[Federal Register Volume 60, Number 148 (Wednesday, August 2, 1995)]
[Proposed Rules]
[Pages 39304-39306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-18770]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 412, 413, 424, 485, and 489

[BPD-825-CN]
RIN 0938-AG95


Medicare Program; Changes to the Hospital Inpatient Prospective 
Payment Systems and Fiscal Year 1996 Rates; Correction

AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Proposed rule; correction.

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SUMMARY: In the June 2, 1995, issue of the Federal Register (60 FR 
29202), we published a proposed rule addressing revisions to 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.
    Additionally, in the addendum to that proposed rule, we described 
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. The changes would be 
applicable to discharges occurring on or after October 1, 1995. We also 
set proposed rate-of-increase limits as well as proposing policy 
changes for hospitals and hospital units excluded from the prospective 
payment systems. This document corrects errors made in the proposed 
rule.
FOR FURTHER INFORMATION CONTACT: Nancy Edwards (410) 966-4532.
SUPPLEMENTARY INFORMATION: In our June 2, 1995, proposed rule (60 FR 
29202), we stated that we were including as Appendix C the report to 
Congress on our initial recommendation on the update factors for 
prospective payment hospitals and hospitals excluded from the 
prospective payment system (60 FR 29258). The report consists of 
letters to the President of the Senate and the Speaker of the House of 
Representatives. Subsequently, we discovered that the incorrect report 
was inadvertently printed in the proposed rule.
    In addition to publishing the proper report to Congress, we are 
making several other corrections to the June 2, 1995 proposed rule.
    The proposed rule (FR Doc 95-13183) published June 2, 1995 (60 FR 
29202) is corrected as follows:
    1. On page 29250, beginning at the bottom of the second column, 
section VIII.B.9 of the preamble is deleted and replaced with the 
following: 9. PPS Payment Impact File
    This file contains data used to estimate FY 1996 payments under 
Medicare's prospective payment systems for hospitals' operating and 
capital-related costs. The data are taken from various sources, 
including the Provider-Specific File, the PPS-IX and PPS-X 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 system published in the Federal Register. This file 
is available for release one month after publication of the proposed 
rule in the Federal Register, with an updated version available one 
month after publication of the final rule.
Media: Diskette
File Cost: $145.00
Periods Available: FY 1996 PPS Update
Sec. 412.23  [Corrected]
    2. On page 29251, second column, in Sec. 412.23(e)(2)(i), at the 
end of the fifth line, add the word ``or''.
    3. On page 29329, Table 6c--Invalid Diagnosis Codes is corrected 
and new Table 6d--Invalid Procedure Codes is added to read as follows:

                                       Table 6c.--Invalid Diagnosis Codes                                       
----------------------------------------------------------------------------------------------------------------
  Diagnosis                                                                                                     
     code                         Description                         CC           MDC               DRG        
----------------------------------------------------------------------------------------------------------------
005.8........  Other bacterial food poisoning..................  N                       6  182, 183, 184.      
278.0........  Obesity.........................................  N                      10  296, 297, 298.      
415.1........  Pulmonary embolism and infarction...............  Y                       4  78                  
                                                                                        15  387, 389.           
569.6........  Colostomy and enterostomy malfunction...........  Y                       6  188, 189, 190.      
690..........  Erythematosquamous dermatosis...................  N                       9  283, 284.           
787.9........  Other symptoms involving digestive system.......  N                       6  182, 183, 184.      
989.8........  Toxic effect of other substances, chiefly         N                      21  449, 450, 451.      
                nonmedicinal as to source.                                                                      
997.0........  Central nervous system complications............  Y                       1  34, 35              
                                                                                        15  387, 389.           
997.9........  Complications affecting other specified body      Y                      21  452, 453.           
                systems, not elsewhere classified.                                                              
V12.5........  Personal history of diseases of circulatory       N                      23  467.                
                system.                                                                                         

[[Page 39305]]
                                                                                                                
V43.8........  Organ or tissue replaced by other means, not      N                      23  467                 
                elsewhere classified.                                                                           
V59.0........  Blood donor.....................................  N                      23  467.                
----------------------------------------------------------------------------------------------------------------



                                       Table 6d.--Invalid Procedure Codes                                       
----------------------------------------------------------------------------------------------------------------
  Procedure                                                                                                     
     code                         Description                         OR           MDC               DRG        
----------------------------------------------------------------------------------------------------------------
33.5.........  Lung transplant.................................  Y                     Pre  495.                
39.7.........  Periarterial sympathectomy......................  Y                       5  478, 479.           
60.2.........  Transurethral prostatectomy.....................  Y                      11  306, 307.           
                                                                                        12  336, 337, 476.      
----------------------------------------------------------------------------------------------------------------

    4. On pages 29376 through 29379, appendix C is removed and the 
following added in its place:

Appendix C--Report to Congress on the Update Factor for Prospective 
Payment Hospitals and Hospitals Excluded From the Prospective Payment 
System
The Secretary of Health and Human Services

Washington, DC 20201

May 26, 1995.
The Honorable Albert Gore, Jr.,
President of the Senate, Washington, D.C. 20510
    Dear Mr. President: Section 1886(e)(3)(B) of the Social Security 
Act (the Act) requires me to report to Congress the initial estimate 
of the applicable percentage increase in inpatient hospital payment 
rates for Fiscal Year (FY) 1996 that I will recommend for hospitals 
subject to the Medicare prospective payment system (PPS) and for 
hospitals and unites excluded from PPS. This submission constitutes 
the required report.
    My recommendations are consistent with the provisions of the 
Omnibus Budget Reconciliation Act (OBRA) of 1993 in which I am 
required to establish the update for PPS hospitals in both large 
urban areas and other areas as the market basket rate of increase 
reduced by 2.0 percentage points. The Office of Management and 
Budget currently estimates the PPS market basket rate of increase 
for FY 1996 to be 3.4 percent. Accordingly, we recommend an update 
for both large urban and other areas of 1.4 percent.
    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 PPS rate. Under 
our recommendation and OBRA 1993, the update to hospital-specific 
rates equals the increase for all PPS hospitals; that is, market 
basket rate of increase of 3.4 percent minus 2.0 percentage points, 
or 1.4 percent.
    Hospitals and distinct part hospital units that are excluded 
from PPS are paid based on their 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 (3.4 percent) minus the applicable reduction for each 
hospital. The applicable reduction with respect to a hospital is the 
lesser of 1 percentage point or the percentage point difference 
between 10 percent and the hospital's update adjustment percentage 
for the fiscal year. Therefore, the hospital-specific update can 
vary between 2.4 and 3.4 percent. The weighted average update to the 
payment limit for PPS excluded hospitals and units equals 2.85 
percent.
    My recommendation for the updates is based on current 
projections of relevant data. A final recommendation on the 
appropriate percentage increases for FY 1996 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 also requires that I 
include in my report recommendations with respect to adjustments to 
the diagnosis-related group (DRG) weighting factors. At this time I 
do not anticipate recommending any adjustment to the DRG weighting 
factors for FY 1996.
    I am pleased to provide my recommendations to you. I am also 
sending a copy of this letter to the Speaker of the House of 
Representatives.

        Sincerely,
Donna E. Shalala.

The Secretary of Health and Human Services

Washington, DC 20201

May 26, 1995.
The Honorable Newt Gingrich,
Speaker of the House of Representatives, Washington, D.C. 20515
    Dear Mr. Speaker: Section 1886(e)(3)(B) of the Social Security 
Act (the Act) requires me to report to Congress the initial estimate 
of the applicable percentage increase in inpatient hospital payment 
rates for Fiscal Year (FY) 1996 that I 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.
    My recommendations are consistent with the provisions of the 
Omnibus Budget Reconciliation Act (OBRA) of 1993 in which I am 
required to establish the update for PPS hospitals in both large 
urban areas and other areas as the market basket rate of increase 
reduced by 2.0 percentage points. The Office of Management and 
Budget currently estimates the PPS market basket rate of increase 
for FY 1996 to be 3.4 percent. Accordingly, we recommend an update 
for both large urban and other areas of 1.4 percent.
    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 PPS rate. Under 
our recommendation and OBRA 1993, the update to hospital-specific 
rates equals the increase for all PPS hospitals; that is, market 
basket rate of increase of 3.4 percent minus 2.0 percentage points, 
or 1.4 percent.
    Hospitals and distinct part hospital units that are excluded 
from PPS are paid based on their 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 (3.4 percent) minus the applicable reduction for each 
hospital. The applicable reduction with respect to a hospital is the 
lesser of 1 percentage point or the percentage point difference 
between 10 percent and the hospital's update adjustment percentage 
for the fiscal year. Therefore, the hospital-specific update can 
vary between 2.4 and 3.4 percent. The weighted average update to the 
payment limit for PPS excluded hospitals and units equals 2.85 
percent.
    My recommendation for the updates is based on current 
projections of relevant data. A final recommendation on the 
appropriate percentage increases for FY 1996 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).

[[Page 39306]]

    Section 1886(d)(4)(C)(iv) of the Act also requires that I 
include in my report recommendations with respect to adjustments to 
the diagnosis-related group (DRG) weighting factors. At this time I 
do not anticipate recommending any adjustment to the DRG weighting 
factors for FY 1996.
    I would be pleased to discuss this recommendation with you. I am 
also sending a copy of this letter to the President of the Senate.

    Sincerely,
Donna E. Shalala.
    5. On page 29380, appendix D, second column, the second full 
paragraph is removed and the following added in its place:
    In its March 1, 1995 report, ProPAC recommended update factors to 
the standardized amounts equal to the percentage increase in the market 
basket minus 1.8 percentage points for hospitals in both large urban 
and other areas. Based on its current market basket rate of increase 
estimate of 3.4 percent, ProPAC's recommended update to the 
standardized amounts equals 1.6 percent for hospitals in both large 
urban and other areas. ProPAC recommended that the update for the 
hospital-specific rates applicable to sole community hospitals be the 
same factor as the rate for all other prospective payment hospitals. 
This recommendation would result in a 1.6 percent update to the 
hospital-specific rates. The components of ProPAC's update factor 
recommendations are described in detail in the ProPAC report, which is 
published as Appendix E to this document. We discuss ProPAC's 
recommendations concerning the update factors and our responses to 
these recommendations below.
    6. On page 29380, appendix D, section III is corrected up to the 
Response on page 29381, column 1 as follows:
III. ProPAC Recommendation for Updating the Prospective Payment System 
Standardized Amounts
    For FY 1996, ProPAC recommends that the standardized amounts be 
updated by the following factors:
     The projected increase in the HCFA hospital market basket 
index, currently estimated at 3.5 percent, with an adjustment of -0.1 
percentage points to account for the different wage and salary price 
proxies used for the ProPAC market basket rate of increase.
     A negative adjustment of 1.8 percentage points to correct 
for substantial error in the FY 1994 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 0.3 percentage points to 
encourage hospital productivity improvements; and
     A net adjustment of zero percentage points for case-mix 
change in FY 1995.
    Overall, the net increase employing the above factors is the 
percentage increase in the hospital market basket minus 1.9 percentage 
points. Based on HCFA's market basket estimate of 3.5 percent, ProPAC 
recommends that hospitals in large urban and other areas receive a 1.6 
percent update.
    7. On page 29383, Table 1--Comparison of FY 1996 Update 
Recommendations is removed and the following added in its place:

         Table 1.--Comparison of FY 1996 Update Recommendations         
------------------------------------------------------------------------
                                                      HHS       ProPAC  
------------------------------------------------------------------------
Market Basket...................................          MB          MB
Difference Between HCFA & ProPAC Market Baskets.  ..........        -0.1
                                                 -----------------------
Subtotal........................................          MB      MB-0.1
Policy Adjustment Factors Productivity..........   -0.7 to -            
                                                         0.8        -0.3
Intensity.......................................         0.0            
Science and Technology..........................  ..........        +0.3
Practice Patterns...............................  ..........       (\1\)
Real Within DRG Change..........................  ..........       (\2\)
                                                 -----------------------
      Subtotal..................................   -0.7 to -            
                                                         0.8        +0.0
Case Mix Adjustment Factors:                                            
    Projected Case Mix Change...................        -0.8        -1.0
    Real Across DRG Change......................         0.8        +0.8
    Real Within DRG Change......................       (\3\)        +0.2
                                                 -----------------------
      Subtotal..................................         0.0         0.0
    Effect of 1994 Reclassification and                                 
     Recalibration..............................        -0.3          --
Forecast Error Correction.......................        -1.8        -1.8
                                                 -----------------------
      Total Recommended Update..................   MB-2.8 to            
                                                      MB-2.9     MB-1.9 
------------------------------------------------------------------------
(\1\) Included in ProPAC's Productivity Measure.                        
(\2\) Included in ProPAC's Case Mix Adjustment.                         
(\3\) Included in HHS's Intensity Factor.                               

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: July 21, 1995.
Neil J. Stillman,
Deputy Assistant Secretary for Information Resources Management.
[FR Doc. 95-18770 Filed 8-1-95; 8:45 am]
BILLING CODE 4120-01-P