reform would have a major 
impact on both providers and beneficiaries. The first eight 
recommendations for fiscal year 1995 reflect the Commission's concerns 
regarding the effect of health care reform on the Medicare program, 
providers, and beneficiaries.
Recommendation 1: Medicare, Medicaid, and Private Payer Payment and 
Coverage of the Uninsured
    Health care reform will have a major effect on the Medicare and 
Medicaid programs and the care beneficiaries receive. The Commission 
believes substantial changes in program policies should be considered 
only with a health care reform plan that covers the uninsured and pays 
comparable rates for similar services. As Medicare and Medicaid have 
constrained payments, providers have obtained additional revenue from 
private payers rather than by reducing their costs. This increasing 
reliance on cost shifting concerns ProPAC because it is likely to have 
a negative effect on access to care for beneficiaries of government 
programs. Further, possible adverse effects on beneficiaries of slower 
growth in payments for hospital and other currently covered services 
must be carefully balanced against desirable effects of increased 
Medicare spending for new benefits proposed in the Health Security Act.
    The Health Security Act proposed by the President contains a number 
of complex features that interact and could have a major effect on the 
services Medicare and Medicaid beneficiaries receive. The Act would 
slow the growth in Medicare and Medicaid spending for currently covered 
services, create a new prescription drug benefit, and add coverage for 
long-term care services for the disabled. It would also use premium 
limits to curb the rise in private payer spending and extend coverage 
to the uninsured.
    Medicare and, more recently, Medicaid have been important sources 
of additional revenues for hospitals that treat a disproportionate 
share of the poor. Substantial reductions in payment levels, such as 
those proposed in the Health Security Act, could adversely affect 
access to care for beneficiaries in both programs. Such reductions 
should be considered only insofar as health reform provides coverage 
for the uninsured.
    Medicare and Medicaid beneficiary access to quality care also 
depends on whether providers receive appropriate payments from both 
government programs and private payers. Proposals that would further 
restrain spending by public payers but that fail to narrow the gap in 
payment to cost ratios between public and private payers or to provide 
coverage for the uninsured could make it more difficult for the 
beneficiaries of public programs and the uninsured to obtain access to 
necessary care.
    As both Medicare and Medicaid have constrained payments in recent 
years, hospitals have turned to private payers for additional revenue 
to offset losses, rather than reducing the increase in their expenses. 
Cost shifting has allowed the Medicare program to curb spending, while 
permitting beneficiaries to receive services at costs that exceeded 
payments. It has also enabled many hospitals to maintain their 
financial position. The ability of hospitals to cost shift, however, 
has reduced their financial incentive to control expenses and increased 
the costs for subscribers of private insurance plans. The reliance on 
cost shifting as a revenue source has also disadvantaged hospitals that 
provide services to a large share of Medicare and Medicaid 
beneficiaries and charity care patients.Further, cost shifting has 
disadvantaged hospitals where private payers successfully control 
hospital revenues. Consequently, hospital financial condition and the 
availability of services increasingly are determined by payer mix 
rather than by efficiency.
    A health care reform plan like the Health Security Act, which would 
constrain the growth in private payer as well as government spending, 
could also affect the care received by Medicare beneficiaries. Since 
hospitals would not be able to obtain additional revenue from private 
payers, they would have to limit expenses to a level consistent with 
revenues. The slower rise in payments for current Medicare services, 
however, would be accompanied by increased spending for a new 
prescription drug benefit and coverage of certain long-term care 
services. As the reform debate continues, balancing the effects of a 
slowdown in spending for hospital and other covered services with an 
increase in expenditures for new benefits is necessary to avoid 
untoward effects on Medicare beneficiaries.
Recommendation 2: Payments to Hospitals Serving a Large Share of Low-
Income Patients
    The Health Security Act would substantially reduce Medicare 
disproportionate share payments, as universal coverage ameliorates many 
of the problems these payments are intended to address. The Commission 
believes the timing of any such reduction in Medicare payments should 
be coordinated with the extension of universal coverage, so that 
hospitals that provide care to low-income populations are not 
disadvantaged. As a result, payments would be targeted more effectively 
to the hospitals that provide care to these populations. Even so, the 
payments received by different hospitals and the balance between 
payment levels for Medicare and other patients may be affected 
significantly. These changes should be structured to ensure that both 
the level and distribution of payments are appropriate. ProPAC intends 
to work with the Congress and the Secretary of Health and Human 
Services to monitor and study this issue.
    The Medicare DSH adjustment was implemented in 1986 to provide 
additional payments to PPS hospitals that treat a large share of 
indigent patients. Since then, the amount of DSH payments has grown 
rapidly, as Congress has increased the number of eligible hospitals and 
raised the adjustment for many. From fiscal year 1989 to fiscal year 
1993, Medicare operating DSH payments grew from $1.1 billion (2.4 
percent of all PPS payments) to $2.7 billion (4.1 percent of PPS 
payments). In addition, beginning in fiscal year 1992, hospitals 
received a DSH adjustment to their prospective capital payment amount.
    Analyses by the Congressional Budget Office, ProPAC, and others 
have shown that Medicare DSH payments far exceed any additional costs 
that might be associated with treating Medicare patients in 
disproportionate share hospitals. As a result, in the eighth year of 
PPS, the PPS margin for all disproportionate share hospitals was 1.6 
percent, compared with -7.2 percent for other hospitals.
    The bulk of Medicare DSH payments goes to hospitals that provide a 
large amount of uncompensated care and other services to the poor. This 
is often cited as a justification for the magnitude of the payments 
made under the Medicare DSH provision and the rules that govern how 
these payments are distributed. Disproportionate share hospitals--
particularly those in inner cities--tend to have lower total margins 
than other hospitals. The Commission is concerned about whether, 
without Medicare DSH payments, Medicare beneficiaries and other 
populations would continue to have access to the services these 
hospitals provide.
    However, ProPAC also is concerned about the ability to target 
Medicare DSH payments effectively to the hospital that need them most. 
Of all PPS hospitals, the 10 percent with the greatest uncompensated 
care losses relative to their total costs provided 28 percent of all 
uncompensated care (net of government subsidies); these hospitals 
received only 17 percent of all Medicare DSH payments. At the other end 
of the spectrum, the 10 percent of PPS hospitals with the smallest 
uncompensated care burdens provided almost no net uncompensated are, 
yet received almost 9 percent of all Medicare DSH payments.
    The Health Security Act eventually would eliminate almost all 
Medicare DSH payments, lowering Medicare hospital payments by an 
estimated $430 million in fiscal year 1996. Medicare DSH payments would 
be $4.8 billion lower than currently projected by fiscal year 2000, 
amounting to a 3.5 percent reduction in baseline Medicare payments. On 
the other hand, people who are now uninsured and those who are 
underinsured would begin to receive coverage. Consequently, hospitals 
now uncompensated for providing care to these patients would be paid 
for these services.
    Hospitals that serve low-income populations would still face some 
risk of financial losses, particularly in treating some noncitizens and 
other individuals who may be unable to meet their financial obligations 
to providers. To recognize the additional costs of treating low-income 
patients and to help hospitals furnish inpatient services to poor 
populations not covered by the standard benefit package, $800 million 
would be available in each of the first five years following passage of 
the Act. These funds would be distributed based on the share of total 
inpatient days accounted for by low-income patients at each eligible 
hospital.
    As with many provisions of the Health Security Act, the impact of 
the reduction in Medicare DSH payments and the extent to which it is 
offset by universal coverage is difficult to estimate. In addition to 
the level of total hospital payments, the distribution of payments also 
may change significantly. The Commission is concerned by the magnitude 
of these changes and their potential effects on the availability of 
necessary services to Medicare beneficiaries and all Americans. In 
addition, if the timing of the reduction of DSH payments is not 
coordinated with the extension of universal coverage, hospitals that 
provide care to low-income populations may be adversely affected.
    Preliminary analysis indicates that the financial status of 
hospitals in the aggregate will depend largely on their ability to hold 
cost increases below historical rates. ProPAC will continue to examine 
the implications of health care reform for the distribution of 
payments. In addition, the technical appropriateness of the proposed 
changes in the rules that determine Medicate DSH payments will be 
investigated as part of the Commission's ongoing mandate to analyze, 
develop, and recommend improvements in Medicare payment for facility-
based services.
Recommendation 3: Payments for Additional Patient Care Costs Incurred 
by Teaching Hospitals
    ProPAC supports the explicit recognition by all payers of the 
higher patient care costs teaching institutions incur. The Commission 
believes such payments should be separated from patient are rates and 
paid through a fund similar to the Academic Health Center Account 
proposed in the Health Security Act. ProPAC is concerned, however, that 
a sharp reduction in the payments teaching hospitals receive from 
government payers may result in financial hardships for some of the 
nation's major hospitals. Constraints on payments from private payers 
may exacerbate this problem. Therefore, ProPAC recommends that the 
total level of funding and the formula for distributing payments 
through such a mechanism should be based on careful analysis of the 
costs teaching institutions incur in carrying out their functions and 
how these payments will affect graduate medical education and access to 
the care these facilities provide.
    The Health Security Act proposes an Academic Health Center Account 
to support the patient are costs incurred routinely by teaching 
facilities but not by other institutions. Among these are the costs of 
reduced faculty productivity, uncompensated costs of clinical research, 
and higher costs associated with specialized treatment of exceptional 
cases. Contributions from Medicare and from the regional and corporate 
alliances would fund the account. The available funds would be 
distributed by the Secretary of Health and Human Services on the basis 
of a formula related to the proposed Medicare IME adjustment percentage 
for fiscal year 1996. Thus, payments for the additional patient care 
costs insured by teaching hospitals would be separated from payments 
for patient care services.
    Medicare's contributions to the Academic Health Center Account 
would be less than the IME payments made under the current formula, 
with estimated budget savings of $17.8 billion over five years (1996 to 
2000). This proposed reduction in Medicare payments reflects the 
Administration's estimate of the amount by which current IME payments 
exceed the additional patient care costs attributable to teaching 
activities.
    Set at $2.1 billion in fiscal year 1996 and $2.0 billion in fiscal 
years 1997 and 1998, Medicare's contributions thereafter would rise at 
the same rate as the consumer price index (CPI) for all urban 
consumers. The total size of the Academic Health Center Account, 
including contributions from the regional and corporate alliances as 
well as Medicare, would be $3.1 billion in fiscal year 1996, increasing 
to $3.2 billion, $3.2 billion, $3.7 billion, and $3.8 billion in the 
succeeding years.
    Many private payers now pay higher rates to teaching hospitals for 
patient care services. However, in an environment of heightened price 
competition, teaching hospitals may not be able to obtain payments that 
reflect their higher patient care costs. Thus, they will likely be 
unable to fund these with revenue from patient care services.
    The Commission supports the explicit recognition by all payers of 
the higher costs of treating patients in teaching institutions and the 
separation of payments for these costs from the basic price of care. 
However, ProPAC has three concerns about the Academic Health Center 
Account proposal in the Health Security Act. First, the amount to be 
distributed through the account should adequately reflect the 
additional costs teaching institutions face. Relatively little is known 
about the overall costs associated with the activities that the 
Academic Health Center Account is intended to support. Both ProPAC and 
the Health Care Financing Administration (HCFA) have analyzed the 
relationship between the intensity of hospital-based teaching 
activities and the cost of treating Medicare inpatients. However, the 
relationship between teaching intensity and the cost of treating other 
types of patients--that is, Medicare outpatients and non-Medicare 
inpatients and outpatients--in hospitals and non-hospital settings is 
not known. Moreover, existing information may not be applicable in the 
environment of tight general funding constraints under health care 
reform. More analysis is needed to ensure that the account has 
sufficient funds to accomplish its purpose.
    Second, the distribution of monies from the Academic Health Center 
Account should be equitable and encourage the efficient operation of 
teaching institutions. The proposed application of the Medicare IME 
adjustment to total patient care revenue may not be the most 
appropriate way to accomplish this objective. To allow for the proper 
distribution of available funds, further analysis should focus on what 
factors determine differences across institutions in terms of the costs 
these funds are intended to defray.
    Finally, the Commission is concerned about how the funding of the 
academic health center mechanism might affect access to services these 
facilities provide for Medicare beneficiaries and others. The funds 
available through the Academic Health Center Account must adequately 
reflect the additional costs of the services they are intended to 
support. Substantial reductions in the level of Medicare IME payments 
should not be made until other components of health reform are fully 
implemented. (See Recommendation 19). The impact of any changes in the 
level or distribution of payments among hospitals should be monitored 
carefully.
    In addition, distributing Medicare IME payments through the 
academic health center mechanism rather than as an adjustment to the 
Medicare payment rate would mean that the payment received for each 
Medicare patient would be reduced relative to its current level (which 
includes the 7.7 percent IME payment adjustment). Medicare payments are 
a smaller proportion of costs than private payer payments. Although 
ProPAC's preliminary analysis indicates that the current gap between 
Medicare and non-Medicare payments relative to costs would narrow 
rather than widen under the proposed approach, this issue should be 
examined closely as health care reform is implemented.
Recommendation 4: Graduate Medical Education Funding and Payment
    ProPAC supports efforts to establish a funding mechanism for 
graduate medical education training programs that encompasses all 
payers, including Medicare. The Commission believes this mechanism 
should be separate from the payment received for patient care services. 
The level of funding and the distribution of payments should be 
determined according to the following principles:
     Funding for graduate medical education should be 
consistent with national work force goals, with respect to both the 
number of residents trained and their specialty distribution.
     Funding should support training for physicians and certain 
non-physician medical personnel who contribute to attaining these 
goals.
     Payment should be made to the training program, whether it 
is based in a hospital inpatient, hospital outpatient, or other 
ambulatory setting. The optimal method for allocating and distributing 
such payments needs to be determined.
     Payment for graduate medical education should be based on 
a national per resident amount, adjusted to recognize regional 
differences in residents' salaries and other factors that, upon further 
study, are found to be appropriate.
    In addition, funds should be available to recognize the additional 
personnel costs of hospitals that operate programs that lose specialty 
training positions as a result of the process described above.
    The Medicare program historically has paid hospitals for the costs 
associated with operating a residency training program. Costs for 
residents' salaries, faculty supervision, classroom space, program 
administration, and other related overhead were, until recently, 
recognized as a separate expense of which Medicare paid its share. 
Medicare is essentially the only payer that explicitly recognizes these 
expenses. Private insurers pay for these costs implicitly through the 
higher payments they make to teaching hospitals.
    The Consolidated Omnibus Budget Reconciliation Act of 1985 changed 
Medicare's payment for these expenses to a hospital-specific per 
resident amount. This amount is equal to the hospital's audited per 
resident costs for the cost reporting period beginning during fiscal 
year 1984, updated annually by the increase in the CPI for all urban 
consumers.
    Under the Health Security Act, there would be a fundamental change 
in financing for graduate medical education (GME). Both Medicare and 
the health care alliances (the entities responsible for coordinating 
the purchase of health insurance for the non-Medicare population) would 
contribute directly to a Health Professions Workforce Account. Initial 
funding for this account would be set at $3.2 billion in fiscal year 
1996, rising to $5.8 billion in 1999 and 2000 and increasing at the 
same rate as the gross domestic product thereafter.
    The Act would establish, within the Department of Health and Human 
Services, a new National Council on Graduate Medical Education. This 
council would determine the number and specialty distribution of 
residency positions to be funded. At least 55 percent of individuals 
completing eligible programs nationwide would be required to be in 
primary care, beginning with the class entering training in the 1998-
1999 academic year. The primary care specialties to which the act 
refers are family medicine, general internal medicine, general 
pediatrics, and obstetrics and gynecology.
    Funds would be distributed to the individual residency programs, 
rather than to the hospital. Each program would receive a per resident 
payment amount based on the national average per resident cost in the 
1992-1993 academic year, trended forward by the CPI and adjusted to 
reflect regional differences in residents' wages and wage-related 
costs.
    The Act would also establish a program with respect to graduate 
nurse training that parallels the one for physician training, with 
funding set at $200 million annually. The Secretary of Health and Human 
Services would be further required to establish or expand programs to 
train physicians, nurses, physician assistants, and other health 
professionals to improve the efficiency and availability of health care 
across geographic locations and settings.
    ProPAC agrees that changes are needed in the way that graduate 
medical education and other health care training activities are 
structured and financed. While others have devoted substantial 
attention to issues related to the supply and distribution of health 
care personnel, the Commission's focus is on payment policies, 
particularly as they affect facility-based care provided to the 
Medicare population and other groups. Consistent with this focus, 
ProPAC has identified several principles that should be used in 
determining the level of funding and the distribution of payments to 
support the training of health care professionals. These principles 
should be used to guide policies relating to the funding of graduate 
medical education whether comprehensive health reform is enacted or 
not.
    All-Payer Funding Mechanism.--The Commission believes it is 
appropriate to include all payers in a mechanism for funding graduate 
medical education that sets a nationwide level for such funding. 
Moreover, this mechanism should be separate from the payment received 
for patient care services.
    Currently, payers other than Medicare contribute only implicitly to 
the support of graduate medical education; Medicare's GME payment is 
based on each hospital's own historical costs. Consequently, there are 
unclear and inconsistent incentives related to the total number of 
residents and their distribution across geographic areas, programs, and 
institutions, as well as to costs per resident.
    An all-payer funding mechanism for graduate medical education would 
base the level and distribution of payments on a consistent set of 
criteria. This would provide appropriate incentives for the allocation 
of resources. It would also ensure that the costs of training 
physicians would be borne by both the Medicare and the non-Medicare 
populations. Further, a funding mechanism that recognizes the costs of 
teaching activities regardless of setting would improve the 
effectiveness of medical education as well as the equity of payments.
    Consistency with National Work Force Goals.--Both the current 
Council on Graduate Medical Education (COGME) and the Physician Payment 
Review Commission (PPRC) have extensively examined physician supply and 
specialty distribution issues. Each of these groups has recommended 
limiting the number of residents entering training to 110 percent of 
the number of graduates from U.S. medical schools. ProPAC supports 
limiting the number of resident positions.
    COGME and PPRC differ, however, on how they would approach the 
issue of specialty distribution. COGME advocates increasing to 50 
percent the proportion of primary care residents, which it defines as 
family practice, general internal medicine, and general pediatrics. 
PPRC does not recommend a specific percentage for primary care, but 
endorses the designation of a national body to determine the most 
appropriate specialty distribution of residents. ProPAC supports 
proposals that would lead to a more appropriate specialty mix of 
physicians, including those who serve the special needs of the Medicare 
population. These issues, however, need to be reexamined periodically, 
and an independent group should be created to monitor and set future 
work force goals. The Commission believes graduate medical education 
funding should be tied to these work force decisions.
    Training for Other Categories of Health Care Professionals.--
National work force goals should include the appropriate use of both 
physicians and other categories of health care professionals. The 
determination of the appropriate roles for specific categories of 
medical personnel is beyond ProPAC's mandate, however. In any event, 
the availability and distribution of funding should be consistent with 
national work force goals.
    Payments to Training Programs.--Currently, Medicare pays the 
hospital for the direct costs of approved graduate medical education 
programs and direct medical education costs for the training of nurses 
and allied health personnel. This provides a strong incentive in 
support of hospital-based training and discourages the use of 
alternative sites, such as physician offices and other ambulatory 
settings. The Commission believes GME payments should be made to the 
training program, rather than to the hospital. This would allow greater 
flexibility concerning where and how the residents are trained and 
would simplify fundings for residencies that are provided in several 
settings.
    Although ProPAC favors payment to the program rather than to the 
hospital, questions arise about the appropriate designation of the 
entity that would actually receive the payment. These questions need to 
be addressed before final determination is made concerning the method 
for allocating and distributing GME payments.
    Per Resident Payment Amount.--The Commission believes GME payments 
should be based on a national per resident payment amount, adjusted for 
appropriate differences in costs across institutions. The current 
Medicare per resident payment amounts, which are based on each 
hospital's own historical costs, vary substantially. Moreover, this 
variation in payments does not, as a rule, correspond to observed 
differences in current costs.
    ProPAC has examined some of the reasons for the variation in per 
resident costs, and has found geographic location to be a significant 
factor. In addition, some hospital and program characteristics are 
correlated with per resident costs. However, the allocation of overhead 
also appears to be related to reported costs. Moreover, the results 
indicate that the PPS hospital wage index, which measures the cost of 
all hospital labor inputs, may not be an appropriate adjuster for 
residents' wage differences.
    The Commission believes further work is necessary to identify 
appropriate adjustments to a national per resident payment amount. 
ProPAC will continue to examine this issue over the coming year.
    Funding for Institutions That Lose Training Positions.--Adequate 
funding should be available to assist hospitals that lose training 
positions as a result of the reduction in the total number of positions 
and the reallocation of these positions across hospitals and other 
settings. Some of these institutions rely on residents to provide basic 
patient care, and the loss of these positions should substantially 
increase their costs. Moreover, many of these facilities are located in 
areas where it is difficult to recruit other physicians, and many 
provide care to populations that otherwise might not have access to 
that care.
Recommendation 5: Quality of Care
    The Commission believes there must be an effective quality 
assurance program for Medicare enrollees, especially given health 
reform's emphasis on cost control and proposed cutbacks in Medicare 
spending. The Peer Review Organization program should be continued but 
thoroughly evaluated. It should be replaced only by a program that has 
been determined to be more effective.
    The Health Security Act eliminates the PRO program and does not 
replace it with another quality assurance program for Medicare 
enrollees. The Commission views this as undesirable, especially given 
that cutbacks in the rate of growth in Medicare spending and cost 
controls in the private insurance market may adversely affect the 
quality of care provided to Medicare patients. ProPAC has stressed the 
importance of a regulatory quality assurance program for Medicare in 
past recommendations; it believes that both pattern analysis and 
individual case review should be continued.
    The PRO program should not be eliminated until another way to 
assess quality proves to be superior. In addition, it should be 
evaluated to see what aspects are most effective in improving quality 
of care. The Health Care Financing Administration should consider 
implementing additional quality assurance programs and evaluating them 
simultaneously with the PRO program to determine the best way to ensure 
that Medicare beneficiaries receive quality care.
    Dramatic changes in the PRO program have reduced the emphasis on 
punitive case review and incorporated pattern analysis with educational 
feedback. These changes are consistent with recommendations made by the 
Institute of Medicine and others. There are no plans, however, to 
evaluate this new methodology.
    The proposed quality assurance program in the Health Security Act 
depends largely on collecting and disseminating information to 
purchasers, consumers, and providers on quality of care, access to 
care, and patient satisfaction. This method of quality assurance is 
largely untested. Further, under the Act it would not apply to most 
Medicare enrollees. The Commission recommends that any quality 
assurance methodology enacted as part of health reform should be 
evaluated. In addition, the methodology should be appropriate for a 
Medicare-enrolled population.
Recommendation 6: Improvements in Premium Risk Adjustment Methods
    The Commission recommends that the Secretary undertake the research 
necessary to substantially improve current risk adjustment methods. 
Risk adjustment will be needed under many health reform proposals to 
ensure that the premiums paid to competing health plans accurately 
reflect the risk composition of their enrollees. Until major 
improvements can be made, some other mechanism may be needed to limit 
the potential impact of enrolling individuals whose care proves to be 
exceptionally costly.
    Under many health reform proposals, including the President's plan, 
most individuals would obtain their health coverage from a health plan 
that participates in local purchasing alliance. Under some proposals, 
persons eligible for Medicaid, along with Medicare enrollees who choose 
to obtain coverage through the risk program, also would receive 
coverage and health services from a health plan that competes in the 
local alliance. Therefore, the ability to establish equitable premium 
payments among competing plans will be important for Medicare and 
Medicaid enrollees, as well as for all other citizens.
    The Commission believes payment equity among competing health plans 
will be critical to preserving the long-term viability of competition 
within each purchasing alliance. In addition, equitable payment is 
necessary to promote and maintain equal access to health services among 
different population groups, including Medicare and Medicaid 
beneficiaries.
    Accurate adjustment of plan premiums to reflect the risk 
composition of plan enrollment is essential to achieve payment equity 
among competing health plans. Fair risk adjustment methods are 
important for two reasons. First, risk adjustment would ensure that all 
plans are able to provide a comparable quantity and mix of health 
services to enrollees with comparable needs. In the absence of 
effective risk adjustment, plans that enroll high-risk persons would be 
forced to limit access to needed services or take a financial loss. 
Moreover, such plans would be unable to offer competitive premium rates 
over the long run. Conversely, plans that enroll low-risk persons would 
be able to provide a richer mix of services or make windfall financial 
gains. Consequently, these plans would be able to offer favorable 
premium rates, thereby securing a competitive advantage. Second, 
without effective risk adjustment, competing health plans would have a 
strong incentive to try to attract a favorable selection of enrollees 
while avoiding high-risk persons. This could lead to unequal access to 
care.
    Current methods of risk adjustment appear to have serious 
deficiencies. Risk adjustment involves using information about 
individuals' demographic characteristics, health status, or recent use 
of health services to predict future expenditures for health care. 
Research suggests that even the best combination of available risk 
indicators accounts for only a small proportion of the variability in 
subsequent expenditures among individuals. Therefore, substantial 
improvements in these methods and the data to support them are urgently 
needed.
    Until improved risk adjustment methods can be developed, the 
financial risks and undesirable incentives associated with unfavorable 
selection could be limited in other ways. This goal could be 
accomplished by compensating plans for a portion of any large losses 
they experience in providing care to enrollees with extraordinary 
medical expenses. This could be done using the traditional reinsurance 
mechanisms of the private insurance industry. In this case, health 
plans could choose to purchase insurance against the occurrence of an 
adverse claims experience that results in spending that is much higher 
than expected. Such insurance would relieve some of the undesirable 
consequences of ineffective risk adjustment.
    Alternatively, plans' financial risks could be reduced by a 
mandatory outlier policy analogous to the outlier payment policy under 
PPS. Under this policy, all plans' premium revenues would be taxed to 
provide an outlier payment fund. This fund would be used to make 
additional payments to any plan that experiences large losses in 
providing care to individual enrollees with extraordinary expenses. 
Such payments would cover a high proportion of the loss in excess of a 
fixed loss threshold. Consequently, this mechanism also would limit 
plans' losses to the extent that they were attributable to unfavorable 
selection. Therefore, it also would mitigate the unwanted effects of 
inadequate risk adjustment.
Recommendation 7: Controlling Medicare Spending Across All Sites of 
Care
    Medicare should continue to develop policies to monitor and control 
total expenditure growth across all sites of care. Payment methods 
should not unduly favor the choice of one site over another. They 
should also provide consistent incentives to constrain increases in 
volume and service intensity across physicians and other providers.
    The Commission endorses the development of prospective payment 
methods for all services across all sites. These methods should be 
designed to offer uniform incentives for efficiency as well as make 
payments across sites more comparable. This is particularly important 
because many services are available in alternative settings. 
Prospective methods alone, however, will not address one of the major 
reasons for expenditure growth: increased volume and intensity of 
services. Medicare's physician payment method incorporates such 
incentives through its volume performance standards by adjusting fees 
to reflect the relationship between actual expenditures and an 
expenditure target. Other providers are not subject to such direct 
volume control measures.
    Premium caps in the President's proposal provide incentives for 
health plans to constrain price and service volume across all settings 
for non-Medicare enrollees. The modifications to Medicare policies 
included in the Health Security Act do not incorporate similar 
incentives. While the Medicare provisions of the President's plan 
generally would reduce the growth in per service payments, spending 
increases likely would persist due to accelerating volume. The Medicare 
program, therefore, should continue to develop volume control methods 
for all sites of care.
    The contribution of expanding utilization to expenditure growth is 
well-illustrated by Medicare's home health program. Home health agency 
charges per visit increased only 4.7 percent annually between 1988 and 
1991, yet Medicare expenditures increased at an average annual rate of 
10.8 percent. As another example, the Medicare payment rate for 
dialysis services has not risen since 1985, yet expenditures increased 
at an annual rate of 12.4 percent through 1990.
    Several strategies for constraining volume have been identified. 
One approach is to combine, or bundle, separately billable services 
into a single payment unit. A volume performance standard like the one 
implemented for physician payment is another method. Finally, managed 
care arrangements have the potential to control utilization and 
encourage care in the most appropriate setting. From a policy 
standpoint, each of these methods provides certain advantages and 
disadvantages. Each also presents different implementation issues. The 
Medicare program should develop the most appropriate ways to achieve 
volume and price control across all services and sites of care. The 
approaches selected should create consistent incentives for all 
providers in all settings.
    Medicare benefit and payment policies are fragmented and at times 
inconsistent across sites and providers. Improvements in these policies 
are needed to ensure stable incentives to slow the growth in spending. 
These changes should reward efficient resource use while improving the 
continuum of care for Medicare beneficiaries.
Recommendation 8: Strengthening Medicare's Risk Contracting Program
    The Commission recommends that the Secretary improve Medicare's 
risk-based, managed care program to give more Medicare beneficiaries 
the option of enrolling in managed care plans. To increase plan 
participation, deficiencies related to the risk adjustment formula and 
local differences in payments need to be corrected.
    Medicare's risk-based, managed care program has been shown to 
improve access and, in some cases, to provide a broader array of 
services to Medicare beneficiaries. The program also may have the 
potential to be cost effective for Medicare, particularly if evaluated 
over several years.Furthermore, increased emphasis on risk-based, 
managed care is consistent with the President's health care reform 
proposal. Despite these advantages and the growth of managed care in 
the private sector, only 5 percent of all Medicare enrollees 
participate in Medicare's managed care program. One reason for the low 
participation may be the limited availability of managed care options. 
Health plans have been reluctant to participate in Medicare's risk-
based program because of concerns related to Medicare's payment method. 
The Commission recommends that HCFA step up its efforts to improve the 
methods for determining payments to risk-based, managed care plans, 
thereby making this option more available to Medicare beneficiaries.
    Participating plans are paid a capitated amount based on 95 percent 
of each county's average Medicare fee-for-service expenditures. 
However, Medicare managed care enrollees' utilization and related 
expenditure patterns differ from those with fee-for-service coverage. 
Managed care enrollees use fewer hospital days and more ambulatory 
care. The dissimilarities between the two populations in service use 
and related spending may not be captured in the current payment method.
    Further, payments based on county-level fee-for-service 
expenditures are even less representative of the average spending in 
areas where managed care enrollment is high. Medicare's policies, 
therefore, may penalize managed care plans in counties where they have 
already helped to slow the growth in fee-for-service spending.
    The risk-based, managed care program also has been criticized for 
failing to make adequate risk adjustments in plan payment amounts. 
Medicare uses a limited number of demographic variables to adjust 
payments for enrollee characteristics (age, sex, Medicaid status, and 
institutional status), but these measures are poor predictors of actual 
expenditures. Better measures are being investigated that incorporate 
utilization data for hospital and ambulatory care, prescription drug 
use, and other factors directly related to health care use and 
spending.
    HCFA is reviewing ways to improve the payment methods for 
Medicare's risk-based, managed care contracts. The Commission 
recommends that HCFA continue these efforts to strengthen this 
component of the Medicare program. Providing more equitable payments 
could encourage greater plan participation, thereby giving more 
beneficiaries the option of enrolling in managed care. Further, 
evaluations of spending under Medicare managed care should be based on 
longitudinal comparisons of beneficiary experience. Medicare's managed 
care option could become even more important under many of the health 
care reform proposals.

Payment Updates

    The Commission is mandated by law to report to the Congress each 
year on an appropriate update to the inpatient hospital payment rates 
under PPS. ProPAC considers several factors in developing its annual 
update recommendation: the hospital market basket index (which reflects 
the prices of resources used by hospitals in providing inpatient care), 
scientific and technological advances, hospital productivity, case-mix 
change, and the quality and long-term cost-effectiveness of health 
care. The Secretary of Health and Human Services is required to 
consider the Commission's recommendation in developing her update 
recommendation. The actual update historically has been legislated by 
the Congress in the budget reconciliation process.
    In the Omnibus Budget Reconciliation Act (OBRA) of 1993, the PPS 
operating update was established for each fiscal year through 1997. For 
fiscal year 1995, the update for hospitals in large urban areas (areas 
with populations over one million) and other urban areas is set equal 
to the change in the hospital market basket index minus 2.5 percentage 
points. The update for rural hospitals is the amount necessary to bring 
the rural standardized amount to the same level as the other urban 
standardized amount. Even though the fiscal year 1995 update has been 
set by law, the Commission has continued its traditional approach of 
examining the individual factors that together determine the 
appropriate update to the PPS payment rates. ProPAC believes this 
approach results in a payment increase that is sufficient, in the 
context of the current health care financing system, to maintain 
Medicare beneficiaries' access to quality care while encouraging 
hospital efficiency in providing that care.
    In addition to the update to the PPS payment rates, the Commission 
recommends an update for the Federal capital payment rate. ProPAC also 
recommends an update for rates derived from hospital base-year costs, 
which may be used in place of the PPS rates for sole community 
hospitals. Finally, the Commission considers the update for facilities 
currently excluded from PPS. ProPAC's recommendation for an update to 
the composite payment rate for dialysis services is also presented.
Recommendation 9: Update Factor for Operating Payments to PPS Hospitals
    For fiscal year 1995, the PPS standardized payment amounts should 
be updated to account for the following:
     The projected increase in the HCFA PPS market basket 
index, currently estimated at 3.7 percent;
     An adjustment of zero percentage points for the difference 
between the projected ProPAC and HCFA market baskets;
     A negative adjustment of 1.1 percentage points for 
substantial error in the fiscal year 1993 market basket forecast;
     A positive adjustment of 0.3 percentage points to reflect 
the cost-increasing effects of scientific and technological advances;
     A negative adjustment of 0.7 percentage points to 
encourage hospital productivity improvements; and
     A net adjustment of zero percentage points for case-mix 
change.
    In addition, a positive adjustment of 3.1 percentage points should 
be made for hospitals in rural areas to complete the phase-out of the 
differential in standardized amounts between rural and other urban 
hospitals. ProPAC's recommendation would result in an estimated average 
update factor of 2.7 percent for fiscal year 1995: an increase of 2.2 
percent for urban hospitals and of 5.3 percent for rural hospitals.
    This recommendation reflects the Commission's judgment about the 
appropriate increase in the level of PPS payment rates. Since it is 
based on current projections of the fiscal year 1995 increase in the 
market basket index, the effective value of ProPAC's update factor 
recommendation may be modified as more recent forecasts become 
available. The components of ProPAC's update factor recommendation are 
summarized in Table 2-1, and a discussion of each follows.
    It should be noted that the increase in average per case payments 
in each year exceeds the PPS update. This is because increases in the 
Medicare case-mix index (CMI) result in proportionally higher hospital 
payments. Future changes in case mix are difficult to predict; however, 
on the basis of currently available data, ProPAC estimates that the CMI 
will rise by 0.9 percent in fiscal year 1995. Based on the Commission's 
recommendation of a 2.7 percent average update, the average increase in 
per case payments would be about 3.6 percent.
    PPS Market Basket Forecast and Forecast Error Correction--The 
forecasted increase in the market basket index is the expected change 
in the prices of the resources used during a typical hospital stay. 
This forecast is the reference point used in updating the PPS payment 
rates. The current forecast is for a 3.7 percent increase in HCFA's PPS 
market basket index during fiscal year 1995.
    In its March 1990 Report and Recommendations to the Secretary, U.S. 
Department of Health and Human Services, ProPAC proposed modifications 
to the market basket used by HCFA. Although HCFA adopted most of these 
modifications, it did not incorporate the key provision that increased 
the weight of internal hospital wages in the computation of the market 
basket index. The Commission believes HCFA's market basket as currently 
constructed does not adequately recognize the unique characteristics of 
the hospital labor market.
    Since the PPS update for fiscal year 1995 is legislated relative to 
HCFA's market basket, that market basket is used as the basis for 
ProPAC's update framework. The Commission takes this into account by 
making an adjustment to allow for the estimated effect of the 
modifications it has proposed. However, the current fiscal year 1995 
forecast is that the increase in ProPAC's and HCFA's market baskets 
will be the same. The corresponding adjustment, therefore, is zero 
percentage points.
    A forecasted market basket increase of 4.1 percent was used to set 
payments in fiscal year 1993. The actual market basket increase, 
however, was only 3.0 percent. The update for fiscal year 1993 thus was 
set 1.1 percentage points higher than if the actual market basket 
increase had been known at the time.
    The Commission believes a correction for substantial error in 
market basket forecasts in an important part of its update framework. 
This correction protects both hospitals and the Federal government by 
adjusting the base payment rates so that the effects of past forecast 
errors (both positive and negative) are removed. Therefore, ProPAC's 
update recommendation also includes a -1.1 percentage point adjustment 
for fiscal year 1993 market basket forecast error.

    Table 2-1.--Recommended Update Factor for PPS Hospital Operating    
                       Payments, Fiscal Year 1994                       
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
           Components of the Update                                     
                                                                        
Components applied to all hospitals:                                    
    Fiscal year 1995 HCFA PPS market basket                             
     forecasta................................  ...........         3.7%
    Adjustment for difference between HCFA and                          
     ProPAC market basketsa...................  ...........          0.0
    Correction for fiscal year 1993 forecast                            
     error....................................  ...........         -1.1
    Allowance for scientific and technological                          
     advances.................................  ...........          0.3
    Adjustment for productivity...............  ...........         -0.7
Adjustments for case-mix change (fiscal year                            
 1994):                                                                 
    Total DRG case-mix index change...........         -0.9  ...........
    Real across-DRG case-mix change...........          0.7  ...........
    Within-DRG case-complexity change.........          0.2  ...........
        Net adjustment for case-mix change....  ...........          0.0
------------------------------------------------------------------------
Additional adjustments to the standardized                              
 amounts:                                                               
    Adjustment for large urban areasb.........          0.0  ...........
    Adjustment for other urban areasc.........          0.0  ...........
    Adjustment for rural areas................          3.1  ...........
========================================================================
              Total Update Factor                                       
                                                                        
Overall average...............................  ...........          2.7
    Large urban areas.........................          2.2  ...........
    Other urban areas.........................          2.2  ...........
    Rural areas...............................          5.3  ...........
------------------------------------------------------------------------
aMarket basket forecast provided by the Health Care Financing           
  Administration, Office of the Actuary, December 1993. The market      
  basket forecast is subject to change as more current data becomes     
  available.                                                            
bLarge urban areas = metropolitan areas with populations of one million 
  or more.                                                              
cOther urban areas = metropolitan areas with populations of less than   
  one million.                                                          

    Adjustment for Scientific and Technological Advances--The allowance 
for scientific and technological advances is a future-oriented policy 
target. It provides additional funds for hospitals to adopt quality-
enhancing health care advances, even when they increase costs. To 
develop an informed judgment about the appropriate level of this 
allowance, ProPAC annually examines emerging, cost-increasing 
technologies and scientific developments. (See Appendix A for more 
information on the technologies contributing to the increase.) The 
Commission believes 0.3 percent is an appropriate level for the 
operating scientific and technological advances allowance for fiscal 
year 1995.
    Adjustment for Productivity Improvement--The productivity 
adjustment is also a future-oriented policy target. The Commission 
believes it is reasonable to expect hospitals to achieve productivity 
improvements during fiscal year 1995 that are comparable to those 
achieved in other sectors of the economy. The recommended adjustment of 
-0.7 percentage points is based on ProPAC's determination that hospital 
productivity should increase by 1.4 percent and that the savings from 
such productivity improvement should be shared equally by hospitals and 
the Medicare program. The Commission thinks it is appropriate for the 
costs of scientific and technological advances to be financed in part 
by expected productivity gains, to provide an incentive for hospitals 
to strive for productivity improvement as they adopt new technologies. 
(See Appendix A for more information on trends in hospital 
productivity.)
    Adjustments for Case-Mix Change--The fiscal year 1995 PPS update 
should be adjusted to account for the net effect of case-mix change 
during fiscal year 1994. The net adjustment in this year's update is 
zero percentage points and reflects the following:
     A 0.9 percentage point reduction for the estimated change 
in the CMI,
     A positive allowance of 0.7 percentage points for real 
case-mix change across diagnosis-related groups (DRGs), and
     A positive allowance of 0.2 percentage points for within-
DRG case-complexity change.
    Adjusting for these factors allows payments to increase due to real 
changes in the resources required to treat an average Medicare patient. 
At the same time, it removes the effect of changes in medical record 
documentation and coding practices that are unrelated to patient 
resource requirements. (See Appendix A for a more detailed discussion 
of case-mix change.)
    Differential Adjustments to the Standardized Amounts--ProPAC 
supports the provisions of OBRA 1990 and OBRA 1993 that eliminate the 
difference between the standardized payment amounts for rural and other 
urban areas in fiscal year 1995. This year's update would complete a 
process begun in 1991 that has provided higher updates in each year to 
rural hospitals. The Commission estimates that the differential would 
be eliminated if the rural update were 3.1 percentage points higher 
than the urban update for fiscal year 1995.
    Since the beginning of PPS, the ratio of Medicare payments to costs 
has been higher for urban hospitals than for rural institutions. This 
is primarily the result of two factors. First, urban hospitals have 
benefited more from the PPS payment adjustments--particularly the 
effects of CMI change and the IME and DSH adjustments. In addition, 
rural hospitals have had large declines in inpatient volume, raising 
fixed costs per case. However, as indicated in ProPAC's October 1991 
report to the Congress, Rural Hospitals Under Medicare's Prospective 
Payment System, several recent policy changes have improved the 
relative performance of rural hospitals under PPS. This trend promises 
to continue. The Commission will monitor and analyze the further 
effects of these policies as additional data become available.
Recommendation 10: Update Factor for Capital Payments to PPS Hospitals
    For fiscal year 1995, the Commission recommends that a formula-
based approach be used to update capital payment rates. The capital 
update should include the following:
     The projected increase in a capital market basket index 
that measures one-year changes in a fixed basket of capital goods 
hospitals purchase, currently estimated at 3.4 percent;
     An adjustment of zero percentage points to correct for 
past forecast errors;
     An adjustment of zero percentage points to reflect changes 
in financing costs;
     A positive adjustment of 0.9 percentage points for 
scientific and technological advances;
     A negative adjustment of 0.7 percentage points to 
encourage hospital productivity; and
     A net adjustment for zero percentage points for case-mix 
change.
    The Commission's recommendations would result in a 3.6 percent 
increase in the Federal capital payment rate for both urban and rural 
hospitals.
    ProPAC believes the capital update should be for future capital 
purchases. It is designed to provide Medicare capital payments 
reflective of future capital replacement prices. It would provide 
updates appropriate to maintain hospital capital stock adequate to 
provide efficient and effective care to Medicare beneficiaries.
    The components of the update recommendation are summarized in Table 
2-2; a discussion of each of these components follows. (See Appendix A 
for more information on the capital update.)
    Capital Market Basket--ProPAC's capital update recommendation 
reflects projected increases in a market basket index designed to 
measure changes in the prices of capital assets hospitals purchase. 
This index, developed by the Commission, provides a measure of the 
increase in capital input prices analogous to that used to update PPS 
operating payments. (See Recommendation 9.) It also measures annual 
change in the price of a fixed mix of capital goods.
    The recommended market basket includes three price components: 
building and fixed equipment, movable equipment, and other capital-
related costs such as insurance. The market basket weights reflect 
hospitals' patterns of capital acquisition. In the absence of accurate 
and current information on actual capital purchases, the Commission 
believes that shares of depreciation expense, adjusted for other 
capital-related costs, are the best available measures of future 
purchases. Therefore these shares, combined with annual outlays for 
capital-related costs, are used as weights in the market basket.

 Table 2-2.--Recommended Update Factor for Capital Payments, Fiscal Year
                                  1995                                  
                    Components of the Update                            
                                                                        
Fiscal year 1995 capital market basketa........................     3.4%
Correction for fiscal year 1993 forecast error.................      (b)
Financing policy adjustment....................................      0.0
Allowance for scientific and technological advances............      0.9
Adjustment for productivity improvement........................     -0.7
Adjustment for case-mix changec................................      0.0
                                                                --------
  Total capital update.........................................      3.6
aMarket basket estimate developed by ProPAC using forecasted data       
  supplied by the Health Care Financing Administration, Office of the   
  Actuary, January 1994. The market basket forecast is subject to change
  as more current data become available.                                
bNot applicable.                                                        
cCase-mix change components = total DRG CMI change, real across-DRG case-
  mix change, and within-DRG case-complexity change.                    

    Although updates should apply to the full Medicare capital payment 
rate, which reflects historical levels of depreciation and interest, 
interest rate changes should be handled separately from the market 
basket. The Commission's financing policy adjustment addresses the 
issue of interest rate change in the update framework.
    The capital market basket proposed by the Secretary uses a complex 
structure of weighted average changes in economywide price proxies and 
measures of interest expense. Its value is largely determined by 
historical values of its components. In ProPAC's view, a 
straightforward market basket that reflects the change in the price of 
hospital capital purchases and other capital-related costs in the 
coming fiscal year is more appropriate. The recommended market basket 
would provide Medicare capital payments reflective of future capital 
purchase prices.
    ProPAC studied a range of alternative capital price measures. In 
its March 1993 Report and Recommendations to the Congress, the 
Commission recommended using two price proxies especially relevant to 
hospital industry capital purchases: for hospital building and fixed 
equipment capital costs, the Boeckh building cost index subindex for 
apartments and office buildings (institutional construction); and for 
movable equipment capital costs, the Marshall and Swift hospital 
equipment index. Changes in other capital-related costs would be 
measured by the consumer price index for residential rent. Components 
would be weighted as discussed above. The market basket would be used 
to prepare single-year projections of price change.
    As of January 1994, the projected increase in ProPAC's market 
basket index for fiscal year 1995 is 3.4 percent. This forecast may 
change as more up-to-date data become available and methodologies for 
estimating the components of the market basket are refined.
    Forecast Error Correction--The Commission believes the correction 
of past market basket index forecast errors should be part of the 
update framework. This correction protects both hospitals and the 
Federal government by adjusting the payment rates so that the effects 
of past forecast errors are not perpetuated. Because a capital market 
basket has not yet been used to increase capital payment rates, a 
correction factor is not needed this year.
    Financing Policy Adjustment--The Commission's capital update frame 
work includes a financing policy adjustment to account for the effects 
of changes in interest rates on hospital capital costs. In ProPAC's 
view, interest rate fluctuations should not be reflected in the market 
basket. If they were, such changes might lead to volatility in updates, 
overcompensation of hospitals in some circumstances, and undue risk for 
facilities at other times. Instead, ProPAC recommends an explicit 
adjustment to the capital update factor to account for significant 
changes in interest rates.
    The financing policy adjustment reflects interest rate changes that 
might otherwise create a significant financial burden for hospitals, as 
well as those that would produce substantial reductions in capital 
costs. It would raise payments to compensate hospitals faced with 
disruptive effects of extreme interest rate increases and allow the 
Medicare program to share in some of the savings resulting from lower 
interest rates.
    Though relatively high compared with short-term rates and in light 
of expected inflation, long-term interest rates are anticipated to 
remain stable through fiscal year 1995. The Commission believes it is 
not appropriate to adjust capital payments for forecasted changes in 
interest rates at this time.
    Scientific and Technological Advances--ProPAC recognizes that 
future hospital capital investments may include more costly, quality-
enhancing medical technology. The capital update framework adjusts 
payments to allow for scientific and technological advances. (See 
Recommendation 9.) The Commission recommends a 0.9 percentage point 
adjustment for the capital component of scientific and technological 
advances.
    Productivity Improvement--ProPAC recognizes the need to adapt the 
capital stock of hospitals to a health care environment with less 
demand for inpatient services through its productivity adjustment. This 
adjustment serves as a target for improvement in productivity due to 
more efficient use of plant and equipment and purchase of cost-
decreasing technologies. The Commission recommends an adjustment of 
-0.7 percentage points to encourage more efficient use of existing 
plant and equipment and the purchase of cost-decreasing technologies. 
(See Recommendation 9.)
    Case-Mix Change--Medicare uses the same DRG definitions and 
relative weights for both operating payments and capital payments. As a 
result, capital payments, respond to changes in the CMI in the same way 
as do PPS operating payments. Thus the adjustment to capital payment 
rates for CMI change is identical to that made to operating payment 
rates. (See Recommendation 9.) The net adjustment for case-mix change 
is zero percentage points.
Recommendation 11: Single Operating and Capital Update Factor
    The Commission recommends that when the transition to fully 
prospective capital payments is complete, a single update factor be 
used for adjusting PPS operating and capital payment rates. Based on 
ProPAC's recommended updates to the operating and capital payment 
rates, the total increase to a fully prospective combined payment rate 
would be 2.8 percent for fiscal year 1995.
    The Commission believes there ultimately should be one payment for 
hospital inpatient operating and capital expenses and a single annual 
update to that payment. ProPAC recognizes that a combined capital and 
operating update factor cannot be used until the transition to a fully 
prospective capital payment system is complete. This is because the 
update applies only to the prospective portion of capital payment 
rates. Further, the operating payment update is currently set by law, 
while the Secretary has authority to establish capital prospective 
payment updates through annual rulemaking. The Medicare program, 
however, should move to a single update approach for inpatient 
operating and capital payment rates as soon as possible. Despite the 
separate payment methods, hospitals do not distinguish between their 
operating and capital payments. Operating payments may be used to 
defray capital shortfalls and vice versa. Separate update factors for 
operating and capital expenses do not reflect the way hospitals 
actually use their revenues or make investment decisions.
    ProPAC therefore recommends the development and use of an update 
framework that includes capital and operating components for fiscal 
year 1995. Like the operating update use by ProPAC, the combined update 
approach should incorporate operating and capital market baskets to 
measure changes in prices, as well as adjust for productivity, 
scientific and technological advances, and case-mix change. This would 
ensure that updates to both operating and capital base payment rates 
reflect increases in the costs of the goods and services that hospitals 
require to produce inpatient hospital care efficiently. Ultimately, 
operating and capital components should be included in a single market 
basket and set of adjustments.
    A combined fully prospective update would yield an average payment 
rate increase of 2.8 percent under the Commission's recommendation. The 
total payment rate increase, however, would be about 3.7 percent, 
because of expected increases in the CMI (see Table 2-3).
Recommendation 12: Update Factor for Hospitals Paid on the Basis of 
Hospital-Specific Rates
    The Commission believes payments based on hospital-specific base-
year costs for sole community hospitals should be updated by the 
average update given to all hospitals.
    The recommendation would result in an update to the hospital-
specific rates of 2.7 percent for fiscal year 1995, consistent with the 
Commission's recommendation on the PPS update. Since the update is 
based on current projections of the fiscal year 1995 increase in the 
market basket index, its effective value may be modified as more recent 
forecasts become available.
    OBRA 1989 provides that certain hospitals be paid on the basis of 
the PPS rate, their own 1982 base-year costs updated to the current 
year, or their updated 1987 base-year costs, whichever would yield the 
largest payment. Sole community hospitals, which meet certain criteria 
based on distance from other hospitals or market share, qualify for 
this special treatment. Provisions affecting small rural Medicare-
dependent hospitals, which were defined as rural hospitals with fewer 
than 50 beds and at least a 60 percent Medicare share of total 
discharges or inpatient days, expired with cost reporting periods 
ending on or after April 1, 1993. However, OBRA 1993 restored this 
provision for cost reporting periods ending before October 1, 1994. For 
fiscal year 1995. Medicare-dependent hospitals will no longer be paid 
on the basis of hospital-specific rates and will be treated like other 
rural hospitals.

   Table 2-3.--Estimated Fiscal Year 1995 Average Increase in Per Case  
             Payments Under Fully Prospective Rates--Percent            
Operating update factor........................................      2.7
Capital update factor..........................................      3.6
  Total average update.........................................      2.8
Estimated case-mix index change (fiscal year 1995).............      0.9
                                                                --------
  Total average increases in PPS payments*.....................      3.7
*The total average increase in PPS payments reflects the multiplicative 
  effects of the total average update and case-mix index change.        


    Current law requires that the hospital-specific rates for these 
hospitals be updated at a rate equal to the expected average update for 
all PPS hospitals. ProPAC concurs with this provision. Sole community 
hospitals are accorded special treatment under PPS because they may 
face higher historical costs due to their special circumstances. 
Nevertheless, these hospitals should be able to control their cost 
increases as other hospitals do. Last year, the Commission recommended 
that the update for rural areas be applied to the hospital-specific 
rate, on the grounds that other rural hospitals are the appropriate 
comparison group for these hospitals. However, this year's PPS update 
for rural hospitals (including sole community hospitals) is 
substantially higher than the average for all hospitals. The Commission 
believes the average increase for all hospitals provides a reasonable 
update for the hospital-specific rates available to these facilities.
Recommendation 13: Update Factor for PPS-Excluded Hospitals and 
Distinct-Part Units
    For fiscal year 1995, the largest rates for PPS-excluded hospitals 
and distinct-part units should be updated by 2.7 percent. This 
recommendation accounts for the following:
     The projected increase in the HCFA PPS-excluded hospital 
market basket, currently estimated at 3.7 percent.
     An adjustment of zero percentage points for the difference 
between the projected ProPAC and HCFA market baskets;
     A negative adjustment of 1.0 percentage points for 
substantial error in the fiscal year 1993 market basket forecast; and
     An adjustment of zero percentage points for scientific and 
technological advances.
    When PPS was established, it was clear that prospective payment 
based on DRGs could not be applied universally and that certain 
providers would need to be excluded. At this time, five types of 
specialty hospitals (psychiatric, rehabilitation, long-term, 
children's, and cancer) and two types of distinct-part units in general 
hospitals (psychiatric and rehabilitation) are exempt from PPS. These 
providers are excluded primarily because DRGs fail to accurately 
predict the resource costs for the patients they treat.
    PPS-excluded hospitals and distinct-part units are subject to the 
payment limitations and incentives established in the Tax Equity and 
Fiscal Responsibility Act of 1982 (TEFRA). Each provider is paid on the 
basis of its current Medicare-allowable inpatient operating costs per 
discharge, or a target amount. The target amount is based on the 
provider's allowable costs per discharge in a base year, trended to the 
current year by an annual update factor. Medicare's share of allowable 
capital costs is paid in its entirety.
    Under TEFRA, a facility with inpatient operating costs per 
discharge that are less than its target rate receives its costs plus 
either 50 percent of the difference between its cost per discharge and 
the target or 5 percent of the target amount, whichever is less. A 
facility with inpatient operating costs per discharge above its target 
rate receives the target amount plus half the difference between that 
amount and its cost per discharge, but no more than 110 percent of the 
target. Further, the Secretary is required to provide for an adjustment 
to a facility's payment when events beyond the facility's control 
distort its cost increase for a cost reporting period.
    Although the Congress legislates the update to the TEFRA target 
amounts, ProPAC and the Secretary of Health and Human Services are 
required to recommend an annual update factor. For fiscal years 1994 
through 1997, each facility will receive an update ranging from the 
projected increase in the market basket to the market basket increase 
minus 1.0 percentage points. The Commission recommends an average 
update to the target rate equal to the market basket increase minus 1.0 
percentage points for fiscal year 1995 (see Table 2-4).
    Market Basket--The update recommendation is determined primarily by 
the projected increase in the PPS-excluded market basket index, which 
measures the price of inputs used by these facilities in treating 
Medicare patients. The current HCFA market basket increase forecast for 
fiscal year 1995 is 3.7 percent. There is no difference between the 
HCFA and ProPAC market basket forecasts for 1995, so no adjustment to 
reflect this difference is necessary.
    Forecast Error Correction.--ProPAC believes the update should be 
corrected for substantial past market basket forecast errors. Because 
projections must rely on available data, they cannot accurately 
anticipate all future economic conditions that may affect input prices. 
Updates based on market basket forecasts, therefore, may result in 
overpayments or underpayments to PPS-excluded facilities, which should 
not be carried forward to subsequent payment years. The market basket 
projection used to update TEFRA target amounts in fiscal year 1993 was 
4.2 percent. The actual market basket increase, however, was only 3.2 
percent. Therefore, ProPAC's update recommendation includes a -1.0 
percentage point adjustment for fiscal year 1993 market basket forecast 
error.

Table 2-4.--Recommended Update Factor for PPS-Excluded Hospitals, Fiscal
                           Year 1995--Percent                           
                    Components of the Update                            
                                                                        
Fiscal year 1995 HCFA PPS-excluded market basket forecast*.....      3.7
Adjustment for difference between HCFA and ProPAC market                
 baskets.......................................................      0.0
Correction for fiscal year 1993 forecast error.................     -1.0
Allowance for scientific and technological advances............      0.0
                                                                --------
    Total update...............................................      2.7
*Market basket forecast provided by the Health Care Financing           
  Administration, Office of the Actuary, December 1993. The market      
  basket forecast is subject to change as more current data become      
  available.                                                            

    Scientific and Technological Advances--ProPAC also believes the 
update should include an allowance for scientific and technological 
advances for PPS-excluded hospitals and distinct-part units. This 
allowance is intended to encourage providers to adopt quality-enhancing 
technologies, even when they increase costs. It reflects the 
Commission's judgment about the expected growth in the cost of 
providing inpatient services resulting from scientific and 
technological advances.
    To reach an informed judgment on the appropriate allowance, ProPAC 
examined emerging technologies used in PPS-excluded facilities to 
estimate their operating costs and predict their increased use in 
fiscal year 1995. (See Appendix A for a full discussion of ProPAC's 
methodology.) To be included in the estimate, a technology must be 
emerging (that is, diffused beyond minimal use but not fully diffused), 
quality-enhancing, and cost-increasing. The contractor identified two 
scientific advances that met these criteria: the drugs sertraline 
hydrochloride and ondanestron hydrochloride. The total increase in 
operating costs due to these advances is estimated to be $140,000, or 
0.002 percent of Medicare payments to PPS-excluded facilities in fiscal 
year 1995. Therefore, the Commission is recommending no allowance for 
scientific and technological advances.
    Unlike the update for PPS hospitals, the update for excluded 
facilities does not include a productivity adjustment. The productivity 
adjustment to the PPS update is based on the principle that Medicare 
should share in the savings generated by productivity improvements. 
However, Medicare automatically shares in the savings under TEFRA 
because part of any productivity increase is factored into reduced 
Medicare payments. ProPAC believes a further reduction in payments for 
gains in productivity is not appropriate.
    Revising the Payment Method--In October 1992, the Commission 
submitted an interim report on payment reform for PPS-excluded 
providers. The findings suggested that in aggregate, TEFRA payments to 
PPS-excluded facilities appeared adequate for most provider types. 
Notable exceptions were psychiatric hospitals and distinct-part units, 
and long-term hospitals. However, substantial variation in the 
proportion of facilities with costs exceeding their target rate was 
found across and within all provider types. Further, the Commission 
could not make definitive conclusions regarding the adequacy of the 
TEFRA payment system due to the lack of information on the amount of 
exceptions payments made to PPS-excluded providers.
    Specialty hospitals and distinct-part units were excluded from PPS 
primarily because the DRG patient classification system does not 
adequately group patients in these facilities according to resource 
use. However, considerable effort has been put into developing a 
patient classification system for rehabilitation hospitals and 
distinct-part units based on patient functional status. The Commission 
supports such efforts in hope that a prospective payment system for 
specialty facilities can be developed.
    Although at this time prospective payment for these facilities is 
not feasible, modifications to the current TEFRA payment method may be 
possible. Each type of PPS-excluded provider has unique patient 
characteristics and cost experiences, yet for payment purposes all 
types are treated similarly. TEFRA does not recognize varying factors 
that affect costs, such as changes in case mix and treatment patterns, 
and all providers receive the same basic update to the target rate. A 
more complete understanding of the factors that differentiate these 
facilities may help to identify appropriate revisions to the current 
TEFRA payment system and update formula.
    ProPAC encourages the Secretary to examine further the factors 
contributing to cost increases among these facilities. The Commission 
will continue to evaluate the appropriateness of the TEFRA system for 
PPS-excluded providers, and will respond to the Secretary's proposal 
for payment reform when it becomes available.
Recommendation 14: Update to the Composite Rate for Dialysis Services
    The fiscal year 1995 update recommendations for the composite rate 
for dialysis services accounts for the following:
     The projected increase in the market basket for dialysis 
services in fiscal year 1995, estimated at 4.3 percent;
     A positive adjustment of 0.7 percentage points to reflect 
the additional costs associated with scientific and technological 
advances;
     A negative adjustment of 1.0 percentage points to 
encourage productivity improvements; and
     A negative discretionary adjustment of 4.0 percentage 
points to reflect the relationship between payments and estimated 
fiscal year 1994 costs.
     This results in a net update recommendation of zero 
percent.
    In 1972, the Congress extended Medicare coverage to almost all U.S. 
residents with end-stage renal disease. These beneficiaries are 
entitled to all Medicare-covered services, including dialysis 
treatments or transplant services to replace lost kidney function. 
Since 1983, payment for outpatient dialysis services has been based on 
a composite rate. The composite rate is a prospective payment intended 
to cover the costs of services typically furnished during a dialysis 
treatment. Derived from data from 1977 through 1979, it represents a 
weighted average cost per treatment for dialysis provided in facilities 
and at home according to the proportion of beneficiaries treated in 
each site. This method was intended to promote the less expensive home 
treatment alternative by paying the same amount for care provided in 
either site. The level of the composite rate has remained essentially 
unchanged since it was developed.
    OBRA 1990 mandated that ProPAC recommend an annual update to 
dialysis payments. In developing its recommendation, the Commission 
first estimated how much payments should increase between fiscal years 
1994 and 1995 using a methodology similar to that employed in the 
update recommendation for PPS hospital payments. Then it evaluated the 
appropriateness of the base payment rate to which the update factor 
would be applied. (See Appendix A for more information on the 
background analyses.)
    Market Basket--The market basket index measures changes in the 
price of inputs dialysis facilities use to produce dialysis treatments. 
It is based on a set of input components that reflect all the goods and 
services dialysis providers purchase. Using 1992 dialysis facility cost 
report data, four types of inputs were identified: capital, labor, 
other direct costs, and overhead. Each component has a weight that 
represents its cost share, or proportion of total expenses. The price 
change for each component is measured by a proxy. The price proxies 
were adapted from those Medicare uses for the PPS, home health agency, 
and skilled nursing facility market baskets. The Commission estimates 
that the prices of inputs used in a dialysis treatment will rise 4.3 
percent between fiscal years 1994 and 1995.
    Scientific and Technological Advances--The scientific and 
technological advances allowance is intended to encourage dialysis 
facilities to adopt new technologies that improve the quality of 
patient care, even when they increase costs. It is an estimate of the 
combined operating and capital costs of new and emerging dialysis-
related technologies, and their expected increase in use for the coming 
fiscal year. To reach an informed judgment on the appropriate 
allowance, ProPAC examined a set of the most important new cost-
increasing innovations in the dialysis industry. On the basis of this 
analysis, the Commission concluded that Medicare payments should rise 
by 0.7 percent to cover the costs of new technologies in fiscal year 
1995.
    Productivity Improvement--The productivity adjustment is intended 
to give dialysis facilities a financial incentive for continued 
improvements in productivity through the more efficient use of 
resources. It is an estimate of the productivity gains that can be 
expected for the coming year. The Commission considered a range of 
options to reach an appropriate adjustment. ProPAC's historical 
productivity study and recent trends in the cost per dialysis treatment 
suggest a higher estimate may be appropriate. Concerns that further 
reductions in the length of dialysis sessions may adversely affect 
quality of care support a lower adjustment. ProPAC concluded that a 
modest productivity target of 2.0 percent arrives at the proper 
balance. The savings from productivity gains should be shared equally 
by the industry and Medicare, resulting in a productivity adjustment of 
-1.0 percentage points.
    Discretionary Adjustment--ProPAC's analysis indicates that in 
aggregate, the estimated cost per dialysis treatment in fiscal year 
1994 is about 5 percent below the median wage-adjusted composite rate. 
This varies by type of facility. The estimated cost per treatment for 
independent facilities is about 13 percent below the payment rate. 
Costs are about 16 percent above payments for hospital-based 
facilities. Determining the true difference between payments and costs 
was complicated by data deficiencies. Nonetheless, the Commission 
believes it is important to recognize this difference in its update 
recommendation through an adjustment to the base composite rate.
    The latest cost data probably are overstated substantially because 
they have not been audited, although the magnitude of this effect is 
not known. Inconsistent cost reporting practices and cost allocation 
methods raise additional concerns about data comparison and reliability 
across facilities. Further, government regulations implemented in 1992 
have likely increased facility costs, but the exact amount is not 
known. In the Commission's judgment, a discretionary adjustment of -4.0 
percentage points balances the need to account for the difference 
between 1994 estimated costs and payments with uncertainties regarding 
the current level of costs.
    ProPAC appreciates HCFA's continued efforts in compiling the 
database of unaudited dialysis facility cost reports and in auditing a 
sample of fiscal year 1991 cost reports. These data are important in 
developing annual update recommendations. The Commission supports 
HCFA's actions to improve the quality of the cost data by adding edits 
to the Hospital Cost Report Information System, revising the cost 
report schedules and instructions, and working with facilities and 
fiscal intermediaries to ensure that cost reports are filed correctly 
and completely. These measures will enhance the accuracy and 
reliability of the data, which is essential for decision making.
    ProPAC will continue to evaluate payments to dialysis facilities. 
Its analysis will focus on the difference between payments and costs 
and how this relationship varies across providers. Additionally, ProPAC 
will take a closer look at the disparity between reported and audited 
costs to better assess the adequacy of payments. Because accurate and 
reliable data are crucial to this undertaking, the Commission urges 
HCFA to continue its measures to improve data quality and to regularly 
audit a representative sample of independent and hospital-based 
dialysis facility cost reports.

Other Payment Policies

    PPS adjusts hospital payments in several ways to account for 
factors that may legitimately affect hospital costs, such as the level 
of teaching activity, wage rates, and patient mix.
    As part of its mandate, the Commission examines the distribution of 
PPS payments across hospitals and makes recommendations concerning the 
various adjustments to the payment system. ProPAC considers adjustments 
that are made both at a hospital level and at a case level. In this 
year's report, the Commission recommends improvements in the PPS 
hospital wage index, outlier payment policy, and the indirect medical 
education adjustment.
    ProPAC is also responsible for making recommendations on Medicare 
payment for facility services provided in settings other than the 
inpatient hospital. These payments have grown rapidly throughout the 
1980s and have become an increasingly important part of the 
Commission's agenda. In this report, ProPAC's recommendations concern 
payment to skilled nursing facilities and hospital outpatient 
facilities.
Recommendation 15: Improvements in Hospital Wage Data
    The Secretary should develop and implement improved methods for 
collecting data on employee compensation and paid hours of employment 
for hospital workers by occupational category. Once these data become 
available, the Secretary should implement an adjustment to the hospital 
wage index under PPS. This adjustment would correct the wage index for 
the inappropriate effects of including geographic differences in the 
mix of occupations employed.
    The PPS wage index is intended to measure geographic differences in 
the unit prices of labor inputs hospitals purchase to provide inpatient 
services. Currently, hospitals report only total compensation and total 
paid hours for all employees, regardless of occupation. Consequently, 
the average hourly wage calculated for each labor market area measures 
the average labor cost per hour for hospitals in the area, reflecting 
both unit prices for labor and the occupational mix of employees.
    The Commission believes the wage index should adjust payments for 
relative differences in local labor prices, rather than in costs. While 
local market prices for labor presumably are determined by forces 
beyond the control of an individual hospital, the quantity and skill 
mix of labor purchased clearly result from management decisions. 
Differences among hospitals in mission, services offered, and patient 
population served may lead to variations in the volume and mix of labor 
required to produce needed inpatient services. The resulting 
differences in operating cost per discharge, however, are accounted for 
by other hospital-specific adjustments in PPS, such as the case-mix 
index, and by the indirect medical education and disproportionate share 
adjustments.
    Hospitals located in large cities tend to employ a substantially 
more expensive mix of labor than hospitals located in rural areas. 
Consequently the current wage index values for large urban areas tend 
to be too high, while those for rural areas tend to be too low. This 
results in overpayment for some hospitals and underpayment for others.
    Previous ProPAC studies of 1988 occupation-specific compensation 
data reported by California hospitals suggest that an adjustment for 
occupational mix would increase the current wage index values for rural 
hospitals and decrease those for hospitals located in large urban 
areas. In 1992, the Commission again used the California data to 
examine the effect of occupational mix adjustment on wage indexes based 
on hospital-specific labor market areas. The results from this study 
were consistent with ProPAC's earlier findings. Adjustment for 
occupational mix may be particularly important for hospitals located in 
areas where there are few other hospitals.
    Differences in occupational mix are an important factor affecting 
the accuracy of the wage index and equity of payment under PPS. To 
address this problem, the Commission previously has recommended 
collecting compensation and employee hours data by occupational 
category. However, the Secretary has rejected this recommendation on 
several grounds, including the burden that would be imposed on the 
hospital industry and lingering doubts about the likely accuracy of 
occupation-specific data. The Commission believes accurate occupation-
specific data can and should be obtained to correct the continuing bias 
in the wage index. Further, the burden of collecting such data could be 
minimized by adapting methods currently used by the Bureau of Labor 
Statistics to collect occupation-specific data for the employment cost 
index.
    A second set of issues relates to the timeliness and accuracy of 
the wage data. Accurate and timely data are essential to improve equity 
of payments among hospitals under PPS. These issues are important 
because the wage index directly affects the distribution of about 70 
percent of all payments under PPS, or some $42 billion per year.
    Under current law, the Secretary is required to update the wage 
index annually, beginning in fiscal year 1994. The wage data collected 
on hospitals' annual cost reports for this purpose, however, will 
continue to lag by three to four years because of the length of the 
cost reporting cycle, intermediary auditing, and data submission to 
HCFA. In addition, the wage data many hospitals submitted on their 
fiscal year 1990 cost reports were initially inaccurate or 
substantially incomplete. HCFA's experience collecting wage data by 
mail survey, with or without occupation-specific data, has been equally 
poor.
    ProPAC believes the implementation of a new wage index based on 
hospital-specific market areas may help to improve the accuracy of the 
wage data. (See Recommendation 16.) With a nearest neighbor approach, a 
hospital's own data would generally have more influence on its wage 
index than is now the case. Therefore, hospital administrators may be 
more strongly motivated to ensure the quality of the information they 
submit.
    Adjustment of the wage index for occupational mix would 
substantially improve payment equity among hospitals under the current 
PPS labor market definitions. It would be equally desirable for a wage 
index based on nearest neighbor labor market areas. In this case, 
ProPAC believes an occupational-mix adjustment would reduce variation 
in wage index values among nearby hospitals and would help the wage 
index more accurately reflect the labor price levels hospitals face.
Recommendation 16: Improvements in the PPS Hospital Wage Index
    The Secretary should substantially revise the hospital wage index 
under PPS for fiscal year 1995. The revised wage index should be 
calculated using hospital-specific labor market definitions based on 
hospital geographic proximity measured by the air-mile distances 
between nearby hospitals. The Congress should repeal the current 
statutory provisions relating to geographic reclassification for the 
wage index.
    The Commission believes the wage index would be substantially more 
accurate if it were calculated using hospital-specific labor market 
areas based on geographic proximity rather than on political 
boundaries, as is now the case. Under this approach, a labor market 
area would be defined for each hospital (the target hospital), 
including only hospitals located in its immediate vicinity. 
Consequently, each hospital's ``nearest neighbor'' wage index would 
reflect its own wage rate averaged with those paid by other nearby 
hospitals.
    This approach has strong intuitive appeal. Hospitals located near 
each other represent potential alternative sources of employment for 
health care workers living in the area. Therefore, in almost all 
instances, the average wage rate paid by all nearby hospitals should 
provide a reasonably accurate measure of the amount the target hospital 
must pay to compete for labor.
    ProPAC's analysis suggests that hospital-specific labor market 
areas offer important advantages compared with the present definitions. 
The current market areas have fixed borders defined by the county and 
state boundaries of metropolitan statistical areas and statewide rural 
areas. Hospitals located near each other but on opposite sides of such 
borders often have widely different wage indexes and PPS payment rates, 
even though they face similar local market conditions. By contrast, 
nearest neighbor labor markets for nearby hospitals overlap 
substantially, including many of the same hospitals. This tends to 
reduce the likelihood of large differences in their wage index values.
    A second advantage is that nearest neighbor labor market areas 
generally are much smaller than the current labor market areas. 
Consequently, they more effectively capture geographic differences in 
market wage levels.
    Under current policy, hospitals located in the same labor market 
area have the same wage index, which is based on the average wage for 
the area. Excluding the effects of geographic reclassification, about 
65 percent of all PPS hospitals incur a large loss or a large gain 
because their hourly wage rates differ from the labor market average by 
more than 5 percent. Because many labor market areas are large, 
however, local hospital wage levels often vary substantially within 
them. As a result, a significant portion of the losses and gains 
currently experienced by individual hospitals are attributable to their 
location in a part of the market area where local wage rates are higher 
or lower than the labor market average. Although many of these 
hospitals pay wage rates that are consistent with those of other nearby 
hospitals, they are inappropriately penalized or rewarded because the 
local wage level differs from the labor market average. This results in 
inequitable payment.
    Under a nearest neighbor approach, each hospital's wage index would 
be based on the level of wage rates paid by hospitals located nearby. 
Consequently, many of the hospitals that now face large losses or gains 
would find these discrepancies reduced or eliminated. Other hospitals 
are inappropriately sheltered by the current system. Many of these 
hospitals would find their small losses or gains substantially altered, 
reflecting the level of wages in their immediate area.
    Implementation of a nearest neighbor wage index in fiscal year 1995 
would result in a substantial redistribution of PPS payments among 
hospitals. However, these changes would make payments more accurate and 
equitable.
    ProPAC has examined a number of alternatives for determining the 
most appropriate size of nearest neighbor labor market areas. Increases 
in the size of the market areas tend to have two different effects. On 
the one hand, the wage index values for nearby hospitals are less 
likely to be substantially different. Consequently, hospitals located 
near each other are less apt to be paid significantly different PPS 
payment rates. This occurs because each hospital's wage index is based 
on wage data for a larger number of hospitals.
    On the other hand, larger market areas include hospitals that are 
located farther from the target hospital. Consequently, wage rates 
within each area tend to vary more. This suggests that some of the more 
distant hospitals may face labor market conditions that differ from 
those in the immediate vicinity of the target hospital. Therefore, 
using larger market areas may yield wage index values that are less 
accurate indicators of the labor market conditions faced by the target 
hospital.
    Finding a balance between these conflicting outcomes is complicated 
by the fact that hospital circumstances vary widely. About 30 percent 
of all PPS hospitals are located in relatively high density areas, with 
seven or more other PPS hospitals located within a radius of 20 miles. 
At the other end of the spectrum, 46 percent of all PPS hospitals are 
located in low density areas, with fewer than three other hospitals 
located within 20 miles.
    For hospitals in areas where there are many other hospitals nearby, 
hospital-specific labor market areas could include the nearest 15 
hospitals within a 20-mile radius. This would keep the variability in 
wage rates at a low level, while limiting the frequency of large 
differences in wage indexes among nearby hospitals. For hospitals 
located in areas with few hospitals nearby, hospital-specific markets 
should include at least three other hospitals. In many instances, this 
would require going beyond 20 miles. To avoid incorporating hospitals 
facing substantially different labor market conditions, however, the 
maximum distance should be 30 to 35 miles.
    In short, a labor market area could be defined for each hospital by 
including the nearest 15 hospitals within a 20-mile radius, but going 
up to a maximum of 30 to 35 miles to find at least three other 
hospitals. Although any of these criteria could be modified, minor 
changes probably would not make the wage index less accurate. A wage 
index based on labor market definitions similar to those outlined above 
would, in ProPAC's view, be far more accurate than the current one.
    Implementation of this approach would impose both one-time and 
ongoing administrative burdens on HCFA. For example, HCFA would need to 
verify the latitude and longitude coordinates for each PPS hospital. 
Methods and procedures would need to be developed for incorporating new 
hospitals into the wage index, and for dealing with multi-campus 
hospitals.
    In addition, HCFA would need to devise methods and administrative 
processes for addressing requests for exceptions. The Commission's 
research shows that hospital-specific labor market areas defined using 
air-mile distances generally correspond closely with those defined 
using road miles. Differences will occur, however, because of the 
presence of major transportation barriers such as a river or 
mountainous terrain. An exceptions process may be needed where a road-
mile definition would produce a substantially different wage index.
    ProPAC recognizes that adoption of a new wage index based on 
nearest neighbor labor markets will have a significant effect on PPS 
payments for many hospitals. This effect is due partly to changes in 
the labor market definitions, and partly to eliminating geographic 
reclassification for the wage index. The Commission believes strongly 
that continued reclassification of the wage index would not be needed 
once a nearest neighbor wage index is implemented.
    Hospitals whose wage index values are reduced by the adoption of a 
nearest neighbor wage index would receive lower payments because of 
this change. ProPAC believes, however, that such changes in hospital 
wage index values generally would reflect improvements in accuracy and 
fairness. Hospitals whose wage indexes decline would be primarily those 
previously sheltered by their inclusion in an appropriately large labor 
market area or those that received an in appropriately high wage index 
because of geographic reclassification.
Recommendation 17: Nursing Facility Wage Index
    The Secretary should collect data on employee compensation and paid 
hours of employment for employees of nursing facilities that care for 
Medicare skilled nursing facility patients. Once these data become 
available, the Secretary should develop a nursing facility wage index 
and use it to adjust Medicare skilled nursing facility payments.
    Medicare payments to nursing facilities are adjusted by the 
hospital wage index to reflect geographic differences in labor costs. 
Yet the geographic differentials in the cost of labor for hospital 
employees differ from those for employees of nursing facilities. This 
may be because there are state variations in regulations affecting 
staffing of nursing facilities that differ from those of hospitals. 
Further, through their Medicaid programs and certification and 
oversight roles, states have a major impact on the costs and structure 
of nursing facilities. Some of this variation is being reduced through 
provisions in OBRA 1987 that mandated stepped-up Federal oversight of 
nursing facilities.
    Another potential reason why the geographic differentials in 
hospital wages do not adequately reflect variation in nursing facility 
wages may be skill mix differences. Compared with hospitals, nursing 
facilities employ more aides. The relative differences in the salaries 
of aides and nurses may not be the same across geographic areas. These 
differences in the employee mix and relative wages are not reflected by 
the hospital wage index.
    An accurate wage index is necessary to account for geographic 
differences in wages. As with the hospital wage index, the method used 
to collect wage and hour data for nursing facilities should be 
prospective. Further, the Commission suggests the Secretary phase in 
the use of the nursing facility wage index to allow facilities to 
adjust.
    ProPAC recognizes that collecting nursing facility wage data and 
developing an index may take several years. The Commission investigated 
an interim approach of separate cost limits for each Census division to 
account for geographic cost differences. (See Appendix A for a more 
complete discussion.) This technique substantially changed the 
distribution of payments compared with the way payments were allocated 
under the current hospital wage index or a simulated nursing facility 
wage index. It inappropriately adjusted for cost variation caused by 
differences in state Medicaid payment policies and rates and other 
state certification requirements. The Commission thus rejects the 
interim measure, recommending instead that efforts focus on the 
development of a nursing facility wage index.
 Recommendation 18: Improving Outlier Payment Policy
    The Commission believes the outlier payment provisions of the 
Omnibus Budget Reconciliation Act of 1993 will improve the current 
policy for identifying outlier cases and determining outlier payments 
under PPS. However, the following changes also should be implemented 
for fiscal year 1995:
     The estimated cost of the case and the outlier payment 
amount should no longer be adjusted to reflect the hospital's indirect 
medical education and disproportionate share status.
     The marginal cost factor for cost outliers should be 
increased to 80 percent.
     These changes would further increase the effectiveness of 
outlier payment in protecting against the risk of large losses on some 
cases. They would also improve the distribution of outlier payments 
across hospitals, including hospitals that receive a large number of 
transfer cases.
    The DRGs used to determine PPS payment are designed to group cases 
with similar resource requirements. The hospital's payment for each 
case is based on the nationwide average cost of patients in the DRG. 
The hospital is at risk for the difference between the cost of the case 
and the payment it receives. However, costs for individual cases in any 
DRG may vary widely, due to patient-specific or treatment-specific 
factors that are not incorporated in the current classification system. 
Even an efficient hospital, therefore, may have some cases with much 
higher than average resource requirements. These cases represent large 
financial losses to the hospitals that threat them.
    In general, most hospitals should be able to offset losses from 
more costly cases with gains from less costly ones. However, this 
averaging principle does not adequately protect hospitals with a small 
number of admissions, because they may be unable to offset the losses 
associated with an occasional very costly case. It also fails to 
protect certain hospitals that regularly care for a greater than 
average share of costly patients.
    To recognize this, additional payment is provided to hospitals for 
cases that are exceptionally resource intensive. Outlier payment is 
also intended to protect against incentives that may adversely affect 
certain types of patients or cases that are perceived to be associated 
with a greater likelihood of financial loss.
    Definition of Outlier Cases--Currently, hospitals receive 
additional payment for cases that have exceptionally long stays (day 
outliers) or high costs (cost outliers). Cases that qualify as both day 
and cost outliers are paid according to the formula that yields the 
highest payment. Over time, there has been increased emphasis on cost 
as a criterion for identifying outlier cases and determining outlier 
payments. The estimated proportion of outlier payments based on the day 
outlier formula has fallen from 85 percent in fiscal year 1984 to 32 
percent in fiscal year 1994.
    The Commission consistently has supported the increased emphasis on 
cost outliers relative to day outliers because the cost criterion 
better identifies the cases associated with the largest losses to the 
hospital. In its March 1993 Report and Recommendations to the Congress, 
ProPAC recommended eliminating day outlier payments over a three-year 
period. In OBRA 1993, the Congress required that payments for day 
outlier cases be phased out beginning in fiscal year 1995 and ending in 
fiscal year 1998.
    As the emphasis on cost outliers grows, however, it becomes more 
important to measure case-level costs accurately. Because costs are not 
reported for individual cases, the only way to identify cost outlier 
cases is to adjust reported charges. The Commission intends to analyze 
alternative methods for estimating case-level costs, their relative 
accuracy, and their implications for the distribution of outlier 
payments.
    Outlier Thresholds--A case does not qualify for outlier payment 
unless it exceeds the day or cost outlier threshold. One problem with 
the current threshold is that the loss incurred before outlier payments 
begin is not the same for every DRG, because DRGs have different 
payment amounts. Further, the loss is not the same for every hospital, 
because the cost of each case is adjusted by the hospital's IME and DSH 
payment adjustments.
    A threshold based on a fixed loss--that is, one that is set so that 
the loss incurred before outlier payments begin is equivalent for every 
case and hospital--would be more effective in reducing the impact of 
large losses associated with individual cases. In its March 1993 Report 
and Recommendations to the Congress, the Commission recommended that 
the cost outlier threshold for each case at each hospital should be a 
fixed amount (adjusted for differences in area wages and cost of 
living) above the DRG payment rate for the case. In OBRA 1993, the 
Congress enacted this change, to begin in fiscal year 1995.
    Another issue is whether estimated costs and outlier payments 
should be adjusted to reflect the hospital's teaching and 
disproportionate share status. Currently, the estimated cost for each 
case is reduced by the hospital's IME and DSH payment adjustments. For 
example, a case costing $50,000 at a teaching or disproportionate share 
hospital is considered less costly for the purposes of outlier payment 
than one costing $50,000 at a non-teaching, non-disproportionate share 
hospital. The amount by which the estimated cost exceeds the outlier 
threshold (which determines the outlier payment amount) thus is smaller 
for the case treated at the teaching or disproportionate share 
hospital. The resulting outlier payment amount is then increased by the 
hospital's IME and DSH adjustments, but this generally is not enough to 
offset the loss in outlier payments resulting from the reduced cost 
estimate for the case.
    ProPAC's analysis indicates that these adjustments result in 
substantial underpayment for outlier cases treated by teaching and 
disproportionate share hospitals. The IME and DSH adjustments should 
apply to the base payment amount that hospitals receive for every case. 
Outlier payments, on the other hand, are intended to defray the loss 
incurred beyond some threshold in treating exceptionally expensive 
cases. Teaching or disproportionate share hospitals should not have to 
bear greater losses before outlier payments begin than do otherwise 
similar hospitals. Moreover, outlier payments should be based on the 
loss incurred on the case rather than the hospital's teaching or 
disproportionate share status.
    Marginal Cost Factors--Once a case exceeds the relevant outlier 
threshold, the payment rate depends on the marginal cost factor. For 
example, hospitals are paid 75 percent of the estimated cost beyond the 
threshold for cost outliers and therefore must bear 25 percent of the 
additional estimated cost beyond the threshold. This is intended to 
provide an incentive to continue to control the costs of outlier cases. 
In addition, it is believed that the additional payment for outlier 
cases should be less than the estimated cost beyond the threshold 
because of a potential bias in the way cost is estimated.
    The changes discussed above would improve the effectiveness of 
outlier payment policy in identifying and directing payment to the most 
costly cases. Outlier payments no longer would be made for cases on 
which the hospital incurs only small losses or even gains. Given these 
changes, the Commission believes it would be appropriate to compensate 
hospitals for a higher percentage of the losses beyond the cost outlier 
threshold. The marginal cost factor for cost outliers therefore should 
be raised to 80 percent.
    Outlier Payment Pool--The outlier pool is expressed in terms of the 
percentage of total PPS payments (excluding the IME and DSH 
adjustments) that is set aside for outlier payments. By law, it must be 
between 5.0 percent and 6.0 percent; it currently is set at 5.1 
percent.
    Last year, ProPAC recommended that the outlier payment pool should 
be increased to 6.0 percent of total PPS payments. Upon further 
examination, however, the Commission has determined that the reduction 
in DRG payment rates required to fund a larger outlier pool would 
offset the benefit from reduced losses that hospitals would have to 
incur before outlier payments begin (see the discussion below). The 
Commission will continue to examine the implications of changing the 
size of the outlier pool in the context of recent and proposed changes 
in outlier payment policy.
    Financing Outlier Payments--Outlier payments are financed by 
across-the-board reductions in the DRG payment amounts for urban and 
rural hospitals--5.5 percent and 2.3 percent, respectively, in fiscal 
year 1994. These reductions reflect the difference in the anticipated 
percentages of outlier payments for the two groups. In fiscal year 
1995, with the elimination of the differential between the standardized 
payment amounts for rural and other urban areas, these reductions will 
be equal for all hospitals.
    Recent ProPAC analyses indicate that outlier cases and payments are 
concentrated among groups of hospitals and DRGs. These findings suggest 
that financing outlier payments by an equal reduction in the basic DRG 
rate paid for each case results in overpayment for DRGs with a high 
percentage of outlier payments and underpayment for DRGs with a low 
percentage of outlier payments.
    Financing outlier payments by reducing the payment rates for cases 
in each DRG, based on the anticipated percentage of outlier payments in 
that DRG, holds promise in improving the effectiveness of outlier 
payments and overall payment equity. Last year, ProPAC recommended this 
change. The Commission is concerned, however, about the potential 
redistribution of payments that would result. ProPAC intends to 
continue its work on this issue, specifically in analyzing the impact 
on payments across hospitals and types of cases.
    Transfer Cases and High-Transfer Hospitals--ProPAC has also 
examined the impact of the outlier payment changes enacted in OBRA 1993 
and the additional changes proposed by the Commission. The results 
indicate that while the OBRA 1993 changes generally target a higher 
proportion of outlier payments to the most expensive cases, they 
actually reduce estimated payments to transfer cases and the hospitals 
that most frequently receive them.
    This reduction is due largely to the application of the IME and DSH 
payment adjustments in estimating outlier costs and calculating outlier 
payments. As discussed earlier, the application of these adjustments 
results in substantial underpayment for outlier cases at teaching and 
disproportionate share hospitals. Because many of the hospitals that 
receive the most transfer cases are teaching hospitals, and because a 
high proportion of transfer cases are outliers, the effect on these 
cases and hospitals is particularly adverse.
    The implementation of the additional changes recommended by the 
Commission would substantially increase payments for transfer cases and 
hospitals that receive a large number of these cases, by targeting more 
outlier payments to the cases associated with the largest losses. 
ProPAC's analysis of these issues will be described in more detail in 
its technical report, Outlier Payment Policy (June 1994).
Recommendation 19: Level of the Indirect Medical Education Adjustment 
to PPS Operating Payments
    The Commission recommends that the indirect medical education 
adjustment to PPS operating payments be reduced from its current level 
of 7.7 percent to 7.0 percent for fiscal year 1995. This reduction 
should be implemented with the anticipated decrease in indirect medical 
education payments returned to all hospitals through a proportionate 
increase in the standardized payment amounts. The Commission also 
recommends continuation of the indirect medical education adjustment to 
PPS payments until an alternative system of compensating appropriately 
for the higher costs of patient care in teaching institutions is fully 
operational.
    The IME adjustment is intended to recognize the higher costs 
teaching hospitals incur in treating Medicare patients. These higher 
costs have been attributed to caring for patients with more severe or 
complex illnesses, providing a broader scope of services and more 
services per patient, and using a costlier mix of staff.
    ProPAC annually estimates the relationship between teaching 
intensity and standardized Medicare operating costs per discharge. The 
standardization controls for differences in costs that are accounted 
for by other PPS payment factors. These include geographic differences 
in the PPS base payment amounts, the local area wage index, the 
hospital's Medicare case-mix index, and outlier payments for extremely 
long or costly cases. The most recent analysis was based on cost data 
from the eighth year of PPS and payment rules for fiscal year 1994. The 
results indicate that, on average, a 10 percent difference in teaching 
intensity is associated with a 5.2 percent difference in Medicare 
operating costs per discharge.
    The estimated relationship between costs and teaching intensity is 
affected by other aspects of the payment system. For example, the 
differential in rural and other urban standardized payment amounts will 
be eliminated in fiscal year 1995. If the elimination of this 
differential were effective in fiscal year 1994, the IME estimate would 
rise to 5.3 percent. Implementation of improvements in the PPS hospital 
wage index and outlier payment policy would increase Medicare payments 
to teaching hospitals. (See Recommendations 16 and 18.) These changes 
also would require that the IME adjustment be reduced to reflect more 
accurately the relationship between costs and teaching intensity.
    The Commission recognizes that since PPS began, the Medicare 
program has more than adequately compensated teaching hospitals for the 
costs of treating medicare patients. The current 7.7 percent IME 
operating payment adjustment is substantially higher than the empirical 
estimate of 5.2 percent indicated by the most recent analysis. 
Moreover, PPS operating margins consistently have been higher for 
teaching hospitals than for nonteaching hospitals. PPS margins have 
been especially high for major teaching hospitals (that is, those with 
the highest levels of teaching intensity).
    However, the Commission is concerned that the continued operation 
of these hospitals and the fulfillment of their unique role in the 
provision of health care might be impaired by a substantial immediate 
reduction of Federal support. ProPAC believes the Medicare program's 
responsibility to its enrollees is broader than merely paying for 
services for beneficiaries. This responsibility includes maintaining 
access to the quality of care and types of services available at 
teaching hospitals, which might be affected adversely by a sharp 
decline in IME payments.
    Given these considerations, the Commission believes a gradual 
reduction of the IME adjustment is a prudent course of action. ProPAC's 
recommendation would reduce the adjustment by approximately one-third 
of the difference between the current adjustment and the Commission's 
estimate of 5.2 percent. The Commission will continue to examine the 
financial status of teaching hospitals to avoid any deleterious effects 
on access to quality care for Medicare enrollees. This approach 
recognizes as an ultimate objective the use of the IME adjustment to 
compensate appropriately for differences in Medicare costs that are 
attributable to differences in teaching intensity.
    The Health Security Act would eliminate the IME adjustment to PPS 
payments beginning in fiscal year 1996. Instead, Medicare and all other 
payers would contribute to an Academic Health Center Account, from 
which the Secretary would distribute payments to teaching institutions. 
Medicare's proposed $2.1 billion contribution to this account in 1996 
is based, in part, on estimated IME expenditures using a 3.0 percent 
IME payment adjustment.
    The 3.0 percent factor is consistent with previous estimates--using 
HCFA's methodology--of the relationship between teaching intensity and 
Medicare inpatient operating cost per case. This consistency, however, 
is an artifact of HCFA's analytic approach, which offsets the 
disproportionate share hospital payment adjustment against each 
hospital's Medicare costs per discharge. ProPAC does not offset costs 
of DSH payments, because the Commission has determined that DSH 
payments generally do not reflect differences in costs.
    The Health Security Act would reduce the DSH adjustment, because it 
would also reduce the number of uninsured and underinsured patients. A 
smaller DSH adjustment would raise HCFA's estimate of the relationship 
between teaching intensity and Medicare inpatient costs per case almost 
to the level of ProPAC's estimates. This change would not affect 
ProPAC's estimates. Thus, a 3.0 percent adjustment is likely to be 
substantially lower than either HCFA's or ProPAC's estimate of the 
empirical relationship between teaching intensity and Medicare 
inpatient costs per case.
    ProPAC is concerned that the level of funding of the Academic 
Health Care Account and the formula for distributing these funds are 
not based on objective analysis of the costs incurred by teaching 
hospitals in carrying out their functions. (See Recommendation 3.) 
Therefore, the Commission believes Medicare can best carry out its 
responsibilities to maintain access to quality care for Medicare 
beneficiaries and other patients by retaining the IME adjustment to PPS 
payments until an alternative system of compensating appropriately for 
the higher costs of patient care in teaching institutions is fully 
operational.
    Changes in the IME adjustment should be considered in the context 
of its interactions with other components of the payment system and its 
effects on PPS payments, as well as hospitals' overall financial 
status. The impact on the quality of care and access to that care 
should also be considered. In general, any change in Medicare payment 
policy must be considered in terms of its effect on the health care 
system as a whole.
    In the coming year, ProPAC will continue to examine the level and 
structure of the IME adjustment, as well as other factors that affect 
hospitals' payments, costs, and financial condition. The distribution 
of PPS and total margins and the other effects of possible changes in 
the IME adjustment will be studied. The Commission will also examine 
the potential effects on teaching hospitals of proposals in the Health 
Security Act. (See Recommendation 3.) A description of ProPAC's most 
recent analyses is available in the Commission's technical report, 
Indirect Medical Education and Disproportionate Share Payment 
Adjustments to Hospitals (March 1994).
Recommendation 20: Prospective Payment Method for Outpatient Services
    The Commission believes a prospective payment system for hospital 
outpatient services should be implemented. Outpatient payment reform 
should result in consistent policies across all sites and providers. 
Payment should be based on a prospective price per unit of service 
until other methods can be developed that would appropriately control 
the volume of services. The payment rate should be adjusted to reflect 
justifiable cost differences across settings.
    The Commission supports congressional intent to establish 
prospective payment methods for hospital outpatient services. These 
methods will create incentives for controlling costs by offering 
providers the opportunity for a profit as well as the risk of financial 
loss. Such incentives are enhanced further as more services are bundled 
within the rate. The current payment method for hospital-provided 
outpatient services contributes to both cost and charge inflation. 
Because payments incorporate at least a portion of facility-specific 
costs or charges, hospitals that reduce their costs receive less in 
payments. Thus, there is little financial incentive to deliver care 
more efficiently.
    The Commission believes the method and unit of payment should be 
comparable across settings. This consistency is necessary because the 
ambulatory services offered by hospitals are also furnished in other 
sites, such as free-standing surgery centers and physician offices. 
Moreover, most ambulatory care is provided outside of hospital 
settings. Additionally, the various payment methods and units that 
Medicare employs for ambulatory services encourage choosing the site of 
service on the basis of financial rather than clinical considerations. 
Finally, the lack of payment comparability across sites inhibits 
efforts to control overall health care expenditures.
    Although the same method and unit should be used to determine 
payment to all providers of ambulatory services, the payment rate may 
vary for different providers and across treatment sites. There are many 
reasons why costs may differ among similar providers (such as teaching 
and non-teaching hospitals) and across treatment sites (such as 
hospitals and physician offices). The Commission believes it is 
desirable to recognize in the payment system those factors that 
represent a benefit to society and are beyond the control of the 
provider, such as the costs associated with medical education. Further, 
these costs should be shared more broadly across the health care system 
to avoid financial discrimination against teaching facilities.
    Medicare should establish a prospective payment rate per unit of 
service based on methods currently used in other settings. Such a 
system would go a long way toward improving the financial incentives to 
providers by rewarding efficiencies in service provision and penalizing 
inefficiencies. ProPAC recognizes that such a system should be only an 
interim measure, however, because it does not control the growth in 
volume of services. The Commission therefore recommends that an 
outpatient prospective payment system be implemented as soon as 
possible to incorporate volume control measures. The payment should 
move from a fee for an individual service to a larger payment unit 
containing more services. Such a bundled approach, along with the 
integration of hospital-provided outpatient services into the physician 
volume performance standards, is necessary to control outpatient 
expenditures.
    ProPAC will submit additional recommendations to the Congress as 
part of its analysis of the pending report from the Secretary on 
outpatient payment. Problems with the current payment method, however, 
should not be ignored until a new system for outpatient services is 
fully implemented. Features of the current system that encourage cost 
and charge inflation and increase beneficiary liability should be 
changed immediately.
Recommendation 21: Revision of the Payment Formula for Outpatient 
Services
    Until prospective payment systems can be implemented for hospital 
outpatient services, the blend formula used to calculate hospital 
payments for ambulatory surgery center-approved procedures, radiology 
services, and diagnostic services should be revised. The formula should 
subtract beneficiary copayment after the total payment has been 
calculated. The resulting reduction in Medicare program payments to 
hospitals should be used to partially offset increases in program 
expenditures due to reducing beneficiary liability.
    The total Medicare payment for certain ambulatory surgery, 
radiology, and other diagnostic services is based on the lesser of 
costs, charges, or a blended amount. The beneficiary's copayment is 20 
percent of charges. Medicare's share is intended to be the total 
payment amount minus the beneficiary copayment. For facilities paid the 
blended amount, however, program payments are not reduced by the full 
amount of the copayment. Thus, total payments to hospitals for 
outpatient services are higher than the Congress intended.
    The formula that determines the blended amount combines two parts: 
the first is the hospital-specific portion of payment based on the 
lesser of costs or charges minus 20 percent of charges; the second is 
the prospective portion based on 80 percent of the applicable 
prospective rate. For ambulatory surgery, the prospective rate is the 
payment for the relevant procedure category used in paying free-
standing ambulatory surgery centers (ASCs). For radiology and 
diagnostic services, it is a portion of the payment in the physician 
fee schedule that is intended to represent the technical expense of 
providing that service.
    The second part of the formula, calculated at 80 percent of the 
prospective rate, inappropriately assumes that 20 percent of the 
prospective rate equals 20 percent of charges (the copayment). In fact, 
charges are usually much higher than the prospective rate. Because the 
full contribution of beneficiary cost sharing is not captured. 
Medicare's share of hospital payments is overstated. To correct the 
formula, the copayment should be subtracted after the calculation of 
the total amount. For ambulatory surgery, the current and the corrected 
payment calculations are illustrated in Figure 2-1.
    The Commission believes the current blend formula results in 
payments to hospitals that are higher than the Congress intended. 
Additionally, this quirk in the formula provides a strong incentive for 
hospitals to increase charges, which increases beneficiary liability 
and total payments to the hospital.
    Correcting the formula would substantially reduce hospital 
payments. The Commission recommends this reduction in program 
expenditures should be used to partially offset the increase in program 
expenditures for outpatient services that results from setting the 
beneficiary copayment at 20 percent of payments rather than at 20 
percent of charges. (See Recommendation 22.).

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Recommendation 22: Beneficiary Liability for Hospital Outpatient 
Services
    Beneficiary coinsurance for hospital outpatient services should be 
limited to 20 percent of the Medicare-allowed payment, as it is in 
other settings. For services not paid on a prospective basis, 
beneficiary copayment would need to be estimated because it is not 
known at the time of service delivery.
    Medicare payment to hospitals for most outpatient services is based 
at least partly on costs or charges. Payment for these hospital 
outpatient services is not prospective. Therefore, it is known until 
the annual Medicare Cost Report is settled. Consequently, beneficiary 
liability is set at 20 percent of charges, rather than at 20 percent of 
payments as it is for the same services in other settings. Because 
hospital charges generally are higher than the costs of Medicare 
payments for outpatient services, beneficiaries are responsible for 
substantially more than 20 percent of costs or payments. In addition, 
for most providers charges have grown more rapidly than payments, 
resulting in disproportionate increases in beneficiary cost sharing.
    HCFA estimated that, in fiscal year 1993, beneficiaries were 
responsible for 33 percent of the facility portion of hospital 
outpatient spending. This is considerably more than if the services had 
been provided in other ambulatory settings. This difference in cost 
sharing unfairly penalizes beneficiaries who receive care in hospital 
outpatient departments. Further, it provides incentives for 
beneficiaries to choose a site of care on the basis of financial 
considerations rather than the appropriateness of the setting.
    ProPAC recommends reducing beneficiary liability for hospital 
outpatient services to 20 percent of payments. The Commission 
recognizes that until prospective payment is implemented for outpatient 
services, payment for a service will not be known at the time of 
delivery. Beneficiary liability based on payments, therefore, must be 
estimated. This could be done in several ways. Copayments could equal a 
lower percentage of charges, for example. Alternatively, the interim 
payment to charge ratio, which HCFA furnishes to all hospitals, could 
be used to determine the coinsurance amount for each service.
    The Commission believes it would be ideal to address beneficiary 
coinsurance in conjunction with the implementation of a prospective 
payment system for hospital outpatient services. (See Recommendation 
20.) It is not clear, however, when such a system will be in place. 
Reducing the coinsurance requirement thus should not be delayed until 
implementation of prospective payment. This change is necessary to 
reduce the significant burden on Medicare beneficiaries who receive 
outpatient services in a hospital.
    ProPAC understands that reducing beneficiary coinsurance will 
substantially increase Medicare outlays and reduce hospital payments. 
The Commission therefore recommends phasing in the change in 
beneficiary liability over a five-year period.
Recommendation 23: Limit the Length of Outpatient Observation Stays
    The Commission recommends limiting the length of hospital 
outpatient observation stays. Further, these changes should be 
coordinated with Peer Review Organizations so that appropriate short 
stay admissions are not denied. ProPAC supports HCFA's effort in this 
regard.
    Observation services are furnished by a hospital on an outpatient 
basis and include the use of a bed and periodic monitoring by a 
hospital's nursing staff. To be reimbursed by Medicare, these services 
must be reasonable and necessary to evaluate a patient's condition or 
determine the need for an admission. Medicare requires that the 
services are ordered by a physician. Observation stays are intended to 
last fewer than 24 hours, but there are no limits on how long an 
individual might stay under observation.
    When Medicare's prospective payment system was implemented, Peer 
Review Organizations examined short inpatient admissions to prevent 
hospitals from receiving the full DRG payment for unnecessary stays. 
Outpatient observation stays, paid on a cost basis, allowed Medicare 
reimbursement for services to beneficiaries who did not need to be 
admitted as inpatients.
    Before 1989, Medicare's policy specified that if an observation 
stay lasted more than 23 hours, the stay would be deemed an inpatient 
admission. Thus, the hospital would receive the relevant DRG payment, 
and the stay would be subject to PRO review. This policy was never 
published in the Federal Register, however, so implementation and 
administration were inconsistent. After 1989, the limits for 
observation stays were removed.
    ProPAC analysis indicates that even though observation stays are a 
small proportion of outpatient services, these stays--particularly long 
ones--are increasing. Because Medicare pays for these services on a 
cost basis, the growing number of longer observation stays has 
implications for higher Medicare outlays and beneficiary liability.
    In 1991, 2.3 percent of all outpatient bills had observation stay 
charges, an increase of 77 percent over 1989. The proportion of these 
bills with stays lasting more than two days increased from 7.1 percent 
in 1989 to 11.1 percent in 1991. The average change for all observation 
stays was $3,212 in 1991. The implications for beneficiary liability 
are substantial because copayments are currently set at 20 percent of 
charges. Compared with the $628 deductible for a hospital admission in 
1991, the beneficiary copayment for an observation stay lasting two or 
more days averaged $765.
    HCFA is planning to limit the length of multiple-day observation 
stays. The change would require hospitals to admit a patient who has 
been under observation in an outpatient department for two consecutive 
midnights. The hospital would receive payment under the appropriate 
DRG, and the stay would be subject to PRO review. These changes might 
increase the number of short inpatient stays: HCFA plans to coordinate 
with the PROs to ensure that appropriate short admissions are not 
disallowed. The Commission supports all these efforts.

[FR Doc. 94-12516 Filed 5-23-94; 8:45 am]
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