[Federal Register Volume 61, Number 170 (Friday, August 30, 1996)]
[Rules and Regulations]
[Pages 46166-46328]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22145]



[[Page 46165]]


_______________________________________________________________________

Part V





Department of Health and Human Services





_______________________________________________________________________



Health Care Financing Administration



_______________________________________________________________________



42 CFR Part 412, et al.



Medicare Program; Changes to the Hospital Inpatient Prospective Payment 
Systems and Fiscal Year 1997 Rates; Final Rule

  Federal Register / Vol. 61, No. 170 / Friday, August 30, 1996 / Rules 
and Regulations  

[[Page 46166]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 412, 413, and 489

[BPD-847-F]
RIN 0938-AH34


Medicare Program; Changes to the Hospital Inpatient Prospective 
Payment Systems and Fiscal Year 1997 Rates

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

ACTION: Final rule.

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SUMMARY: We are revising 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 systems. In addition, in the addendum to this final rule, we are 
describing 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 are applicable 
to discharges occurring on or after October 1, 1996. We are also 
setting forth rate-of-increase limits as well as policy changes for 
hospitals and hospital units excluded from the prospective payment 
systems.

EFFECTIVE DATE: This rule is a major rule as defined in Title 5, United 
States Code, section 804(2). Pursuant to 5 U.S.C. section 801(a)(3), 
this rule may not take effect until 60 days after the report required 
by that section is submitted to the Congress, which is October 29, 
1996. However, for purposes of the policy discussions in this document, 
we have assumed that the effective date of this final rule will be 
October 1, 1996, the earliest date by which this rule could take effect 
under 5 U.S.C. section 801 and the Medicare statute.

ADDRESSES: 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 
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number and expiration date. Credit card orders can also be placed by 
calling the order desk at (202) 512-1800 or by faxing to (202) 512-
2250. The cost for each copy is $8.00. 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.

FOR FURTHER INFORMATION CONTACT:

Nancy Edwards (410) 786-4531: Operating Prospective Payment, DRG, Wage 
Index Issues.
Tzvi Hefter (410) 786-4529: Capital Prospective Payment, Direct 
Graduate Medical Education, Excluded Hospitals.

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 care 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.
    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 the Provisions of the May 31, 1996 Proposed Rule

    On May 31, 1996, we published a proposed rule in the Federal 
Register (61 FR 27444) setting forth proposed changes to the Medicare 
hospital inpatient prospective payment systems for both operating costs 
and capital-related costs which would be effective for discharges 
occurring on or after October 1, 1996. The following is a summary of 
the major issues addressed and changes that we proposed to make:
     We proposed changes for FY 1997 DRG classifications and 
relative weighting factors as required by section 1886(d)(4)(c) of the 
Act.
     We proposed to update the wage index for FY 1997. We also 
solicited comments on the possible expansion of the types of contract 
labor costs included in the wage index and on possible revisions in 
Puerto Rico labor market areas.
     We proposed revisions to the regulations governing the 
composition of the Medicare Geographic Classification Review Board 
(MGCRB).
     We proposed to use a rebased and revised hospital market 
basket in developing the FY 1997 update factor for the operating 
prospective payment rates, the capital prospective payment rates, and 
the excluded hospital rate-of-increase limits.
     We discussed several provisions of the regulations in 42 
CFR parts 412, 413, and 489 and set forth proposed changes concerning 
the following:

--Sole community hospitals.
--Rural referral centers.
--Disproportionate share adjustment.
--Direct graduate medical education payments.
--Hospital distribution of ``An Important Message from Medicare.''

     We discussed several provisions of the regulations in 42 
CFR part 412 concerning the prospective payment system for capital-
related costs, including possible adjustments to the capital Federal 
and hospital-specific rates, and set forth a proposed change concerning 
the use of simplified cost accounting.
     We discussed clarifications concerning the calculation of 
payments to hospitals excluded from the prospective payment system.
     In the addendum to the proposed rule, we set forth 
proposed changes to the amounts and factors for determining

[[Page 46167]]

the FY 1997 prospective payment rates for operating costs and capital-
related costs. We also proposed new update factors for determining the 
rate-of-increase limits for cost reporting periods beginning in FY 1997 
for hospitals and hospital units excluded from the prospective payment 
system.
     In Appendix A to the proposed rule, we set forth an 
analysis of the impact that the proposed changes would have on affected 
entities.
     In Appendix B to the proposed rule, we set forth our 
technical appendix on the proposed FY 1997 capital acquisition model.
     In Appendix C to the proposed rule, we set forth the data 
sources used to determine the market basket relative weights and choice 
of price proxies.
     In Appendix D to the proposed rule, we included our report 
to Congress on our initial estimate of an update factor for FY 1997 for 
both hospitals included in and hospitals excluded from the prospective 
payment systems as required by section 1886(e)(3)(B) of the Act.
     As required by sections 1886(e)(4) and (e)(5) of the Act, 
in Appendix E we provided our recommendation of the appropriate 
percentage change for FY 1997 for the following:

--Large urban area and other area 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.

     In the proposed rule, we discussed in detail the March 1, 
1996 recommendations made by the Prospective Payment Assessment 
Commission (ProPAC). 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 printed ProPAC's March 1, 1996 report, which included its 
recommendations, as Appendix F to the proposed rule. The 
recommendations, and the actions we proposed to take with regard to 
them (when an action is recommended), were discussed in detail in the 
appropriate sections of the preamble, the addendum, or the appendices 
to the proposed rule.
    Set forth below in this preamble, the addendum to this final rule, 
and the appendices are detailed discussions of the May 31 proposed 
rule, the public comments received in response to the proposed rule, 
and the responses to those comments, as well as the changes we are 
making. In addition, in section V.E.3 of this preamble, we address a 
recent statutory amendment to the Public Health Service Act that 
prohibits certain abortion-related discrimination by the Federal 
Government and State and local governments. The new statutory provision 
requires the Federal Government to deem accredited for certain purposes 
any postgraduate physician training program that would otherwise be 
accredited, except for the accrediting agency's reliance on certain 
standards concerning induced abortions.

C. Public Comments Received in Response to the May 31 Proposed Rule

    A total of 511 items of correspondence containing comments on the 
proposed rule were received timely. We received over 300 letters on 
payments for direct graduate medical education programs. The main other 
areas of concern addressed by the commenters were the following:
     Requests for changes in DRG classification and relative 
weights.
     Issues related to the wage index.
     Disproportionate share adjustment.
     Possible adjustments to the capital Federal and hospital-
specific rates.

II. 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 all 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 changes to the DRG 
classification system and the recalibration of the DRG weights for 
discharges occurring on or after October 1, 1996 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

[[Page 46168]]

classification changes and to recalibrate the DRG weights.
    Currently, cases are assigned to one of 492 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 five 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, bone marrow, and 
lung transplant (DRGs 480, 481, and 495, 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.
    We proposed to make several changes to the DRG classification 
system for FY 1997 and other decisions concerning DRGs. These proposed 
changes and other revisions, the comments we received concerning them, 
our responses to those comments, and the final DRG changes are set 
forth below.
2. Pre-MDC DRGs
    Effective October 1, 1994, ICD-9-CM procedure code 41.04, 
Autologous hematopoietic stem cell transplant, was created to capture 
the transplantation of stem cells obtained from bone marrow or 
peripheral blood. At that time, we designated the code as non-OR. When 
we created this code, we received comments requesting that it be 
designated as an OR procedure and assigned to DRG 481 (Bone Marrow 
Transplant) based on the resource use associated with the type of 
transplant. However, as we stated in the September 1, 1994 final rule 
(59 FR 45340), when a new code is introduced, our longstanding practice 
is to assign it to the same DRG category as its predecessor code. 
Because we could not separately identify the stem cell transplant cases 
from the other cases coded with 99.73 (the code previously used for 
stem cell transplant) in order to reclassify them and their charges to 
a new DRG, we were unable to predict the new weights of both the DRGs 
in which this code currently is classified and the new DRG to which it 
would be assigned. Therefore, we were prevented from redesignating code 
41.04 as an OR procedure or assigning it to a DRG. However, we stated 
that we would analyze the stem cell cases as soon as the FY 1995 cases 
were available.
    This year, the FY 1995 MedPAR file is available for use in DRG 
analysis and weight setting for FY 1997. Since the average resource use 
associated with stem cell transplant is similar to that associated with 
bone marrow transplant, we proposed to assign procedure code 41.04 to 
DRG 481 effective with discharges occurring on or after October 1, 
1996. In addition, we proposed to designate stem cell transplant as an 
OR procedure. In the proposed rule, we noted that, as set forth in the 
Medicare Coverage Issues Manual at section 35-30.1 (see Transmittal No. 
84, April 1996), autologous stem cell transplants are not covered when 
performed for the following conditions:
     Acute leukemia not in remission (diagnosis codes 204.00, 
205.00, 206.00, 207.00 and 208.00).
     Chronic granulocytic leukemia (diagnosis codes 205.10 and 
205.11).
     Solid tumors (other than neuroblastomas) (diagnosis codes 
140.0 through 199.1).
     Multiple myeloma (diagnosis codes 203.00, 203.01, and 
238.6).
    We received five comments supporting our proposal to assign 
procedure code 41.04 to DRG 481, and we will include this change in the 
final DRG classifications. Two other commenters had specific questions 
concerning the assignment of cases to DRG 481.
    Comment: One commenter questioned the DRG assignment of cases in 
which an autologous hematopoietic stem cell transplant is performed for 
one of the noncovered conditions such as acute leukemia not in 
remission or multiple myeloma. The commenter is unsure whether those 
cases would be assigned to DRG 481 or retain their current DRG 
assignment.
    Response: When a stem cell transplant is performed for a noncovered 
condition, the case will not be assigned to DRG 481. If the only reason 
that the patient is admitted to the hospital is to receive the 
noncovered procedure, then the case receives no Medicare payment 
because the hospital stay is not covered. If a patient receives a 
noncovered stem cell transplant during an otherwise Medicare-covered 
stay, then the case is assigned to a DRG based on the patient's 
principal and secondary diagnoses as well as any other covered 
procedure the patient receives. The stem cell transplant will not be 
considered in the DRG assignment.
    Comment: One commenter was concerned about the assignment of a case 
in which a kidney transplant patient receives an allogeneic bone marrow 
transplant (procedure code 41.03) from the kidney donor to reduce the 
incidence and magnitude of organ rejection. The commenter believes it 
is inappropriate to assign such a case to DRG 481 rather than DRG 302 
(Kidney Transplant) and that we should therefore revise the pre-MDC 
surgical hierarchy.
    Response: Allogeneic bone marrow transplants performed for purposes 
of reducing rejection during a kidney transplant have not yet been 
subject to a national coverage decision. Therefore, under HCFA policy, 
the Medicare contractors (Part A fiscal intermediaries and Part B 
carriers) determine, on a case-by-case basis, whether or not to cover 
and pay for such claims. If a contractor did decide that one of these 
claims should be covered, then it would be paid under DRG 481. If the 
contractor determines that the bone marrow transplant is not covered, 
the claim would be assigned to a DRG without considering the bone 
marrow transplant. In most cases, this assignment would be DRG 302.
3. MDC 1 (Diseases and Disorders of the Nervous System)
    a. Sleep apnea. As discussed in the proposed rule, we have received 
correspondence requesting that we review the DRG assignment of cases in 
which surgery is performed to correct obstructive sleep apnea 
(diagnosis code 780.57). When coded as a principal diagnosis, sleep 
apnea is assigned to DRGS 34 and 35 (Other Disorders of the Nervous 
System) 1 in MDC 1.
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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 DRG 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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[[Page 46169]]

    Recently, new surgical interventions to correct sleep apnea have 
been introduced. The procedures most frequently performed for this 
---------------------------------------------------------------------------
condition are the following:


------------------------------------------------------------------------
               Code                             Description             
------------------------------------------------------------------------
27.69............................  Other plastic repair of palate.      
29.4.............................  Plastic operation on pharynx.        
29.59............................  Other repair of pharynx.             
------------------------------------------------------------------------

    Since none of these surgical procedures is assigned to MDC 1, cases 
of sleep apnea treated with one of these surgeries are assigned to DRG 
468 (Extensive OR procedure Unrelated to Principal Diagnosis) or to DRG 
477 (Nonextensive OR Procedure Unrelated to Principal Diagnosis), 
depending on the procedure.
    We proposed to address this situation by assigning the three 
surgical procedures to MDC 1. Based on the charges associated with 
these cases and the fact that they are not clinically similar to the 
other surgical DRGs in MDC 1, we proposed to include them in DRGs 7 and 
8 (Peripheral and Cranial Nerve and Other Nervous System Procedures).
    We received two comments in support of the addition of codes 27.69, 
29.4 and 29.59 to DRGS 7 and 8. The commenters agree that these 
procedures are frequently used as surgical interventions to correct 
sleep apnea and are appropriately classified to DRGs 7 and 8. We also 
received two comments that disagreed, as discussed below.
    Comment: One commenter was opposed to moving the procedure codes to 
DRGS 7 and 8. The commenter stated that if the patient had obstructive 
sleep apnea, the more appropriate diagnosis code would be the 
underlying cause of the obstruction, such as upper airway blockage 
(diagnosis code 528.9, Other and Unspecified Diseases of the Oral Soft 
Tissues) or diagnosis code 478.29, Other Diseases of Pharynx for 
Redundant Pharyngeal Mucosa.
    Response: We agree that if the medical record provides a precise 
diagnosis for the obstruction, then that condition should be coded. 
However, information supporting these codes is not always provided in 
the medical record. Physicians frequently document obstructive sleep 
apnea as the reason for the surgery. In these cases, medical record 
coders are assigning code 780.57. As explained above, we believe that 
it is inappropriate to continue to assign these cases to DRGS 468 and 
477 and that the better policy is to assign the procedures to MDC 1.
    Comment: We received one comment suggesting that obstructive sleep 
apnea reported in conjunction with procedure codes 27.69, 29.4, or 
29.59 would be more appropriately classified to DRGs 76 and 77 (Other 
Respiratory System Procedures) in MDC 4 (Diseases of the Respiratory 
System). In addition, the commenter recommended that obstructive sleep 
apnea medical cases be assigned to DRGs 101 and 102 (Other Respiratory 
Diagnoses).
    Response: In order to properly classify each case, a diagnosis code 
may be assigned to only one MDC. Diagnoses in each MDC correspond to a 
single organ system or etiology and in general are associated with a 
particular medical specialty. In order to classify cases of obstructive 
sleep apnea to DRGs 76, 77, 101, and 102, code 780.57 would have to be 
reassigned from MDC 1 to MDC 4. We believe that obstructive sleep apnea 
is more appropriately classified to MDC 1; therefore, these cases 
cannot be assigned to a DRG in MDC 4.
    Comment: One commenter noted an error in the discussion of sleep 
apnea in the proposed rule. The second time we referred to the codes to 
be moved to MDC 1, we listed them as 25.59, 78.49, and 29.4 (see 61 FR 
27447).
    Response: In the proposed rule, we inadvertently referred to 
procedures codes 25.59 and 78.49. The codes that will be added to DRGs 
7 and 8 are 27.69, 29.4 and 29.59.
    b. Guillain-Barre Syndrome. Guillain-Barre syndrome (diagnosis code 
357.0) is a post-infectious polyneuropathy in which severely affected 
patients may require ventilatory assistance and long stays in intensive 
care. In recognition of the high resource consumption associated with 
this diagnosis, effective with FY 1991, we reassigned code 357.0 from 
DRGs 18 and 19 (Cranial and Peripheral Nerve Disorders) to DRG 20 
(Nervous System Infection Except Viral Meningitis). (See the September 
4, 1990 final rule (55 FR 36024).)
    We have recently received requests that we again review this 
assignment. These commenters stated that the treatment for these cases 
remains very costly and often entails long hospital stays. Therefore, 
we conducted an analysis of the cases assigned to DRG 20 using the 10 
percent random sample of the FY 1995 MedPAR file that we use for 
analyzing possible classification changes.
    Cases coded with 357.0 constitute approximately 20 percent of the 
cases assigned to DRG 20. The average standardized charges for these 
cases, approximately $22,400, was higher than the average charge for 
the DRG, approximately $17,100. However, the length of stay was 
virtually the same. Since we believe that DRG 20 is the appropriate 
assignment clinically for Guillain-Barre cases, we reviewed the other 
cases assigned to DRG 20 for possible change.
    We found that herpes zoster of the nervous system, NOS (diagnosis 
code 053.10) and herpes zoster of the nervous system, NEC (diagnosis 
code 053.19) had average charges of only $7,700 and $7,100, 
respectively. They also had lower average lengths of stay (6.2 and 6.1 
days, respectively). (In the proposed rule, we mistakenly cited these 
lengths of stay as 4.4 and 4.2, respectively (61 FR 27447).) Because 
these two diagnoses account for approximately 20 percent of the cases 
in DRG 20, their low average charge has the effect of significantly 
lowering the average charge for the DRG. We proposed to reassign these 
codes to DRGs 18 and 19.
    Comment: We received two comments regarding our proposal to assign 
diagnosis codes 053.10 and 053.19 to DRGs 18 and 19, both of which 
supported the change. However, one commenter noted that even though 
these cases obviously do not consume the amount of resources as other 
cases assigned to DRG 20, clinically, they are more closely related to 
cases in DRG 20 than those in DRGs 18 and 19. The commenter also 
expressed an interest in the length of stay and charges for geniculate 
herpes zoster (diagnosis code 053.11), which we did not propose to move 
from DRG 20.
    Response: We do not believe that reassigning these codes to DRGs 18 
and 19 is clinically unsound. There are currently two other herpes 
zoster diagnoses classified to those DRGs (Postherpetic trigeminal 
neuralgia (code 053.12) and postherpetic polyneuropathy (code 053.13)). 
Further, as the commenter noted, the charges and length of stay for 
053.10 and 053.19 are very close to those for the cases assigned to 
DRGs 18 and 19.
    We had considered moving all three herpes diagnosis codes (035.10, 
053.11, and 053.19) from DRG 20 to DRGs 18 and 19. However, the higher 
charges associated with geniculate herpes zoster ($11,000) and slightly 
higher length of stay (6.7 days) led us to decide instead to leave 
053.11 in DRG 20 and to closely monitor these cases in upcoming years.
4. MDC 5 (Diseases and Disorders of the Circulatory System)
    Effective for discharges occurring on or after October 1, 1995, we 
created a

[[Page 46170]]

new code for insertion of a coronary artery stent (procedure code 
36.06). Until creation of the new code, insertion of coronary artery 
stent had been included in the codes for percutaneous transluminal 
coronary angioplasty (PTCA) (procedure codes 36.01, 36.02, and 36.05).
    When a new code is introduced, our longstanding practice is to 
assign it to the same DRG category as its predecessor code or codes. 
Therefore, in the September 1, 1995 final rule (60 FR 45785), we 
assigned procedure code 36.06 to DRG 112 (Percutaneous Cardiovascular 
Procedures), the DRG to which PTCA is assigned. We also stated that the 
resource use and other data associated with procedure code 36.06 will 
be available in the FY 1996 Medicare cases which are used for analysis 
as part of FY 1998 DRG changes. We will evaluate the DRG assignment of 
coronary artery stent insertion at that time.
    Since publication of the September 1, 1995 final rule, we have 
received data on stent cases provided by the manufacturer of one of the 
two stent devices currently approved by the Food and Drug 
Administration (FDA). In addition, the manufacturer has provided us 
with an analysis of the charges and length of stay of approximately 
7,500 Medicare patients who received stents in FY 1995.
    The manufacturer's analysis found that the FY 1995 average charge 
for PTCA cases without stent is approximately $15,700 and the average 
charge for cases with stent is approximately $21,000. However, our 
analysis of the data shows that there is wide variation in the hospital 
standardized charges reported for cases with implant of coronary artery 
stent. Individual hospital average charges for these cases range from 
about $9,000 to over $45,000.
    This inconsistency in the data illustrates why our policy of not 
reassigning new codes until we have collected an entire year of coded 
Medicare data for analysis is prudent. The uncertainty associated with 
using incomplete data collected outside the Medicare program that 
cannot be verified remains a problem. Therefore, we did not propose any 
DRG assignment change for implant of coronary artery stent.
    Comment: We received five comments on this issue. One commenter 
agreed that the strategy of not assigning new codes into different DRGs 
until Medicare data have been collected and reviewed is appropriate. 
Four commenters requested that we take action this year. The commenters 
suggested various options for reassigning code 36.06: assign the code 
to its own DRG; move the code to a higher-weighted DRG (DRG 116, Other 
Permanent Cardiac Pacemaker Implant or AICD Lead or Generator Procedure 
was suggested); or increase the weight for DRG 112 to recognize that 
some of these cases involve stents.
    One commenter believes that if we delay action, hospitals will not 
be able to provide stent therapy to Medicare beneficiaries, thereby 
depriving them of state-of-the-art technology and better outcomes. The 
commenter noted that although the literature has reported higher costs 
(for example, cost of the device itself, increased anticoagulation 
therapy, more frequent monitoring) related to this procedure, there has 
also been some offset noted because of the reduction in followup 
medical costs. There is also the potential that further improvement in 
stent design, implantation techniques, and other anticoagulant therapy 
could further increase this offset by reducing vascular complications 
or length of stay.
    One commenter, the manufacturer of a coronary stent device, stated 
that the assignment of coronary stent implant to DRG 112 is 
inappropriate in light of the higher average lengths of stay and 
charges associated with this procedure compared to traditional 
angioplasty. The commenter argued that, given these differences, DRG 
reclassification of procedure code 36.06 would be consistent with the 
statutory mandate to adjust the DRG classifications and relative 
weights to ``reflect changes in treatment patterns, technology, and 
other factors which may change the relative use of hospital 
resources.'' (Section 1886(d)(4)(C) of the Act.)
    The commenter also cited 1,200 peer-reviewed clinical publications 
that demonstrate superior clinical outcomes with coronary stent 
implant. Finally, the commenter stated that the variation in hospital 
standardized charges for coronary stent implant cases is less than the 
variation in charges for all PTCA cases without stent implant.
    Response: As we stated in the proposed rule (61 FR 27447) and in 
the September 1, 1995 final rule (60 FR 45785), our practice is to 
assign a new code to the same DRG or DRGs as its predecessor code. One 
compelling reason for this practice is our inability to move the cases 
associated with the new code to a new DRG assignment as part of the DRG 
reclassification and recalibration process. Because the code is new, we 
cannot identify the stent cases in DRG 112 to remove the charges from 
that DRG, revise the relative weight accordingly, and move those cases 
to another DRG and establish the revised weight of that DRG.
    We do not disagree with the commenters that the stent implant cases 
are more costly, on average, than other PTCA cases. We also do not 
dispute the clinical superiority of this treatment for certain 
patients. However, until we can review actual Medicare data to 
determine exactly what the difference in charges is, we cannot make a 
reasoned decision as to whether those cases should be moved to another 
DRG or be assigned to a new DRG. We believe that waiting for 
appropriate data is entirely consistent with our statutory duty to 
adjust DRG classifications.
    Regarding the comment on the variation in charges for stent versus 
nonstent PTCA cases, we note that the charges for a specific procedure 
should vary less than the charges for a set of cases that vary in 
severity and for which many different treatments may be performed. That 
is, the homogeneity of the patients who received a stent implant should 
reflect a lower degree of variation.
    Finally, analysis of data provided by the stent manufacturer 
convinced us that Medicare beneficiaries have access to stent implants 
that is at least equal to the general population. Moreover, we note 
that it is a violation of a hospital's Medicare provider agreement to 
place restrictions on the number of Medicare beneficiaries it will 
accept for treatment unless it places the same restrictions on all 
other patients. We will carefully examine the PTCA cases with and 
without stent implant in the FY 1996 claims data file as soon as it is 
available. Any DRG changes we determine are supported by the data will 
be addressed in the FY 1998 proposed rule.
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue)
    In the proposed rule, we reviewed the DRG assignment in MDC 8 of 
bipolar hip replacement cases as a follow-up to a comment received last 
year. The commenter believed that the procedure for partial hip 
replacement (code 81.52), currently assigned to DRG 209 (Major Joint 
and Limb Reattachment Procedures of Lower Extremity), is very similar 
to the procedure for open reduction of fracture of the femur with 
internal fixation (code 79.35), which is assigned to DRGs 210, 211, and 
212 (Hip and Femur Procedures Except Major Joint). Further, the 
commenter noted that partial hip replacement patients are more frail 
individuals than the population that elects total hip replacement and 
need longer hospital stays to recover.

[[Page 46171]]

    After reviewing the FY 1995 MedPAR file, we concluded that the 
charges and lengths of stay for partial hip replacement cases assigned 
to DRG 209 were very similar to the other cases assigned to DRG 209. 
However, the average charge for cases in DRG 210 was significantly less 
than the partial hip replacement charges. We note that the length of 
stay for partial hip replacement cases was closer to the average length 
of stay for DRG 210. However, the higher charges of the partial hip 
replacement cases indicate that they are more resource-intensive than 
the cases in DRG 210 and similar to the cases in DRG 209. Therefore, we 
proposed to retain procedure code 81.52 in DRG 209.
    We received three comments, all of which supported our proposal, 
and we will continue to assign partial hip replacement cases to DRG 
209.
6. 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 relative 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 procedure'' surgical class is 
uniformly ordered last in the surgical hierarchy of each MDC in which 
it occurs, regardless of the fact that the relative weights 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 
diagnosis 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 proposed 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 the 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.
    We proposed to revise the surgical hierarchy for the Pre-MDC DRGs, 
MDC 3 (Diseases and Disorders of the Ear, Nose, Mouth, and Throat), and 
MDC 10 (Endocrine, Nutritional and Metabolic Diseases and Disorders) as 
follows:
     In the Pre-MDC DRGs, we proposed to reorder Tracheostomy 
Except for Face, Mouth and Neck diagnoses (DRG 483) above Liver 
Transplant (DRG 480).
     In MDC 3, we proposed to reorder Cleft Lip and Palate 
Repair (DRG 52) and Sinus and Mastoid Procedures (DRGs 53 and 54) above 
Tonsillectomy and Adenoidectomy, Except Tonsillectomy and/or 
Adenoidectomy Only (DRGs 57 and 58).
     In MDC 10, we proposed to reorder Adrenal and Pituitary 
Procedures (DRG 286) above Amputation of Lower Limb for Endocrine, 
Nutritional, and Metabolic Disorders (DRG 285).
    We received two comments in support of the three surgical hierarchy 
changes. In addition, based on a test of the proposed changes using the 
most recent MedPAR file and the revised GROUPER software, we have found 
that the changes are still supported by the data and no additional 
changes are indicated. Therefore, we are incorporating these changes in 
this final rule.
7. Refinement of Complications and Comorbidities List
    a. Addition or Deletion of CCs. 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 previous years, we have 
made changes to the standard list of CCs, either by adding new CCs or 
deleting any of the diagnosis codes on the CC list.
    In the September 1, 1995 final rule (60 FR 45782), we added 
diagnosis code 008.49 (Bacterial enteritis) to the CC list.

[[Page 46172]]

In response to a request from one commenter that we also add diagnosis 
code 008.45 (Clostridium difficile), we stated that we would review 
that request as part of our DRG analysis for FY 1997. We have 
reevaluated diagnosis code 008.45 as well as the remainder of the 
``family'' of codes assigned to the category of Intestinal infections 
due to other specified bacteria (008.41, 008.42, 008.43, 008.44, 
008.46, and 008.47). Our analysis shows that all of these diagnoses, 
when present as a secondary condition, do lead to higher resource use. 
Therefore, we proposed to add the following diagnosis codes to the CC 
list:

008.41  Intestinal infections due to staphylococcus
008.42  Intestinal infections due to pseudomonas
008.43  Intestinal infections due to campylobacter
008.44  Intestinal infections due to yersinia enterocolitica
008.45  Intestinal infections due to clostridium difficile
008.46  Intestinal infections due to other anaerobes
008.47  Intestinal infections due to other gram-negative bacteria

    These diagnoses would be considered CCs for any principal diagnosis 
not shown in Table 6f, Additions to the CC Exclusions List (see 
discussion of CC Exclusions list in section V of the addendum below).
    This same commenter also requested that we add the following codes 
to the CC list:

331.0  Alzheimer's disease
423.9  Unspecified disease of the pericardium
348.5  Cerebral edema
333.4  Huntington's chorea
458.0  Orthostatic hypotension
458.9  Hypotension, not otherwise specified

    Our analysis of these codes demonstrated that their presence as a 
secondary diagnosis did not significantly add to the resource use of 
the case. Therefore, we did not propose to add them to the CC list.
    Finally, the commenter suggested that the following diagnoses be 
added as cardiovascular complications for DRG 121 (Circulatory 
Disorders with AMI and Cardiovascular Complications, Discharged Alive):

434.xx  Occlusion of cerebral arteries
436  Acute, but ill-defined, cerebrovascular disease

    Based on our analysis, charges associated with those cases were 
indeed comparable to the other cases assigned to DRG 121. However, when 
we sought the advice of our medical specialists (physicians who work 
directly for or under contract with HCFA), they strongly opposed adding 
these codes to the list of conditions for DRG 121 based on the fact 
that these are not cardiovascular complications. Therefore, they are 
not clinically similar to other cases assigned to this DRG.
    Our analysis of DRG 121 did reveal a large variation in the charges 
and lengths of stay within this DRG. We believe that a close 
examination of the list of complicating conditions assigned to DRG 121 
is needed. Therefore, we plan to perform a thorough analysis of the 
cases assigned to that DRG as part of our DRG analysis agenda for FY 
1998. In the meantime, we did not propose any change to DRG 121.
    We received three comments supporting the addition of the remainder 
of the ``family'' of codes for intestinal infection due to bacteria to 
the CC list. We received one comment in support of our decision not to 
add 331.0, 423.9, 348.5, 333.4, 458.0, and 458.9 to the CC list.
    Comment: Two commenters requested that we reconsider our decision 
not to add codes 434.xx (Occlusion of cerebral arteries) and 436 
(Acute, but ill-defined, cerebrovascular disease) to the list of 
conditions that are designated cardiovascular complications for 
assignment to DRG 121 (Circulatory Disorders with AMI and 
Cardiovascular Complications, Discharged Alive). One commenter noted 
that even though these diagnoses are not cardiac in nature, they are 
vascular complications. The other commenter stated that there are other 
conditions assigned to DRG 121, such as acute renal failure, that are 
not strictly cardiovascular conditions. The commenter supports our 
decisions to completely review DRG 121, but believes diagnosis codes 
434.xx and 436 should be added this year.
    Response: As explained in the proposed rule (61 FR 27449), in our 
initial analysis, cases assigned to DRG 121 that had these diagnoses 
coded as secondary conditions contained charges that were indeed 
comparable to the other cases assigned to DRG 121. However, our 
analysis of DRG 121 and the list of cardiovascular conditions revealed 
large variations in the charges and lengths of stay for cases within 
this DRG. Because the diagnoses associated with codes 434.xx and 436 
are not strictly cardiovascular in nature, we believe the better course 
would be to do a comprehensive review of DRG 121, including considering 
adding additional diagnosis as complicating conditions. We will address 
these issues as part of our DRG analysis agenda for FY 1998.
    b. CC Exclusions 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 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 a CC. (See the September 30, 1988 
final rule for the revisions made for the discharges occurring in FY 
1989 (53 FR 38485); the September 1, 1989 final rule for the FY 1990 
revisions (54 FR 36552); the September 4, 1990 final rule for the FY 
1991 revisions (55 FR 36126); the August 30, 1991 final rule for the FY 
1992 revision (56 FR 43209); the September 1, 1992 final rule for the

[[Page 46173]]

FY 1993 revisions (57 FR 39753); the September 1, 1993 final rule for 
the FY 1994 revisions (58 FR 46278); the September 1, 1994 final rule 
for the FY 1995 revisions (59 FR 45334); and the September 1, 1995 rule 
for the FY 1996 revisions (60 FR 45782).)
    The proposed rule reflected 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, 1996, as well as the 
proposed CC changes described above. (See section II.B.8, below, for a 
discussion of ICD-9-CM changes.) These changes are being made in 
accordance with the principles established when we created the CC 
Exclusions List in 1987.
    The changes discussed above have been added to Table 6g, Additions 
to the CC Exclusions List, in section V of the addendum to this final 
rule.
    Table 6g and 6h in section V of the addendum to this final rule 
contain the revisions to the CC Exclusions List that will be effective 
for discharges occurring on or after October 1, 1996. Each table shows 
the principal diagnoses with final 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 6g--Additions to the CC 
Exclusions List. Beginning with discharges on or after October 1, 1996, 
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 6h--Deletions from 
the CC Exclusions List. Beginning with discharges on or after October 
1, 1996, 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 for the National Technical Information Service (NTIS) of 
the Department of Commerce. It is available in hard copy for $92.00 
plus $6.00 shipping and handling and on microfiche for $20.50, plus 
$4.00 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, 1994, 1995, and 
1996) and those in Tables 6g and 6h 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, 1996.
    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 13.0, is available for $195.00, 
which includes $15.00 for shipping and handling. Version 14.0 of this 
manual, which will include the final FY 1997 DRG changes, will be 
available in October 1996 for $195.00. These manuals may be obtained by 
writing 3M/HIS at the following address: 100 Barnes Road; Wallingford, 
Connecticut 06492; or by calling (203) 949-0303. Please specify the 
revision or revisions requested.
8. 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 it would be appropriate to change the procedures 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
60.21  Transurethral prostatectomy
60.29  Other 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 prostatic 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, September 1, 1993, September 1, 
1994, and September 1, 1995, we moved several other procedures from DRG 
468 to 477. (See 55 FR 36135, 56 FR 43212, 57 FR 23625, 58 FR 46279, 59 
FR 45336, and 60 FR 45783, 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. This 
year's review did not identify any necessary changes; therefore, we did 
not propose to move any procedures from DRG 468 or DRG 477 to one of 
the surgical DRGs.
    b. Reassignment of Procedures Among DRGs 468, 476, and 477. We also 
reviewed the list of procedures that produce assignments to DRGs 468, 
476, and 477 to ascertain if any of those procedures should be moved 
from one of these DRGs to another 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 moved one procedure from DRG 468 to DRG 477.
    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 one procedure, Closed endoscopic biopsy of lung 
(code

[[Page 46174]]

33.27), a needle biopsy, that is significantly less resource-intensive 
than the other procedures assigned to DRG 468. Therefore, we proposed 
to move procedure code 33.27 to the list of procedures that result in 
assignment to DRG 477.
    In reviewing the list of procedures assigned to DRG 477, we did not 
identify any procedures that should be assigned to either DRG 468 or 
476. We did, however, identify the following procedures that we believe 
should be reassigned from an OR to a non-OR designation:

08.81  Linear repair of laceration of eyelid or eyebrow
08.82  Repair of laceration involving lid margin, partial-thickness
08.83  Other repair of laceration of eyelid, partial-thickness
08.84  Repair of laceration involving lid margin, full-thickness
08.85  Other repair of laceration of eyelid, full-thickness
08.86  Lower eyelid rhytidectomy
08.87  Upper eyelid rhytidectomy
08.89  Other eyelid repair

    Our analysis of the data associated with these eyelid repair 
procedures leads us to conclude that the procedures are performed 
following accidental injury or falls, incurred while the patient is in 
the hospital. These procedures, which are normally performed at bedside 
and do not necessitate a trip to the operating room, are significantly 
less resource-intensive than other procedures designated as OR 
procedures. Therefore, we proposed to change the procedures from OR to 
non-OR procedures. We noted that these procedures are assigned to 
surgical DRGs in MDCs 2, 9, 21, 22, and 24. With this change, cases in 
which procedure codes 08.81 through 08.89 are the only OR procedure 
codes listed would no longer be assigned to a surgical DRG.
    Comment: We received two comments that generally supported our 
proposal to move procedure code 33.27 to the list of procedures that 
result in assignment to DRG 477. However, one of the commenters was 
concerned because this code also includes transbronchial lung biopsy. 
The commenter believes that transbronchial lung biopsy is a high-risk 
procedure and questions whether this would be considered a nonextensive 
procedure.
    Response: In analyzing the procedures that produce assignments to 
each of DRG 468, 476, and 477 for possible reassignment, we evaluate 
average charges and lengths of stay. The cases in DRG 468 with 
procedure code 33.27 are significantly less resource-intensive than the 
other procedures assigned to DRG 468, and more closely resemble the 
average charge and length of stay for procedures classified to DRG 477. 
Although transbronchial lung biopsy may be a more difficult procedure 
to perform than other procedures assigned to 33.27, we do not know how 
many of these cases are actually assigned to DRG 468, that is, how many 
times this procedure is performed for an unrelated principal diagnosis. 
It is possible that the lower charges associated with closed endoscopic 
biopsy of lung cases in DRG 468 do not include many transbronchial lung 
biopsy cases. We also note that in MDC 4, procedure code 33.27 is not 
assigned to the major procedures DRG (DRG 75). In any case, our data 
support the reclassification of these procedures to DRG 477. Therefore, 
we are reassigning procedure code 33.27 from DRG 468 to DRG 477, as 
proposed.
    Comment: We received four comments regarding our proposal to 
designate procedure code category ``other repair of eyelid'' (codes 
08.81 through 08.89) as non-OR. Two commenters supported our decision, 
although one of those commenters stated that even though these 
procedures may not require an operating room, they may require a 
specialist. One commenter requested that we consider designating these 
eyelid repair codes as non-OR procedures that affect DRG assignment 
when the procedure is the only one performed in connection with a 
related principal diagnosis. The fourth commenter understood that our 
reason for making this change had to do with our belief that many of 
these injuries are sustained during hospital stays. That commenter 
believes that the causes surrounding the injury are not necessarily 
indicative of the nature of the services furnished or the procedures 
performed and that we should not make this change unless we reviewed 
the resources consumed delivering these services.
    Response: Our proposal to change the OR designation for these 
procedures was not based on where the injuries were incurred. Rather, 
we based the decision on our analysis of claims data as part of our 
annual review of procedures that result in assignment to DRGs 468, 476, 
and 477, and on the clinical opinions of our physician consultants. 
Cases in which 08.81 was coded as the only OR procedure, unrelated to 
the principal diagnosis, were the second most frequently assigned to 
DRG 477. Our evaluation of the average charges and length of stay for 
these cases was the deciding factor in our proposal. Both of these 
statistics were much lower for the eyelid repair cases than the average 
case assigned to DRG 477. In addition, the opinion of our medical staff 
was that these repairs would not normally necessitate a trip to the OR, 
even if they are performed by a specialist. Because there are so many 
cases of eyelid repair performed for unrelated diagnoses, we speculated 
that they were the result of injuries sustained while the patient was 
in the hospital.
    Regarding the request to designate codes 08.81 through 08.89 as 
non-OR procedures that affect DRG assignment in the MDCs to which they 
were previously assigned, we analyzed the FY 1995 MedPAR file cases in 
which one of these codes is assigned to DRG 40 and 41 (Extraocular 
Procedures Except Orbit) in MDC 2 (Diseases and Disorders of the Eye) 
and DRG 268 (Skin, Subcutaneous Tissue and Breast Plastic Procedures) 
in MDC 9 (Disease and Disorders of the Skin, Subcutaneous Tissue and 
Breast). In both DRGs 40 and 268 (no cases were assigned to DRG 41 in 
FY 1995), there were no cases in which an eyelid repair was the only 
related procedure coded. That is, in every case, there was another OR 
procedure code present on the claim that would cause it to be assigned 
to either DRG 40 or 268. This means that assignment of cases to these 
DRGs will not be affected by changing the OR designation for the eyelid 
repair codes.
9. 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 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

[[Page 46175]]

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 field, 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 5 and November 30, 1995, and finalized the coding 
changes after consideration of comments received at the meetings and in 
writing within 30 days following the November 1995 meeting. The initial 
meeting for consideration of coding issues for implementation in FY 
1998 was held on June 6, 1996. 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: Donna Pickett, Co-Chairperson; 
ICD-9-CM Coordination and Maintenance Committee; NCHS; Room 1100; 6525 
Belcrest Road; Hyattsville, Maryland 20782. Comments may be sent by E-
mail to: [email protected].
    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 Hospital Policy; Division of 
Prospective Payment System; C5-06-27; 7500 Security Boulevard; 
Baltimore, Maryland 21244-1850. Comments may be sent by E-mail to: 
[email protected].
    The ICD-9-CM codes changes that have been approved will become 
effective October 1, 1996. The new ICD-9-CM codes are listed, along 
with their DRG classifications, in Tables 6a and 6b (New Diagnosis 
Codes and New Procedure Codes, respectively) in section V of the 
addendum to this final 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.
    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, and other 
codes, or have been deleted, are in Table 6c (Invalid Diagnosis Codes). 
The procedure codes that have been replaced by expanded codes or have 
been deleted are in Table 6d (Invalid Procedure Codes). These invalid 
diagnosis and procedure codes will not be recognized by the GROUPER 
beginning with discharges occurring on or after October 1, 1996. The 
corresponding new or expanded codes are included in Tables 6a and 6b. 
Revisions to diagnosis and procedure code titles are in Tables 6e 
(Revised Diagnosis Code Titles) and 6f (Revised Procedure Code Titles), 
which also include the DRG assignments for these revised codes.
    Based on the comments received and our own review, we have 
corrected a code title and added omitted secondary DRG assignments to 
several codes in Tables 6a and 6b. The code title corrected is 995.59, 
Other child abuse and neglect. The codes for which DRG changes have 
been made are as follows:
     In Table 6a, MDC 15 and DRG 391 were added to 752.51 and 
752.52 because they are considered ``major problems'' in this DRG; 
922.31, 922.32, and 922.33 were modified to add MDC 24 and DRGs 484, 
485, 486, and 487; and MDC 15 and DRGs 387 and 389 were added to 
998.11, 998.12, 998.13, 998.51 and 998.59 because they are considered 
``major problems'' in these DRGs.
     In Table 6b, DRG 303 was added to code 59.03.
    Comment: One commenter supported the creation of new procedure 
codes for partial cholecystectomies; however, the commenter disagreed 
with their assignment to DRGs 193 and 194 (Biliary Tract Procedures 
except only Cholecystectomy with or without C.D.E.). The commenter 
believes that partial cholecystectomy (code 51.21) is similar to 
cholecystectomy (code 51.22) and laparoscopic partial cholecystectomy 
(51.23) is similar to laparoscopic cholecystectomy (51.24). Therefore, 
procedure codes 51.21 and 51.23 should be assigned to the same DRGs as 
51.22 and 51.24, respectively.
    Response: We agree with the commenter. Partial cholecystectomies 
are clinically similar to cholecystectomies and laparoscopic partial 
cholecystectomies are clinically similar to laparoscopic 
cholecystectomies, as well as being similar in terms of resource use. 
Therefore, we have revised Table 6b to indicate that procedure code 
51.21 is assigned to DRGs 195 and 196 (Cholecystectomy with C.D.E.) and 
DRGs 197 and 198 (Cholecystectomy except by Laparoscope) and 51.23 is 
assigned to DRGs 195 and 196 and DRGs 493 and 494 (Laparoscopic 
Cholecystectomy).
    Comment: We received one comment on modifications made to the ICD-
9-CM codes involving psychiatric diagnoses. The commenter had 
participated in the ICD-9-CM Coordination and Maintenance Committee 
meetings and had submitted written proposals for revisions. The 
commenter stated that although the proposed rule listed all final code 
revisions, it did not explain the final action on specific proposals or 
why that action was taken. The commenter suggested that this 
information be included in the final rule. The commenter also objected 
to changing the title of category V61.1 from ``Marital Problems'' to 
``Counseling for Marital and Partner Problems'' because it narrows the 
use of the category.
    Response: The National Center for Health Statistics (NCHS) has the 
lead responsibility for maintaining the diagnosis part of ICD-9-CM. As 
explained above, after receiving comments at the public meetings held 
by the Coordination and Maintenance Committee and reviewing subsequent 
written comments, NCHS proposes final revisions to ICD-9-CM diagnosis 
codes. These revisions are then jointly approved by NCHS and HCFA. The 
purpose of printing the final codes in the Federal Register is simply 
to notify the public and solicit comment on the proposed DRG 
classifications. We recommend that the commenter, or any other 
interested party, contact NCHS directly to discuss the final codes. If 
further revisions are sought, then these can be handled through future 
meetings of the Coordination and Maintenance Committee. We will forward 
the commenter's concerns on category V61.1 to NCHS for review.
    Comment: One commenter supported the ICD-9-CM code revisions for 
October 1, 1996, but suggested that rules relating to the sequencing of 
the new code V66.7, Encounter for palliative care, should be developed 
prior to its use beginning on October 1, 1996.
    Response: We agree with the commenter that medical records 
technicians and administrators will

[[Page 46176]]

need advice on coding this diagnosis. Specific directions in the form 
of a note within the tabular section of the ICD-9-CM will direct the 
coder to ``code first underlying disease'' when coding V66.7. The NCHS 
has also developed an extensive set of V code guidelines that will also 
clarify that V66.7 should be sequenced second. In addition, AHA 
routinely includes advice on the use of new and modified codes in the 
fourth quarter issue of their publication, Coding Clinic for ICD-9-CM 
Coding. This year's issue will clarify that V66.7 will be used only as 
a secondary diagnosis. The coding advice in Coding Clinic is a 
collaborative effort among HCFA, NCHS, AHA, and AHIMA. Information on 
ordering Coding Clinic can be obtained from the following: American 
Hospital Association, Central Office on ICD-9-CM, One North Franklin, 
Chicago, IL 60606, (312) 422-3366.
    Comment: Although the Committee made no revisions to the pacemaker 
codes, a commenter noted that there have been advances in pacemaker 
technology that may have an effect on coding and DRG classification. 
One new pacemaker device functions as a dual-chamber pacemaker 
(procedure code 37.83) but has only a single lead (procedure code 37.71 
or 37.73). If these pairs of codes are reported on a claim, the case is 
assigned to a medical DRG rather than DRG 115 or 116 (Permanent Cardiac 
Pacemaker Implant).
    Response: This coding issue was addressed recently by the Editorial 
Advisory Board of the Coding Clinic for ICD-9-CM. After consultation 
with the manufacturer of the new pacemaker device, the Board decided 
that, although this pacemaker has a single lead, it functions as dual 
electrodes. Therefore, the insertion of this pacemaker should be coded 
with procedure codes 37.83 and 37.72 (dual lead insertion). If a 
hospital follows this coding advice, the case will be classified to DRG 
115 or 116. This advice will be included in an upcoming issue of Coding 
Clinic. We will monitor this situation to determine if hospitals are 
following this coding advice or if a change in the DRG software is 
necessary.

C. Recalibration of DRG Weights

    We used the same basic methodology for the FY 1997 recalibration as 
we did for FY 1996. (See the September 1, 1995 final rule (60 FR 
45791).) That is, we recalibrated the weights based on charge data for 
Medicare discharges. However, we used the most current charge 
information available, the FY 1995 MedPAR file, rather than the FY 1994 
MedPAR file. The MedPAR file is based on fully-coded diagnostic and 
surgical procedure data for all Medicare inpatient hospital bills.
    The recalibrated DRG relative weights are constructed from FY 1995 
MedPAR data, based on bills received by HCFA through June 1996, from 
all hospitals subject to the prospective payment system and short-term 
acute care hospitals in waiver States. The FY 1995 MedPAR file includes 
data for approximately 11.1 million Medicare discharges.
    The methodology used to calculate the DRG relative weights from the 
FY 1995 MedPAR file is as follows:
     All the claims were regrouped using the final DRG 
classification revisions discussed above in section II.B of this 
preamble.
     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 
criteria as were used in computing the current weights. That is, we 
eliminated all cases that are outside of 3.0 standard deviations from 
the mean of the log distribution of both the charges per case and the 
charges per day for each DRG.
     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. 
A transfer case is counted as a fraction of a case based on the ratio 
of its length of stay to the geometric mean length of stay of the cases 
assigned to the DRG. That is, a 5-day length of stay transfer case 
assigned to a DRG with a geometric mean length of stay of 10 days is 
counted as 0.5 of a total case.
     We established the relative weight for heart and heart-
lung, liver, and lung transplants (DRGs 103, 480, and 495) in a manner 
consistent with the methodology for all other DRGs except that the 
transplant cases that were used to establish the weights were limited 
to those Medicare-approved heart, heart-lung, liver, and lung 
transplant centers that have cases in the FY 1995 MedPAR file. 
(Medicare coverage for heart, heart-lung, liver, and lung transplants 
is limited to those facilities that have received approval from HCFA as 
transplant centers.)
     Acquisition cost for kidney, heart, heart-lung, liver, and 
lung 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 
for heart and heart-lung transplants); DRG 480 (Liver Transplant); and 
DRG 495 (Lung 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 proposed to use that same case 
threshold in recalibrating the DRG weights for FY 1997. For this final 
rule, using the June 1996 FY 1995 MedPAR data set, there are 37 DRGs 
that contain fewer than 10 cases. We computed the weights for the 37 
low-volume DRGs by adjusting the FY 1996 weights of these DRGs by the 
percentage change in the average weight of the cases in the other DRGs. 
We note that the FY 1996 weights for the low-volume DRGs were 
recalculated based on non-Medicare data we acquired from 19 States. 
This was the first update of the weights since they were initially 
calculated for FY 1984 based on data from Maryland and Michigan. For a 
complete description of this process, see the September 1, 1995 final 
rule (60 FR 45781).
    The weights developed according to the methodology described above, 
using the 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

[[Page 46177]]

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 we have done in 
past years and as discussed in section II.A.4.b. of the addendum to 
this final rule, we are making a budget neutrality adjustment to assure 
that the requirement of section 1886(d)(4)(C)(iii) of the Act is met.

III. Changes to the Hospital Wage Index

A. Background

    Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary must 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 Metropolitan Statistical Areas (MSAs) (and New England County 
Metropolitan Areas), issued by the Office of Management and Budget 
(OMB). In addition, 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 requires that the wage index be 
updated annually beginning October 1, 1993. Furthermore, this section 
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 the wages and 
wage-related costs incurred in furnishing skilled nursing services.

B. FY 1997 Wage Index Update

    The final FY 1997 wage index (effective for hospital discharges 
occurring on or after October 1, 1996 and before October 1, 1997) is 
based on the data collected from the Medicare cost reports submitted by 
hospitals for cost reporting periods beginning in FY 1993 (the FY 1996 
wage index is based on FY 1992 wage data). We used the same categories 
of data that were used in the FY 1996 wage index. Therefore, the FY 
1997 wage index reflects the following:
     Total salaries and hours from short-term, acute care 
hospitals.
     Home office costs and hours.
     Fringe benefits associated with hospital and home office 
salaries.
     Direct patient care contract labor costs and hours.
     The exclusion of salaries and hours for nonhospital type 
services such as skilled nursing facility services, home health 
services, or other subprovider components that are not subject to the 
prospective payment system.
    Finally, we are making a minor revision to Sec. 412.63(s)(1) to 
state clearly that we update the wage index annually as required by 
section 1886(d)(3)(E) of the Act.
    Although we did not propose any changes in the reporting of 
hospital wage index data, we received comments regarding our current 
policies. (Comments specifically related to our policy on contract 
labor are addressed below in section III.D of this preamble.)
    Comment: We received several comments concerning the treatment of 
Medicare Part A physician salaries in the wage index calculation. One 
commenter stated that we should immediately exclude all of these costs, 
using Worksheet A-8-2 of the Medicare cost report to identify physician 
Part A costs. Alternatively, the commenter suggested that we should 
include contracted Part A physician salaries in those States where 
hospitals are prohibited from employing physicians. Two other 
commenters suggested we should prepare an impact analysis of the 
effects of the exclusion of Part A physician salaries.
    Response: As stated in the September 1, 1994 final rule (59 FR 
45355), effective with cost reporting periods beginning on or after 
October 1, 1994, we revised the Medicare cost report to provide for the 
separate reporting of all salary costs for physicians (including 
teaching physicians), interns and residents, and certified registered 
nurse anesthetists. After evaluating these data, we will consider 
appropriate changes in developing the FY 1999 wage index update.
    In response to the suggestion that we should use Worksheet A-8-2 to 
expedite our evaluation of excluding physician Part A salaries, we will 
explore the technical feasibility of using the data from that 
worksheet. Regarding the suggestion that we should allow contracted 
Part A physician salaries to be included in the wage index calculation 
in those States that do not allow hospitals to employ physicians 
directly, we note that, if we were to adopt such a policy it would not 
be effective until hospitals' FY 1997 cost reporting periods. 
Therefore, the data would not be available until the FY 2001 wage 
index. Because we are already collecting data that would allow us to 
exclude all physician Part A salaries by the FY 1999 wage index, we are 
not adopting this comment.
    With respect to the comments that we should prepare an analysis of 
the impact on the wage index of excluding Part A physician salaries, 
any such analysis is, of course, contingent upon having reliable data 
to analyze. At this point, we do not foresee having such data prior to 
the availability of hospitals' FY 1995 cost reports.
    Comment: A commenter stated that the wage index value of rural 
hospitals with swing-bed programs is unfairly deflated by the inclusion 
of the lower salaries related to skilled nursing level care provided to 
patients in swing-beds. The commenter indicated that since hospitals 
can separately identify these salaries, they should be excluded from 
total salaries to be consistent with the way salaries are reported for 
hospitals without a swing-bed program.
    Response: Salaries related to skilled nursing level care provided 
to patients in swing-beds are not reported separately on the Medicare 
cost report. Salary costs for swing-beds are combined with those for 
general adult and pediatric care on the cost report at line 25 of 
Worksheet A. Therefore, it would not be possible under the current cost 
report format to remove from the wage index calculation these costs as 
we do for direct salaries associated with distinct part skilled nursing 
facilities and units. Furthermore, given the nature of the swing-bed 
program, we do not believe it would be appropriate to impose on 
hospitals the additional recordkeeping requirements that would be 
necessary to report these salaries.
1. Verification of Wage Data from the Medicare Cost Report
    The data for the FY 1997 wage index were obtained from Worksheet S-
3, Part II of the Medicare cost report. The data file used to construct 
the wage index includes FY 1993 data submitted to the Hospital Cost 
Report Information System (HCRIS). As in past years, we performed an 
intensive review of the wage data, mostly through the use of edits 
designed to identify aberrant data.
    In the proposed rule, we discussed in detail our review of the wage 
data as well as the process that hospitals could use to verify their 
wage data and submit requests for corrections if necessary (61 FR 
27455). To be reflected in the final wage index, wage data corrections 
had

[[Page 46178]]

to be reviewed, verified, and transmitted to HCFA through HCRIS by June 
17, 1996 (any changes after this date are limited to errors related to 
handling the data, as described below in section III.C of this 
preamble). All data elements that failed edits have been resolved and 
are reflected in this final rule.
2. Computation of the Wage Index
    As noted above, we are basing the FY 1997 wage index on wage data 
reported on the FY 1993 cost reports. The final wage index is based on 
data from 5,231 hospitals paid under the prospective payment system and 
short-term acute care hospitals in waiver States. The method used to 
compute the final 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, 1992 and before October 1, 
1993. In addition, we included data from a few hospitals that had cost 
reporting periods beginning in September 1992 and 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 these wage data as FY 1993 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 subprovider components not 
subject to the prospective payment system) from gross hospital salaries 
to determine net hospital salaries. To determine total salaries plus 
fringe benefits, we added direct patient care contract labor costs, 
hospital fringe benefits, and any home office salaries and fringe 
benefits reported by the hospital, to the net hospital salaries.
    Step 3--For each hospital, we adjusted the total salaries plus 
fringe benefits resulting from Step 2 to a common period to determine 
total adjusted wages. To make the wage inflation adjustment, we used 
the percentage change in average hourly earnings for each 30-day 
increment from October 14, 1992 through September 15, 1994, for 
hospital industry workers from Standard Industry Classification 806, 
Bureau of Labor Statistics Employment and Earnings Bulletin. The annual 
inflation rates used were 4.8 percent for FY 1992, 3.6 percent for FY 
1993, and 2.7 percent for FY 1994. 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                   
------------------------------------------------------------------------
         After                    Before             Adjustment factor  
------------------------------------------------------------------------
10/14/92...............  11/15/92...............  1.044482              
11/14/92...............  12/15/92...............  1.041408              
12/14/92...............  01/15/93...............  1.038343              
01/14/93...............  02/15/93...............  1.035287              
02/14/93...............  03/15/93...............  1.032240              
03/14/93...............  04/15/93...............  1.029203              
04/14/93...............  05/15/93...............  1.026174              
05/14/93...............  06/15/93...............  1.023154              
06/14/93...............  07/15/93...............  1.020143              
07/14/93...............  08/15/93...............  1.017141              
08/14/93...............  09/15/93...............  1.014147              
09/14/93...............  10/15/93...............  1.011163              
10/14/93...............  11/15/93...............  1.008920              
11/14/93...............  12/15/93...............  1.006683              
12/14/93...............  01/15/94...............  1.004450              
01/14/94...............  02/15/94...............  1.002223              
02/14/94...............  03/15/94...............  1.000000              
03/14/94...............  04/15/94...............  0.997782              
04/14/94...............  05/15/94...............  0.995570              
05/14/94...............  06/15/94...............  0.993362              
06/14/94...............  07/15/94...............  0.991159              
07/14/94...............  08/15/94...............  0.988961              
08/14/94...............  09/15/94...............  0.986767              
------------------------------------------------------------------------

    For example, the midpoint of a cost reporting period beginning 
January 1, 1993 and ending December 31, 1993 is June 30, 1993. An 
inflation adjustment factor of 1.020143 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 1993 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 direct patient care 
contract labor hours and home office hours to determine total hours.
    Step 5--As part of our editing process, we deleted data for eight 
hospitals for which we lacked sufficient documentation to verify data 
that failed edits because the hospitals are no longer participating in 
the Medicare program or are in bankruptcy status. We retained the data 
for other hospitals that are no longer participating in the Medicare 
program because these hospitals reflected the relative wage levels in 
their labor market areas during their FY 1993 cost reporting period.
    Step 6--Each hospital was assigned to its appropriate urban or 
rural labor market area prior to any reclassifications under sections 
1886(d)(8)(B) or 1886(d)(10) of the Act. Within each urban or rural 
labor market area, we added the total adjusted wages obtained in Step 3 
for all hospitals in that area to determine the total adjusted wages 
for the labor market area.
    Step 7--We divided the total adjusted wages 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 wages 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 $19.5533.
    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.
    We note that on June 28, 1996, OMB announced the designation of the 
Pocatello, Idaho MSA comprising Bannock County, Idaho and the 
Jonesboro, Arkansas MSA comprising Craighead County, Arkansas and the 
addition of Chester County, Tennessee to the Jackson, Tennessee MSA. 
These changes are reflected in the final wage index.
3. 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 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

[[Page 46179]]

the wage index value for the area to which they have been redesignated. 
Therefore, as provided in 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.
     If including the wage data for the redesignated hospitals 
increases the MSA wage index value, the MSA and the redesignated 
hospitals receive the combined wage index value.
     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 values 
increase as a result of excluding the wage data for the hospitals that 
have been redesignated to another area have their wage indexes 
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.
     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 those urban areas whose 
wage index values are already below the rural wage index and would be 
reduced by redesignations, 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. These areas 
receive the prereclassified wage index value. The prereclassified wage 
index value will apply as long as the MSA remains empty.
    The final wage index values for FY 1997 are shown in Tables 4a, 4b, 
and 4c in the Addendum to this final rule. The FY 1997 wage index 
values incorporate all hospital redesignations for FY 1997, withdrawals 
of requests for reclassification, wage index corrections, appeals, and 
the Administrator's review process. For FY 1997, 385 hospitals are 
redesignated for purposes of the wage index (hospitals redesignated 
under section 1886(d)(8)(B) or 1886(d)(10) of the Act). For hospitals 
that are redesignated, the wage index values are shown in Table 4c. For 
some areas, Table 4c shows more than one wage index value. 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, prior to the redesignation of hospitals, based on the FY 1993 
wage data. In addition, Table 3C in the addendum to this final rule 
includes the adjusted average hourly wage for each hospital based on 
the FY 1993 data. Hospitals should use the average hourly wage 
published in this final rule in applying to the MGCRB for wage index 
reclassifications that would be effective for FY 1998. The MGCRB will 
use the average hourly wage published in the final rule to evaluate a 
hospital's application for reclassification, unless that average hourly 
wage is later revised in accordance with the wage data correction 
policy described in Sec. 412.63(s)(2). In such cases, the MGCRB will 
use the most recent revised data used for purposes of the hospital wage 
index.

C. Requests for Wage Data Corrections

    In the proposed rule, we noted that we would make a diskette 
available in mid-August that contained the wage data used to construct 
the wage index values in this final rule. As with the diskette made 
available in March 1996, HCFA made the August diskette available to 
hospital associations and the public. (Please note that this data file 
is also available on HCFA's World-Wide Web page, public use files 
address (http://www.hcfa.gov/stats/stats.html).) This file is made 
available only for the purpose of identifying any potential errors made 
by HCFA or the intermediary in the handling of the final wage data that 
result from the process described above, not for the initiation of new 
wage data correction requests.
    In addition, as noted above, Table 3C in the Addendum to this final 
rule contains each hospital's adjusted average hourly wage used to 
construct the wage index values. A hospital can verify its average 
hourly wage as reflected on its cost report (after taking into account 
any adjustments made by the intermediary), by dividing the adjusted 
average hourly wage in Table 3C by the applicable wage inflation 
adjustment factors as set forth above in Step 3 of the computation of 
the wage index.
    As noted in the proposed rule, 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, after that point, neither the intermediary nor HCFA will 
accept the following types of requests in conjunction with this 
process:
     Requests for wage data corrections that were submitted too 
late to be included in the data transmitted to the HCRIS system on or 
before June 17, 1996.
     Requests for correction of errors made by the hospital 
that were not, but could have been, identified during the hospital's 
review of the March 1996 data.
     Requests to revisit factual determinations or policy 
interpretations made by the intermediary or HCFA during the wage data 
correction process.
    If, after reviewing the data in the August diskette or this final 
rule, a hospital believes that its wage data are incorrect due to a 
fiscal intermediary or HCFA error in the entry or tabulation of the 
final wage data, it should send a letter to both its fiscal 
intermediary and HCFA. The letters should outline why the hospital 
believes an error exists and provide all supporting information. These 
requests must be received by HCFA and the intermediaries no later than 
September 16, 1996. We have set this year's deadline one week earlier 
than last year's deadline because we found the later deadline made it 
difficult to evaluate the requests and recalculate the wage index 
values before

[[Page 46180]]

the start of FY 1997 (that is, October 1, 1996). Requests sent to HCFA 
should be sent to: Health Care Financing Administration, Office of 
Hospital Policy, Attention: Stephen Phillips, Technical Advisor, 
Division of Prospective Payment System; C5-06-27, 7500 Security 
Boulevard, Baltimore, Maryland 21244-1850. Each request must also be 
sent to the hospital's fiscal intermediary. 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.
    We believe the wage data correction process described above and in 
the proposed rule provides hospitals with sufficient opportunity to 
bring errors made during the preparation of the Worksheet S-3 to the 
intermediary's attention. Moreover, because hospitals had access to the 
wage data in mid-August, they will have had the opportunity to detect 
any data entry or tabulation errors made by the intermediary or HCFA 
before the implementation of the FY 1997 wage index on October 1, 1996. 
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 retain the 
right to make midyear changes to the wage index under very limited 
circumstances.
    Specifically, in accordance with Sec. 412.63(s)(2), we 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, before the beginning of FY 1997 (that is, by the 
September 16, 1996 deadline). As indicated earlier, since a hospital 
will have had 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 effective prospectively from the date the 
correction is made.
    Comment: One commenter commended us for making the wage data file 
available on the HCFA home page. The commenter also suggested that the 
file be updated frequently and include such additional information as 
the MSA name where the hospital is located, the applicable inflation 
adjustment factors, and the MSA to which each hospital has been 
reclassified by the MGCRB, if applicable.
    Response: The wage data file is currently updated twice a year, in 
mid-March and mid-August, in conjunction with the issuances of the 
proposed and final rules for the hospital inpatient prospective payment 
systems. This effort is very labor intensive, and since hospitals are 
able to submit cost reports throughout the year, it is impractical to 
update the wage data file more frequently. In addition, we would point 
out that the intent of making these data available is primarily to 
provide hospitals the opportunity to verify the data used in the 
calculation of their wage index. Updating this file more frequently is 
not necessary to fulfill this primary objective.
    Regarding the suggestion to include additional information on the 
wage data file that we make available to the public, we note that the 
suggested data elements are not necessary for the purpose of allowing 
an opportunity for providers to verify the accuracy of their wage data. 
We note that we publish the MSA names and inflation adjustment factors 
in the proposed and final rules, and the MSAs to which hospitals are 
reclassified can be found on the PPS Payment Impact Public Use File, 
available shortly after publication of the proposed and final rules.

D. Contract Labor--Costs Included in the Hospital Wage Index

    Our policy concerning inclusion of contract labor costs for 
purposes of calculating the wage index has evolved over the past 
several years. Primarily, this has occurred as we recognized the role 
of contract labor in meeting special personnel needs of many hospitals. 
In addition, improvements in the wage data have allowed us to more 
accurately identify contract labor costs and hours. As a result, 
effective with the FY 1994 wage index, we included the costs of direct 
patient care contract services in the wage index calculation. Effective 
with the FY 1999 wage index, which will use data from FY 1995 cost 
reports, we will begin to include the costs and hours of certain 
management contract services.
    In the proposed rule, we provided a general overview of the issues 
related to including contract labor costs in the wage index calculation 
and solicited comments from the public regarding further expansion of 
the types of contract labor costs included in the wage index. We also 
listed nine specific issues on which we were seeking public comment. 
The following background material is identical to the overview included 
in the proposed rule, but we believe it is useful as a reference for 
responding to many of the comments we received.
1. Background
    In the May 9, 1990 proposed rule (55 FR 19442), we reported the 
results of the 1988 wage index survey which collected, among other 
information, data on the costs and hours associated with direct patient 
care contract labor. All prospective payment hospitals completed the 
wage survey for their cost reporting periods ending in calendar year 
1988. The survey data indicated that hospitals had difficulty in 
tracking and recording the actual hours worked associated with the 
contract labor. In addition, there were reporting inconsistencies. For 
example, some hospitals inappropriately reported patient care services 
furnished directly by physicians, which are not included in the wage 
data because they are paid under Medicare Part B rather than Part A.
    In the May 9, 1990 proposed rule, we also discussed public comments 
we received in response to issues we raised related to including 
contract labor costs in the wage index. Specifically, in the May 8, 
1989 proposed rule (54 FR 19647), we requested comment on the following 
issues:
     Should the wage index include data on contract labor?
     Should the definition of contract services in the wage 
index survey be expanded to include services indirectly related to 
patient care, such as billing or housekeeping services?
    A majority of the commenters supported the inclusion of contract 
services, and many argued for the expansion of contract labor services 
to include indirect patient care services. Those opposed to including 
contract services, in addition to some commenters who supported 
including contract service costs, were concerned about the difficulty 
of accurately tracking and recording hours worked for all types of 
contract labor. Other commenters were also concerned that if a hospital 
contracts for services from outside its labor market area, the contract 
wages could artificially increase or decrease the hospital's area wage 
index. Based on the comments and the overall poor quality of the 1988 
survey data, we decided to exclude all contract labor from the FY 1991 
wage index.
    We stated that we would continue our analysis of contract labor. In 
addition, we announced that we would develop a new wage index survey 
with improved

[[Page 46181]]

instructions and auditing criteria to facilitate the inclusion of 
contract labor in future wage index updates. The new survey, Worksheet 
S-3, Part II, was included in the hospital cost report effective with 
cost reporting periods beginning on or after October 1, 1989.
    The Worksheet S-3, Part II consists of detailed information for use 
in the hospital wage index including contract labor for direct patient 
care services. In the instructions for completing this worksheet, 
contract labor costs and hours were limited to labor-related payments 
and hours attributable to direct patient care contract services, such 
as nursing services. Specifically, we instructed hospitals to exclude 
indirect patient care contract services (for example, management and 
housekeeping services), nonlabor-related expenses (for example, 
equipment and supplies), and any contract services for which labor-
related payments and hours could not be accurately determined.
    In the September 4, 1990 final rule (55 FR 36036), we discussed 
additional comments we received on the contract labor issue. Those 
commenters who supported the inclusion of contract labor stated that 
some hospitals, especially rural hospitals, are dependent on contract 
labor for nursing services, and it would be unfair not to include these 
wage data. Other commenters requested that the definition of contract 
labor be expanded to include indirect patient care services.
    We also received several comments requesting that we continue to 
exclude contract labor from the wage index. These commenters stated 
that the contract labor data are not reliable because of the difficulty 
in tracking and reporting hours and the lack of consistency in the 
reporting of contract labor. In addition, inclusion of nonlabor 
contract costs would inappropriately drive up labor costs, and contract 
labor brought in from outside the labor market area would artificially 
increase or decrease the area wage index value. Finally, commenters 
were concerned that contract labor costs are too variable, temporary, 
and not reflective of true wage costs. Therefore, some suggested that 
contract labor should not be included in the wage index.
    The FY 1994 wage index, which was based on the data collected on 
the Worksheet S-3, Part II, was the first to include direct patient 
care contract labor costs. In making the decision to include these 
costs, we analyzed hospitals' FY 1990 data to determine if it was 
sufficiently complete for inclusion in the wage index calculation (see 
the May 26, 1993 proposed rule (58 FR 30236)). We noted that, in most 
labor market areas, including contract labor in the wage index 
computation had little effect on the average hourly wage. We further 
stated that, based on our analysis of the data, including direct 
patient care contract labor would more accurately and fairly reflect 
wage levels across hospitals and MSAs. In the September 1, 1993 final 
rule, we also responded to comments from the hospital industry 
expressing concern that we did not recognize the costs of certain 
contract management services (58 FR 46296). In particular, many rural 
hospitals stated they were either unable to recruit or afford top 
managers such as hospital administrators and must contract for these 
services.
    In the September 1, 1994 final rule (59 FR 45355), we expanded the 
definition of contract labor for purposes of determining the hospital 
wage index to include the personnel costs and hours associated with 
certain contract management personnel. Contract management services 
would be limited to individuals working in the top four positions in 
the hospital: the Chief Executive Officer/Hospital Administrator, Chief 
Operating Officer, Chief Financial Officer, and Nursing Administrator. 
We noted that while exact titles may vary, individuals should be 
performing essentially the same duties as customarily assigned these 
management positions.
    We further noted that, since the cost report did not provide at 
that time 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 (FY 1995). Hospitals were 
instructed to continue to exclude all management contract costs and 
hours until the FY 1995 data were reported (these data will be used to 
compute the FY 1999 wage index). In addition, we began requiring 
hospitals to provide descriptions and aggregate totals for all 
management contracts and complete details on all direct patient care 
contracts on the Form HCFA-339 (the Provider Cost Report Reimbursement 
Questionnaire). A hospital must file this form with its corresponding 
cost report.
    We continue to receive requests that we expand our contract labor 
definition to include more types of contract services in the wage 
index. In particular, we have been asked to include the costs for 
pharmacy and laboratory services on the basis that these services are 
consistent with our definition of direct patient care (see the 
September 1, 1995 final rule (60 FR 45792)). Others have asked that we 
expand our definition to include all contracted services, both direct 
and indirect patient care services, in order to more appropriately 
calculate relative hospital wage costs.
    We have limited the contract services that are included in the wage 
index to direct patient care services and specific management services 
for several reasons. First, hospitals reported difficulty in accurately 
tracking the hours associated with contract services, especially for 
off-site facilities that serve more than one hospital. Second, we are 
concerned about the contractor's ability to separate nonlabor costs 
from labor costs. We believe that the generally higher costs for 
contract labor compared to salaried labor, due at least in part to the 
added costs of overhead and supplies not separately identified in most 
contracts, may distort the wage index. Finally, we are concerned that 
it is difficult to remove the costs and hours for services such as 
legal and accounting from total management contracts.
    Our goal is to ensure that our wage index policy continues to be 
responsive to the changing need for contract labor, allowing those 
hospitals that must depend on contract labor to supply needed services 
to reflect those costs in their wage data. At the same time, however, 
we wish to avoid providing an opportunity for hospitals to inflate 
their average hourly wage inappropriately by including nonlabor 
contract costs. The advantage of our approach of including only 
contract labor costs and hours associated with direct patient care and 
specific management services is that it minimizes distortions in the 
wage index that are due to a hospital's inability to identify and 
exclude nonlabor costs. While changes to the wage index values are made 
in a budget neutral manner and are not expected to affect aggregate 
payments, we strive for policies that are equitable for all hospitals.
    Finally, due to the 4-year time lag between the cost reporting 
period itself and the fiscal year when data for that period are used in 
calculating the wage index, it is important that we anticipate any need 
to change our policy on contract labor. Therefore, in order to 
formulate the most responsive and responsible policy, we solicited 
comments on the following issues:
     To what extent do hospitals rely on the use of contract 
services?
     For which services are contracts typically used?
     Can hospitals accurately determine hours related to 
contract services?
     Can hospitals accurately isolate labor-related costs from 
nonlabor- related costs?
     Should the contract labor definition be expanded to 
include contract

[[Page 46182]]

services indirectly related to patient care?
     If contract labor remains limited to direct patient care, 
what categories of services, if any, in addition to those identified 
above, should be included?
     Would the wage index more accurately reflect relative wage 
levels if we did not limit contract labor to direct patient care 
(generally high wage) services?
     Would expanding the types of contract labor that are 
included in the wage index provide less incentive to hospitals to keep 
their labor costs low, as higher labor costs may result in a higher 
wage index value for that hospital or allow it to reclassify to a labor 
market with a higher wage index?
     What other issues should be considered in revising the 
policy for including contract labor in the wage index?
2. Discussion of Comments
    We received 27 individual letters addressing the issue of contract 
labor in the wage index. We appreciate the time and attention of all of 
the commenters. The information provided has already increased our 
understanding of the issue, and we intend to include in our future 
analyses an evaluation of many of the points made by commenters. The 
remainder of this section discusses the comments--first by responding 
to the general comments we received and some specific policy questions, 
then summarizing all of the responses we received to the questions 
listed above. Although we do not respond directly to these latter 
comments, they will aid us in our future consideration of this issue.
    Comment: One commenter who represents a national association of 
health systems noted that most of the issues raised by us in the 
proposed rule were addressed by a special wage index Medicare Technical 
Advisory Group (MTAG) work group. The commenter stated that ``(a)fter 
considering all these issues in the MTAG work group, HCFA decided to 
limit the inclusion of contract labor to direct patient care services. 
This was because, in general, these services are in revenue producing 
cost centers that have higher personnel costs (such as nursing 
services) where the treatment of contract labor in determining the wage 
index would have the greatest impact on hospitals. Also, these areas 
generally have had fewer problems than contract services provided in 
the overhead departments where average personnel costs are lower. 
Patient care contract labor is more often billed on an hourly rate, and 
because these are direct patient care services, they are generally 
performed by personnel working on the hospital premises and therefore 
include less indirect overhead cost from the contract organization. On 
the other hand, contract labor costs related to overhead departments 
normally has lower average cost, often includes more indirect overhead, 
and often the related hours are not available.''
    Response: We appreciate this commenter's past contributions into 
the development of our contract labor policies and believe that the 
commenter has presented a generally correct characterization of our 
rationale for our current policy on contract labor costs. However, as 
noted above, we are concerned that our policy continue to accurately 
measure wage costs in a rapidly changing hospital environment and, 
therefore, have solicited public input into our future policy 
considerations.
    Comment: Several commenters, including ProPAC, supported the 
principle that all contract labor costs should be included in 
calculating the wage index if they would have been included had the 
contract workers been employees of the hospital; but the commenters 
recognized the problems of accurately collecting contract labor costs. 
The Commission suggested that, in light of the increasing importance of 
adjusting payments to reflect input price variations in multiple 
settings with the accelerating integration of health care delivery, a 
need exists for a more comprehensive strategy for obtaining geographic 
input price data. Finally, ProPAC indicated it would ``be pleased to 
work with HCFA staff to develop and explore feasible approaches to a 
solution.''
    Response: We agree that, in principle, the wage index should 
measure labor costs across hospitals without regard to who employs the 
workers if such costs reflect relative wage levels and can be 
identified. We also agree that, as health care delivery becomes more 
integrated, so do the labor costs. Of course, we have increasingly been 
concerned with this issue as we have worked to develop prospective 
payment systems for various provider types. Therefore, we appreciate 
ProPAC's offer of cooperation in this regard and look forward to 
working together to address these issues.
    Comment: Several commenters disagreed with our definition of direct 
patient care contract labor, specifically, the exclusion of the costs 
of contracted laboratory and pharmacy services. One commenter stated 
that a preferable definition would include services that are directly 
identifiable and billable to individual patients. Laboratory and 
pharmacy services would be included in this definition. Another 
commenter called our exclusion discriminatory toward rural hospitals as 
rural hospitals are more likely to contract for a pharmacist than are 
urban facilities. This commenter stated that pharmacists do have direct 
patient care contact, noting that they dispense drugs to patients, 
provide patient education, and are required to participate on 
``interdisciplinary patient care'' teams.
    Response: While there may be some direct patient care contact in 
providing laboratory and pharmacy services, the amount varies across 
hospitals and is only a portion of the total time spent providing 
service to a hospital. As we noted in the proposed rule, one of the 
reasons we have limited the types of contract services included in the 
wage index calculation is that hospitals reported difficulty tracking 
the hours associated with off-site facilities that serve more than one 
hospital. Our experience and other comments we received indicate this 
is also the case for contracted laboratory and pharmacy services. For 
example, it is possible that a contracted pharmacist would spend part 
of an hour preparing medications for patients in more than one 
hospital.
    We recognize the necessity for many hospitals, particularly small 
and rural hospitals, to contract for pharmacy and laboratory services, 
which are likely to be relatively costly. In fact, this is one of the 
issues that led us to solicit public input into how our contract labor 
policy may be improved. We believe that the insight from the comments 
we received, as well as continuing communication with the hospital 
industry, will ultimately help to resolve these difficult issues.
    Comment: Several commenters representing hospital associations 
recommended that we reinstitute an MTAG to ``assist in developing the 
materials and definitions needed to implement these changes in 
collecting contract labor data * * *'' Other commenters recommended the 
initiation of a pilot study in selected regions to determine whether 
``using (contract labor) costs in the wage index methodology are worth 
the collection effort.''
    Response: Again, we appreciate the volume of the responses we 
received. Over the next few weeks, we will review our options for 
pursuing the reinstitution of an MTAG to evaluate the need to revise 
our policy on contract labor. We will also contact many of the national 
and State hospital associations that responded to our solicitation for 
further input.

[[Page 46183]]

    Comment: Several commenters pointed to the need for greater clarity 
regarding our definition of contract labor. There was a call for a 
``universal model and criteria'' for fiscal intermediaries to follow in 
determining allowable contract labor costs. One commenter submitted an 
example of what such a model could look like.
    Response: We have provided more detailed cost report instructions 
for reporting contract labor in periods beginning on or after October 
1, 1995. We will also include these more detailed instructions in the 
desk reviews of the FY 1995 cost reports. In addition, on FORM HCFA-339 
(the Provider Cost Report Reimbursement Questionnaire), we require 
hospitals to provide detailed information on contract labor costs 
currently included in the wage index calculation. This information 
consists of descriptions and aggregate costs and hours for top 
management contracts and costs and hours for each type of direct 
patient care contract.
    We will, however, continue to pursue opportunities for policy 
improvement. In that regard, we welcome the suggestions we received in 
response to the proposed rule, and encourage further input from 
interested parties in the future.
    Below, we summarize the comments we received in response to the 
specific questions listed in the proposed rule. Again, we note that 
while we are not responding to these comments here, we intend to take 
them into consideration in our future analysis of this issue.
     To what extent do hospitals rely on the use of contract 
services?
    According to the comments received, hospitals, particularly those 
in rural areas and smaller cities, rely on contract labor for a variety 
of services. In general, hospitals have begun to reduce ongoing labor 
costs by employing contract personnel in many operational areas. 
Because of fluctuating patient volumes, contract labor is a more cost 
effective alternative to direct hiring. Furthermore, some States 
prohibit the direct hiring of certain health care personnel; thus, 
these positions must be contracted. Hospitals located in areas 
experiencing shortages in health care personnel such as nurses and 
pharmacists also rely heavily on contract labor.
     For which services are contracts typically used? Virtually 
all of those who commented stated that hospitals contract for nursing 
and therapy (occupational, physical, respiratory, speech) services. 
Most commenters mentioned the following as services for which hospitals 
contract: radiology (including mammography and ultrasound); anesthesia; 
dietary (including therapeutic); psychological and social; pharmacy; 
laboratory and pathology; emergency room; medical records; 
housekeeping, laundry, and central supply; clerical; legal; accounting 
and audit; facility and equipment maintenance; and environmental. The 
following services were also mentioned by at least one commenter: 
surgery (technicians); air ambulance; management (e.g., medical 
director); information systems management; education; and biomedical 
engineering. Based on these comments, hospitals contract for every 
category of labor.
     Can hospitals accurately determine hours related to 
contract services?
    Most commenters stated that hospitals could accurately determine 
hours related to contract services, particularly for contracts billed 
on an hourly basis and for services such as laboratory, pharmacy, and 
management. Some commenters explained that their hospitals have 
established methods for tracking hours, such as time sheets maintained 
for hourly workers, or invoices that include the hours worked and the 
hourly rate. Others commented that, if necessary, systems to track 
hours (for example, log-in sheets) could easily be instituted. Several 
others suggested that hospitals could more accurately report hours 
associated with contract services if HCFA clarified the contract labor 
definition, developed acceptable methods for tracking hours and 
associated costs, and developed a universal model and criteria for the 
fiscal intermediaries to follow in auditing contract labor costs and 
hours.
    A few commenters stated concerns that hospitals may not be able to 
accurately report contract labor hours. One suggested there may be 
difficulty in reporting hours in situations where the contractor serves 
more than one client. One hospital explained that for some services, it 
does not report hours, or it relies on the contractor to supply the 
hours. For services such as physical therapy, this hospital pays 
contractors based on a percentage of revenue generated. One hospital 
association stated that hospitals may not be able to accurately 
determine the hours for services such as laundry, dietary, 
housekeeping, and maintenance. Another association explained that, 
while hospitals in its area are required to report contract hourly 
rates and hours for nonpatient care cost centers, evidence suggests 
that the data for many hospitals may not be completely accurate, 
reflecting the difficulty of capturing such detailed information.
     Can hospitals accurately isolate labor-related costs from 
nonlabor-related costs?
    Several commenters stated that hospitals can accurately isolate 
labor-related costs from nonlabor-related costs using invoices. One 
commenter explained that for services with little or no nonlabor costs, 
such as laboratory, pharmacy, and management, there is no need to 
identify and isolate these costs.
    On the other hand, one commenter suggested there may be difficulty 
in reporting hours in situations where the contractor serves more than 
one client. One hospital stated that it does not separate labor and 
nonlabor costs. One association stated that contracts for services such 
as laundry, dietary, housekeeping, and maintenance may include more 
nonlabor costs and may be more difficult for hospitals to isolate 
nonlabor costs. Another association believes that intermediaries are 
inconsistent in handling nonlabor costs and that HCFA needs to develop 
better guidelines.
     Should the contract labor definition be expanded to 
include contract services indirectly related to patient care?
    The majority of the commenters support expanding the definition of 
contract labor to include services indirectly related to patient care. 
Two commenters stated that, in principle, all contract labor costs and 
hours should be included if they would have been included had the 
workers been employed by the hospital. Two commenters responded that 
excluding contract labor services understates the cost of providing 
patient services and puts hospitals at a disadvantage. Two others 
commented that HCFA's definition of direct patient care is too 
restrictive and should be revised to include services that can be 
identified and billed separately and are not included in the routine 
care charge. One commenter, although in support of including indirect 
patient care contract services, recognized that considerable review 
would be necessary to determine which labor costs should be included as 
contract labor. Another commenter noted that reporting additional types 
of contract labor should not be considered an unnecessary burden. Two 
associations expressed concern that excluding large labor expenses, for 
services such as dietary and housekeeping, may create inconsistencies 
across labor market areas. Some commenters also suggested that we 
include the following services (that we consider indirectly related to 
patient care) in the definition of contract labor: pharmacy, dietary, 
clerical,

[[Page 46184]]

housekeeping and environmental, accounting and audit, legal, 
consultant, and medical director.
    Some commenters, including five large hospital associations, 
expressed concern over expanding the definition of contract labor to 
include indirect patient care services. Two commented it would add 
considerably to the complexity of tracking costs and determining which 
services should be included or excluded. One commenter added that, 
based on its analyses, it would be difficult to collect reliable data 
and that including contracted indirect patient care costs would have 
only a minor impact on the wage index. Another commented that problems 
that exist with contract labor data are more prevalent in nonrevenue 
producing areas.
     If contract labor remains limited to direct patient care, 
what categories of services, if any, in addition to those identified 
above, should be included?
    Commenters named the following services as those that should be 
included in the direct patient care definition of contract labor: 
dietary, anesthesia, social, pharmacy, laboratory, pathology, medical 
records, equipment maintenance, environmental management, central 
supply, and all clinical services.
     Would the wage index more accurately reflect relative wage 
levels if we did not limit contract labor to direct patient care 
(generally high wage services)?
    Five hospitals and ProPAC commented that the wage index would more 
accurately reflect relative wage levels if we did not limit contract 
labor to direct patient care. One stated that failure to include all 
contract labor could result in major biases in the wage index because 
contract services may vary substantially among types of hospitals and 
across labor market areas. Two rural hospitals argued that the current 
policy discriminates against rural hospitals because they are more 
likely to have to contract pharmacists and other personnel because of 
employee shortages in their wage areas.
    Three associations and a hospital commented that the wage index 
would not more accurately reflect relative wage levels if we did not 
limit contract labor to direct patient care. One explained that the 
results would not be more accurate by adding or subtracting categories 
of care; rather, the key to an accurate calculation is that the 
components are consistent for all hospitals, not how many components 
are included. Another added that, based on its analyses, including 
contracted indirect patient care costs would have only a minor impact 
on the wage index. A third commenter expressed concern that the time 
necessary at the hospital level to obtain this information and the time 
necessary for the intermediary to review such information would not be 
cost effective.
     Would expanding the types of contract labor that are 
included in the wage index provide less incentive to hospitals to keep 
their labor costs low, as higher labor costs may result in a higher 
wage index value for that hospital or allow it to reclassify to a labor 
market with a higher wage index?
    Commenters were unanimous in their belief that expanding the types 
of contract labor that are included in the wage index would not provide 
less incentive to hospitals to keep their labor costs low. Several 
commenters explained that hospitals in today's environment have every 
incentive to keep their costs down. Because Medicare is only one payer, 
allowing labor costs to increase for improved Medicare payment would 
put hospitals in an uncompetitive position as far as other payers are 
concerned. Also, it would take 4 years for those costs to be reflected 
in the wage index. One of them added that it is difficult to conceive 
of any situation in which a hospital would benefit from paying higher 
labor rates than necessary.
     What other issues should be considered in revising the 
policy for including contract labor in the wage index?
    An association, located in a mostly rural State, suggested that 
changes to expand contract labor should be made as soon as possible to 
provide a more accurate and equitable wage index for all hospitals.

E. Puerto Rico Wage Index Values

    For several years, hospitals in Puerto Rico have experienced large 
swings in their wage index values. We recognize that large shifts in 
the wage index values can cause shifts in the payment levels for a 
particular MSA. Because three of the six MSAs in Puerto Rico 
(Aguadilla, Arecibo, and Caguas) as well as the rural area have four or 
fewer hospitals, a large change in one hospital's wage data can cause a 
large increase or decrease in the wage index value for the entire MSA. 
One possible method to limit these annual swings in wage index values 
would be to create a single labor market area encompassing all the 
hospitals in Puerto Rico. That is, the six MSAs and the rural area 
could be combined into one area with one wage index value. A single 
labor market area would create a much larger set of hospitals to 
develop aggregate wage amounts and would mitigate situations where a 
change in the wage data of a single hospital has a large effect on the 
wage index of an MSA.
    If we created a single labor market area for Puerto Rico, we would 
do so in a budget neutral manner; therefore, the effect would be to 
raise wage index values for some hospitals in Puerto Rico and to lower 
the values for others. Because of the negative effect on some 
hospitals, rather than propose such a change, we solicited comment on 
this approach for mitigating the fluctuations in wage index values for 
hospitals in Puerto Rico. We noted that the potential change would have 
no impact on hospitals outside Puerto Rico. We received five comments 
in response to our solicitation. These comments and our responses are 
set forth below.
    Comment: All of the commenters expressed grave concern regarding 
the creation of a single MSA in Puerto Rico for purposes of the wage 
index. Most commenters objected to the negative impact this proposal 
would have on the wage index values of high wage areas. One commenter 
protested the elimination of large urban status for the San Juan MSA. 
Two commenters were concerned about the effect this change would have 
on hospitals that are able to reclassify through the MGCRB. One 
commenter noted that HCFA relies on OMB for MSA designations and OMB 
has not approved this change. Finally, a commenter stated that a single 
labor market area would not recognize the difference between tertiary 
and secondary hospitals.
    Response: We solicited comment on consolidating Puerto Rico into 
one labor market area because it was one method for addressing swings 
in wage index values within Puerto Rico without adversely affecting 
hospitals outside Puerto Rico. Since commenters do not favor this 
approach, we will not pursue the option. We note that this approach 
would not have eliminated large urban status of the San Juan MSA for 
standardized amount purposes. Puerto Rico would have been treated as 
one labor market area solely for wage index purposes.
    We have recently met with representatives of the Puerto Rico 
Hospital Association to explore other solutions to the problems faced 
by hospitals in the Commonwealth. In reviewing the latest Medicare cost 
report data available, we find that hospitals in Puerto Rico continue 
to demonstrate average Medicare operating margins comparable to all 
other prospective payment hospitals.
    Comment: One commenter urged an add-on adjustment of not less than 
7

[[Page 46185]]

percent to the Puerto Rico standardized amounts to account for the 
penalty resulting from the use of temporary cost allocation methods by 
government hospitals with a noncharge structure in Puerto Rico.
    Response: We do not believe it is appropriate to adjust the 
standardized amounts of Puerto Rico for those government hospitals with 
a noncharge structure when we have not adjusted the national 
standardized amounts applicable to all other hospitals to account for 
government hospitals with noncharge structures that are located in the 
50 States and the District of Columbia. We believe the prospective 
payment system should be fair and equitable to all hospitals, no matter 
where they are located.
    Comment: A commenter requested that we establish a wage index floor 
for the labor market areas in Puerto Rico.
    Response: The wage index measures relative wage levels across labor 
market areas. Since Puerto Rico labor market areas have not increased 
wages at the same average rate as all other hospitals, their wage index 
values have decreased accordingly. If we were to create a floor, it 
would improperly benefit labor market areas whose wages are not in line 
with the national experience. The hospitals receiving the floor wage 
index would receive artificially high DRG payments.
    In addition, we note that, if such a change were to ever be 
adopted, it would be implemented in a budget neutral manner. Thus, a 
wage index floor for hospitals in Puerto Rico would result in lower 
payments to other hospitals.
    Comment: Two commenters suggested that we eliminate the Puerto Rico 
rural area classification and classify those hospitals to the nearest 
MSA.
    Response: We do not believe it is appropriate to offer special 
treatment to hospitals located in the rural area of Puerto Rico. While 
we acknowledge certain limitations in the current geographic 
classification system, we have yet to find a system that is 
demonstrably better. (See the discussion on labor market area research 
in the June 2, 1995 proposed rule (60 FR 29218).) Unless we decide to 
adopt a new method for defining labor market areas, we will continue to 
use rural areas for hospitals in counties that are not designated as 
part of MSAs. We note that rural hospitals in Puerto Rico may apply for 
geographic redesignation under the same criteria as all other hospitals 
and that some hospitals in rural Puerto Rico have been approved for 
reclassification.
    Comment: One commenter suggested that OMB review the San Juan MSA 
for possible redesignation of certain San Juan municipalities to other 
urban areas.
    Response: As acknowledged by the commenter, it is OMB that makes 
the determination of which municipalities are included in a particular 
MSA. We believe that OMB uses the same criteria to create the San Juan 
MSA as it does for all other MSAs. We urge the commenter to forward any 
suggestions directly to OMB for its consideration.

F. Changes to the MGCRB Composition and Criteria

    Under section 1886(d)(10) of the Act, the MGCRB considers 
applications by hospitals for geographic reclassification for purposes 
of payment under the prospective payment system. Guidelines concerning 
the criteria and conditions for hospital reclassification are located 
at Secs. 412.230 through 412.236. The purpose of these criteria is to 
provide direction, to both the MGCRB and those hospitals seeking 
geographic reclassification, with respect to the situations that merit 
an exception to the rules governing the geographic classification of 
hospitals under the prospective payment system. The composition of the 
MGCRB and the procedures it follows in making reclassification 
determinations are set forth in Secs. 412.246 through 412.280.
    In the May 31, 1996 proposed rule, we proposed one change to the 
MGCRB regulations. In addition, we requested comments on sources of 
data that could be used to identify the occupational mix in a given 
MSA.
1. MGCRB Composition (Sec. 412.246)
    Section 1886(d)(10)(B)(i) of the Act provides that the MGCRB is 
composed of five members appointed by the Secretary. This provision is 
implemented in regulations at Sec. 412.246(a). Two of the members must 
be representative of the concerns of rural hospitals and at least one 
member must be knowledgeable in the field of analyzing costs of 
providing inpatient hospital services. Under current Sec. 412.246(b), 
the term of office for an MGCRB member is 3 years, and appointments are 
limited to two consecutive 3-year terms. This section further provides 
that to permit staggered terms of office, initial appointments may be 
for shorter terms. Finally, the Secretary is permitted to terminate a 
member's tenure before his or her full term has expired.
    In the proposed rule, in order to allow the Secretary maximum 
flexibility to recruit and retain qualified Board members, we proposed 
to eliminate the current requirement at Sec. 412.246(b) that a Board 
member can serve for only two consecutive 3-year terms and to provide 
that an appointment to the MGCRB may be for any term not to exceed 3 
years.
    Under the proposed revisions, the Secretary would continue to be 
able to terminate a member's tenure before his or her full term has 
expired.
    We received no comments on this proposal, and we have incorporated 
it as final in this document.
2. Occupational Mix Adjustment
    Section 1886(d)(10)(D)(i) of the Act requires the Secretary to 
publish guidelines to be used by the MGCRB in rendering decisions on 
applications submitted for geographic reclassification. Those are to 
include guidelines for ``comparing wages, taking into account (to the 
extent the Secretary determines appropriate) occupational mix, in the 
area in which the hospital is classified and the area in which the 
hospital is applying to be classified.''
    Section 412.230(e) describes the criteria for hospital 
reclassification for purposes of the wage index. One of the criteria 
relates to the relationship between the hospital's wages and those of 
the area to which it seeks reclassification. Specifically, 
Sec. 412.230(e)(1)(iv) provides that the hospital must demonstrate that 
its wages are at least 84 percent of the average hourly wage of 
hospitals in the area to which it seeks reclassification, or that the 
hospital's average hourly wage weighted for occupational mix is at 
least 90 percent of the average hourly wage of hospitals in the area to 
which it seeks reclassification. Under Secs. 412.232(c) and 412.234(b), 
a group of hospitals seeking to reclassify must demonstrate that its 
aggregate average hourly wage is at least 85 percent of the average 
hourly wage of the hospitals in the area to which it seeks 
reclassification. These sections also provide that the threshold for 
occupational-mix adjusted hourly wage for hospital groups is the same 
as that for a single hospital, that is, 90 percent.
    In the September 6, 1990 interim final rule (55 FR 36760), we 
stated that the acceptable sources for occupational mix data were the 
American Hospital Association (AHA) or the Bureau of Labor Statistics. 
Since publication of that document, the Bureau of Labor has 
discontinued its hospital wage surveys. Thus, the only currently 
acceptable occupational mix data source is the AHA Survey Data. We have 
been informed by the AHA that the survey for 1993 will be the last 
survey to collect information on the Hospital Personnel by Occupational 
Category. Therefore,

[[Page 46186]]

requests filed on or before October 1, 1996 for FY 1998 
reclassification, which use FY 1993 wage data, may be the last for 
which we have an appropriate source of occupational mix data.
    As we stated in the June 4, 1991 final rule with comment period (56 
FR 25458), the reclassification process requires the use of 
occupational mix data that are comparable across areas and can be 
consistently applied. We are unaware of any sources other than the AHA 
data that meet these criteria.
    As noted in the proposed rule (61 FR 27459), we did not propose 
collecting occupational mix data ourselves in light of past experience. 
Instead, we solicited suggestions about any occupational mix data 
sources that are available on a national basis. In addition, we 
indicated that we were willing to consider suggestions about other 
methods that would account for occupational mix in the wage index 
reclassification process.
    Comment: We received three comments on this issue. One commenter 
believes that collection of the occupational mix data is burdensome, 
that the data are unreliable, and that we should therefore eliminate 
the use of such data. One commenter urged that the AHA continue to 
collect the data for HCFA. The final commenter suggested that we 
consider using the Geographic Reference Report to obtain occupational 
mix information. That commenter noted, however, that this collection 
effort would have to be expanded for our use.
    Response: The AHA has notified us that it does not have enough 
demand for these data to warrant continued collection. Generally, the 
AHA, as well as HCFA, have found that hospitals do not want to provide 
occupational breakdowns in a survey format. The Geographic Reference 
Report would have to be expanded and tailored to fit our needs, which 
means that it would be unavailable for at least several years as a data 
source for this purpose. As there is no readily available data source 
that can be used immediately to represent occupational mix data for the 
purposes of reclassification applications, it appears that we will be 
unable to continue to use such data as an alternative for hospital 
reclassification applications. However, since the 1993 AHA data are 
available for reclassification requests for FY 1998, we will not make a 
final decision in this rule. If a suitable source of occupational mix 
data becomes available in the next year, we will consider using it 
beginning with reclassifications for FY 1999.
    Comment: We received one comment from a hospital that was concerned 
that it might not qualify for reclassification for purposes of using 
the wage index of a proximate area because it could not meet the 108 
percent qualifying criteria. This commenter noted that the hospital is 
located in an area where it materially influences the average hourly 
wage in its area, but it does not dominate the area. The commenter 
believes that the current criteria disadvantages such a hospital, 
because it can no longer meet the 108 percent threshold for 
reclassification.
    Response: We have addressed similar comments a number of times. The 
purpose of the reclassification wage criteria is to identify situations 
in which a hospital would receive more appropriate payments if it were 
redesignated to another area. The 108 percent criterion in particular 
is designed to identify situations in which a hospital is significantly 
disadvantaged by its current geographic classification. If a hospital's 
wages are less than 8 percent higher than the average hourly wage in 
the hospital's labor market area, we believe the hospital is not 
significantly disadvantaged by the payments it would receive and, 
therefore, geographic reclassification is not appropriate.
    Comment: One commenter requested confirmation of the process by 
which a group of hospitals withdraw its application for 
reclassification. The commenter believes that all the hospitals must be 
a party to the withdrawal request.
    Response: The commenter is correct. The regulations at 
Sec. 412.273(b) clearly state that all hospitals that are party to the 
application must request the withdrawal in writing. Therefore, a 
request to withdraw an approved application by the MGCRB must be agreed 
upon and requested in writing by the entire group.

IV. Rebasing and Revising of the Hospital Market Baskets

A. Operating Costs

1. Background
    Effective for cost reporting periods beginning on or after July 1, 
1979, we developed and adopted a hospital input price index (that is, 
the hospital ``market basket'') for operating costs. Although ``market 
basket'' technically describes the mix of goods and services used to 
produce hospital care, this term is also commonly used to denote the 
input price index (that is, cost category weights and price proxies 
combined) derived from that market basket. Accordingly, the term 
``market basket'' as used in this document refers to the hospital input 
price index.
    The percentage change in the market basket reflects the average 
change in the price of goods and services hospitals purchase in order 
to furnish inpatient care. We first used the market basket to adjust 
hospital cost limits by an amount that reflected the average increase 
in the prices of the goods and services used to furnish hospital 
inpatient care. This approach linked the increase in the cost limits to 
the efficient utilization of resources.
    With the inception of the hospital inpatient prospective payment 
system on October 1, 1983, we continued to use the hospital market 
basket to update each hospital's 1981 inpatient operating cost per 
discharge used in establishing the FY 1984 standardized payment 
amounts. In addition, the projected change in the hospital market 
basket has been the integral component of the update factor by which 
the prospective payment rates are updated every year. Under section 
1886(b)(3)(B)(i)(XII) of the Act, the prospective payment rates will be 
updated in FY 1997 by the projected increase in the hospital market 
basket minus 0.5 percentage points. A detailed explanation of the 
hospital market basket used to develop the prospective payment rates 
was published in the Federal Register on September 3, 1986 (51 FR 
31461). For additional background information on general development of 
hospital input price indexes, we refer the reader to the article by 
Freeland, Anderson, and Schendler, ``National Hospital Input Price 
Index,'' Health Care Financing Review, Summer 1979, pp 37-61. We also 
refer the reader to the September 4, 1990 Federal Register (55 FR 
35990) in which we discussed the previous rebasing of the hospital 
input price index.
    The hospital market basket is a fixed-weight, Laspeyres-type price 
index that is constructed in three steps. First, a base period is 
selected and total base period expenditures are estimated for mutually 
exclusive and exhaustive spending categories based upon type of 
expenditure. Then, the proportion of total costs that each category 
represents is determined. These proportions are called cost or 
expenditure weights. Second, each expenditure category is matched to an 
appropriate price/wage variable, referred to as a price proxy. These 
price proxies are price levels derived from a publicly available 
statistical series published on a consistent schedule, preferably at 
least on a quarterly basis. Third and finally, the price level for each 
spending category is multiplied by the expenditure weight for that 
category. The sum of these products (that is, the

[[Page 46187]]

expenditure weights multiplied by the price levels) for all cost 
categories yields the composite index level in the market basket in a 
given year. Repeating this step for other years produces a series of 
market basket index levels over time. Dividing one index level by an 
earlier index level produces rates of growth in the input price index.
    The market basket is described as a fixed-weight index because it 
answers the question of how much it would cost, at another time, to 
purchase the same mix of goods and services that was purchased in the 
base period. The effects on total expenditures resulting from changes 
in the quantity or mix of goods and services purchased subsequent to 
the base period are not considered. For example, shifting a 
traditionally inpatient type of care to an outpatient setting might 
affect the volume of inpatient goods and services purchased by the 
hospital, but would not be factored into the price change measured by a 
fixed weight hospital market basket.
    We believe that it is desirable to rebase the market basket 
periodically so the cost weights reflect changes in the mix of goods 
and services that hospitals purchase (hospital inputs) in furnishing 
inpatient care. We last rebased the hospital market basket cost weights 
effective for FY 1991. This market basket, still used through FY 1996, 
reflected base year data from FY 1987 in the construction of the cost 
weights.
    In its April 1, 1985 report to the Secretary (Appendix C of the 
June 10, 1985 proposed rule (50 FR 24446)), ProPAC supported HCFA's 
position on periodic rebasing, stating that the market basket cost 
weights should be recalculated or ``rebased'' at least every 5 years, 
or more frequently if significant changes in the weights occur. We note 
that there are separate market baskets for prospective payment 
hospitals and hospitals and hospital units excluded from the 
prospective payment system. The separate, excluded hospital market 
basket is set forth in section IV.A.5 of this preamble.
2. Rebasing and Revising the Hospital Market Basket
    The terms rebasing and revising, while often used interchangeably, 
actually denote different activities. Rebasing means moving the base 
year for the structure of costs of an input price index (for example, 
we are moving the base year cost structure from FY 1987 to FY 1992). 
Revising means changing data sources, cost categories, or price proxies 
used in the input price index.
    We are adopting a rebased and revised hospital market basket in 
developing the FY 1997 update factor for the prospective payment rates. 
The new market basket has been rebased to reflect 1992, rather than 
1987, cost data.
    In developing the rebased and revised market basket, we reviewed 
hospital operating expenditure data for the market basket cost 
categories. In a change from the previous methodology, we relied 
primarily on Medicare hospital cost report data for the rebasing. For 
the rebased market baskets, we used data on hospital expenditures for 
four major expense categories (wages and salaries, employee benefits, 
pharmaceuticals, and a residual ``all other'') from hospital cost 
reporting periods beginning in FY 1992 (that is, periods beginning on 
or after October 1, 1991 and before October 1, 1992). We refer to these 
as PPS-9 cost reports (the 9th year of the prospective payment system 
(PPS)). The market basket was previously based on 1987 expense data 
from the 1988 American Hospital Association (AHA) Annual Survey.
    Expenses for wages and salaries, employee benefits, and 
pharmaceuticals were determined using data from PPS-9 cost reports as 
reported in the Hospital Cost Report Information System (HCRIS) files. 
We determined total professional fees using AHA Annual Survey data. 
Total professional fees include medical and nonmedical professional 
fees. Since the medical professional fees included in the compensation 
of provider-based physicians are paid under Medicare Part B, we 
analyzed HCRIS data to determine the professional component of 
provider-based physician compensation and subtracted it from total 
professional fees to obtain an estimate of nonmedical professional 
fees. Malpractice insurance costs were determined using the cost share 
for PPS-6 (cost reporting periods beginning in FY 1989), the last year 
these costs had to be treated separately from all other administrative 
and general costs, trended forward to 1992 based on the relative 
importance of malpractice costs found in the previous market basket. 
The All Other Expenses category was calculated in two steps. First, 
from PPS-9 cost reports, total operating expenses were tabulated by 
subtracting capital-related expenses, direct medical education 
expenses, and the medical professional fees from total expenses. 
Second, we subtracted the total of the five cost category expenses 
already determined from total operating expenses to obtain the All 
Other Expenses category.
    After totals for these main cost categories (wages and salaries, 
employee benefits, professional fees, pharmaceuticals, malpractice 
insurance, and all other expenses) were calculated, we then determined 
the proportion each category represents of the total costs. These 
proportions represent the major rebased market basket weights. The 
differences between the six major categories for the 1992-based index 
and the previous 1987-based index are summarized in Table 1 below.

   Table 1.--Comparison of 1992 and 1987 Prospective Payment Hospital   
                  Operating Cost Categories and Weights                 
------------------------------------------------------------------------
                                                     Rebased     1987-  
                                                       1992      based  
                Expense categories                   hospital   hospital
                                                      market     market 
                                                      basket     basket 
------------------------------------------------------------------------
Wages and salaries................................     50.244       52.2
Employee benefits.................................     11.146        9.5
Nonmedical professional fees......................      2.127        1.6
Malpractice insurance.............................      1.189        1.4
Pharmaceuticals...................................      4.162        3.9
All other.........................................     31.132       31.4
                                                   ---------------------
    Total.........................................    100.000      100.0
------------------------------------------------------------------------
Note: Although we rounded the weights to the tenths decimal position in 
  the 1987-based market basket as published in the September 4, 1990    
  final rule, we are presenting the 1992 weights in greater specificity.

    Table 2 sets forth the market basket cost categories, weights, and 
price proxies. Weights for the ``Utilities'' and the ``All Other'' cost 
categories, as well as the subcategories, were determined using the 
1987 Department of Commerce's Bureau of Economic Analysis (BEA) Input-
Output Table, from which data for the hospital industry were extracted. 
The BEA Input-Output database, which is updated at 5-year intervals, 
was most recently described in the Survey of Current Business, 
``Benchmark Input-Output Accounts for the U.S. Economy, 1987'' (April 
1994). To date, the Department of Commerce has not released final 1992 
cost data. Therefore, we plan to incorporate these data into the FY 
1998 proposed rule.
    We aged the 1987 cost shares to 1992 using historical price changes 
between 1987 and 1992 for each category. The aged shares were 
normalized to be consistent with the 1992 hospital cost report data. 
Relative weights for the new base year were then calculated for various 
expenditure categories. This work resulted in the identification of 26 
separate cost categories in the rebased hospital market basket, two 
fewer categories than were included in the 1987-based market basket. 
Detailed

[[Page 46188]]

descriptions of each category and respective price proxy are provided 
in Appendix C to this final rule.

    Table 2.--1992-Based Prospective Payment Hospital Operating Cost    
                 Categories, Weights, and Price Proxies                 
------------------------------------------------------------------------
                                       Rebased                          
                                         1992                           
         Expense categories            hospital        Price proxy      
                                        market                          
                                        basket                          
------------------------------------------------------------------------
1. Compensation.....................     61.390  .......................
    A. Wages and salaries*..........     50.244  HCFA occupational wage 
                                                  index.                
    B. Employee benefits*...........     11.146  HCFA occupational      
                                                  benefits index        
2. Professional fees*...............      2.127  ECI--compensation for  
                                                  professional,         
                                                  specialty and         
                                                  technical.            
3. Utilities........................      2.469  .......................
    A. Fuel, oil, and gasoline......      0.345  PPI refined petroleum  
                                                  products.             
    B. Electricity..................      1.349  PPI commercial electric
                                                  power.                
    C. Natural gas..................      0.670  PPI commercial natural 
                                                  gas.                  
    D. Water and sewerage...........      0.106  CPI-U water and        
                                                  sewerage maintenance. 
4. Professional liability insurance.      1.189  HCFA professional      
                                                  liability insurance   
                                                  premium index.        
5. All other........................     32.824  .......................
    A. All other products...........     24.033  .......................
        (1.) Pharmaceuticals........      4.162  PPI ethical            
                                                  (prescription) drugs. 
        (2.) Food...................      3.459  .......................
          a. Direct purchase........      2.363  PPI processed foods and
                                                  feeds.                
          b. Contract service.......      1.096  CPI-U food away from   
                                                  home.                 
        (3.) Chemicals..............      3.795  PPI industrial         
                                                  chemicals.            
        (4.) Medical instruments....      3.128  PPI medical instruments
                                                  and equipment.        
        (5.) Photographic supplies..      0.399  PPI photographic       
                                                  supplies              
        (6.) Rubber and plastics....      4.868  PPI rubber and plastic 
                                                  products.             
        (7.) Paper products.........      2.062  PPI converted paper and
                                                  paperboard products.  
        (8.) Apparel................      0.875  PPI apparel.           
        (9.) Machinery and equipment      0.211  PPI machinery and      
                                                  equipment.            
        (10.) Miscellaneous products      1.074  PPI finished goods.    
    B. All other services...........      8.792  .......................
        (1.) Business services*.....      3.823  ECI--compensation for  
                                                  private workers in    
                                                  business services.    
        (2.) Computer services*.....      1.927  AHE computer and data  
                                                  processing services.  
        (3.) Transportation services      0.188  CPI-U transportation.  
        (4.) Telephone services.....      0.531  CPI-U telephone        
                                                  services.             
        (5.) Postage*...............      0.272  CPI-U postage.         
        (6.) All other: labor             1.707  ECI--compensation for  
         intensive*.                              private service       
                                                  occupations.          
        (7.) All other: nonlabor          0.344  CPI-U all items.       
         intensive.                                                     
                                     -----------                        
          Total.....................    100.000  .......................
------------------------------------------------------------------------
* Labor-related.                                                        
Note: Due to rounding, weights may not sum to total.                    

    The 1987-based market basket included a separate Blood Services 
cost category. In the 1992-based market basket, Blood Services is 
contained within the Chemicals cost category. In addition, the 1987-
based cost category for Fuel Oil, Coal, etc. has been combined with the 
1987-based Motor Gasoline cost category to form the 1992-based Fuel, 
Oil and Gasoline cost category. Both of these changes are based on 
revised cost categories from BEA. For comparison purposes, the 1987-
based cost categories are set forth in Table 3.

    Table 3.--1987-Based Prospective Payment Hospital Operating Cost    
                 Categories, Weights, and Price Proxies                 
------------------------------------------------------------------------
                                         1987                           
                                       hospital                         
         Expense categories             market         Price proxy      
                                        basket                          
------------------------------------------------------------------------
1. Compensation.....................       61.7  .......................
    A. Wages and salaries *.........       52.2  HCFA occupational wage 
                                                  index.                
    B. Employee benefits *..........        9.5  HCFA occupational      
                                                  benefits index.       
2. Professional fees *..............        1.6  ECI--wages and salaries
                                                  for professional,     
                                                  specialty and         
                                                  technical.            
3. Utilities........................        2.4  .......................
    A. fuel, oil, coal, etc.........        0.6  WPI light fuel oils.   
    B. Electricity..................        1.1  WPI industrial power.  
    C. Natural gas..................        0.3  WPI natural gas.       

[[Page 46189]]

                                                                        
    D. Motor gasoline...............        0.2  WPI gasoline.          
    E. Water and sewerage...........        0.0  CPI-U water and        
                                                  sewerage maintenance. 
4. Professional liability insurance.        1.4  HCFA professional      
                                                  liability insurance   
                                                  premiums.             
5. All other........................       32.8  .......................
    A. All other products...........       21.8  .......................
        (1.) Pharmaceuticals........        3.9  WPI prescription drugs.
        (2.) Food...................        3.3  .......................
          a. Direct purchase........        2.1  WPI processed foods.   
          b. Contract service.......        1.2  CPI-U food away from   
                                                  home.                 
        (3.) Chemicals..............        3.1  WPI industrial         
                                                  chemicals.            
        (4.) Medical instruments....        2.7  WPI medical instruments
                                                  and equipment.        
        (5.) Photographic supplies..        2.6  WPI photographic       
                                                  supplies.             
        (6.) rubber and plastics....        2.3  WPI rubber and plastic 
                                                  products.             
        (7.) Paper products.........        1.4  PPI converted paper and
                                                  paperboard products.  
        (8.) Apparel................        1.1  WPI textile house      
                                                  furnishings.          
        (9.) machinery and equipment        0.4  WPI machinery and      
                                                  equipment.            
        (10.) Miscellaneous products        0.8  WPI finished goods.    
    B. All other services...........       11.1  .......................
        (1.) Business services *....        3.8  AHE business services. 
        (2.) Computer services *....        2.0  AHE computer and data  
                                                  processing services.  
        (3.) Transportation services        1.2  CPI-U transportation.  
        (4.) Telephone services.....        1.0  CPI-U telephone        
                                                  services.             
        (5.) Blood services *.......        0.6  WPI blood and          
                                                  derivatives.          
        (6.) Postage *..............        0.4  CPI-U postage.         
        (7.) All other: labor               1.2  ECI--wages and salaries
         intensive *.                             for private service   
                                                  occupations.          
        (8.) All other: nonlabor            0.8  CPI-U all items.       
         intensive.                                                     
                                     -----------                        
            Total...................     100.0                          
------------------------------------------------------------------------
* Labor-related.4700                                                    
Note: Due to rounding, weights may not sum to total.                    

    In the September 4, 1990 final rule, for purposes of determining 
the labor-related portion of the standardized amounts, we summed the 
percentages of the labor-related items (that is, wages and salaries, 
employee benefits, professional fees, business services, computer and 
data processing, blood services, postage, and all other labor-intensive 
services) in the hospital market basket. This summation resulted in a 
labor-related portion of the hospital market basket of 71.4 percent and 
nonlabor-related portion of 28.6 percent. Under sections 1886 (d)(2)(H) 
and (d)(3)(E) of the Act, in making payments under the prospective 
payment system, the Secretary estimates from time to time the 
proportion of payments that are labor-related. Since October 1, 1990, 
then, we have considered 71.4 percent of costs to be labor-related for 
purposes of the prospective payment system.
    In connection with the rebasing of the hospital market basket, we 
have reestimated the labor-related share of the standardized amounts. 
Based on the relative weights of the 1992-based prospective payment 
hospital market basket, as described in Table 2, the labor-related 
portion that is subject to hospital wage index adjustments (based on 
wages and salaries, employee benefits, professional fees, business 
services, computer and data processing, postage, and all other labor-
intensive services) is 71.246 percent and the nonlabor-related portion 
is 28.754 percent. To implement this change, effective with discharges 
occurring on or after October 1, 1996, we recomputed the labor-related 
and nonlabor-related shares of the large urban and other areas' 
standardized amounts used to establish the prospective payment rates.
    The amounts in Table 4 reflect the revised labor-related and 
nonlabor-related portions. Due to the Bureau of Economic Analysis' 
reclassification of Blood Services to Chemicals, we now allocate Blood 
Services to a nonlabor cost category. We note that, although there are 
revisions of the labor and nonlabor portions, due to both weight 
changes and the Blood Services category change, the labor-related 
portions of the rates published in Table 4 have remained essentially 
the same. The labor-related portion has decreased by 0.146 percentage 
points.

                      Table 4.--Labor-Related Share                     
------------------------------------------------------------------------
                        Cost category                            Weight 
------------------------------------------------------------------------
Wages and salaries...........................................     50.244
Employee benefits............................................     11.146
Professional fees............................................      2.127
Business services............................................      3.823
Computer services............................................      1.927
Postal services..............................................      0.272
All other labor intensive....................................      1.707
                                                              ----------
    Total labor related......................................     71.246
                                                              ----------
    Total nonlabor related...................................     28.754
------------------------------------------------------------------------

    Comment: Several commenters noted that because the prospective 
payment system hospital input price index directly measures changes in 
the price of labor for the overall economy as well as the changes in 
the prices of goods and services purchased by hospitals, if legislation 
is passed increasing the minimum wage in the United States the market 
basket update should be revised to reflect this change.
    Response: The commenters are correct in asserting that an increase 
in the minimum wage should be appropriately reflected in the 
prospective payment system hospital input price index. The structure of 
the prospective payment

[[Page 46190]]

system hospital input price index is designed to track the historical 
increases in compensation for workers comparable to those employed in 
the hospital sector (as well as the prices of goods and services 
comparable to those purchased by hospitals). The blend of occupational 
data represents a composite of the types of labor that hospitals employ 
in the production of their services. The proxies selected by HCFA to 
represent these inputs are Employment Cost Indexes (ECIs) compiled by 
the Bureau of Labor Statistics for the relevant occupational 
categories. When the historical data for the period of the minimum wage 
increase becomes available, the ECIs automatically reflect the impacts 
of increases in the minimum wage. These proxies will therefore reflect 
any increases in wages and benefits associated with the legislated 
increase in the minimum wage.
    The second quarter 1996 DRI/McGraw-Hill forecast of the prospective 
payment system hospital input price index, which is included in this 
final rule, reflects an anticipated increase in the minimum wage.
    In the first quarter of 1996, HCFA commissioned DRI/McGraw-Hill to 
consider the effects of an increase in the minimum wage on the HCFA 
input price indexes. In its analysis, DRI/McGraw-Hill stated that the 
critical factor in determining the relative impact on each of HCFA's 
input price indexes in comparison with the economy-wide impact is the 
distribution of minimum wage workers associated with the occupational 
mix within each health sector. Data from the 1990, 5-percent Public Use 
Micro Data Survey (scaled for consistency with the nonfarm aggregate 
from the 1994 Current Population Survey) indicate that the share of all 
hourly workers at or below the minimum wage is approximately 3.3 
percent for the health sector as a whole, versus an economy wide share 
of 3.6 percent. There is a wide variation in the importance of minimum 
wage workers across health industry sectors as well, ranging from a low 
of 2.0 percent for the workforce in hospitals, to a high of 9.3 percent 
for nursing-care related facilities. For the key wage proxies in the 
prospective payment system hospital input price index (ECI Civilian 
Hospital workers and the ECI for Professional-Technical workers) the 
share of minimum wage workers is negligible. The expected increase in 
minimum wage will likely affect the annual rates of increase in the 
prospective payment system hospital input price index in the range of 
about 0.1 percent.
    Comment: One commenter noted that there are few who can afford to 
spend the time necessary to study the proposal to rebase and revise the 
hospital market baskets in its present form or hire an economist for an 
interpretation. The commenter suggests that HCFA could save valuable 
resources and, at the same time, simplify a process that is extremely 
complicated by using the overall cost data from the cost reports as a 
means of simplifying and arriving at an accurate market basket.
    Response: The Medicare cost report is designed to track hospitals' 
costs for services that are covered by Medicare. Expenditures or costs 
are determined by the price of inputs for a particular good or service 
times the quantity of that input good or service that is used. An 
increase in costs could result from input price growth (inflation) or 
growth in the quantity of services used. It is essential to 
understanding the growth in Medicare program costs to have a rigorous 
framework for distinguishing the effects of input price growth from the 
effects of increases in the quantity of inputs. A measure based upon 
overall cost data from the cost reports, while appearing to simplify 
the process, would not separate input price changes from changes in the 
quantity of inputs and consequently would not serve the needs of 
government or industry.
    We do appropriately use Medicare cost report data in developing 
weights for the Medicare input price indexes. The 1992 base year 
weights for the four core operating categories (wages and salaries, 
employee benefits, pharmaceuticals, and all other) were derived from 
Medicare cost report data on hospitals' relative shares of costs in 
these four categories in 1992. By holding the weights constant at their 
1992 relative values, and applying proxies to measure price change over 
time, it is possible to estimate the effect of pure input price 
inflation while holding quantity and quality of inputs constant. This 
is the purpose of the prospective payment system hospital input price 
index.
    Comment: A commenter stated that, in rebasing the market basket, 
HCFA has chosen to put malpractice costs into a separate category. In 
doing so, this cost was taken from 1989 cost reports and ``trended'' 
forward. The commenter suggested that, because this cost cannot be 
taken from cost reports in future years, it would be better to 
consolidate malpractice cost within an ``all other'' category.
    Response: Malpractice has appropriately been a separate cost 
category since the inception of the prospective payment system hospital 
input price index. We are modifying the Medicare cost report to again 
include relevant malpractice cost questions, so that we will not have 
to estimate the malpractice share of costs.
3. Selection of Price Proxies
    After computing the 1992 cost weights for the rebased hospital 
market basket, it was necessary to select appropriate wage and price 
proxies to monitor the rate of increase for each expenditure category. 
Most of the indicators are based on Bureau of Labor Statistics (BLS) 
data and are grouped into one of the following BLS categories:
     Producer Price Indexes--Producer Price Indexes (PPIs) 
measure price changes for goods sold in other than retail markets. For 
example, we used the PPI for ethical drugs, rather than the Consumer 
Price Index (CPI) for prescription drugs. PPIs are preferable price 
proxies for goods that hospitals purchase as inputs in producing their 
outputs. The PPIs we used measure price change at the final stage of 
production.
     Consumer Price Indexes--Consumer Price Indexes (CPIs) 
measure change in the prices of final goods and services bought by the 
typical consumer. Because they may not represent the price faced by the 
producer, the consumer price indexes were used if no appropriate PPI 
was available, or if the expenditure was more similar to that of retail 
consumers in general rather than a purchase at the wholesale level. For 
example, the CPI for food purchased away from home was used as a proxy 
for contracted food services.
     Employment Cost Indexes--Employment Cost Indexes (ECIs) 
measure the rate of change in employee wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. They are not affected by shifts in employment mix.
     Average Hourly Earnings--Average Hourly Earnings (AHEs) 
measure the rate of change of hourly earnings for various occupations 
within a given industry, and, therefore, reflect a weighted 
occupational mix within a particular industry. The AHE series is 
calculated by dividing gross payrolls by total hours and measures 
actual earnings rather than pure wage rates. It is a current-weight 
series rather than a fixed-weight index and thus reflects shifts in 
employment mix. An AHE rather than an ECI is used when there is no 
corresponding ECI category that is an appropriate measure of growth for 
a

[[Page 46191]]

given labor category or when the ECI does not have sufficient length of 
history to be useful for our purpose.
    Our price proxies for the rebased prospective payment hospital 
market basket are shown in Table 2 above and are summarized in Appendix 
C to this final rule.
    Comment: One commenter believes that the most recent available 
Medicare cost report and other data should be used to establish the 
cost weights, particularly because the hospital industry and its cost 
structure are changing so rapidly.
    Response: The prospective payment system hospital input price index 
was designed to be rebased at 5-year intervals, consistent with the 
scheduled release of the Commerce Department data on detailed cost 
structure by industrial sector of the U.S. economy. The Gross Domestic 
Product (GDP) and other related government statistics are on the same 
schedule of 5-year intervals between updates. Therefore, when planning 
for rebasing, HCFA adopted a base year that was 5 years from the most 
recent previous base year, 1987. We note that the Department of 
Commerce has not yet made its planned release of the 1992 detailed data 
on cost structure by industrial sector of the U.S. economy. However, in 
the proposed rule for FY 1998, we intend to modify the input price 
indexes for both the prospective payment system and excluded hospitals 
by incorporating the 1992 detailed cost structure data.
    Comment: One commenter requested that we provide a more complete 
rationale in the final rule concerning the proposed price-proxy 
changes.
    Response: The following discussion is offered to further explain 
our rationale for the price proxy changes we are adopting.
    a. Nonmedical professional fees: The ECI for Compensation for 
Professional and Technical Workers replaced the ECI for Wages and 
Salaries for Professional and Technical Workers. The new index measures 
the growth in input prices associated with employee benefits as well as 
wages and salaries. Since the nonmedical professional fees category 
represents the hospital costs associated with obtaining these services, 
a price measure that accounts for aggregate compensation costs is 
preferable to one that measures only the wages and salaries component. 
When the ECI was first collected, it measured only growth in wages and 
salaries (not employee benefits). We changed the price proxy to reflect 
the improved data from the Bureau of Labor Statistics (BLS).
    b. In an effort to improve the general accuracy and validity of the 
index's measurement of price growth, we made four minor producer price 
index changes:
     Fuel Oil and Gasoline: In the 1992-based index, the Fuel 
Oil and Gasoline category represents a combination of the Fuel Oil and 
Coal category and the Motor Gasoline category from the 1987-based 
index. The weight for motor gasoline was too small to keep it as a 
separate category. The price proxy used for the combined group in the 
1992-based index, the Producer Price Index for Refined Petroleum 
Products, encompasses both PPIs used in the 1987-based index.
     Electricity: The PPI for Industrial Power was replaced 
with the PPI for Commercial Electrical Power to reflect information 
from the hospital industry and utility industry that commercial rates 
of change for utility costs are generally more appropriate than 
industrial rates.
     Paper Products: The weighted average of the percentage 
change in the price of converted paper and paperboard products and the 
percentage change in the price of paper excluding newsprint and 
packaging paper was replaced by the PPI for converted paper and 
paperboard products to better reflect the composition of costs in 
hospitals.
     Apparel: The PPI for textile house furnishings was 
replaced by the PPI for Apparel to better reflect the composition of 
costs in hospitals.
    c. Business Services: The Average Hourly Earnings (AHE) for 
Business Services (AHE73NS) was replaced by the ECI for Compensation 
for Business Services. Compensation, which reflects both fringe 
benefits and wages, more appropriately measures the cost of business 
services. In addition, the ECI measurement holds the skill mix 
constant, measuring just the change in the cost of compensation, 
whereas a change in the AHE for Business Services can reflect a change 
in skill mix as well as a change in earnings. At the time of 
publication of the 1987-based index, the ECI for Business Services was 
not available.
    d. All Other Services, Labor Intensive: The ECI Wages and Salaries 
for Private Service workers was replaced by the ECI Compensation for 
Private Service workers. A compensation price proxy reflects both a 
change in the price of benefits as well as a change in the price of 
wages and salaries.
4. The HCFA Blended Compensation Index
    Compensation includes the two largest categories of the rebased 
market basket: wages and salaries, and employee benefits. Wages and 
salaries account for 50.244 percent and employee benefits account for 
11.146 percent of the total weight in the prospective payment hospital 
market basket.
     The HCFA Blended Compensation Index groups hospital occupations 
into nine broad categories. For eight of those occupational groups, we 
believe that hospitals compete for labor generally with employers 
outside the health care sector. Accordingly, we use economy-wide 
employment cost indexes (ECI) as price proxies for these eight 
occupational groups. In the case of compensation for nurses, as well as 
for certain other health care technicians and professionals, the 
hospital labor market may be predominant. However, hospitals do compete 
with other industries to obtain certain skilled professional and 
technical staff (for example, computer programmers). Therefore, for 
professional and technical workers, we believe a price proxy that 
reflects an equal blend of internal and external compensation variables 
is appropriate.
    Similar to the methodology used for the previous rebasing, the 
weights for the nine cost categories in the occupational blend index 
were derived from the 1992 Current Population Survey (CPS) produced by 
BLS. Using the CPS, private hospital workers were classified into the 
nine occupational categories. Private hospitals better reflect the mix 
of occupations used to produce acute care services for the prospective 
payment system hospital input price index. Government hospitals were 
excluded because their occupational mix reflects the subset of nonacute 
care hospitals. Once private hospital workers were sorted by occupation 
into one of the nine occupational groups, weights were estimated using 
the share of wages and salaries for each of the nine occupations. These 
shares formed the basis of the weights that were used for the market 
basket of occupational categories.
    An additional adjustment was made for contract labor costs. Rather 
than treat contract labor as a distinct noncompensation cost category, 
it was integrated into the occupational blend as a component of 
hospitals' compensation costs for purposes of the market basket index. 
Thus, contract labor is treated the same as other labor expenses. 
Contract labor was allocated to the professional and technical and 
service occupation categories. After adjusting the professional and 
technical and service workers' shares to account for contract labor, 
the weights for the

[[Page 46192]]

nine occupational blend categories were renormalized to equal 100.00 
percent. The weights and proxies for the nine cost categories of the 
HCFA Blended Wages and Salaries Index are shown in Table 5.

   Table 5.--HCFA Blended Wages and Salaries Index (Wages and Salaries  
               Component of the 1992-Based Market Basket)               
------------------------------------------------------------------------
            Cost category               Weight         Price proxy      
------------------------------------------------------------------------
Professional and technical..........     65.729  Equal blend of ECI for 
                                                  wages and salaries of 
                                                  civilian hospital     
                                                  workers and ECI for   
                                                  wages and salaries of 
                                                  professional,         
                                                  specialty and         
                                                  technical workers.    
Managers and administrators.........      9.554  ECI for wages and      
                                                  salaries for          
                                                  executive,            
                                                  administrative and    
                                                  managerial workers.   
Sales...............................      0.402  ECI for wages and      
                                                  salaries for sales    
                                                  workers.              
Clerical workers....................     12.379  ECI for wages and      
                                                  salaries for          
                                                  administrative support
                                                  including clerical    
                                                  workers.              
Craft and kindred...................      1.689  ECI for wages and      
                                                  salaries for precision
                                                  production, craft and 
                                                  repair workers.       
Operatives except transport.........      0.437  ECI for wages and      
                                                  salaries for machine  
                                                  operators, assemblers 
                                                  and inspectors.       
Transport equipment operatives......      0.122  ECI for wages and      
                                                  salaries for          
                                                  transportation and    
                                                  material moving       
                                                  workers.              
Nonfarm laborers....................      0.084  ECI for wages and      
                                                  salaries for handlers,
                                                  equipment cleaners,   
                                                  helpers and laborers. 
Service workers.....................      9.606  ECI for wages and      
                                                  salaries for service  
                                                  occupations.          
Total wages and salaries............    100.000  Total weight for wages 
                                                  and salaries is 50.2. 
------------------------------------------------------------------------
Note: Due to rounding, weights may not sum to total.                    

    Comment: One commenter suggested that the manner in which hospital-
specific wages and benefits price proxies are incorporated into the 
market basket should be changed, so that the internal hospital industry 
wage and benefit price proxies represent more of the compensation 
weights in the market basket. The ECI for hospital workers should be 
blended 50-50 for all labor cost categories, not just the professional 
and technical worker cost group. Although nonprofessional and technical 
workers may be employed in other settings, many of these workers have 
skills that are specific to the hospital industry.
    Response: The blended compensation index of nine broad occupational 
groups with the ECI for Hospital Workers that is included in the 
prospective payment system hospital input price index reflects HCFA's 
judgment that, except for the professional and technical occupational 
category, hospitals compete primarily in the economy-wide labor market. 
Accordingly, HCFA uses Employment Cost Indexes (ECIs) for the private 
sector of the economy for eight of the nine occupation groups. For one 
broad occupational group, professional and technical workers, HCFA has 
recognized that certain subcategory occupations, such as registered 
nurses and physical therapists, are so specialized that hospitals are 
the predominant employers. Other types of professional and technical 
workers such as computer programers and biological researchers are 
distributed more evenly throughout the private sector economy. 
Therefore, a blend of the ECI for ``Private Professional Specialty and 
Technical Workers'' and the ECI for Civilian Hospital workers is used 
to measure growth in compensation prices for professional and 
technical. Since none of the other eight occupational categories are 
likely to use substantial proportions of hospital specific occupations, 
extending the blend to other labor categories is not appropriate.
    As a practical matter, there is virtually no difference in the 
overall hospital input price index that results from using only a 50-50 
blend of the ECI for Professional-Technical Workers and the ECI for 
Hospital Workers versus using a 50-50 blend for each of the nine ECI 
occupation groups with the ECI for Civilian Hospital Workers. The 
following table illustrates this point:

Difference in the Rate of Increase in the Hospital Index 50-50 Blend of 
Professional-Technical Workers Versus 50-50 Blend of All Occupations

                   Federal Fiscal Year Percent Change                   
------------------------------------------------------------------------
                                                   1997    1998    1999 
------------------------------------------------------------------------
50-50 blend of ECI P&T and ECI civilian hospital                        
 workers........................................     2.5     2.9     3.1
50-50 blend of all nine occupations and ECI                             
 civilian hospital workers......................     2.5     2.8     3.1
------------------------------------------------------------------------

    The latest forecast of the rate of increase in the hospital input 
price index indicates that there is no difference for the FY 1997 
update. For FY 1998, the current forecasts have a 0.1 percent 
difference. For FY 1999, the forecasts are identical. We will continue 
to monitor the effect on the hospital input price index that results 
from the alternative construction of the compensation sub-index. If a 
material difference develops between the two versions, we will 
reevaluate our position on the construction of the compensation sub-
index.
    Comment: One commenter, noting Table 5, ``HCFA Blended Wages and 
Salaries Index (Wages and Salaries Component of the 1992-Based Market 
Basket) (61 FR 27463), which lists the nine occupational categories, 
stated that HCFA is of the opinion that hospitals compete with the 
general labor market with the first category entitled ``Professional 
and Technical.'' The commenter questioned how HCFA arrives at this 
conclusion. The commenter recommended that, unless there is evidence 
that ``Professional and Technical'' workers provide an accurate proxy 
for wages in the hospital industry, the ``blend'' be dropped and be 
replaced by a hospital industry measure.
    Response: The professional and technical workers category includes 
computer programmers, computer systems analysts, social workers, 
accountants, scientists, and lawyers. To varying degrees, hospitals 
employ each of these types of personnel. As noted in the previous 
comment and response, these occupations are also in significant demand 
outside the hospital industry, and hospitals must compete with 
employers in other industries as well as with other hospitals. For 
these types of occupations, competitive market forces that affect the 
compensation levels paid to workers in the nonhospital sector directly 
influence the compensation that prudent buyer hospitals pay. In order 
to account for this, it is appropriate to use the ECI Compensation for 
Private Professional-Technical Workers.
    Hospitals are also major employers of other types of workers such 
as physical therapists, respiratory therapists, and registered nurses. 
Because hospitals demand substantial proportions of these types of 
workers, it is appropriate to reflect, at least in part, hospital 
industry-specific compensation.

[[Page 46193]]

    The blend of professional-technical workers with the hospital 
industry specific compensation ECI is also used mitigate the effect of 
potential labor market imperfections in the hospital industry. 
Licensure requirements and the existence of third party insurance are 
believed by some to have enabled certain occupations to command 
compensation premiums that are above what can be explained by 
traditional predictors such as education, skill, experience, and 
location. Because certain professional and technical workers tend to 
have licensure restrictions that are more limiting than other 
occupations in the health care industry, there is some reason to 
believe that workers with the strictest licensure requirements are most 
able to realize a compensation premium. A blend provides a reasonable 
way to recognize that hospital compensation of professional and 
technical workers is influenced by both economy-wide and hospital 
sector-specific forces and that licensure requirements may influence 
compensation in ways different from a competitive market.
    The advent of managed care may have diminished the ability of 
certain health sector labor occupations to achieve compensation 
premiums. This is suggested by the fact that recently the rate of 
increase in the ECI for Hospital workers has declined relative to the 
ECI for economy-wide professional-technical workers while in earlier 
periods the reverse held. Since FY 1992, the ECI for Hospital Workers 
has grown at a slower rate than the ECI for Private Professional and 
Technical workers. We will continue to monitor the ECIs and other data 
to detect changes in the market dynamics for the types of workers that 
hospitals employ.

Employment Cost Index Hospital Industry Workers Versus Economywide 
Professional and Technical Occupations

                   Federal Fiscal Year Percent Change                   
------------------------------------------------------------------------
                                           1992    1993    1994    1995 
------------------------------------------------------------------------
ECI civilian hospital industry workers..     4.3     3.7     3.1     2.5
ECI private P&T occupations.............     4.5     4.0     3.2     2.6
------------------------------------------------------------------------

    Comment: One commenter believed that the hospital industry does not 
compete with the general labor market for the cost category entitled 
``Managers and Administrators.'' Therefore, the price proxy for this 
category should be the ECI for hospital workers, a hospital sector-
specific proxy.
    Response: Occupations in this category require a knowledge of and 
the capability to put into effect management principles, practices and 
techniques. The skills that these personnel possess are in demand in 
the overall economy as well as the hospital sector.
    Since FY 1994, the ECI Compensation for Hospital Workers has grown 
at a slower rate than the ECI Compensation for Private Executive 
Administrative and Managerial Workers. Recent projections of these 
price proxies by DRI/McGraw-Hill suggest that this trend will continue.
    Comment: One commenter suggested that, as an alternative to using 
the ECI for Hospital Industry Workers as a price proxy for all nine 
occupational categories, HCFA could use the data base it has developed 
over the last few years dealing with hospital wages.
    Response: We assume that the commenter's reference to the data base 
that HCFA has developed over the last few years refers to the Hospital 
Area Wage Index. This index was developed pursuant to a statutory 
requirement that the Secretary adjust the standardized amounts for area 
differences in hospital wage levels. This index is designed to measure 
geographic differences in wage levels, not changes in wages over time. 
Also, because the area wage index is computed using total adjusted 
compensation divided by the sum total hours worked in a labor market 
(see section III of this preamble), it does not hold constant the 
skill-mix of employees from year to year. Therefore, any year-to-year 
index based upon the area wage index would include both price and 
quantity effects. The hospital input price index is appropriately 
designed to measure pure price inflation.
5. Separate Market Basket for Hospitals and Hospital Units Excluded 
from the Prospective Payment System
    In its March 1, 1990 report, ProPAC recommended that we establish a 
separate market basket for hospitals and hospital units excluded from 
the prospective payment system. Effective with FY 1991, HCFA adopted 
ProPAC's recommendation to implement separate market baskets. (See the 
September 4, 1990 final rule (55 FR 36044).) Prospective payment and 
excluded hospitals tend to have different case mixes, practice 
patterns, and composition of inputs. The fact that these hospitals are 
not included under the prospective payment system in part reflects 
these differences.
    Studies completed by HCFA, ProPAC, and the hospital industry have 
documented different weights for excluded hospitals and prospective 
payment hospitals. Table 7 compares major weights in the rebased 1992 
market basket for excluded hospitals with weights in the rebased 1992 
market basket for prospective payment system hospitals. Wages and 
salaries are 52.152 percent of total operating costs for excluded 
hospitals compared to 50.244 percent for prospective payment hospitals. 
Employee benefits are 11.569 percent for excluded hospitals compared to 
11.146 percent for prospective payment hospitals. As a result, 
compensation costs (wages and salaries plus employee benefits) for 
excluded hospitals are 63.721 percent of costs compared to 61.390 
percent for prospective payment hospitals. Noncompensation costs are 
36.279 percent for excluded hospitals and 38.610 of costs for 
prospective payment hospitals.
    Two significant differences in the category weights occur in 
Pharmaceuticals and Business Services. Pharmaceuticals represent 4.162 
percent of costs for prospective payment hospitals and 3.070 percent 
for excluded hospitals. Business services represent 3.823 percent of 
costs for prospective payment hospitals and 2.337 percent for excluded 
hospitals. The weights for the excluded hospital market basket were 
derived using the same data sources and methods as for the prospective 
payment market basket (see Appendix C to this final rule).
    Differences in weights between the excluded hospital and 
prospective payment hospital market baskets do not necessarily lead to 
significant differences in the rate of price growth for the two market 
baskets. If the individual wages and prices move at the approximately 
same annual rate, both market baskets may have about the same price 
growth even though weights may differ substantially because both market 
baskets use the same wages and prices. Also, offsetting price increases 
for various cost components can result in similar composite price 
growth in both market baskets.
    The wage and price proxies are the same for the excluded hospital 
and prospective payment hospital market baskets. As discussed in 
section IV.A.2 of this preamble, all of the cost expenditure weights 
for both the prospective payment and excluded hospital market baskets 
are subject to refinement when the U.S. Department of Commerce 1992 
data are released, analyzed by HCFA, and incorporated in

[[Page 46194]]

the PPS and exempt final market baskets.
    The excluded hospital market basket is a composite set of weights 
for Medicare participating psychiatric, long-term care, rehabilitation, 
and children's hospitals. We are using cost report data for excluded 
hospitals and units whose average length of stay for Medicare patients 
is within 15 percent (that is, 15 percent higher or lower) of the 
facility average length of stay for all patients. This is a change from 
the 1987-based market basket, for which data for all excluded hospitals 
and units were used. We believe that limiting our sample to hospitals 
with a Medicare average length of stay within 15 percent of the total 
facility average length of stay provides a more accurate reflection of 
the structure of costs for Medicare. We note that the forecast for FY 
1997 differs by only 0.1 percent when we included all excluded 
hospitals in the calculation of weights. The forecast for the limited 
index was 2.5 percent, while the forecast for the full set of excluded 
hospitals was 2.6 percent.

   Table 6.--Comparison of Significant Weights for 1992-Based Excluded  
        Hospital and Prospective Payment Hospital Market Baskets        
------------------------------------------------------------------------
                                                             Prospective
                    Category                       Excluded    payment  
                                                  hospitals   hospitals 
------------------------------------------------------------------------
Wages and salaries..............................     52.152      50.244 
Employee benefits...............................     11.569      11.146 
Professional fees...............................      2.098       2.127 
Pharmaceuticals.................................      3.070       4.162 
All other.......................................     31.111      32.321 
    Total.......................................    100.000     100.000 
------------------------------------------------------------------------


    Table 7.--1992-Based Excluded Hospital Operating Cost Categories,   
                       Weights, and Price Proxies                       
------------------------------------------------------------------------
                                       Rebased                          
                                         1992                           
                                       excluded                         
         Expense categories            hospital        Price proxy      
                                        market                          
                                        basket                          
------------------------------------------------------------------------
1. Compensation.....................     63.721  .......................
    A. Wages and salaries...........     52.152  HCFA occupational wage 
                                                  index.                
    B. Employee benefits............     11.569  HCFA occupational      
                                                  benefits index.       
    2. Professional fees............      2.098  ECI--Compensation for  
                                                  professional,         
                                                  specialty and         
                                                  technical.            
3. Utilities........................      2.557  .......................
     A. Fuel, oil, and gasoline.....      0.357  PPI refined petroleum  
                                                  products.             
    B. Electricity..................      1.396  PPI commercial electric
                                                  power.                
    C. Natural gas..................      0.694  PPI commercial natural 
                                                  gas.                  
    D. Water and sewerage...........      0.110  CPI-U water and        
                                                  sewerage maintenance. 
4. Professional liability insurance.      1.081  HCFA professional      
                                                  liability insurance   
                                                  premiums index.       
5. All other........................     30.543  .......................
    A. All other products...........     23.642  .......................
        (1.) Pharmaceuticals........      3.070  PPI ethical            
                                                  (prescription) drugs. 
        (2.) Food...................      3.581  .......................
          a. Direct purchase........      2.446  PPI processed foods and
                                                  feeds.                
          b. Contract service.......      1.135  CPI-U food away from   
                                                  home.                 
        (3.) Chemicals..............      3.929  PPI industrial         
                                                  chemicals.            
        (4.) Medical instruments....      3.238  PPI medical instruments
                                                  and equipment.        
        (5.) Photographic supplies..      0.413  PPI photographic       
                                                  supplies.             
        (6.) Rubber and plastics....      5.039  PPI rubber and plastic 
                                                  products.             
        (7.) Paper products.........      2.134  PPI converted paper and
                                                  paperboard products.  
        (8.) Apparel................      0.906  PPI apparel.           
        (9.) Machinery and equipment      0.218  PPI machinery and      
                                                  equipment.            
        (10.) Miscellaneous products      1.112  PPI finished goods.    
    B. All other services...........      6.901  .......................
        (1.) Business services......      2.337  ECI--compensation for  
                                                  private workers in    
                                                  business services.    
        (2.) Computer services......      1.415  AHE computer and data  
                                                  processing services.  
        (3.) Transportation services      0.195  CPI-U transportation.  
        (4.) Telephone services.....      0.549  CPI-U telephone        
                                                  services.             
        (5.) Postage................      0.282  CPI-U postage.         
        (6.) All other: labor             1.767  ECI--compensation for  
         intensive.                               private service       
                                                  occupations.          
        (7.) All other: nonlabor          0.356  CPI-U all items.       
         intensive.                                                     
          Total.....................    100.000                         
------------------------------------------------------------------------
Note: Due to rounding, weights may not sum to total.                    
                                                                        
Table 8, below, shows what the                                          
 excluded hospital weights would be                                     
 if cost data for all excluded                                          
 hospitals had been used.                                               


[[Page 46195]]



Table 8.--1992 Excluded Hospital Operating Cost Categories, Weights, and
             Proxies using Data from all Excluded Hospitals             
------------------------------------------------------------------------
                                       Rebased                          
                                         1992                           
                                       excluded                         
         Expense categories            hospital        Price proxy      
                                        market                          
                                        basket                          
------------------------------------------------------------------------
1. Compensation.....................     68.074  .......................
    A. Wages and salaries...........     55.714  HCFA occupational wage 
                                                  index.                
    B. Employee benefits............     12.360  HCFA occupational      
                                                  benefits index.       
2. Professional fees................      2.073  ECI--compensation for  
                                                  professional,         
                                                  specialty and         
                                                  technical.            
3. Utilities........................      2.191  .......................
    A. Fuel, oil, and gasoline......      0.306  PPI refined petroleum  
                                                  products.             
    B. Electricity..................      1.196  PPI commercial electric
                                                  power.                
    C. Natural gas..................      0.595  PPI commercial natural 
                                                  gas.                  
    D. Water and sewerage...........      0.094  CPI-U water and        
                                                  sewerage maintenance. 
4. Professional liability insurance.      1.081  HCFA professional      
                                                  liability insurance   
                                                  premiums index.       
5. All other........................     26.582  .......................
    A. All other products...........     20.333  .......................
        (1.) Pharmaceuticals........      2.704  PPI ethical            
                                                  (prescription) drugs. 
        (2.) Food...................      3.069  .......................
          a. Direct purchase........      2.096  PPI processed foods and
                                                  feeds.                
          b. Contract Service.......      0.973  CPI-U food away from   
                                                  home.                 
        (3.) Chemicals..............      3.367  PPI industrial         
                                                  chemicals.            
        (4.) Medical instruments....      2.775  PPI medical instruments
                                                  and equipment.        
        (5.) Photographic supplies..      0.354  PPI photographic       
                                                  supplies.             
        (6.) Rubber and plastics....      4.319  PPI rubber and plastic 
                                                  products.             
        (7.) Paper products.........      1.829  PPI converted paper and
                                                  paperboard products.  
        (8.) Apparel................      0.777  PPI apparel.           
        (9.) Machinery and equipment      0.187  PPI machinery and      
                                                  equipment.            
        (10.) Miscellaneous products      0.953  PPI finished goods.    
    B. All other services...........      6.248  .......................
        (1.) Business services......      2.337  ECI--compensation for  
                                                  private workers in    
                                                  business services.    
        (2.) Computer services......      1.213  AHE computer and data  
                                                  processing services.  
        (3.) Transportation services      0.167  CPI-U transportation.  
        (4.) Telephone Services.....      0.471  CPI-U telephone        
                                                  services.             
        (5.) Postage................      0.242  CPI-U postage.         
        (6.) All Other: Labor             1.514  ECI--compensation for  
         Intensive.                               private service       
                                                  occupations.          
        (7.) All Other: Nonlabor          0.305  CPI-U all items.       
         Intensive.                                                     
          Total.....................    100.000  .......................
------------------------------------------------------------------------

    The relatively small differences in weights between the excluded 
hospital market basket data from excluded hospitals that have a 
Medicare length of stay within 15 percent of the total facility average 
length of stay and the excluded hospital market basket using data from 
all excluded hospitals do not lead to significant changes in the rate 
of price growth for these two market baskets. If all individual wages 
and prices move at about the same annual rate, both market baskets 
could have about the same price growth even if weights are somewhat 
different. Also, offsetting price increases for various costs 
components can result in the price growth being the same.
    To examine the sensitivity of the change to the limited set of 
excluded hospitals, we developed a comparison for the period 1988-1998. 
Using historical data and forecasts for the market baskets, we compared 
limited and full sets of excluded hospitals.

  Table 9.--A Comparison of the Excluded Hospital Market Basket and the 
  Excluded Hospital Market Basket Rebased Using All Excluded Hospitals, 
                        Percent Change, 1988-1998                       
------------------------------------------------------------------------
                               Excluded (+/-     Excluded               
                                    15%)     hospital market            
                                 hospital      basket using             
     Federal fiscal year          market       all excluded   Difference
                               basket--1992  hospitals--1992            
                                   base            base                 
------------------------------------------------------------------------
Historical: 1988.............          4.9            4.8           0.1 
1989.........................          5.6            5.5           0.1 
1990.........................          4.6            4.7          (0.1)
1991.........................          4.3            4.4          (0.1)

[[Page 46196]]

                                                                        
1992.........................          3.0            3.2          (0.2)
1993.........................          3.1            3.1          (0.0)
1994.........................          2.6            2.7          (0.1)
1995.........................          3.3            3.2           0.1 
Forecasted: 1996.............          2.5            2.7          (0.2)
1997.........................          2.5            2.6          (0.1)
1998.........................          2.8            2.9          (0.1)
Historical average: 1988-1995          3.9            4.0          (0.1)
Forecasted average: 1996-1998          2.6            2.7          (0.1)
------------------------------------------------------------------------

    Note that the historical average rate of growth from 1988 to 1995 
for the excluded hospital market basket including only excluded 
hospitals with Medicare average length of stay within 15 percent of 
total facility average length of stay is virtually identical to that 
for the excluded hospital market basket with all excluded hospitals. 
The rates of growth using the two methodologies are within 0.1 percent 
for FY 1996, 1997, and 1998.
    Comment: A commenter requested a more detailed explanation about 
the rationale for dropping from the calculation of the excluded 
facility market basket those excluded hospitals and units with Medicare 
average lengths of stay that vary by more than 15 percent from the 
facility's overall average length of stay. The commenter stated that 
there is no description of the hospitals being dropped or their 
characteristics (e.g., if these facilities have low Medicare shares, it 
may be appropriate to exclude them). More information is needed before 
the appropriateness of the 15-percent screen can be assessed.
    Response: To the extent possible, we used total reimbursable 
facility costs to determine the weights for Medicare costs. If the 
patterns of practice for Medicare patients differ significantly from 
the overall patient population, we believe that total facility costs 
for facilities with high shares of Medicare patients are more 
representative of the Medicare population. We chose to compare the 
average length of stay for all patients to that of Medicare 
beneficiaries as the test of the similarity of the practice patterns 
for non-Medicare patients versus Medicare patients. Our method results 
in retaining hospitals that had a share of patient days attributable to 
Medicare that was approximately three times that of hospitals that were 
excluded. Our goal is to measure cost shares that are reflective of 
case mix and practice patterns associated with providing services to 
Medicare beneficiaries.
    Comment: A commenter questioned whether there will be a need for a 
separate market basket for each type of excluded hospital once 
prospective payment systems are developed for psychiatric and 
rehabilitation hospitals and units. The commenter recommended that HCFA 
consider whether it would be beneficial to begin identifying a separate 
market basket for each type of excluded hospital.
    Response: We agree with the commenter that HCFA will have to 
consider whether to use separate market baskets for each type of 
excluded hospital once prospective payment systems are developed for 
psychiatric and rehabilitation hospitals. However, until those systems 
are designed we believe it is premature to develop separate market 
baskets.

B. Capital Costs

Rebasing the Capital Input Price Index
1. Background
    Effective for cost reporting periods beginning on or after October 
1, 1995, the Capital Input Price Index (CIPI) is used to determine the 
price increase associated with prospective payment hospital capital-
related expenses. Capital-related expenses are defined as depreciation 
expenses, capital-related interest expenses, and other capital-related 
expenses, such as insurance and taxes. The CIPI measures the input 
price change of these capital-related expenses, and is included in the 
capital prospective payment update framework to determine a rate of 
increase in capital prospective payments.
    Like the prospective payment hospital operating input price index, 
the CIPI is a fixed-weight price index. A fixed-weight price index 
measures how much it would cost at a later date to purchase the same 
mix of goods and services purchased in the base period. For the 
prospective payment hospital operating and capital input price indexes, 
the base period is selected and cost category weights are determined 
using available data on hospitals. Next, appropriate price proxy 
indexes are chosen for each cost category. Then a price proxy index 
level for each expenditure category is multiplied by the comparable 
cost category weight. The sum of these products (that is, weights 
multiplied by price proxy index levels) for all cost categories yields 
the composite index level of the market basket for a given year. 
Repeating the step for other years produces a time series of composite 
market basket index levels. Dividing an index level by a later index 
level produces a rate of growth in the input price index. Since the 
percent change is computed for the fixed mix of total capital inputs 
with a 1992 base, the index is called fixed-weight.
    Like the operating input price index, the CIPI measures the price 
changes associated with costs during a given year. In order to do so, 
the CIPI must differ from the operating input price index in one 
important aspect. The CIPI must reflect the vintage nature of capital, 
which is the acquisition and use of capital over time. Capital expenses 
in any given year are determined by the stock of capital in that year 
(that is, capital that remains on hand from all current and prior 
capital acquisitions).

[[Page 46197]]

An index measuring capital price changes needs to reflect this vintage 
nature of capital. Therefore, the CIPI was developed to capture the 
vintage nature of capital by using a weighted-average of past capital 
purchase prices up to and including the current year. Using Medicare 
cost reports, AHA data, and Securities Data Corporation data, a 
vintage-weighted price index was developed to measure price increases 
associated with capital expenses.
    Comment: A commenter suggested that HCFA's model is overly 
complicated and relies excessively on assumptions given that capital 
costs make up approximately 10 percent of total hospital costs. The 
commenter recommended that HCFA adopt a simpler approach to update the 
Federal rate for capital-related costs for hospital inpatient services.
    Response: Capital payments for prospective payment hospitals are 
expected to be about $8.6 billion in FY 1997, a significant amount that 
warrants an appropriate input price index. It would not be appropriate 
to use a simpler index if it does not accurately reflect the price 
increases associated with capital costs. Capital costs are inherently 
complicated and are determined by complex capital purchasing decisions 
over time, which are based on such factors as interest rates and debt 
financing decisions. Also, capital is depreciated over periods of time 
instead of being consumed in the same period it is purchased. The CIPI 
accurately reflects the annual price increases associated with capital 
costs, and is a useful simplification of the actual capital 
accumulation process. By appropriately accounting for the vintage 
nature of capital in the CIPI, HCFA is able to provide an accurate, 
stable annual measure of price increases. Annual, non-vintage price 
changes for capital are highly unstable due to the volatility of 
interest rate changes. These unstable annual price changes do not 
reflect the actual annual price changes for Medicare capital-related 
costs. The HCFA CIPI reflects the underlying stability of the capital 
acquisition process and provides hospitals with the ability to plan for 
changes in capital payments.
    The most recent discussion on the CIPI and methodological 
background was published in the May 31, 1996 proposed rule (61 FR 
27466). The following Federal Register documents describe development 
and revisions of the methodology involved with the construction of the 
CIPI: September 1, 1992 (57 FR 40016), May 26, 1993 (58 FR 30448), 
September 1, 1993 (58 FR 46490), May 27, 1994 (59 FR 27876), September 
1, 1994 (59 FR 45517), June 2, 1995 (60 FR 29229), and September 1, 
1995 (60 FR 45815).
    We periodically update the base year for the operating and capital 
input prices to reflect the changing composition of inputs for 
operating and capital expenses. Previously, both the operating input 
price index and the CIPI are based to FY 1987. We are updating the base 
year cost structure to FY 1992, the most recent year with relatively 
complete data for purposes of rebasing. We explain the process of 
rebasing the cost structure weights for the CIPI below.
2. Rebasing the Capital Input Price Index
    We are using a rebased capital input price index (CIPI) in 
developing the FY 1997 capital update factor for capital prospective 
payment rates. The new CIPI is rebased to reflect the 1992, rather than 
the 1987, structure of capital costs. In developing the rebased CIPI, 
we reviewed hospital capital expenditure data for capital cost 
categories (depreciation, interest, and other). Two sets of weights had 
to be developed in order to compute the rebased CIPI: (1) cost category 
weights which identify the proportion of total hospital capital 
expenditures attributable to each capital expenditure category, and (2) 
relative vintage weights for depreciation and interest which identify 
the proportion of capital expenditures within a cost category that are 
attributable to each year over the life of capital assets in that 
category. Because capital expense data in the Medicare Cost Reports is 
not available prior to 1980 for use in computing vintage weights, the 
two sets of weights are measured using the best data sources available 
as explained below and in Appendix C to this final rule. The 
computations involved with rebasing the CIPI are explained for each of 
these sets of weights.
    a. Capital Cost Category Weights. The capital cost category weights 
in Table 10 below were computed using a combination of the FY 1992 
Medicare Cost Reports and 1992 AHA Annual Survey data. FY 1992 marked 
the first year for expanded capital data available in the Medicare Cost 
Reports. After reviewing the data, we determined that much of the data 
had been reclassified into different expense categories. Therefore, we 
removed prospective payment hospital reports that appeared to have 
reclassified data, and matched the remaining reports to the 
corresponding reports in the AHA Annual Survey data set. These 
remaining 2724 prospective payment hospital reports were used to 
compute capital cost category weights and the expected life of capital, 
which is used in determining vintage weights for depreciation and 
interest.
    In reviewing the data, we determined that the Medicare Cost Reports 
provided accurate data for depreciation and other capital expenses, but 
had reclassified interest data. We determined that AHA Annual Survey 
data more accurately reflected interest expense, based on past trends 
in interest rates. Therefore, we used the AHA Annual Survey interest 
levels along with the Medicare Cost Report levels for depreciation and 
other capital expenses to develop a more robust capital cost data base.
    After removing depreciation, interest, and other capital expenses 
from total capital expenses, the remainder constitutes lease expenses. 
Lease expenses are not a separate cost category in the CIPI. They are 
distributed to the other cost categories (depreciation, interest, 
other), reflecting an assumption that the underlying cost structure of 
leases is similar to capital costs in general. We assigned 10 percent 
of lease expenses to the other capital expenses cost category as 
overhead, and the remaining lease expenses were distributed to the 
three cost categories based on the weights of depreciation, interest, 
and other capital expenses not including lease expenses. (We base this 
assignment of 10 percent of lease expenses to overhead on the common 
assumption that overhead is 10 percent of costs.)
    We also used the 1992 Medicare cost reports to determine weights 
for the building and fixed equipment category and the movable equipment 
category. Expenses for building and fixed equipment and for movable 
equipment were determined using the same sample of prospective payment 
hospital reports as was used to compute the major cost category 
weights. The split between building and fixed equipment and movable 
equipment was also used to compute the vintage weights described below. 
Table 10 presents a comparison of the rebased 1992 capital cost weights 
and the 1987 capital cost weights.
    We only used those hospital reports which we considered to have 
capital data that was not reclassified. Because we did not use all 
hospital reports, we were concerned that the hospitals used may not be 
representative of the universe. Therefore, we compared the distribution 
of costs for the hospitals used with the data re-weighted to reflect 
the characteristics of the total universe of hospitals. From this 
analysis we validated that the cost weights derived from the subset we 
used were

[[Page 46198]]

representative of the cost weights for the entire universe of 
hospitals.

      Table 10.--Comparison of 1987 and 1992 Cost Category Weights      
------------------------------------------------------------------------
                                             Rebased                    
       Expense categories          FY 1987   FY 1992      Price proxy   
------------------------------------------------------------------------
1. Building and fixed equipment     0.3054    0.3009  Boeckh            
 depreciation.                                         Institutional    
                                                       Construction     
                                                       Index--vintage   
                                                       weighted (22 yrs)
2. Movable equipment                0.3456    0.3475  PPI for machinery 
 depreciation.                                         and equipment--  
                                                       vintage weighted 
                                                       (10 yrs)         
    Total interest..............    0.3274    0.3184                    
1. Government/nonprofit interest    0.2783    0.2706  Average yield on  
                                                       domestic         
                                                       municipal bonds  
                                                       (bond buyer 20   
                                                       bonds)--vintage  
                                                       weighted (22 yrs)
2. For-profit interest..........    0.0491    0.0478  Average yield on  
                                                       Moody's Aaa      
                                                       Bonds--vintage   
                                                       weighted (22 yrs)
Other...........................    0.0216    0.0332  CPI(U) for        
                                                       residential rent 
    Total.......................    1.0000    1.0000                    
      Total depreciation........    0.6510    0.6484                    
------------------------------------------------------------------------
Source: 1992 Medicare Cost Reports, PPS year 9; 1992 AHA Annual Survey. 

    Note: Due to rounding, weights may not sum to totals.

    Comment: The price proxy for ``for-profit interest'' was listed in 
Table 10 of the May 31, 1996 Federal Register (61 FR 27468) as the 
Average Yield on Moody's AAA Corporate Bonds. A commenter pointed out 
that Moody's highest ratings is Aaa instead of AAA.
    Response: As the commenter pointed out, the correct Moody's rating 
is Aaa. While publications other than Moody's may not be as precise in 
their presentation of Moody's ratings, HCFA will use the more precise 
definition of Aaa and refer to the price proxy for for-profit interest 
as the Average Yield on Moody's Aaa Corporate Bonds throughout this 
final rule.
    We had planned to incorporate the 1992 data from the Department of 
Commerce for developing capital cost category weights. However, these 
data are not available for inclusion in this final rule.
    b. Relative Vintage Weights for Prices. As we have explained in 
previous Federal Register documents (most recently the September 1, 
1995 final rule at 60 FR 45817), the CIPI was developed to capture the 
vintage nature of capital; that is, because capital is acquired and 
consumed over time, the capital expenses in any given year are 
determined by past and current purchases of physical and financial 
capital. Therefore, a vintage-weighted CIPI was developed which used 
vintage weights for depreciation (physical capital) and interest 
(financial capital) to capture the long-term consumption of capital. 
These vintage weights reflect the purchase patterns of building and 
fixed equipment and movable equipment over time. Because depreciation 
and interest expenses are determined by the amount of past and current 
capital purchases, we use the vintage weights to compute vintage-
weighted price changes associated with depreciation and interest 
expense, which is the purpose of the CIPI.
    To compute the vintage weights for depreciation and interest 
expenses, we used a time series of capital purchases for building and 
fixed equipment and movable equipment. We found no single source that 
provides the best time series of capital purchases by hospitals for all 
of the above components of capital purchases. The Medicare cost reports 
did not have sufficient capital data to meet this need. The AHA Panel 
Survey provides a consistent database back to 1963. While the AHA Panel 
Survey data does not provide annual capital purchases, it does provide 
a time series of depreciation and interest expenses, which can be used 
to infer capital purchases over time. The process of using the AHA data 
to estimate a time series of capital purchases, and eventually vintage 
weights, is explained in detail below.
    In order to estimate capital purchases from AHA data on 
depreciation and interest expenses, the expected life for building and 
fixed equipment, for movable equipment, and for debt instruments is 
needed. The expected life is used in the calculation of vintage weights 
for building and fixed equipment, movable equipment, and debt 
instruments as we explain below.
    We used the same sample of prospective payment hospitals from FY 
1992 Medicare cost reports and the 1992 AHA Annual Survey explained 
above in computing cost category weights to compute the expected life 
of building and fixed equipment and movable equipment. (The AHA Panel 
Survey is a monthly survey of a sample of hospitals, while the AHA 
Annual Survey is a more detailed survey of all hospitals.) The expected 
life of any piece of equipment can be determined by dividing the 
historical asset cost (excluding fully depreciated assets) by the 
current year depreciation amount. This calculation yields the estimated 
useful life of an asset if depreciation continued at current year 
levels, assuming straight-line depreciation, which is the only 
depreciation method allowed under Medicare. From the FY 1992 costs 
reports, the expected life of building and fixed equipment was 
determined to be 22 years, and the expected life of movable equipment 
was determined to be 10 years. By comparison, the expected life using 
FY 1987 data was 25 years for building and fixed equipment and 10 years 
for movable equipment.
    It was also necessary to compute the expected life of debt 
instruments held by hospitals. As in prior exercises, we used hospital 
issuances of municipal and commercial bonds from Securities Data 
Corporation to determine the expected life of hospital debt 
instruments, which is used in the estimation of vintage weights for 
interest expense. This data source produced a weighted average life for 
the two types of bonds of 22 years for FY 1992, the same expected life 
as was computed for the 1987-based CIPI.
    An annual series of total expenses and depreciation expenses was 
obtained from the AHA Panel Survey. For the calculation of vintage 
weights, this expense data was needed back to 1963. However, the 
depreciation expense data in the AHA Panel survey was available only 
back to 1976. We noticed an increasing trend in depreciation expenses 
as a percentage of total expenses. We performed a regression on this 
percentage, and used the regression

[[Page 46199]]

equation to estimate depreciation expenses back to 1963. We then used 
the fixed and movable weights derived from the FY 1992 Medicare cost 
reports to partition the AHA Panel Survey depreciation expenses into 
annual amounts of building and fixed depreciation and movable 
depreciation.
    Multiplying the annual depreciation amounts by the expected life 
calculations from the FY 1992 Medicare cost reports, year-end asset 
costs for building and fixed equipment and movable equipment were 
determined. Then by subtracting the previous year asset costs from the 
current year asset costs, annual purchases of building and fixed 
equipment and movable equipment were estimated back to 1963. This 
capital purchase time series is then used to compute the vintage 
weights for building and fixed equipment, movable equipment, and debt 
instruments. Each of these sets of vintage weights is explained in 
detail below.
    For building and fixed equipment vintage weights, the real annual 
capital purchase amounts for building and fixed equipment derived from 
the AHA Panel Survey were used. The real annual purchase amount was 
used to capture the actual amount of the physical acquisition, net of 
the effect of price inflation. This real annual purchase amount for 
building and fixed equipment was produced by deflating the nominal 
annual purchase amount by the building and fixed equipment price proxy, 
the Boeckh institutional construction index. Because building and fixed 
equipment has an expected life of 22 years, the vintage weights for 
building and fixed equipment were deemed to represent the average 
purchase pattern of building and fixed equipment over 22-year periods. 
With real building and fixed equipment purchase estimates available 
back to 1963, nine 22-year periods could be averaged to determine the 
average vintage weights for building and fixed equipment. Averaging 
different periods produces vintage weights that are representative of 
average building and fixed equipment purchase patterns over time. 
Vintage weights for each 22-year period are calculated by dividing the 
real building and fixed capital purchase amount in any given year by 
the total amount of purchases in the 22-year period. For example, for 
the 22-year period of 1964-1985, the vintage weight for year 1 is 
calculated by dividing the real annual capital purchase amount of 
building and fixed equipment in 1964 into the total amount of real 
annual capital purchases of building and fixed equipment over the 
entire 1964-1985 period. This calculation is done for each year in the 
22-year period, and for each of the nine 22-year periods. An average is 
taken of the nine 22-year periods to determine the FY 1992 average 
building and fixed equipment vintage weights, presented in Table 11 
with the FY 1987 vintage weights.
    For movable equipment vintage weights, the real annual capital 
purchase amounts for movable equipment derived from the AHA Panel 
Survey were used. The real annual purchase amount was used to capture 
the actual amount of the physical acquisition, net of price inflation. 
This real annual purchase amount for movable equipment was produced by 
deflating the nominal annual purchase amount by the movable equipment 
price proxy, the Producer Price Index for machinery and equipment. 
Because movable equipment has an expected life of 10 years, the vintage 
weights for movable equipment were deemed to represent the average 
purchase pattern of movable equipment over 10-year periods. With real 
movable equipment purchase estimates available back to 1963, 21 10-year 
periods could be averaged to determine the average vintage weights for 
movable equipment. Averaging different periods produces vintage weights 
which are representative of average movable equipment purchase patterns 
over time. Vintage weights for each 10-year period are calculated by 
dividing the real movable capital purchase amount for any given year by 
the total amount of purchases in the 10-year period. For example, for 
the 10-year period of 1976-1985, the vintage weight for year 1 is 
calculated by dividing the real annual capital purchase amount of 
movable equipment in 1976 into the total amount of real annual capital 
purchases of movable equipment over the entire 1976-1985 period. This 
calculation is done for each year in the 10-year period, and for each 
of the 21 10-year periods. The average of the 21 10-year periods is 
used to determine the FY 1992 average movable equipment vintage 
weights, presented in Table 11 with the FY 1987 vintage weights.
    For interest vintage weights, the nominal annual capital purchase 
amounts for total equipment (building and fixed, and movable) derived 
from the AHA Panel Survey were used. Nominal annual purchase amounts 
were used to capture the value of the debt instrument. Because debt 
instruments have an expected life of 22 years, the vintage weights for 
interest were deemed to represent the average purchase pattern of total 
equipment over 22-year periods. With nominal total equipment purchase 
estimates available back to 1963, nine 22-year periods could be 
averaged to determine the average vintage weights for interest. 
Averaging different periods produces vintage weights which are 
representative of average capital purchase patterns over time. Vintage 
weights for each 22-year period are calculated by dividing the nominal 
total capital purchase amount for any given year by the total amount of 
purchases in the 22-year period. For example, for the 22-year period of 
1964-1985, the vintage weight for year 1 is calculated by dividing the 
nominal annual capital purchase amount of total equipment in 1964 into 
the total amount of nominal annual capital purchases of total equipment 
over the entire 1964-1985 period. This calculation is done for each 
year in the 22-year period, and for each of the nine 22-year periods. 
The average of the nine 22-year periods is used to determine the FY 
1992 average interest vintage weights, presented in Table 11 with the 
FY 1987 weights.

[[Page 46200]]



                          Table 11.--Vintage Weights for Capital-Related Price Proxies                          
----------------------------------------------------------------------------------------------------------------
                                       Building and fixed         Movable equipment             Interest        
                                            equipment        ---------------------------------------------------
                                   --------------------------                                                   
               Year                                Rebased    Fiscal Year    Rebased    Fiscal Year    Rebased  
                                    Fiscal Year  Fiscal Year    1987  10   Fiscal Year    1987  22   Fiscal Year
                                      1987  25     1992  22       yrs        1992  10       yrs        1992  22 
                                        yrs          yrs                       yrs                       yrs    
----------------------------------------------------------------------------------------------------------------
1.................................        0.015        0.019        0.064        0.069        0.007        0.007
2.................................        0.019        0.020        0.072        0.075        0.009        0.008
3.................................        0.022        0.023        0.077        0.083        0.010        0.010
4.................................        0.024        0.026        0.085        0.091        0.011        0.012
5.................................        0.023        0.028        0.095        0.097        0.013        0.014
6.................................        0.022        0.030        0.101        0.103        0.015        0.016
7.................................        0.020        0.031        0.109        0.109        0.017        0.018
8.................................        0.021        0.032        0.122        0.115        0.020        0.021
9.................................        0.025        0.036        0.132        0.124        0.023        0.024
10................................        0.030        0.039        0.142        0.133        0.027        0.029
11................................        0.033        0.043  ...........  ...........        0.032        0.035
12................................        0.034        0.047  ...........  ...........        0.038        0.041
13................................        0.034        0.050  ...........  ...........        0.043        0.047
14................................        0.035        0.052  ...........  ...........        0.050        0.052
15................................        0.038        0.055  ...........  ...........        0.057        0.059
16................................        0.043        0.059  ...........  ...........        0.064        0.067
17................................        0.049        0.062  ...........  ...........        0.074        0.074
18................................        0.053        0.065  ...........  ...........        0.083        0.081
19................................        0.056        0.067  ...........  ...........        0.090        0.088
20................................        0.057        0.069  ...........  ...........        0.098        0.093
21................................        0.060        0.072  ...........  ...........        0.105        0.099
22................................        0.066        0.073  ...........  ...........        0.114        0.103
23................................        0.071  ...........  ...........  ...........  ...........  ...........
24................................        0.075  ...........  ...........  ...........  ...........  ...........
25................................        0.077  ...........  ...........  ...........  ...........  ...........
                                   -----------------------------------------------------------------------------
    Total.........................        1.000        1.000        1.000        1.000        1.000        1.000
----------------------------------------------------------------------------------------------------------------
 Sources: AHA Panel Survey, 1963-1993; 1992 Medicare Cost Reports; Securities Data Corporation.                 


[[Page 46201]]


    Comment: ProPAC again commented that HCFA's capital update 
framework could be improved, and that ProPAC's capital update framework 
is similar to the operating update framework. The ProPAC framework also 
includes a discretionary financing policy adjustment for use in 
extended periods of unusually high or low interest rates.
    Response: The HCFA CIPI measures the annual price increase 
associated with vintage-weighted capital expenses, making it consistent 
with the HCFA operating input price index, which measures the annual 
price increase associated with operating expenses. The ProPAC market 
basket reflects the price increase of capital purchases from one year 
to the next, and does not capture the vintage nature of capital that is 
captured by the HCFA CIPI. Therefore, we believe the HCFA CIPI 
accurately measures annual price increases in capital expenses, as we 
stated before in the May 26, 1993 (58 FR 30451), September 1, 1993 (58 
FR 46492), May 27, 1994 (59 FR 27889), September 1, 1994 (59 FR 45521), 
June 2, 1995 (60 FR 29233), and the September 1, 1995 (60 FR 45823) 
Federal Registers. ProPAC has presented no criteria (objective or 
subjective) for determining when a discretionary financing policy 
adjustment would be appropriate. HCFA believes that interest rates are 
intrinsic to a technically sound and fair measure of price increases in 
capital expenses (which are defined as depreciation, interest, and 
lease expenses, and insurance and taxes), just as all expense 
components are appropriately included in the HCFA operating input price 
index.
3. Selection of Price Proxies
    After the 1992 capital cost category weights were computed, it was 
necessary to select appropriate price proxies to monitor the rate of 
increase for each expenditure category. Our price proxies for the FY 
1992 based CIPI are the same as those for the FY 1987 based CIPI. The 
rationale for selecting the price proxies is explained in the June 2, 
1995 proposed rule (60 FR 29227) and the September 1, 1995 final rule 
(60 FR 45817). The price proxies are presented in Table 10.
    Comment: A commenter contended the average yield on bonds rated Aaa 
is not representative of the bond rating the for-profit hospital 
industry is obtaining. The commenter examined the bond rating of some 
of its member companies and found them to range from A3 (highest) to B1 
(lowest). The commenter recommended the selection of a price proxy that 
better reflects interest costs of taxpaying hospitals.
    Response: The commenter is correct that the average yield on lower-
rated corporate bonds is different from the average yield on higher-
rated corporate bonds, and that some for-profit hospitals have lower 
ratings than Aaa. However, the interest component for for-profit 
hospitals in the HCFA CIPI is based on percent changes in yields and 
not the yields themselves. We analyzed the percent change in the yield 
for two bond ratings: Aaa and Baa. Despite the yields for the two bond 
ratings being significantly different for the 15 years between 1981-
1995, the percent changes in the yields for the two bond ratings were 
nearly identical. We used the percent changes in both yields to 
calculate the CIPI and determined the impact of the different yields on 
the overall CIPI was essentially zero. Because our analysis did not 
reveal any significant difference in the percent change in yields for 
corporate bonds with different ratings, we believe the average yield 
for Moody's Aaa corporate bonds is an appropriate price proxy for for-
profit interest expense.
4. Forecast of the CIPI for Federal Fiscal Year 1997
    DRI forecasts a 1.3 percent increase in the rebased 1992 CIPI for 
FY 1997, as indicated in Table 12. This is the outcome of a 2.4 percent 
increase in projected depreciation prices (building and fixed 
equipment, and movable equipment) and a 2.2 percent increase in other 
capital expense prices in FY 1997, partially offset by a 1.8 percent 
decline in vintage-weighted interest rates in FY 1997.

[[Page 46202]]



   Table 12.--HCFA Capital Input Price Index Percent Changes, Total and Components, Fiscal Years 1979 to 2000   
----------------------------------------------------------------------------------------------------------------
                                                              Depreciation                                      
                                                ---------------------------------------                         
            Fiscal year                Total                    Building                  Interest      Other   
                                                    Total      and fixed     Movable                            
                                                               equipment    equipment                           
----------------------------------------------------------------------------------------------------------------
Weights (fiscal year 1992)........       1.0000       0.6484       0.3009       0.3475       0.3184       0.0332
----------------------------------------------------------------------------------------------------------------
                                                                                                                
                                         VINTAGE-WEIGHTED PRICE CHANGES                                         
----------------------------------------------------------------------------------------------------------------
1979..............................          5.4          7.4          7.0          7.7          2.7          7.1
1980..............................          6.9          8.0          7.3          8.5          5.4          8.6
1981..............................          8.7          8.5          7.7          9.1          9.1          8.8
1982..............................          9.2          8.5          8.0          9.0         10.2          8.0
1983..............................          6.7          8.1          7.9          8.2          4.8          6.3
1984..............................          6.3          7.3          7.6          7.1          4.9          5.0
1985..............................          5.2          6.3          7.0          5.8          3.5          5.9
1986..............................          3.7          5.7          6.4          5.1          0.7          6.2
1987..............................          3.1          5.1          5.9          4.5         -0.1          4.5
1988..............................          3.0          4.6          5.4          4.0          0.3          3.8
1989..............................          2.6          4.4          5.2          3.7         -0.5          3.8
1990..............................          2.3          4.0          4.9          3.2         -0.7          4.2
1991..............................          2.0          3.6          4.6          2.7         -1.1          3.9
1992..............................          1.5          3.2          4.4          2.1         -2.0          2.6
1993..............................          1.1          2.9          4.1          1.8         -2.8          2.4
1994..............................          1.1          2.7          3.9          1.7         -2.7          2.3
1995..............................          1.3          2.6          3.8          1.6         -2.0          2.5
1996..............................          1.1          2.5          3.6          1.5         -2.4          2.4
1997..............................          1.3          2.4          3.5          1.5         -1.8          2.2
1998..............................          1.2          2.4          3.3          1.5         -2.2          3.1
1999..............................          1.2          2.4          3.3          1.5         -2.2          2.2
2000..............................          1.3          2.4          3.3          1.5         -2.3          3.1
----------------------------------------------------------------------------------------------------------------


[[Page 46203]]


5. Comparison of Percent Changes in the FY 1992-Based CIPI and the FY 
1987-Based CIPI
    Rebasing the CIPI from 1987 to 1992 decreased the percent change in 
the FY 1997 forecast by only 0.2 percentage points, from 1.5 to 1.3 as 
indicated in Table 13. The effect of rebasing is analyzed by comparing 
the 1992-based CIPI forecasted percent changes to the 1987-based CIPI 
forecasted percent changes using the same DRI forecast of component 
prices. As shown in Table 13, there is only a 0.2 percentage point 
difference between the percent changes in the 1992-based CIPI and the 
1987-based CIPI using the second quarter 1996 forecast. The difference 
reflects changes to: (1) cost category weights, (2) expected life, and 
(3) vintage weights. The changes to cost category weights coupled with 
the wide disparity in price changes between the different cost 
categories contributed to lowering the CIPI percent change in the FY 
1997 forecast. This was the case with fixed depreciation, which has 
faster price growth than the other cost categories and now has a lower 
weight by nearly one-half of a percentage point because of rebasing to 
1992. Also contributing to the 0.2 percentage point difference in FY 
1997 forecast is the change in the expected life of building and fixed 
equipment and the change in the vintage weights for all three 
components: building and fixed equipment, movable equipment, and 
interest. The shorter expected life (22 years in 1992 versus 25 years 
in 1987) of building and fixed equipment slightly decreased the FY 1997 
forecast CIPI percent change because years with higher price increases 
were not included as they had been before. The change in vintage 
weights also tended to decrease the FY 1997 CIPI percent change because 
vintage weights in all cases changed to be spread more evenly over the 
life of the asset, decreasing the weight of more recent years and 
increasing the weight of past years. In the years around FY 1997, 
prices for depreciation and interest are projected to increase slightly 
faster than prices in earlier years.

 Table 13.--Comparison of 1987 and 1992 Based Capital Input Price Index 
         Using the Same DRI Forecast, Percent Change, 1979-1997         
------------------------------------------------------------------------
                                                            CIPI        
                                                   ---------------------
                Federal fiscal year                             Rebased 
                                                       1987       1992  
------------------------------------------------------------------------
1979..............................................        5.6        5.4
1980..............................................        7.1        6.9
1981..............................................        8.8        8.7
1982..............................................        9.3        9.2
1983..............................................        6.7        6.7
1984..............................................        6.3        6.3
1985..............................................        5.1        5.2
1986..............................................        3.7        3.7
1987..............................................        3.1        3.1
1988..............................................        3.0        3.0
1989..............................................        2.7        2.6
1990..............................................        2.4        2.3
1991..............................................        2.1        2.0
1992..............................................        1.7        1.5
1993..............................................        1.3        1.1
1994..............................................        1.3        1.1
1995..............................................        1.5        1.3
1996..............................................        1.4        1.1
1997..............................................        1.5        1.3
------------------------------------------------------------------------

V. Other Decisions and Changes to the Prospective Payment System 
for Inpatient Operating Costs

A. Sole Community Hospital Criteria (Sec. 412.92)

    Under the prospective payment system, special payment protections 
are provided to hospitals that, by reason of factors such as isolated 
location, weather conditions, travel conditions, or absence of other 
hospitals, are the sole source of hospital inpatient services 
reasonably available to Medicare beneficiaries. The criteria a hospital 
must meet to be classified as a sole community hospital (SCH) as well 
as the special payment adjustments available are set forth in the 
regulations at Sec. 412.92.
    One of the ways in which a hospital can qualify for sole community 
status is to be located between 25 and 35 miles from other like 
hospitals and prove that no more than 25 percent of residents who 
become inpatients or no more than 25 percent of the Medicare 
beneficiaries who become inpatients in the hospital's ``service area'' 
are admitted to other like hospitals located within a 35-mile radius of 
the hospital (or its service area, if larger).
    In the final rule published on September 30, 1988, we stated: ``A 
hospital may delineate its service area by identifying the zip codes of 
all its inpatients for the cost reporting period ending before the date 
it applies for SCH status. The lowest number of zip codes accounting 
for at least 75 percent of its inpatients would then constitute its 
service area.'' (53 FR 35810).
    In March 1990, we issued a revised manual which inadvertently 
reflected policy prior to October 1, 1988; specifically, section 2810 
A.2.c of the Medicare Provider Reimbursement Manual, Part 1 (HCFA Pub. 
15-1) stated, ``A hospital may define its service area as the lowest 
number of contiguous zip codes from which the hospital draws at least 
75 percent of its inpatients.'' (Emphasis added.) As discussed in the 
proposed rule, some hospitals have raised questions about the 
definition of service area. Therefore, we clarified that our definition 
of ``service area'' for purposes of determining SCH status does not 
require contiguous zip code areas. We have applied this definition 
since October 1, 1988 (the effective date of the September 30, 1988 
final rule). We also indicated that we intended to revise the current 
manual accordingly at our earliest opportunity.
    Comment: Two commenters responded to our clarification on the use 
of zip codes to determine a hospital's service area for SCH purposes. 
One commenter did not object to the policy clarification, but requested 
that we also clarify whether use of zip codes and use of a statewide 
health planning agency are the only two methods of defining a service 
area. The other commenter believes our current policy may lead to 
unfair results for some hospitals in sparsely populated areas. The 
commenter requested that we permit a hospital to use either the lowest 
number of zip codes or the lowest number of contiguous zip codes to 
determine its service area.
    Response: We discussed the definition of a hospital's service area 
for SCH purposes at some length in the preamble of the September 30, 
1988 final rule (53 FR 38511). In that document, we stated that a 
hospital's service area is the area from which it draws at least 75 
percent of its inpatients for the 12-month cost reporting period ending 
before it applies for SCH classification.
    We noted that not all States have Statewide health planning 
commissions that identify hospitals' service areas and we offered the 
zip code methodology as one alternative. We also noted that ``(t)he 
important consideration is that a hospital be able to define its 
service area as the area from which it draws 75 percent of its 
inpatient admissions, as stated in the regulations text at 
Sec. 412.92(c)(3).''
    We have not restricted a hospital's source of data for defining its 
service area to the use of zip codes or to Statewide planning 
commissions. These are merely the two most common methods and, thus, 
are the two we have

[[Page 46204]]

discussed in detail. There have been instances where a State hospital 
association has been the source of data used to define the hospital's 
service area. If a hospital does not wish to use the zip code 
methodology to define its service area, we will review data from any 
independent source that can supply documented data to identify the 
hospital's service area. The important consideration is that we must be 
able to verify supportable evidence that a hospital drew at least 75 
percent of its inpatients from the defined service area.
    In regard to the commenter who requested that a hospital be 
permitted to define its service area using either the lowest number of 
zip codes or the lowest number of contiguous zip codes, we do not 
agree. Since October 1, 1988, any hospital choosing to define its 
service area using the zip code methodology has been required to use 
the lowest number of zip codes from which it drew at least 75 percent 
of its inpatients during its most recently completed cost reporting 
period.
    We have not permitted any hospital to define its service area using 
the lowest number of contiguous zip codes because we do not believe 
this method presents as accurate a picture of a hospital's true service 
area as does the actual lowest number of zip codes. Although the 
commenter presented an elaborate example of how a hospital might meet 
the market share test if its service area is based on contiguous zip 
codes, but not meet the market share test when service area is defined 
strictly as the lowest number of zip codes, we do not believe such a 
scenario is likely to occur with any frequency. And, as noted above, a 
hospital is not required to use the zip code methodology to define its 
service area. If a hospital does not qualify using the lowest number of 
zip codes, it can look to other sources such as a State hospital 
association, Statewide planning commission, or any other independent 
body that can present documentable data to verify that at least 75 
percent of its inpatients came from the identified area.
    Comment: One commenter was concerned about the interim payments 
that sole community hospitals receive during the year. Specifically, 
the commenter was troubled by the method we use to account for outlier 
payments. Because our pricing methodology assumes that all sole 
community hospitals will receive ``average ''outlier payments, the 
aggregate interim payments for a hospital with few outliers are less 
than the amount ultimately due the hospital. Although the difference is 
paid to the hospital during its cost report settlement, the commenter 
claimed that the delay in receiving the money due the hospital has 
caused dire financial consequences.
    Response: One of the difficulties in making interim payments during 
the year for sole community hospitals is not knowing precisely the 
amount of outlier payments the hospital is going to receive. Currently, 
we simply use the overall national expected rate of approximately 5.1 
percent to adjust the Federal payment rate. That is, we take the 
hospital's Federal payment rate, already adjusted for the wage index, 
indirect medical education factor, and disproportionate share factor, 
and further adjust the rate by assuming that the hospital's outlier 
payments will be 5.1 percent of its total DRG payments. Then, we 
compare this amount to the hospital-specific amount and, if the 
hospital-specific amount is higher, we make the difference an add-on to 
the Federal payment rate in making interim payments.
    Some sole community hospitals, however, actually receive much less 
in outlier payments than the national average of 5.1 percent. This 
causes our estimate of their outlier-adjusted Federal payments to be 
higher than is really the case. Therefore, the hospital does not 
receive all of its add-on payments during the year, because the 
difference between the hospital-specific rate and the estimated 
adjusted Federal payment rate is understated. The effect is a 
potentially large payment to the hospital at the time of settlement. We 
note that for sole community hospitals with higher than average outlier 
payments, the opposite problem results. That is, the hospitals are 
overpaid during the year and must repay monies to the Federal 
Government at cost report settlement.
    We believe an assumption based on the expected percentage of 
overall national outlier payments is reasonable, but we will explore 
this problem in more detail during the next year and try to determine 
if use of a hospital-specific outlier adjustment factor for this 
limited purpose would be more appropriate, as well as feasible.

B. 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 received the benefit of payment based on the 
other urban rather than the rural standardized amount. As of that date, 
the other urban and rural standardized amounts are the same. However, 
rural referral centers 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 may 
be 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 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 included all urban hospitals nationwide, and the proposed 
regional values were 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).
    The values in the proposed rule were based on discharges occurring 
during FY 1995 (October 1, 1994 through September 30, 1995) and 
included bills posted to HCFA's records through December 1995. 
Therefore, in addition to meeting other criteria, we proposed that to 
qualify for initial rural referral center status or to meet the 
triennial review standards for cost reporting periods beginning on or 
after October 1,

[[Page 46205]]

1996, a hospital's case-mix index value for FY 1995 would have to be at 
least--
     1.3332; 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. (See the table set forth in the May 31, 
1996 proposed rule at 61 FR 27472.)
    Based on the latest data available (FY 1995 bills received through 
June 1996), the final national case-mix value is 1.3347 and 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)....................       1.2249
2. Middle Atlantic (PA, NJ, NY)............................       1.2230
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).....       1.3396
4. East North Central (IL, IN, MI, OH, WI).................       1.2471
5. East South Central (AL, KY, MS, TN).....................       1.2933
6. West North Central (IA, KS, MN, MO, NE, ND, SD).........       1.2125
7. West South Central (AR, LA, OK, TX).....................       1.3116
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)...............       1.3339
9. Pacific (AK, CA, HI, OR, WA)............................       1.3303
------------------------------------------------------------------------

    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 1995 case-mix index 
value in Table 3C in section V of the Addendum to this final 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 
proposed to update the regional standards. The proposed regional 
standards were based on discharges for urban hospitals' cost reporting 
periods that began during FY 1994 (that is, October 1, 1993 through 
September 30, 1994). That is the latest year for which we have complete 
discharge data available.
    Therefore, in addition to meeting other criteria, we proposed that 
to qualify for initial rural referral center status or to meet the 
triennial review standards for cost reporting periods beginning on or 
after October 1, 1996, the number of discharges a hospital must have 
for its cost reporting period that began during FY 1995 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. (See 
the table set forth in the June 2, 1996 proposed rule at 61 FR 27472.)
    Based on the latest discharge data available, the final median 
numbers of discharges for urban hospitals by census regions are as 
follows:

------------------------------------------------------------------------
                                                              Number of 
                           Region                             discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)....................         6771
2. Middle Atlantic (PA, NJ, NY)............................         8486
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).....         7504
4. East North Central (IL, IN, MI, OH, WI).................         7384
5. East South Central (AL, KY, MS, TN).....................         6386
6. West North Central (IA, KS, MN, MO, NE, ND, SD).........         5794
7. West South Central (AR, LA, OK, TX).....................         4806
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)...............         7553
9. Pacific (AK, CA, HI, OR, WA)............................         5617
------------------------------------------------------------------------

    We reiterate that, to qualify for rural referral center status for 
cost reporting periods beginning on or after October 1, 1996, an 
osteopathic hospital's number of discharges for its cost reporting 
period that began during FY 1995 must 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 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.
    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 1997 outlined above in this section of the 
preamble), it will retain its status for another 3 years. 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 1997, a hospital must meet 
the criteria in Sec. 412.96(c) for FY 1997 or it must meet the criteria 
for 2 of the last 3 years as follows:

------------------------------------------------------------------------
For the cost                      Use the discharges     Use numerical  
  reporting     Use hospital's    for the hospital's     standards as   
   period     case-mix index for    cost reporting     published in the 
  beginning           FY           period beginning    Federal Register 
  during FY                            during FY              on        
------------------------------------------------------------------------
1996          1994..............  1994..............  September 1, 1995.
1995          1993..............  1993..............  September 1, 1994.
1994          1992..............  1992..............  September 1, 1993.
------------------------------------------------------------------------

    Example: A hospital with a cost reporting period beginning July 1 
qualified as a referral center effective July 1, 1994. The hospital has 
fewer than 275 beds. Its 3-year status as a referral center is 
protected through June 30, 1997 (the end of its cost reporting period 
beginning July 1, 1996). To determine if the hospital should retain its 
status as a referral center for an

[[Page 46206]]

additional 3-year period, we will review its compliance with the 
applicable criteria for its cost reporting periods beginning July 1, 
1994, July 1, 1995, and July 1, 1996. The hospital must meet the 
criteria in effect either for its cost reporting period beginning July 
1, 1997, 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, 1995, the hospital's case-mix index value 
during FY 1993 must have equaled or exceeded the lower of the national 
or the appropriate regional standard as published in the September 1, 
1994 final rule with comment period. The hospital's total number of 
discharges during its cost reporting year beginning July 1, 1993, must 
have equaled or exceeded 5,000 or the regional standard as published in 
the September 1, 1994 final rule with comment period.
    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. We received no comments on the rural 
referral center criteria.

C. Disproportionate Share Adjustment (Sec. 412.106)

    Section 1886(d)(5)(F) of the Act provides for additional payments 
for hospitals that serve a disproportionate share of low income 
patients. The disproportionate share adjustment, which was added to the 
prospective payment system by section 9105 of the Consolidated Omnibus 
Budget Reconciliation Act of 1985 (Public Law 99-272), was intended to 
address the higher Medicare costs associated with treating a large 
number of low-income patients. Under this provision, patients who are 
eligible for Medicaid and Supplemental Security Income (SSI) benefits 
were used as a proxy measure of the proportion of low-income patients.
    A hospital's disproportionate share adjustment is generally 
determined by calculating the sum of two patient percentages (Medicare 
Part A/Supplemental Security Income (SSI) covered days to total 
Medicare Part A covered days, and Medicaid but not Medicare Part A 
covered days to total inpatient hospital days). Based on the location 
and size of the hospital, a formula determines if the hospital's 
patient percentage qualifies the hospital for an adjustment and how 
much that adjustment will be. There is also a limited exception 
providing for disproportionate share adjustments for large urban 
hospitals that receive substantial state and local revenues for 
indigent (non-Medicare, non-Medicaid) care.
    With respect to the Medicare-SSI calculation, hospitals have 
expressed dissatisfaction with these proxy measures, and have 
challenged HCFA's implementation of them in recent litigation. Since 
SSI beneficiary information is confidential, hospitals do not have 
access to lists of patients who are eligible for both Medicare Part A 
and SSI benefits. Hospitals are increasingly frustrated by their 
inability to monitor these data.
    With respect to the Medicaid fraction, hospitals have complained 
that, because of Medicaid coverage restrictions, Medicaid covered days 
may not be a consistent measure of indigent care across States. 
Medicaid reforms under consideration by the President and Congress may 
further interfere with the utility of Medicaid covered days as a 
measure of the proportion of low-income patients.
    Because of these concerns, we have been examining alternative 
measures of indigent care. Some of the measures we have explored using 
are estimates of patient income in a hospital's service area, hospital 
levels of bad debt, and proportion of emergency room admissions in a 
hospital. Because of data and other limitations, however, we have yet 
to find an alternative that appears promising as a replacement to the 
present measure. Therefore, in the proposed rule, we solicited comments 
from the industry on better and more direct measures of indigent care 
than the present measure that relies on SSI and Medicaid data. We also 
discussed ProPAC's recommendations concerning DSH payments (61 FR 
27474).
    Comment: A large number of commenters responded to our request for 
input on the Medicare disproportionate share adjustment calculation and 
the SSI and Medicaid data that go into its development. Some commenters 
believe that the current method of identifying disproportionate share 
hospitals is acceptable. Other commenters stated that we should 
implement a revised formula only if it captures the current base of 
eligible hospitals as well as additional facilities. Finally, several 
commenters believe that the current calculation is flawed beyond repair 
and that we should reevaluate the current base of hospitals that are 
eligible for payments under the disproportionate share adjustment and 
revise the formula dramatically. The suggestions we received follow:
     Use the current formula, but expand Medicaid days to 
include all days that a person eligible for Title XIX spends in the 
hospital, whether or not Medicaid paid. Further, in the case of States 
that have replaced traditional Medicaid programs with alternate health 
care programs for their low-income population, include all days that a 
person who is covered by the State's program spends in the hospital, 
whether or not that person would have been eligible for Title XIX 
benefits.
     Use the current formula and include outpatient data as 
well as inpatient data.
     Use data from the Department of Commerce based on income 
levels and zip code information to determine median income levels 
within designated service areas. These data can then be compared to 
Federal poverty guidelines to establish the appropriate level of 
disbursement of disproportionate share payments.
     Combine charity care and bad debts as reported on the 
hospital's financial statements and multiply by the hospital's overall 
cost-to-charge ratio. Then, divide these costs by the hospital's net 
patient revenue excluding Medicare, Medicaid, Medicare health 
maintenance organization (HMO), and Medicaid (HMO) data. This method is 
similar to the current qualifying criteria for an exception under the 
disproportionate share adjustment calculation set forth at 
Sec. 412.106(c)(2).
     Use the low-income utilization rate that is currently used 
in the administration of Medicaid disproportionate share adjustments. 
This is a combination of a hospital's Medicaid revenues and its State 
and local subsidies divided by its total revenues and its inpatient 
charity care charges minus its State and local inpatient subsidies 
divided by total charges.
    Some of the commenters referred to the decisions in court cases in 
the 6th and the 8th Circuits that require the inclusion of days that 
would have been paid by Medicaid but for a State day limitation in the 
disproportionate share calculation. These commenters encouraged HCFA to 
implement the Court's ruling at the national level. Other commenters 
were concerned

[[Page 46207]]

about the inclusion of HMO and other managed care utilization data in 
the calculation. Many of these commenters suggested that HCFA should 
require States to more accurately identify the Medicaid enrollees who 
receive services under a waiver program, possibly by providing these 
enrollees with encrypted insurance cards to reflect Title XIX 
eligibility.
    Several commenters believe that the adjusted average per capita 
cost (AAPCC) payment rate for Medicare managed care plans should be 
revised to exclude any adjustment for disproportionate share and that 
those payments should be made directly to the eligible hospitals. 
Several commenters offered to work with HCFA on this issue.
    Response: We appreciate the responses that we received on the 
disproportionate share adjustment issue. Members of the hospital 
industry and its representatives carefully considered the question of 
data sources, targeted hospitals, and the indigent population. In 
general, commenters believe that compensation for hospitals that treat 
a disproportionate share of the indigent population is valid. However, 
as noted above, there are conflicting ideas about how to target that 
set of hospitals.
    Although many of these comments will require further analysis, we 
will address some suggestions here. First, in the current formula, we 
believe that Medicaid covered days is the correct measure and the 
correct interpretation of Congressional intent as we have outlined on 
numerous previous occasions, most notably in the September 1, 1986 
final rule (54 FR 31460-31461). Given the current statute, we believe 
it is not reasonable to include days that a person spent in the 
hospital while that person was not eligible for Medicaid under any 
circumstances. The statute clearly states that title XIX eligibility is 
a requirement under any circumstances. If a State chooses to adopt some 
sort of a waiver program and elects to cover people who would not have 
otherwise been eligible for care, those persons will not be included as 
Medicaid days in the current formula. Further, inpatient data are used 
in the Medicare disproportionate share adjustment calculation because 
the payment add-on is applied to the Medicare inpatient payment. It is 
not designed to reflect either Medicaid shortfalls or outpatient data, 
since there is a separate Medicaid disproportionate share adjustment, 
and payment for outpatient services is not made through a prospective 
payment system.
    Data from the Department of Commerce based on the U.S. Census are 
collected only during decennial census periods. Thus, while the data 
look promising on first analysis, they become increasingly 
unrepresentative of the population's income trends as they relate to 
geographic areas as the years pass from the base year for which the 
data are collected. We also have a problem with any data that may be 
reported on a hospital's financial statements but that are not reported 
on its annual Medicare cost report. The Medicare cost report data are 
collected annually and subject to a settlement process. The financial 
statements of hospitals vary from facility to facility, are audited on 
an erratic schedule, and are not currently collected by Medicare for 
evaluation.
    Finally, we would not want to duplicate the procedure by which the 
Medicaid disproportionate share adjustment is determined since the 
Medicaid program already pays hospitals an adjustment under Medicaid 
based on these criteria.
    Regarding commenters' concerns on HMO days, currently we collect 
data on HMO utilization for use in the disproportionate share 
adjustment calculation. However, it is up to the hospital, in securing 
the contract with the HMO, to obtain an agreement from the HMO that 
allows the hospital to be able to distinguish those Medicare and 
Medicaid patients that are utilizing services so that it may report 
those days to the fiscal intermediary. We note that the President's FY 
1997 budget includes a provision that would mandate the removal of 
disproportionate share payments from the AAPCC calculation and allow 
these payments to be made directly to the eligible hospital.
    While there appears to be no easy or quick solution to improving 
the disproportionate share payment adjustment, we appreciate the 
comments that the hospital industry provided on this issue. Our concern 
is that Medicaid data will continue to vary more and more from State to 
State and SSI data will continue to be protected from the hospital 
industry's examination by the Privacy Act. Therefore, we will continue 
to examine the inconsistencies in the current Medicare disproportionate 
share adjustment calculation and ways to improve the data and the 
calculation to better target those hospitals that treat a 
disproportionate share of the indigent population.

D. Direct Graduate Medical Education (Sec. 413.86)

1. Initial Residency Period Limitations
    As discussed in the proposed rule, we are updating the Initial 
Residency Period Limitations for direct graduate medical education 
(GME), originally published in the Federal Register on September 29, 
1989 (54 FR 40286). The regulations in Sec. 413.86(g)(1) state that, 
``[e]ffective July 1, 1995, an initial residency period is defined as 
the minimum number of years required for board eligibility.''
    The update reflects the following:
     Effective July 1, 1995, section 1886(h)(5)(F) of the Act, 
as amended by Public Law 103-66, defines an initial residency period as 
the minimum number of years required for initial board eligibility. 
Previously, this period had been defined as minimum number of years 
``plus one.'' The prior listing had included the additional year, not 
to exceed five years.
     Changes in curriculum requirements regarding the number of 
years needed for board eligibility for previously approved programs.
     Addition of newly approved graduate medical education 
programs.
    The table of initial residency periods published in the proposed 
rule (61 FR 27475) did not constitute a proposal in the usual 
rulemaking sense because we were simply updating the tables in 
accordance with current policy. Nevertheless, we received many comments 
that reflected a misunderstanding of the meaning of ``initial residency 
period'' in general. The initial residency period, as that term is used 
in section 1886(h)(5) (F) and (G) of the Act and in Sec. 413.86 refers 
to the minimum number of years necessary to satisfy the requirements 
for initial board eligibility in a specialty. During the initial 
residency period, each full-time resident is weighted at 1.0 full-time 
equivalent (FTE) for purposes of determining GME payments. Once the 
resident has worked the minimum number of years required for board 
eligibility in a specialty, any subsequent training in an approved 
program is weighted at 0.5 FTE.
    The comments on the updated listing also brought to our attention 
information that has resulted in changes in the table of initial 
residency periods. We have added allopathic allergy and immunology with 
an initial residency period of 3 years, osteopathic preventive 
medicine/aerospace medicine with an initial residency of 4 years, and 
osteopathic combined programs in internal medicine/emergency medicine 
and internal medicine/pediatrics with

[[Page 46208]]

an initial residency period of 4 years. We have also modified the table 
by listing pathology/anatomic and pathology/clinical with respective 
initial residency periods of 3 years and pathology/anatomic and 
clinical with an initial residency period of 4 years. Finally, in the 
proposed rule, emergency medicine was listed with an initial residency 
period of 3/4 years due to our understanding that these programs have 
been approved for both 3 and 4 years. However, since the Accreditation 
Council for Graduate Medical Education (ACGME) has approved 3-year 
programs, the minimum number of years of training to become board 
eligible in emergency medicine is actually 3 years. Accordingly, we are 
including the appropriate initial residency period limitation of 3 
years in the table in this final rule.

                  Initial Residency Period Limitations                  
------------------------------------------------------------------------
                                                       Initial residency
                    Residency type                     period limitation
                                                         (No. of years) 
------------------------------------------------------------------------
                      ALLOPATHY                                         
ALLERGY AND IMMUNOLOGY...............................                  3
ANESTHESIOLOGY.......................................                  4
    Critical Care Medicine...........................                  4
    Pain Management..................................                  4
COLON AND RECTAL SURGERY.............................                  5
DERMATOLOGY..........................................                  4
    Dermatopathology.................................                  4
    Clinical & Laboratory Dermatological Immunology..                  4
EMERGENCY MEDICINE...................................                  3
    Sports Medicine..................................                  3
FAMILY PRACTICE......................................                  3
    Geriatric Medicine...............................                  5
    Sports Medicine..................................                  3
INTERNAL MEDICINE....................................                  3
    Adolescent Medicine..............................                  3
    Cardiovascular Disease...........................                  3
    Clinical Cardiac Electrophysiology...............                  3
    Clinic & Laboratory Immunology...................                  3
    Critical Care Medicine...........................                  3
    Endocrinology, Diabetes, and Metabolism..........                  3
    Gastroenterology.................................                  3
    Geriatric Medicine...............................                  5
    Hematology.......................................                  3
    Hematology and Oncology..........................                  3
    Infectious Disease...............................                  3
    Medical Oncology.................................                  3
    Nephrology.......................................                  3
    Pulmonary Disease................................                  3
    Pulmonary Disease and Critical Care Medicine.....                  3
    Rheumatology.....................................                  3
    Sports Medicine..................................                  3
MEDICAL GENETICS.....................................                  4
NEUROLOGICAL SURGERY.................................                  5
    Pediatric Neurological Surgery...................                  5
NEUROLOGY............................................                  4
    Child Neurology..................................                  4
    Clinical Neurophysiology.........................                  4
NUCLEAR MEDICINE.....................................                  3
OBSTETRICS AND GYNECOLOGY............................                  4
    Critical Care Medicine...........................                  4
    Gynecological Oncology...........................                  4
    Maternal and Fetal Medicine......................                  4
    Reproductive Endocrinology.......................                  4
OPHTHALMOLOGY........................................                  4
ORTHOPAEDIC SURGERY..................................                  5
    Adult Reconstructive Orthopaedics................                  5
    Foot and Ankle Orthopaedics......................                  5
    Hand Surgery.....................................                  5
    Musculoskeletal Oncology.........................                  5
    Pediatric Orthopaedics...........................                  5
    Spinal Cord Injury...............................                  5
    Sports Medicine..................................                  5
OTOLARYNGOLOGY.......................................                  5
    Neurotology/Otolaryngology.......................                  5
    Pediatric Otolaryngology.........................                  5
PATHOLOGY, ANATOMIC..................................                  3
PATHOLOGY, CLINICAL..................................                  3
PATHOLOGY, ANATOMIC AND CLINICAL.....................                  4
    Blood Banking/Transfusion Medicine...............                  4
    Chemical Pathology...............................                  4

[[Page 46209]]

                                                                        
    Cytopathology....................................                  4
    Dermatopathology.................................                  4
    Forensic Pathology...............................                  4
    Hematology.......................................                  4
    Immunopathology..................................                  4
    Medical Microbiology.............................                  4
    Neuropathology...................................                  4
    Pediatric Pathology..............................                  4
PEDIATRICS...........................................                  3
    Adolescent Medicine..............................                  3
    Clinical and Laboratory Immunology...............                  3
    Neonatal-Perinatal Medicine......................                  3
    Pediatric Cardiology.............................                  3
    Pediatric Critical Care Medicine.................                  3
    Pediatric Emergency Medicine.....................                  3
    Pediatric Endocrinology..........................                  3
    Pediatric Gastroenterology.......................                  3
    Pediatric Hematology/Oncology....................                  3
    Pediatric Infectious Disease.....................                  3
    Pediatric Nephrology.............................                  3
    Pediatric Opthamology............................                  3
    Pediatric Pulmonology............................                  3
    Pediatric Rheumatology...........................                  3
    Pediatric Sports Medicine........................                  3
PHYSICAL MEDICINE AND REHABILITATION.................                  4
PLASTIC SURGERY......................................                  5
    Hand Surgery.....................................                  5
PREVENTIVE MEDICINE..................................                  3
    Aerospace Medicine...............................                  3
    Medical Toxicology...............................                  3
    Occupational Medicine............................                  3
    Public Health & General Preventive Medicine......                  3
PSYCHIATRY...........................................                  4
    Addiction Medicine...............................                  4
    Child & Adolescent Psychiatry....................                  4
    Forensic Psychiatry..............................                  4
    Geriatric Psychiatry.............................                  5
RADIOLOGY, DIAGNOSTIC................................                  4
    Neuroradiology...................................                  4
    Nuclear Radiology................................                  4
    Pediatric Radiology..............................                  4
    Vascular and Interventional Radiology............                  4
    Radiation Oncology...............................                  4
SURGERY, GENERAL.....................................                  5
    Critical Care Medicine...........................                  5
    Hand Surgery.....................................                  5
    Pediatric Surgery................................                  5
    Thoracic Surgery.................................                  5
    Vascular Surgery.................................                  5
UROLOGY..............................................                  5
    Pediatric Urology................................                  5
                                                                        
                      OSTEOPATHY                                        
ANESTHESIOLOGY.......................................                  4
    Critical Care Medicine...........................                  4
DERMATOLOGY..........................................                  4
    Dermatopathology.................................                  4
    MOHS Micrographic Surgery........................                  4
EMERGENCY MEDICINE...................................                  4
    Sports Medicine..................................                  4
FAMILY PRACTICE......................................                  3
    Adolescent and Young Adult Medicine..............                  3
    Geriatrics.......................................                  5
    Sports Medicine..................................                  3
INTERNAL MEDICINE....................................                  4
    Clinical Allergy and Immunology..................                  4
    Cardiology.......................................                  4
    Endocrinology....................................                  4
    Gastroenterology.................................                  4
    Hematology.......................................                  4
    Infectious Diseases..............................                  4

[[Page 46210]]

                                                                        
    Nephrology.......................................                  4
ONCOLOGY.............................................                  4
    Pulmonary Diseases...............................                  4
    Rheumatology.....................................                  4
    Clinical Cardiac Electrophysiology...............                  4
    Critical Care Medicine...........................                  4
    Geriatrics.......................................                  6
    Sports Medicine..................................                  4
NUCLEAR MEDICINE.....................................                  4
    In-Vivo and In-Vitro Nuclear Medicine............                  4
    Nuclear Cardiology...............................                  4
    Nuclear Imaging and Therapy......................                  4
NEUROLOGY............................................                  4
    Child Neurology..................................                  4
PSYCHIATRY...........................................                  4
    Child Psychiatry.................................                  4
OBSTETRICS/GYNECOLOGY................................                  5
    Maternal and Fetal Medicine......................                  5
    Gynecological Oncology...........................                  5
    Reproductive Endocrinology.......................                  5
FACIAL PLASTIC SURGERY...............................                  5
OPHTHALMOLOGY........................................                  4
OTORHINO/FACIAL PLASTIC SURGERY......................                  5
OTORHINOLARYNGOLOGY..................................                  5
ORTHOPEDIC SURGERY...................................                  5
PATHOLOGY, ANATOMIC..................................                  4
PATHOLOGY, ANATOMIC/LABORATORY MEDICINE..............                  5
PATHOLOGY, LABORATORY MEDICINE.......................                  4
    Forensic Pathology...............................                  5
    Blood Banking/Transfusion Medicine...............                  5
    Chemical Pathology...............................                  5
    Cytopathology....................................                  5
    Dermatopathology.................................                  5
    Hematology.......................................                  5
    Immunopathology..................................                  5
    Medical Microbiology.............................                  5
    Neuropathology...................................                  5
PEDIATRICS...........................................                  3
    Adolescent and Young Adult Medicine..............                  3
    Neonatal Medicine................................                  3
    Pediatric Allergy/Immunology.....................                  3
    Pediatric Cardiology.............................                  3
    Pediatric Hematology/Oncology....................                  3
    Pediatric Infectious Diseases....................                  3
    Pediatric Intensive Care.........................                  3
    Pediatric Nephrology.............................                  3
    Pediatric Pulmonology............................                  3
    Pediatric Sports Medicine........................                  3
PREVENTIVE MEDICINE..................................                  4
PREVENTIVE/AEROSPACE MEDICINE........................                  4
PROCTOLOGY...........................................                  3
RADIATION ONCOLOGY...................................                  4
RADIOLOGY, DIAGNOSTIC................................                  5
    Angiography and Interventional Radiology.........                  5
    Diagnostic Ultrasound............................                  5
    Neuroradiology...................................                  5
    Nuclear Radiology................................                  5
    Radiological Imaging.............................                  5
    Pediatric Radiology..............................                  5
REHABILITATION MEDICINE..............................                  4
    Sports Medicine..................................                  4
GENERAL SURGERY......................................                  5
NEUROSURGERY.........................................                  5
PLASTIC AND RECONSTRUCTIVE SURGERY...................                  5
THORACIC CARDIOVASCULAR SURGERY......................                  5
UROLOGICAL SURGERY...................................                  5
GENERAL VASCULAR SURGERY.............................                  5
CRITICAL CARE SURGERY................................                  5
OSTEOPATHIC MANIPULATIVE MEDICINE....................                  3
                                                                        
                       PODIATRY                                         
ROTATING PODIATRIC RESIDENCY(PRIMARY CARE)...........                  2

[[Page 46211]]

                                                                        
PODIATRIC ORTHOPEDIC RESIDENCY.......................                  2
PODIATRIC SURGICAL RESIDENCY.........................                  2
                                                                        
                      DENTISTRY                                         
DENTAL PUBLIC HEALTH.................................                  1
ENDODONTICS..........................................                  2
ORAL PATHOLOGY.......................................                  3
ORAL AND MAXILLOFACIAL SURGERY.......................                  4
ORTHODONTICS.........................................                  2
PEDIATRIC DENTISTRY..................................                  2
PERIODONTICS.........................................                  3
PROSTHODONTICS.......................................                  3
PROSTHODONTICS/MAXILLOFACIAL.........................                  3
GENERAL DENTISTRY....................................                  1
ADVANCED GENERAL DENTISTRY...........................                  2
                                                                        
             ALLOPATHY COMBINED PROGRAMS*                               
FAMILY PRACTICE(3) AND PSYCHIATRY(4).................                  4
INTERNAL MEDICINE(3) & EMERGENCY MEDICINE(3).........                  3
INTERNAL MEDICINE(3) & FAMILY PRACTICE(3)............                  3
INTERNAL MEDICINE(3) & NEUROLOGY(4)..................                  4
INTERNAL MEDICINE(3) & PEDIATRICS(3).................                  3
INTERNAL MED(3) & PHYS MED & REHABILITATION(4).......                  4
INTERNAL MEDICINE(3) & PREVENTIVE MEDICINE(5)........                  5
INTERNAL MEDICINE(3) & PSYCHIATRY(4).................                  4
NEUROLOGY(4) & PHYS MEDICINE AND REHAB(4)............                  4
PEDIATRICS(3) & EMERGENCY MEDICINE(3)................                  3
PEDIATRICS(3) & PHYSICAL MEDICINE AND REHAB(4).......                  4
PEDIATRICS(3)/PSYCHIATRY(4)/CHILD&ADOL PSYCH(4)......                  4
PSYCHIATRY(4) AND NEUROLOGY(4).......................                  4
                                                                        
            OSTEOPATHY COMBINED PROGRAMS*                               
INTERNAL MEDICINE/EMERGENCY MEDICINE.................                  4
INTERNAL MEDICINE/PEDIATRICS.........................                  4
------------------------------------------------------------------------
* For residents participating in combined programs, Medicare limits the 
  initial residency period to the time required for individual          
  certification in the longer of the two programs.                      

2. Combined Residency Programs
    As discussed in the proposed rule, when we updated the listing of 
the Initial Residency Period Limitations for GME, we noted many new 
programs that were combined specialty residency programs. The combined 
programs run concurrently for a period of time that is longer than the 
required time for certification in either specialty, but shorter than 
would be required if the programs were taken sequentially. Residents 
completing these programs are eligible for board certification in both 
specialties.
    We use the Internal Medicine and Pediatrics combined program as an 
example: Taken individually, Internal Medicine is a 3-year program and 
Pediatrics is also a 3-year program. However, taken as a combined 
program, Internal Medicine and Pediatrics is a 4-year program, with 
eligibility for certification in both specialties.
    Currently, we are aware of 13 allopathic and 2 osteopathic combined 
programs, including Internal Medicine/Pediatrics, Pediatrics/Emergency 
Medicine, Family Practice/Psychiatry, and Neurology/Physical Medicine 
and Rehabilitation. Due to the increasing prevalence of combined 
residency programs since our September 29, 1989 final rule, we proposed 
to clarify how the definition of initial residency period applies in 
such cases. As discussed in detail in the proposed rule (61 FR 27477), 
we proposed to clarify the definition of the initial residency period 
for combined programs as the time required for individual certification 
in the longer of the two programs. Continuing to use Internal Medicine 
and Pediatrics as an example, we would define the initial residency for 
Internal Medicine and Pediatrics as 3 years. The remaining year of the 
combined program would be treated as 0.5 FTE, in accordance with 
Sec. 413.86(g)(3). We received numerous comments on this policy, and 
the issues raised by the commenters are discussed below.
    Comment: Many commenters disagreed with our clarification 
concerning initial residency periods for combined programs. These 
commenters stated that residents in combined programs are not board 
eligible in either specialty until they have completed the entire 
combined program. Some commenters asserted that we did not understand 
that training in combined programs does not occur sequentially. One 
commenter noted that the Graduate Medical Education Directory states 
that ``applicants may not appear for certifying examinations until all 
training has been completed.'' Many commenters stated that the law 
states that a resident is to be counted as a 1.0 FTE during the 
resident's initial residency period, which is defined as the ``period 
of board eligibility'' in section 1886(h)(5)(F) of the Act. These 
commenters do not believe we have the authority to establish an initial 
residency period that is shorter than the length of the combined 
program, because Medicare will not be paying for residents at 1.0 FTE 
for the period of initial board eligibility.
    Several commenters noted that a resident enrolled in a combined 
program is enrolling in one program and receives a single certificate 
upon completion. One commenter stated that the directors of combined 
programs have not sought to independently certify their graduates with 
a single examination administered by a single

[[Page 46212]]

board. This commenter added that similar to family practice, combined 
programs are not a composite of separate specialties and should be 
recognized as a single discipline. Other commenters noted that training 
in combined internal medicine/pediatrics programs is more intensive 
than family practice and the initial residency period should recognize 
this superior training in adult and pediatric medicine. Some commenters 
believe our proposal implies that training in a second specialty is 
``superfluous, nonessential or less important.''
    Response: We have always recognized that the training in combined 
programs does not occur sequentially, and we acknowledge that residents 
participating in combined programs are not board eligible in either 
specialty until they have completed all of their training requirements. 
We agree that combined training is more intensive than training in each 
specialty taken separately, and we never stated or meant to imply that 
training in a second specialty is unimportant or superfluous. Our 
intent is simply to establish a reasonable policy, consistent with the 
statute, that provides for full Medicare payment for training in one 
speciality.
    We believe our policy is consistent with section 1886(h)(5)(F) of 
the Act, which defines ``initial residency period'' as ``the period of 
board eligibility.'' Section 1886(h)(5)(G) defines the ``period of 
board eligibility'' as ``the minimum number of years of formal training 
necessary to satisfy the requirements for initial board eligibility in 
the particular specialty for which the resident is training.'' 
(Emphasis added.)
    The statute does not address how to count the initial residency 
period in combined programs, perhaps because such programs were not 
contemplated at the time the statute was enacted. We believe the 
statutory scheme indicates congressional intent to allow ``full'' 
Medicare payment only for the minimum period required to train in one 
specialty. Contrary to the suggestion of the commenters, it is clear 
that the statute does not require Medicare to apply a weighting factor 
of 1.0 for a resident until the resident actually becomes board 
eligible. Rather, the statute requires a weighting factor of 1.0 only 
for the ``minimum number of years necessary to satisfy the requirements 
for initial board eligibility''; for time beyond the ``minimum'' 
period, the statute provides that the weighting factor is 0.5. Thus, 
the statute contemplates Medicare payments for the costs of graduate 
medical education, but it does not impose an open-ended obligation for 
Medicare to pay full costs until a resident becomes board eligible.
    The statute defines the initial residency period as the ``minimum 
number of years'' necessary to satisfy the requirements for the 
``particular specialty'' for which the resident is training. Based on 
the public comments we received, we are not persuaded that combined 
residency programs are ``particular specialties'' in and of themselves. 
As we understand it, graduates of these combined residency programs are 
not certified by a single examination by a single board. Rather, they 
must take each board's examination separately. Thus, these residents 
can become board eligible for each distinct specialty (for example, 
Internal Medicine and Pediatrics). It appears that combined programs 
simply combine training in separate specialties (whose requirements may 
overlap). As always, we are willing to consider further information on 
this issue.
    We believe our policy on combined programs is reasonable. Residents 
in combined programs complete all of the training requirements for two 
specialties, but the minimum number of years required to become board 
eligible in either specialty is less than the length of the combined 
program. We believe it is reasonable to define the initial residency 
period for combined programs as the longer of the initial residency 
periods for the two specialties. Our policy is consistent with the 
manner in which Medicare payment would be made if the resident trained 
in two specialties in a sequential manner. In such cases, the resident 
would be counted as a full 1.0 FTE during the training for the first 
specialty, and as 0.5 FTE for later years.
    Comment: Many commenters stated that Congress established the 
initial residency period limitation with the intent of discouraging 
subspecialty training and increasing the primary care work force. These 
commenters do not believe that Congress intended to limit training in 
combined programs consisting of two primary care specialties. 
Similarly, other commenters noted that graduates of combined programs 
are more likely to enter primary care practice in rural and medically 
underserved areas than are graduates of other programs. These 
commenters said that our proposal conflicts with Congress' goal to 
provide medical care to rural and medically underserved areas.
    Response: The initial residency period limitation on full Medicare 
payment applies to all types of programs, both primary care and non-
primary care, and is not intended to discourage primary care practice. 
We agree with these commenters that in general Federal policy should 
encourage more training in primary care and that programs designed to 
encourage practice in rural and medically underserved areas should 
continue to be an important component of Federal health policy. 
However, we believe that these concerns are more properly addressed in 
other contexts. We note that section 1886(h)(2)(D) of the Act provides 
updates to the per resident amounts for primary care residents, but the 
statute does not distinguish between primary and non-primary care 
specialties for purposes of determining the initial residency period.
    Comment: Some commenters were concerned that our policy 
clarification would lead to the dismantling of combined residency 
programs.
    Response: As we have stated, we believe this policy clarification 
is necessary to avoid full Medicare payments, beyond the time required 
to train in one specialty. We note that hospitals will continue to be 
paid for residents in combined programs beyond their initial residency 
period, with the residents weighted at 0.5 FTE.
    Comment: Several commenters were concerned that HCFA developed this 
policy, in part, to control Medicare's graduate medical education 
payments. These commenters noted that there are few of these programs 
in existence with only a small number of graduates who will be 
affected. Accordingly, Medicare savings resulting from this policy 
clarification will be small.
    Response: This policy clarification is based on considerations 
concerning the appropriate application of the statute and does not 
arise solely from a goal of limiting payments. However, we acknowledge 
that Medicare's payment liabilities will be less under this policy than 
if hospitals were allowed to weight residents as 1.0 FTE throughout the 
entire training period in the combined program. We believe that 
combined training programs may have grown in recent years as physicians 
seek additional qualifications in a competitive job market. Our 
understanding is that there are more than 1,400 students in combined 
programs. Given that only a portion of these students are beyond the 
initial residency period under this clarification, we agree that any 
budgetary impact is small relative to the total number of residents 
participating in approved programs.
    Comment: One commenter noted that osteopathic residency programs 
allow 4 years for internal medicine but that allopathic residency 
programs allow 3

[[Page 46213]]

years. This commenter suggested that if we modified the initial 
residency periods so that both were of the same duration, the 4-year 
combined residency could be accommodated.
    Response: Allopathic and osteopathic specialty boards set different 
requirements for board certification. The first year of postgraduate 
osteopathic training consists of a rotating internship which is 
followed by subsequent specialty training. Most allopathic training 
programs do not require similar training. In the September 29, 1989 GME 
regulation published in the Federal Register (54 FR 40293), we stated 
that the osteopathic rotating internship, like the transitional year 
required by some allopathic medical residency programs, would not count 
as an additional year beyond initial board eligibility.
    Comment: One commenter questioned the limitation on the number of 
years noted on the table for geriatric psychiatry. The listing of the 
initial residency periods permits an additional year for training in 
geriatric medicine as a subspecialty of internal medicine and family 
practice but not as a subspecialty of psychiatry. This commenter noted 
that there is a minimum requirement of 4 years of training in 
psychiatry and requested that the initial residency period be extended 
to 5 years for training in geriatric psychiatry. Another commenter 
noted that section 1886(h)(5)(F) of the Act provides that a 2-year 
geriatric residency or fellowship program is treated as part of the 
initial residency period, ``but shall not be counted against any 
limitation on the initial residency period.'' This commenter stated 
that the law clearly provides that geriatric psychiatry programs should 
be eligible for full funding under the special geriatric medical 
education provision described in the law. Other commenters noted that 
the Accreditation Council for Graduate Medical Education (ACGME) only 
accredited geriatric subspecialty programs in family and internal 
medicine when the 1989 regulations were published but now recognizes 
geriatric subspecialty programs in psychiatry.
    Response: We agree that the initial residency period for geriatric 
psychiatry programs should be revised. When the September 29, 1989 
regulation (54 FR 40286) was published, the ACGME was in the process of 
approving training programs in geriatrics as a subspecialty of internal 
medicine and family practice. At that time, we proposed to consider 
expanding the exception to the initial residency period limitation to 
fellowships in other programs when the appropriate national 
organizations establish criteria for approving these programs. 
Subsequently, the ACGME established criteria for accrediting 12-month 
programs in geriatric psychiatry, and the American Board of Psychiatry 
and Neurology recognizes applicants with the required training for 
certification in geriatric psychiatry. Accordingly, we are including 
geriatric psychiatry in the table above with an initial residency 
period of 5 years, which includes a 1-year exception to the 4-year 
initial residency period for psychiatry. We are also modifying the 
definition of ``approved geriatric program'' in Sec. 413.86(b) to 
reflect that the ACGME is accrediting, and boards are recognizing, 
training in geriatric medicine in specialties other than internal 
medicine and family practice.
3. Statutory Provision Regarding Prohibition on Abortion-Related 
Discrimination in Training and Licensing of Physicians 
(Secs. 412.105(g) and 413.86(b))
    Congress recently enacted a statutory provision that prohibits 
certain abortion-related discrimination by the Federal Government and 
State and local governments. In section 515 of the Departments of 
Labor, Health and Human Services, and Education, and Related Agencies 
Appropriations Act of 1996 (see section 101(d) of the Omnibus 
Consolidated Rescissions and Appropriations Act of 1996, Pub. L. No. 
104-134), enacted April 26, 1996, Congress added a new section 245 to 
the Public Health Service Act to provide that:

    ``The Federal Government, and any State or local government that 
receives Federal financial assistance, may not subject any health 
care entity to discrimination on the basis that--
    (1) the entity refuses to undergo training in the performance of 
induced abortions, to require or provide such training, to perform 
such abortions, or to provide referrals for such training or such 
abortions;
    (2) the entity refuses to make arrangements for any of the 
activities specified in paragraph (1); or
    (3) the entity attends (or attended) a post-graduate physician 
training program, or any other program of training in the health 
professions, that does not (or did not) perform induced abortions or 
require, provide or refer for training in the performance of induced 
abortions, or make arrangements for the provision of such 
training.''

    For purposes of section 245, the statute defines ``financial 
assistance'' to include ``governmental payments provided as 
reimbursement for carrying out health-related activities,'' and defines 
``health care entity'' to include individual physicians, postgraduate 
physician training programs (which includes residency training 
programs), and participants in a program of training in the health 
professions.
    The new section also addresses accreditation of postgraduate 
physician training programs. Specifically, the statute provides that:

    ``In determining whether to grant a legal status to a health 
care entity (including a license or certificate) or to provide such 
entity with financial assistance, services or other benefits, the 
Federal government, or any State or local government that receives 
Federal financial assistance, shall deem accredited any postgraduate 
physician training program that would be accredited but for the 
accrediting agency's reliance upon an accreditation standard that 
requires an entity to perform an induced abortion or require, 
provide, or refer for training in the performance of induced 
abortions, or make arrangements for such training, regardless of 
whether such accreditation standard provides exceptions or 
exemptions.''

    The statute further requires that the government involved ``shall 
formulate such regulations or other mechanisms, or enter into such 
agreements with accrediting agencies, as are necessary to comply with 
this subsection.''
    Under the terms of the statute, the provisions of section 245 shall 
not ``prevent any health care entity from voluntarily electing to be 
trained, to train, or to arrange for training in the performance of, to 
perform, or to make referrals for induced abortions.'' Similarly, the 
provisions of section 245 shall not ``prevent an accrediting agency or 
a Federal, State or local government from establishing standards of 
medical competency applicable only to those individuals who have 
voluntarily elected to perform abortions.''
    In this document, we are making conforming changes to the 
regulations at Sec. 412.105(g) and Sec. 413.86(b) to reflect the 
accreditation provisions of section 245. These technical changes merely 
conform the regulations text to the express requirements of the 
statute, and do not involve an exercise of discretion by the agency.

E. Distribution of an ``Important Message from Medicare'' (Sec. 489.27)

    Under Sec. 489.27 of our provider agreement regulations, all 
hospitals that participate in Medicare (including those not paid under 
the prospective payment system) must agree to furnish each Medicare 
beneficiary with a notice, at or about the time of admission, that 
explains the patient's discharge rights. This statement, entitled ``An 
Important Message from Medicare,'' advises a beneficiary of his or her 
rights to be fully informed about decisions affecting

[[Page 46214]]

Medicare coverage or payment and about his or her appeal rights in 
response to any hospital's notice to the effect that Medicare will no 
longer cover the patient's care. The ``Important Message'' also advises 
the patient of what to do when he or she receives such a hospital 
statement and how to elicit more information.
    In November 1993, the Medicare Technical Advisory Group (M-TAG) 
established the Beneficiary Protection and Documentation Issues Task 
Force. The task force consists of HCFA staff as well as representatives 
from health care industry organizations, beneficiary advocate groups, 
fiscal ntermediaries, and peer review organizations (PROs). The task 
force was charged with reviewing various issues that impact 
beneficiaries and the health care community, including how to improve 
the effectiveness of ``An Important Message from Medicare.''
    We proposed to adopt a recommendation of this task force that would 
respond to numerous requests for clarification on the timing of the 
written notice of discharge rights that must be given to hospital 
inpatients. As noted above, existing Sec. 489.27 specifies that a 
hospital must distribute the statement ``at or about the time of 
admission.'' We understand that for monitoring purposes some PROs have 
interpreted this requirement to mean ``within 24 hours preceding or 
following the admission.'' However, we agree with the task force's 
determination that the PRO's interpretation is unnecessarily narrow. We 
believe that during the first 24 hours of a patient's admission, the 
hospital is primarily concerned with ensuring appropriate treatment of 
the patient's illness or injury. Therefore, we proposed to change 
Sec. 489.27 to specify that the hospital must provide timely notice 
during the course of the hospital stay.
    For purposes of this requirement, we would consider the course of 
the hospital stay to begin when the hospital provides the individual 
with a package of information regarding scheduled preadmission testing 
and registration for a planned hospital admission. This would give 
hospitals more flexibility in meeting the requirement, as well as 
encourage the distribution of the ``Important Message'' at a time when 
the beneficiary is better able to receive and more likely to understand 
its contents. In complying with the requirement to provide timely 
notice during the course of the patient's hospital stay, the hospital 
must give the patient the ``Important Message'' far enough in advance 
of the hospital's written notice regarding continued stay to provide 
the beneficiary time to appeal the hospital's decision. Finally, 
``timely notice'' would also include adherence to any State 
requirements on the provision of patient rights notices.
    We received only one comment on this proposal.
    Comment: One commenter agreed with the proposal to permit hospitals 
to provide timely notice during the course of the hospital stay. 
However, the commenter stated that the ``Important Message'' is 
currently ineffective in meeting its intended purpose, regardless of 
the timing, because people are too sick and frightened to comprehend 
the information at the point of hospitalization. The commenter 
suggested instead using mass mailings to Medicare beneficiaries when 
they are healthy and have no immediate plans to be hospitalized.
    Response: While we agree that making this information available to 
the Medicare beneficiary prior to hospitalization may enhance 
comprehension, we believe that the ``Important Message'' may be ignored 
during a mass mailing because the information would not be considered 
needed at the time. Moreover, it is a statutory requirement that the 
``Important Message'' be provided during an individual's 
hospitalization; therefore, we cannot accept the commenter's 
suggestion. Furthermore, in our proposal, while we did not intend to 
address the effectiveness or the content of the ``Important Message'' 
in this regulation, we recognize the need to review its contents. 
Therefore, an internal HCFA workgroup has begun the process to revise 
the ``Important Message,'' including further consideration of the 
recommendations for revision made by the Beneficiary Protection and 
Documentation Issues Task Force of the Medicare Technical Advisory 
Group (M-TAG). The goals of the Workgroup are to improve clarity for 
increased comprehension and to improve efficiency of its distribution 
to Medicare beneficiaries. Comments on the revision will be solicited 
from selected outside parties in the near future.

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

A. Consistent Cost Finding During the Capital Transition Period 
(Sec. 412.302(d))

    Section 412.302(d) requires that during the transition period to 
full prospective payment for capital-related costs, a hospital must 
follow consistent cost-finding methods for classifying and allocating 
capital-related costs. Specifically, the regulation requires that 
unless there is a change of ownership, a hospital must continue the 
same cost-finding methods for old capital costs, including its 
practices for direct assignment of costs and its cost-allocation bases, 
that were in effect in the hospital's last cost-reporting period before 
becoming subject to payment under the capital prospective payment 
transition system. A hospital may request a change in its cost-finding 
methods for new capital, provided that the request is made in a timely 
fashion as provided in the regulation, the hospital provides 
justification for the change, and the intermediary determines that the 
justification is reasonable.
    It is important to note that, while the regulation does permit 
changes in cost-finding methods for new capital, such changes are only 
permitted where they do not involve any changes in cost-finding for old 
capital. In practice, this means that if a hospital claims any old 
capital, the intermediary cannot permit a change in any of the 
allocation bases on Worksheet B-1 of the cost report from the bases 
used in the last cost reporting period prior to the capital prospective 
payment system transition period. Otherwise, the consistency rule 
governing old capital cost-finding would be violated.
    In response to concerns expressed by the hospital industry about 
the costs of the recordkeeping required under the cost-reporting rules, 
HCFA has developed new cost reporting instructions, which will be 
released later this year, that permit hospitals to voluntarily adopt a 
simplified cost allocation methodology. This methodology reduces the 
number of statistical bases that a hospital is required to maintain. 
Under the new instructions for HCFA Form 2552-96 (the cost report 
instructions for FY 1996 cost reporting periods), hospitals may request 
the simplified cost allocation methodology. However, hospitals that 
elect this methodology must employ a prescribed list of statistical 
bases with no deviations. Hospitals may not pick and choose among the 
prescribed statistics for the combination that is most advantageous. 
The election of the simplified method cannot be used to shift costs 
inappropriately. Furthermore, a hospital that elects the simplified 
methodology must continue to use it for at least 3 years, unless a 
change of ownership occurs. In the proposed rule (61 FR 27478), we 
proposed to add a new paragraph (d)(4) to Sec. 412.302, to provide that 
hospitals may elect to adopt the simplified cost allocation

[[Page 46215]]

methodology, as will be provided in the instructions for HCFA Form 
2552-96.
    Comment: One commenter agreed with our proposal to revise 
Sec. 412.302(d)(4) to allow for a simplified cost allocation 
methodology, but suggested that we make a technical change to existing 
Sec. 412.302(d)(1) to reflect the availability of the simplified 
methodology option.
    Response: We are adopting the commenter's recommended change to the 
regulations. Section 412.302(d)(1) will now read: ``For cost reporting 
periods beginning on or after October 1, 1991 and before October 1, 
2001, the hospital must follow consistent cost finding methods for 
classifying and allocating capital-related costs, except as otherwise 
provided in paragraph (d)(4) of this section.''
    Comment: In response to our proposal on the simplified cost 
allocation methodology, one commenter argued that the general capital 
consistency rule is flawed. The commenter stated that a provider should 
be able to request that the fiscal intermediary reassign capital costs 
from the acute care hospital portion of a facility to exempt areas of 
the facility if the provider is using the space differently than it was 
used during the capital base year, such as using the space as a skilled 
nursing facility or a rehabilitation unit.
    Response: This comment concerns the underlying intent of the 
capital consistency rule itself rather than the subject of our May 31, 
1995 proposed rule. In the August 30, 1991 final rule that implemented 
the capital prospective payment system (56 FR 43396), we explained the 
rationale for the capital consistency rule. We explained that the 
capital consistency rule is necessary: (1) to prevent cost shifting to 
outpatient departments through changes in cost finding methods, and (2) 
to provide consistency with the determination of the hospital-specific 
rate used in the base year. For these reasons, it is important that the 
hospital continue the same bases of cost allocation for old capital 
throughout the transition.
    Throughout the transition to a fully prospective payment system for 
capital, the provider must continue to allocate any space that was part 
of the acute care hospital in the base year in the same way. However, 
if the provider opens a new section of the facility as a skilled 
nursing facility or excluded unit, capital costs in those areas could 
be allocated directly to those areas.

B. Possible Adjustments to the Capital Prospective Payment System 
Federal Rate and Hospital-Specific Rates (Secs. 412.308(b) and 412.328)

    In the proposed and final rules for FY 1996 (60 FR 29238-29239 and 
60 FR 45830-45831), we discussed the effects of the expiration of the 
statutory budget neutrality provision on rates and aggregate payments 
under the capital prospective payment system. Under the budget 
neutrality provision, we set the capital-prospective payment system 
rates during FY 1992 through FY 1995 so that payments were projected to 
equal 90 percent of Medicare payments that would have been made on a 
reasonable cost basis for each fiscal year. As a result of the 
provision's expiration in FY 1996, the capital-prospective payment 
system rates and payments under the transition system increased 
significantly. The FY 1996 Federal rate is 22.59 percent higher than 
the FY 1995 Federal rate. We now estimate that aggregate capital 
payments will increase 27.5 percent in FY 1996 relative to FY 1995, and 
that payments will exceed capital costs by 8.8 percent in FY 1996. 
Under current law and regulations, we estimate that aggregate payments 
will further increase by 6.8 percent in FY 1997, for an increase of 
36.1 percent over 2 years. We also estimate that payments will exceed 
capital costs by 7.5 percent in FY 1997.
    In the May 31, 1996 proposed rule, we stated that we continue to 
believe that such large increases in capital payments are neither 
necessary nor warranted. We identified several possible approaches for 
establishing a more appropriate level for the rates and discussed the 
options we considered in developing the proposed rule (61 FR 27479). 
These options included freezing the inflation updates for the rates in 
FY 1997 or making downward adjustments in the base rates, as discussed 
below:
     Reduce the standard Federal rate by 7.38 percent and the 
hospital-specific rates by 9.48 percent to reflect revised data on base 
year costs used to determine the rates.
     Implement the provision contained in the Administration's 
budget plan to reduce the base Federal and hospital-specific rates by 
15.7 percent.
    As discussed in detail in the proposed rule, the rationale for 
reducing the base rate derives from an analysis of current data 
compared to data on which the rate was originally based. Under 
Sec. 412.308, HCFA determined the standard Federal rate, which is used 
to determine the Federal rate for each fiscal year, on the basis of an 
estimate of the FY 1992 national average Medicare capital cost per 
discharge. The FY 1992 national average Medicare capital cost per 
discharge was estimated by updating the FY 1989 national average 
Medicare capital cost per discharge by the estimated increase in 
Medicare inpatient capital cost per discharge.
    Section 13501(a)(3) of Public Law 103-66 amended section 
1886(g)(1)(A) of the Social Security Act to require that, for 
discharges occurring after September 30, 1993, the unadjusted standard 
Federal rate be reduced by 7.4 percent. The purpose of that reduction 
was to reflect revised inflation estimates as of May 1993, for the 
increases in Medicare capital costs per discharge during FY 1989 
through FY 1992. We now have extensive cost report data for FY 1992 
that shows an audit-adjusted FY 1992 Medicare inpatient capital cost 
per discharge that is an additional 7.38 percent lower that the 
estimate on which the Federal rate is currently based. Accordingly, the 
rate could be reduced to reflect accurate FY 1992 capital cost per 
discharge data.
    Under Sec. 412.328, HCFA determined the FY 1992 hospital-specific 
rate by using a process similar to the process for determining the FY 
1992 Federal rate. The intermediary determined each hospital's 
allowable Medicare inpatient capital cost per discharge for the 
hospital's latest cost reporting period ending on or before December 
31, 1990. The intermediary then updated each hospital's FY 1990 
allowable Medicare capital cost per discharge to FY 1992 based on the 
estimated increase in Medicare inpatient capital cost per case. As with 
the Federal rate updates, current data demonstrate that the estimates 
used to update the hospital specific rates from FY 1990 to FY 1992 were 
overstated. In order to adjust the hospital-specific rate to reflect 
actual FY 1992 data, the rates must be reduced by 9.48 percent.
    The reduction reflected in the President's budget plan is based on 
a different consideration. That reduction would build the budget 
neutrality adjustment for FY 1995 (0.8432, or -15.68 percent) 
permanently into the base rates, effectively using the FY 1995 base 
payment rate as the base for future years. The actual payment rates for 
future years would then be determined by applying the analytical update 
framework that we adopted in the final rule for FY 1996 (60 FR 45815-
45829). Our last analysis (60 FR 45826-45829) suggested that the 
estimated FY 1992 capital costs used to set the Federal and hospital-
specific capital rates exceeded by approximately 28 percent the level 
that could be accounted for by known factors. This unaccounted for 
difference

[[Page 46216]]

in the rates justifies a 15.7 percent reduction to the rates.
    We seriously considered proposing one of these options in the 
proposed rule, and we invited public comment on their merits and on the 
advisability of implementing one or the other in the final rule, in the 
absence of legislative action.
    We received many comments on our discussion of possible adjustments 
to the capital Federal rate, and these comments and our responses are 
presented below. Although we continue to believe that any of these 
options is justified on the basis of current data and analysis, we are 
not implementing any freeze or reduction to the capital Federal rates 
in this final rule. The President's budget bill includes numerous 
proposals to reform the Medicare program, including a reduction to the 
capital prospective payment rate. At this time, we believe it would be 
more appropriate to adopt a change to the rate in the context of more 
global changes to the Medicare program than to implement this one 
specific provision of the President's budget through regulation. 
Therefore, we are not implementing any of the possible reductions to 
the capital Federal rate that were discussed in the proposed rule but 
instead are updating the capital rates in accordance with the capital 
update framework, as discussed in section III of the addendum to this 
final rule.
    In general, commenters opposed freezing or reducing the capital 
Federal rate as suggested in the proposed rule. Commenters cited 
various reasons why the suggested changes were inappropriate or 
unnecessary. One commenter, ProPAC, agreed that continued significant 
increases in capital payments are unjustified and supported reductions 
to the capital rate. ProPAC suggested several options for our 
consideration, such as using the FY 1995 rates as the base for future 
years, or rebasing the FY 1992 capital payment rates and updating them 
to the current year using an analytic framework. As explained earlier, 
although we agree with ProPAC that a reduction in the rates is 
warranted, we have decided not to proceed with reducing the rates by 
regulation at this time. We discuss the comments on the possible 
changes in more detail below.
    Comment: Some commenters contended that it would be illegal for 
HCFA to implement any of the identified reductions to the rates 
(including an efficiency adjustment) because HCFA does not have the 
authority to rebase the capital payment rate. Two commenters 
characterized the rate reduction options as thinly disguised attempts 
to rebase hospitals' base year capital costs, and asserted that 
Congress has not given the Secretary of Health and Human Services the 
authority to rebase hospital capital costs. One commenter stated that 
the rate revisions discussed in the proposed rule would violate a 
fundamental principle of prospective payment: that the system provide 
certain and predictable payment rates. Another commenter opposed any 
reduction in the capital Federal rate undertaken without legislative 
direction.
    Finally, one commenter noted that when Congress specified the 7.4 
percent reduction in the Federal rate as part of OBRA 93, Congress 
referenced the capital Federal rate ``as described in 
Sec. 412.308(c).'' That regulation describes the methodology for 
defining the Federal rate. The commenter believes that the regulation 
does not contemplate the substitution of actual cost data for periods 
in which estimated data were used initially. The commenter believes 
that because Congress cited this section of the regulations, it 
implicitly approved the continued use of estimated data for setting the 
rates rather than the use of actual data.
    Response: Section 1886(g) of the Act states that ``the Secretary 
shall, for hospital cost reporting periods beginning on or after 
October 1, 1991, provide for payments for [capital-related] costs in 
accordance with a prospective payment system established by the 
Secretary.'' The statute gives the Secretary wide discretion in 
determining the particular features of the prospective payment system 
for capital-related costs, including the appropriate level of payment 
rates.
    We believe that, consistent with this broad authority, it is 
appropriate to make prospective adjustments to the capital rates. We 
believe that any rate revision implemented prospectively would satisfy 
the principle of certainty and predictability under a prospective 
system. We have never contemplated a retroactive adjustment to payment 
rates used in prior years.
    The provision of OBRA 93 cited by the commenter does not indicate 
that we cannot make other adjustments to the capital Federal rate in 
future years. Section 412.308(c) describes the process for determining 
the Federal rate by adjusting the standard Federal rate by an update 
factor each year. We believe that Congress cited this section solely to 
identify the rate to which we applied the 7.4 percent reduction.
    Since the inception of the capital prospective payment system, 
rates have been set on the basis of FY 1992 capital costs. Since we set 
initially set rates before FY 1992 started, we necessarily had to 
project capital costs for FY 1992. We used FY 1989 costs as the basis 
for projecting FY 1992 costs because they were the latest cost report 
data available at that time. (Even the FY 1989 data required an 
estimated adjustment for the effect of audits not yet performed.) We 
applied estimated adjustment factors to the FY 1989 data to derive 
estimated FY 1992 capital costs. We used this estimated FY 1992 cost 
level to set rates beginning in FY 1992.
    When Congress legislated that the unadjusted standard Federal rate 
be reduced by 7.4 percent in 1993, the size of the adjustment was based 
on more recent data on FY 1992 costs available at that time. The latest 
available data now indicate an additional 7.36 percent reduction is 
appropriate. Again, although we are not implementing this adjustment, 
we believe that we have the authority to do so and that it would 
represent a logical extension of our policy of basing the capital 
Federal rate on FY 1992 capital costs.
    Comment: Several commenters stated that the discussion in the 
proposed rule of the possibility of implementing reductions to the 
capital Federal rate through the final rule did not constitute 
sufficient notice to the public of proposed regulatory changes. The 
commenters asserted that before implementing a reduction in the capital 
payment rates, HCFA was obligated to provide ``formal'' public notice 
and time for the public to respond.
    Response: As noted above, we do not intend to implement any 
reduction to the capital Federal rate at this time. However, we believe 
that the discussion in the proposed rule would have satisfied the 
requirements of the Administrative Procedure Act by (1) describing in 
some detail three potential options for cutting the capital rate, (2) 
informing the public that we might implement one of these options if 
Congress and the Administration did not act to cut the rate, and (3) 
soliciting public comment on the possible options. We stated that it 
was our intention to consider all of the options in light of the 
comments received. Moreover, in the FY 1996 proposed rule (60 FR 
29238), we discussed in some detail and invited comments on two options 
for adjusting the Federal and hospital specific rate, to account for 
the overestimation of the FY 1992 Medicare inpatient capital cost per 
discharge, and to compensate for the effects of the expiration of 
budget neutrality. Finally, since FY 1992 we have printed seven 
discussions of the efficiency issue, and providers have long known that 
we

[[Page 46217]]

might make an adjustment in the rate to account for possible 
inefficiency.
    Comment: Some commenters stated that we should not adjust the 
Federal rate to reflect the actual level of FY 1992 capital spending 
because the FY 1992 level is lower than was projected. The commenters 
asserted that FY 1992 capital cost levels are lower than projected 
because hospitals responded in FY 1992 to the incentives of the 
prospective payment system and modified their capital spending 
behavior. Some commenters argued that hospitals responded to the 
possible implementation of a capital prospective payment system even 
prior to FY 1992. These commenters asserted that in order to get a true 
sense of the impact of the capital prospective payment system on 
hospital capital expenditure behavior, one must look further back to 
when hospitals believed implementation of such a system was imminent.
    One commenter explained that one reason actual increases in capital 
costs in FY 1992 were less than projected was because lengthy 
certificate of need (CON) approval processes prevented hospitals from 
beginning building projects as planned. The commenter also stated that 
if rates were reduced, hospitals in States with strict CON processes 
should not be subjected to the same rate reductions as hospitals in 
States without such processes. The commenter asserted that facilities 
in the commenter's State are undercapitalized relative to facilities in 
the rest of the country.
    Finally, some commenters believe that the overestimation of FY 1992 
capital costs (discussed above) stems not from a forecast error in the 
FY 1992 capital cost per case but from a change in the treatment of 
allowable interest that was implemented in the first capital 
prospective payment system final rule published on August 30, 1991. 
Thus, they believe the overestimation resulted from a change in the 
rules regarding capital and that the proposed reduction based on a 
revised FY 1992 capital cost data is not justified.
    Response: Since the inception of the capital prospective payment 
system, we have based capital rates on FY 1992 cost levels. We believe 
it is appropriate for the rate to reflect actual FY 1992 capital 
spending, even if hospitals had modified capital spending behavior 
before the current system was implemented.
    We agree that the prospective payment system provides an incentive 
for hospitals to modify their capital spending behavior, and that it is 
likely that hospitals have done so. However, we do not believe that the 
magnitude of the difference between the projection for FY 1992 capital 
costs and the latest measurement of FY 1992 capital costs can be 
completely explained by changes in capital spending behavior caused by 
the incentives of the prospective payment system. First, most of the 
capital costs in FY 1992 would be attributable to capital acquired 
before FY 1992 that was still being depreciated. Second, most capital 
acquired in FY 1992 would have been planned and committed prior to FY 
1992. Thus, only a small proportion of FY 1992 capital spending would 
have been impacted by the implementation of the capital prospective 
payment system. Consequently, the implementation of the prospective 
payment system would have had little, if any, effect on capital growth 
in FY 1992. Moreover, the anticipated onset of the prospective payment 
system for capital-related costs may have encouraged some hospitals to 
limit spending, but we are aware of several situations in which 
hospitals actually hastened building projects in order to qualify for 
possible old capital protections.
    We recognize that CON processes may well delay hospital building 
projects. However, the commenter does not explain why these effects 
would have been greater in FY 1992 than in previous years. Our data on 
the cumulative percentage change in capital-related cost per case, 
which we presented in the September 1, 1995 final rule (60 FR 45828), 
demonstrate that the growth of capital costs has slowed considerably in 
recent years, from a high of 19.9 percent per year in 1986 to a low of 
2.9 percent per year in 1992. The most recent FY 1992 HCRIS data 
available show that hospitals' actual FY 1992 capital costs per 
discharge are an additional 7.36 percent lower than the estimate on 
which the capital Federal rate is currently based (taking into 
consideration the adjustment mandated by Public Law 103-66). We believe 
it is appropriate for the rate to reflect actual costs.
    In designing the prospective payment system for capital costs, we 
recognized the unique position of hospitals in States with CON programs 
by developing special rules with regard to obligated capital. Those 
special rules (see Sec. 412.302(c)(2), ``Lengthy certificate-of-need 
process'') are designed to ensure that hospitals in States with CON 
programs receive equitable treatment in terms of recognition ``old 
capital costs.'' Essentially, this provision permits certain obligated 
capital costs in CON States to be treated in the same manner as actual 
capital expenditures in non-CON States. We believe these provisions 
adequately address the concerns of hospitals in states with CON 
processes.
    Finally, we do not agree that the August 30, 1991 final rule 
implemented any change in the treatment of allowable interest. Section 
412.302(b)(2)(v), which defines old capital costs for purposes of the 
prospective payment system for capital-related costs, states that 
``Investment income, excluding income from funded depreciation 
accounts, is used to reduce old capital interest expense based on the 
ratio of total old capital interest expense to total allowable interest 
expense in each cost reporting period. ''(Emphasis added.) The 
commenter apparently believes that this statement reflects a change in 
the treatment of allowable interest because Sec. 413.130(g)(2), which 
defines capital-related interest expense net of investment income 
(under our reasonable cost reimbursement rules), provides that in 
determining the proportion of investment income to be offset, the ratio 
is to be based on capital-related interest to total interest. However, 
Sec. 413.130(g) derives from Sec. 413.130(a)(7), and Sec. 413.130(a)(7) 
addresses only ``allowable interest expense'' (that is, interest 
expense as determined under Sec. 413.153), so the ratio expressed in 
Sec. 413.130(g) is reasonably interpreted to refer to ``total allowable 
interest expense.''
    Comment: Commenters also addressed the possible adjustment based in 
part on an efficiency analysis. A few commenters stated that higher 
than expected capital costs per case for FY 1992 were not the result of 
inefficient use of capital resources, but rather a reaction to pent-up 
demand in States that had restrictive certificate of need (CON) 
policies. Another commenter argued that no overexpansion of health 
facilities has occurred in the commenter's State, because it is highly 
regulated, and that the average age of hospitals' physical plants in 
the State is among the oldest in the country. This commenter too 
believes that it is inappropriate to apply a rate reduction equally in 
all States.
    Some commenters agreed with our statement that economic theory 
would suggest incentives for the overuse of capital during a period in 
which capital was paid on a cost basis while operating costs were paid 
on the basis of a prospective rate. However, the commenters contended 
that economic theory would also suggest that, if hospitals over 
purchased capital, they conversely had to under employ operating 
inputs. Thus, the commenters believe that reductions to the capital 
Federal rate to account for the

[[Page 46218]]

inefficient overuse of capital should be matched by increases in the 
operating rates to account for inefficient underutilization of 
operating inputs.
    Finally, one commenter suggested that we obtain an independent 
evaluation of HCFA's capital model and the factors that account for the 
known increase in costs per case, such as the inflation in capital 
input prices, quality enhancing intensity increases, and real case-mix 
growth, as well as the factors that may be responsible for the 
unexplained growth in capital costs per case.
    Response: As noted in our September 1, 1995 final rule in response 
to a similar comment (60 FR 45829), we agree that the conjunction of 
rate-based payment for operating costs and cost-based payment for 
capital costs encouraged hospitals to substitute capital inputs for 
labor and other operating inputs. However, we do not agree that an 
inefficiently high level of capital inputs under those conditions 
necessarily implies an inefficiently low level of operating inputs. 
Rather, the conjunction of rate-based payment for operating costs and 
cost-based payment for capital could also lead to the substitution of 
inefficient capital inputs for inefficient operating inputs. Indeed, 
our previous analysis of efficient operating costs for hospitals during 
FY 1985 through FY 1991 (57 FR 40014) indicates that operating 
prospective payments during that period were sufficient for the 
efficient and cost-effective delivery of quality care. In conjunction 
with the analysis of capital spending during FY 1985 to FY 1992, these 
results suggest that hospitals may indeed have responded to the 
existing incentives by substituting an inefficiently high level of 
capital inputs for inefficient operating inputs. Under these 
circumstances, it would not be appropriate to increase operating rates 
in conjunction with a decrease in capital rates. Decreased capital 
rates, along with the existing level of operating rates, would provide 
the appropriate incentives for hospitals to achieve efficient levels of 
both capital and operating inputs.
    As we stated in our September 1, 1995 final rule in response to a 
similar comment (60 FR 45828), our analysis suggests a significant 
measure of inefficiency in capital costs, and was based on national 
figures. Therefore, since we are evaluating an efficiency adjustment in 
the national Federal rate, our analysis does not consider regional 
differences, such as the existence of CON requirements in some States. 
The national Federal rate is based on an average; thus, we recognize 
that some States will have higher costs than the average and other 
States will have lower costs. We note, however, that although we did 
not make adjustments for CON policies for purposes of this particular 
analysis, Sec. 412.302(c)(2) does provide for differential treatment of 
hospitals in CON States in terms of the recognition of obligated 
capital (as discussed in more detail above).
    In response to the commenter's suggestion that a group of 
independent economists should evaluate the capital model and our theory 
about the possible cause of the unexplained growth in capital costs per 
case, we note that ProPAC has also analyzed the current capital rate 
and has discussed possible reductions to the capital rate, implicitly 
endorsing a reduction to the capital rate in the order of magnitude 
that we discussed in the proposed rule.
    Comment: A number of commenters contended that the reductions 
discussed in the proposed rule would jeopardize the ability of many 
hospitals to meet current obligations and reduce their ability to meet 
future capital needs.
    Response: Our data indicate that there is ample room to cut the 
capital rate without a major adverse affect on facilities in any 
region. Before the implementation of the prospective payment system for 
capital-related costs, facilities were paid only 85 percent of their 
capital costs. In the proposed rule, we estimated that payments would 
exceed capital costs by 9.6 percent in FY 1996 (61 FR 27479). We now 
estimate that capital payments will exceed capital costs by 8.8 percent 
in FY 1996 and 7.5 percent in FY 1997.

C. Possible Adjustment to Capital Prospective Payment System Minimum 
Payment Levels

    Section 412.348(b) of the regulations provides that, during the 
capital prospective payment system transition period, a hospital may 
receive an additional payment under an exceptions process if its total 
inpatient capital-related payments under its payment methodology (that 
is, fully prospective or hold-harmless) are less than a minimum 
percentage of its allowable Medicare inpatient capital-related costs. 
The minimum payment levels are established by class of hospitals under 
Sec. 412.348(c). The minimum payment levels for portions of cost 
reporting periods occurring in FY 1996 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 for previous cost reporting periods exceed its 
cumulative minimum payment is deducted from the additional payment that 
would otherwise be payable for a cost reporting period.
    Section 412.348(h) further provides that total estimated exceptions 
payments under the exceptions 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. In the 
final rule implementing the prospective payment system for capital-
related costs we stated that the minimum payment levels in subsequent 
transition years would be revised, if necessary, to keep the projected 
percentage of payments under the exceptions process at no more than 10 
percent of capital prospective payments.
    In section III of the addendum to the proposed rule (61 FR 27499), 
we discussed the factors and adjustments used to develop the FY 1997 
Federal and hospital-specific rates. In particular, we discussed the FY 
1997 exceptions payment reduction factor. This factor adjusts the 
annual payment rates for the estimated percentage of additional 
payments for exceptions in FY 1997. In the proposed rule, we estimated 
that exceptions would equal 6.07 percent of aggregate payments based on 
the Federal rate and the hospital-specific rate. We indicated that it 
might be necessary to implement adjustments to the minimum payment 
levels in the final rule and that it will almost certainly be necessary 
to adjust the minimum payment levels for FY 1998. We therefore provided 
public notification that adjustments to the minimum payment levels were 
imminent, discussed our ideas on the most appropriate method for 
adjusting the minimum payment levels, and solicited public comment.
    We stated that, when it does become necessary to adjust the minimum 
payment levels, we intended to adjust each of the existing levels (that 
is, 90 percent for sole community hospitals, 80 percent for large urban 
DSH hospitals, and 70 percent for all other

[[Page 46219]]

hospitals) by 5 percentage point increments until estimated exceptions 
payments are within the 10 percent limit.
    Current estimates indicate that we will not reach the 10 percent 
exception limit in FY 1997. Therefore, we are not making adjustments to 
the minimum payment levels at this time; the minimum payment levels for 
exception payments will remain at the current levels.
    We received several comments regarding the necessity and 
methodology of adjustments to the minimum payment levels.
    Comment: Some commenters objected to the proposed method for 
handling necessary reductions to the minimum payment levels. One 
commenter suggested that we develop a more sophisticated methodology 
that would allow more refined adjustment of the minimum payment levels. 
Another commenter suggested a 1 or 2 percent reduction increment, 
rather than the proposed 5 percent increment.
    Response: As stated above, in this final rule the minimum payment 
levels for exception payments will remain at the current levels, since 
our current forecasts indicate that we will not reach the 10 percent 
limit in FY 1997. All comments received on this issue will be taken 
under advisement and considered at such time as it becomes necessary to 
make such an adjustment.
    Comment: Some commenters believe that HCFA's capital acquisition 
model (see appendix B to this final rule for a detailed discussion) 
projects excessive growth in exception payments. These commenters 
objected to any reduction in the capital minimum payment levels based 
on projected rapid growth in exceptions and requested further 
explanation. The commenters further stated that they could not 
understand why exception payments would be so large when average 
payments exceed costs.
    Response: Since payments under the capital prospective payment 
system are based on averages, not on an individual hospital's costs, 
some hospitals may receive payments exceeding their costs, while other 
hospitals may receive payments less than their costs. Even if aggregate 
payments exceed aggregate costs, some hospitals may have costs so much 
higher than payments that they qualify for large exceptions payments.
    It is these large exceptions payments that are driving the 
aggregate exception payments toward the 10 percent ceiling on exception 
payments. We have reviewed the cost reports for the first 3 years under 
the capital prospective payment system. The number of hospitals 
receiving exceptions payments and the aggregate amount paid for 
exceptions have increased each year. We expect this trend to continue 
throughout the transition period, as some hospitals' payments deviate 
even more from their actual costs. Our model is consistent with these 
findings. The model projects, as expected, that exceptions payments 
will continue to grow.
    ``Low cost'' hospitals are paid a blend of their hospital-specific 
rate, and a higher Federal rate. ``High cost'' hospitals are paid 85 
percent of their old capital plus their ratio of new capital to total 
capital applied to the Federal rate. In both cases, the capital the 
hospitals had at the time the capital prospective payment system was 
implemented is addressed by the standard payments.
    Capital prospective payment rates for FY 1992 were designed to 
adequately address capital costs that existed at the time the 
prospective payment system began. Since then, hospitals have acquired 
additional capital, with some hospitals acquiring more than others. 
With each passing year, more additional capital is accumulated. In some 
cases, this additional capital is large, and the affected hospitals' 
capital costs greatly exceed their standard payments. Exceptions 
payments mitigate the financial impact on these hospitals.
    High cost hospitals are more likely to qualify for exceptions 
payments. Their old capital costs are encompassed in the hold harmless 
payments, while their new capital costs are reimbursed at a fraction of 
the Federal rate. If their new capital costs are high, these high cost 
hospitals will need the full benefit of the exceptions process. Since 
high cost hospitals will acquire more additional capital over time, 
more hospitals will qualify for exceptions payments. In fact, high cost 
hospitals showed rapid growth in exceptions in the first three years 
under the capital prospective payment system. We expect this rapid 
growth to continue.
    Comment: Regarding minimum payment levels, one commenter suggested 
we reconcile exceptions payments retrospectively and recoup any 
overpayments on a pro rata basis by reducing future payments to 
hospitals. The commenter recommends reductions in subsequent Medicare 
payments to hospitals.
    Response: Section 412.348(d) states that ``Total estimated payments 
under the exceptions 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.'' (Emphasis added.) 
We believe reconciling actual exceptions payments with estimated 
exceptions payments on a retroactive basis would fundamentally 
undermine the prospectivity of the system. Moreover, recouping 
``overpayments'' on a retroactive basis may be potentially unfair to 
individual hospitals. An individual hospital that qualifies for an 
exception payment in one year may not also qualify for an exception in 
the later year in which a ``retroactive'' exception payment is to be 
made. Hospitals would not be able to predict the effects of retroactive 
adjustments to supposedly prospective payment rates.

VII. Changes for Hospitals and Units Excluded From the Prospective 
Payment Systems

Application of Ceiling in Calculating Payment for Hospital Inpatient 
Operating Costs (Sec. 413.40 (d) and (g))

    Section 1886(b)(1)(B) of the Act provides for an additional payment 
to a hospital excluded from the prospective payment system when the 
hospital's reasonable operating costs exceed its target amount. The 
additional payment is based on the lesser of 50 percent of the amount 
by which the operating costs exceed the target amount, or 10 percent of 
the target amount. The Medicare statute further provides that this 
comparison is made ``after any exceptions or adjustments are made to 
such target amount for any cost reporting period.'' The regulations, at 
42 CFR Sec. 413.40(d)(3), state that the total payment to the hospital 
for inpatient operating costs (including the additional payment 
described above) is based on the lesser of the following: the ceiling 
(target amount multiplied by the number of Medicare discharges) plus 50 
percent of the allowable net inpatient operating costs in excess of the 
ceiling, or 110 percent of the ceiling. However, the regulations do not 
explicitly include the additional statutory requirement regarding the 
effect of exceptions or adjustments.
    As discussed in the proposed rule (61 FR 27481), we understand that 
there are questions about the calculation of the additional payment 
under the regulations, which require comparison of two amounts: the 
``ceiling'' plus 50 percent of the difference between allowable costs 
and the ceiling, and 110 percent of the ``ceiling.'' Specifically, 
where a hospital has received an adjustment to the target amount under 
Sec. 413.40(g), there has been confusion as to whether the ``ceiling'' 
used for purposes of calculating the additional payment under 
Sec. 413.40(d) is the unadjusted ceiling (the amount determined without 
consideration of

[[Page 46220]]

any adjustments granted to the hospital) or the adjusted ceiling.
    To address any confusion about these issues, we proposed to revise 
Sec. 413.40(d)(3) to indicate specifically that calculation of payments 
for hospital inpatient operating costs under that provision reflects 
the adjusted ceiling amount (the amount determined after an adjustment 
under Sec. 413.40(g)). This would apply to all adjustments, including 
adjustments based on a longer average length of stay in the hospital's 
rate year as compared to the base year and adjustments for increased 
routine services.
    We received only two comments on this proposal. Both commenters 
supported the proposal, and we will adopt as final the proposed changes 
to the regulations at Sec. 413.40(d)(3).

VIII. ProPAC Recommendations

    As required by law, we reviewed the March 1, 1996 report submitted 
by ProPAC to Congress and gave its recommendations careful 
consideration in conjunction with the proposals set forth in the 
proposed rule. We also responded to the individual recommendations in 
the proposed rule (61 FR 27482). The comments we received on the 
treatment of the ProPAC recommendations are set forth below along with 
our responses to those comments. However, if we received no comments 
from the public concerning a ProPAC recommendation, we have not 
repeated the recommendation and response in the discussion below. The 
update factors for inpatient operating costs and the update factor for 
hospitals excluded from the prospective payment system and distinct-
part units (ProPAC recommendations 10 and 12, respectively) are 
discussed in Appendix E to this final rule. Capital payment rates 
(recommendation 11) are discussed in section VI of this final rule. 
Disproportionate share hospitals (recommendations 17 and 18) are 
discussed in section V of this final rule. The remaining 
recommendations on which we received comments are discussed below.

A. Discharges From Hospitals to Other Facilities (Recommendation 19)

    Recommendation: Medicare payments should be modified to account for 
the shift in services from acute to postacute settings. Broadening the 
definition of transfer cases, however, is not an appropriate approach.
    Response in the Proposed Rule: In both the September 1, 1994 and 
September 1, 1995 final rules, we expressed our concern that the 
current trend of declining average lengths of stay as hospitals 
discharge Medicare patients into alternative health care settings 
(other than acute care prospective payment hospitals) in less time may 
result in a misalignment of payments and costs under our existing 
payment systems (59 FR 45362; 60 FR 29221). In particular, we expressed 
concern over the potential for hospitals paid under the prospective 
payment system to shift costs (for which they are compensated through 
the DRG payments) to alternative settings, which are in turn paid on a 
cost basis. Although we solicited comments on possible solutions to 
this problem, we did not propose any change in policy.
    The President's FY 1997 budget includes a proposal to redefine 
discharges from acute care hospitals to excluded hospitals and units 
and skilled nursing facilities as transfers for payment purposes. 
Currently, for cases transferred from one acute care hospital paid 
under the prospective payment system to another like hospital, the 
sending hospital is paid a per diem rate instead of the full DRG 
amount. For cases transferred to an excluded hospital or unit or to a 
skilled nursing facility (as well as cases discharged home or home with 
home health care), hospitals receive the full DRG payment amount, 
regardless of the length of stay in the hospital. Under the per diem 
transfer payment methodology, hospitals receive a per diem amount 
(doubled for the first day of the stay) until the full DRG amount is 
reached. Therefore, under the President's budget proposal, hospitals 
transferring patients to excluded facilities or skilled nursing 
facilities prior to the geometric mean length of stay for the DRG, 
minus one day (to account for the double per diem on the first day), 
would receive less than the full DRG amount for that case.
    The basis for ProPAC's opposition to this proposal is that it ``* * 
* thinks this policy would discourage the use of postacute providers. 
Moreover, it could result in longer inpatient stays, which may not be 
desirable or cost effective in the long run.'' We acknowledge that the 
change in the definition of a transfer is not the ultimate solution to 
this health care trend. In response to immediate concerns about 
overpaying hospitals for the reduced services they are providing and 
the rate of increase in expenditures for postacute care services, 
however, we believe this is an appropriate interim measure while we 
continue to explore long-term policy alternatives that will better 
integrate our payment systems for care provided to Medicare 
beneficiaries across the acute and postacute care settings.
    Comment: We received several comments on this response. ProPAC 
repeated its concern that redefining transfers may not be the right 
approach, indicating that ``(m)ore needs to be known about the 
relationships among these services before implementing a policy that 
assumes that hospitals are being overpaid for cases who use post-acute 
care.'' Two other commenters expressed their objections to the 
redefinition of transfers from acute care hospitals. Generally, both of 
these commenters agreed with ProPAC's assessment that this would lead 
to longer inpatient stays and discourage the use of postacute care. 
Also, both commenters objected to ProPAC's suggestion that HCFA bundle 
acute and postacute care payments. Finally, one commenter recommended 
that ``the total Medicare funding for hospitals be reduced to recognize 
the shift of patient days away from the hospital setting.''
    Response: We agree with ProPAC that a better understanding of this 
phenomenon is needed, and we are well aware of the improved efficiency 
claims made by those who advocate even greater use of postacute care. 
However, while we continue to explore potential refinements to reflect 
the shift in services from acute to postacute settings, we believe it 
is appropriate to concurrently explore interim measures for responding 
to the undisputed trends showing continuing declining lengths of 
hospital inpatient stays and increasing postacute care utilization, 
particularly for certain DRGs. The present overlaps between our acute 
and postacute payment methodologies demand immediate attention, given 
our responsibility for preserving the Medicare Trust Fund.
    We also understand the commenters' concerns about the transfer 
redefinition. In evaluating any such interim measures two fundamental 
questions need to be answered: Will this approach protect 
beneficiaries' access to quality, effective health care and will it 
adequately compensate the providers of that care for their costs? To 
the extent that increasing utilization of postacute care allows 
hospitals to release patients earlier, redefining transfers would 
better match payments with costs, as well as eliminate some of the 
potential incentive for premature discharges.
    With regard to the comments we received about ProPAC's suggestion 
that bundling might be a potential alternative, we intend to continue 
to evaluate all potential payment approaches. For example, implementing 
an offset to the hospital inpatient standardized amounts to reflect 
cost

[[Page 46221]]

shifting is another approach under examination.

B. Prospective Payment for Postacute Care (Recommendation 20)

    Recommendation: Prospective payment systems should be implemented 
for all postacute services. The payment method for each service should 
be consistent across delivery sites. The Secretary should explore 
methods to control volume of postacute service use, such as bundling 
services for a single payment.
    Response in the Proposed Rule: We agree that HCFA should develop 
prospective payment systems for all postacute services, and we have 
made significant progress in this area. As we discuss in our responses 
to Recommendations 22 and 23, we have developed detailed implementation 
plans for interim prospective payment systems for skilled nursing 
facilities (SNFs) and home health agencies (HHAs) that do not require 
patient classification systems. Execution of these plans will, of 
course, require legislative action.
    Beyond our interim plan, we have developed a strategy for 
developing a full-fledged prospective payment system for SNFs. In the 
absence of legislation, we have been pursuing data that could be used 
to support a case-mix prospective payment system through our Multi-
State Case Mix Demonstration Project. This demonstration project, now 
in its operational phase, is collecting data on patient case mix using 
a modified version of the minimum data set, the assessment tool SNFs 
use in developing patient care plans. Through the course of the 
demonstration, we hope to gather data on the full range of SNF 
resources needed for each resource utilization group. We are proceeding 
to require by regulation that all facilities provide resident 
assessment data. Consolidated billing of SNF services (that is, 
requiring SNFs to bill for all services furnished to their patients) 
and uniform coding of SNF services are also prerequisites for a SNF 
prospective payment system. Consolidated billing and uniform coding are 
needed to determine the appropriate payment for the ancillary services 
component of SNF services and to provide useful data on the range of 
services SNFs furnish.
    We have also been working on a strategy to develop a full-fledged 
prospective payment system for HHAs. We have funded a project to 
develop outcome measures for home care that can be used for an outcome-
based quality improvement system. These measures will be based largely 
on a core standard assessment data set that includes items measuring 
sociodemographic, environmental, support system, health status, 
functional status, and health service utilization characteristics of 
patients. Many of the data items included in the core standard 
assessment data set are not only essential for assessing patient 
outcomes but are also critical for designing an adequate case-mix 
system for payment purposes. To test and refine Medicare's approach to 
outcome based quality improvement for home health care, HCFA is 
currently sponsoring the Medicare Quality Assurance and Improvement 
Demonstration, which uses this instrument. We plan to publish 
regulations identifying the required data elements and addressing the 
collection of information from the core standard assessment data set. 
We also plan to sponsor additional research that would lead to an 
appropriate case mix adjuster that can be used in a national 
prospective payment system.
    In addition to the developmental work underway on SNF and HHA 
prospective payment systems, we have begun work on the preliminary 
steps necessary for the development of a prospective payment system for 
hospital inpatient rehabilitation services. The biggest obstacle we 
have faced in this effort is the lack of appropriate patient 
classification systems for the types of patients treated by 
rehabilitation hospitals. We have recently contracted with the Rand 
Corporation to evaluate a rehabilitation coding system known as the 
Functional Independence Measure (FIM), which is a scoring system that 
measures the degree of functional independence of rehabilitation 
patients. These researchers will also evaluate the patient 
classification system known as function related groups (FRGs), which 
are based on the FIM, as a possible basis for a Medicare prospective 
payment system for rehabilitation services. If the research confirms 
functional status measures can be used to develop an appropriate 
patient classification system, we will begin the additional work 
necessary to put a prospective payment system into place. This would 
require collecting patient assessment data from Medicare rehabilitation 
hospitals and units and developing all the necessary components of the 
new payment system. It will take at least 3 years to design and 
implement such a system. To facilitate implementation, we are 
considering initiating collection of patient assessment data in advance 
of legislation establishing a prospective payment system. We will be 
seeking public input on whether to proceed with a requirement for 
patient assessment data in the absence of legislation and what data 
elements should be included in a core data set that could be used not 
only as the basis for a patient classification system but also to 
assess outcomes.
    We recognize that there are advantages to a coordinated approach in 
developing prospective payment systems for postacute services and we 
will be evaluating how to make them as consistent as possible. We also 
recognize that the demand for implementation of prospective payment 
systems for postacute services is sufficiently immediate so that there 
may not be time for the broad study, data collection, and research 
needed to develop a ``unified'' system using similar resource grouping 
principles. Most of the current legislative proposals, including the 
Administration's proposals, would require implementation dates within 
the next several years. It may not be feasible to develop a ``unified'' 
system within the time frames contemplated by the current legislative 
proposals. Trade-offs may be required between continuation of the 
interim payment systems versus the prospective payment systems on one 
hand, and the separate versus ``unified'' prospective payment systems 
on the other hand.
    Comment: One commenter strongly supported adoption of a prospective 
payment system for inpatient rehabilitation and believes that the RAND 
research project will likely produce such a system. The commenter noted 
that we are considering initiating the collection of patient assessment 
data in advance of legislation establishing a prospective payment 
system and urged us to begin collecting the data at the earliest 
possible date. The commenter believes that imposition of a reporting 
requirement based on the FIM should not be a great burden on the 
industry since rehabilitation hospitals and units are already using the 
FIM or similar patient evaluation measures. Systematizing collection of 
such data would expedite introduction of a prospective payment system 
based on FRGs and would considerably reduce the 3-year minimum 
implementation period suggested in HCFA's response in the proposed 
rule. The commenter also urged, as a means toward developing a payment 
system that is consistent across payment sites based on patient 
characteristics, that HCFA expand the RAND research project to 
determine the feasibility of using an FRG-based payment system for 
rehabilitation patients in skilled nursing facilities.

[[Page 46222]]

    Response: Since the collection of patient assessment data in 
advance of legislation establishing a prospective payment system would 
expedite implementation of the system, we are exploring whether we can 
initiate the collection of data from rehabilitation facilities without 
legislative action. Our estimate of 3 years to design and implement a 
payment system includes beginning data collection at the earliest 
possible time and continuing the collection over a period sufficient to 
ensure the validity and stability of the components of a payment 
system, such as payment rates, relative weights of patient groups, 
outlier payments, and facility payment adjustments, in addition to 
ensuring the validity of coding within and across hospitals.
    We agree with the commenter that, as a step toward developing a 
payment system that is consistent across delivery sites, it would be 
desirable to explore the usefulness of FRGs in a payment system for 
rehabilitation services in skilled nursing facilities. We will, 
therefore, evaluate our ability to expand the RAND project given the 
limits of available resources. We note that we are also engaged in 
research on other case-mix measures for SNF and home health services 
and we will investigate the suitability of these measures for 
rehabilitation hospital services.

C. Case-Mix Measures for Postacute Services (Recommendation 21)

    Recommendation: Reliable case-mix measurement is important in 
prospective payment systems to account for resource use and to analyze 
treatment patterns and costs across sites. The Secretary should 
coordinate case-mix research across postacute care settings, using 
consistent methods for measuring patient acuity and resource use.
    Response in the Proposed Rule: We are attempting to coordinate our 
work on case-mix adjustment for home health care, long-term and SNF 
care, and rehabilitative services. To develop a case-mix adjustment 
system for SNF care, time studies were conducted in order to measure 
resource utilization. Similarly, as noted above in response to 
Recommendation 20, we have funded a new home health case-mix study.
    In addition, in the case-mix work to date for both home health care 
and SNF care, dependence in activities of daily living is the biggest 
predictor of resource utilization. Some of the other predictors differ 
across SNF care and home health care due to differences in the 
treatment settings and the availability of information for a 
classification system.
    As also noted in the preceding response, researchers at the 
University of Pennsylvania have developed a classification system based 
on FIMs called Function Related Groups (FIM-FRGs). This system appears 
promising for use in a case-mix adjusted prospective payment system for 
rehabilitation and long-term care facilities, and we are working with 
the Rand Corporation on a research project to evaluate the suitability 
of FIM-FRGs for this purpose.
    We agree that a compatible cross-provider measure of resource use 
would be the best multiplier in any universal postacute system. We also 
believe that such measures do not now exist and to produce them would 
require the program to incur significant costs and impose significant 
data reporting and collection requirements on providers. We would 
prefer to obtain explicit legislative direction before we incur these 
costs and impose these burdens. Even so, we believe several years would 
be required to gather the data and develop the case-mix measures. For 
these reasons, we believe that interim prospective payment systems of 
the types contained in the President's FY 1997 budget should be put in 
place.
    Comment: One commenter agreed with ProPAC's recommendation to 
develop a unified case-mix prospective payment system for postacute 
care, but expressed concern that such a prospective payment system 
based on ICD-9-CM codes will require the development of uniform coding 
guidelines that do not currently exist.
    Response: We have not yet decided whether it would be appropriate 
to use ICD-9-CM codes in connection with a postacute prospective 
payment system. We will keep the overall concern of uniform coding 
guidelines in mind as we progress in our evaluation of postacute 
prospective payment.

D. Update to the Composite Rate for Dialysis Services (Recommendation 
24)

    Recommendation: The Secretary should develop methods to control 
total Medicare per capita expenditures for end stage renal disease 
(ESRD) beneficiaries. In the meantime, the composite rate should be 
updated by 2.7 percent for hospital-based dialysis facilities and by 
2.0 percent for freestanding facilities for fiscal year 1997. The 
Secretary should also develop reliable measures of patient severity and 
outcomes to analyze the relationships among treatment processes, 
patient outcomes, and costs. These factors should be considered in 
evaluating the need for and the level of future payment updates.
    Response in the Proposed Rule: One of ProPAC's suggestions is that 
HCFA consider opening enrollment for ESRD beneficiaries to participate 
in Medicare risk programs. The reason for this recommendation is the 
rapid growth in total Medicare spending for ESRD beneficiaries. A large 
part of this increase is attributable to the expanding ESRD population, 
especially older patients who require more services. These 
beneficiaries are using more acute inpatient, skilled nursing and other 
dialysis-related services than ever before. ProPAC suggests that to 
control these expenditures, Medicare examine the possibility of 
adopting a capitation payment system for ESRD services, since 
capitation rates have been successful in controlling expenditure growth 
for other populations. At a minimum, they are recommending that 
utilization review or other managed care techniques be used to control 
the total volume of services provided to ESRD beneficiaries across all 
sites of care.
    Section 1876(d) of the Act currently prevents an individual with 
ESRD from enrolling in an HMO or a competitive medical plan. However, 
an individual who is enrolled in a prepaid health plan when he or she 
is determined to have ESRD may continue enrollment in that plan. A 
prepaid health plan may only disenroll a beneficiary as provided by 
regulations at Sec. 417.460.
    Congress addressed the issue of paying for ESRD services in a 
capitation setting in legislation. Section 13567(b) of the Omnibus 
Budget Reconciliation Act of 1993 (Pub. L. 103-66) (August 10, 1993) 
amended section 2355 of Public Law 98-369 by requiring the Secretary to 
include the integration of acute and chronic care management for 
patients with ESRD through expanded community care case management 
services in a social health maintenance organization (SHMO). Initial 
legislation required the Secretary to grant demonstration waivers for 
SHMOs that provide for the integration of health and social services at 
a fixed annual prepaid capitation rate. In the January 26, 1996 Federal 
Register, we published a notice informing interested parties of the 
opportunity to apply for funds for a cooperative agreement to operate 
an ESRD Managed Care Demonstration (61 FR 2516). Two of the 
demonstration's purposes would be to test whether ESRD beneficiaries 
can and should be given access to HMOs during open enrollment and 
whether the statewide capitation rate can and should be adjusted. The 
demonstration would adjust rates for treatment status (such as 
dialysis, transplant, or a functioning graft), age groups and the cause 
of renal

[[Page 46223]]

failure (for example, diabetes). As the legislation requires, rates 
would be based on 100 percent of the adjusted average per capita costs 
(AAPCC); additional non-Medicare-covered benefits would be offered by 
the provider to justify the additional 5 percent beyond the 95 percent 
of the AAPCC paid to Medicare risk-contracting HMOs on behalf of ESRD 
enrollees. Based on the results of this demonstration, we would make 
recommendations to Congress concerning the appropriateness of paying 
for dialysis services in a capitation setting.
    To improve the quality of care ESRD patients are receiving, we are 
in the process of developing proposed rules for ESRD conditions for 
coverage. The essence of the regulation is patient-centered and 
outcome-oriented. The proposed conditions for coverage will focus on 
facilities achieving an optimal level of health and well-being for all 
dialysis patients. The proposed rules will be published in Spring 1996 
with expected implementation in late fiscal year 1997.
    While we share ProPAC's concern that payment rates be sufficient to 
assure quality care for ESRD patients, we do not believe there is 
sufficient evidence at this point to conclude that more money is needed 
to provide appropriate care. Currently, the University of Michigan, as 
part of a National Institute of Health grant, is examining the 
relationship between facilities' costs and the level of KT/V. Also the 
National Institute of Diabetes and Digestive and Kidney Diseases is 
sponsoring a study on the impact of increasing dialysis as measured by 
KT/V and the use of high-flux-dialysis on ESRD patients. The results of 
these studies should help us analyze the relationship between patient 
outcomes and costs, and thus provide us with a basis for recommending 
an appropriate payment rate increase.
    While we acknowledge that an increase in the composite rate may be 
appropriate in the next few years, we believe that any rate increase 
should be linked to implementation of the revised conditions for 
coverage. Moreover, any ESRD rate increase must be considered within 
the context of Medicare budgetary concerns and should have a direct 
link to improved patient outcomes. We will continue to monitor ESRD 
facility costs, and, if appropriate, we may recommend an update to the 
ESRD composite rate for FY 1998.
    We note that ProPAC's recommendation provides for an across-the-
board rate increase for all renal facilities. However, data show that 
high volume independent facilities (over 6,000 treatments per year) 
account for about 85 percent of independent dialysis treatments. These 
high volume facilities report margins between Medicare payments and 
costs that are higher than average. Therefore, in proposing a future 
rate increase, we would want to examine the need to adjust payment 
increases for volume. In addition, we believe that any update to the 
composite rate should include an update to the wage index currently 
used to adjust the labor portion of the rate. We are currently using an 
outdated wage index which is a blend of 1980 Bureau of Labor Statistics 
(BLS) and 1984 prospective payment system wage data and does not 
reflect the MSA revisions resulting from the 1990 census.
    The Commission's final recommendation is that the Secretary closely 
monitor treatment patterns and patient outcomes to ensure that 
facilities use the payment increase to improve quality of care. The 
proposed ESRD conditions for coverage should address this issue. We 
expect the proposed rule to be published in the Federal Register before 
Summer 1996. Between the publication of the proposed and final rules, 
HCFA is planning to meet with the renal community to develop complete 
clinical data sets to monitor patient outcomes and medical conditions. 
These data will then be used to evaluate the quality of dialysis 
services furnished by individual facilities. Of course, this is a long-
term project. In the short term, we are exploring the possibility of 
collecting limited patient outcome data such as KT/V and URR.
    Comment: One commenter and the Commission reiterated that ProPAC's 
recommended update framework was appropriate. According to ProPAC, its 
analysis suggests that input costs are rising and large productivity 
gains may no longer be possible. Consequently, renal facilities may be 
unable to continue to provide quality dialysis without some payment 
increase.
    Response: As discussed above, we recognize that an increase in the 
composite payment rate may be appropriate in the future, but we believe 
that any rate increase should be linked to implementation of the 
revised conditions for coverage for ESRD facilities. Until such 
implementation, we will continue to monitor facility costs and other 
factors to determine if it is appropriate to recommend a payment rate 
increase. At this time, the composite payment rate is set by statute.

IX. Other Required Information

A. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 provides for notice and comment 
when a collection of information requirement is submitted to the Office 
of Management and Budget (OMB) for review and approval. In order to 
fairly evaluate whether an information collection should be approved by 
OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 
requires that we solicit comment on the following issues:
     Whether the information collection is necessary and useful 
to carry out the proper functions of the agency;
     The accuracy of the agency's estimate of the information 
collection burden;
     The quality, utility, and clarity of the information to be 
collected; and
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.

Therefore, in the proposed rule, we solicited public comment on each of 
these issues for the information collection requirement discussed 
below.
    The only information collection or paperwork burden item contained 
in the FY 1997 proposed or final rules involves the requirement under 
Sec. 489.27 that a hospital furnish each Medicare beneficiary with a 
notice of discharge rights supplied by HCFA, that is, ``An Important 
Message from Medicare.''
    As discussed in section V of this preamble, we are revising the 
current requirement that a hospital must distribute the ``Important 
Message'' to each Medicare beneficiary at or about the time of 
admission. In order to permit hospitals more flexibility, but still 
ensure that beneficiaries are aware of their discharge rights, we are 
revising Sec. 489.27 to specify that a hospital must provide the notice 
of discharge rights ``during the course of the hospital stay.'' We 
estimated that the paperwork burden associated with the requirement 
that hospital personnel distribute the ``Important Message'' to each 
Medicare beneficiary is approximately 1 minute per admission. Based on 
our most recent available data (1995 Data Compendium, HCFA Pub. No. 
03364), there are approximately 11 million Medicare beneficiaries 
admitted to hospitals each year, resulting in an annual burden of 
approximately 183,000 hours.
    This paperwork burden is not effective until it has been approved 
by OMB. A notice will be published in the Federal Register when 
approval is obtained.

[[Page 46224]]

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, and on the 
internet at HTTP://WWW.HCFA.GOV/STATS/PUBFILES.HTML. In our May 31, 
1996 proposed rule, we published a list of data sets that are available 
for purchase (61 FR 27490).

C. Waiver of Notice of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking for a rule to 
provide a period for public comment. However, we may waive that 
procedure if we find good cause that prior notice and comment are 
impracticable, unnecessary, or contrary to public interest.
    Most provisions of this final rule were directly addressed in the 
May 31, 1996 proposed rule (61 FR 27444) or were made in response to 
comments on that proposed rule. The only issue raised in this final 
rule for which we have not provided an opportunity for notice and 
comment concerns a recently enacted statutory provision. On April 26, 
1996, Congress enacted the Omnibus Consolidated Rescissions and 
Appropriations Act of 1996. Among other things, the new statute 
requires that, for certain purposes, the Federal Government ``shall 
deem accredited any postgraduate physician training program that would 
be accredited but for the accrediting agency's reliance upon an 
accreditation standard that requires an entity to perform an induced 
abortion or require, provide, or refer for training in the performance 
of induced abortions, or make arrangements for such training, 
regardless of whether such standard provides exceptions or 
exemptions.''
    In this final rule, we are revising the regulations at Sec. 412.105 
and Sec. 413.86 to conform the regulations to the new statutory 
provision. We find good cause to waive the procedure for notice and 
comment with respect to these conforming changes. We find that the 
procedure for notice and comment is unnecessary because these technical 
changes merely conform the regulations text to the express requirements 
of the statute and do not involve an exercise of agency discretion; 
moreover, delaying these technical changes would be contrary to the 
public interest because any perceived discrepancy between the 
regulations and the statute might cause confusion.

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 489

    Health facilities, Medicare.

    42 CFR chapter IV is amended as set forth below:
    A. Part 412 is 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 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

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

    2. In Sec. 412.63(s)(1), a new sentence is added at the end to read 
as follows:


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

* * * * *
    (s) * * *
    (1) * * * The wage index is updated annually.
* * * * *

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

    3. In Sec. 412.105, the introductory text of both paragraph (g)(1) 
and paragraph (g)(1)(i) is republished and a new paragraph (g)(1)(i)(D) 
is added to read as follows:


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

* * * * *
    (g) Determining the total number of full-time equivalent residents 
for cost reporting periods beginning on or after July 1, 1991.
    (1) For cost reporting periods beginning on or after July 1, 1991, 
the count of full-time equivalent residents for the purpose of 
determining the indirect medical education adjustment is determined as 
follows:
    (i) The resident must be enrolled in an approved teaching program. 
An approved teaching program is one that meets one of the following 
requirements:
* * * * *
    (D) Is a program that would be accredited except for the 
accrediting agency's reliance upon an accreditation standard that 
requires an entity to perform an induced abortion or require, provide, 
or refer for training in the performance of induced abortions, or make 
arrangements for such training, regardless of whether the standard 
provides exceptions or exemptions.
* * * * *

Subpart L--The Medicare Geographic Classification Review Board

    4. In Sec. 412.246, paragraph (b) is revised to read as follows:


Sec. 412.246 MGCRB members.

* * * * *
    (b) Term of office. The term of office for an MGCRB member may not 
exceed 3 years. A member may serve more than one term. The Secretary 
may terminate a member's tenure prior to its full term.

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

    5. In Sec. 412.302, paragraph (d)(1) is revised and a new paragraph 
(d)(4) is added to read as follows:


Sec. 412.302  Introduction to capital costs.

* * * * *
    (d) Consistency in cost reporting--(1) General rule. For cost 
reporting periods beginning on or after October 1, 1991, and before 
October 1, 2001, the hospital must follow consistent cost finding 
methods for classifying and allocating capital-related costs, except as 
otherwise provided in paragraph (d)(4) of this section.
* * * * *
    (4) Hospitals may elect the simplified cost allocation methodology 
under the terms and conditions provided in the instructions for HCFA 
Form 2552.
    B. Part 413 is amended as follows:

[[Page 46225]]

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES

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

    Authority: Secs. 1102, 1861(v)(1)(A), and 1871 of the Social 
Security Act (42 U.S.C. 1302, 1395x(v)(1)(A), and 1395hh).

Subpart C--Limits on Cost Reimbursement

    2. In Sec. 413.40, paragraph (d)(3) is revised to read as follows:


Sec. 413.40  Ceiling on the rate of increase in hospital inpatient 
costs.

* * * * *
    (d) * * *
    (3) Net inpatient operating costs are greater than the ceiling. For 
cost reporting periods beginning on or after October 1, 1991, if a 
hospital's allowable net inpatient operating costs exceed the 
hospital's ceiling (or the adjusted ceiling, if applicable), payment 
will be based on the lower of the--
    (i) Ceiling (or the adjusted ceiling, if applicable) plus 50 
percent of the allowable net inpatient operating costs in excess of the 
ceiling (or the adjusted ceiling, if applicable); or
    (ii) One hundred-ten percent of the ceiling (or the adjusted 
ceiling, if applicable).
* * * * *

Subpart F--Specific Categories of Costs

    3. In Sec. 413.86, under paragraph (b), the definition of 
``Approved geriatric program'' is revised and a new paragraph (4) is 
added to the definition of ``Approved medical residency program'' and a 
new sentence is added at the end of paragraph (g)(1) introductory text 
to read as follows:


Sec. 413.86  Direct graduate medical education payments.

* * * * *
    (b) Definitions.
* * * * *
    Approved geriatric program means a fellowship program of one or 
more years in length that is approved by the Accreditation Council for 
Graduate Medical Education (ACGME) under the ACGME's criteria for 
geriatric fellowship programs.
    Approved medical residency program * * *
    (4) Is a program that would be accredited except for the 
accrediting agency's reliance upon an accreditation standard that 
requires an entity to perform an induced abortion or require, provide, 
or refer for training in the performance of induced abortions, or make 
arrangements for such training, regardless of whether the standard 
provides exceptions or exemptions.
* * * * *
    (g) * * *
    (1) * * * For combined residency programs, an initial residency 
period is defined as the time required for individual certification in 
the longer of the programs.
* * * * *
    C. Part 489 would be amended as follows:

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

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

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

Subpart B--Essentials of Provider Agreements

    2. Section 489.27 is revised to read as follows:


Sec. 489.27  Beneficiary notice of discharge rights.

    A hospital that participates in the Medicare program must furnish 
each Medicare beneficiary, or an individual acting on his or her 
behalf, the notice of discharge rights HCFA supplies to the hospital to 
implement section 1886(a)(1)(M) of the Act. The hospital must provide 
timely notice during the course of the hospital stay. For purposes of 
this paragraph, the course of the hospital stay may begin with the 
provision of a package of information regarding scheduled preadmission 
testing and registration for a planned hospital admission. The hospital 
must be able to demonstrate compliance with this requirement.

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

    Dated: August 23, 1996.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Dated: August 23, 1996.
Donna E. Shalala,
Secretary.

[Note: The following addendum and appendixes will not appear in the 
Code of Federal Regulations.]

Addendum--Schedule of Standardized Amounts Effective With 
Discharges On or After October 1, 1996 and Update Factors and Rate-
of-Increase Percentages Effective With Cost Reporting Periods 
Beginning On or After October 1, 1996

I. Summary and Background

    In this addendum, we are setting forth the amounts and factors for 
determining prospective payment rates for Medicare inpatient operating 
costs and Medicare inpatient capital-related costs. We are also setting 
forth 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, 1996, except for 
sole community hospitals and hospitals located in Puerto Rico, each 
hospital's payment per discharge under the prospective payment system 
will be based on 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. For hospitals in Puerto Rico, the payment per 
discharge is based on the sum 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 making changes in the 
determination of the prospective payment rates for Medicare inpatient 
operating costs. The changes, to be applied prospectively, will affect 
the calculation of the Federal rates. In section III, we discuss 
changes we are making in determining the prospective payment rates for 
Medicare inpatient capital-related costs. Section IV sets forth our 
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 this final rule are presented at the end of 
this addendum in section V.

II. Changes to Prospective Payment Rates for Inpatient Operating 
Costs for FY 1997

    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

[[Page 46226]]

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 are effective 
with discharges occurring on or after October 1, 1996. As required by 
section 1886(d)(4)(C) of the Act, we must also adjust the DRG 
classifications and weighting factors for discharges in FY 1997.
    In summary, the standardized amounts set forth in Tables 1a and 1c 
of section V of this addendum reflect--
     Updates of 2.0 percent for all areas (that is, the market 
basket percentage increase of 2.5 percent minus 0.5 percentage points);
     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 large 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 1996 budget 
neutrality factor and applying a revised factor; and
     An adjustment to apply the revised outlier offset by 
removing the FY 1996 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 1997 were made. That is, the standardization adjustments 
reflected in the FY 1997 standardized amounts are the same as those 
reflected in the FY 1996 standardized amounts.
    Under sections 1886(d)(2)(H) and (d)(3)(E) of the Act, in making 
payments under the prospective payment system, the Secretary estimates 
from time to time the proportion of costs that are wages and wage-
related costs. Since October 1, 1990, when the market basket was last 
rebased, we have considered 71.4 percent of costs to be labor-related 
for purposes of the prospective payment system. As discussed in section 
IV of the preamble, we are using a rebased market basket effective for 
FY 1997. Based on the rebased market basket, we are revising the labor 
and nonlabor proportions of the standardized amounts. Effective with 
discharges occurring on or after October 1, 1996, we are establishing a 
labor-related proportion of 71.2 percent and a nonlabor- related 
proportion of 28.8 percent. The standardized amounts in Table 1a of 
section V of this addendum have been recomputed to reflect the revised 
labor-related and nonlabor-related proportions. (We are revising the 
Puerto Rico standardized amounts by the average labor share in Puerto 
Rico of 82.8 percent. We are also revising the discharged-weighted 
national standardized amount to reflect the proportion of discharges in 
large urban and other areas from the FY 1995 MedPAR file.)
2. Computing Large Urban and Other Averages Within Geographic Areas
    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 sections 1886(d)(9)(B)(iii) 
and (C)(i) 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 for discharges from hospitals located in other urban and rural 
areas will be based on the other standardized amount.
    Based on 1995 population estimates published by the Bureau of the 
Census, 56 areas meet the criteria to be defined as large urban areas 
for FY 1997. These areas are identified by an asterisk in Table 4a.
    Table 1a contains the two national standardized amounts that are 
applicable to all hospitals, except for sole community hospitals and 
hospitals in Puerto Rico. For a number of years, Table 1b had been used 
to set forth the 18 regional standardized amounts applicable for 
hospitals located in census areas subject to the regional floor. 
However, as provided in section 1886(d)(1)(A)(iii)(II) of the Act, the 
regional floor expires effective with discharges occurring on or after 
October 1, 1996. Therefore, all hospitals (except sole community 
hospitals and hospitals in Puerto Rico) will be paid solely on the 
basis of the national standardized amounts. 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

[[Page 46227]]

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 will be 
applicable to most hospitals in Puerto Rico.
    We note that on June 28, 1996, the Office of Management and Budget 
announced the designation of the Pocatello, Idaho MSA and the 
Jonesboro, Arkansas MSA. In addition, Chester County was added to the 
Jackson, Tennessee MSA. We have incorporated these changes in this 
final rule.
3. Updating the Average Standardized Amounts
    In accordance with section 1886(d)(3)(A)(iv) of the Act, we are 
updating the large urban and the other areas average standardized 
amounts for FY 1997 using the applicable percentage increases specified 
in section 1886(b)(3)(B)(i) of the Act. Section 1886(b)(3)(B)(i)(XII) 
of the Act specifies that, for hospitals in all areas, the update 
factor for the standardized amounts for FY 1997 is the market basket 
percentage increase minus 0.5 percentage points.
    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 forecast of the rebased 
hospital market basket increase for FY 1997 is 2.5 percent. For FY 
1997, this yields an update to the average standardized amounts of 2.0 
percent (2.5 percent minus 0.5 percent). (See section IV of the 
preamble to this final rule for a discussion of the market basket 
rebasing.)
    As in the past, we are adjusting the FY 1996 standardized amounts 
to remove the effects of the FY 1996 geographic reclassifications and 
outlier payments before applying the FY 1997 updates. That is, we are 
increasing the standardized amounts to restore the reductions that were 
made for the effects of geographic reclassification and outliers. After 
including the FY 1997 offsets to the standardized amounts for outliers 
and geographic reclassification, we estimate that there will be an 
actual increase of 1.8 percent to the large urban and other area 
standardized amounts.
    We note that the FY 1996 standardized amounts reflected a budget 
neutrality factor of 0.997575 to account for the change in transfer 
payment policy implemented in FY 1996. See 60 FR 45854. In the proposed 
rule we stated that ``there will be no need for a further budget 
neutrality adjustment'' (61 FR 27573), but we incorrectly suggested 
that the FY 1996 budget neutrality adjustment for transfers should be 
removed in setting the FY 1997 rates. The budget neutrality adjustment 
for the transfer policy is built permanently into the unadjusted rates.
    Although the update factor for FY 1997 is set by law, we were 
required by section 1886(e)(3)(B) of the Act to report to Congress on 
our initial recommendation of update factors for FY 1997 for both 
prospective payment hospitals and hospitals excluded from the 
prospective payment system. For general information purposes, we 
published the report to Congress as Appendix D to the proposed rule. 
That recommendation was based on an earlier forecast of the market 
basket increase. Our final recommendation on the update factors (which 
is required by sections 1886(e)(4)(A) and (e)(5)(A) of the Act) is set 
forth as Appendix D to this final 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.
    Section 1886(d)(3)(E) of the Act specifies that the hospital wage 
index must be updated 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 DRG reclassification 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 budget neutral, we compared 
aggregate payments using the FY 1996 relative weights and wage index to 
aggregate payments using the FY 1997 relative weights and wage index. 
The same methodology was used for the FY 1996 budget neutrality 
adjustment. (See the discussion in the September 1, 1992 final rule (57 
FR 39832).) Based on this comparison, we computed a proposed budget 
neutrality adjustment factor equal to 0.998509. Based on the final FY 
1997 relative weights and wage index, the final budget neutrality 
adjustment factor is 0.998703. This budget neutrality adjustment factor 
is applied to the standardized amounts without removing the effects of 
the FY 1996 budget neutrality adjustment. We do not remove the prior 
budget neutrality adjustment because estimated aggregate payments after 
the changes in the DRG relative weights and wage index should equal 
estimated aggregate payments prior to the changes. If we removed the 
prior year adjustment, we would not satisfy this condition.
    In addition, we will continue to apply the same FY 1997 adjustment 
factor to the hospital-specific rates that are effective for cost 
reporting periods beginning on or after October 1, 1996, 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 
FY 1997 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.
    Under section 1886(d)(8)(D) of the Act, the Secretary is required 
to adjust the 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 are equal to the aggregate prospective payments that would have 
been made absent these provisions. To calculate this budget neutrality 
factor, we used historical discharge data to simulate payments, and 
compared total prospective payments (including indirect medical 
education and disproportionate share payments) prior to any 
reclassifications to total prospective payments after 
reclassifications. In the proposed rule, we applied an adjustment 
factor of 0.994059 to ensure that the effects of reclassification are 
budget neutral. The

[[Page 46228]]

final budget neutrality adjustment factor is 0.993514.
    The adjustment factor is applied to the standardized amounts after 
removing the effects of the FY 1996 budget neutrality adjustment 
factor. We note that the proposed FY 1997 adjustment reflected wage 
index and standardized amount reclassifications approved by the MGCRB 
or the Administrator as of March 14, 1996. The final budget neutrality 
adjustment factor reflects the effects of all reclassification changes 
resulting from appeals and reviews of the MGCRB decisions for FY 1997 
or from a hospital's request for the withdrawal of a reclassification 
request.
    c. Outliers.--Section 1886(d)(5)(A) of the Act provides for 
payments in addition to the basic prospective payments for ``outlier'' 
cases, cases involving extraordinarily high costs (cost outliers) or 
long lengths of stay (day outliers). Section 1886(d)(3)(B) of the Act 
requires the Secretary to adjust both the large urban and other area 
national standardized amounts by the same factor to account for the 
estimated proportion of total DRG payments made to outlier cases. 
Similarly, section 1886(d)(9)(B)(iv) of the Act requires the Secretary 
to adjust the large urban and other standardized amounts applicable to 
hospitals in Puerto Rico by the same factor to account for the 
estimated proportion of total DRG payments made to outlier cases. 
Furthermore, under section 1886(d)(5)(A)(iv) of the Act, outlier 
payments for any year must be projected to be not less than 5 percent 
nor more than 6 percent of total payments based on DRG prospective 
payment rates.
    Beginning with FY 1995, section 1886(d)(5)(A) of the Act requires 
the Secretary to phase out payments for day outliers (correspondingly, 
payments for cost outliers would increase). Under the requirements of 
section 1886(d)(5)(A)(v), the proportion of day outlier payments to 
total outlier payments is reduced from FY 1994 levels as follows: 75 
percent of FY 1994 levels in FY 1995, 50 percent of FY 1994 levels in 
FY 1996, and 25 percent of FY 1994 levels in FY 1997. We estimated the 
FY 1994 proportion of day outlier payments to total outlier payments at 
31.3 percent in our September 1, 1993 final rule (58 FR 46348). Thus, 
the proportion of day outlier payments to total outlier payments in FY 
1997 will be approximately 8 percent (25 percent of 31.3 percent). For 
discharges occurring after September 30, 1997, the Secretary will no 
longer pay for day outliers under the provisions of section 
1886(d)(5)(A)(I) of the Act.

i. FY 1997 Outlier Payment Policies, Including Outlier Thresholds

    For FY 1996, 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 (the percent of 
Medicare's average per diem payment paid for each outlier day) is 44 
percent for FY 1996. The fixed loss cost outlier threshold is equal to 
the prospective payment for the DRG plus $15,150 ($13,800 for hospitals 
that have not yet entered the prospective payment system for capital-
related costs). The marginal cost factor for cost outliers (the percent 
of costs paid after costs for the case exceed the threshold) is 80 
percent. We applied an outlier adjustment to the FY 1996 standardized 
amounts of 0.949054 for the large urban and other areas rates and 
0.9526 for the capital Federal rate.
    For FY 1997, we proposed to set the day outlier threshold at the 
geometric mean length of stay for each DRG plus the lesser of 24 days 
or 3.0 standard deviations. Section 1886(d)(5)(A)(iii) of the Act, as 
amended by section 13501(c)(3) of Public Law 103-66, provides that 
additional payments for day outlier cases may be reduced below the 
marginal cost of care to meet the requirements of section 
1886(d)(5)(A)(v) of the Act. We also proposed to reduce the marginal 
cost factor for each outlier day from 44 percent to 35 percent in FY 
1997. The thresholds that we are establishing in this final rule will 
be the geometric mean length of stay for each DRG plus the lesser of 24 
days or 3.0 standard deviations. Based on updated simulations, we are 
establishing in this final rule a marginal cost factor of 33 percent 
for each outlier day in FY 1997. We estimate that these policies will 
reduce the proportion of outlier payments paid to day outliers to 
approximately 8 percent, in accordance with section 1886(d)(5)(A) of 
the Act.
    In the proposed rule, we proposed to maintain the marginal cost 
factor for cost outliers at 80 percent and proposed a fixed loss cost 
outlier threshold in FY 1997 equal to the prospective payment rate for 
the DRG plus $11,050 ($10,075 for hospitals that have not yet entered 
the prospective payment system for capital-related costs). In this 
final rule, based on simulations using updated data and a revised cost 
inflation factor (discussed below), we are establishing a fixed loss 
cost outlier threshold in FY 1997 equal to the prospective payment rate 
for the DRG plus $9,700 ($8,850 for hospitals that have not yet entered 
the prospective payment system for capital-related costs). We are also 
establishing a marginal cost factor for cost outliers of 80 percent, as 
proposed. We note that the FY 1997 cost outlier calculations are to be 
completed using the revised labor/nonlabor shares discussed above in 
section II.A.1 in this Addendum.
    The final FY 1997 cost outlier threshold reflects a revised cost 
inflation factor. As explained in the proposed rule, in setting the 
proposed FY 1997 cost outlier threshold, we used a cost inflation 
factor of 0.0 percent to simulate payments using FY 1995 hospital bills 
(61 FR 27497). That is, to determine when a case should qualify for 
cost outlier payments in FY 1997, we calculated FY 1997 ``costs'' for 
each bill in the FY 1995 MedPAR file by applying a cost inflation 
factor of 0.0 percent. We indicated that we would reevaluate this 
factor in developing the final rule.
    The latest available Medicare cost reports indicate that hospital 
cost per case decreased from FY 1993 to FY 1994 as well as from FY 1994 
to FY 1995. Cost report data for 4,600 hospitals for cost reporting 
periods beginning in FYs 1993 and 1994 show that cost per case 
decreased 1.906 percent from FY 1993 to FY 1994. Preliminary data for 
cost reports beginning in FY 1995, which were unavailable when we 
developed the proposed rule, show that cost per case decreased 2.392 
percent from FY 1994 to FY 1995. The latter figure is preliminary to 
the extent that it reflects only 1,800 hospitals and also reflects ``as 
submitted'' cost reports. Nevertheless, it suggests a continued trend 
in cost deflation. Accordingly, based on the more complete data for 
hospital cost reporting periods beginning in FYs 1993 and 1994, we have 
decided to use a cost inflation factor of minus 1.906 percent (a cost 
per case decrease of 1.906 percent) for purposes of setting the final 
FY 1997 outlier thresholds (as compared with our proposed FY 1997 cost 
inflation factor of 0.0 percent). We note that this is the first time 
we have deflated costs in making the outlier projection.
    The use of a negative cost inflation factor results in lower FY 
1997 ``costs'' for the set of cases analyzed. For example, if a bill in 
the FY 1995 MedPAR file reflects FY 1995 ``costs'' of $1,000, the FY 
1997 ``costs'' will be

$1,000  x (1-0.01906)  x (1-0.01906)

(reflecting 2 years of cost deflation), or $962.24. These lower costs, 
in turn, result in a lower cost outlier threshold relative to a 
methodology using a positive or zero cost inflation factor (other 
things being equal). As stated above, the final FY 1997 cost outlier 
threshold is the DRG amount plus $9,700, rather than $11,050 as 
indicated in the proposed rule.

[[Page 46229]]

    In accordance with section 1886(d)(5)(A)(iv) of the Act, we 
calculated outlier thresholds so that outlier payments are projected to 
equal 5.1 percent of total payments based on DRG prospective payment 
rates. In accordance with section 1886(d)(3)(E), we reduced the FY 1997 
standardized amounts by the same percentage to account for the 
projected proportion of payments paid to outliers.
    As stated in the September 1, 1993 final rule (58 FR 46348), we 
establish outlier thresholds that are applicable to both inpatient 
operating costs and inpatient capital-related costs. 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 
project that the thresholds for FY 1997 will result in outlier payments 
equal to 5.1 percent of operating DRG payments and 5.2 percent of 
capital payments based on the Federal rate.
    The proposed outlier adjustment factors applied to the standardized 
amounts and the capital Federal rate for FY 1997 were as follows:

------------------------------------------------------------------------
      Operating standardized amounts            Capital Federal rate    
------------------------------------------------------------------------
0.948968..................................  0.9476                      
------------------------------------------------------------------------

    The final outlier adjustment factors applied to the standardized 
amounts and the capital Federal rate for FY 1997 are as follows:

------------------------------------------------------------------------
      Operating standardized amounts            Capital Federal rate    
------------------------------------------------------------------------
0.948766..................................  0.9481                      
------------------------------------------------------------------------

    As in the proposed rule, we apply the final outlier adjustment 
factors after removing the effects of the FY 1996 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 will replace the ratios published in the September 1, 
1995 final rule (60 FR 45922), effective October 1, 1996. Table 8b 
contains comparable Statewide average capital cost-to-charge ratios. 
These average ratios will be used to calculate cost outlier payments 
for those hospitals for which the intermediary computes operating cost-
to-charge ratios lower than 0.24265 or greater than 1.28879 and capital 
cost-to-charge ratios lower than 0.013243 or greater than 0.19730. 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. We 
note that the cost-to-charge ratios in Tables 8a and 8b will be used 
for all cost reports settled during FY 1997 (regardless of the actual 
cost reporting period) when hospital-specific cost-to-charge ratios are 
either not available or outside the three standard deviations range.

iii. FY 1995 and FY 1996 Outlier Payments

    In the proposed rule, we estimated that actual outlier payments for 
FY 1995 were approximately 3.7 percent of actual total DRG payments 
(lower than the 5.1 percent we projected in setting outlier policies 
for FY 1995). This percentage was computed by simulating payments using 
actual FY 1995 bill data available at the time of the proposed rule. 
Our current estimate is that actual outlier payments for FY 1995 were 
approximately 3.8 percent of actual total DRG payments. These estimates 
are based on simulations using the July 1996 update of the provider-
specific file and the June 1996 update of the FY 1995 MedPAR file.
    In the proposed rule, we estimated that actual outlier payments for 
FY 1996 would be approximately 4.2 percent of actual total DRG payments 
(lower than the 5.1 percent we projected in setting outlier policies 
for FY 1996). We currently estimate that FY 1996 outlier payments will 
approximate 4.0 percent of total DRG payments. This current estimate is 
based on simulations using the July 1996 update of the provider-
specific file and the June 1996 update of the FY 1995 MedPAR file. We 
used these data to calculate an estimate of the actual outlier 
percentage for FY 1996 by applying FY 1996 rates and policies to the FY 
1995 bills.
    In the proposed rule, we discussed in detail our methodology for 
setting outlier thresholds, our periodic refinements to that 
methodology, and some possible explanations for the recent differences 
between projected and actual outlier percentages (61 FR 27496). We 
invited comments and suggestions for further refinements to the 
methodology. The comments on our outlier policies and methodology and 
our responses are set forth below.
    Comment: A number of commenters are concerned that the percentages 
of actual outlier payments for FYs 1995 and 1996 are lower than we 
projected when we set the respective thresholds for those years. Some 
commenters requested that we monitor outlier payments during a fiscal 
year, so that we can change the thresholds in the middle of the year in 
the event that projected actual outlier payments are not between 5 and 
6 percent of projected actual total DRG payments. Other commenters 
requested that any difference between outlier payments and the amount 
set aside be used to offset the amount required in the next year. One 
commenter argued that it is fundamentally inequitable, even assuming 
that it is not illegal, not to make additional outlier payments after 
the end of the fiscal year to assure that we meet our 5.1 percent goal. 
The commenter cited historical figures on outlier payments from a 
pending court case in the United States District Court for the District 
of Columbia, County of Los Angeles v. Shalala, C.A. No. 93-0146 SSH 
(D.D.C).
    Response: We have responded to similar comments a number of times, 
including the final rules for FY 1993 (57 FR 39784), FY 1994 (58 FR 
46347), FY 1995 (59 FR 45408), and FY 1996 (60 FR 45856). As we have 
explained before and as explained below, we believe our outlier 
policies are consistent with the statute and the goals of the 
prospective payment system and are not inequitable.
    In accordance with section 1886(d)(5)(A)(iv) of the Act, we set 
outlier thresholds before a fiscal year so that outlier payments for 
the fiscal year are projected to be 5.1 percent of total DRG payments. 
In doing so, we use the best available Medicare discharge data and 
hospital-specific data.
    Many of the factors used to set prospective payment amounts for a 
given fiscal year are based on estimates. These factors include not 
only the outlier thresholds, but also the market basket rate of 
increase used to establish

[[Page 46230]]

the update factors, the recalibration of the DRG weights, and the 
various required budget neutrality provisions. We do not believe that 
Congress intended for us to revise these factors in midyear. Similarly, 
we do not believe that Congress intended that the standardized amounts 
for a given fiscal year should be adjusted (upward or downward) to 
reflect any difference between projected and actual outlier payments 
for a past fiscal year. Payments for a given discharge in a given 
fiscal year are generally intended to reflect or address the average 
costs of that discharge in that year; that goal would be undermined if 
we adjusted prospective payment system payments to account for 
``underpayments'' or ``overpayments'' in other years.
    Moreover, the midyear or retroactive adjustments contemplated by 
the commenters would be extremely difficult or impracticable (if not 
impossible) to administer. Hospital bill data with respect to a given 
fiscal year continues to be added to the MedPAR file for some time 
after the end of the fiscal year. (We update the MedPAR file for 2 full 
years after the end of the respective fiscal year.) Therefore, precise 
figures on actual outlier payments for a given fiscal year cannot be 
determined until well after that fiscal year ends. We do publish 
estimates of ``actual'' outlier payments for recent fiscal years, but 
those estimates are based on available bills (and sometimes based on 
simulations using bills for a previous year, adjusted for estimates of 
inflation).
    In short, we believe our outlier policies are consistent with the 
statute and the goals of the prospective payment system. In a recent 
court decision, the United States District Court for the Central 
District of California upheld the agency's interpretation of the 
statute as reasonable, writing in part that ``[a]ny retroactive 
adjustment would be inconsistent with [prospective payment system] 
because the incentives for cost reduction and efficiency would be 
eliminated.'' Alvarado Community Hospital v. Shalala, Case No. CV 94-
0972 RMT (Ex) (C.D. Cal May 6, 1996), appeal filed, No. 96-55967 (9th 
Cir.). (There is pending litigation on the same issues in the U.S. 
District Court for the District of Columbia.)
    Finally, we do not agree that our outlier policies are 
fundamentally inequitable. As we discussed in the proposed rule, we 
believe that one reason outlier payments have been lower than expected 
is that hospital costs are not increasing at the rate we expected, and 
costs may even be decreasing. Available data show that, beginning in FY 
1994, for the first time since the inception of the prospective payment 
system, hospitals are experiencing actual decreases in cost per case 
from one year to the next. This information is confirmed by ProPAC in 
its June 1996 Report to Congress ``Medicare and the American Health 
Care System'' (Table 3-3, Annual Change in PPS Operating Costs and 
Payments, First 11 Years of PPS, p. 65). These actual decreases in cost 
per case follow a period of several years in which the rate of increase 
in operating cost per case declined from one year to the next.
    The thresholds for a given fiscal year reflect a certain level of 
costs, so if hospitals are generally holding costs down, then fewer 
cases qualify for outlier payments and outlier payments are lower than 
expected. But if lower hospital costs result in lower than expected 
outlier payments, it also results in higher than expected ``profits'' 
(at least with respect to nonoutlier cases). Hospital, Medicare profit 
margins have rebounded to levels not seen since the middle of the 
1980s. In the June 1996 report, ProPAC found the aggregate prospective 
payment system operating margin to be 6.0 percent for FY 1994 (Figure 
3-2, Aggregate PPS Operating Margin, First 13 Years of PPS p. 68). 
ProPAC believes that aggregate prospective payment system margins are 
even higher for FYs 1995 and 1996.
    Therefore, we believe that ``underpayments'' for outliers are not 
fundamentally inequitable because one factor contributing to this 
result--lower hospital costs--results in ``overpayments'' with respect 
to the standard DRG payments. We do not make retroactive adjustments to 
the standard DRG payments to account for the effect of actual costs 
being lower than expected; similarly, we do not make retroactive 
adjustments to outlier payments.
    As we have stated previously, we believe the more appropriate 
action for addressing outlier payments is to continue to examine the 
outlier policy and try to refine our estimation methodology.
    Comment: Two commenters stated that, after modeling the outlier 
payments, they were able to replicate HCFA's result of 5.1 percent for 
operating outlier payments, but that their analysis yielded only 4.8 
percent for capital outlier payments as compared with HCFA's result of 
5.2 percent.
    Response: We have determined that the methodology used by the 
commenters contained several technical errors.
    Comment: Two commenters requested that we develop an econometric 
hospital cost model to help us predict the cost inflation factors used 
for purposes of setting outlier thresholds.
    Response: Currently, we calculate the cost inflation factor used to 
set outlier thresholds by analyzing hospital cost report data on cost 
per case for recent cost reporting periods. The nature of the 
econometric cost model contemplated by the commenters is not entirely 
clear to us, but we are interested in exploring such an approach and 
welcome specific suggestions for developing an econometric model. We 
believe such an approach might be helpful if the model could analyze 
data that are more recent than the data available in hospital cost 
reports.
    We did not receive any specific suggestions for refinements to our 
outlier estimation methodology. We note that one commenter believes 
that the 0.0 percent cost inflation factor reflected in the proposed 
rule is warranted. As explained above, in this final rule, we are using 
a cost inflation factor of minus 1.906 percent to further reflect the 
decreases in cost per case.

B. Adjustments for Area Wage Levels and Cost of Living

    The adjusted standardized amounts are divided into labor and 
nonlabor portions. Tables 1a 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. 
This section addresses two types of adjustments to the standardized 
amounts that are made in determining the prospective payment rates as 
described in this addendum.
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.

[[Page 46231]]

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 1997, 
we are adjusting the payments for hospitals in Alaska and Hawaii by 
multiplying the nonlabor portion of the standardized amounts by the 
appropriate adjustment factor contained in the table below.

 Table of Cost-of-Living Adjustment Factors, Alaska and Hawaii Hospitals
                                                                        
                                                                        
------------------------------------------------------------------------
Alaska--All areas.............................................     1.25 
Hawaii:                                                                 
    County of Honolulu........................................     1.225
    County of Hawaii..........................................     1.15 
    County of Kauai...........................................     1.20 
    County of Maui............................................     1.225
    County of Kalawao.........................................     1.225 
------------------------------------------------------------------------
(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 reflect the 
resource utilization of cases in each DRG relative to Medicare cases in 
other DRGs. Table 5 of section V of this addendum contains the relative 
weights that we will use for discharges occurring in FY 1997. These 
factors have been recalibrated as explained in section II of the 
preamble.

D. Calculation of Prospective Payment Rates for FY 1997

General Formula for Calculation of Prospective Payment Rates for FY 
1997
    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 updated FY 1982 
hospital-specific rate, or 100 percent of the updated 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 national 
large urban standardized amount and the national other standardized 
amount.
1. Federal Rate
    For discharges occurring on or after October 1, 1996 and before 
October 1, 1997, except for sole community hospitals and hospitals in 
Puerto Rico, the hospital's payment is based exclusively on the Federal 
national rate. Section 1866(d)(1)(A)(iii) of the Act provides that the 
Federal rate is comprised of 100 percent of the Federal national rate.
    The payment amount is determined as follows:
    Step 1--Select the appropriate national standardized amount 
considering the type of hospital and designation of the hospital as 
large urban or other (see Tables 1a, 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 
1997.--We are increasing the hospital-specific rates by 2.0 percent 
(the hospital market basket percentage increase of 2.5 percent minus 
0.5 percentage points) for sole community hospitals located in all 
areas in FY 1997. Section 1886(b)(3)(C)(ii) of the Act 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 1997, is the market basket 
rate of increase minus 0.5 percentage points.
    b. Calculation of Hospital-Specific Rate.--For sole community 
hospitals, the applicable FY 1997 hospital-specific rate will be 
calculated by multiplying a hospital's hospital-specific rate for the 
preceding fiscal year by the applicable update factor (2.0 percent), 
which is the same as the update for all prospective payment hospitals. 
In addition, the hospital-specific rate will be adjusted by the budget 
neutrality adjustment factor (that is, 0.998703) as discussed in 
section II.A.4.a of this addendum. This resulting rate will be used in 
determining under which rate a sole community hospital is paid for its 
discharges beginning on or after October 1, 1996, 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, 1996 
and Before October 1, 1997
    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.

[[Page 46232]]

    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. Changes to Payment Rates for Inpatient Capital-Related Costs 
for FY 1997

    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 based on an increasing 
proportion of the capital prospective payment system Federal rate and a 
decreasing proportion of the hospital's historical costs for capital.
    The basic methodology for determining Federal capital prospective 
rates is set forth at Secs. 412.308 through 412.352. Below we discuss 
the factors that we used to determine the Federal rate and the 
hospital-specific rates for FY 1997. The rates will be effective for 
discharges occurring on or after October 1, 1996.
    For FY 1992, we computed the 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 update the standard Federal rate, as 
provided in Sec. 412.308(c)(1), to account for capital input price 
increases and other factors. 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. Section 412.308(c)(3) further 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 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 required that the 
Federal rate also be adjusted by a budget neutrality factor so that 
estimated aggregate payments for inpatient hospital capital costs were 
projected to 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. That provision expired in FY 1996.
    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. 
For FY 1992 through FY 1995, the hospital-specific rate was also 
adjusted by a 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. With the expiration of the budget neutrality provision, the model 
is still used to estimate the exceptions payment adjustment and other 
factors. 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 for operating costs under a special 
payment formula. These hospitals are paid a blended rate that consists 
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 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 1996, the Federal rate was $461.96. In the proposed rule, we 
stated that the proposed FY 1997 Federal rate was $441.84. In this 
final rule, we are establishing an FY 1997 Federal rate of $438.92.
    In the discussion that follows, we explain the factors that were 
used to determine the FY 1997 Federal rate. In particular, we explain 
why the FY 1997 Federal rate has decreased 4.99 percent compared to the 
FY 1996 Federal rate. We also explain that capital payments per case 
are estimated to increase by 3.92 percent. Taking into account the 
effects of increases in projected discharges, we estimate that 
aggregate capital payments will increase 6.77 percent.
    The major factor contributing to the decrease in the FY 1997 rate 
in comparison to FY 1996 is the change in the exceptions reduction 
factor. We have expected the number and amount of exceptions payments 
generally to increase throughout the transition period.
    Total payments to hospitals under the prospective payment system 
are relatively insensitive to changes in the capital prospective 
payments. Since capital payments are about 10 percent of hospital 
payments, a 1 percent change in the capital Federal rate yields only 
about 0.1 percent change in actual payments to hospitals. Aggregate 
payments under the capital prospective payment transition system are 
estimated to increase in FY 1997 compared to FY 1996. Specifically, we 
estimate that aggregate payments in FY 1997 will be 6.77 percent higher 
than they were in FY 1996. Changes in aggregate payments include 
changes in capital payments per discharge and changes in the number of 
discharges. Under the prospective payment system for capital-related 
costs, payments per discharge (or case) are estimated to increase 3.92 
percent in FY 1997 compared to FY 1996.
1. Standard Federal Rate Update
    Section 412.308(c)(1)(ii) has provided that the standard Federal 
rate is updated based on an analytical framework that takes into 
account changes in a capital input price index and other factors. The 
update framework consists of a capital input price index and several 
policy adjustment factors. Specifically, we have adjusted the projected 
CIPI rate of increase as appropriate each year for

[[Page 46233]]

case-mix index related changes, for intensity, and for errors in 
previous CIPI forecasts. The proposed rule reflected an update factor 
of 1.0 percent, based on the data available at the time. The final 
update factor for FY 1997 under that framework is 0.7 percent. This 
update factor is based on a projected 1.3 percent increase in the CIPI, 
and on policy adjustment factors of -0.6 percent. We explain the basis 
for the FY 1997 CIPI projection in section IV.B of the preamble to this 
final rule. Here we describe the policy adjustments that have been 
applied.
    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''). 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 higher resource 
requirements. 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 have adopted this CMI 
adjustment in the capital update framework as well.
    For FY 1997, we are projecting a 1.6 percent increase in the case-
mix index. We now estimate that real case-mix increase will be 1.0 
percent in FY 1997. In previous years, we have assumed that real case 
mix will increase at about 1.0 percent per year. We expect this pattern 
to continue. The final net adjustment for case-mix change in FY 1997 is 
therefore 0.6 percentage points.
    We estimate that DRG reclassification and recalibration resulted in 
a 0.0 percent change in the case mix when compared with the case-mix 
index that would have resulted if we had not made the reclassification 
and recalibration changes to the DRGs.
    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 upcoming year. In any given year there may be 
unanticipated price fluctuations that may result in differences between 
the actual increase in prices faced by hospitals and the forecast used 
in calculating the update factors. In setting a prospective payment 
rate under the proposed framework, we 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. Because we 
only introduced this analytical framework in FY 1996, FY 1998 is the 
first year in which a forecast error adjustment could be required.
    Under the capital prospective payment system framework, we also 
make an adjustment for changes in intensity. We calculate this 
adjustment using the same methodology and data as in the framework for 
the operating prospective payment system. 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 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 have therefore 
incorporated the intensity adjustment from the operating update 
framework into the capital update framework. Without 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 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 thus provides 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.
    For FY 1997, we have developed a Medicare-specific intensity 
measure based on a 5-year average using FY 1991-1995. In determining 
case-mix constant intensity, we found that observed case-mix increase 
was 2.8 percent in FY 1991, 1.8 percent in FY 1992, 0.9 percent in FY 
1993, 0.8 percent in FY 1994, and 1.6 percent in FY 1995. For FY 1991, 
FY 1992 and FY 1995, we estimate that real case-mix increase was 1.0 to 
1.4 percent each year. The estimate for those years is supported by 
past studies of case-mix change by the RAND Corporation. The most 
recent study was ``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). The study suggested that real 
case-mix change was not dependent on total change, but was rather 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 document medical records more 
completely in order to improve payment. Following that study, we 
consider up to 1.4 percent of observed case-mix change as real for FY 
1991 through FY 1995.
    Given estimates of real case-mix increase of 1.0 percent for FY 
1991 and FY 1992, 0.9 percent for FY 1993, 0.8 percent for FY 1994, and 
1.0 percent for FY 1995, we estimate that case-mix constant intensity 
declined by an average 1.1 percent during FY 1991 through FY 1995, for 
a cumulative decrease of 5.3 percent. If we assume that real case-mix 
increase was 1.4 percent for FY 1991 and FY 1992, 0.9 percent for FY 
1993, 0.8 percent for FY 1994, and 1.4 percent for FY 1995, we estimate 
that case-mix constant intensity declined by an average 1.2 percent 
during FY 1991 through FY

[[Page 46234]]

1995, for a cumulative decrease of 5.8 percent. Since we estimate that 
intensity has declined during that period, we are recommending a 0.0 
percent intensity adjustment for FY 1997.
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 used to calculate the 
hospital's inpatient capital-related payments (for example, 60 percent 
for cost reporting periods beginning in FY 1997 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 total DRG 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, 1995 final rule, we estimated that outlier 
payments for capital in FY 1996 would equal 4.64 percent of inpatient 
capital-related payments based on the Federal rate. Accordingly, we 
applied an outlier adjustment factor of 0.9536 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 5.19 percent of 
inpatient capital-related payments based on the Federal rate in FY 
1997. We are, therefore, applying an outlier adjustment factor of 
0.9481 to the Federal rate. Thus, estimated capital outlier payments 
for FY 1997 represent a higher percentage of total capital payments 
than in FY 1996.
    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 1997 is 0.9942 (.9481/.9536). Thus, the outlier 
adjustment decreases the FY 1997 Federal rate by 0.58 percent (1-
0.9942) compared with the FY 1996 outlier adjustment.
3. Budget Neutrality Adjustment Factor for Changes in DRG 
Classifications and 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 DRG 
reclassification and recalibration and changes in the geographic 
adjustment factor equal estimated aggregate payments that would have 
been made based on the Federal rate without such changes. We use 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 use 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 use these figures to compute the 
adjustment required to maintain budget neutrality for changes in DRG 
weights and in the geographic adjustment factor.
    For FY 1996, we calculated a GAF/DRG budget neutrality factor of 
0.9994. In the proposed rule for FY 1997, we proposed a GAF/DRG budget 
neutrality factor of 0.9992. In this final rule, based on calculations 
using updated data, we are applying a factor of 0.9987 to meet this 
requirement. 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 
estimated aggregate payments each year be no more than they would have 
been in the absence of the annual DRG reclassification and 
recalibration and changes in the geographic adjustment factor. The 
incremental change in the adjustment from FY 1996 to FY 1997 is 0.9987. 
The cumulative change in the rate due to this adjustment is 1.0012 (the 
product of the incremental factors for FY 1993, FY 1994, FY 1995, FY 
1996, and FY 1997: 0.9980  x  1.0053  x  0.9998  x  0.9994  x  0.9987 = 
1.0012).
    This factor accounts for DRG reclassifications and recalibration 
and for changes in the geographic adjustment factor. It also 
incorporates the effects on the geographic adjustment factor of FY 1997 
geographic reclassification decisions made by the MGCRB compared to FY 
1996 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. 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. We use the model originally 
developed for determining the budget neutrality adjustment factor to 
estimate payments under the exceptions payment process and to determine 
the exceptions payment adjustment factor. We describe that model in 
Appendix B to this final rule.
    For FY 1996, we estimated that exceptions payments would equal 1.51 
percent of aggregate payments based on the Federal rate and the 
hospital-specific rate. Therefore, we applied an exceptions reduction 
factor of 0.9849 (1-.0151) in determining the Federal rate. For FY 
1997, we estimated in the May 31, 1996, proposed rule that exceptions 
payments would equal 6.07 percent of aggregate payments based on the 
Federal rate and the hospital-specific rate. Therefore, we proposed to 
apply an exceptions reduction factor of 0.9393 (1-0.0607) to determine 
the FY 1997 Federal rate. For this final rule, we estimate that 
exceptions payments for FY 1997 will equal 6.42 percent of aggregate 
payments based on the Federal rate and the hospital-specific rate. We 
are, therefore, applying an exceptions payment reduction factor of 
0.9358 to the Federal rate for FY 1997.
    The final exceptions reduction factor for FY 1997 is thus 4.99 
percent lower than the factor for FY 1996, and 0.37 percent lower than 
the factor in the FY 1997 proposed rule. As we have stated before, we 
have expected the number and amount of exceptions payments generally to 
increase throughout the transition period.
    The exceptions reduction factors are not built permanently into the 
rates; that is, the factors are not applied cumulatively in determining 
the Federal rate. Therefore, the net adjustment to the FY 1997 Federal 
rate is 0.9358/0.9849, or 0.9501.

[[Page 46235]]

5. Standard Capital Federal Rate for FY 1997
    For FY 1996, the capital Federal rate was $461.96. With the changes 
we proposed to the factors used to establish the Federal rate, we 
proposed that the FY 1997 Federal rate would be $441.84. In this final 
rule, we are establishing an FY 1997 Federal rate of $438.92. The final 
Federal rate for FY 1997 was calculated as follows:
     The FY 1997 update factor is 1.0070, that is, the update 
is 0.70 percent.
     The FY 1997 outlier adjustment factor is 0.9481.
     The FY 1997 budget neutrality adjustment factor applied to 
the standard Federal payment rate for changes in the DRG relative 
weights and in the geographic adjustment factor is 0.9987.
     The FY 1997 exceptions payments adjustment factor is 
0.9358.
    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 are making no additional adjustments in the standard 
Federal rate for these factors other than the budget neutrality factor 
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 1997 affected the computation of the final FY 1997 
Federal rate in comparison to the FY 1996 Federal rate. The final FY 
1997 update factor increases the Federal rate 0.70 percent compared to 
the rate in FY 1996, while the final geographic and DRG budget 
neutrality factor decreases the Federal rate by 0.13 percent. The final 
FY 1997 outlier adjustment factor decreases the Federal rate by 0.58 
percent compared to FY 1996. The final FY 1997 exceptions reduction 
factor decreases the Federal rate by 4.99 percent compared to the 
exceptions reduction for FY 1996. The combined effect of all the 
changes is to decrease the Federal rate by 4.99 percent compared to the 
Federal rate for FY 1996.

              Comparison of Factors and Adjustments: FY 1996 Federal Rate and FY 1997 Federal Rate              
----------------------------------------------------------------------------------------------------------------
                                                                                  Change         Percent change 
----------------------------------------------------------------------------------------------------------------
Update factor \1\:                                                                                              
    FY 1996............................................             1.0120  .................  .................
    FY 1997............................................             1.0070             1.0070               0.70
GAF/DRG adjustment factor \1\:                                                                                  
    FY 1996............................................             0.9994  .................  .................
    FY 1997............................................             0.9987             0.9987              -0.13
Outlier adjustment factor \2\:                                                                                  
    FY 1996............................................             0.9536  .................  .................
    FY 1997............................................             0.9481             0.9942              -0.58
Exceptions adjustment factor \2\:                                                                               
    FY 1996............................................             0.9849  .................  .................
    FY 1997............................................             0.9358             0.9501              -4.99
Federal Rate:                                                                                                   
    FY 1996............................................            $461.96  .................  .................
    FY 1997............................................            $438.92             0.9501             -4.99 
----------------------------------------------------------------------------------------------------------------
\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 1996 to FY 1997 resulting from the application of the 0.9987 GAF/DRG  
  budget neutrality factor for FY 1997 is 0.9987.                                                               
\2\ The outlier reduction factor and the exceptions reduction factor 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 1997 exceptions reduction factor is 0.9358/0.9849, or 0.9501. 

    We are also providing a chart that shows how the final FY 1997 
Federal rate differs from the proposed FY 1997 Federal rate.
    This chart shows the factors that contributed to the 0.66 percent 
decrease in the rate since the proposed rule. The update factor 
decreased 0.30 percent since the proposed rule. Another change since 
the proposed rule is seen in the exceptions reduction factor, 
decreasing 0.37 percent from the earlier estimate. The GAF/DRG 
reduction factor decreased only 0.05 percent since the proposed rule 
and the outlier reduction factor increased 0.05 percent since the 
proposed estimate.

       Comparison of Factors and Adjustments: Proposed FY 1997 Federal Rate and Final FY 1997 Federal Rate      
----------------------------------------------------------------------------------------------------------------
                                                                              Net adjustment     Percent change 
----------------------------------------------------------------------------------------------------------------
Update factor:                                                                                                  
    Proposed FY 1997...................................             1.0100  .................  .................
    Final FY 1997......................................             1.0070             0.9970              -0.30
Outlier reduction factor:                                                                                       
    Proposed FY 1997...................................             0.9476  .................  .................
    Final FY 1997......................................             0.9481             1.0005               0.05
GAF/DRG reduction factor:                                                                                       
    Proposed FY 1997...................................             0.9992  .................  .................
    Final FY 1997......................................             0.9987             0.9995              -0.05
Exceptions reduction factor:                                                                                    
    Proposed FY 1997...................................             0.9393  .................  .................
    Final FY 1997......................................             0.9358             0.9963              -0.37
Federal rate:                                                                                                   
    Proposed FY 1997...................................            $441.84  .................  .................
    Final FY 1997......................................            $438.92             0.9934              -0.66
----------------------------------------------------------------------------------------------------------------


[[Page 46236]]


6. Special Rate for Puerto Rico Hospitals
    For FY 1996, the special rate for Puerto Rico hospitals was 
$355.35. With the changes we proposed to the factors used to determine 
the rate, the proposed FY 1997 special rate for Puerto Rico was 
$339.87. In this final rule, the FY 1997 capital rate for Puerto Rico 
is $337.63.

B. Determination of Hospital-Specific Rate Update

    Section 412.328(e) of the regulations provides that the hospital-
specific rate for FY 1997 be determined by adjusting the FY 1996 
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 1997, the hospital-specific rate will be 
updated by a factor of 1.0070.
2. Exceptions Payment Adjustment Factor
    For FY 1992 through FY 2001, the updated hospital-specific rate is 
multiplied by an adjustment factor to account for estimated exceptions 
payments for capital-related costs 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 1997, we estimated in the proposed 
rule that exceptions payments would be 6.07 percent of aggregate 
payments based on the Federal rate and the hospital-specific rate. We 
therefore proposed that the updated hospital-specific rate be reduced 
by a factor of 0.9393. In this final rule, we estimate that exceptions 
payments will be 6.42 percent of aggregate payments based on the 
Federal rate and the hospital-specific rate. We are therefore applying 
an exceptions reduction factor of 0.9358 to the hospital-specific rate. 
The exceptions reduction factors are not built permanently into the 
rates; that is, the factors are not applied cumulatively in determining 
the hospital-specific rate. Therefore, the net adjustment to the FY 
1997 hospital-specific rate is 0.9358/0.9849, or 0.9501.
3. Net Change to Hospital-Specific Rate
    We are providing a chart to show the net change to the hospital-
specific rate. The chart shows the factors for FY 1996 and FY 1997 and 
the net adjustment for each factor. It also shows that the cumulative 
net adjustment from FY 1996 to FY 1997 is 0.9568, which represents a 
decrease of 4.32 percent to the hospital-specific rate. The FY 1997 
hospital-specific rate for each hospital is determined by multiplying 
the FY 1996 hospital-specific rate by the cumulative net adjustment of 
0.9568.

                            FY 1997 Update and Adjustments to Hospital-Specific Rates                           
----------------------------------------------------------------------------------------------------------------
                                                                              Net adjustment     Percent change 
----------------------------------------------------------------------------------------------------------------
Update factor:                                                                                                  
    FY 1996............................................             1.0100  .................  .................
    FY 1997............................................             1.0070             1.0070               0.70
Exceptions payment adjustment factor:                                                                           
    FY 1996............................................             0.9849  .................  .................
    FY 1997............................................             0.9358             0.9501              -4.99
Cumulative adjustments:                                                                                         
    FY 1996............................................             0.9947  .................  .................
    FY 1997............................................             0.9518             0.9568             -4.32 
----------------------------------------------------------------------------------------------------------------
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 FY 1996 to FY 1997 is 1.0070. In contrast, the exceptions  
  payment adjustment factor and the budget neutrality factor are not applied cumulatively. Thus, for example,   
  the incremental increase in the exceptions reduction factor from FY 1996 to FY 1997 is 0.9358/0.9849, or      
  0.9501.                                                                                                       

C. Calculation of Inpatient Capital-Related Prospective Payments for FY 
1997

    During the capital prospective payment system transition period, a 
hospital is paid for 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

[[Page 46237]]

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 
1997 are 60 percent of the adjusted Federal rate and 40 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 
hospital's inpatient capital-related payments that is based on the 
Federal rate. For fully prospective hospitals, that portion is 60 
percent Federal rate for discharges occurring in cost reporting periods 
beginning during FY 1997. Thus, a fully prospective hospital will 
receive 60 percent of the capital-related outlier payment calculated 
for the case for discharges occurring in cost reporting periods 
beginning in FY 1997. 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 based on 100 percent of the Federal rate, 100 
percent of the Federal rate is included in the hospital's outlier 
payments.
    The outlier thresholds for FY 1997 are published in section 
II.A.4.c of this addendum. For FY 1997, 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 $9,700. A 
case qualifies as a day outlier for FY 1997 if the length of stay is 
greater than the geometric mean length of stay for the DRG plus the 
lesser of 3 standard deviations of the length of stay or 24 days.
    During the capital prospective payment system transition period, a 
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 1997 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. Changes to Payment Rates for Excluded Hospitals and Hospital 
Units

A. Rate-of-Increase Percentages for Excluded Hospitals and Hospital 
Units

    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 is paid its costs plus the lower of--
     Fifty percent of the difference between the allowable 
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. Section 1886(b)(3)(B) of the Act provides that for 
cost reporting periods beginning on or after October 1, 1993 and before 
October 1, 1994, the applicable rate-of-increase percentage is the 
market basket percentage increase minus the lesser of 1 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 is the market 
basket percentage increase. The ``update adjustment percentage'' is the 
percentage by which a hospital's allowable inpatient operating costs 
exceeds the hospital's ceiling for the cost reporting period beginning 
in FY 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

[[Page 46238]]

applicable reduction. The applicable reduction and applicable rate of 
increase percentage are then determined in the same manner as for FY 
1994. The most recent forecast of the market basket increase for FY 
1997 for hospitals and hospital units excluded from the prospective 
payment system is 2.5 percent.

B. Wage Index Exceptions for Excluded Hospitals and Units

    In the August 30, 1991 final rule (56 FR 43232), we set forth our 
policy for target amount adjustments for significant wage increases. 
Effective with cost reporting periods beginning on or after April 1, 
1990, significant increases in wages since the base period are 
recognized as a basis for an adjustment in the target amount under 
Sec. 413.40(g).
    To qualify for an adjustment, the excluded hospital or hospital 
unit must be located in a labor market area for which the average 
hourly wage increased significantly more than the national average 
hourly wage between the hospital's base period and the period subject 
to the ceiling. We use the hospital wage index for prospective payment 
hospitals to determine the rate of increase in the average hourly wage 
in the labor market area. For a hospital to qualify for an adjustment, 
the wage index value for the cost reporting period subject to the 
ceiling must be at least 8 percent higher than the wage index based on 
wage survey data collected for the base year cost reporting period. If 
survey data are not available for one (or both) of the cost reporting 
periods used in the comparison, the wage index based on the latest 
available survey data collected before that cost reporting period will 
be used. For example, to make the comparison between a 1983 base period 
and a hospital's cost reporting period beginning in FY 1994, we would 
use the rate of increase between the wage index based on 1982 wage data 
and the wage index based on the FY 1993 data, since the FY 1993 data 
are the most recent data currently available. Further, the comparison 
is made without regard to geographic reclassifications made by the 
MGCRB under sections 1886(d) (8) and (10) of the Act. Therefore, the 
comparison is made based on the wage index value of the labor market 
area in which the hospital is actually located.
    We determine the amount of the adjustment for wage increases by 
considering three factors for the time between the base period and the 
period for which an adjustment is requested: the rate of increase in 
the hospital's average hourly wage; the rate of increase in the average 
hourly wage in the labor market area in which the hospital is located; 
and, the rate of increase in the national average hourly wage for 
hospital workers. The adjustment is limited to the amount by which the 
lower of the hospital's or the labor market area's rate of increase in 
average hourly wages significantly exceeds the national increase (that 
is, exceeds the national rate of increase by more than 8 percent). For 
purposes of computing the adjustment, the relative rate of increase in 
the average hourly wage for the labor market area is assumed to have 
been the same over each of the intervening years between the wage 
surveys.
    To determine the rate of increase in the national average hourly 
wage, we use the average hourly earnings (AHE) component of the wages 
and salaries portion of the market basket. This measure is derived from 
the 1982-based market basket since the 1987-based market basket uses 
the employment cost index (ECI) for hospital workers as the price proxy 
for this component. Unlike the AHE, the ECI for hospital workers can be 
measured historically only back to 1986. In addition, the ECI does not 
adjust for skill-mix shifts and, therefore, measures only the change in 
wage rates per hour.
    The average hourly earnings for hospital workers as measured by the 
market basket show the following increases:

1992 = 4.8 percent
1993 = 3.6 percent
1994 = 2.7 percent
1995 = 3.3 percent
1996 = 3.3 percent
1997 = 3.2 percent

    We note that this section merely provides updated information with 
respect to areas that would qualify for the wage index adjustment under 
Sec. 413.30(g). This information was calculated in accordance with 
established policy and does not reflect any change in that policy. The 
geographic areas in which the percentage difference in wage indexes was 
sufficient to qualify for a wage index adjustment are listed in Table 
10 of section V of the addendum to this final rule. The table is 
constructed with old MSAs instead of the revised MSAs effective October 
1, 1993 because current adjustment requests are for years prior to FY 
1995.

V. Tables

    This section contains the tables referred to throughout the 
preamble to this final rule and in this Addendum. For purposes of this 
final 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, 1C, 
1D, 3C, 4a, 4b, 4c, 4d, 4e, 5, 6A, 6B, 6C, 6D, 6E, 6F, 6G, 6H, 7A, 7B, 
8A, 8B, and 10 are presented below. The tables presented below are as 
follows:

Table 1A--National 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 1995 and Hospital Average Hourly Wage for Federal Fiscal 
Year 1997 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--Invalid Procedure Codes
Table 6E--Revised Diagnosis Code Titles
Table 6F--Revised Procedure Code Titles
Table 6G--Additions to the CC Exclusions List
Table 6H--Deletions to the CC Exclusions List
Table 7A--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay FY 95 MEDPAR Update 06/95 GROUPER V13.0
Table 7B--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay FY 95 MEDPAR Update 06/95 GROUPER V14.0
Table 8A--Statewide Average Operating Cost-to-Charge Ratios for Urban 
and Rural Hospitals (Case Weighted) August 1996
Table 8B--Statewide Average Capital Cost-to-Charge Ratios for Urban and 
Rural Hospitals (Case Weighted) August 1996

[[Page 46239]]

Table 10--Percentage Difference in Wage Indexes for Areas that Qualify 
for a Wage Index Exception for Excluded Hospitals and Units

   Table 1A.--National Adjusted Operating Standardized Amounts, Labor/  
                                Nonlabor                                
------------------------------------------------------------------------
                Large urban areas                       Other areas     
------------------------------------------------------------------------
                                       Nonlabor-    Labor-     Nonlabor-
            Labor-related               related     related     related 
------------------------------------------------------------------------
$2,782.84...........................   $1,125.64   $2,738.79   $1,107.83
------------------------------------------------------------------------


               Table 1C.--Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor               
----------------------------------------------------------------------------------------------------------------
                                                Large urban areas                        Other areas            
                                     ---------------------------------------------------------------------------
                                            Labor             Nonlabor            Labor             Nonlabor    
----------------------------------------------------------------------------------------------------------------
National............................          $2,759.22          $1,116.09          $2,759.22          $1,116.09
Puerto Rico.........................           2,488.70             518.65           2,449.31            510.446
----------------------------------------------------------------------------------------------------------------


            Table 1D.--Capital Standard Federal Payment Rate            
------------------------------------------------------------------------
                                                                 Rate   
------------------------------------------------------------------------
National...................................................      $438.92
Puerto Rico................................................       337.63
------------------------------------------------------------------------


[[Page 46240]]



                                                    Table 3c.--Hospital Case Mix Indexes for Discharges Occurring in Federal Fiscal Year 1995                                                   
                                                                                          Page 1 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
010001.......................   01.4404   14.82   010095..........   00.9193   11.25   030004.........   01.0049   13.48   040003.........   01.0725   13.23   040106.........   01.2549   12.84
010004.......................   00.9693   11.10   010097..........   00.9352   15.20   030006.........   01.5554   17.52   040004.........   01.4587   14.83   040107.........   01.1909   14.95
010005.......................   01.1626   15.40   010098..........   01.1820   11.02   030007.........   01.3159   16.41   040005.........   01.0378   11.59   040109.........   01.1653   12.69
010006.......................   01.4724   15.23   010099..........   01.1144   15.49   030008.........   02.0954   20.42   040007.........   01.8743   18.12   040114.........   01.8503   16.64
010007.......................   01.1025   13.12   010100..........   01.1699   14.77   030009.........   01.2852   15.58   040008.........   01.0326   10.77   040116.........   01.3868   19.25
010008.......................   01.1344   09.54   010101..........   01.1120   14.21   030010.........   01.4117   17.75   040010.........   01.2297   13.78   040118.........   01.1263   14.29
010009.......................   01.1393   14.82   010102..........   00.9570   13.63   030011.........   01.5040   17.66   040011.........   00.9313   10.75   040119.........   01.0928   14.34
010010.......................   01.1289   14.33   010103..........   01.7657   17.15   030012.........   01.2238   15.81   040014.........   01.1951   16.07   040124.........   01.2159   14.30
010011.......................   01.6182   18.94   010104..........   01.6869   17.90   030013.........   01.2435   18.99   040015.........   01.1979   12.12   040126.........   00.9606   11.74
010012.......................   01.2658   16.27   010108..........   01.1476   13.68   030014.........   01.4395   17.86   040016.........   01.7360   16.43   050002.........   01.5608   25.91
010015.......................   01.0576   15.63   010109..........   01.0643   11.48   030016.........   01.2487   17.09   040017.........   01.2593   11.68   050006.........   01.3917   19.15
010016.......................   01.2642   16.76   010110..........   01.0158   13.44   030017.........   01.5214   18.98   040018.........   01.1718   16.66   050007.........   01.5863   25.29
010018.......................   00.9019   16.19   010112..........   01.1218   14.09   030018.........   01.7970   19.57   040019.........   01.1544   13.52   050008.........   01.5106   25.48
010019.......................   01.2853   14.99   010113..........   01.6345   13.69   030019.........   01.2020   19.31   040020.........   01.5961   14.08   050009.........   01.7160   31.63
010021.......................   01.2330   12.20   010114..........   01.3192   15.37   030022.........   01.5026   17.41   040021.........   01.2317   14.69   050013.........   01.8083   22.05
010022.......................   01.0214   16.89   010115..........   00.8472   11.98   030023.........   01.2631   17.64   040022.........   01.6987   14.73   050014.........   01.1762   22.55
010023.......................   01.4798   14.71   010117..........   00.8122   13.54   030024.........   01.7885   21.04   040024.........   01.1694   12.16   050015.........   01.3901   22.18
010024.......................   01.4003   15.62   010118..........   01.2505   15.07   030025.........   01.1635   12.76   040025.........   00.9192   11.81   050016.........   01.1490   18.51
010025.......................   01.4321   13.16   010119..........   01.4921   16.36   030027.........   01.0796   14.69   040026.........   01.5567   16.35   050017.........   02.0442   24.39
010027.......................   00.8360   13.55   010120..........   00.9671   14.32   030030.........   01.6610   18.19   040027.........   01.2885   12.56   050018.........   01.3313   18.49
010029.......................   01.4936   14.84   010121..........   01.2282   12.92   030033.........   01.2472   16.40   040028.........   01.0910   11.40   050021.........   01.4226   23.40
010031.......................   01.1845   14.58   010123..........   01.2531   16.95   030034.........   01.0470   15.89   040029.........   01.2512   14.12   050022.........   01.4532   22.63
010032.......................   00.9480   12.45   010124..........   01.2853   16.15   030035.........   01.3434   20.77   040030.........   00.8948   11.09   050024.........   01.3916   21.31
010033.......................   01.9155   17.61   010125..........   01.0231   12.86   030036.........   01.1448   18.23   040032.........   01.0009   11.18   050025.........   01.7849   21.97
010034.......................   01.0754   13.48   010126..........   01.1654   13.13   030037.........   02.0251   19.60   040035.........   01.0269   10.24   050026.........   01.4559   21.79
010035.......................   01.2416   15.13   010127..........   01.2974   16.29   030038.........   01.6224   18.82   040036.........   01.4885   16.45   050028.........   01.4384   15.33
010036.......................   01.1248   15.34   010128..........   00.9619   12.34   030040.........   01.1863   15.88   040037.........   01.1075   11.55   050029.........   01.3835   25.55
010038.......................   01.3476   16.70   010129..........   01.0826   13.29   030041.........   00.9847   13.68   040039.........   01.2413   12.23   050030.........   01.3340   19.24
010039.......................   01.7027   16.14   010130..........   01.0405   15.28   030043.........   01.1901   18.25   040040.........   01.0021   15.73   050032.........   01.2750   22.76
010040.......................   01.5324   18.21   010131..........   01.3555   17.75   030044.........   01.0338   13.19   040041.........   01.3902   13.95   050033.........   01.4227   25.47
010043.......................   01.1075   10.35   010134..........   00.9077   13.36   030046.........   00.9532   16.38   040042.........   01.2961   12.03   050036.........   01.6184   18.61
010044.......................   01.0952   11.01   010137..........   01.2701   16.36   030047.........   00.9496   19.91   040044.........   00.9581   10.04   050038.........   01.4467   29.05
010045.......................   01.2215   10.79   010138..........   00.9454   09.85   030049.........   00.9747   17.30   040045.........   01.0339   14.28   050039.........   01.6003   21.04
010046.......................   01.5270   15.51   010139..........   01.6545   19.67   030054.........   00.8681   12.63   040047.........   01.0992   14.78   050040.........   01.0789   22.92
010047.......................   01.0203   10.05   010143..........   01.1818   15.83   030055.........   01.2107   16.85   040048.........   01.2128   13.48   050041.........   02.8307   22.21
010049.......................   01.1130   15.66   010144..........   01.3065   18.42   030059.........   01.2755   19.95   040050.........   01.1009   11.66   050042.........   01.3156   20.20
010050.......................   01.0631   13.48   010145..........   01.3277   14.59   030060.........   01.2055   13.90   040051.........   01.0953   12.64   050043.........   01.5742   30.15
010051.......................   00.8526   10.24   010146..........   01.1731   15.59   030061.........   01.6515   16.75   040053.........   01.1051   11.67   050045.........   01.2631   17.44
010052.......................   00.9891   12.78   010148..........   00.9991   12.83   030062.........   01.2298   15.56   040054.........   01.0313   12.44   050046.........   01.1948   23.81
010053.......................   01.0623   12.67   010149..........   01.3548   16.86   030064.........   01.6287   17.31   040055.........   01.4492   14.51   050047.........   01.6384   29.15
010054.......................   01.1715   16.17   010150..........   01.0458   16.29   030065.........   01.6550   18.87   040058.........   01.0595   13.61   050051.........   01.1150   16.63
010055.......................   01.4799   16.35   010152..........   01.5001   16.29   030067.........   01.0493   15.92   040060.........   00.9905   09.85   050054.........   01.1945   20.55
010056.......................   01.3958   17.99   010155..........   01.0155   09.42   030068.........   00.9533   14.04   040062.........   01.6183   16.66   050055.........   01.3688   27.48
010058.......................   01.0940   12.96   020001..........   01.4893   25.53   030069.........   01.3387   19.11   040063.........   01.4690   15.67   050056.........   01.3269   25.23
010059.......................   01.0172   14.17   020002..........   01.0275   24.16   030071.........   00.9564  .......  040064.........   01.0568   10.49   050057.........   01.4831   20.22
010061.......................   01.0121   14.70   020004..........   01.1018   25.46   030072.........   00.8597  .......  040066.........   01.1450   14.63   050058.........   01.4657   22.78
010062.......................   01.0056   13.45   020005..........   00.9023   28.36   030073.........   00.9795  .......  040067.........   01.0823   11.34   050060.........   01.5871   24.25
010064.......................   01.8006   17.85   020006..........   01.1404   23.19   030074.........   00.8590  .......  040069.........   01.1002   14.90   050061.........   01.4278   22.12
010065.......................   01.3671   14.30   020007..........   00.8988   21.82   030075.........   00.8591  .......  040070.........   00.9422   14.98   050063.........   01.4169   21.44
010066.......................   00.9765   10.87   020008..........   01.1004   26.45   030076.........   00.9802  .......  040071.........   01.5971   15.42   050065.........   01.6154   22.37
010068.......................   01.2347   18.82   020009..........   00.9164   21.29   030077.........   00.8769  .......  040072.........   01.0869   13.39   050066.........   01.2719   24.33
010069.......................   01.1593   13.06   020010..........   00.9035   22.13   030078.........   01.0972  .......  040074.........   01.2491   14.51   050067.........   01.3827   21.09
010072.......................   01.2165   12.72   020011..........   01.0329   22.27   030079.........   00.7727  .......  040075.........   01.0588   11.57   050068.........   01.0946   19.05
010073.......................   00.9681   09.66   020012..........   01.3114   23.99   030080.........   01.6582   20.82   040076.........   01.0307   14.71   050069.........   01.6194   23.15
010078.......................   01.1765   15.50   020013..........   01.0331   24.03   030083.........   01.3074   21.70   040077.........   00.9164   10.72   050070.........   01.2861   30.65
010079.......................   01.2797   13.72   020014..........   01.0795   24.52   030084.........   00.9397  .......  040078.........   01.4848   17.29   050071.........   01.3190   30.60
010080.......................   01.0410   12.99   020017..........   01.5155   26.83   030085.........   01.5017   20.21   040080.........   01.0736   15.45   050072.........   01.3045   30.90
010081.......................   01.9870   16.16   020018..........   00.8963  .......  030086.........   01.3255   18.76   040081.........   00.9292   09.91   050073.........   01.3242   31.28
010083.......................   01.0482   13.25   020019..........   00.8718  .......  030087.........   01.6136   18.77   040082.........   01.2135   13.69   050074.........   01.2333   33.23
010084.......................   01.4758   16.64   020020..........   00.8462  .......  030088.........   01.3530   19.90   040084.........   01.0970   14.83   050075.........   01.4037   30.63
010085.......................   01.3193   17.11   020021..........   00.8338  .......  030089.........   01.5845   18.66   040085.........   01.2469   15.18   050076.........   01.7727   29.53
010086.......................   01.0497   13.54   020024..........   01.0892   22.64   030092.........   01.5679   20.62   040088.........   01.3050   13.73   050077.........   01.6129   22.83
010087.......................   01.6125   16.88   020025..........   01.0122   24.44   030093.........   01.3720   18.08   040090.........   00.8995   13.78   050078.........   01.3591   24.44
010089.......................   01.1896   15.13   020026..........   01.3245  .......  030094.........   01.2482   18.57   040091.........   01.2939   18.25   050079.........   01.5793   28.30
010090.......................   01.5738   16.40   020027..........   01.0132  .......  030095.........   01.2170   13.09   040093.........   00.9710   10.98   050080.........   01.2370   16.56
010091.......................   00.9216   13.43   030001..........   01.3125   19.28   030098.........   00.9899  .......  040095.........   00.9117   10.56   050081.........   01.6631   24.01
010092.......................   01.4203   15.35   030002..........   01.8022   20.25   040001.........   01.1237   12.37   040100.........   01.2420   12.81   050082.........   01.5000   21.34
010094.......................   01.1427   16.76   030003..........   01.8995   21.05   040002.........   01.1641   13.07   040105.........   01.0034   11.90   050084.........   01.5602   22.33
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[[Page 46241]]



                                                                                          Page 2 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
050088.......................   01.1393   21.94   050188..........   01.3477   25.25   050295.........   01.4128   20.86   050419.........   01.3115   18.88   050542.........   01.2233   13.79
050089.......................   01.3622   19.92   050189..........   00.9734   21.50   050296.........   01.2084   22.69   050420.........   01.4349   25.15   050543.........   00.9225   21.68
050090.......................   01.2815   21.75   050191..........   01.5035   20.64   050298.........   01.2991   20.77   050421.........   01.4202   24.62   050545.........   00.8302   20.39
050091.......................   01.2000   24.42   050192..........   01.1398   18.74   050299.........   01.3639   22.49   050423.........   00.9862   19.25   050546.........   00.7201   21.10
050092.......................   00.8597   16.12   050193..........   01.3513   22.56   050300.........   01.3143   18.87   050424.........   01.8327   22.16   050547.........   00.9283   20.65
050093.......................   01.5911   22.35   050194..........   01.2422   25.03   050301.........   01.3882   21.54   050425.........   01.2730   30.30   050549.........   01.7151   25.86
050096.......................   01.1293   12.95   050195..........   01.5895   31.26   050302.........   01.4072   24.31   050426.........   01.3016   23.89   050550.........   02.3039   23.34
050097.......................   01.4914   18.40   050196..........   01.4171   16.40   050305.........   01.5823   29.82   050427.........   00.9243   18.44   050551.........   01.3441   24.20
050099.......................   01.4623   22.91   050197..........   01.8264   29.07   050307.........   01.4384   20.51   050430.........   00.9414   15.94   050552.........   01.1681   22.44
050100.......................   01.7458   29.38   050199..........   00.8980   19.48   050308.........   01.5751   29.77   050431.........   01.0690   22.58   050557.........   01.4977   21.08
050101.......................   01.4057   25.12   050204..........   01.5012   23.12   050309.........   01.3320   23.63   050432.........   01.5759   23.69   050559.........   01.3565   24.18
050102.......................   01.4495   22.34   050205..........   01.4071   19.99   050310.........   01.2559   22.24   050433.........   01.0471   17.37   050560.........   01.1958  ......
050103.......................   01.6149   26.74   050207..........   01.2968   20.58   050312.........   01.9778   23.66   050434.........   01.1429   18.08   050561.........   01.2258   30.34
050104.......................   01.3954   21.73   050208..........   00.9598   27.60   050313.........   01.1978   20.90   050435.........   01.2450   18.98   050564.........   01.2054   24.02
050107.......................   01.4293   22.92   050211..........   01.3146   29.60   050315.........   01.1780   20.82   050436.........   01.0070   15.77   050565.........   01.1520   21.26
050108.......................   01.5836   22.79   050213..........   01.3874   21.12   050317.........   01.3273   20.90   050438.........   01.6314   23.33   050566.........   00.8825   19.75
050109.......................   02.3476   24.68   050214..........   01.4375   21.76   050320.........   01.3287   27.27   050440.........   01.3954   19.93   050567.........   01.6587   23.01
050110.......................   01.2507   18.72   050215..........   01.5190   27.75   050324.........   01.8319   25.93   050441.........   01.9149   28.55   050568.........   01.4204   18.28
050111.......................   01.3798   18.81   050217..........   01.3643   18.44   050325.........   01.2523   20.87   050443.........   00.9587   15.95   050569.........   01.3542   22.93
050112.......................   01.5220   22.15   050219..........   01.3321   20.37   050327.........   01.6010   21.00   050444.........   01.3523   22.19   050570.........   01.6980   24.91
050113.......................   01.2853   28.23   050222..........   01.5922   24.56   050328.........   01.4495   32.92   050446.........   00.8940   17.25   050571.........   01.4204   22.37
050114.......................   01.3991   21.65   050224..........   01.5653   22.17   050329.........   01.3164   20.34   050447.........   01.0844   18.59   050573.........   01.6397   23.66
050115.......................   01.5990   21.11   050225..........   01.3294   20.67   050331.........   01.4127   27.08   050448.........   01.1051   19.82   050575.........   01.2273  ......
050116.......................   01.4567   22.73   050226..........   01.3370   22.58   050333.........   00.9784   18.66   050449.........   01.3604   21.99   050577.........   01.3597   20.32
050117.......................   01.2834   20.93   050228..........   01.3736   29.90   050334.........   01.7734   28.22   050454.........   01.8370   26.64   050578.........   01.1992   23.70
050118.......................   01.2808   23.24   050230..........   01.2918   26.22   050335.........   01.2452   19.62   050455.........   01.9214   22.89   050579.........   01.5677   26.94
050121.......................   01.4021   19.96   050231..........   01.6412   24.14   050336.........   01.3479   21.04   050456.........   01.1402   20.24   050580.........   01.3586   23.47
050122.......................   01.7000   22.90   050232..........   01.7744   24.17   050337.........   01.1692   23.87   050457.........   01.9338   28.66   050581.........   01.4202   24.63
050124.......................   01.2720   19.72   050233..........   01.2916   30.88   050342.........   01.3725   17.55   050459.........   01.1867   28.20   050583.........   01.5832   23.08
050125.......................   01.3165   25.98   050234..........   01.3192   22.00   050343.........   01.0360   18.56   050464.........   01.8999   22.62   050584.........   01.2104   22.39
050126.......................   01.4674   23.23   050235..........   01.5083   25.00   050348.........   01.5885   22.83   050468.........   01.3992   16.26   050585.........   01.2578   23.70
050127.......................   01.2913   22.89   050236..........   01.6581   24.28   050349.........   00.9126   14.28   050469.........   01.0927   17.33   050586.........   01.3811   21.76
050128.......................   01.5432   20.97   050238..........   01.4934   22.95   050350.........   01.3885   22.68   050470.........   01.1184   21.29   050588.........   01.3856   26.55
050129.......................   01.5533   22.11   050239..........   01.5043   21.24   050351.........   01.4758   24.81   050471.........   01.7401   24.07   050589.........   01.3208   25.37
050131.......................   01.2667   27.78   050240..........   01.3972   22.82   050352.........   01.2909   23.35   050476.........   01.3455   19.12   050590.........   01.4063   23.00
050132.......................   01.4398   24.55   050241..........   01.2317   25.78   050353.........   01.5639   21.45   050477.........   01.5165   24.50   050591.........   01.2961   22.97
050133.......................   01.3529   20.16   050242..........   01.4661   27.10   050355.........   00.9639   15.53   050478.........   00.9231   21.73   050592.........   01.3448   20.34
050135.......................   01.3822   26.86   050243..........   01.5339   21.58   050357.........   01.7182   23.17   050481.........   01.4226   24.85   050593.........   01.5312   24.40
050136.......................   01.3787   21.89   050245..........   01.3997   21.74   050359.........   01.2130   18.78   050482.........   00.9467   14.55   050594.........   02.0186   23.81
050137.......................   01.3809   31.46   050248..........   01.2055   24.50   050360.........   01.4693   30.15   050483.........   01.1688   23.89   050597.........   01.2823   21.91
050138.......................   01.8792   32.07   050251..........   01.0803   17.68   050366.........   01.3068   20.47   050485.........   01.6321   22.34   050598.........   01.4008   26.87
050139.......................   01.3410   31.14   050253..........   00.7756   18.87   050367.........   01.2858   27.02   050486.........   01.4321   24.94   050599.........   01.6761   22.70
050140.......................   01.4209   30.76   050254..........   01.1917   22.13   050369.........   01.3286   23.30   050488.........   01.3939   30.41   050601.........   01.3057   29.03
050144.......................   01.5867   26.03   050256..........   01.7682   19.70   050373.........   01.4241   23.83   050489.........   00.9463   27.10   050603.........   01.4202   23.50
050145.......................   01.3536   27.67   050257..........   01.0737   20.65   050376.........   01.3722   25.86   050491.........   01.2864   23.76   050604.........   01.5879   29.45
050146.......................   01.3368  .......  050260..........   01.0937   21.96   050377.........   00.9038   15.01   050492.........   01.2453   23.05   050607.........   01.2965   21.79
050147.......................   00.6982   20.55   050261..........   01.1916   17.91   050378.........   01.1132   22.45   050494.........   01.1689   24.95   050608.........   01.3088   15.23
050148.......................   01.1363   19.62   050262..........   01.9314   26.89   050379.........   01.0922   19.04   050496.........   01.7816   31.64   050609.........   01.4337   31.39
050149.......................   01.4384   21.97   050263..........   01.2879   24.44   050380.........   01.6730   28.31   050497.........   00.7940  .......  050613.........   01.1371   22.70
050150.......................   01.2549   23.23   050264..........   01.3787   26.01   050382.........   01.4475   20.97   050498.........   01.2605   22.42   050615.........   01.7184   23.31
050152.......................   01.4365   24.60   050267..........   01.5206   24.88   050385.........   01.3946   24.83   050502.........   01.6552   23.61   050616.........   01.3002   20.68
050153.......................   01.6526   30.53   050270..........   01.2597   23.60   050388.........   00.9121   14.19   050503.........   01.3025   23.01   050618.........   01.0773   19.37
050155.......................   01.1138   23.60   050272..........   01.3290   19.69   050390.........   01.2239   20.80   050506.........   01.4050   25.57   050623.........   01.1535   24.40
050158.......................   01.6868   27.88   050274..........   00.9762   18.36   050391.........   01.2734   21.61   050510.........   01.3660   30.46   050624.........   01.3672   25.95
050159.......................   01.2594   22.01   050276..........   01.2209   26.99   050392.........   00.9526   17.49   050512.........   01.4632   31.27   050625.........   01.5887   24.00
050167.......................   01.4435   21.67   050277..........   01.3813   21.30   050393.........   01.4172   21.56   050515.........   01.3623   30.78   050630.........   01.3492   21.26
050168.......................   01.6111   24.83   050278..........   01.5176   23.01   050394.........   01.5474   20.71   050516.........   01.6598   24.33   050633.........   01.2939   21.76
050169.......................   01.5874   24.53   050279..........   01.2425   20.58   050396.........   01.6173   21.89   050517.........   01.2778   19.15   050635.........   01.4086   31.06
050170.......................   01.5243   21.58   050280..........   01.6603   22.80   050397.........   01.0096   19.97   050522.........   01.3194   30.40   050636.........   01.4306   20.37
050172.......................   01.2559   19.96   050281..........   01.4482   22.74   050401.........   01.1146   19.09   050523.........   01.2674   27.65   050638.........   01.0967   24.28
050173.......................   01.2322   23.70   050282..........   01.3406   21.42   050404.........   01.1459   16.51   050526.........   01.3671   24.28   050641.........   01.2440   12.26
050174.......................   01.6918   27.89   050283..........   01.1645   27.24   050406.........   01.1157   15.29   050528.........   01.3348   16.46   050643.........   00.7692  ......
050175.......................   01.3877   21.97   050286..........   01.0345   17.99   050407.........   01.3194   27.06   050531.........   01.3097   23.60   050644.........   00.9068   26.86
050177.......................   01.2949   18.76   050289..........   01.7959   27.38   050410.........   01.0758   17.45   050534.........   01.3868   23.83   050660.........   01.3466  ......
050179.......................   01.2634   17.29   050290..........   01.6280   32.31   050411.........   01.4012   29.35   050535.........   01.3837   22.46   050661.........   00.8839   20.21
050180.......................   01.5556   30.12   050291..........   01.2616   24.46   050414.........   01.2883   24.32   050537.........   01.2702   21.30   050662.........   00.8598   21.17
050183.......................   01.1975   19.09   050292..........   01.0830   21.20   050417.........   01.3024   21.14   050539.........   01.2222   21.90   050663.........   01.0612   23.51
050186.......................   01.2894   24.12   050293..........   01.0595   19.93   050418.........   01.4205   24.24   050541.........   01.5919   30.97   050666.........   00.7408   22.84
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 46242]]



                                                                                          Page 3 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
050667.......................   01.1376   24.88   060043..........   00.9469   11.78   080003.........   01.3117   19.32   100069.........   01.3695   17.29   100165.........   01.3116   13.45
050668.......................   01.1691   28.20   060044..........   01.2667   17.32   080004.........   01.2876   17.59   100070.........   01.4431   17.56   100166.........   01.4649   20.31
050670.......................   00.7582   20.12   060046..........   01.1210   16.56   080005.........   01.3302   16.82   100071.........   01.2985   16.98   100167.........   01.3941   20.54
050672.......................   00.6286   23.77   060047..........   00.9812   11.40   080006.........   01.3946   20.49   100072.........   01.2499   17.24   100168.........   01.3762   19.35
050674.......................   01.2103   29.09   060049..........   01.3584   17.47   080007.........   01.3608   17.99   100073.........   01.7985   20.61   100169.........   01.8614   18.29
050675.......................   01.7287   16.32   060050..........   01.1733   13.77   090001.........   01.4141   19.64   100075.........   01.6343   17.85   100170.........   01.5053   16.56
050676.......................   01.0181   13.83   060052..........   01.1025   12.56   090002.........   01.2979   20.51   100076.........   01.3934   17.15   100172.........   01.3679   13.38
050677.......................   01.4291   32.99   060053..........   00.9924   13.73   090003.........   01.3037   24.74   100077.........   01.3130   17.25   100173.........   01.6821   16.33
050678.......................   01.0695   24.07   060054..........   01.3339   16.80   090004.........   01.7183   23.49   100078.........   01.1660   15.14   100174.........   01.5414   18.20
050680.......................   01.2184   26.13   060056..........   00.9638   13.37   090005.........   01.3403   27.07   100079.........   01.8349   16.01   100175.........   01.2188   16.18
050682.......................   00.8554   14.98   060057..........   01.0526   21.45   090006.........   01.3699   19.52   100080.........   01.6185   19.40   100176.........   02.0480   21.95
050684.......................   01.2032   21.30   060058..........   00.9353   12.54   090007.........   01.4082   19.58   100081.........   01.1190   13.33   100177.........   01.3381   18.55
050685.......................   01.2265   26.94   060060..........   00.9689   12.21   090008.........   01.5337   24.06   100082.........   01.5411   17.93   100179.........   01.6547   19.03
050686.......................   01.3481   30.96   060062..........   00.9518   15.85   090010.........   00.9987   21.70   100083.........   01.3214   17.50   100180.........   01.4234   17.67
050688.......................   01.2759   27.89   060063..........   01.0378   11.12   090011.........   01.9774   24.77   100084.........   01.5306   16.53   100181.........   01.2716   17.59
050689.......................   01.4006   29.12   060064..........   01.4255   20.21   090015.........   01.1679  .......  100085.........   01.4393   19.50   100183.........   01.3672   19.33
050690.......................   01.4317   30.29   060065..........   01.3431   19.98   100001.........   01.5420   18.86   100086.........   01.3389   21.32   100186.........   01.4766   16.70
050693.......................   01.9223   28.80   060066..........   00.9927   13.10   100002.........   01.4781   19.71   100087.........   01.8063   20.83   100187.........   01.4519   18.35
050694.......................   01.3722   21.20   060068..........   01.2574   14.00   100004.........   01.0281   11.81   100088.........   01.6818   17.41   100189.........   01.3788   23.13
050695.......................   01.1715   24.30   060070..........   01.0379   14.99   100005.........   01.0125   16.26   100090.........   01.4281   16.49   100191.........   01.3328   19.19
050696.......................   02.0081   27.85   060071..........   01.2272   14.69   100006.........   01.5475   18.99   100092.........   01.4493   16.91   100199.........   01.4386   21.91
050697.......................   01.1596   17.93   060073..........   00.9804   14.32   100007.........   01.8482   19.61   100093.........   01.5191   14.28   100200.........   01.3968   21.35
050698.......................   01.1420   22.83   060075..........   01.3519   20.27   100008.........   01.7482   19.80   100098.........   01.1444   17.43   100203.........   01.2655   19.34
050699.......................   00.5836   23.13   060076..........   01.3688   15.97   100009.........   01.5619   18.17   100099.........   01.2518   13.09   100204.........   01.6212   19.95
050700.......................   01.4316   32.46   060085..........   00.9849   10.28   100010.........   01.5539   20.58   100102.........   01.1013   16.44   100206.........   01.3436   19.47
050701.......................   01.3067   27.13   060087..........   01.6543   18.67   100012.........   01.6867   16.73   100103.........   01.1795   14.46   100207.........   01.4708   19.86
050702.......................   00.8621   16.98   060088..........   01.0424   15.38   100014.........   01.4263   18.57   100105.........   01.4672   18.08   100208.........   01.6280   21.86
050704.......................   01.2122   20.48   060090..........   00.9635   14.23   100015.........   01.2474   17.60   100106.........   01.0473   15.46   100209.........   01.6581   22.39
050706.......................   00.9234   16.16   060096..........   01.0000   21.70   100017.........   01.6490   17.18   100107.........   01.4657   18.26   100210.........   01.6673   16.51
050707.......................   01.1851   25.62   060100..........   01.4179   20.95   100018.........   01.2838   19.94   100108.........   01.1057   15.45   100211.........   01.3452   19.17
050708.......................   00.9454   15.13   060103..........   01.2446   21.10   100019.........   01.4953   18.81   100109.........   01.3492   16.81   100212.........   01.6712   18.54
050709.......................   01.3089  .......  060104..........   01.3185   20.32   100020.........   01.3391   18.31   100110.........   01.4144   18.91   100213.........   01.5487   20.00
050710.......................   01.4032  .......  070001..........   01.7660   24.78   100022.........   01.8412   23.05   100112.........   00.9727   10.84   100217.........   01.2995   17.06
050711.......................   02.3704  .......  070002..........   01.8658   24.78   100023.........   01.3492   15.88   100113.........   02.0782   18.19   100220.........   01.9605   19.66
050712.......................   02.1009  .......  070003..........   01.1262   24.50   100024.........   01.3428   19.54   100114.........   01.4899   17.73   100221.........   01.5710   20.68
060001.......................   01.5508   18.95   070004..........   01.1725   23.70   100025.........   01.8824   16.22   100117.........   01.3400   18.32   100222.........   01.3999   18.80
060003.......................   01.2948   16.17   070005..........   01.3749   25.45   100026.........   01.6407   15.52   100118.........   01.2643   16.03   100223.........   01.4871   18.53
060004.......................   01.2527   19.46   070006..........   01.3549   26.73   100027.........   00.9771   11.53   100121.........   01.3066   15.44   100224.........   01.4719   19.83
060006.......................   01.1975   16.19   070007..........   01.3479   24.08   100028.........   01.2652   16.38   100122.........   01.4506   16.39   100225.........   01.3254   19.52
060007.......................   01.2004   13.06   070008..........   01.3150   23.47   100029.........   01.4199   18.94   100124.........   01.3626   19.41   100226.........   01.3465   16.58
060008.......................   01.0187   14.31   070009..........   01.2763   25.01   100030.........   01.2742   18.25   100125.........   01.1588   17.77   100228.........   01.3104   21.73
060009.......................   01.4655   19.88   070010..........   01.5525   22.46   100032.........   01.9211   17.39   100126.........   01.4979   18.74   100229.........   01.3245   16.27
060010.......................   01.5260   20.98   070011..........   01.3234   22.80   100034.........   01.7396   18.34   100127.........   01.6887   17.42   100230.........   01.5387   18.97
060011.......................   01.3370   20.75   070012..........   01.2507   23.38   100035.........   01.6148   16.60   100128.........   02.2486   20.13   100231.........   01.6719   17.53
060012.......................   01.3930   15.79   070013..........   01.2967   24.01   100038.........   01.6027   21.18   100129.........   01.2547   17.45   100232.........   01.2671   17.95
060013.......................   01.2675   18.83   070015..........   01.3575   23.82   100039.........   01.7141   21.15   100130.........   01.2030   17.45   100234.........   01.5302   19.03
060014.......................   01.7036   20.52   070016..........   01.3214   25.46   100040.........   01.6660   17.04   100131.........   01.3906   20.00   100235.........   01.4767   17.51
060015.......................   01.5654   19.33   070017..........   01.3822   23.54   100043.........   01.4572   17.78   100132.........   01.4161   15.67   100236.........   01.4469   17.14
060016.......................   01.0899   11.42   070018..........   01.3711   27.83   100044.........   01.5020   19.01   100134.........   01.0905   14.50   100237.........   02.1542   22.65
060018.......................   01.2065   16.36   070019..........   01.2155   24.04   100045.........   01.4043   17.12   100135.........   01.5238   16.11   100238.........   01.4815   18.68
060020.......................   01.5157   16.73   070020..........   01.3663   24.32   100046.........   01.5110   18.53   100137.........   01.3214   18.42   100239.........   01.4625   19.34
060022.......................   01.6703   17.89   070021..........   01.3063   25.47   100047.........   01.9063   18.62   100138.........   00.9490   13.00   100240.........   00.8493   15.06
060023.......................   01.6452   16.65   070022..........   01.7748   24.30   100048.........   01.0049   11.69   100139.........   01.0446   14.54   100241.........   00.9419   12.47
060024.......................   01.8238   21.86   070024..........   01.3565   23.81   100049.........   01.3205   18.04   100140.........   01.2494   16.91   100242.........   01.4130   16.29
060026.......................   01.4257   19.44   070025..........   01.7832   24.06   100050.........   01.2217   15.06   100142.........   01.1996   16.68   100243.........   01.4202   18.82
060027.......................   01.6710   19.41   070026..........   01.2095   23.07   100051.........   01.1641   16.60   100144.........   01.1391   13.65   100244.........   01.4365   17.32
060028.......................   01.4813   21.26   070027..........   01.2527   24.31   100052.........   01.3742   15.60   100145.........   01.3457   14.87   100246.........   01.3480   20.92
060029.......................   00.9561   13.93   070028..........   01.4842   24.67   100053.........   01.2969   17.36   100146.........   01.2636   14.27   100248.........   01.7029   17.88
060030.......................   01.3302   20.36   070029..........   01.3530   21.65   100054.........   01.2845   17.74   100147.........   01.1046   13.43   100249.........   01.3523   18.87
060031.......................   01.6125   18.60   070030..........   01.3017   24.71   100055.........   01.3733   17.47   100150.........   01.3716   18.64   100252.........   01.2487   19.21
060032.......................   01.5798   19.35   070031..........   01.2736   22.24   100056.........   01.4638   19.83   100151.........   01.8558   18.63   100253.........   01.4795   20.60
060033.......................   01.1592   11.96   070033..........   01.2828   28.25   100057.........   01.3486   16.78   100154.........   01.5652   17.95   100254.........   01.5994   17.50
060034.......................   01.4918   15.10   070034..........   01.3756   24.74   100060.........   01.8574   17.64   100156.........   01.2197   18.65   100255.........   01.3326   19.11
060036.......................   01.1876   14.12   070035..........   01.3457   24.31   100061.........   01.5097   20.88   100157.........   01.6104   19.31   100256.........   01.8928   19.32
060037.......................   01.0382   13.22   070036..........   01.4357   26.98   100062.........   01.7312   17.34   100159.........   00.9792   12.76   100258.........   01.6487   21.12
060038.......................   01.0165   12.25   070039..........   00.9163  .......  100063.........   01.3440   16.12   100160.........   01.1077   18.07   100259.........   01.4550   16.36
060041.......................   00.9131   16.53   080001..........   01.6108   23.66   100067.........   01.4273   16.38   100161.........   01.5218   19.76   100260.........   01.4008   20.44
060042.......................   01.0563   15.65   080002..........   01.1901   17.34   100068.........   01.3898   17.42   100162.........   01.3906   14.53   100262.........   01.4078   19.32
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                                                                                          Page 4 of 16                                                                                          
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                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
100263.......................   01.3780   15.44   110061..........   01.0125   10.61   110154.........   00.8337   12.68   130009.........   00.9607   14.78   140042.........   01.0485   13.30
100264.......................   01.3927   18.24   110062..........   00.9133   09.73   110155.........   01.2457   12.27   130010.........   00.9378   15.04   140043.........   01.1788   16.37
100265.......................   01.3736   17.47   110063..........   01.0733   11.44   110156.........   01.0063   12.68   130011.........   01.2462   16.74   140045.........   01.0658   14.21
100266.......................   01.2340   15.64   110064..........   01.2886   15.87   110161.........   01.3364   20.79   130012.........   01.0306   18.53   140046.........   01.3024   14.83
100267.......................   01.3054   16.39   110065..........   01.0226   12.00   110162.........   00.8869  .......  130013.........   01.2406   17.21   140047.........   01.1337   13.20
100268.......................   01.1963   22.00   110066..........   01.4492   15.93   110163.........   01.4519   18.52   130014.........   01.3064   16.43   140048.........   01.2661   21.68
100269.......................   01.3576   19.07   110069..........   01.1724   15.22   110164.........   01.4148   19.63   130015.........   00.8651   12.43   140049.........   01.5736   19.35
100270.......................   00.8215   12.95   110070..........   01.1711   11.37   110165.........   01.3220   17.47   130016.........   00.9236   16.18   140051.........   01.4909   19.14
100271.......................   01.6484   19.22   110071..........   01.0312   10.29   110166.........   01.4938   16.67   130017.........   01.3329   13.03   140052.........   01.3125   17.02
100273.......................   00.5356   19.72   110072..........   01.0247   11.53   110168.........   01.6565   19.22   130018.........   01.6907   17.60   140053.........   01.8943   17.53
100275.......................   01.4323   21.96   110073..........   01.2039   12.67   110169.........   00.7217   19.70   130019.........   01.1299   13.74   140054.........   01.3596  ......
100276.......................   01.3023   21.94   110074..........   01.4766   18.11   110171.........   01.4568   21.21   130021.........   01.0465   11.96   140055.........   00.9522   13.00
100277.......................   01.0092   12.71   110075..........   01.2078   15.29   110172.........   01.3364   22.83   130022.........   01.1801   15.79   140058.........   01.2417   15.26
100279.......................   01.3749   18.35   110076..........   01.3901   18.01   110174.........   01.0421   17.57   130024.........   01.0502   15.25   140059.........   01.1373   13.52
100280.......................   01.3702   16.93   110078..........   01.6719   20.46   110176.........   01.1237   19.42   130025.........   01.1504   15.21   140061.........   01.0923   13.80
100281.......................   01.2549   20.85   110079..........   01.3994   21.08   110177.........   01.4754   19.21   130026.........   01.1837   17.88   140062.........   01.2440   23.10
100282.......................   01.0458   16.99   110080..........   01.1584   17.55   110178.........   01.3367   16.78   130027.........   00.9547   17.18   140063.........   01.4167   22.48
100283.......................   01.5652  .......  110082..........   02.0181   20.36   110179.........   01.2418   21.56   130028.........   01.2487   16.08   140064.........   01.3103   16.15
110001.......................   01.2981   17.40   110083..........   01.7259   20.66   110181.........   00.9808   12.59   130029.........   01.0228   17.07   140065.........   01.4933   23.68
110002.......................   01.2392   15.22   110086..........   01.2202   13.76   110183.........   01.3677   17.07   130030.........   01.0169   16.20   140066.........   01.3703   13.39
110003.......................   01.3058   15.41   110087..........   01.3382   19.17   110184.........   01.1756   17.58   130031.........   01.0188   13.26   140067.........   01.8244   18.24
110004.......................   01.3077   16.17   110088..........   00.9695   11.17   110185.........   01.0884   12.23   130034.........   01.0391   16.38   140068.........   01.3717   19.00
110005.......................   01.1844   21.40   110089..........   01.2124   15.37   110186.........   01.3073   15.75   130035.........   01.0662   15.37   140069.........   01.0074   14.23
110006.......................   01.3576   18.87   110091..........   01.3396   19.15   110187.........   01.2468   17.19   130036.........   01.2648   12.50   140070.........   01.2760   16.18
110007.......................   01.4531   16.31   110092..........   01.1806   12.55   110188.........   01.4230   18.00   130037.........   01.2740   14.58   140074.........   00.9717   14.60
110008.......................   01.2394   15.47   110093..........   01.0117   09.81   110189.........   01.1532   19.78   130043.........   00.9512   14.61   140075.........   01.4676   21.53
110009.......................   01.0428   15.71   110094..........   00.9605   12.06   110190.........   01.0880   14.41   130044.........   01.1521   12.37   140077.........   01.1406   17.05
110010.......................   02.1537   21.39   110095..........   01.2790   13.86   110191.........   01.3522   18.06   130045.........   01.0312   12.15   140079.........   01.2381   20.90
110011.......................   01.2831   16.01   110096..........   01.1394   14.30   110192.........   01.3947   22.17   130048.........   01.0694   11.90   140080.........   01.5767   19.60
110013.......................   01.1303   14.36   110097..........   01.0211   15.58   110193.........   01.2332   16.16   130049.........   01.2951   17.55   140081.........   01.0786   13.92
110014.......................   01.0358   14.48   110098..........   01.0943   11.76   110194.........   00.9677   11.77   130054.........   00.9652   17.12   140082.........   01.5017   22.10
110015.......................   01.3568   16.52   110100..........   01.0953   12.27   110195.........   01.0807   10.50   130056.........   00.8422   09.45   140083.........   01.2513   16.51
110016.......................   01.2935   14.21   110101..........   01.0963   09.24   110198.........   01.3335   22.58   130058.........   00.9768   12.87   140084.........   01.2323   17.94
110017.......................   00.8913   11.01   110103..........   00.9600   10.35   110200.........   01.9391   15.79   130060.........   01.1395   18.38   140086.........   01.1440   13.93
110018.......................   01.1312   17.20   110104..........   01.1190   13.28   110201.........   01.4569   16.13   130061.........   00.9484  .......  140087.........   01.3815   17.10
110020.......................   01.2347   17.30   110105..........   01.1311   15.17   110203.........   00.9715   14.94   140001.........   01.2991   14.63   140088.........   01.6591   23.33
110023.......................   01.2424   17.53   110107..........   01.8265   17.61   110204.........   00.8135   13.48   140002.........   01.2823   17.06   140089.........   01.2280   15.85
110024.......................   01.4719   16.51   110108..........   00.9766   11.27   110205.........   01.1045   11.84   140003.........   01.0185   13.14   140090.........   01.5067   23.62
110025.......................   01.4105   16.85   110109..........   01.1048   12.14   110207.........   01.0934   15.59   140004.........   01.0772   13.75   140091.........   01.8655   17.70
110026.......................   01.1893   14.02   110111..........   01.1951   15.43   110208.........   00.9744   14.94   140005.........   00.9515   09.98   140093.........   01.1958   17.17
110027.......................   01.1003   14.56   110112..........   01.1526   16.19   110209.........   00.8260  .......  140007.........   01.4661   20.56   140094.........   01.2893   18.81
110028.......................   01.6029   17.75   110113..........   01.1372   12.86   120001.........   01.7306   24.22   140008.........   01.4816   20.57   140095.........   01.4253  ......
110029.......................   01.3446   17.71   110114..........   01.0725   13.75   120002.........   01.1982   21.46   140010.........   01.3912   22.14   140097.........   00.9264   14.15
110030.......................   01.2789   16.60   110115..........   01.6206   21.82   120003.........   01.1664   21.82   140011.........   01.1461   15.31   140100.........   01.2257   17.62
110031.......................   01.3373   19.59   110118..........   01.0282   13.18   120004.........   01.2809   20.56   140012.........   01.2854   17.59   140101.........   01.2060   18.04
110032.......................   01.2263   15.31   110120..........   01.0844   13.35   120005.........   01.2640   18.34   140013.........   01.6583   16.49   140102.........   01.0399   14.09
110033.......................   01.5143   20.32   110121..........   01.1813   11.84   120006.........   01.2131   22.75   140014.........   01.0788   16.53   140103.........   01.3225   16.66
110034.......................   01.5234   16.64   110122..........   01.3572   16.03   120007.........   01.6283   20.27   140015.........   01.2919   13.45   140105.........   01.3087   18.25
110035.......................   01.4060   18.53   110124..........   01.0707   15.32   120009.........   00.9840   18.05   140016.........   00.9315   11.59   140107.........   01.0822   11.63
110036.......................   01.6813  .......  110125..........   01.2239   15.97   120010.........   01.8462   22.11   140018.........   01.4546   18.85   140108.........   01.3622   20.00
110037.......................   01.0852   10.18   110127..........   00.9150   14.43   120011.........   01.2509   30.31   140019.........   00.9900   11.80   140109.........   01.1367   12.95
110038.......................   01.4649   15.04   110128..........   01.2059   17.54   120012.........   00.9944   20.30   140024.........   01.0188   13.59   140110.........   01.2343   14.51
110039.......................   01.3761   17.93   110129..........   01.6793   14.06   120014.........   01.3609   21.25   140025.........   01.0804   15.88   140112.........   01.1043   13.55
110040.......................   01.0393   16.26   110130..........   01.0709   10.57   120015.........   00.8375   21.01   140026.........   01.1408   15.58   140113.........   01.4630   19.21
110041.......................   01.2212   16.43   110132..........   01.1522   12.87   120016.........   00.8646   21.94   140027.........   01.3210   15.96   140114.........   01.3392   18.95
110042.......................   01.2049   14.63   110134..........   00.8920   11.65   120018.........   01.0071   21.16   140029.........   01.3790   19.62   140115.........   01.2253   19.32
110043.......................   01.7109   15.17   110135..........   01.1993   13.83   120019.........   01.1783   19.48   140030.........   01.6766   21.46   140116.........   01.2899   19.68
110044.......................   01.0952   14.31   110136..........   01.1192   13.74   120021.........   01.0173   19.68   140031.........   01.1664   13.02   140117.........   01.4908   17.63
110045.......................   01.2460   22.04   110140..........   00.8194   15.03   120022.........   01.7340   17.83   140032.........   01.2528   16.44   140118.........   01.6836   23.01
110046.......................   01.1964   15.07   110141..........   00.9075   11.65   120026.........   01.2870   22.30   140033.........   01.2626   19.10   140119.........   01.6901   19.58
110048.......................   01.3156   12.97   110142..........   00.9799   11.15   120027.........   01.5254   21.16   140034.........   01.1754   16.74   140120.........   01.5071   14.72
110049.......................   01.0670   13.71   110143..........   01.4049   18.27   130001.........   01.0518   17.21   140035.........   01.0183   10.70   140121.........   01.5259   10.91
110050.......................   01.0687   14.00   110144..........   01.1632   16.44   130002.........   01.3744   14.66   140036.........   01.2342   15.03   140122.........   01.5567   21.02
110051.......................   00.9846   16.35   110146..........   01.0267   09.43   130003.........   01.3166   18.11   140037.........   00.9837   12.24   140124.........   01.1235   23.06
110052.......................   00.9986   09.11   110149..........   01.1280   12.17   130005.........   01.4466   18.49   140038.........   01.1512   15.00   140125.........   01.3444   15.60
110054.......................   01.2820   16.57   110150..........   01.3562   16.56   130006.........   01.9033   18.19   140039.........   00.9224   11.51   140127.........   01.3521   17.11
110056.......................   00.9698   12.61   110152..........   01.1389   13.06   130007.........   01.6435   19.45   140040.........   01.3038   14.34   140128.........   01.0617   16.10
110059.......................   01.2862   14.39   110153..........   01.0201   15.49   130008.........   00.9993   10.28   140041.........   01.2502   15.01   140129.........   01.0511   13.18
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[[Page 46244]]



                                                                                          Page 5 of 16                                                                                          
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                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
140130.......................   01.2732   21.67   140224..........   01.3678   22.10   150039.........   01.0056   14.51   150125.........   01.4257   18.17   160068.........   01.1088   13.30
140132.......................   01.4192   18.58   140228..........   01.7080   17.36   150042.........   01.2901   15.47   150126.........   01.5188   19.24   160069.........   01.4027   16.05
140133.......................   01.3737   19.77   140230..........   00.9428   15.48   150043.........   01.0529   16.65   150127.........   01.0449   14.34   160070.........   01.0379   13.84
140135.......................   01.3086   14.29   140231..........   01.6699   19.79   150044.........   01.2628   17.63   150128.........   01.2306   18.59   160072.........   01.0673   12.08
140137.......................   01.0318   13.61   140233..........   01.7418   16.57   150045.........   01.0901   15.00   150129.........   01.2088   20.35   160073.........   01.0129   11.50
140138.......................   00.9633   12.15   140234..........   01.1961   16.03   150046.........   01.5910   16.06   150130.........   01.1433   16.23   160074.........   01.1103   12.98
140139.......................   01.0713   13.46   140236..........   01.0474   12.82   150047.........   01.6262   17.74   150132.........   01.3406   19.17   160075.........   01.1107   13.84
140140.......................   01.1363   13.05   140239..........   01.5891   18.81   150048.........   01.1670   16.18   150133.........   01.2048   14.96   160076.........   01.0695   16.33
140141.......................   00.9005   13.30   140240..........   01.5057   20.90   150049.........   01.0814   13.72   150134.........   01.3003   16.53   160077.........   01.1355   10.97
140143.......................   01.0710   15.95   140242..........   01.5840   22.51   150050.........   01.1857   14.50   150136.........   00.9384   18.69   160079.........   01.4258   15.22
140144.......................   00.9814   16.57   140245..........   01.1287   13.55   150051.........   01.3842   16.92   150138.........   01.1552  .......  160080.........   01.2094   15.46
140145.......................   01.1986   14.80   140246..........   01.0547   12.03   150052.........   01.0656   12.93   150139.........   01.5412  .......  160081.........   01.0669   14.36
140146.......................   00.9645   14.85   140250..........   01.3128   21.35   150053.........   01.0612   16.69   150141.........   01.1063  .......  160082.........   01.7526   17.09
140147.......................   01.1905   13.32   140251..........   01.3100   18.25   150054.........   01.1373   12.39   150142.........   02.4300  .......  160083.........   01.5750   17.49
140148.......................   01.7984   16.51   140252..........   01.4282   21.53   150056.........   01.7052   21.58   160001.........   01.2713   16.39   160085.........   01.0913   12.79
140150.......................   01.5793   26.00   140253..........   01.4398  .......  150057.........   02.3094   15.06   160002.........   01.1942   13.14   160086.........   01.0153   12.88
140151.......................   01.1069   17.61   140258..........   01.5311   20.98   150058.........   01.6859   18.64   160003.........   01.0183   11.87   160088.........   01.0346   13.10
140152.......................   01.0701   22.68   140271..........   01.0187   13.54   150059.........   01.3219   18.93   160005.........   01.1028   12.93   160089.........   01.1654   14.12
140155.......................   01.1892   16.91   140275..........   01.2297   18.20   150060.........   01.1301   12.79   160007.........   01.0097   12.02   160090.........   01.0018   13.98
140158.......................   01.2623   21.41   140276..........   01.9808   20.48   150061.........   01.3042   15.86   160008.........   01.1070   13.93   160091.........   01.1032   10.56
140160.......................   01.2330   15.34   140280..........   01.2730   16.16   150062.........   01.0694   15.20   160009.........   01.1682   13.54   160092.........   00.9729   12.93
140161.......................   01.1376   17.05   140281..........   01.6371   20.19   150063.........   01.0497   18.88   160012.........   01.0622   14.05   160093.........   01.1433   15.20
140162.......................   01.7733   18.38   140285..........   01.1995   14.75   150064.........   01.2128   16.48   160013.........   01.2233   16.64   160094.........   01.2151   14.79
140164.......................   01.2955   16.01   140286..........   01.1484   17.59   150065.........   01.1479   15.94   160014.........   01.0356   12.21   160095.........   01.0295   12.30
140165.......................   01.1122   13.06   140288..........   01.7729   22.68   150066.........   01.0006   12.89   160016.........   01.2891   15.68   160097.........   01.0918   13.47
140166.......................   01.2945   16.62   140289..........   01.3068   15.73   150067.........   01.1174   14.35   160018.........   00.9441   13.19   160098.........   01.0813   13.90
140167.......................   01.1593   14.64   140290..........   01.3353   19.21   150069.........   01.2347   16.53   160020.........   01.0854   12.11   160099.........   00.9773   12.80
140168.......................   01.1855   15.02   140291..........   01.2791   22.84   150070.........   01.0425   16.70   160021.........   01.0514   13.85   160101.........   01.1119   17.71
140170.......................   01.1292   12.39   140292..........   01.1677   19.04   150071.........   01.1521   12.69   160023.........   01.1553   13.66   160102.........   01.3846   15.69
140171.......................   00.9125   12.53   140294..........   01.1871   16.10   150072.........   01.1943   15.32   160024.........   01.5685   17.39   160103.........   01.0159   12.95
140172.......................   01.5367   18.29   140297..........   01.2576   21.42   150073.........   01.0179   15.49   160026.........   01.0997   15.21   160104.........   01.2441   19.21
140173.......................   00.9787   13.11   140300..........   01.6558   24.90   150074.........   01.5921   18.63   160027.........   01.1632   13.22   160106.........   01.0809   14.18
140174.......................   01.4289   18.89   150001..........   01.0902   16.95   150075.........   01.2189   13.82   160028.........   01.3375   17.78   160107.........   01.1459   13.78
140176.......................   01.2609   18.83   150002..........   01.4428   19.23   150076.........   01.1446   19.89   160029.........   01.4982   17.46   160108.........   01.1575   14.09
140177.......................   01.2794   16.44   150003..........   01.7127   18.32   150077.........   01.2631   16.21   160030.........   01.2329   16.67   160109.........   01.1710   12.01
140179.......................   01.3313   19.51   150004..........   01.4240   20.15   150078.........   01.0858   17.20   160031.........   01.1857   13.26   160110.........   01.5051   17.76
140180.......................   01.5279   20.22   150005..........   01.1897   17.17   150079.........   01.1456   13.01   160032.........   01.1518   14.66   160111.........   01.1008   10.75
140181.......................   01.3085   18.82   150006..........   01.2020   16.72   150082.........   01.4952   18.38   160033.........   01.7266   15.82   160112.........   01.4058   14.48
140182.......................   01.3245   19.11   150007..........   01.2261   17.95   150084.........   01.8742   21.80   160034.........   01.0638   13.81   160113.........   00.9632   11.39
140184.......................   01.1998   14.20   150008..........   01.3450   18.38   150086.........   01.3003   15.76   160035.........   00.9589   11.91   160114.........   01.0691   14.13
140185.......................   01.4563   16.35   150009..........   01.3279   16.97   150088.........   01.1875   16.71   160036.........   01.0735   12.83   160115.........   01.0315   13.87
140186.......................   01.3197   18.48   150010..........   01.2026   16.10   150089.........   01.4010   18.99   160037.........   01.1648   14.80   160116.........   01.1763   15.46
140187.......................   01.4891   16.33   150011..........   01.2227   16.76   150090.........   01.2547   19.34   160039.........   01.0629   15.23   160117.........   01.3429   15.52
140188.......................   00.9624   10.54   150012..........   01.6885   20.57   150091.........   01.0744   15.66   160040.........   01.3465   16.04   160118.........   01.0327   12.42
140189.......................   01.1723   15.74   150013..........   01.1612   13.09   150092.........   01.0659   12.44   160041.........   01.0613   12.88   160120.........   01.0161   09.94
140190.......................   01.1204   13.36   150014..........   01.4250   18.85   150094.........   00.9984   16.65   160043.........   01.0335   13.38   160122.........   01.1556   14.96
140191.......................   01.3847   23.16   150015..........   01.2351   17.85   150095.........   01.1097   15.78   160044.........   01.1566   13.36   160123.........   01.1606   12.18
140192.......................   01.1887   16.51   150017..........   01.8496   17.26   150096.........   01.1003   17.15   160045.........   01.6893   17.48   160124.........   01.2587   15.35
140193.......................   01.0150   12.24   150018..........   01.2888   17.47   150097.........   01.1268   16.64   160046.........   01.0357   11.92   160126.........   01.1485   13.82
140197.......................   01.2770   16.05   150019..........   01.1204   13.82   150098.........   01.1387   11.81   160047.........   01.3555   15.87   160129.........   01.0397   13.07
140199.......................   01.0179   15.13   150020..........   01.1507   13.19   150099.........   01.2979   17.10   160048.........   01.0230   11.76   160130.........   01.1619   13.04
140200.......................   01.4263   20.12   150021..........   01.6805   18.22   150100.........   01.6831   18.15   160049.........   00.9816   12.04   160131.........   01.0980   12.63
140202.......................   01.3108   20.09   150022..........   01.1445   17.62   150101.........   01.0919   14.46   160050.........   01.0242   14.12   160134.........   00.9706   11.37
140203.......................   01.1567   19.02   150023..........   01.4993   17.81   150102.........   01.0920   14.61   160051.........   00.9990   12.90   160135.........   01.0543   13.24
140205.......................   00.9105   13.88   150024..........   01.4398   16.96   150103.........   01.0356   17.63   160052.........   01.0599   14.80   160138.........   01.0612   13.48
140206.......................   01.0979   19.58   150025..........   01.4540   16.32   150104.........   01.1461   15.09   160054.........   01.0268   10.82   160140.........   01.0940   14.86
140207.......................   01.3773   26.85   150026..........   01.1855   16.69   150105.........   01.4058   16.61   160055.........   01.0383   11.48   160142.........   01.0318   13.60
140208.......................   01.6155   23.94   150027..........   01.0681   16.04   150106.........   01.1387   15.58   160056.........   01.0434   12.84   160143.........   01.1292   13.03
140209.......................   01.7014   17.46   150029..........   01.2766   20.57   150109.........   01.4513   16.04   160057.........   01.3212   15.92   160145.........   01.0839   13.74
140210.......................   01.0830   12.87   150030..........   01.1946   16.20   150110.........   00.9917   14.72   160058.........   01.6811   18.42   160146.........   01.4188   15.32
140211.......................   01.2257   20.44   150031..........   01.0622   15.93   150111.........   01.2066   12.88   160060.........   01.0858   13.82   160147.........   01.2744   15.02
140212.......................   01.2970   22.65   150032..........   01.7930   18.85   150112.........   01.2228   16.84   160061.........   01.0104   14.19   160151.........   01.0694   12.75
140213.......................   01.2892   20.44   150033..........   01.6075   20.07   150113.........   01.1843   16.78   160062.........   00.9605   11.95   160152.........   01.0169   13.30
140215.......................   01.1640   13.22   150034..........   01.4013   18.15   150114.........   01.0253   13.44   160063.........   01.2810   14.24   160153.........   01.7061   17.05
140217.......................   01.2388   21.09   150035..........   01.4004   17.90   150115.........   01.4004   17.31   160064.........   01.6369   16.41   170001.........   01.2005   15.90
140218.......................   01.0502   13.64   150036..........   01.0404   17.35   150122.........   01.1415   17.55   160065.........   01.0755   14.51   170004.........   01.0839   13.18
140220.......................   01.1066   14.22   150037..........   01.2647   17.06   150123.........   01.1703   12.81   160066.........   01.1226   14.06   170006.........   01.1973   13.48
140223.......................   01.5408   25.37   150038..........   01.2712   16.65   150124.........   01.1239   15.00   160067.........   01.3756   16.70   170008.........   00.9787   13.35
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[[Page 46245]]



                                                                                          Page 6 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
170009.......................   01.1209   16.81   170089..........   00.9887   14.21   180011.........   01.1747   15.71   180103.........   02.0746   17.85   190060.........   01.4965   16.51
170010.......................   01.2604   16.38   170090..........   01.0970   09.58   180012.........   01.3355   17.14   180104.........   01.5020   16.55   190064.........   01.5617   17.46
170011.......................   01.4042   14.59   170092..........   00.8625   11.45   180013.........   01.5057   17.38   180105.........   00.9303   12.23   190065.........   01.4781   15.75
170012.......................   01.4938   15.48   170093..........   00.9308   11.58   180014.........   01.6061   19.67   180106.........   00.9112   12.65   190071.........   00.8601   11.38
170013.......................   01.3148   13.27   170094..........   01.0437   12.81   180015.........   01.2422   14.91   180108.........   00.8502   12.49   190077.........   00.9184   13.41
170014.......................   01.0357   15.18   170095..........   01.0793   13.80   180016.........   01.3158   14.91   180115.........   01.0276   14.18   190078.........   01.1344   11.21
170015.......................   00.9779   13.74   170097..........   01.0290   13.42   180017.........   01.2736   13.52   180116.........   01.3708   14.92   190079.........   01.2606   13.61
170016.......................   01.6634   21.80   170098..........   01.0823   16.21   180018.........   01.2225   15.73   180117.........   01.1829   16.14   190081.........   00.8818   09.70
170017.......................   01.1668   16.76   170099..........   01.3430   11.00   180019.........   01.3412   17.22   180118.........   01.0472   11.72   190083.........   00.9480   12.45
170018.......................   01.0636   12.23   170100..........   00.9977   14.63   180020.........   01.0343   15.37   180120.........   01.0465   12.49   190086.........   01.3623   14.02
170019.......................   01.1792   15.13   170101..........   00.9112   14.13   180021.........   01.1778   13.25   180121.........   01.2193   13.09   190088.........   01.1960   16.01
170020.......................   01.3277   14.54   170102..........   01.0195   12.78   180023.........   00.8339   11.27   180122.........   01.0457   14.47   190089.........   01.1207   09.60
170022.......................   01.1643   14.15   170103..........   01.2461   15.28   180024.........   01.3934   15.69   180123.........   01.4536   19.34   190090.........   01.0617   15.75
170023.......................   01.4219   15.57   170104..........   01.4212   19.52   180025.........   01.1240   16.18   180124.........   01.4782   16.00   190092.........   01.3320   20.14
170024.......................   01.1563   12.71   170105..........   01.0263   14.45   180026.........   01.1079   13.66   180125.........   00.9495   16.23   190095.........   00.9953   14.04
170025.......................   01.1622   18.37   170106..........   00.8380   12.54   180027.........   01.2747   14.17   180126.........   01.1697   11.90   190098.........   01.5422   17.56
170026.......................   01.0141   16.38   170108..........   00.9468   10.88   180028.........   00.9964   16.19   180127.........   01.2380   16.63   190099.........   01.1497   17.31
170027.......................   01.3730   15.02   170109..........   01.0494   14.67   180029.........   01.2190   15.99   180128.........   01.1870   15.40   190102.........   01.5854   16.15
170030.......................   01.0399   13.61   170110..........   01.0197   13.62   180030.........   01.1777   12.89   180129.........   01.0306   13.93   190103.........   00.8408   09.66
170031.......................   00.9163   12.36   170112..........   00.9254   13.44   180031.........   01.0461   12.38   180130.........   01.4219   17.87   190106.........   01.1388   17.27
170032.......................   01.1121   14.18   170113..........   01.1501   13.43   180032.........   00.9926   15.30   180132.........   01.2453   15.43   190109.........   01.1894   14.20
170033.......................   01.3417   14.08   170114..........   00.9540   12.96   180033.........   01.1325   12.57   180133.........   01.2455   18.31   190110.........   00.9431   11.96
170034.......................   00.9579   13.74   170115..........   00.9905   11.01   180034.........   01.0720   13.61   180134.........   01.0124   13.71   190111.........   01.5456   17.24
170035.......................   00.9370   12.37   170116..........   01.0367   13.94   180035.........   01.5668   18.26   180136.........   01.5752   16.63   190112.........   01.5143   20.35
170036.......................   00.8755   12.31   170117..........   00.9947   12.63   180036.........   01.2433   17.36   180137.........   01.6637   17.00   190113.........   01.3748   17.85
170037.......................   01.1197   15.02   170119..........   00.9470   11.32   180037.........   01.2824   20.29   180138.........   01.2089   17.02   190114.........   01.0043   11.51
170038.......................   00.9180   10.94   170120..........   01.2814   14.66   180038.........   01.4336   14.73   180139.........   01.0714   16.41   190115.........   01.2409   16.75
170039.......................   01.1372   11.69   170122..........   01.9013   19.69   180040.........   02.0237   19.04   180140.........   01.0106  .......  190116.........   01.2969   14.97
170040.......................   01.5594   18.21   170123..........   01.7740   17.69   180041.........   01.0904   13.03   190001.........   00.9354   16.67   190118.........   01.0464   11.87
170041.......................   00.9886   11.41   170124..........   00.9495   12.10   180042.........   01.1215   13.43   190002.........   01.6389   16.28   190120.........   00.9281   12.89
170043.......................   00.9329   13.41   170126..........   00.9261   11.07   180043.........   01.0168   15.31   190003.........   01.4461   17.16   190122.........   01.2732   12.96
170044.......................   01.1174   14.73   170128..........   01.0762   14.31   180044.........   01.0336   14.68   190004.........   01.3781   14.81   190124.........   01.5748   18.80
170045.......................   01.0311   13.54   170131..........   01.0910   10.54   180045.........   01.2089   16.86   190005.........   01.6913   14.94   190125.........   01.5826   16.74
170049.......................   01.3345   18.05   170133..........   01.1401   14.09   180046.........   01.2073   16.81   190006.........   01.2839   14.07   190128.........   01.2172   17.04
170050.......................   00.8380   09.63   170134..........   00.9226   12.10   180047.........   01.0087   13.79   190007.........   01.0054   12.79   190130.........   00.9983   11.74
170051.......................   00.9591   13.31   170137..........   01.1832   16.81   180048.........   01.1345   15.53   190008.........   01.6481   17.79   190131.........   01.2691   17.33
170052.......................   01.0675   13.31   170139..........   00.9838   11.66   180049.........   01.3619   14.47   190009.........   01.1897   13.40   190133.........   01.0518   15.09
170053.......................   01.0064   13.09   170140..........   00.9990   11.17   180050.........   01.2650   15.58   190010.........   01.1104   15.31   190134.........   00.9992   12.16
170054.......................   01.0821   12.86   170142..........   01.2590   16.10   180051.........   01.4236   14.35   190011.........   01.1162   14.08   190135.........   01.4027   17.70
170055.......................   01.0629   17.05   170143..........   01.1201   12.53   180053.........   01.1138   14.22   190013.........   01.4152   15.27   190136.........   01.1264   10.66
170056.......................   00.9457   10.99   170144..........   01.6225   18.74   180054.........   01.1573   14.02   190014.........   01.0568   15.36   190138.........   00.7080   15.62
170057.......................   01.0529   13.75   170145..........   01.1678   17.02   180055.........   01.0383   13.61   190015.........   01.2394   16.38   190140.........   00.9434   11.60
170058.......................   01.1738   17.54   170146..........   01.4164   17.58   180056.........   01.1035   16.68   190017.........   01.3740   17.22   190142.........   00.9384   12.20
170060.......................   01.1254   12.73   170147..........   01.2279   18.33   180058.........   01.0125   12.85   190018.........   01.1705   13.78   190144.........   01.2227   18.82
170061.......................   01.1532   12.59   170148..........   01.4736   18.35   180059.........   00.9719   11.98   190019.........   01.5074   17.57   190145.........   00.9867   13.77
170062.......................   00.9501   10.45   170150..........   01.0772   13.13   180060.........   00.7427   13.48   190020.........   01.1936   15.83   190146.........   01.5911   18.99
170063.......................   00.8993   09.30   170151..........   00.9962   11.69   180063.........   00.9643   10.28   190025.........   01.2979   12.36   190147.........   00.9929   13.30
170064.......................   00.9472   11.38   170152..........   00.9812   13.27   180064.........   01.3019   14.40   190026.........   01.4497   15.65   190148.........   00.8949   11.81
170066.......................   00.9901   12.26   170160..........   01.0305   11.25   180065.........   00.9850   09.05   190027.........   01.4805   15.62   190149.........   00.9972   11.02
170067.......................   01.0335   11.05   170164..........   01.0288   13.87   180066.........   01.2107   16.87   190029.........   01.1364   14.09   190151.........   01.1567   12.30
170068.......................   01.3864   14.01   170166..........   01.1446   13.49   180067.........   01.8972   15.96   190033.........   00.9673   09.64   190152.........   01.4477   20.50
170069.......................   01.1712   13.20   170168..........   00.9486   09.97   180069.........   01.0363   16.08   190034.........   01.2482   14.93   190155.........   00.9246   10.54
170070.......................   01.0193   11.83   170171..........   01.0923   11.15   180070.........   01.0919   14.86   190035.........   01.4173   20.27   190156.........   00.8872   11.89
170072.......................   00.9565   11.53   170172..........   00.9841   11.07   180072.........   01.0544   13.80   190036.........   01.6581   21.15   190158.........   01.2399   20.36
170073.......................   01.1115   12.66   170174..........   01.0916   11.58   180075.........   00.9745   13.08   190037.........   00.9667   11.05   190160.........   01.2163   15.56
170074.......................   01.1546   12.86   170175..........   01.2906   16.30   180078.........   01.1237   17.35   190039.........   01.4275   16.41   190161.........   01.0457   12.98
170075.......................   00.8688   10.55   170176..........   01.5023   18.40   180079.........   01.2461   13.75   190040.........   01.3850   19.03   190162.........   01.1677   21.04
170076.......................   01.0722   11.15   170181..........   01.0745  .......  180080.........   01.0640   15.16   190041.........   01.4986   19.72   190164.........   01.2267   16.86
170077.......................   00.9683   11.12   170182..........   00.8647  .......  180085.........   01.2920   17.49   190043.........   01.1369   12.38   190166.........   01.0709   14.81
170079.......................   01.0838   11.81   170183..........   02.1585  .......  180087.........   01.0844   13.72   190044.........   01.1725   18.27   190167.........   01.2039   16.09
170080.......................   00.9559   11.05   180001..........   01.2298   16.16   180088.........   01.5754   19.42   190045.........   01.3644   19.09   190170.........   00.9613   12.34
170081.......................   00.9254   10.42   180002..........   01.0070   17.16   180092.........   01.0511   14.43   190046.........   01.4846   16.87   190173.........   01.4516   19.47
170082.......................   01.0572   10.60   180004..........   01.0887   13.54   180093.........   01.3575   14.76   190048.........   01.0651   14.55   190175.........   01.2790  ......
170084.......................   00.9830   11.06   180005..........   01.0375   17.40   180094.........   01.0158   11.93   190049.........   00.9679   14.74   190176.........   01.7076   18.06
170085.......................   00.9074   12.01   180006..........   00.9157   08.63   180095.........   01.1597   12.78   190050.........   01.0446   13.90   190177.........   01.6056   22.02
170086.......................   01.7241   18.04   180007..........   01.5430   14.17   180099.........   01.2008   11.72   190053.........   01.0575   11.98   190178.........   00.9842   11.20
170087.......................   01.4580   18.87   180009..........   01.3358   17.70   180101.........   01.3403   18.84   190054.........   01.4118   13.67   190182.........   01.1627   20.12
170088.......................   00.9068   10.59   180010..........   01.8318   16.91   180102.........   01.5134   16.31   190059.........   00.9449   13.58   190183.........   01.1310   13.81
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                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
190184.......................   01.0574   12.13   210002..........   01.9575   16.84   220028.........   01.4667   22.45   220162.........   01.0805  .......  230102.........   01.1047  ......
190185.......................   01.3141   19.03   210003..........   01.5314   22.97   220029.........   01.1906   22.25   220163.........   02.0697   24.73   230103.........   01.0214   17.37
190186.......................   00.9515   11.69   210004..........   01.3228   20.30   220030.........   01.0842   16.42   220171.........   01.6908   22.55   230104.........   01.6223   20.32
190187.......................   00.7862   14.05   210005..........   01.2352   17.70   220031.........   02.0234   27.21   230001.........   01.2061   15.98   230105.........   01.6171   19.46
190189.......................   00.9439   14.54   210006..........   01.1253   16.84   220033.........   01.3931   19.40   230002.........   01.2210   19.28   230106.........   01.1730   18.07
190190.......................   00.9294   18.74   210007..........   01.6144   18.82   220035.........   01.2748   19.72   230003.........   01.0891   18.07   230107.........   00.8972   12.56
190191.......................   01.3146   18.47   210008..........   01.3145   21.21   220036.........   01.6198   23.26   230004.........   01.6087   20.95   230108.........   01.2387   16.64
190194.......................   01.1471   19.16   210009..........   01.7113   18.57   220038.........   01.2797   21.85   230005.........   01.2812   18.02   230110.........   01.3356   17.10
190196.......................   00.9064   16.46   210010..........   01.2016   17.00   220041.........   01.2446   20.87   230006.........   01.1331   16.19   230111.........   00.9762   15.13
190197.......................   01.2631   19.05   210011..........   01.2066   20.12   220042.........   01.2043   24.10   230007.........   01.0869   16.51   230113.........   00.9500   17.66
190199.......................   01.3557   12.82   210012..........   01.4880   21.27   220046.........   01.3991   21.48   230013.........   01.2823   20.70   230114.........   00.6368   23.27
190200.......................   01.5122   21.33   210013..........   01.2755   20.65   220049.........   01.2668   21.58   230015.........   01.1305   18.28   230115.........   01.0218   15.14
190201.......................   01.2417   18.24   210015..........   01.2700   18.48   220050.........   01.0856   17.45   230017.........   01.5161   20.40   230116.........   00.9079   15.58
190202.......................   01.4412   18.34   210016..........   01.7323   20.37   220051.........   01.2701   19.70   230019.........   01.5116   20.50   230117.........   01.9633   23.81
190203.......................   01.5963   19.50   210017..........   01.1297   15.35   220052.........   01.2969   22.76   230020.........   01.7218   21.17   230118.........   01.2381   17.25
190204.......................   01.5211   20.12   210018..........   01.2426   20.93   220053.........   01.2476   18.86   230021.........   01.5949   17.25   230119.........   01.3182   21.13
190205.......................   01.8559   17.63   210019..........   01.3992   17.42   220055.........   01.3472   20.61   230022.........   01.2454   17.62   230120.........   01.2209   19.00
190206.......................   01.4848   21.17   210022..........   01.4541   20.07   220057.........   01.4402   20.91   230024.........   01.4230   21.79   230121.........   01.2308   19.67
190207.......................   01.1759   19.43   210023..........   01.2870   20.31   220058.........   01.0628   17.55   230027.........   01.0568   16.25   230122.........   01.3310   18.32
190208.......................   00.8210   10.20   210024..........   01.5093   18.06   220060.........   01.2567   24.78   230029.........   01.5980   20.91   230124.........   01.1514   16.49
190218.......................   01.1418   15.05   210025..........   01.3259   17.84   220062.........   00.6041   19.30   230030.........   01.2372   16.55   230125.........   01.3587   13.01
190223.......................   00.4998   12.04   210026..........   01.3221   24.54   220063.........   01.2982   18.42   230031.........   01.4622   18.32   230128.........   01.3795   19.33
190227.......................   00.8050   30.01   210027..........   01.2047   17.47   220064.........   01.2108   20.66   230032.........   01.7401   18.97   230129.........   01.8851   19.07
190230.......................   00.8511  .......  210028..........   01.2362   16.66   220065.........   01.2162   20.00   230034.........   01.1936   16.64   230130.........   01.6896   22.37
190231.......................   01.3052  .......  210029..........   01.3022   20.04   220066.........   01.2825   19.39   230035.........   01.1374   15.84   230132.........   01.5360   22.92
190232.......................   01.6623  .......  210030..........   01.0938   15.77   220067.........   01.2910   22.82   230036.........   01.2859   19.78   230133.........   01.2321   14.06
190233.......................   01.1753  .......  210031..........   01.6379   16.97   220068.........   00.5210   15.95   230037.........   01.1680   16.96   230134.........   01.1066   15.87
190234.......................   01.0977  .......  210032..........   01.2064   18.42   220070.........   01.2693   17.77   230038.........   01.6453   21.18   230135.........   01.2023   19.88
200001.......................   01.2668   15.74   210033..........   01.1813   17.38   220071.........   01.8550   24.38   230040.........   01.1967   18.35   230137.........   01.1665   17.78
200002.......................   01.0219   16.15   210034..........   01.3999   20.29   220073.........   01.3821   25.34   230041.........   01.2106   19.17   230141.........   01.6842   20.84
200003.......................   01.1282   15.90   210035..........   01.1950   17.25   220074.........   01.2579   21.18   230042.........   01.1517   19.03   230142.........   01.2118   18.71
200006.......................   01.0627   14.95   210037..........   01.2862   16.14   220075.........   01.3235   20.09   230046.........   01.8323   24.65   230143.........   01.1404   15.23
200007.......................   01.0052   16.86   210038..........   01.3397   19.90   220076.........   01.1791   22.47   230047.........   01.3036   19.61   230144.........   01.1171   21.06
200008.......................   01.2463   18.34   210039..........   01.1588   15.25   220077.........   01.7205   22.32   230053.........   01.5335   23.82   230145.........   01.1817   15.41
200009.......................   01.7644   19.84   210040..........   01.2948   20.32   220079.........   01.1871   21.28   230054.........   01.8245   19.74   230146.........   01.2933   19.49
200012.......................   01.1610   16.11   210043..........   01.2538   20.04   220080.........   01.2723   17.77   230055.........   01.1799   17.36   230147.........   01.4832   19.34
200013.......................   01.1360   15.32   210044..........   01.2025   20.28   220081.........   00.9625   23.55   230056.........   00.9745   14.17   230149.........   01.2487   14.92
200015.......................   01.2341   17.15   210045..........   01.0197   11.73   220082.........   01.2932   19.28   230058.........   01.0807   17.42   230151.........   01.3634   21.32
200016.......................   01.0283   16.10   210046..........   01.1047   12.34   220083.........   01.1845   19.80   230059.........   01.4913   19.00   230153.........   01.1245   15.61
200017.......................   01.2444   16.86   210048..........   01.1780   22.47   220084.........   01.2361   22.24   230060.........   01.2802   16.90   230154.........   00.9519   12.09
200018.......................   01.1671   14.27   210049..........   01.1482   16.57   220086.........   01.5481   24.60   230062.........   01.0313   13.61   230155.........   00.9759   13.80
200019.......................   01.2445   18.01   210051..........   01.4488   13.94   220088.........   01.5772   21.76   230063.........   01.3188   18.41   230156.........   01.7043   21.57
200020.......................   01.1821   19.86   210054..........   01.2726   20.17   220089.........   01.3301   22.99   230065.........   01.5013   18.63   230157.........   01.2036   19.67
200021.......................   01.1844   17.66   210055..........   01.2866   22.48   220090.........   01.2380   20.78   230066.........   01.3628   18.72   230159.........   01.3967   18.93
200023.......................   00.8848   14.61   210056..........   01.4106   16.51   220092.........   01.2548   20.86   230068.........   01.4399   22.29   230162.........   00.9885   13.73
200024.......................   01.2892   19.16   210057..........   01.3623  .......  220094.........   01.2795   19.76   230069.........   01.1716   18.86   230165.........   01.8687   20.92
200025.......................   01.2698   18.81   210058..........   01.6823   18.09   220095.........   01.2220   17.77   230070.........   01.4873   19.30   230167.........   01.3648   19.18
200026.......................   01.0913   15.20   210059..........   01.2586   21.91   220098.........   01.2874   19.81   230071.........   01.1375   20.78   230169.........   01.4359   21.16
200027.......................   01.1419   16.51   210060..........   01.1661   25.28   220099.........   01.1836   15.97   230072.........   01.2839   18.87   230171.........   00.9842   14.18
200028.......................   00.9343   14.83   210061..........   01.0947   14.25   220100.........   01.2742   23.48   230075.........   01.5188   19.29   230172.........   01.3154   17.85
200031.......................   01.2955   14.96   220001..........   01.1632   20.98   220101.........   01.5044   22.58   230076.........   01.3263   21.53   230174.........   01.2896   19.11
200032.......................   01.3528   17.72   220002..........   01.5425   21.62   220104.........   01.2488   23.12   230077.........   01.9786   18.44   230175.........   04.1740   14.83
200033.......................   01.7115   19.57   220003..........   01.0771   16.92   220105.........   01.2188   21.97   230078.........   01.0937   14.82   230176.........   01.2350   20.89
200034.......................   01.1951   17.19   220004..........   01.1778   18.85   220106.........   01.2489   21.83   230080.........   01.1934   20.41   230178.........   01.0502   16.02
200037.......................   01.2200   15.53   220006..........   01.4287   21.79   220107.........   01.1695   18.46   230081.........   01.2169   16.55   230180.........   01.0710   15.03
200038.......................   01.1115   17.66   220008..........   01.2538   19.26   220108.........   01.1491   20.96   230082.........   01.1611   14.88   230184.........   01.2276   16.99
200039.......................   01.2513   18.06   220010..........   01.2956   20.94   220110.........   01.9412   30.07   230085.........   01.1161   17.10   230186.........   01.3686   15.81
200040.......................   01.0917   16.48   220011..........   01.1550   27.95   220111.........   01.2575   21.21   230086.........   00.9918   14.03   230188.........   01.1727   15.49
200041.......................   01.2221   17.37   220012..........   01.3665   27.84   220116.........   01.9442   23.95   230087.........   01.0641   13.65   230189.........   00.8937   14.50
200043.......................   00.5614   16.96   220015..........   01.1777   20.35   220118.........   02.0524   26.47   230089.........   01.3393   21.55   230190.........   01.0395   22.66
200050.......................   01.1978   16.71   220016..........   01.3747   20.16   220119.........   01.3288   24.40   230092.........   01.3264   17.77   230191.........   00.8900   14.99
200051.......................   00.9723   17.70   220017..........   01.4278   23.78   220123.........   01.0371   23.85   230093.........   01.2267   17.37   230193.........   01.2471   16.03
200052.......................   00.9716   13.07   220019..........   01.1780   17.06   220126.........   01.3041   19.39   230095.........   01.2357   15.53   230194.........   01.2111   14.37
200055.......................   01.1557   14.56   220020..........   01.2189   18.47   220128.........   01.1441   20.85   230096.........   01.1957   19.85   230195.........   01.2822   19.80
200062.......................   00.9198   14.64   220021..........   01.3862   23.21   220133.........   00.8406   30.53   230097.........   01.5406   17.75   230197.........   01.2640   22.00
200063.......................   01.1662   16.63   220023..........   01.1469   19.37   220135.........   01.2559   23.97   230099.........   01.2173   19.06   230199.........   01.1553   17.72
200066.......................   01.1689   14.34   220024..........   01.1752   20.14   220153.........   01.0402   19.74   230100.........   01.1533   15.19   230201.........   01.2138   14.02
210001.......................   01.4102   17.94   220025..........   01.1894   18.87   220154.........   00.9268   18.96   230101.........   01.0658   16.79   230204.........   01.3660   19.78
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[[Page 46247]]



                                                                                          Page 8 of 16                                                                                          
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                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
230205.......................   01.0570   14.54   240044..........   01.2004   16.02   240129.........   01.0159   12.18   250032.........   01.2599   15.70   250134.........   00.9882   12.70
230207.......................   01.2586   19.85   240045..........   01.0731   18.49   240130.........   01.0112   14.54   250033.........   00.9948   11.57   250136.........   00.7904   16.84
230208.......................   01.1857   16.10   240047..........   01.5172   18.27   240132.........   01.2360   21.80   250034.........   01.5348   12.99   250138.........   01.3513   16.94
230211.......................   00.9823   13.86   240048..........   01.2728   20.43   240133.........   01.1709   16.16   250035.........   00.9044   11.82   250140.........   00.9213   09.37
230212.......................   01.0970   21.13   240049..........   01.7768   20.33   240135.........   00.8166   11.38   250036.........   00.9786   11.34   250141.........   01.2098   15.50
230213.......................   01.0251   12.69   240050..........   01.1319   19.89   240137.........   01.2521   15.40   250037.........   00.8704   09.53   250144.........   00.9384   11.18
230216.......................   01.5269   17.91   240051..........   00.9956   15.97   240138.........   00.8994   13.09   250038.........   00.9851   12.52   250145.........   00.9432  ......
230217.......................   01.2172   18.06   240052..........   01.2612   17.21   240139.........   00.9643   14.24   250039.........   01.0021   11.71   250146.........   01.0011   13.25
230219.......................   01.0186   15.18   240053..........   01.5152   19.67   240141.........   01.0919   19.12   250040.........   01.2981   15.65   250148.........   01.1518  ......
230221.......................   01.1845   18.15   240056..........   01.2438   20.13   240142.........   01.1289   15.16   250042.........   01.1494   13.78   250149.........   00.9174  ......
230222.......................   01.3604   18.98   240057..........   01.7426   22.04   240143.........   01.0597   12.48   250043.........   01.0352   10.49   260001.........   01.6549   16.08
230223.......................   01.3187   19.85   240058..........   00.9668   09.64   240144.........   00.9459   13.39   250044.........   00.9822   13.98   260002.........   01.4877   20.05
230227.......................   01.5187   22.00   240059..........   01.0942   17.98   240145.........   00.9654   12.37   250045.........   01.1477   17.17   260003.........   00.9457   12.45
230228.......................   01.2121   17.29   240061..........   01.7512   20.93   240146.........   00.9209   17.20   250047.........   00.9674   09.12   260004.........   01.0314   11.86
230230.......................   01.5400   20.38   240063..........   01.4674   20.88   240148.........   00.9490   11.34   250048.........   01.4542   13.51   260005.........   01.6146   19.68
230232.......................   01.0356   15.87   240064..........   01.2630   18.13   240150.........   00.8906   11.72   250049.........   00.9037   09.93   260006.........   01.5247   16.72
230235.......................   01.1038   14.65   240065..........   01.1600   11.14   240152.........   01.0128   17.85   250050.........   01.2407   12.30   260007.........   01.4679   16.03
230236.......................   01.3542   21.07   240066..........   01.4040   19.08   240153.........   01.0199   14.30   250051.........   00.8548   09.44   260008.........   01.2220   15.65
230239.......................   01.1770   16.07   240069..........   01.1629   18.35   240154.........   01.0158   13.15   250057.........   01.1806   14.06   260009.........   01.2407   15.63
230241.......................   01.1553   17.08   240071..........   01.1200   18.05   240155.........   00.9827   14.39   250058.........   01.1385   13.65   260011.........   01.6765   16.87
230244.......................   01.3134   20.14   240072..........   01.0257   16.08   240157.........   01.1226   13.92   250059.........   01.0304   12.16   260012.........   01.0472   11.96
230253.......................   01.0735   17.39   240073..........   00.9213   15.13   240160.........   01.0116   14.65   250060.........   00.8121   12.19   260013.........   01.1520   14.02
230254.......................   01.2785   22.64   240075..........   01.2132   18.79   240161.........   00.9351   14.56   250061.........   00.8654   10.75   260014.........   01.7769   17.84
230257.......................   01.1031   19.01   240076..........   01.1434   19.94   240162.........   00.9629   15.28   250063.........   00.8615   12.68   260015.........   01.2698   13.16
230259.......................   01.1967   19.06   240077..........   01.0646   14.15   240163.........   00.9381   14.10   250065.........   00.8878   11.72   260017.........   01.2272   13.94
230264.......................   00.9614   16.74   240078..........   01.4510   21.46   240166.........   01.1661   14.67   250066.........   00.9422   12.17   260018.........   00.9658   09.56
230269.......................   01.3062   21.71   240079..........   01.0143   12.57   240169.........   00.9528   15.25   250067.........   01.1241   14.14   260019.........   00.9862   12.63
230270.......................   01.2238   20.08   240080..........   01.3766   20.87   240170.........   01.1518   14.42   250068.........   00.8546   11.19   260020.........   01.7312   19.29
230273.......................   01.6568   22.11   240082..........   01.1233   14.55   240171.........   00.9973   14.02   250069.........   01.1820   13.42   260021.........   01.5117   18.47
230275.......................   00.5764   16.53   240083..........   01.3779   16.60   240172.........   01.0856   14.50   250071.........   00.9499   08.06   260022.........   01.3423   18.69
230276.......................   00.8113   16.23   240084..........   01.3446   17.20   240173.........   00.9609   14.82   250072.........   01.2933   17.40   260023.........   01.2569   15.58
230277.......................   01.2440   21.76   240085..........   00.9356   14.90   240179.........   00.9990   14.30   250076.........   00.9378   10.32   260024.........   01.0179   12.28
230278.......................   02.1143   19.50   240086..........   01.0496   15.23   240180.........   01.0157   10.51   250077.........   00.9481   11.08   260025.........   01.3240   13.61
230279.......................   00.7080  .......  240087..........   01.1088   15.69   240184.........   01.0352   11.31   250078.........   01.4504   14.21   260027.........   01.5963   18.92
230280.......................   01.0737  .......  240088..........   01.4423   18.10   240187.........   01.2576   16.56   250079.........   00.8573   15.12   260029.........   01.1241   15.76
230281.......................   01.8228  .......  240089..........   00.9966   15.23   240193.........   01.0505   14.73   250081.........   01.3046   15.19   260030.........   01.0922   09.73
240001.......................   01.5705   21.24   240090..........   01.0889   13.57   240196.........   00.6134   22.50   250082.........   01.2852   12.30   260031.........   01.5029   18.49
240002.......................   01.6951   19.40   240093..........   01.3149   16.49   240200.........   00.8945   13.34   250083.........   01.0297   11.01   260032.........   01.5899   17.59
240004.......................   01.4733   20.16   240094..........   01.0470   17.26   240205.........   00.9066  .......  250084.........   01.0930   13.92   260034.........   00.9820   14.22
240005.......................   00.9911   13.49   240096..........   01.0126   14.12   240206.........   00.8405  .......  250085.........   01.0146   11.42   260035.........   01.0725   11.44
240006.......................   01.1243   19.75   240097..........   01.1262   17.05   240207.........   01.2516   21.47   250088.........   00.9555   15.43   260036.........   01.0697   15.72
240007.......................   01.1114   15.15   240098..........   00.9639   16.41   240210.........   01.2558   21.44   250089.........   01.0349   11.77   260037.........   01.3946   15.17
240008.......................   01.0447   15.22   240099..........   01.1186   11.00   240211.........   00.9295   11.18   250093.........   01.1144   12.17   260039.........   01.1393   11.17
240009.......................   00.9722   14.18   240100..........   01.3180   19.58   240212.........   01.9942  .......  250094.........   01.2380   14.41   260040.........   01.6081   14.92
240010.......................   01.9804   20.17   240101..........   01.1585   17.32   250001.........   01.6860   15.91   250095.........   00.9763   13.57   260042.........   01.4179   15.65
240011.......................   01.1378   15.69   240102..........   00.8877   12.27   250002.........   00.7948   13.34   250096.........   01.3058   16.49   260044.........   01.0453   14.29
240013.......................   01.3077   15.90   240103..........   01.0788   14.10   250003.........   01.0260   14.13   250097.........   01.1879   13.83   260047.........   01.3608   14.19
240014.......................   01.0825   17.79   240104..........   01.2317   21.71   250004.........   01.4695   15.12   250098.........   00.8668   13.73   260048.........   01.2801   18.05
240016.......................   01.3045   15.46   240105..........   01.0024   12.70   250005.........   00.9707   09.15   250099.........   01.2736   12.73   260050.........   01.0896   14.71
240017.......................   01.1365   15.15   240106..........   01.3351   23.68   250006.........   00.9603   12.27   250100.........   01.2423   14.53   260052.........   01.3429   15.95
240018.......................   01.2985   15.82   240107..........   00.9779   15.07   250007.........   01.2699   16.88   250101.........   00.9416   09.89   260053.........   01.1239   09.46
240019.......................   01.2259   19.58   240108..........   00.9570   11.64   250008.........   00.9041   11.36   250102.........   01.5340   14.80   260054.........   01.3205   16.08
240020.......................   01.1410   18.11   240109..........   00.9926   13.59   250009.........   01.1772   15.04   250104.........   01.3615   15.58   260055.........   01.0344   13.67
240021.......................   00.9545   12.49   240110..........   01.0347   15.18   250010.........   01.0374   11.07   250105.........   00.9185   13.13   260057.........   01.1563   13.85
240022.......................   01.1265   17.33   240111..........   00.9806   13.06   250012.........   00.9543   13.77   250107.........   00.9101   14.16   260059.........   01.1218   14.17
240023.......................   01.0070   15.86   240112..........   01.0585   13.30   250015.........   01.0921   09.75   250109.........   00.9351   11.54   260061.........   01.1737   10.87
240025.......................   01.1710   15.02   240114..........   00.9961   11.13   250017.........   01.0049   13.77   250112.........   00.9915   14.22   260062.........   01.1677   19.89
240027.......................   00.9990   12.60   240115..........   01.6186   22.30   250018.........   00.9576   09.81   250117.........   01.0706   13.28   260063.........   01.1867   14.82
240028.......................   01.1340   16.50   240116..........   00.9450   12.43   250019.........   01.4239   17.43   250119.........   01.2057   10.80   260064.........   01.3241   15.40
240029.......................   01.1619   15.70   240117..........   01.0688   16.21   250020.........   01.0024   10.78   250120.........   01.0683   12.04   260065.........   01.7807   15.31
240030.......................   01.2995   16.78   240119..........   00.8459   16.93   250021.........   00.8612   07.74   250122.........   01.2814   15.87   260066.........   01.0907   12.78
240031.......................   00.9285   13.50   240121..........   00.8986   17.10   250023.........   00.8655   11.22   250123.........   01.3253   17.72   260067.........   00.9812   10.43
240036.......................   01.5566   19.05   240122..........   01.0462   16.80   250024.........   00.9845   08.25   250124.........   00.9123   10.69   260068.........   01.6696   18.49
240037.......................   01.0463   16.40   240123..........   01.0518   13.30   250025.........   01.1440   13.58   250125.........   01.3189   18.35   260070.........   01.0868   11.09
240038.......................   01.4513   22.50   240124..........   01.0123   15.71   250027.........   01.0290   10.40   250126.........   00.9867   10.22   260073.........   00.9754   11.58
240040.......................   01.2271   17.67   240125..........   00.9399   10.75   250029.........   00.8857   11.87   250127.........   00.7659  .......  260074.........   01.2444   11.49
240041.......................   01.3105   14.43   240127..........   01.0272   12.51   250030.........   00.9703   11.39   250128.........   01.0941   12.64   260077.........   01.7237   16.30
240043.......................   01.2029   16.83   240128..........   01.1234   14.55   250031.........   01.3147   17.20   250131.........   01.0545   09.36   260078.........   01.1752   12.39
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[[Page 46248]]



                                                                                          Page 9 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
260079.......................   00.9808   11.78   270002..........   01.1914   13.92   280024.........   01.0190   13.22   280111.........   01.2501   16.06   310014.........   01.7262   23.69
260080.......................   00.9748   09.77   270003..........   01.2463   18.65   280025.........   00.9834   11.07   280114.........   00.9302   10.26   310015.........   01.7788   24.34
260081.......................   01.4994   16.44   270004..........   01.6543   17.33   280026.........   01.1268   12.80   280115.........   00.9762   13.59   310016.........   01.2218   22.93
260082.......................   01.1249   13.50   270006..........   01.0348   18.67   280028.........   01.0603   13.64   280117.........   01.2367   14.48   310017.........   01.3316   21.95
260085.......................   01.5653   18.92   270007..........   00.9630   12.26   280029.........   01.0513   12.62   280118.........   00.9917   13.47   310018.........   01.2149   21.06
260086.......................   01.0538   12.67   270009..........   01.0369   14.91   280030.........   01.7482   23.06   280119.........   00.8442  .......  310019.........   01.6444   20.84
260089.......................   00.9595   13.31   270011..........   01.1240   16.46   280031.........   01.0457   12.48   280123.........   00.7968  .......  310020.........   01.1914   19.66
260091.......................   01.6036   18.96   270012..........   01.5997   17.10   280032.........   01.3205   15.11   290001.........   01.6296   22.35   310021.........   01.3482   21.15
260094.......................   01.1818   15.98   270013..........   01.2868   16.78   280033.........   00.9881   13.62   290002.........   00.9009   17.99   310022.........   01.2391   19.38
260095.......................   01.4416   16.05   270014..........   01.7155   15.97   280034.........   01.2104   13.41   290003.........   01.6155   21.15   310024.........   01.2539   22.60
260096.......................   01.5553   21.52   270016..........   00.8195   11.51   280035.........   00.9439   11.75   290005.........   01.4321   19.66   310025.........   01.2317   21.92
260097.......................   01.1803   15.82   270017..........   01.2264   18.32   280037.........   01.0150   13.55   290006.........   01.2223   16.54   310026.........   01.2770   21.91
260100.......................   00.9672   13.12   270019..........   01.0747   13.34   280038.........   01.0733   13.39   290007.........   01.9023   25.07   310027.........   01.3756   18.17
260102.......................   01.0113   16.75   270021..........   01.1036   15.55   280039.........   01.1841   14.24   290008.........   01.2244   17.14   310028.........   01.1453   20.46
260103.......................   01.3826   16.73   270023..........   01.2906   18.76   280040.........   01.5869   18.30   290009.........   01.6096   21.07   310029.........   01.8972   20.69
260104.......................   01.6337   19.57   270024..........   00.9931   11.15   280041.........   00.9988   10.95   290010.........   01.2116   19.33   310031.........   02.6282   24.14
260105.......................   01.8722   19.18   270026..........   00.8677   11.95   280042.........   01.0970   13.22   290011.........   00.8854   14.39   310032.........   01.2962   20.00
260107.......................   01.3844   18.55   270027..........   01.0389   12.69   280043.........   01.1235   12.75   290012.........   01.4484   19.97   310034.........   01.2537   19.14
260108.......................   01.8056   18.26   270028..........   01.0735   14.91   280045.........   01.1409   13.48   290013.........   01.0180   14.85   310036.........   01.2137   18.44
260109.......................   00.9922   11.92   270029..........   00.9056   14.51   280046.........   01.0729   11.09   290014.........   01.0424   16.52   310037.........   01.3032   25.43
260110.......................   01.6069   14.16   270031..........   00.8747   09.71   280047.........   01.1632   15.70   290015.........   00.9691   15.38   310038.........   01.9189   22.82
260111.......................   00.9994   08.04   270032..........   01.1776   16.46   280048.........   01.0813   11.17   290016.........   01.1476   18.71   310039.........   01.2906   20.51
260112.......................   01.4123   17.47   270033..........   00.8822   11.39   280049.........   01.0363   13.82   290019.........   01.2779   17.92   310040.........   01.2680   23.12
260113.......................   01.1111   14.05   270035..........   01.0294   15.87   280050.........   00.9263   13.11   290020.........   01.0783   17.65   310041.........   01.3192   22.90
260115.......................   01.2400   14.92   270036..........   00.9483   10.42   280051.........   01.0572   13.72   290021.........   01.5602   19.17   310042.........   01.2513   21.74
260116.......................   01.1317   13.70   270039..........   01.0661   11.99   280052.........   01.0352   11.85   290022.........   01.7398   22.47   310043.........   01.2027   20.60
260119.......................   01.1592   15.01   270040..........   01.0819   17.60   280054.........   01.2613   15.54   290027.........   00.9516   14.68   310044.........   01.2981   20.16
260120.......................   01.1606   15.72   270041..........   01.0700   11.14   280055.........   00.9274   11.63   290029.........   00.9400  .......  310045.........   01.3866   25.76
260122.......................   01.1407   13.12   270044..........   01.1997   13.40   280056.........   00.9925   10.99   290032.........   01.4088   18.66   310047.........   01.3405   23.05
260123.......................   01.0309   11.17   270046..........   00.9328   13.50   280057.........   01.0060   14.48   290036.........   01.4927  .......  310048.........   01.1853   20.69
260127.......................   00.9517   13.71   270048..........   01.0968   13.30   280058.........   01.3349   13.75   290038.........   01.1066  .......  310049.........   01.3247   23.54
260128.......................   00.9877   08.95   270049..........   01.8369   18.19   280060.........   01.5930   18.38   300001.........   01.3969   20.70   310050.........   01.2623   20.88
260129.......................   01.2126   13.51   270050..........   01.0374   15.96   280061.........   01.4692   14.76   300003.........   01.8661   20.92   310051.........   01.3232   24.26
260131.......................   01.3183   16.32   270051..........   01.2969   18.02   280062.........   01.2236   11.92   300005.........   01.2669   18.65   310052.........   01.2516   20.53
260134.......................   01.1485   13.87   270052..........   01.0663   18.02   280064.........   01.0732   12.61   300006.........   01.1225   16.24   310054.........   01.2937   23.19
260137.......................   01.2635   13.71   270053..........   00.8716   09.53   280065.........   01.2934   16.22   300007.........   01.1477   16.76   310056.........   01.1800   20.11
260138.......................   01.9683   20.66   270057..........   01.1700   17.35   280066.........   01.0101   11.38   300008.........   01.2465   16.95   310057.........   01.2906   20.10
260141.......................   01.8935   16.53   270058..........   00.9419   11.20   280068.........   00.9716   09.31   300009.........   01.1071   17.45   310058.........   01.1047   25.35
260142.......................   01.1604   14.50   270059..........   00.8676   19.21   280070.........   01.0712   10.75   300010.........   01.2380   17.80   310060.........   01.2112   17.55
260143.......................   00.9437   10.52   270060..........   00.9653   11.92   280073.........   01.0399   12.78   300011.........   01.3508   21.36   310061.........   01.2156   19.85
260147.......................   01.0490   12.81   270063..........   00.8933   12.94   280074.........   01.0981   12.87   300012.........   01.2779   21.64   310062.........   01.2941   23.90
260148.......................   00.9639   09.33   270068..........   00.8629   12.38   280075.........   01.2063   12.90   300013.........   01.2250   16.87   310063.........   01.3515   20.78
260158.......................   01.1355   11.80   270072..........   00.8526   14.88   280076.........   01.0602   12.54   300014.........   01.2336   18.41   310064.........   01.2988   21.35
260159.......................   01.2962   18.17   270073..........   01.0764   11.06   280077.........   01.3589   17.36   300015.........   01.1776   17.37   310067.........   01.3199   21.14
260160.......................   01.0683   14.07   270074..........   00.8861  .......  280079.........   01.0649   09.40   300016.........   01.3172   17.41   310069.........   01.1308   18.19
260162.......................   01.6912   17.70   270075..........   00.8706  .......  280080.........   01.0842   11.34   300017.........   01.2081   20.49   310070.........   01.3980   22.16
260163.......................   01.3188   14.11   270076..........   00.8386  .......  280081.........   01.5683   17.24   300018.........   01.2333   18.85   310072.........   01.2980   20.74
260164.......................   00.9955   12.07   270079..........   00.9563   13.36   280082.........   01.1154   13.03   300019.........   01.2621   18.43   310073.........   01.5552   22.31
260166.......................   01.2126   21.51   270080..........   01.1536   14.27   280083.........   01.0646   15.64   300020.........   01.2622   19.78   310074.........   01.4149   21.08
260172.......................   01.0128   12.07   270081..........   01.0790   09.77   280084.........   01.0366   10.92   300021.........   01.1644   15.69   310075.........   01.2933   21.67
260173.......................   00.9588   11.15   270082..........   01.0039   16.10   280085.........   00.7201   14.02   300022.........   01.1031   17.08   310076.........   01.3854   28.16
260175.......................   01.1310   14.60   270083..........   01.1160   10.96   280088.........   01.8032   18.12   300023.........   01.3278   20.13   310077.........   01.5172   23.09
260176.......................   01.6716   19.26   270084..........   00.9034   12.77   280089.........   01.0548   13.79   300024.........   01.2736   16.56   310078.........   01.3568   22.70
260177.......................   01.3854   19.46   280001..........   01.0830   14.11   280090.........   00.9850   11.70   300028.........   01.2674   15.52   310081.........   01.2644   20.80
260178.......................   01.4707   19.06   280003..........   01.9484   18.11   280091.........   01.1370   13.17   300029.........   01.3084   21.29   310083.........   01.2592   22.20
260179.......................   01.5633   18.48   280005..........   01.3783   16.64   280092.........   00.8990   11.63   300033.........   01.1012   13.70   310084.........   01.2622   20.43
260180.......................   01.6919   18.45   280009..........   01.7335   16.70   280094.........   01.1464   13.32   300034.........   01.9356   21.31   310086.........   01.1738   20.89
260183.......................   01.6448   16.51   280011..........   00.9513   11.56   280097.........   01.0552   12.56   310001.........   01.7775   24.91   310087.........   01.2345   18.95
260186.......................   01.2538   15.20   280012..........   01.2413   14.88   280098.........   01.0077   09.68   310002.........   01.7278   25.68   310088.........   01.2566   19.57
260188.......................   01.2759   15.70   280013..........   02.0235   19.71   280101.........   01.1173   10.92   310003.........   01.2230   23.16   310090.........   01.1884   22.86
260189.......................   00.9409   11.23   280014..........   00.9990   10.78   280102.........   01.1321   11.77   310005.........   01.2257   19.20   310091.........   01.2193   21.35
260190.......................   01.2003   18.46   280015..........   01.0254   13.78   280104.........   00.9599   09.88   310006.........   01.2209   19.02   310092.........   01.3080   20.52
260191.......................   01.1725   19.44   280017..........   01.1524   13.42   280105.........   01.2988   16.46   310008.........   01.2785   21.23   310093.........   01.2193   19.52
260193.......................   01.2262   19.13   280018..........   01.1939   12.25   280106.........   00.9481   13.23   310009.........   01.2877   21.35   310096.........   01.9014   21.19
260195.......................   01.1678  .......  280020..........   01.5198   18.97   280107.........   01.0284   12.36   310010.........   01.2966   21.05   310105.........   01.1914   22.41
260197.......................   01.3273   20.38   280021..........   01.3322   14.01   280108.........   01.1433   13.26   310011.........   01.3050   21.71   310108.........   01.3940   21.08
260198.......................   01.2292   14.98   280022..........   00.9740   11.07   280109.........   00.9424   10.61   310012.........   01.5915   23.53   310110.........   01.2108   19.69
260200.......................   01.3542   19.14   280023..........   01.3802   13.73   280110.........   01.0201   10.88   310013.........   01.2813   19.91   310111.........   01.2536   19.70
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[[Page 46249]]



                                                                                          Page 10 of 16                                                                                         
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                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
310112.......................   01.2441   20.58   330024..........   01.9152   30.03   330126.........   01.2229   20.35   330230.........   01.5076   26.44   330396.........   01.2740   25.30
310113.......................   01.2115   20.70   330025..........   01.1879   13.80   330127.........   01.3974   25.01   330231.........   01.1364   27.57   330397.........   01.3146   26.82
310115.......................   01.1954   19.78   330027..........   01.4751   28.56   330128.........   01.3390   25.26   330232.........   01.2180   15.46   330398.........   01.2362   26.59
310116.......................   01.2905   21.67   330028..........   01.3453   23.76   330132.........   01.1636   13.74   330233.........   01.5344   29.08   330399.........   01.3284   29.65
310118.......................   01.1883   21.86   330029..........   01.1091   17.36   330133.........   01.3525   28.31   330234.........   02.1947   24.17   340001.........   01.4939   19.54
310119.......................   01.5440   27.27   330030..........   01.2330   15.20   330135.........   01.2522   16.25   330235.........   01.1384   17.37   340002.........   01.8814   18.53
310120.......................   01.0653   17.24   330033..........   01.2702   13.46   330136.........   01.2620   20.45   330236.........   01.3965   26.57   340003.........   01.1186   16.56
310121.......................   01.0416   16.61   330034..........   00.7745   36.61   330140.........   01.7171   17.19   330238.........   01.1734   14.53   340004.........   01.4952   17.21
320001.......................   01.4645   16.76   330036..........   01.3260   21.00   330141.........   01.3544   23.17   330239.........   01.2034   15.44   340005.........   01.2172   14.57
320002.......................   01.4190   21.55   330037..........   01.1403   15.17   330144.........   00.9809   13.27   330240.........   01.3472   26.47   340006.........   01.2315   14.56
320003.......................   01.1694   15.57   330038..........   01.2154   14.91   330148.........   01.0806   14.39   330241.........   01.8842   20.92   340007.........   01.1793   14.81
320004.......................   01.2647   17.86   330039..........   00.8474   13.18   330151.........   01.0508   13.77   330242.........   01.3486   22.98   340008.........   01.1505   16.90
320005.......................   01.3207   17.86   330041..........   01.3957   27.81   330152.........   01.4256   27.77   330245.........   01.2684   17.15   340009.........   01.3744   19.12
320006.......................   01.3742   15.20   330043..........   01.2516   26.92   330153.........   01.6484   17.44   330246.........   01.2600   22.99   340010.........   01.3111   16.41
320009.......................   01.5332   16.49   330044..........   01.2413   17.05   330154.........   01.5904  .......  330247.........   00.7043   26.49   340011.........   01.1105   13.98
320011.......................   00.9883   17.79   330045..........   01.4206   24.83   330157.........   01.3111   18.41   330249.........   01.2271   15.89   340012.........   01.2599   15.82
320012.......................   01.0365   16.57   330046..........   01.5166   30.08   330158.........   01.3798   24.33   330250.........   01.3148   16.01   340013.........   01.2783   16.58
320013.......................   01.2196   18.28   330047..........   01.2282   16.63   330159.........   01.3217   17.55   330252.........   00.9107   15.40   340014.........   01.5898   22.15
320014.......................   01.0172   13.13   330048..........   01.3029   16.10   330160.........   01.4707   26.09   330254.........   01.0280   15.94   340015.........   01.2409   16.44
320016.......................   01.1611   12.00   330049..........   01.2452   17.52   330161.........   00.7237   16.00   330258.........   01.4226   25.28   340016.........   01.2062   15.18
320017.......................   01.2209   17.34   330053..........   01.1285   14.39   330162.........   01.2663   26.18   330259.........   01.4498   21.99   340017.........   01.2587   15.96
320018.......................   01.4884   16.61   330055..........   01.5084   29.02   330163.........   01.2137   17.75   330261.........   01.2244   24.35   340018.........   01.1282   14.78
320019.......................   01.4863   19.01   330056..........   01.4474   28.37   330164.........   01.3963   18.96   330263.........   00.9929   17.00   340019.........   01.0519   13.69
320021.......................   01.7092   20.62   330057..........   01.7158   16.48   330166.........   00.9723   14.11   330264.........   01.2681   20.00   340020.........   01.1686   17.33
320022.......................   01.1787   16.34   330058..........   01.3270   15.85   330167.........   01.6440   27.45   330265.........   01.3105   15.78   340021.........   01.2198   15.08
320023.......................   01.0348   13.29   330059..........   01.6224   29.66   330169.........   01.4303   31.95   330267.........   01.2786   22.78   340022.........   01.0527   14.56
320030.......................   00.9822   16.54   330061..........   01.2977   23.38   330171.........   01.2804   22.28   330268.........   00.9740   15.79   340023.........   01.3923   18.44
320031.......................   00.9008   14.78   330062..........   01.1779   14.99   330175.........   01.1255   14.11   330270.........   01.9655   30.33   340024.........   01.2228   15.49
320032.......................   00.9936   16.66   330064..........   01.3752   28.38   330177.........   01.0208   12.46   330273.........   01.2942   21.36   340025.........   01.1893   14.38
320033.......................   01.1484   19.23   330065..........   01.1890   17.14   330179.........   00.8617   14.09   330275.........   01.2178   18.34   340027.........   01.1954   15.46
320035.......................   01.0033   14.82   330066..........   01.2343   17.26   330180.........   01.1952   16.36   330276.........   01.1877   16.61   340028.........   01.5380   17.48
320037.......................   01.2052   15.17   330067..........   01.3770   19.68   330181.........   01.3076   28.32   330277.........   01.1372   16.35   340030.........   02.0110   19.06
320038.......................   01.1660   15.62   330072..........   01.3458   26.89   330182.........   02.5837   26.92   330279.........   01.2893   17.24   340031.........   00.9808   12.56
320046.......................   01.1839   18.23   330073..........   01.1820   14.32   330183.........   01.4389   18.88   330285.........   01.8218   21.81   340032.........   01.3999   17.87
320048.......................   01.3187   13.90   330074..........   01.1874   17.35   330184.........   01.3396   25.83   330286.........   01.3203   22.59   340035.........   01.1695   14.97
320056.......................   00.9819  .......  330075..........   01.0879   16.48   330185.........   01.2256   24.23   330290.........   01.7578   28.28   340036.........   01.1713   17.04
320057.......................   01.0573  .......  330078..........   01.4454   16.90   330186.........   00.9205   18.79   330293.........   01.1689   13.72   340037.........   01.1725   15.50
320058.......................   00.9038  .......  330079..........   01.3130   16.60   330188.........   01.1850   17.75   330304.........   01.2689   25.52   340038.........   01.1103   14.52
320059.......................   00.9778  .......  330080..........   01.4167   24.95   330189.........   01.3177   16.20   330306.........   01.4522   26.59   340039.........   01.2748   19.18
320060.......................   00.9187  .......  330082..........   01.1199   16.29   330191.........   01.2688   17.18   330307.........   01.2171   18.33   340040.........   01.7746   17.75
320061.......................   01.1051  .......  330084..........   00.9919   15.59   330193.........   01.3086   27.34   330308.........   01.1772   28.68   340041.........   01.2471   15.99
320062.......................   00.9353  .......  330085..........   01.3266   18.66   330194.........   01.8119   26.07   330309.........   01.2334   24.67   340042.........   01.1864   13.80
320063.......................   01.3272   15.84   330086..........   01.2540   24.13   330195.........   01.6272   29.02   330314.........   01.3526   21.07   340044.........   01.1056   13.26
320065.......................   01.2822   16.76   330088..........   01.1094   24.41   330196.........   01.3367   25.53   330315.........   01.2558   24.58   340045.........   01.0365   10.95
320067.......................   00.8203   09.19   330090..........   01.5534   16.86   330197.........   01.0945   14.43   330316.........   01.3037   26.23   340047.........   01.9028   17.98
320068.......................   00.9119   17.98   330091..........   01.3842   17.64   330198.........   01.3399   22.17   330327.........   00.9253   15.30   340048.........   00.9055   09.39
320069.......................   01.0454   09.08   330092..........   01.1025   13.64   330199.........   01.4635   24.80   330331.........   01.2220   27.78   340049.........   00.6394   15.10
320070.......................   01.0243  .......  330094..........   01.2299   15.78   330201.........   01.5377   27.83   330332.........   01.2606   24.30   340050.........   01.1904   14.69
320074.......................   01.1107   17.15   330095..........   01.2598   16.49   330202.........   01.4872   25.07   330333.........   01.3624   22.00   340051.........   01.2639   16.23
320079.......................   01.2049   17.41   330096..........   01.0679   14.88   330203.........   01.3994   19.16   330336.........   01.3438   27.39   340052.........   01.0447   18.62
330001.......................   01.1955   24.84   330097..........   01.1652   14.63   330204.........   01.4236   24.90   330338.........   01.1329   22.52   340053.........   01.6969   18.96
330002.......................   01.4938   24.26   330100..........   00.6895   25.95   330205.........   01.1568   19.46   330339.........   00.8034   18.09   340054.........   01.0901   12.68
330003.......................   01.3393   19.29   330101..........   01.8031   33.09   330208.........   01.2061   23.16   330340.........   01.2081   23.91   340055.........   01.2079   16.69
330004.......................   01.2785   19.10   330102..........   01.3004   16.32   330209.........   01.1871   21.17   330350.........   01.8138   27.96   340060.........   01.1390   16.38
330005.......................   01.8133   19.53   330103..........   01.2486   15.94   330211.........   01.2093   16.31   330353.........   01.3975   27.49   340061.........   01.7128   19.20
330006.......................   01.3128   24.11   330104..........   01.3604   25.44   330212.........   01.1755   20.25   330354.........   01.3898  .......  340063.........   01.0555   13.01
330007.......................   01.3289   17.43   330106..........   01.5666   33.04   330213.........   01.1241   16.19   330357.........   01.3757   32.07   340064.........   01.2278   17.24
330008.......................   01.1187   15.77   330107..........   01.2590   24.38   330214.........   01.7379   28.90   330359.........   00.9471   23.70   340065.........   01.3129   12.82
330009.......................   01.3480   28.08   330108..........   01.2119   15.85   330215.........   01.2197   15.65   330372.........   01.2689   22.53   340067.........   01.1907   12.84
330010.......................   01.1648   15.34   330111..........   01.0877   14.62   330218.........   01.1661   17.16   330381.........   01.1945   27.09   340068.........   01.2333   14.21
330011.......................   01.2464   17.22   330114..........   00.8876   15.48   330219.........   01.6358   18.39   330385.........   01.1735   29.27   340069.........   01.7159   18.31
330012.......................   01.6173   27.84   330115..........   01.2008   14.46   330221.........   01.3421   26.57   330386.........   01.1478   20.82   340070.........   01.3795   16.78
330013.......................   02.0611   16.93   330116..........   00.9149   13.82   330222.........   01.2611   15.28   330387.........   00.8589   23.28   340071.........   01.0726   14.30
330014.......................   01.3852   27.12   330118..........   01.6360   18.19   330223.........   01.0811   15.10   330389.........   01.8045   29.95   340072.........   01.1400   13.86
330016.......................   01.0249   14.55   330119..........   01.7390   29.88   330224.........   01.2647   18.85   330390.........   01.2567   28.38   340073.........   01.4546   20.50
330019.......................   01.1339   23.60   330121..........   01.0050   14.35   330225.........   01.1856   23.23   330393.........   01.7319   25.24   340075.........   01.1558   15.98
330020.......................   01.0573   14.25   330122..........   01.2081   20.92   330226.........   01.2808   16.83   330394.........   01.5114   17.27   340080.........   01.1240   13.55
330023.......................   01.2492   22.80   330125..........   01.8059   19.91   330229.........   01.3242   14.92   330395.........   01.3557   30.16   340084.........   01.0689   14.51
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[[Page 46250]]



                                                                                          Page 11 of 16                                                                                         
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                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
340085.......................   01.2597   15.46   350008..........   01.0366   15.15   360032.........   01.0867   16.18   360108.........   01.0267   15.08   360197.........   01.2031   16.76
340087.......................   01.1439   16.80   350009..........   01.1592   15.74   360034.........   01.1593   13.30   360109.........   01.0942   17.43   360200.........   01.0011   13.48
340088.......................   01.1199   16.46   350010..........   01.1821   12.30   360035.........   01.5736   19.90   360112.........   01.7563   21.61   360203.........   01.1469   15.55
340089.......................   00.9632   12.28   350011..........   01.9090   17.37   360036.........   01.3217   17.31   360113.........   01.3031   18.24   360204.........   01.2935   16.96
340090.......................   01.1321   16.30   350012..........   01.1445   12.36   360037.........   02.1462   20.14   360114.........   01.1423   16.05   360210.........   01.2312   19.23
340091.......................   01.6457   18.32   350013..........   01.0749   14.58   360038.........   01.5947   18.31   360115.........   01.3193   18.08   360211.........   01.2323   17.25
340093.......................   01.0600   11.60   350014..........   01.0459   14.29   360039.........   01.2539   15.34   360116.........   01.1312   16.04   360212.........   01.3976   20.25
340094.......................   01.3349   16.83   350015..........   01.7084   15.42   360040.........   01.3179   17.72   360118.........   01.3243   17.37   360213.........   01.1708   15.77
340096.......................   01.2029   17.18   350016..........   01.0584   10.35   360041.........   01.3771   18.25   360121.........   01.2823   16.74   360218.........   01.2976   16.21
340097.......................   01.1577   16.04   350017..........   01.4608   14.88   360042.........   01.1043   16.74   360122.........   01.3977   17.77   360230.........   01.3323   20.27
340098.......................   01.6813   19.05   350018..........   01.1656   10.67   360044.........   01.1490   15.84   360123.........   01.2541   17.50   360231.........   01.1369   12.45
340099.......................   01.1020   13.36   350019..........   01.6065   18.69   360045.........   01.4935   19.25   360124.........   01.2534   17.08   360234.........   01.3572   17.90
340101.......................   01.0289   11.11   350020..........   01.4956   18.57   360046.........   01.1278   18.52   360125.........   01.1047   16.87   360236.........   01.1905   18.56
340104.......................   00.9432   10.60   350021..........   01.0704   10.94   360047.........   01.2351   13.85   360126.........   01.2042   18.97   360239.........   01.2400   18.70
340105.......................   01.3861   17.75   350023..........   00.8923   15.59   360048.........   01.7480   21.00   360127.........   01.1566   16.28   360241.........   00.5347   17.69
340106.......................   01.1062   17.79   350024..........   01.1031   13.69   360049.........   01.2653   17.36   360128.........   01.1287   13.85   360242.........   01.7176  ......
340107.......................   01.3146   16.17   350025..........   01.0558   12.60   360050.........   01.1666   12.43   360129.........   01.0400   14.06   360243.........   00.7473   14.35
340109.......................   01.3269   15.91   350027..........   00.9712   12.57   360051.........   01.5445   21.82   360130.........   01.1366   15.16   360244.........   00.7208   16.77
340111.......................   01.1675   13.78   350029..........   01.0062   12.34   360052.........   01.7086   17.88   360131.........   01.4162   16.27   360245.........   00.8023   12.10
340112.......................   01.2839   14.03   350030..........   01.0917   15.42   360054.........   01.2621   15.55   360132.........   01.2311   20.78   360246.........   00.8798   15.05
340113.......................   02.0160   19.50   350033..........   00.9596   13.23   360055.........   01.2391   18.92   360133.........   01.4596   17.61   360247.........   00.4357  ......
340114.......................   01.5131   19.16   350034..........   01.0571   13.58   360056.........   01.3529   16.92   360134.........   01.5973   18.25   370001.........   01.6944   18.41
340115.......................   01.5532   17.23   350035..........   00.9015   10.11   360057.........   01.0445   13.04   360135.........   01.1672   17.12   370002.........   01.2462   13.60
340116.......................   01.9191   20.30   350038..........   01.0538   13.26   360058.........   01.2628   15.35   360136.........   01.0528   14.73   370004.........   01.2787   15.30
340119.......................   01.2839   15.21   350039..........   00.9705   13.53   360059.........   01.5433   20.00   360137.........   01.5604   18.98   370005.........   01.0273   14.12
340120.......................   01.1296   12.33   350041..........   01.0446   13.05   360062.........   01.4697   18.40   360140.........   01.0178   15.47   370006.........   01.3096   14.88
340121.......................   01.0450   14.52   350042..........   01.0504   12.39   360063.........   01.1243   17.19   360141.........   01.4412   19.84   370007.........   01.1404   12.80
340122.......................   00.9921   10.30   350043..........   01.6433   16.58   360064.........   01.5567   19.65   360142.........   01.0184   14.99   370008.........   01.4080   16.02
340123.......................   01.1293   14.07   350044..........   00.9113   10.01   360065.........   01.2287   16.97   360143.........   01.2979   17.74   370011.........   01.0616   12.47
340124.......................   01.0275   12.27   350047..........   01.2204   16.64   360066.........   01.3889   17.16   360144.........   01.3148   20.19   370012.........   00.8457   10.05
340125.......................   01.4145   16.94   350049..........   01.2419   10.38   360067.........   01.2670   12.11   360145.........   01.6244   16.84   370013.........   01.7611   18.61
340126.......................   01.4353   16.23   350050..........   00.9371   10.24   360068.........   01.6576   21.91   360147.........   01.2662  .......  370014.........   01.3196   17.14
340127.......................   01.3099   16.30   350051..........   00.9466   14.13   360069.........   01.1437   16.38   360148.........   01.0715   16.50   370015.........   01.2617   13.84
340129.......................   01.3429   18.65   350053..........   01.0767   09.58   360070.........   01.6677   16.57   360149.........   01.1450   20.33   370016.........   01.3790   14.25
340130.......................   01.3332   16.03   350055..........   00.9216   11.50   360071.........   01.2655   15.42   360150.........   01.2825   17.70   370017.........   01.1042   12.14
340131.......................   01.4267   16.05   350056..........   00.9601   12.92   360072.........   01.1448   16.29   360151.........   01.3167   16.55   370018.........   01.2647   14.06
340132.......................   01.3222   12.41   350058..........   00.9495   12.18   360074.........   01.3535   19.15   360152.........   01.4765   17.73   370019.........   01.3066   11.91
340133.......................   01.0518   13.87   350060..........   00.7458   08.17   360075.........   01.4875   20.80   360153.........   01.1500   13.64   370020.........   01.2884   12.53
340136.......................   00.7885   24.45   350061..........   01.0625   13.77   360076.........   01.3060   18.84   360154.........   01.0235   12.39   370021.........   00.9781   10.01
340137.......................   01.2154   12.68   350063..........   00.8969  .......  360077.........   01.4820   18.59   360155.........   01.3290   18.75   370022.........   01.2741   15.13
340138.......................   01.1811   17.60   350064..........   00.9840  .......  360078.........   01.2766   18.97   360156.........   01.3403   16.47   370023.........   01.3301   14.95
340141.......................   01.6320   18.27   350066..........   00.7996  .......  360079.........   01.7539   19.31   360159.........   01.1943   18.50   370025.........   01.4024   15.37
340142.......................   01.1998   14.94   360001..........   01.3171   17.88   360080.........   01.1169   14.39   360161.........   01.2798   18.78   370026.........   01.4279   16.08
340143.......................   01.3874   18.50   360002..........   01.2012   15.33   360081.........   01.3564   17.96   360162.........   01.2593   17.27   370028.........   01.8659   17.67
340144.......................   01.4263   14.85   360003..........   01.7460   20.67   360082.........   01.3158   19.81   360163.........   01.8617   19.87   370029.........   01.2335   12.79
340145.......................   01.3230   16.80   360006..........   01.7465   19.53   360083.........   01.2516   15.77   360164.........   00.8576   13.98   370030.........   01.2425   12.05
340146.......................   01.0175   15.42   360007..........   01.0523   15.41   360084.........   01.6097   18.16   360165.........   01.2134   14.31   370032.........   01.5284   14.28
340147.......................   01.2925   17.80   360008..........   01.2955   16.20   360085.........   01.8261   19.63   360166.........   01.1750   15.83   370033.........   01.0754   11.23
340148.......................   01.4427   18.28   360009..........   01.3969   17.35   360086.........   01.4494   16.75   360169.........   00.9859   16.99   370034.........   01.2609   12.79
340151.......................   01.1215   14.05   360010..........   01.2298   15.38   360087.........   01.4106   17.32   360170.........   01.2826   15.68   370035.........   01.6338   15.21
340153.......................   01.9740   21.08   360011..........   01.2267   17.83   360088.........   01.2136   15.48   360172.........   01.3727   16.62   370036.........   01.0298   09.22
340155.......................   01.3941   20.91   360012..........   01.2961   17.61   360089.........   01.1654   16.92   360174.........   01.2295   19.24   370037.........   01.7224   16.37
340156.......................   00.8042  .......  360013..........   01.0861   16.71   360090.........   01.2325   17.90   360175.........   01.2416   17.61   370038.........   00.9103   12.01
340158.......................   01.1785   15.94   360014..........   01.1236   17.57   360091.........   01.2653   18.90   360176.........   01.1811   15.62   370039.........   01.4595   17.22
340159.......................   01.1571   16.88   360016..........   01.5986   17.81   360092.........   01.2754   17.85   360177.........   01.2619   16.30   370040.........   01.1036   10.89
340160.......................   01.0888   12.88   360017..........   01.7484   19.82   360093.........   01.2219   16.66   360178.........   01.2206   15.58   370041.........   01.0290   13.52
340162.......................   01.2211   17.78   360018..........   01.5417   18.51   360094.........   01.3012   20.27   360179.........   01.2895   19.01   370042.........   00.8626   11.22
340164.......................   01.4594   18.17   360019..........   01.2939   18.22   360095.........   01.3299   16.68   360180.........   02.0595   22.07   370043.........   00.9753   12.91
340166.......................   01.4192   18.51   360020..........   01.4334   20.05   360096.........   01.1102   16.20   360184.........   00.4913   17.11   370045.........   01.1501   10.20
340168.......................   00.5028   14.78   360021..........   01.2759   18.04   360098.........   01.3988   18.00   360185.........   01.2472   17.09   370046.........   00.9820   09.22
340171.......................   01.1220  .......  360024..........   01.4300   17.76   360099.........   01.1087   16.91   360186.........   01.1741   15.04   370047.........   01.3236   15.40
350001.......................   01.0070   11.08   360025..........   01.2331   17.66   360100.........   01.3108   15.63   360187.........   01.2880   16.00   370048.........   01.1790   13.46
350002.......................   01.7570   16.04   360026..........   01.1939   15.59   360101.........   01.7511   19.71   360188.........   01.0028   14.77   370049.........   01.3544   16.07
350003.......................   01.1983   15.67   360027..........   01.5318   19.06   360102.........   01.2675   19.68   360189.........   01.0113   15.40   370051.........   00.9604   13.31
350004.......................   01.9399   17.94   360028..........   01.4723   15.28   360103.........   01.3274   18.70   360192.........   01.2451   19.28   370054.........   01.3882   14.79
350005.......................   01.0794   13.14   360029..........   01.1573   16.41   360104.........   01.9146   20.28   360193.........   01.3171   16.77   370056.........   01.5659   15.41
350006.......................   01.3898   16.16   360030..........   01.1350   14.82   360106.........   01.0557   13.89   360194.........   01.1176   16.14   370057.........   01.1762   15.05
350007.......................   00.9506   12.20   360031..........   01.3576   18.42   360107.........   01.2429   16.98   360195.........   01.1297   17.72   370059.........   01.1142   13.53
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                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
370060.......................   01.0828   12.88   370190..........   01.6289   17.49   390002.........   01.3694   17.03   390078.........   01.0673   15.98   390164.........   01.9539   19.14
370063.......................   01.0959   13.12   370192..........   01.1353  .......  390003.........   01.2550   15.57   390079.........   01.7078   16.83   390166.........   01.1034   17.40
370064.......................   00.9954   10.14   370194..........   02.0879  .......  390004.........   01.3802   16.70   390080.........   01.2568   18.66   390167.........   01.2653   20.71
370065.......................   01.0424   14.76   370195..........   02.4526  .......  390005.........   01.0808   14.82   390081.........   01.3530   20.23   390168.........   01.2043   17.54
370071.......................   01.0343   10.18   380001..........   01.3214   19.27   390006.........   01.7350   17.39   390083.........   01.2270   20.87   390169.........   01.2058   18.63
370072.......................   00.9116   11.67   380002..........   01.2073   22.74   390007.........   01.1796   21.33   390084.........   01.2421   15.29   390170.........   01.8570   22.43
370076.......................   01.3116   12.42   380003..........   01.1475   18.75   390008.........   01.1300   15.08   390086.........   01.1340   16.87   390173.........   01.1954   17.08
370077.......................   01.2139   16.30   380004..........   01.8006   22.89   390009.........   01.6087   18.07   390088.........   01.3283   18.42   390174.........   01.7088   24.17
370078.......................   01.7084   14.58   380005..........   01.1861   19.47   390010.........   01.1790   16.58   390090.........   01.8006   19.41   390176.........   01.1460   16.79
370079.......................   00.9678   11.98   380006..........   01.3890   18.29   390011.........   01.2467   16.49   390091.........   01.1700   17.09   390178.........   01.2822   17.74
370080.......................   00.9908   11.12   380007..........   01.5689   22.66   390012.........   01.1943   19.15   390093.........   01.1538   15.20   390179.........   01.2710   22.80
370082.......................   00.9103   12.48   380008..........   01.0706   18.69   390013.........   01.2311   16.77   390095.........   01.1758   13.95   390180.........   01.5397   22.83
370083.......................   00.9505   10.95   380009..........   01.8307   22.17   390014.........   01.6424   16.42   390096.........   01.2633   16.88   390181.........   01.0583   17.80
370084.......................   01.0351   08.88   380010..........   01.0879   24.15   390015.........   01.2054   13.06   390097.........   01.3262   20.91   390183.........   01.1883   17.16
370085.......................   00.8092   12.94   380011..........   01.1042   14.95   390016.........   01.2233   15.58   390098.........   01.7539   20.06   390184.........   01.1032   17.69
370086.......................   01.1831   09.89   380013..........   01.2681   21.54   390017.........   01.1747   14.20   390100.........   01.6285   19.30   390185.........   01.2281   16.12
370089.......................   01.2759   14.01   380014..........   01.4266   18.89   390018.........   01.2261   19.47   390101.........   01.2027   15.70   390189.........   01.0384   18.41
370091.......................   01.6816   16.13   380017..........   01.7014   21.77   390019.........   01.1185   14.53   390102.........   01.3635   20.34   390191.........   01.0441   13.91
370092.......................   01.0706   12.73   380018..........   01.8329   19.21   390022.........   01.3887   21.81   390103.........   01.0941   17.17   390192.........   01.1158   17.15
370093.......................   01.8716   18.67   380019..........   01.2061   18.88   390023.........   01.2485   19.71   390104.........   01.0526   15.15   390193.........   01.1854   15.39
370094.......................   01.4235   16.67   380020..........   01.4312   20.06   390024.........   00.8664   22.60   390106.........   01.0134   14.85   390194.........   01.1543   18.97
370095.......................   00.9189   11.62   380021..........   01.2831   19.10   390025.........   00.6470   16.64   390107.........   01.2490   18.66   390195.........   01.8317   22.08
370097.......................   01.3652   18.99   380022..........   01.1731   19.92   390026.........   01.2710   20.58   390108.........   01.4094   19.97   390196.........   01.3947  ......
370099.......................   01.1641   12.91   380023..........   01.2312   17.76   390027.........   01.9535   23.48   390109.........   01.1447   14.44   390197.........   01.3094   18.40
370100.......................   01.0343   13.02   380025..........   01.2677   21.90   390028.........   01.7850   18.54   390110.........   01.6460   17.36   390198.........   01.1948   15.21
370103.......................   00.9027   11.77   380026..........   01.1914   16.87   390029.........   01.9570   18.73   390111.........   01.8484   26.22   390199.........   01.2026   14.89
370105.......................   02.0050   17.06   380027..........   01.2567   20.25   390030.........   01.2446   16.29   390112.........   01.1485   12.16   390200.........   01.0202   14.67
370106.......................   01.5501   16.96   380029..........   01.1523   17.29   390031.........   01.1536   16.93   390113.........   01.2135   16.04   390201.........   01.2674   18.75
370108.......................   01.0589   10.82   380031..........   01.0334   15.92   390032.........   01.2594   17.80   390114.........   01.1068   21.07   390203.........   01.3159   20.45
370112.......................   01.0733   12.33   380033..........   01.7873   22.97   390035.........   01.2733   17.28   390115.........   01.3311   21.40   390204.........   01.2627   20.05
370113.......................   01.1633   12.33   380035..........   01.3604   18.58   390036.........   01.3360   17.63   390116.........   01.2395   19.91   390205.........   01.3650   22.42
370114.......................   01.6326   14.69   380036..........   01.1184   17.27   390037.........   01.3511   18.49   390117.........   01.1590   15.65   390206.........   01.3418   19.91
370121.......................   01.1757   15.78   380037..........   01.2075   18.24   390039.........   01.0973   15.60   390118.........   01.1514   16.34   390209.........   01.0388   15.48
370122.......................   01.1255   09.78   380038..........   01.3358   21.15   390040.........   01.0015   12.71   390119.........   01.3484   17.17   390211.........   01.1864   17.10
370123.......................   01.2080   14.12   380039..........   01.3285   18.89   390041.........   01.2556   16.82   390121.........   01.3362   18.95   390213.........   00.9413   14.55
370125.......................   01.0313   11.90   380040..........   01.2529   19.23   390042.........   01.4303   21.35   390122.........   01.0707   16.06   390215.........   01.1567   20.69
370126.......................   00.9473   10.66   380042..........   01.1547   18.06   390043.........   01.1059   15.65   390123.........   01.3002   20.58   390217.........   01.2820   17.92
370131.......................   01.0515   12.93   380047..........   01.6980   19.84   390044.........   01.6035   18.80   390125.........   01.2243   15.08   390219.........   01.3126   18.57
370133.......................   01.1108   09.82   380048..........   01.0877   13.92   390045.........   01.7250   17.35   390126.........   01.3270   20.07   390220.........   01.2051   19.33
370138.......................   01.1139   14.40   380050..........   01.3535   16.37   390046.........   01.5479   18.49   390127.........   01.2341   20.26   390222.........   01.3047   20.42
370139.......................   01.0952   10.62   380051..........   01.5153   19.13   390047.........   01.6934   23.83   390128.........   01.2022   17.96   390223.........   01.6436   23.15
370140.......................   00.9914   11.71   380052..........   01.1886   16.70   390048.........   01.1867   16.26   390130.........   01.1400   16.62   390224.........   00.9380   13.04
370141.......................   01.3994   19.17   380055..........   01.2332   23.88   390049.........   01.5481   19.82   390131.........   01.2704   16.24   390225.........   01.2136   15.42
370146.......................   01.0334   12.03   380056..........   01.0805   15.78   390050.........   02.1410   21.21   390132.........   01.2472   20.25   390226.........   01.7849   23.22
370148.......................   01.5867   19.01   380060..........   01.5427   21.51   390051.........   02.1789   24.98   390133.........   01.7840   20.57   390228.........   01.2097   18.67
370149.......................   01.2406   15.19   380061..........   01.5190   21.85   390052.........   01.1942   16.68   390135.........   01.2903   19.73   390231.........   01.3073   21.89
370153.......................   01.0980   13.17   380062..........   01.1022   15.07   390054.........   01.2238   14.56   390136.........   01.2304   15.66   390233.........   01.3224   16.71
370154.......................   01.0184   12.31   380063..........   01.3291   19.90   390055.........   01.7758   21.82   390137.........   01.3205   17.80   390235.........   01.5737   23.94
370156.......................   01.0910   13.37   380064..........   01.4379   18.47   390056.........   01.1158   15.73   390138.........   01.3335   17.41   390236.........   01.1730   15.90
370158.......................   01.0520   12.08   380065..........   01.0522   19.24   390057.........   01.3213   18.94   390139.........   01.5034   23.50   390237.........   01.6110   20.17
370159.......................   01.3498   13.95   380066..........   01.3198   17.60   390058.........   01.3256   17.46   390142.........   01.6703   22.64   390238.........   01.3009   16.12
370163.......................   00.8598   10.99   380068..........   01.0572   19.31   390060.........   01.1441   16.68   390145.........   01.3568   18.64   390242.........   01.2706   18.69
370165.......................   01.0906   11.74   380069..........   01.1302   17.51   390061.........   01.4388   20.47   390146.........   01.3133   16.19   390244.........   00.9314   13.32
370166.......................   01.0846   15.48   380070..........   01.3936   21.21   390062.........   01.1400   15.76   390147.........   01.2593   19.22   390245.........   01.3505   23.15
370169.......................   01.1130   10.66   380071..........   01.2923   18.06   390063.........   01.7390   19.30   390149.........   01.2546   19.59   390246.........   01.2343   15.91
370170.......................   00.9813  .......  380072..........   00.9776   14.15   390064.........   01.5536   16.30   390150.........   01.1045   17.50   390247.........   01.0532   17.11
370171.......................   01.0235  .......  380075..........   01.4343   20.90   390065.........   01.2840   18.85   390151.........   01.2950   18.26   390249.........   01.0339   10.81
370172.......................   00.8846  .......  380078..........   01.1630   16.95   390066.........   01.2949   17.15   390152.........   01.0397   17.07   390256.........   01.7863   23.51
370173.......................   01.2880  .......  380081..........   01.1420   17.66   390067.........   01.8124   18.03   390153.........   01.2439   21.93   390258.........   01.2630   19.78
370174.......................   00.9656  .......  380082..........   01.2830   20.35   390068.........   01.3206   18.13   390154.........   01.1846   13.93   390260.........   01.1752   20.02
370176.......................   01.1460   16.48   380083..........   01.2473   18.93   390069.........   01.3149   19.23   390155.........   01.2947   20.56   390262.........   01.9683   17.25
370177.......................   00.9746   10.10   380084..........   01.2083   20.61   390070.........   01.2872   19.49   390156.........   01.4292   22.61   390263.........   01.4329   18.66
370178.......................   01.0093   12.17   380087..........   01.0126   12.30   390071.........   01.1143   13.36   390157.........   01.3465   17.97   390265.........   01.3177   17.72
370179.......................   00.8839   14.28   380088..........   01.0041   15.71   390072.........   01.1098   15.76   390158.........   01.5904  .......  390266.........   01.2130   16.69
370180.......................   01.0671  .......  380089..........   01.2966   21.87   390073.........   01.5899   18.94   390160.........   01.2106   17.51   390267.........   01.2925   18.93
370183.......................   01.0923   14.00   380090..........   01.3003   24.41   390074.........   01.2338   16.26   390161.........   01.0926   14.87   390268.........   01.3885   19.94
370186.......................   01.0180   12.72   380091..........   01.2100   23.79   390075.........   01.2463   15.92   390162.........   01.4285   19.03   390270.........   01.3067   15.89
370189.......................   00.9704   10.13   390001..........   01.3711   18.16   390076.........   01.3156   20.45   390163.........   01.2240   16.55   390272.........   00.4528  ......
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[[Page 46252]]



                                                                                          Page 13 of 16                                                                                         
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                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
390277.......................   00.5603   20.34   420002..........   01.3814   18.80   430011.........   01.3374   14.33   440024.........   01.3270   16.22   440146.........   00.9338   11.08
390278.......................   00.7678   17.52   420004..........   01.8677   18.35   430012.........   01.3054   14.99   440025.........   01.1364   13.01   440147.........   01.1985   17.06
390279.......................   01.0751   13.63   420005..........   01.2065   14.35   430013.........   01.2411   15.06   440029.........   01.2900   16.30   440148.........   01.1378   14.37
390281.......................   03.2278  .......  420006..........   01.2691   18.90   430014.........   01.2803   16.77   440030.........   01.2038   13.21   440149.........   01.2007   15.19
400001.......................   01.2220   08.25   420007..........   01.5104   16.31   430015.........   01.1797   14.41   440031.........   00.9661   12.29   440150.........   01.2814   19.58
400002.......................   01.4856   10.96   420009..........   01.2122   15.70   430016.........   01.8135   17.59   440032.........   01.0524   12.65   440151.........   01.3711   15.86
400003.......................   01.2332   08.92   420010..........   01.1103   14.35   430018.........   00.9842   14.06   440033.........   01.0675   14.84   440152.........   01.5691   16.91
400004.......................   01.1483   07.59   420011..........   01.0948   14.89   430022.........   00.9711   10.91   440034.........   01.5752   16.64   440153.........   01.2623   15.10
400005.......................   01.1206   06.10   420014..........   01.1243   14.11   430023.........   00.9247   09.95   440035.........   01.3207   15.65   440156.........   01.5611   18.85
400006.......................   01.2016   08.16   420015..........   01.3249   15.96   430024.........   00.9133   12.28   440039.........   01.6370   16.76   440157.........   01.0908   13.64
400007.......................   01.2693   07.55   420016..........   01.0738   14.39   430026.........   01.0802   11.36   440040.........   00.9724   17.03   440159.........   01.2247   14.83
400009.......................   01.0262   07.68   420018..........   01.7297   18.63   430027.........   01.8126   16.64   440041.........   01.0380   12.35   440161.........   01.6915   20.63
400010.......................   00.9203   07.94   420019..........   01.2334   14.90   430028.........   01.0919   13.68   440046.........   01.3297   13.59   440166.........   01.4435   17.80
400011.......................   00.9992   08.65   420020..........   01.3863   15.98   430029.........   00.9945   13.10   440047.........   00.9562   15.31   440168.........   01.0268   13.03
400012.......................   01.2240   07.45   420023..........   01.4196   18.07   430031.........   00.9633   11.31   440048.........   01.7952   16.64   440173.........   01.5203   16.91
400013.......................   01.3026   07.90   420026..........   01.9243   18.05   430033.........   01.0190   11.90   440049.........   01.6599   15.62   440174.........   00.9800   13.30
400014.......................   01.3669   07.72   420027..........   01.3766   15.51   430034.........   01.0691   11.58   440050.........   01.2144   16.03   440175.........   01.2313   18.06
400015.......................   01.2460   10.88   420030..........   01.3136   15.83   430036.........   01.0403   10.11   440051.........   00.9274   13.29   440176.........   01.2943   18.36
400016.......................   01.3669   10.57   420031..........   00.9596   12.15   430037.........   00.9746   12.89   440052.........   01.2208   14.25   440178.........   01.1828   20.20
400017.......................   01.2323   06.27   420033..........   01.2169   19.24   430038.........   01.0102   10.77   440053.........   01.3082   15.64   440180.........   01.1590   16.68
400018.......................   01.3497   09.15   420035..........   00.8201   12.43   430039.........   01.0851   11.53   440054.........   01.2219   12.82   440181.........   01.0247   11.75
400019.......................   01.6713   09.52   420036..........   01.2109   15.61   430040.........   00.9125   12.17   440056.........   01.0837   13.45   440182.........   00.9496   15.33
400021.......................   01.4363   07.63   420037..........   01.2790   19.65   430041.........   00.9368   11.91   440057.........   01.0173   10.77   440183.........   01.5317   15.06
400022.......................   01.3221   09.94   420038..........   01.3043   14.43   430042.........   00.9807   10.63   440058.........   01.3195   14.95   440184.........   01.3454   18.63
400024.......................   01.0278   08.62   420039..........   01.1575   14.52   430043.........   01.1884   12.02   440059.........   01.3263   15.63   440185.........   01.1231   14.24
400026.......................   00.9518   05.90   420042..........   01.2023   12.15   430044.........   00.9113   13.17   440060.........   01.1970   14.76   440186.........   01.1936   16.21
400027.......................   01.1389   08.01   420043..........   01.1809   18.82   430047.........   01.1401   12.24   440061.........   01.2086   15.46   440187.........   01.2024   14.85
400028.......................   01.0186   07.77   420048..........   01.1316   14.26   430048.........   01.2003   15.01   440063.........   01.6128   17.43   440189.........   01.4803   18.81
400029.......................   01.1282   06.64   420049..........   01.1758   14.55   430049.........   00.9292   12.66   440064.........   01.1917   15.05   440192.........   01.1477   14.18
400031.......................   01.1362   08.00   420051..........   01.5589   17.99   430051.........   01.0196   13.48   440065.........   01.2342   16.18   440193.........   01.2835   17.88
400032.......................   01.1227   07.75   420053..........   01.1416   14.03   430054.........   01.0137   13.13   440067.........   01.1944   15.54   440194.........   01.4255   16.89
400044.......................   01.2346   09.09   420054..........   01.3673   16.39   430056.........   00.8553   08.93   440068.........   01.2212   16.43   440196.........   00.9505   13.32
400048.......................   01.1349   07.30   420055..........   01.0608   12.51   430057.........   00.9283   10.47   440069.........   01.1286   14.17   440197.........   01.4034   19.15
400061.......................   01.6729   11.80   420056..........   01.1544   13.41   430060.........   01.1566   08.46   440070.........   01.1243   12.52   440200.........   01.1971   15.41
400079.......................   01.2619   08.43   420057..........   01.1466   14.96   430062.........   00.8743   10.31   440071.........   01.3952   14.87   440203.........   00.9399   13.17
400087.......................   01.3682   07.87   420059..........   00.9934   13.96   430064.........   01.1303   11.89   440072.........   01.5223   13.92   440205.........   01.0953   14.15
400094.......................   01.0449   07.49   420061..........   01.1508   16.16   430065.........   00.9479   09.93   440073.........   01.3496   16.96   440206.........   01.0265   13.82
400098.......................   01.2488   07.50   420062..........   01.4491   15.65   430066.........   00.9678   10.93   440078.........   01.0256   13.28   440208.........   01.8205  ......
400102.......................   01.1685   08.67   420064..........   01.1139   13.45   430073.........   01.0704  .......  440081.........   01.1542   15.31   450002.........   01.4659   19.35
400103.......................   01.3822   08.80   420065..........   01.3039   16.72   430076.........   00.9751   09.41   440082.........   01.9853   20.54   450004.........   01.1678   12.38
400104.......................   01.3757   08.97   420066..........   00.9103   14.40   430077.........   01.5817   16.53   440083.........   01.1097   10.96   450005.........   01.1514   13.79
400105.......................   01.1767   08.37   420067..........   01.2427   16.24   430079.........   00.9610   11.47   440084.........   01.1791   11.41   450007.........   01.2393   13.73
400106.......................   01.2375   08.39   420068..........   01.2907   16.08   430080.........   01.1317   08.89   440087.........   00.9425   14.44   450008.........   01.3554   14.96
400109.......................   01.5324   09.13   420069..........   01.1030   13.71   430081.........   01.0291  .......  440090.........   00.9368   13.29   450010.........   01.3345   15.37
400110.......................   01.1163   07.65   420070..........   01.2642   15.05   430082.........   00.8067  .......  440091.........   01.5497   16.53   450011.........   01.5020   17.43
400111.......................   01.1523   07.98   420071..........   01.3101   16.13   430083.........   00.8649  .......  440100.........   01.0343   12.82   450014.........   01.0617   13.84
400112.......................   01.2541   06.01   420072..........   01.0775   10.64   430084.........   00.9278  .......  440102.........   01.0720   12.26   450015.........   01.5403   15.15
400113.......................   01.2466   08.20   420073..........   01.3072   18.13   430085.........   00.9194  .......  440103.........   01.2317   17.24   450016.........   01.6194   17.57
400114.......................   01.0452   06.50   420074..........   00.9037   11.72   430087.........   00.9027   09.29   440104.........   01.6500   17.68   450018.........   01.6073   21.75
400115.......................   01.0096   07.56   420075..........   00.9694   12.66   440001.........   01.1291   12.18   440105.........   01.3509   16.69   450020.........   01.0239   15.47
400117.......................   01.1759   09.23   420078..........   01.8104   18.59   440002.........   01.6019   15.73   440109.........   01.1368   12.28   450021.........   01.8149   21.11
400118.......................   01.1868   08.61   420079..........   01.5628   16.94   440003.........   01.0727   15.23   440110.........   00.9697   16.06   450023.........   01.4758   15.45
400120.......................   01.3057   09.14   420080..........   01.2627   19.18   440006.........   01.6333   17.55   440111.........   01.3691   18.00   450024.........   01.3739   16.45
400121.......................   01.0090   05.80   420082..........   01.3944   19.13   440007.........   01.0099   11.83   440114.........   01.0453   12.68   450025.........   01.5088   16.23
400122.......................   00.9993   05.88   420083..........   01.1937   18.36   440008.........   00.9877   13.50   440115.........   01.1184   14.66   450028.........   01.6360   17.17
400123.......................   01.1685   08.24   420084..........   00.7413   13.56   440009.........   01.1773   13.22   440120.........   01.5405   16.14   450029.........   01.3996   12.98
400124.......................   02.6681   09.27   420085..........   01.3941   16.86   440010.........   00.9181   08.75   440125.........   01.4435   16.09   450031.........   01.5825   18.72
410001.......................   01.3237   23.02   420086..........   01.3585   16.90   440011.........   01.2884   16.28   440130.........   01.1725   14.16   450032.........   01.2733   13.63
410004.......................   01.3672   21.15   420087..........   01.5958   16.53   440012.........   01.4781   17.72   440131.........   01.1390   13.44   450033.........   01.6352   16.84
410005.......................   01.3477   21.90   420088..........   01.1487   15.05   440014.........   01.0633   09.06   440132.........   01.1117   14.01   450034.........   01.6414   16.28
410006.......................   01.2581   21.40   420089..........   01.2296   19.40   440015.........   01.6236   16.42   440133.........   01.5475   17.78   450035.........   01.4498   18.91
410007.......................   01.6598   20.37   420091..........   01.2145   13.16   440016.........   01.0124   11.35   440135.........   01.3052   17.20   450037.........   01.6198   17.78
410008.......................   01.1681   21.05   430004..........   01.0941   17.25   440017.........   01.6214   18.42   440137.........   00.9781   12.14   450039.........   01.3536   18.70
410009.......................   01.2979   20.66   430005..........   01.3166   14.06   440018.........   01.4781   16.10   440141.........   01.0780   13.59   450040.........   01.5551   17.75
410010.......................   01.0163   25.40   430007..........   01.0466   12.56   440019.........   01.6255   19.06   440142.........   01.0334   10.75   450042.........   01.6664   15.75
410011.......................   01.2082   22.25   430008..........   01.1342   14.01   440020.........   01.2332   15.43   440143.........   01.1007   17.21   450043.........   01.4465   20.40
410012.......................   01.7245   19.51   430009..........   01.0881   11.86   440022.........   01.2045   13.72   440144.........   01.3344   18.35   450044.........   01.6233   20.51
410013.......................   01.3149   24.63   430010..........   01.1233   09.23   440023.........   01.0084   11.58   440145.........   01.0427   10.99   450046.........   01.3659   14.67
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 46253]]



                                                                                          Page 14 of 16                                                                                         
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
450047.......................   01.1220   13.43   450152..........   01.2584   16.04   450292.........   01.2041   20.69   450473.........   01.0025   17.83   450648.........   01.0330   11.36
450050.......................   01.0646   16.00   450153..........   01.5850   17.97   450293.........   00.9718   13.55   450475.........   01.1382   14.13   450649.........   01.0760   14.64
450051.......................   01.5938   18.22   450154..........   01.1993   12.23   450296.........   01.3113   16.46   450484.........   01.4918   18.53   450651.........   01.8202   21.97
450052.......................   01.0170   13.18   450155..........   01.0180   12.61   450297.........   01.0190   12.01   450488.........   01.2564   15.04   450652.........   00.9227   13.44
450053.......................   01.1454   13.11   450157..........   01.0065   12.97   450299.........   01.3347   17.02   450489.........   00.9782   11.56   450653.........   01.2431   18.84
450054.......................   01.7192   21.32   450160..........   00.9923   17.50   450303.........   00.9406   09.97   450497.........   01.1271   12.05   450654.........   01.0022   11.11
450055.......................   01.1447   12.92   450162..........   01.1938   16.77   450306.........   01.0853   12.50   450498.........   01.2476   13.88   450656.........   01.4892   16.48
450056.......................   01.6156   18.26   450163..........   01.0440   15.34   450307.........   00.8981   13.62   450508.........   01.5513   16.37   450658.........   00.9782   14.01
450058.......................   01.5801   14.76   450164..........   01.0742   12.56   450309.........   01.0640   12.74   450514.........   01.2130   18.78   450659.........   01.5709   21.98
450059.......................   01.2524   13.14   450165..........   00.9592   14.34   450315.........   01.1187   19.65   450517.........   00.9987   10.94   450660.........   01.5676   21.85
450060.......................   01.3645   22.17   450166..........   00.9684   10.06   450320.........   01.3390   18.20   450518.........   01.5354   16.84   450661.........   01.1458   19.26
450063.......................   00.9796   11.51   450169..........   00.9080   13.82   450321.........   00.9595   12.45   450523.........   01.5274   21.38   450662.........   01.6776   16.53
450064.......................   01.5134   15.34   450170..........   00.9791   11.32   450322.........   00.7151   15.40   450530.........   01.4471   21.64   450665.........   00.9352   11.45
450065.......................   01.1489   14.75   450176..........   01.2251   15.23   450324.........   01.6544   15.19   450534.........   00.9729   20.29   450666.........   01.2706   19.71
450068.......................   01.7905   20.31   450177..........   01.0924   13.18   450325.........   01.2253   11.93   450535.........   01.2548   14.12   450668.........   01.5402   18.90
450070.......................   01.2681   15.46   450178..........   01.0088   14.65   450327.........   00.9860   12.11   450537.........   01.3601   17.80   450669.........   01.2864   19.10
450072.......................   01.2416   18.19   450181..........   01.0019   15.15   450330.........   01.2227   16.86   450538.........   01.3999   21.17   450670.........   01.3009   19.44
450073.......................   01.1264   12.84   450184..........   01.5407   23.27   450334.........   01.0534   11.65   450539.........   01.2984   13.27   450672.........   01.6541   19.75
450076.......................   01.5782  .......  450185..........   01.1327   08.47   450337.........   01.2371   17.14   450544.........   01.4369   22.65   450673.........   01.1436   11.38
450078.......................   00.9932   11.17   450187..........   01.2814   16.44   450340.........   01.3187   14.54   450545.........   01.2718   14.13   450674.........   01.0111   22.09
450079.......................   01.4322   19.03   450188..........   01.0119   12.46   450341.........   01.0248   16.26   450546.........   01.8222   18.37   450675.........   01.5087   17.94
450080.......................   01.2955   15.79   450190..........   01.1860   19.53   450346.........   01.3451   16.27   450547.........   01.1713   15.09   450677.........   01.4313   19.18
450081.......................   01.0995   12.87   450191..........   01.0888   15.75   450347.........   01.1474   15.48   450550.........   00.9808   17.01   450678.........   01.4822   20.45
450082.......................   00.9666   12.75   450192..........   01.2364   16.25   450348.........   01.0026   10.99   450551.........   01.1921   13.75   450681.........   03.0551   17.29
450083.......................   01.7113   17.42   450193..........   02.0587   21.32   450351.........   01.1755   18.65   450558.........   01.7741   17.17   450683.........   01.3220   20.22
450085.......................   01.0883   14.38   450194..........   01.2395   18.11   450352.........   01.1091   16.21   450559.........   00.9492   12.75   450684.........   01.2741   18.53
450087.......................   01.4225   19.35   450196..........   01.5055   17.58   450353.........   01.3200   17.98   450561.........   01.6456   17.65   450686.........   01.5540   14.30
450090.......................   01.2033   12.40   450197..........   01.0524   19.66   450355.........   01.1377   11.18   450563.........   01.2363   21.98   450688.........   01.2881   18.65
450092.......................   01.2143   13.12   450200..........   01.3821   16.35   450358.........   02.0797   20.57   450565.........   01.3067   15.63   450690.........   01.4332   20.17
450094.......................   01.2606   19.39   450201..........   01.0166   15.38   450362.........   01.1880   18.62   450570.........   01.0343   11.74   450691.........   01.0990   14.91
450096.......................   01.5374   19.25   450203..........   01.1911   16.13   450369.........   01.0899   10.21   450571.........   01.4975   14.52   450694.........   01.2392   15.91
450097.......................   01.4459   18.33   450209..........   01.5470   16.62   450370.........   01.1322   13.02   450573.........   01.0043   13.58   450696.........   01.6532   23.37
450098.......................   01.1700   13.75   450210..........   01.1942   12.03   450371.........   01.1439   11.02   450574.........   00.9401   13.41   450697.........   01.5296   16.28
450099.......................   01.2845   17.70   450211..........   01.3875   15.53   450372.........   01.2685   20.49   450575.........   01.0588   16.98   450698.........   00.9741   11.66
450101.......................   01.4874   15.03   450213..........   01.5135   16.27   450373.........   01.1458   13.68   450578.........   00.9188   12.94   450700.........   00.9361   12.68
450102.......................   01.7024   21.87   450214..........   01.3724   18.61   450374.........   00.9606   12.20   450580.........   01.1043   12.59   450702.........   01.6116   17.58
450104.......................   01.2215   13.74   450217..........   01.0493   12.61   450376.........   01.5130   16.26   450583.........   01.0101   12.24   450703.........   01.5347   22.71
450107.......................   01.6114   18.75   450219..........   01.1376   14.22   450378.........   01.0872   21.56   450584.........   01.2252   12.86   450704.........   01.3685   17.86
450108.......................   00.9951   14.49   450221..........   01.0919   14.05   450379.........   01.5119   21.28   450586.........   00.9990   11.26   450705.........   01.0325   16.80
450109.......................   00.9937   15.36   450222..........   01.6583   17.32   450381.........   01.0501   12.56   450587.........   01.2284   16.93   450706.........   01.2203   21.90
450110.......................   01.2581   19.34   450224..........   01.3804   16.16   450388.........   01.7618   17.41   450591.........   01.1443   16.28   450709.........   01.2258   20.05
450111.......................   01.2467   19.56   450229..........   01.5720   15.17   450389.........   01.2091   16.74   450596.........   01.3111   17.29   450711.........   01.6445   17.90
450112.......................   01.3458   13.87   450231..........   01.5952   18.09   450393.........   01.3286   20.94   450597.........   01.0558   14.23   450712.........   00.7326   15.03
450113.......................   01.2354   16.99   450234..........   00.9894   11.27   450395.........   01.0373   14.68   450603.........   00.8313   16.27   450713.........   01.4795   18.10
450118.......................   01.5684   21.60   450235..........   01.0641   13.47   450399.........   00.9972   13.37   450604.........   01.3843   13.57   450715.........   01.4608   19.89
450119.......................   01.2883   16.37   450236..........   01.0680   14.17   450400.........   01.1529   13.70   450605.........   01.4572   17.91   450716.........   01.2763   19.64
450121.......................   01.4394   18.70   450237..........   01.5497   16.60   450403.........   01.3695   19.91   450609.........   00.8873   12.25   450717.........   01.3876   22.95
450123.......................   01.1501   17.47   450239..........   01.2041   12.35   450411.........   00.9528   11.46   450610.........   01.4525   16.09   450718.........   01.2410   20.52
450124.......................   01.5911   19.48   450241..........   01.0376   15.67   450417.........   01.0520   12.95   450614.........   01.0500   12.43   450723.........   01.3595   18.17
450126.......................   01.3790   11.95   450243..........   00.8397   11.57   450418.........   01.3231   17.42   450615.........   01.0751   11.70   450724.........   01.2949   16.59
450128.......................   01.2417   14.78   450246..........   00.9745   15.02   450419.........   01.2764   22.40   450617.........   01.2951   20.82   450725.........   01.0238   20.88
450130.......................   01.5026   16.34   450249..........   00.9682   10.70   450422.........   00.8069   23.47   450620.........   01.0721   12.48   450726.........   00.8634   14.54
450131.......................   01.3704   21.35   450250..........   00.9525   09.93   450423.........   01.4345   21.03   450623.........   01.1422   17.62   450727.........   00.9554   09.78
450132.......................   01.6500   16.45   450253..........   01.3238   13.51   450424.........   01.2052   16.33   450626.........   01.0899   14.09   450728.........   00.9742   14.31
450133.......................   01.5434   16.49   450258..........   01.0987   11.17   450429.........   01.1218   13.35   450628.........   00.9432   15.48   450730.........   01.3596   21.14
450135.......................   01.7232   21.81   450259..........   01.2053   17.44   450431.........   01.6621   17.30   450630.........   01.6460   20.60   450733.........   01.3642   16.91
450137.......................   01.5052   24.28   450264..........   00.8888   11.94   450438.........   01.1814   14.39   450631.........   01.7443   18.24   450735.........   00.8814   12.70
450140.......................   00.8514   16.46   450269..........   01.1527   12.62   450446.........   00.8552   13.07   450632.........   01.0135   11.17   450742.........   01.3392   21.43
450142.......................   01.4322   19.50   450270..........   01.1746   10.16   450447.........   01.3578   17.69   450633.........   01.5955   19.99   450743.........   01.4512   18.56
450143.......................   01.0933   12.23   450271..........   01.2705   14.41   450450.........   01.0892   16.43   450634.........   01.6915   21.57   450746.........   01.0348   13.39
450144.......................   01.1100   16.23   450272..........   01.2918   16.29   450451.........   01.1189   20.23   450637.........   01.3801   18.24   450747.........   01.3596   16.51
450145.......................   00.8715   12.46   450276..........   01.1012   10.44   450457.........   01.7888   17.14   450638.........   01.5960   22.52   450749.........   01.0066   12.35
450146.......................   01.0002   16.53   450278..........   00.8518   18.12   450460.........   01.0391   12.06   450639.........   01.4075   21.41   450750.........   01.0207   11.86
450147.......................   01.4238   17.66   450280..........   01.5267   20.58   450462.........   01.8388   19.89   450641.........   01.0270   12.60   450751.........   01.3180   21.80
450148.......................   01.3128   19.02   450283..........   01.0534   12.09   450464.........   00.9829   13.41   450643.........   01.2616   17.57   450754.........   00.8914   13.19
450149.......................   01.3535   19.71   450286..........   01.0404   14.54   450465.........   01.3156   14.66   450644.........   01.4772   20.30   450755.........   01.1576   13.66
450150.......................   00.8833   13.62   450288..........   01.2198   12.58   450467.........   00.9614   14.39   450646.........   01.6091   19.59   450757.........   00.9791   13.32
450151.......................   01.1042   13.27   450289..........   01.4806   17.37   450469.........   01.3754   16.94   450647.........   02.0177   20.35   450758.........   01.2161   13.21
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                                                                                          Page 15 of 16                                                                                         
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                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
450760.......................   01.1995   16.97   460047..........   01.7910   19.49   490067.........   01.2066   14.95   500028.........   01.0863   14.76   500139.........   01.4752   21.33
450761.......................   01.0624   09.63   460049..........   01.9373   17.36   490069.........   01.4041   15.74   500029.........   00.9240   14.30   500141.........   01.3369   21.93
450763.......................   01.0137   16.27   460050..........   01.3229   20.35   490071.........   01.4437   17.56   500030.........   01.4741   22.13   500143.........   00.7548   14.92
450766.......................   02.3026   21.39   460051..........   01.1889  .......  490073.........   01.3572   21.49   500031.........   01.2908   20.19   500146.........   01.0356  ......
450769.......................   01.0302   13.28   470001..........   01.2042   17.11   490074.........   01.3267   16.06   500033.........   01.2023   18.05   510001.........   01.7170   17.08
450770.......................   00.9569   13.59   470003..........   01.8185   20.22   490075.........   01.3350   16.62   500036.........   01.3243   19.11   510002.........   01.2698   16.31
450771.......................   01.9684   19.76   470004..........   01.1082   14.18   490077.........   01.1612   16.87   500037.........   01.1182   17.63   510004.........   00.9340   12.62
450774.......................   00.9029   23.99   470005..........   01.2621   18.71   490079.........   01.3172   14.30   500039.........   01.3816   21.32   510005.........   00.9906   13.71
450775.......................   01.2195   19.26   470006..........   01.1890   17.05   490083.........   00.6451   14.63   500041.........   01.2847   22.09   510006.........   01.2547   17.08
450776.......................   00.9203  .......  470008..........   01.2515   15.41   490084.........   01.2474   15.96   500042.........   01.3841   20.95   510007.........   01.4719   17.81
450777.......................   01.0133   15.01   470010..........   01.1785   18.58   490085.........   01.2069   13.36   500043.........   01.2790   16.56   510008.........   01.1392   15.33
450779.......................   01.3433   20.59   470011..........   01.1576   19.30   490088.........   01.2040   13.97   500044.........   01.8929   20.56   510012.........   01.0689   14.26
450780.......................   01.6395   19.78   470012..........   01.2641   17.52   490089.........   01.0777   14.37   500045.........   01.1206   20.65   510013.........   01.1401   15.10
450781.......................   01.5121   16.23   470013..........   01.1730   18.38   490090.........   01.1910   14.25   500048.........   00.9121   16.01   510015.........   00.9645   12.51
450785.......................   01.0081   26.08   470015..........   01.0821   16.29   490091.........   01.2048   20.14   500049.........   01.4662   19.34   510016.........   00.9894   11.27
450788.......................   01.4240  .......  470018..........   01.1960   17.37   490092.........   01.2073   14.32   500050.........   01.4048   20.41   510018.........   01.1325   14.40
450793.......................   01.6623  .......  470020..........   00.9790   14.50   490093.........   01.2886   15.31   500051.........   01.6400   22.71   510020.........   01.0439   10.16
450794.......................   01.4607  .......  470023..........   01.3025   17.20   490094.........   01.0703   14.57   500052.........   01.2844  .......  510022.........   01.8032   19.52
450795.......................   00.8583  .......  470024..........   01.1065   17.08   490095.........   01.4704   16.32   500053.........   01.2764   20.10   510023.........   01.1453   15.14
450797.......................   00.6907  .......  490001..........   01.0855   19.41   490097.........   01.1309   13.69   500054.........   01.8765   20.41   510024.........   01.4123   17.94
450798.......................   00.8914  .......  490002..........   01.0634   13.61   490098.........   01.3117   11.69   500055.........   01.0919   20.32   510026.........   00.9431   12.19
450799.......................   01.4105  .......  490003..........   00.6013   17.55   490099.........   00.9354   15.29   500057.........   01.3473   16.24   510027.........   00.9624   13.86
450800.......................   01.3490  .......  490004..........   01.2275   16.67   490100.........   01.3718   16.69   500058.........   01.5008   19.82   510028.........   01.0722   14.90
450801.......................   01.4785  .......  490005..........   01.5365   16.10   490101.........   01.1892   23.64   500059.........   01.1568   20.02   510029.........   01.2911   16.69
450802.......................   01.0743  .......  490006..........   01.1550   13.27   490104.........   00.8927   14.46   500060.........   01.4852   20.70   510030.........   01.1024   14.87
450803.......................   00.8537  .......  490007..........   02.0173   17.19   490105.........   00.7368   16.55   500061.........   00.9874   17.95   510031.........   01.3462   16.27
450804.......................   01.5317  .......  490009..........   01.8300   18.08   490106.........   00.8894   14.86   500062.........   01.0881   17.16   510033.........   01.2683   14.42
450805.......................   01.1690  .......  490010..........   01.0896   17.08   490107.........   01.3168   22.65   500064.........   01.5317   21.69   510035.........   01.1333   16.46
450807.......................   00.9104  .......  490011..........   01.4141   17.03   490108.........   00.8692   13.78   500065.........   01.2988   17.67   510036.........   01.0124   09.34
450809.......................   01.6695  .......  490012..........   01.2074   15.55   490109.........   00.9193   14.09   500068.........   01.0249   17.17   510038.........   01.1602   13.71
460001.......................   01.7915   19.82   490013..........   01.2459   14.82   490110.........   01.3951   15.90   500069.........   01.1604   18.62   510039.........   01.3713   15.02
460003.......................   01.7205   18.38   490014..........   01.3674   21.04   490111.........   01.2384   16.79   500071.........   01.3704   19.46   510043.........   00.9246   11.33
460004.......................   01.7759   20.68   490015..........   01.4613   17.30   490112.........   01.7317   19.07   500072.........   01.1955   21.19   510046.........   01.2634   15.26
460005.......................   01.5560   18.80   490017..........   01.3610   16.58   490113.........   01.2998   20.96   500073.........   01.0893   16.85   510047.........   01.2119   17.26
460006.......................   01.4316   18.71   490018..........   01.2531   16.88   490114.........   01.1055   15.00   500074.........   01.1764   14.80   510048.........   01.0836   17.39
460007.......................   01.5439   19.27   490019..........   01.2029   15.60   490115.........   01.2378   14.25   500075.........   03.7376   20.25   510050.........   01.4644   15.34
460008.......................   01.3622   16.02   490020..........   01.1532   14.16   490116.........   01.2262   15.61   500077.........   01.3928   21.63   510053.........   01.0373   13.50
460009.......................   01.8858   18.11   490021..........   01.1440   17.12   490117.........   01.1727   13.62   500079.........   01.4051   19.87   510055.........   01.2326   19.41
460010.......................   01.9311   20.15   490022..........   01.4164   17.59   490118.........   01.7640   21.32   500080.........   00.8347   11.56   510058.........   01.1980   16.23
460011.......................   01.3873   16.16   490023..........   01.2222   17.03   490119.........   01.3430   16.41   500084.........   01.1384   20.05   510059.........   01.2369   13.65
460013.......................   01.5121   18.54   490024..........   01.7777   17.06   490120.........   01.3210   16.90   500085.........   01.0600   17.19   510060.........   01.1653   15.36
460014.......................   01.0302   15.38   490027..........   01.1366   13.11   490122.........   01.5068   20.86   500086.........   01.4233   18.48   510061.........   01.0684   12.59
460015.......................   01.2578   19.75   490028..........   01.3505   18.42   490123.........   01.1433   14.80   500088.........   01.3681   22.86   510062.........   01.2001   15.38
460016.......................   00.8956   13.54   490030..........   01.0966   11.16   490124.........   01.1494   16.99   500089.........   00.9699   13.99   510063.........   01.0086   10.63
460017.......................   01.4587   16.52   490031..........   01.1399   12.61   490126.........   01.3829   14.72   500090.........   00.9942   12.60   510065.........   01.0057   12.04
460018.......................   00.9760   13.59   490032..........   01.7447   19.08   490127.........   01.0153   14.44   500092.........   01.0866   15.65   510066.........   01.1328   12.02
460019.......................   01.1474   12.90   490033..........   01.1930   15.58   490129.........   01.4271   17.98   500094.........   00.9216   15.53   510067.........   01.2442   15.91
460020.......................   01.0550   14.21   490035..........   01.2134   09.64   490130.........   01.3112   16.58   500096.........   01.0818   17.13   510068.........   01.1194   14.01
460021.......................   01.3930   19.20   490037..........   01.1236   13.27   490131.........   01.0313   14.06   500097.........   01.1361   16.12   510070.........   01.2176   16.05
460022.......................   00.9379   19.41   490038..........   01.2160   12.54   500001.........   01.3320   20.92   500098.........   00.9259   13.66   510071.........   01.2805   14.49
460023.......................   01.1852   20.75   490040..........   01.4126   21.19   500002.........   01.4806   18.75   500101.........   01.0231   17.84   510072.........   01.0631   13.50
460024.......................   00.8925   13.88   490041..........   01.3528   16.82   500003.........   01.4107   21.28   500102.........   00.9438   18.43   510077.........   01.1112   14.36
460025.......................   00.8072   12.63   490042..........   01.3424   15.18   500005.........   01.8423   22.52   500104.........   01.2581   18.71   510080.........   01.1526   09.35
460026.......................   01.0894   16.98   490043..........   01.3567   16.74   500007.........   01.4103   20.14   500106.........   00.9357   15.53   510081.........   01.0273   13.19
460027.......................   00.9427   18.71   490044..........   01.3652   16.65   500008.........   01.8538   22.88   500107.........   01.1326   15.58   510082.........   01.0492   12.08
460029.......................   01.0225   15.71   490045..........   01.1326   18.60   500009.........   01.2784   21.07   500108.........   01.6728   21.40   510084.........   00.9917   13.25
460030.......................   01.2159   15.78   490046..........   01.4684   17.24   500011.........   01.3857   21.44   500110.........   01.2764   18.75   510085.........   01.2369   17.99
460032.......................   01.0099   19.00   490047..........   01.0719   16.34   500012.........   01.5255   20.94   500118.........   01.1356   20.88   510086.........   01.0561   15.65
460033.......................   00.9544   18.22   490048..........   01.4849   17.53   500014.........   01.5705   22.36   500119.........   01.3328   20.48   520002.........   01.2922   17.24
460035.......................   00.9610   11.43   490050..........   01.4304   20.06   500015.........   01.3611   20.92   500122.........   01.1907   20.27   520003.........   01.1620   15.19
460036.......................   00.9397   19.41   490052..........   01.6110   15.34   500016.........   01.4832   22.76   500123.........   00.8533   14.78   520004.........   01.1559   16.53
460037.......................   01.0591   15.92   490053..........   01.2500   14.14   500019.........   01.3350   19.82   500124.........   01.3275   22.39   520006.........   01.0574   18.05
460039.......................   01.0976   21.08   490054..........   01.1202   13.91   500021.........   01.5313   20.77   500125.........   00.9883   10.72   520007.........   01.2421   14.14
460041.......................   01.2170   18.29   490057..........   01.5395   17.05   500023.........   01.1880   19.09   500129.........   01.7287   22.41   520008.........   01.5505   20.54
460042.......................   01.4763   16.14   490059..........   01.5677   18.24   500024.........   01.6344   21.06   500132.........   00.9951   19.79   520009.........   01.5958   16.88
460043.......................   00.9968   20.44   490060..........   01.0692   16.72   500025.........   01.8629   21.69   500134.........   00.8092   15.75   520010.........   01.1719   19.34
460044.......................   01.2081   19.41   490063..........   01.6593   22.34   500026.........   01.4296   22.42   500137.........   00.7050   19.99   520011.........   01.2046   16.46
460046.......................   00.7432   10.23   490066..........   01.2205   17.58   500027.........   01.5358   23.68   500138.........   03.4209  .......  520013.........   01.2869   17.88
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 46255]]



                                                                                          Page 16 of 16                                                                                         
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                 Case      Avg.                       Case      Avg.                      Case      Avg.                      Case      Avg.                      Case     Avg. 
           Provider               mix      hour       Provider         mix      hour       Provider        mix      hour       Provider        mix      hour       Provider        mix     hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
520014.......................   01.2027   15.55   520103..........   01.3253   17.70   530025.........   01.3617   17.99                                                                        
520015.......................   01.1208   16.65   520107..........   01.2590   17.46   530026.........   01.0549   14.63                                                                        
520016.......................   01.0905   12.75   520109..........   00.9991   17.25   530027.........   00.8298   09.56                                                                        
520017.......................   01.1856   16.87   520110..........   01.1737   16.47   530029.........   00.9607   13.49                                                                        
520018.......................   01.0817   15.88   520111..........   00.9881   14.44   530031.........   00.8790   10.95                                                                        
520019.......................   01.2831   16.65   520112..........   01.0774   18.15   530032.........   01.1497   17.34                                                                        
520021.......................   01.3589   19.16   520113..........   01.1649   17.80                                                                                                            
520024.......................   01.0340   13.33   520114..........   01.1065   12.61                                                                                                            
520025.......................   01.1366   15.19   520115..........   01.3241   15.89                                                                                                            
520026.......................   01.0973   17.48   520116..........   01.2614   17.66                                                                                                            
520027.......................   01.2310   19.22   520117..........   01.0328   15.40                                                                                                            
520028.......................   01.3213   17.60   520118..........   00.9426   10.95                                                                                                            
520029.......................   00.9672   16.70   520120..........   00.8716   11.95                                                                                                            
520030.......................   01.6756   20.19   520121..........   00.9752   14.18                                                                                                            
520031.......................   01.1149   16.11   520122..........   00.9991   13.96                                                                                                            
520032.......................   01.1627   14.56   520123..........   01.1304   16.55                                                                                                            
520033.......................   01.1838   15.91   520124..........   01.1231   14.34                                                                                                            
520034.......................   01.1326   17.17   520130..........   01.0848   12.60                                                                                                            
520035.......................   01.2520   14.67   520131..........   01.0608   15.82                                                                                                            
520037.......................   01.6526   18.23   520132..........   01.1759   14.31                                                                                                            
520038.......................   01.4892   17.14   520134..........   01.0288   15.14                                                                                                            
520039.......................   01.0077   16.24   520135..........   00.9463   13.84                                                                                                            
520040.......................   01.4307   20.05   520136..........   01.4791   18.87                                                                                                            
520041.......................   01.1426   14.54   520138..........   01.8806   18.18                                                                                                            
520042.......................   01.0710   16.25   520139..........   01.2886   18.50                                                                                                            
520044.......................   01.3714   16.09   520140..........   01.6140   19.31                                                                                                            
520045.......................   01.6919   17.97   520141..........   01.1169   15.63                                                                                                            
520047.......................   01.0188   14.50   520142..........   00.9147   12.48                                                                                                            
520048.......................   01.4400   17.67   520144..........   01.0393   16.10                                                                                                            
520049.......................   01.9950   17.97   520145..........   00.9143   16.57                                                                                                            
520051.......................   02.0353   19.41   520146..........   01.0746   13.71                                                                                                            
520053.......................   01.0992   14.78   520148..........   01.1623   15.34                                                                                                            
520054.......................   01.0858   16.40   520149..........   00.9555   13.31                                                                                                            
520056.......................   01.3107   17.77   520151..........   01.0897   14.43                                                                                                            
520057.......................   01.1288   16.08   520152..........   01.1331   16.38                                                                                                            
520058.......................   01.0509   17.87   520153..........   00.9798   13.19                                                                                                            
520059.......................   01.3228   18.17   520154..........   01.1472   16.15                                                                                                            
520060.......................   01.2997   15.15   520156..........   01.1203   16.37                                                                                                            
520062.......................   01.2655   16.18   520157..........   00.9424   13.70                                                                                                            
520063.......................   01.2607   17.61   520159..........   00.9388   16.25                                                                                                            
520064.......................   01.7082   18.60   520160..........   01.7678   17.77                                                                                                            
520066.......................   01.4098   17.73   520161..........   01.0250   14.76                                                                                                            
520068.......................   00.8915   15.82   520170..........   01.2443   18.51                                                                                                            
520069.......................   01.1870   16.75   520171..........   00.9943   13.69                                                                                                            
520070.......................   01.5908   16.93   520173..........   01.1567   17.36                                                                                                            
520071.......................   01.1171   17.71   520174..........   01.4333   20.57                                                                                                            
520074.......................   01.0987   14.96   520177..........   01.6449   20.33                                                                                                            
520075.......................   01.4698   17.44   520178..........   01.0559   14.61                                                                                                            
520076.......................   01.1236   14.40   520186..........   02.5906  .......                                                                                                           
520077.......................   01.0257   14.50   530002..........   01.1980   18.07                                                                                                            
520078.......................   01.5135   17.89   530003..........   00.9289   12.59                                                                                                            
520082.......................   01.3440   15.25   530004..........   01.0252   13.17                                                                                                            
520083.......................   01.5917   21.59   530005..........   01.1380   13.19                                                                                                            
520084.......................   01.0815   15.73   530006..........   01.1263   16.83                                                                                                            
520087.......................   01.6157   17.16   530007..........   01.0519   11.52                                                                                                            
520088.......................   01.2441   17.56   530008..........   01.2819   17.75                                                                                                            
520089.......................   01.5181   18.76   530009..........   00.9693   20.60                                                                                                            
520090.......................   01.2798   16.16   530010..........   01.2110   16.30                                                                                                            
520091.......................   01.3653   17.25   530011..........   01.0901   15.27                                                                                                            
520092.......................   01.1109   15.11   530012..........   01.5887   17.25                                                                                                            
520094.......................   01.0028   16.07   530014..........   01.3344   15.01                                                                                                            
520095.......................   01.3845   18.56   530015..........   01.1465   19.22                                                                                                            
520096.......................   01.4966   17.78   530016..........   01.2083   11.87                                                                                                            
520097.......................   01.3301   17.90   530017..........   00.9927   16.09                                                                                                            
520098.......................   01.7373   19.40   530018..........   01.0650   14.57                                                                                                            
520100.......................   01.2315   15.91   530019..........   00.9451   14.32                                                                                                            
520101.......................   01.1002   15.75   530022..........   01.1165   15.94                                                                                                            
520102.......................   01.2175   19.00   530023..........   00.8533   17.76                                                                                                            
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Case mix indexes do not include discharges from PPS-exempt units. Case mix indexes include cases received in HCFA central office through June 1996.                                       


[[Page 46256]]



Table 4a.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                               Urban Areas                              
------------------------------------------------------------------------
     Urban area (constituent counties or county         Wage            
                    equivalents)                        index      GAF  
------------------------------------------------------------------------
0040  Abilene, TX...................................    0.8147    0.8691
  Taylor, TX                                                            
0060  Aguadilla, PR.................................    0.4237    0.5554
  Aguada, PR                                                            
  Aguadilla, PR                                                         
  Moca, PR                                                              
0080  Akron, OH.....................................    0.9853    0.9899
  Portage, OH                                                           
  Summit, OH                                                            
0120  Albany, GA....................................    0.8597    0.9017
  Dougherty, GA                                                         
  Lee, GA                                                               
0160  Albany-Schenectady-Troy, NY...................    0.8624    0.9036
  Albany, NY                                                            
  Montgomery, NY                                                        
  Rensselaer, NY                                                        
  Saratoga, NY                                                          
  Schenectady, NY                                                       
  Schoharie, NY                                                         
0200  Albuquerque, NM...............................    0.9350    0.9550
  Bernalillo, NM                                                        
  Sandoval, NM                                                          
  Valencia, NM                                                          
0220  Alexandria, LA................................    0.8194    0.8725
  Rapides, LA                                                           
0240  Allentown-Bethlehem-Easton, PA................    0.9992    0.9995
  Carbon, PA                                                            
  Lehigh, PA                                                            
  Northampton, PA                                                       
0280  Altoona, PA...................................    0.9510    0.9662
  Blair, PA                                                             
0320  Amarillo, TX..................................                    
  Potter, TX                                            0.8730    0.9112
  Randall, TX                                                           
0380  Anchorage, AK.................................    1.3255    1.2128
  Anchorage, AK                                                         
0440  Ann Arbor, MI.................................    1.1662    1.1110
  Lenawee, MI                                                           
  Livingston, MI                                                        
  Washtenaw, MI                                                         
0450  Anniston, AL..................................    0.8023    0.8600
  Calhoun, AL                                                           
0460  Appleton-Oshkosh-Neenah, WI...................    0.8890    0.9226
  Calumet, WI                                                           
  Outagamie, WI                                                         
  Winnebago, WI                                                         
0470  Arecibo, PR...................................    0.4397    0.5697
  Arecibo, PR                                                           
  Camuy, PR                                                             
  Hatillo, PR                                                           
0480  Asheville, NC.................................    0.9344    0.9546
  Buncombe, NC                                                          
  Madison, NC                                                           
0500  Athens, GA....................................    0.9408    0.9591
  Clarke, GA                                                            
  Madison, GA                                                           
  Oconee, GA                                                            
0520  *Atlanta, GA..................................    1.0033    1.0023
  Barrow, GA                                                            
  Bartow, GA                                                            
  Carroll, GA                                                           
  Cherokee, GA                                                          
  Clayton, GA                                                           
  Cobb, GA                                                              
  Coweta, GA                                                            
  DeKalb, 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                                                            
0560  Atlantic-Cape May, NJ.........................    1.1077    1.0726
  Atlantic, NJ                                                          
  Cape May, NJ                                                          
0600  Augusta-Aiken, GA-SC..........................    0.8836    0.9187
  Columbia, GA                                                          
  McDuffie, GA                                                          
  Richmond, GA                                                          
  Aiken, SC                                                             
  Edgefield, SC                                                         
0640  Austin-San Marcos, TX.........................    0.9254    0.9483
  Bastrop, TX                                                           
  Caldwell, TX                                                          
  Hays, TX                                                              
  Travis, TX                                                            
  Williamson, TX                                                        
0680  Bakersfield, CA...............................    1.0189    1.0129
  Kern, CA                                                              
0720  *Baltimore, MD................................    0.9798    0.9861
  Anne Arundel, MD                                                      
  Baltimore, MD                                                         
  Baltimore City, MD                                                    
  Carroll, MD                                                           
  Harford, MD                                                           
  Howard, MD                                                            
  Queen Anne's, MD                                                      
0733  Bangor, ME....................................    0.9391    0.9579
  Penobscot, ME                                                         
0743  Barnstable-Yarmouth, MA.......................    1.3651    1.2375
  Barnstable, MA                                                        
0760  Baton Rouge, LA...............................    0.8433    0.8898
  Ascension, LA                                                         
  East Baton Rouge, LA                                                  
  Livingston, LA                                                        
  West Baton Rouge, LA                                                  
0840  Beaumont-Port Arthur, TX......................    0.8576    0.9001
  Hardin, TX                                                            
  Jefferson, TX                                                         
  Orange, TX                                                            
0860  Bellingham, WA................................    1.1317    1.0884
  Whatcom, WA                                                           
0870  Benton Harbor, MI.............................    0.8550    0.8983
  Berrien, MI                                                           
0875  *Bergen-Passaic, NJ...........................    1.1785    1.1190
  Bergen, NJ                                                            
  Passaic, NJ                                                           
0880  Billings, MT..................................    0.9086    0.9365
  Yellowstone, MT                                                       
0920  Biloxi-Gulfport-Pascagoula, MS................    0.8554    0.8986
  Hancock, MS                                                           
  Harrison, MS                                                          
  Jackson, MS                                                           
0960  Binghamton, NY................................    0.8822    0.9178
  Broome, NY                                                            
  Tioga, NY                                                             
1000  Birmingham, AL................................    0.9036    0.9329
  Blount, AL                                                            
  Jefferson, AL                                                         
  St. Clair, AL                                                         
  Shelby, AL                                                            
1010  Bismarck, ND..................................    0.8074    0.8637
  Burleigh, ND                                                          
  Morton, ND                                                            
1020  Bloomington, IN...............................    0.8652    0.9056
  Monroe, IN                                                            
1040  Bloomington-Normal, IL........................    0.8990    0.9297
  McLean, IL                                                            
1080  Boise City, ID................................    0.9383    0.9573
  Ada, ID                                                               
  Canyon, ID                                                            
1123  *Boston-Worcester-Lawrence-Lowell-Brockton, MA-                   
 NH.................................................    1.1613    1.1078
  Bristol, MA                                                           
  Essex, MA                                                             
  Middlesex, MA                                                         
  Norfolk, MA                                                           
  Plymouth, MA                                                          
  Suffolk, MA                                                           
  Worcester, MA                                                         
  Hillsborough, NH                                                      
  Merrimack, NH                                                         
  Rockingham, NH                                                        
  Strafford, NH                                                         
1125  Boulder-Longmont, CO..........................    0.9522    0.9670
  Boulder, CO                                                           
1145  Brazoria, TX..................................    0.8845    0.9194
  Brazoria, TX                                                          
1150  Bremerton, WA.................................    1.0901    1.0609
  Kitsap, WA                                                            
1240  Brownsville-Harlingen-San Benito, TX..........    0.8542    0.8977
  Cameron, TX                                                           
1260  Bryan-College Station, TX.....................    0.8851    0.9198
  Brazos, TX                                                            
1280  *Buffalo-Niagara Falls, NY....................    0.9107    0.9380
  Erie, NY                                                              
  Niagara, NY                                                           
1303  Burlington, VT................................    1.0068    1.0047
  Chittenden, VT                                                        
  Franklin, VT                                                          
  Grand Isle, VT                                                        
1310  Caguas, PR....................................    0.4589    0.5866
  Caguas, PR                                                            
  Cayey, PR                                                             
  Cidra, PR                                                             
  Gurabo, PR                                                            
  San Lorenzo, PR                                                       

[[Page 46257]]

                                                                        
1320  Canton-Massillon, OH..........................    0.8648    0.9053
  Carroll, OH                                                           
  Stark, OH                                                             
1350  Casper, WY....................................    0.8821    0.9177
  Natrona, WY                                                           
1360  Cedar Rapids, IA..............................    0.8458    0.8916
  Linn, IA                                                              
1400  Champaign-Urbana, IL..........................    0.9391    0.9579
  Champaign, IL                                                         
1440  Charleston-North Charleston, SC...............    0.8963    0.9278
  Berkeley, SC                                                          
  Charleston, SC                                                        
  Dorchester, SC                                                        
1480  Charleston, WV................................    0.9526    0.9673
  Kanawha, WV                                                           
  Putnam, WV                                                            
1520  *Charlotte-Gastonia-Rock Hill, NC-SC..........    0.9620    0.9738
  Cabarrus, NC                                                          
  Gaston, NC                                                            
  Lincoln, NC                                                           
  Mecklenburg, NC                                                       
  Rowan, NC                                                             
  Union, NC                                                             
  York, SC                                                              
1540  Charlottesville, VA...........................    0.9155    0.9413
  Albemarle, VA                                                         
  Charlottesville City, VA                                              
  Fluvanna, VA                                                          
  Greene, VA                                                            
1560  Chattanooga, TN-GA............................    0.8847    0.9195
  Catoosa, GA                                                           
  Dade, GA                                                              
  Walker, GA                                                            
  Hamilton, TN                                                          
  Marion, TN                                                            
1580  Cheyenne, WY..................................    0.7678    0.8345
  Laramie, WY                                                           
1600  *Chicago, IL..................................    1.0760    1.0514
  Cook, IL                                                              
  DeKalb, IL                                                            
  DuPage, IL                                                            
  Grundy, IL                                                            
  Kane, IL                                                              
  Kendall, IL                                                           
  Lake, IL                                                              
  McHenry, IL                                                           
  Will, IL                                                              
1620  Chico-Paradise, CA............................    1.0417    1.0284
  Butte, CA                                                             
1640  *Cincinnati, OH-KY-IN.........................    0.9568    0.9702
  Dearborn, IN                                                          
  Ohio, IN                                                              
  Boone, KY                                                             
  Campbell, KY                                                          
  Gallatin, KY                                                          
  Grant, KY                                                             
  Kenton, KY                                                            
  Pendleton, KY                                                         
  Brown, OH                                                             
  Clermont, OH                                                          
  Hamilton, OH                                                          
  Warren, OH                                                            
1660  Clarksville-Hopkinsville, TN-KY...............    0.7716    0.8373
  Christian, KY                                                         
  Montgomery, TN                                                        
1680  *Cleveland-Lorain-Elyria, OH..................    0.9886    0.9922
  Ashtabula, OH                                                         
  Cuyahoga, OH                                                          
  Geauga, OH                                                            
  Lake, OH                                                              
  Lorain, OH                                                            
  Medina, OH                                                            
1720  Colorado Springs, CO..........................    0.9341    0.9544
  El Paso, CO                                                           
1740  Columbia, MO..................................    0.8904    0.9236
  Boone, MO                                                             
1760  Columbia, SC..................................    0.9160    0.9417
  Lexington, SC                                                         
  Richland, SC                                                          
1800  Columbus, GA-AL...............................                    
  Russell, AL                                           0.7779    0.8420
  Chattanoochee, GA                                                     
  Harris, GA                                                            
  Muscogee, GA                                                          
1840  *Columbus, OH.................................    0.9681    0.9780
  Delaware, OH                                                          
  Fairfield, OH                                                         
  Franklin, OH                                                          
  Licking, OH                                                           
  Madison, OH                                                           
  Pickaway, OH                                                          
1880  Corpus Christi, TX............................    0.8881    0.9219
  Nueces, TX                                                            
  San Patricio, TX                                                      
1900  Cumberland, MD-WV.............................    0.8671    0.9070
  Allegany, MD                                                          
  Mineral, WV                                                           
1920  *Dallas, TX...................................    0.9729    0.9814
  Collin, TX                                                            
  Dallas, TX                                                            
  Denton, TX                                                            
  Ellis, TX                                                             
  Henderson, TX                                                         
  Hunt, TX                                                              
  Kaufman, TX                                                           
  Rockwall, TX                                                          
1950  Danville, VA..................................    0.8497    0.8945
  Danville City, VA                                                     
  Pittsylvania, VA                                                      
1960  Davenport-Moline-Rock Island, IA-IL...........    0.8388    0.8866
  Scott, IA                                                             
  Henry, IL                                                             
  Rock Island, IL                                                       
2000  Dayton-Springfield, OH........................    0.9559    0.9696
  Clark, OH                                                             
  Greene, OH                                                            
  Miami, OH                                                             
  Montgomery, OH                                                        
2020  Daytona Beach, FL.............................    0.8871    0.9212
  Flagler, FL                                                           
  Volusia, FL                                                           
2030  Decatur, AL...................................    0.8384    0.8863
  Lawrence, AL                                                          
  Morgan, AL                                                            
2040  Decatur, IL...................................    0.7848    0.8471
  Macon, IL                                                             
2080  *Denver, CO...................................    1.0166    1.0113
  Adams, CO                                                             
  Arapahoe, CO                                                          
  Denver, CO                                                            
  Douglas, CO                                                           
  Jefferson, CO                                                         
2120  Des Moines, IA................................    0.8815    0.9173
  Dallas, IA                                                            
  Polk, IA                                                              
  Warren, IA                                                            
2160  *Detroit, MI..................................    1.0724    1.0490
  Lapeer, MI                                                            
  Macomb, MI                                                            
  Monroe, MI                                                            
  Oakland, MI                                                           
  St. Clair, MI                                                         
  Wayne, MI                                                             
2180  Dothan, AL....................................    0.7740    0.8391
  Dale, AL                                                              
  Houston, AL                                                           
2190  Dover, DE.....................................    0.8997    0.9302
  Kent, DE                                                              
2200  Dubuque, IA...................................    0.8112    0.8665
  Dubuque, IA                                                           
2240  Duluth-Superior, MN-WI........................    0.9416    0.9596
  St. Louis, MN                                                         
  Douglas, WI                                                           
2281  Dutchess County, NY...........................    1.0589    1.0400
  Dutchess, NY                                                          
2290  Eau Claire, WI................................    0.8678    0.9075
  Chippewa, WI                                                          
  Eau Claire, WI                                                        
2320  El Paso, TX...................................    0.9464    0.9630
  El Paso, TX                                                           
2330  Elkhart-Goshen, IN............................    0.8801    0.9163
  Elkhart, IN                                                           
2335  Elmira, NY....................................    0.8417    0.8887
  Chemung, NY                                                           
2340  Enid, OK......................................    0.7862    0.8481
  Garfield, OK                                                          
2360  Erie, PA......................................    0.9159    0.9416
  Erie, PA                                                              
2400  Eugene-Springfield, OR........................    1.1477    1.0989
  Lane, OR                                                              
2440  Evansville-Henderson, IN-KY...................    0.8983    0.9292
  Posey, IN                                                             
  Vanderburgh, IN                                                       
  Warrick, IN                                                           
  Henderson, KY                                                         
2520  Fargo-Moorhead, ND-MN.........................    0.9045    0.9336

[[Page 46258]]

                                                                        
  Clay, MN                                                              
  Cass, ND                                                              
2560  Fayetteville, NC..............................    0.9007    0.9309
  Cumberland, NC                                                        
2580  Fayetteville-Springdale-Rogers, AR............    0.7220    0.8001
  Benton, AR                                                            
  Washington, AR                                                        
2620  Flagstaff, AZ-UT..............................    0.9019    0.9317
  Coconino, AZ                                                          
  Kane, UT                                                              
2640  Flint, MI.....................................    1.1248    1.0839
  Genesee, MI                                                           
2650  Florence, AL..................................    0.8111    0.8664
  Colbert, AL                                                           
  Lauderdale, AL                                                        
2655  Florence, SC..................................    0.8594    0.9014
  Florence, SC                                                          
2670  Fort Collins-Loveland, CO.....................    1.0562    1.0382
  Larimer, CO                                                           
2680  *Ft. Lauderdale, FL...........................    1.0586    1.0398
  Broward, FL                                                           
2700  Fort Myers-Cape Coral, FL.....................    0.9032    0.9327
  Lee, FL                                                               
2710  Fort Pierce-Port St. Lucie, FL................    1.0169    1.0115
  Martin, FL                                                            
  St. Lucie, FL                                                         
2720  Fort Smith, AR-OK.............................    0.7867    0.8485
  Crawford, AR                                                          
  Sebastian, AR                                                         
  Sequoyah, OK                                                          
2750  Fort Walton Beach, FL.........................    0.9192    0.9439
  Okaloosa, FL                                                          
2760  Fort Wayne, IN................................    0.8800    0.9162
  Adams, IN                                                             
  Allen, IN                                                             
  DeKalb, IN                                                            
  Huntington, IN                                                        
  Wells, IN                                                             
  Whitley, IN                                                           
2800  *Forth Worth-Arlington, TX....................    1.0153    1.0105
  Hood, TX                                                              
  Johnson, TX                                                           
  Parker, TX                                                            
  Tarrant, TX                                                           
2840  Fresno, CA....................................    1.1177    1.0792
  Fresno, CA                                                            
  Madera, CA                                                            
2880  Gadsden, AL...................................    0.8881    0.9219
  Etowah, AL                                                            
2900  Gainesville, FL...............................    0.9434    0.9609
  Alachua, FL                                                           
2920  Galveston-Texas City, TX......................    1.0997    1.0672
  Galveston, TX                                                         
2960  Gary, IN......................................    0.9155    0.9413
  Lake, IN                                                              
  Porter, IN                                                            
2975  Glens Falls, NY...............................    0.8562    0.8991
  Warren, NY                                                            
  Washington, NY                                                        
2980  Goldsboro, NC.................................    0.8393    0.8869
  Wayne, NC                                                             
2985  Grand Forks, ND-MN............................    0.9207    0.9450
  Polk, MN                                                              
  Grand Forks, ND                                                       
2995  Grand Junction, CO............................    0.8825    0.9180
  Mesa, CO                                                              
3000  Grand Rapids-Muskegon-Holland, MI.............    1.0119    1.0081
  Allegan, MI                                                           
  Kent, MI                                                              
  Muskegon, MI                                                          
  Ottawa, MI                                                            
3040  Great Falls, MT...............................    0.9015    0.9315
  Cascade, MT                                                           
3060  Greeley, CO...................................    0.9690    0.9787
  Weld, CO                                                              
3080  Green Bay, WI.................................    0.9366    0.9561
  Brown, WI                                                             
3120  *Greensboro-Winston-Salem-High Point, NC......    0.9314    0.9525
  Alamance, NC                                                          
  Davidson, NC                                                          
  Davie, NC                                                             
  Forsyth, NC                                                           
  Guilford, NC                                                          
  Randolph, NC                                                          
  Stokes, NC                                                            
  Yadkin, NC                                                            
3150  Greenville, NC................................    0.9078    0.9359
  Pitt, NC                                                              
3160  Greenville-Spartanburg-Anderson, SC...........    0.8927    0.9252
  Anderson, SC                                                          
  Cherokee, SC                                                          
  Greenville, SC                                                        
  Pickens, SC                                                           
  Spartanburg, SC                                                       
3180  Hagerstown, MD................................    0.9175    0.9427
  Washington, MD                                                        
3200  Hamilton-Middletown, OH.......................    0.9490    0.9648
  Butler, OH                                                            
3240  Harrisburg-Lebanon-Carlisle, PA...............    1.0158    1.0108
  Cumberland, PA                                                        
  Dauphin, PA                                                           
  Lebanon, PA                                                           
  Perry, PA                                                             
3283  *Hartford, CT.................................    1.2367    1.1566
  Hartford, CT                                                          
  Litchfield, CT                                                        
  Middlesex, CT                                                         
  Tolland, CT                                                           
3285  Hattiesburg, MS...............................    0.7252    0.8025
  Forrest, MS                                                           
  Lamar, MS                                                             
3290  Hickory-Morganton-Lenoir, NC..................    0.7953    0.8548
  Alexander, NC                                                         
  Burke, NC                                                             
  Caldwell, NC                                                          
  Catawba, NC                                                           
3320  Honolulu, HI..................................    1.1461    1.0979
  Honolulu, HI                                                          
3350  Houma, LA.....................................    0.7853    0.8475
  Lafourche, LA                                                         
  Terrebonne, LA                                                        
3360  *Houston, TX..................................    1.0000    1.0000
  Chambers, TX                                                          
  Fort Bend, TX                                                         
  Harris, TX                                                            
  Liberty, TX                                                           
  Montgomery, TX                                                        
  Waller, TX                                                            
3400  Huntington-Ashland, WV-KY-OH..................    0.9174    0.9427
  Boyd, KY                                                              
  Carter, KY                                                            
  Greenup, KY                                                           
  Lawrence, OH                                                          
  Cabell, WV                                                            
  Wayne, WV                                                             
3440  Huntsville, AL................................    0.8206    0.8734
  Limestone, AL                                                         
  Madison, AL                                                           
3480  *Indianapolis, IN.............................    0.9903    0.9933
  Boone, IN                                                             
  Hamilton, IN                                                          
  Hancock, IN                                                           
  Hendricks, IN                                                         
  Johnson, IN                                                           
  Madison, IN                                                           
  Marion, IN                                                            
  Morgan, IN                                                            
  Shelby, IN                                                            
3500  Iowa City, IA.................................    0.9361    0.9558
  Johnson, IA                                                           
3520  Jackson, MI...................................    0.9045    0.9336
  Jackson, MI                                                           
3560  Jackson, MS...................................    0.7928    0.8530
  Hinds, MS                                                             
  Madison, MS                                                           
  Rankin, MS                                                            
3580  Jackson, TN...................................    0.8288    0.8793
  Chester, TN                                                           
  Madison, TN                                                           
3600  Jacksonville, FL..............................    0.9089    0.9367
  Clay, FL                                                              
  Duval, FL                                                             
  Nassau, FL                                                            
  St. Johns, FL                                                         
3605  Jacksonville, NC..............................    0.7055    0.7875
  Onslow, NC                                                            
3610  Jamestown, NY.................................    0.7670    0.8339
  Chautaqua, NY                                                         
3620  Janesville-Beloit, WI.........................    0.8645    0.9051
  Rock, WI                                                              
3640  Jersey City, NJ...............................    1.1382    1.0927
  Hudson, NJ                                                            
3660  Johnson City-Kingsport-Bristol, TN-VA.........    0.8901    0.9234
  Carter, TN                                                            
  Hawkins, TN                                                           
  Sullivan, TN                                                          
  Unicoi, TN                                                            

[[Page 46259]]

                                                                        
  Washington, TN                                                        
  Bristol City, VA                                                      
  Scott, VA                                                             
  Washington, VA                                                        
3680  Johnstown, PA.................................    0.8398    0.8873
  Cambria, PA                                                           
  Somerset, PA                                                          
3700  Jonesboro, AR.................................    0.7220    0.8001
  Craighead, AR                                                         
3710  Joplin, MO....................................    0.7659    0.8331
  Jasper, MO                                                            
  Newton, MO                                                            
3720  Kalamazoo-Battlecreek, MI.....................    1.0542    1.0368
  Calhoun, MI                                                           
  Kalamazoo, MI                                                         
  Van Buren, MI                                                         
3740  Kankakee, IL..................................    0.9115    0.9385
  Kankakee, IL                                                          
3760  *Kansas City, KS-MO...........................    0.9478    0.9640
  Johnson, KS                                                           
  Leavenworth, KS                                                       
  Miami, KS                                                             
  Wyandotte, KS                                                         
  Cass, MO                                                              
  Clay, MO                                                              
  Clinton, MO                                                           
  Jackson, MO                                                           
  Lafayette, MO                                                         
  Platte, MO                                                            
  Ray, MO                                                               
3800  Kenosha, WI...................................    0.9145    0.9406
  Kenosha, WI                                                           
3810  Killeen-Temple, TX............................    1.0392    1.0267
  Bell, TX                                                              
  Coryell, TX                                                           
3840  Knoxville, TN.................................    0.8502    0.8948
  Anderson, TN                                                          
  Blount, TN                                                            
  Knox, TN                                                              
  Loudon, TN                                                            
  Sevier, TN                                                            
  Union, TN                                                             
3850  Kokomo, IN....................................    0.8590    0.9012
  Howard, IN                                                            
  Tipton, IN                                                            
3870  La Crosse, WI-MN..............................    0.8618    0.9032
  Houston, MN                                                           
  La Crosse, WI                                                         
3880  Lafayette, LA.................................    0.8165    0.8704
  Acadia, LA                                                            
  Lafayette, LA                                                         
  St. Landry, LA                                                        
  St. Martin, LA                                                        
3920  Lafayette, IN.................................    0.8804    0.9165
  Clinton, IN                                                           
  Tippecanoe, IN                                                        
3960  Lake Charles, LA..............................    0.8034    0.8608
  Calcasieu, LA                                                         
3980  Lakeland-Winter Haven, FL.....................    0.8668    0.9067
  Polk, FL                                                              
4000  Lancaster, PA.................................    0.9583    0.9713
  Lancaster, PA                                                         
4040  Lansing-East Lansing, MI......................    1.0010    1.0007
  Clinton, MI                                                           
  Eaton, MI                                                             
  Ingham, MI                                                            
4080  Laredo, TX....................................    0.7073    0.7889
  Webb, TX                                                              
4100  Las Cruces, NM................................    0.8497    0.8945
  Dona Ana, NM                                                          
4120  *Las Vegas, NV-AZ.............................    1.0870    1.0588
  Mohave, AZ                                                            
  Clark, NV                                                             
  Nye, NV                                                               
4150  Lawrence, KS..................................    0.8597    0.9017
  Douglas, KS                                                           
4200  Lawton, OK....................................    0.8365    0.8849
  Comanche, OK                                                          
4243  Lewiston-Auburn, ME...........................    0.9410    0.9592
  Androscoggin, ME                                                      
4280  Lexington, KY.................................    0.8303    0.8804
  Bourbon, KY                                                           
  Clark, KY                                                             
  Fayette, KY                                                           
  Jessamine, KY                                                         
  Madison, KY                                                           
  Scott, KY                                                             
  Woodford, KY                                                          
4320  Lima, OH......................................    0.8732    0.9113
  Allen, OH                                                             
  Auglaize, OH                                                          
4360  Lincoln, NE...................................    0.9161    0.9418
  Lancaster, NE                                                         
4400  Little Rock-North Little Rock, AR.............    0.8597    0.9017
  Faulkner, AR                                                          
  Lonoke, AR                                                            
  Pulaski, AR                                                           
  Saline, AR                                                            
4420  Longview-Marshall, TX.........................    0.8645    0.9051
  Gregg, TX                                                             
  Harrison, TX                                                          
  Upshur, TX                                                            
4480  *Los Angeles-Long Beach, CA...................    1.2382    1.1576
  Los Angeles, CA                                                       
4520  Louisville, KY-IN.............................    0.9447    0.9618
  Clark, IN                                                             
  Floyd, IN                                                             
  Harrison, IN                                                          
  Scott, IN                                                             
  Bullitt, KY                                                           
  Jefferson, KY                                                         
  Oldham, KY                                                            
4600  Lubbock, TX...................................    0.8510    0.8954
  Lubbock, TX                                                           
4640  Lynchburg, VA.................................    0.8052    0.8621
  Amherst, VA                                                           
  Bedford, VA                                                           
  Bedford City, VA                                                      
  Campbell, VA                                                          
  Lynchburg City, VA                                                    
4680  Macon, GA.....................................    0.8824    0.9179
  Bibb, GA                                                              
  Houston, GA                                                           
  Jones, GA                                                             
  Peach, GA                                                             
  Twiggs, GA                                                            
4720  Madison, WI...................................    1.0021    1.0014
  Dane, WI                                                              
4800  Mansfield, OH.................................    0.8524    0.8964
  Crawford, OH                                                          
  Richland, OH                                                          
4840  Mayaguez, PR..................................    0.4215    0.5534
  Anasco, PR                                                            
  Cabo Rojo, PR                                                         
  Hormigueros, PR                                                       
  Mayaguez, PR                                                          
  Sabana Grande, PR                                                     
  San German, PR                                                        
4880  McAllen-Edinburg-Mission, TX..................    0.8485    0.8936
  Hidalgo, TX                                                           
4890  Medford-Ashland, OR...........................    1.0082    1.0056
  Jackson, OR                                                           
4900  Melbourne-Titusville-Palm Bay, FL.............    0.9068    0.9352
  Brevard, FL                                                           
4920  *Memphis, TN-AR-MS............................    0.8166    0.8705
  Crittenden, AR                                                        
  DeSoto, MS                                                            
  Fayette, TN                                                           
  Shelby, TN                                                            
  Tipton, TN                                                            
4940  Merced, CA....................................    1.0660    1.0447
  Merced, CA                                                            
5000  *Miami, FL....................................    0.9938    0.9958
  Dade, FL                                                              
5015  *Middlesex-Somerset-Hunterdon, NJ.............    1.0688    1.0466
  Hunterdon, NJ                                                         
  Middlesex, NJ                                                         
  Somerset, NJ                                                          
5080  *Milwaukee-Waukesha, WI.......................    0.9645    0.9756
  Milwaukee, WI                                                         
  Ozaukee, WI                                                           
  Washington, WI                                                        
  Waukesha, WI                                                          
5120  *Minneapolis-St. Paul, MN-WI..................    1.0777    1.0526
  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                                                         
5160  Mobile, AL....................................    0.7981    0.8569
  Baldwin, AL                                                           
  Mobile, AL                                                            
5170  Modesto, CA...................................    1.0112    1.0077
  Stanislaus, CA                                                        

[[Page 46260]]

                                                                        
5190  *Monmouth-Ocean, NJ...........................    1.0996    1.0672
  Monmouth, NJ                                                          
  Ocean, NJ                                                             
5200  Monroe, LA....................................    0.8211    0.8737
  Ouachita, LA                                                          
5240  Montgomery, AL................................    0.7876    0.8492
  Autauga, AL                                                           
  Elmore, AL                                                            
  Montgomery, AL                                                        
5280  Muncie, IN....................................    0.9714    0.9803
  Delaware, IN                                                          
5330  Myrtle Beach, SC..............................    0.7790    0.8428
  Horry, SC                                                             
5345  Naples, FL....................................    1.0199    1.0136
  Collier, FL                                                           
5360  *Nashville, TN................................    0.9081    0.9361
  Cheatham, TN                                                          
  Davidson, TN                                                          
  Dickson, TN                                                           
  Robertson, TN                                                         
  Rutherford, TN                                                        
  Sumner, TN                                                            
  Williamson, TN                                                        
  Wilson, TN                                                            
5380  *Nassau-Suffolk, NY...........................    1.3547    1.2311
  Nassau, NY                                                            
  Suffolk, NY                                                           
5483  *New Haven-Bridgeport-Stamford-Waterbury-.....    1.2750    1.1810
  Danbury, CT                                                           
  Fairfield, CT                                                         
  New Haven, CT                                                         
5523  New London-Norwich, CT........................    1.2317    1.1534
  New London, CT                                                        
5560  *New Orleans, LA..............................    0.9294    0.9511
  Jefferson, LA                                                         
  Orleans, LA                                                           
  Plaquemines, LA                                                       
  St. Bernard, LA                                                       
  St. Charles, LA                                                       
  St. James, LA                                                         
  St. John The Baptist, LA                                              
  St. Tammany, LA                                                       
5600  *New York, NY.................................    1.4154    1.2686
  Bronx, NY                                                             
  Kings, NY                                                             
  New York, NY                                                          
  Putnam, NY                                                            
  Queens, NY                                                            
  Richmond, NY                                                          
  Rockland, NY                                                          
  Westchester, NY                                                       
5640  *Newark, NJ...................................    1.1036    1.0698
  Essex, NJ                                                             
  Morris, NJ                                                            
  Sussex, NJ                                                            
  Union, NJ                                                             
  Warren, NJ                                                            
5660  Newburgh, NY-PA...............................    1.0803    1.0543
  Orange, NY                                                            
  Pike, PA                                                              
5720  *Norfolk-Virginia Beach-Newport News, VA-NC...    0.8348    0.8837
  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                                                              
5775  *Oakland, CA..................................    1.5069    1.3242
  Alameda, CA                                                           
  Contra Costa, CA                                                      
5790  Ocala, FL.....................................    0.9105    0.9378
  Marion, FL                                                            
5800  Odessa-Midland, TX............................    0.8566    0.8994
  Ector, TX                                                             
  Midland, TX                                                           
5880  *Oklahoma City, OK............................    0.8371    0.8854
  Canadian, OK                                                          
  Cleveland, OK                                                         
  Logan, OK                                                             
  McClain, OK                                                           
  Oklahoma, OK                                                          
  Pottawatomie, OK                                                      
5910  Olympia, WA...................................    1.0689    1.0467
  Thurston, WA                                                          
5920  Omaha, NE-IA..................................    0.9480    0.9641
  Pottawattamie, IA                                                     
  Cass, NE                                                              
  Douglas, NE                                                           
  Sarpy, NE                                                             
  Washington, NE                                                        
5945  *Orange County, CA............................    1.1902    1.1266
  Orange, CA                                                            
5960  *Orlando, FL..................................    0.9470    0.9634
  Lake, FL                                                              
  Orange, FL                                                            
  Osceola, FL                                                           
  Seminole, FL                                                          
5990  Owensboro, KY.................................    0.7575    0.8268
  Daviess, KY                                                           
6015  Panama City, FL...............................    0.8061    0.8628
  Bay, FL                                                               
6020  Parkersburg-Marietta, WV-OH...................    0.7877    0.8492
  Washington, OH                                                        
  Wood, WV                                                              
6080  Pensacola, FL.................................    0.8202    0.8731
  Escambia, FL                                                          
  Santa Rosa, FL                                                        
6120  Peoria-Pekin, IL..............................    0.8905    0.9237
  Peoria, IL                                                            
  Tazewell, IL                                                          
  Woodford, IL                                                          
6160  *Philadelphia, PA-NJ..........................    1.1237    1.0831
  Burlington, NJ                                                        
  Camden, NJ                                                            
  Gloucester, NJ                                                        
  Salem, NJ                                                             
  Bucks, PA                                                             
  Chester, PA                                                           
  Delaware, PA                                                          
  Montgomery, PA                                                        
  Philadelphia, PA                                                      
6200  *Phoenix-Mesa, AZ.............................    0.9810    0.9870
  Maricopa, AZ                                                          
  Pinal, AZ                                                             
6240  Pine Bluff, AR................................    0.7886    0.8499
  Jefferson, AR                                                         
6280  *Pittsburgh, PA...............................    0.9701    0.9794
  Allegheny, PA                                                         
  Beaver, PA                                                            
  Butler, PA                                                            
  Fayette, PA                                                           
  Washington, PA                                                        
  Westmoreland, PA                                                      
6323  Pittsfield, MA................................    1.0552    1.0375
  Berkshire, MA                                                         
6340  Pocatello, ID.................................    0.8784    0.9150
  Bannock, ID                                                           
6360  Ponce, PR.....................................    0.4685    0.5950
  Guayanilla, PR                                                        
  Juana Diaz, PR                                                        
  Penuelas, PR                                                          
  Ponce, PR                                                             
  Villalba, PR                                                          
  Yauco, PR                                                             
6403  Portland, ME..................................    0.9619    0.9738
  Cumberland, ME                                                        
  Sagadahoc, ME                                                         
  York, ME                                                              
6440  *Portland-Vancouver, OR-WA....................    1.1235    1.0830
  Clackamas, OR                                                         
  Columbia, OR                                                          
  Multnomah, OR                                                         
  Washington, OR                                                        
  Yamhill, OR                                                           
  Clark, WA                                                             
6483  Providence-Warwick-Pawtucket, RI..............    1.1092    1.0736
  Bristol, RI                                                           
  Kent, RI                                                              
  Newport, RI                                                           
  Providence, RI                                                        
  Washington, RI                                                        
6520  Provo-Orem, UT................................    1.0116    1.0079
  Utah, UT                                                              
6560  Pueblo, CO....................................    0.8284    0.8790
  Pueblo, CO                                                            
6580  Punta Gorda, FL...............................    0.8353    0.8841
  Charlotte, FL                                                         
6600  Racine, WI....................................    0.8835    0.9187
  Racine, WI                                                            
6640  Raleigh-Durham-Chapel Hill, NC................    0.9728    0.9813

[[Page 46261]]

                                                                        
  Chatham, NC                                                           
  Durham, NC                                                            
  Franklin, NC                                                          
  Johnston, NC                                                          
  Orange, NC                                                            
  Wake, NC                                                              
6660  Rapid City, SD................................    0.8458    0.8916
  Pennington, SD                                                        
6680  Reading, PA...................................    0.9445    0.9617
  Berks, PA                                                             
6690  Redding, CA...................................    1.1605    1.1073
  Shasta, CA                                                            
6720  Reno, NV......................................    1.1018    1.0686
  Washoe, NV                                                            
6740  Richland-Kennewick-Pasco, WA..................    0.9970    0.9979
  Benton, WA                                                            
  Franklin, WA                                                          
6760  Richmond-Petersburg, VA.......................    0.9194    0.9441
  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                                                     
6780  *Riverside-San Bernardino, CA.................    1.1234    1.0829
  Riverside, CA                                                         
  San Bernardino, CA                                                    
6800  Roanoke, VA...................................    0.8702    0.9092
  Botetourt, VA                                                         
  Roanoke, VA                                                           
  Roanoke City, VA                                                      
  Salem City, VA                                                        
6820  Rochester, MN.................................    1.0428    1.0291
  Olmsted, MN                                                           
6840  *Rochester, NY................................    0.9649    0.9758
  Genesee, NY                                                           
  Livingston, NY                                                        
  Monroe, NY                                                            
  Ontario, NY                                                           
  Orleans, NY                                                           
  Wayne, NY                                                             
6880  Rockford, IL..................................    0.8994    0.9300
  Boone, IL                                                             
  Ogle, IL                                                              
  Winnebago, IL                                                         
6895  Rocky Mount, NC...............................    0.8955    0.9272
  Edgecombe, NC                                                         
  Nash, NC                                                              
6920  *Sacramento, CA...............................    1.2351    1.1556
  El Dorado, CA                                                         
  Placer, CA                                                            
  Sacramento, CA                                                        
6960  Saginaw-Bay City-Midland, MI..................    0.9667    0.9771
  Bay, MI                                                               
  Midland, MI                                                           
  Saginaw, MI                                                           
6980  St. Cloud, MN.................................    0.9457    0.9625
  Benton, MN                                                            
  Stearns, MN                                                           
7000  St. Joseph, MO................................    0.8551    0.8983
  Andrews, MO                                                           
  Buchanan, MO                                                          
7040  *St. Louis, MO-IL.............................    0.9022    0.9319
  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                                                            
7080  Salem, OR.....................................    0.9728    0.9813
  Marion, OR                                                            
  Polk, OR                                                              
7120  Salinas, CA...................................    1.3803    1.2470
  Monterey, CA                                                          
7160  *Salt Lake City-Ogden, UT.....................    0.9677    0.9778
  Davis, UT                                                             
  Salt Lake, UT                                                         
  Weber, UT                                                             
7200  San Angelo, TX................................    0.7577    0.8270
  Tom Green, TX                                                         
7240  *San Antonio, TX..............................    0.8390    0.8867
  Bexar, TX                                                             
  Comal, TX                                                             
  Guadalupe, TX                                                         
  Wilson, TX                                                            
7320  *San Diego, CA................................    1.2154    1.1429
  San Diego, CA                                                         
7360  *San Francisco, CA............................    1.4211    1.2721
  Marin, CA                                                             
  San Francisco, CA                                                     
  San Mateo, CA                                                         
7400  *San Jose, CA.................................    1.4455    1.2870
  Santa Clara, CA                                                       
7440  *San Juan-Bayamon, PR.........................    0.4506    0.5793
  Aguas Buenas, PR                                                      
  Barceloneta, PR                                                       
  Bayamon, PR                                                           
  Canovanas, PR                                                         
  Carolina, PR                                                          
  Catano, PR                                                            
  Ceiba, PR                                                             
  Comerio, PR                                                           
  Corozal, PR                                                           
  Dorado, PR                                                            
  Fajardo, PR                                                           
  Florida, PR                                                           
  Guaynabo, PR                                                          
  Humacao, PR                                                           
  Juncos, PR                                                            
  Los Piedras, PR                                                       
  Loiza, PR                                                             
  Luguillo, PR                                                          
  Manati, PR                                                            
  Morovis, PR                                                           
  Naguabo, PR                                                           
  Naranjito, PR                                                         
  Rio Grande, PR                                                        
  San Juan, PR                                                          
  Toa Alta, PR                                                          
  Toa Baja, PR                                                          
  Trujillo Alto, PR                                                     
  Vega Alta, PR                                                         
  Vega Baja, PR                                                         
  Yabucoa, PR                                                           
7460  San Luis Obispo-Atascadero-Paso Robles, CA....    1.1561    1.1044
  San Luis Obispo, CA                                                   
7480  Santa Barbara-Santa Maria-Lompoc, CA..........    1.1242    1.0835
  Santa Barbara, CA                                                     
7485  Santa Cruz-Watsonville, CA....................    1.3520    1.2294
  Santa Cruz, CA                                                        
7490  Santa Fe, NM..................................    1.0823    1.0557
  Los Alamos, NM                                                        
  Santa Fe, NM                                                          
7500  Santa Rosa, CA................................    1.2487    1.1643
  Sonoma, CA                                                            
7510  Sarasota-Bradenton, FL........................    0.9789    0.9855
  Manatee, FL                                                           
  Sarasota, FL                                                          
7520  Savannah, GA..................................    0.9649    0.9758
  Bryan, GA                                                             
  Chatham, GA                                                           
  Effingham, GA                                                         
7560  Scranton--Wilkes-Barre--Hazleton, PA..........    0.8752    0.9128
  Columbia, PA                                                          
  Lackawanna, PA                                                        
  Luzerne, PA                                                           
  Wyoming, PA                                                           
7600  *Seattle-Bellevue-Everett, WA.................    1.1384    1.0928
  Island, WA                                                            
  King, WA                                                              
  Snohomish, WA                                                         
7610  Sharon, PA....................................    0.8885    0.9222
  Mercer, PA                                                            
7620  Sheboygan, WI.................................    0.7764    0.8409
  Sheboygan, WI                                                         
7640  Sherman-Denison, TX...........................    0.8631    0.9041
  Grayson, TX                                                           
7680  Shreveport-Bossier City, LA...................    0.9359    0.9556
  Bossier, LA                                                           
  Caddo, LA                                                             
  Webster, LA                                                           
7720  Sioux City, IA-NE.............................    0.8313    0.8812
  Woodbury, IA                                                          

[[Page 46262]]

                                                                        
  Dakota, NE                                                            
7760  Sioux Falls, SD...............................    0.8620    0.9033
  Lincoln, SD                                                           
  Minnehaha, SD                                                         
7800  South Bend, IN................................    0.9934    0.9955
  St. Joseph, IN                                                        
7840  Spokane, WA...................................    1.0524    1.0356
  Spokane, WA                                                           
7880  Springfield, IL...............................    0.8671    0.9070
  Menard, IL                                                            
  Sangamon, IL                                                          
7920  Springfield, MO...............................    0.7842    0.8466
  Christian, MO                                                         
  Greene, MO                                                            
  Webster, MO                                                           
8003  Springfield, MA...............................    1.0586    1.0398
  Hampden, MA                                                           
  Hampshire, MA                                                         
8050  State College, PA.............................    0.9538    0.9681
  Centre, PA                                                            
8080  Steubenville-Weirton, OH-WV...................    0.8266    0.8777
  Jefferson, OH                                                         
  Brooke, WV                                                            
  Hancock, WV                                                           
8120  Stockton-Lodi, CA.............................    1.1391    1.0933
  San Joaquin, CA                                                       
8140  Sumter, SC....................................    0.7699    0.8360
  Sumter, SC                                                            
8160  Syracuse, NY..................................    0.9396    0.9582
  Cayuga, NY                                                            
  Madison, NY                                                           
  Onondaga, NY                                                          
  Oswego, NY                                                            
8200  Tacoma, WA....................................    1.0866    1.0585
  Pierce, WA                                                            
8240  Tallahassee, FL...............................    0.8313    0.8812
  Gadsden, FL                                                           
  Leon, FL                                                              
8280  *Tampa-St. Petersburg-Clearwater, FL..........    0.9302    0.9517
  Hernando, FL                                                          
  Hillsborough, FL                                                      
  Pasco, FL                                                             
  Pinellas, FL                                                          
8320  Terre Haute, IN...............................    0.8591    0.9012
  Clay, IN                                                              
  Vermillion, IN                                                        
  Vigo, IN                                                              
8360  Texarkana, AR-Texarkana, TX...................    0.8509    0.8953
  Miller, AR                                                            
  Bowie, TX                                                             
8400  Toledo, OH....................................    1.0361    1.0246
  Fulton, OH                                                            
  Lucas, OH                                                             
  Wood, OH                                                              
8440  Topeka, KS....................................    1.0086    1.0059
  Shawnee, KS                                                           
8480  Trenton, NJ...................................    1.0549    1.0373
  Mercer, NJ                                                            
8520  Tucson, AZ....................................    0.9075    0.9357
  Pima, AZ                                                              
8560  Tulsa, OK.....................................    0.8095    0.8653
  Creek, OK                                                             
  Osage, OK                                                             
  Rogers, OK                                                            
  Tulsa, OK                                                             
  Wagoner, OK                                                           
8600  Tuscaloosa, AL................................    0.7784    0.8424
  Tuscaloosa, AL                                                        
8640  Tyler, TX.....................................    0.9996    0.9997
  Smith, TX                                                             
8680  Utica-Rome, NY................................    0.8413    0.8884
  Herkimer, NY                                                          
  Oneida, NY                                                            
8720  Vallejo-Fairfield-Napa, CA....................    1.3452    1.2252
  Napa, CA                                                              
  Solano, CA                                                            
8735  Ventura, CA...................................    1.1052    1.0709
  Ventura, CA                                                           
8750  Victoria, TX..................................    0.8393    0.8869
  Victoria, TX                                                          
8760  Vineland-Millville-Bridgeton, NJ..............    0.9993    0.9995
  Cumberland, NJ                                                        
8780  Visalia-Tulare-Porterville, CA................    1.0151    1.0103
  Tulare, CA                                                            
8800  Waco, TX......................................    0.7772    0.8415
  McLennan, TX                                                          
8840  *Washington, DC-MD-VA-WV......................    1.0823    1.0557
  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                                                         
8920  Waterloo-Cedar Falls, IA......................    0.8705    0.9094
  Black Hawk, IA                                                        
8940  Wausau, WI....................................    1.0323    1.0220
  Marathon, WI                                                          
8960  West Palm Beach-Boca Raton, FL................    1.0002    1.0001
  Palm Beach, FL                                                        
9000  Wheeling, OH-WV...............................    0.7563    0.8259
  Belmont, OH                                                           
  Marshall, WV                                                          
  Ohio, WV                                                              
9040  Wichita, KS...................................    0.9369    0.9563
  Butler, KS                                                            
  Harvey, KS                                                            
  Sedgwick, KS                                                          
9080  Wichita Falls, TX.............................    0.8041    0.8613
  Archer, TX                                                            
  Wichita, TX                                                           
9140  Williamsport, PA..............................    0.8467    0.8923
  Lycoming, PA                                                          
9160  Wilmington-Newark, DE-MD......................    1.1315    1.0883
  New Castle, DE                                                        
  Cecil, MD                                                             
9200  Wilmington, NC................................    0.9046    0.9336
  New Hanover, NC                                                       
  Brunswick, NC                                                         
9260  Yakima, WA....................................    1.0026    1.0018
  Yakima, WA                                                            
9270  Yolo, CA......................................    1.1444    1.0968
  Yolo, CA                                                              
9280  York, PA......................................    0.9104    0.9377
  York, PA                                                              
9320  Youngstown-Warren, OH.........................    0.9742    0.9823
  Columbiana, OH                                                        
  Mahoning, OH                                                          
  Trumbull, OH                                                          
9340  Yuba City, CA.................................    1.0414    1.0282
  Sutter, CA                                                            
  Yuba, CA                                                              
9360  Yuma, AZ......................................    0.9497    0.9653
  Yuma, AZ                                                              
------------------------------------------------------------------------
*Large Urban Area                                                       


Table 4b.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                               Rural Areas                              
------------------------------------------------------------------------
                                                        Wage            
                    Nonurban area                       index      GAF  
------------------------------------------------------------------------
Alabama.............................................    0.7150    0.7947
Alaska..............................................    1.2444    1.1615
Arizona.............................................    0.7928    0.8530
Arkansas............................................    0.6954    0.7798
California..........................................    1.0002    1.0001
Colorado............................................    0.8092    0.8650
Connecticut.........................................    1.2759    1.1816
Delaware............................................    0.9447    0.9618
Florida.............................................    0.8668    0.9067
Georgia.............................................    0.7653    0.8326
Hawaii..............................................    1.0245    1.0167
Idaho...............................................    0.8277    0.8785
Illinois............................................    0.7553    0.8252
Indiana.............................................    0.8124    0.8674
Iowa................................................    0.7366    0.8111
Kansas..............................................    0.7107    0.7915
Kentucky............................................    0.7753    0.8401
Louisiana...........................................    0.7253    0.8026
Maine...............................................    0.8317    0.8814

[[Page 46263]]

                                                                        
Maryland............................................    0.8427    0.8894
Massachusetts.......................................    1.0770    1.0521
Michigan............................................    0.8836    0.9187
Minnesota...........................................    0.8144    0.8688
Mississippi.........................................    0.6793    0.7674
Missouri............................................    0.7261    0.8032
Montana.............................................    0.8128    0.8677
Nebraska............................................    0.7214    0.7996
Nevada..............................................    0.8775    0.9144
New Hampshire.......................................    0.9751    0.9829
New Jersey \1\......................................  ........  ........
New Mexico..........................................    0.8000    0.8583
New York............................................    0.8558    0.8989
North Carolina......................................    0.7953    0.8548
North Dakota........................................    0.7358    0.8105
Ohio................................................    0.8332    0.8825
Oklahoma............................................    0.6942    0.7788
Oregon..............................................    0.9664    0.9769
Pennsylvania........................................    0.8459    0.8917
Puerto Rico.........................................    0.4026    0.5363
Rhode Island \1\....................................  ........  ........
South Carolina......................................    0.7668    0.8337
South Dakota........................................    0.7063    0.7881
Tennessee...........................................    0.7341    0.8092
Texas...............................................    0.7462    0.8183
Utah................................................    0.8848    0.9196
Vermont.............................................    0.8921    0.9248
Virginia............................................    0.7729    0.8383
Washington..........................................    0.9933    0.9954
West Virginia.......................................    0.7923    0.8526
Wisconsin...........................................    0.8430    0.8896
Wyoming.............................................    0.8177    0.8713
------------------------------------------------------------------------
\1\ All counties within the State are classified as urban.              


Table 4c.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                     Hospitals that are Reclassified                    
------------------------------------------------------------------------
                                                        Wage            
                Area reclassified to                    index      GAF  
------------------------------------------------------------------------
Abilene, TX.........................................    0.8147    0.8691
Albuquerque, NM.....................................    0.9350    0.9550
Alexandria, LA......................................    0.8194    0.8725
Allentown-Bethlehem-Easton, PA......................    0.9992    0.9995
Amarillo, TX........................................    0.8730    0.9112
Anchorage, AK.......................................    1.3255    1.2128
Asheville, NC.......................................    0.9344    0.9546
Atlanta, GA.........................................    1.0033    1.0023
Bangor, ME..........................................    0.9391    0.9579
Baton Rouge, LA.....................................    0.8433    0.8898
Benton Harbor, MI...................................    0.8550    0.8983
Benton Harbor, MI (Rural Michigan Hosp.)............    0.8836    0.9187
Billings, MT........................................    0.9086    0.9365
Birmingham, AL......................................    0.9036    0.9329
Bismarck, ND........................................    0.8074    0.8637
Boise City, ID......................................    0.9383    0.9573
Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH....    1.1613    1.1078
Caguas, PR..........................................    0.4589    0.5866
Champaign-Urbana, IL................................    0.8978    0.9288
Charleston-North Charleston, SC.....................    0.8963    0.9278
Charlotte-Gastonia-Rock Hill, NC-SC.................    0.9620    0.9738
Charlottesville, VA.................................    0.8990    0.9297
Chattanooga, TN-GA..................................    0.8847    0.9195
Chicago, IL.........................................    1.0658    1.0446
Cincinnati, OH-KY-IN................................    0.9568    0.9702
Cleveland-Lorain-Elyria, OH.........................    0.9886    0.9922
Columbia, MO........................................    0.8904    0.9236
Columbus, OH........................................    0.9681    0.9780
Dallas, TX..........................................    0.9729    0.9814
Davenport-Moline-Rock Island, IA-IL.................    0.8388    0.8866
Denver, CO..........................................    1.0166    1.0113
Des Moines, IA......................................    0.8714    0.9100
Duluth-Superior, MN-WI..............................    0.9416    0.9596
Dutchess County, NY.................................    1.0291    1.0198
Elkhart-Goshen, IN..................................    0.8801    0.9163
Eugene-Springfield, OR..............................    1.1477    1.0989
Fargo-Moorhead, ND-MN...............................    0.8879    0.9218
Fayetteville, NC....................................    0.8640    0.9047
Flagstaff, AR-UT....................................    0.8828    0.9182
Flint, MI...........................................    1.1248    1.0839
Florence, AL........................................    0.8111    0.8664
Florence, SC........................................    0.8594    0.9014
Fort Lauderdale, FL.................................    1.0586    1.0398
Fort Pierce-Port St. Lucie, FL......................    1.0027    1.0018
Fort Smith, AR-OK...................................    0.7867    0.8485
Fort Walton Beach, FL...............................    0.8980    0.9290
Fort Worth-Arlington, TX............................    1.0153    1.0105
Gadsden, AL.........................................    0.8881    0.9219
Gary, IN............................................    0.9155    0.9413
Grand Forks, ND-MN..................................    0.9207    0.9450
Grand Junction, CO..................................    0.8825    0.9180
Grand Rapids-Muskegon-Holland, MI...................    1.0119    1.0081
Great Falls, MT.....................................    0.9015    0.9315
Greeley, CO.........................................    0.9388    0.9577
Green Bay, WI.......................................    0.9366    0.9561
Greensboro-Winston-Salem-High Point, NC.............    0.9314    0.9525
Greenville-Spartanburg-Anderson, SC.................    0.8927    0.9252
Hartford, CT........................................    1.2191    1.1453
Honolulu, HI........................................    1.1461    1.0979
Houston, TX.........................................    1.0000    1.0000
Huntington-Ashland, WV-KY-OH........................    0.9174    0.9427
Huntsville, AL......................................    0.8081    0.8642
Indianapolis, IN....................................    0.9796    0.9860
Jackson, MS.........................................    0.7928    0.8530
Jacksonville, FL....................................    0.9089    0.9367
Johnson City-Kingsport-Bristol, TN-VA...............    0.8901    0.9234
Joplin, MO..........................................    0.7659    0.8331
Kalamazoo-Battlecreek, MI...........................    1.0542    1.0368
Kansas City, KS-MO..................................    0.9478    0.9640
Knoxville, TN.......................................    0.8502    0.8948
Lafayette, LA.......................................    0.8165    0.8704
Lansing-East Lansing, MI............................    1.0010    1.0007
Las Vegas, NV-AZ....................................    1.0870    1.0588
Lexington, KY.......................................    0.8303    0.8804
Lima, OH............................................    0.8732    0.9113
Lincoln, NE.........................................    0.9030    0.9325
Little Rock-North Little Rock, AR...................    0.8597    0.9017
Longview-Marshall, TX...............................    0.8504    0.8950
Los Angeles-Long Beach, CA..........................    1.2382    1.1576
Louisville, KY-IN...................................    0.9447    0.9618
Macon, GA...........................................    0.8468    0.8924
Madison, WI.........................................    1.0021    1.0014
Mansfield, OH.......................................    0.8524    0.8964
Medford-Ashland, OR.................................    1.0082    1.0056
Memphis, TN-AR-MS...................................    0.8166    0.8705
Middlesex-Somerset-Hunterdon, NJ....................    1.0688    1.0466
Milwaukee-Waukesha, WI..............................    0.9645    0.9756
Minneapolis-St. Paul, MN-WI.........................    1.0777    1.0526
Modesto, CA.........................................    1.0112    1.0077
Monmouth-Ocean, NJ..................................    1.0764    1.0517
Montgomery, AL......................................    0.7876    0.8492
Nashville, TN.......................................    0.9081    0.9361
New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT.    1.2750    1.1810
New London-Norwich, CT..............................    1.2317    1.1534
New Orleans, LA.....................................    0.9294    0.9511
New York, NY........................................    1.4010    1.2597
Newark, NJ..........................................    1.1036    1.0698
Oakland, CA.........................................    1.5069    1.3242
Odessa-Midland, TX..................................    0.8566    0.8994
Oklahoma City, OK...................................    0.8371    0.8854
Omaha, NE-IA........................................    0.9480    0.9641
Orange County, CA...................................    1.1902    1.1266
Peoria-Pekin, IL....................................    0.8905    0.9237
Philadelphia, PA-NJ.................................    1.1237    1.0831
Pittsburgh, PA......................................    0.9539    0.9682
Portland, ME........................................    0.9619    0.9738
Portland-Vancouver, OR-WA...........................    1.1235    1.0830
Provo-Orem, UT......................................    1.0116    1.0079
Raleigh-Durham-Chapel Hill, NC......................    0.9602    0.9726
Rapid City, SD......................................    0.8458    0.8916
Roanoke, VA.........................................    0.8702    0.9092
Rochester, MN.......................................    1.0428    1.0291
Rockford, IL........................................    0.8994    0.9300
Sacramento, CA......................................    1.2351    1.1556
Saginaw-Bay City-Midland, MI........................    0.9667    0.9771
St. Cloud, MN.......................................    0.9457    0.9625
St. Louis, MO-IL....................................    0.9022    0.9319
Salt Lake City-Ogden, UT............................    0.9677    0.9778
San Diego, CA.......................................    1.2154    1.1429
San Francisco, CA...................................    1.4211    1.2721
San Jose, CA........................................    1.4455    1.2870
Santa Rosa, CA......................................    1.2363    1.1563
Sarasota-Bradenton, FL..............................    0.9789    0.9855
Seattle-Bellevue-Everett, WA........................    1.1384    1.0928
Sharon, PA..........................................    0.8885    0.9222
Sherman-Denison, TX.................................    0.8631    0.9041

[[Page 46264]]

                                                                        
Sioux Falls, SD.....................................    0.8620    0.9033
South Bend, IN......................................    0.9934    0.9955
Springfield, IL.....................................    0.8671    0.9070
Springfield, MO.....................................    0.7842    0.8466
Stockton-Lodi, CA...................................    1.1391    1.0933
Syracuse, NY........................................    0.9396    0.9582
Tacoma, WA..........................................    1.0866    1.0585
Tampa-St. Petersburg-Clearwater, FL.................    0.9302    0.9517
Texarkana, AR-Texarkana, TX.........................    0.8509    0.8953
Toledo, OH..........................................    1.0361    1.0246
Topeka, KS..........................................    0.9795    0.9859
Tucson, AZ..........................................    0.9075    0.9357
Tulsa, OK...........................................    0.8095    0.8653
Tyler, TX...........................................    0.9605    0.9728
Victoria, TX........................................    0.8185    0.8718
Washington, DC-MD-VA-WV.............................    1.0823    1.0557
Waterloo-Cedar Falls, IA............................    0.8591    0.9012
Wausau, WI..........................................    0.9698    0.9792
Wichita, KS.........................................    0.9211    0.9453
Rural Alabama.......................................    0.7150    0.7947
Rural Florida.......................................    0.8668    0.9067
Rural Kentucky......................................    0.7753    0.8401
Rural Louisiana.....................................    0.7253    0.8026
Rural Michigan......................................    0.8836    0.9187
Rural Minnesota.....................................    0.8144    0.8688
Rural New Hampshire.................................    0.9751    0.9829
Rural North Carolina................................    0.7953    0.8548
Rural Virginia......................................    0.7729    0.8383
Rural Virginia (Rural Kentucky Hosp.)...............    0.7753    0.8401
Rural Washington....................................    0.9933    0.9954
Rural West Virginia.................................    0.7923    0.8526
Rural Wyoming.......................................    0.8177    0.8713
------------------------------------------------------------------------


             Table 4d.--Average Hourly Wage for Urban Areas             
------------------------------------------------------------------------
                                                                Average 
                          Urban area                             hourly 
                                                                  wage  
------------------------------------------------------------------------
Abilene, TX..................................................    15.7361
Aguadilla, PR................................................     8.2856
Akron, OH....................................................    19.2662
Albany, GA...................................................    16.8101
Albany-Schenectady-Troy, NY..................................    16.8634
Albuquerque, NM..............................................    18.2712
Alexandria, LA...............................................    15.8746
Allentown-Bethlehem-Easton, PA...............................    19.5376
Altoona, PA..................................................    18.5951
Amarillo, TX.................................................    17.0704
Anchorage, AK................................................    25.8567
Ann Arbor, MI................................................    22.8035
Anniston, AL.................................................    15.6871
Appleton-Oshkosh-Neenah, WI..................................    17.3835
Arecibo, PR..................................................     8.5979
Asheville, NC................................................    18.2517
Athens, GA...................................................    18.3967
Atlanta, GA..................................................    19.6186
Atlantic-Cape May, NJ........................................    21.6594
Augusta-Aiken, GA-SC.........................................    17.2764
Austin-San Marcos, TX........................................    18.0941
Bakersfield, CA..............................................    19.9230
Baltimore, MD................................................    19.1581
Bangor, ME...................................................    18.3630
Barnstable-Yarmouth, MA......................................    26.6928
Baton Rouge, LA..............................................    16.4888
Beaumont-Port Arthur, TX.....................................    16.7698
Bellingham, WA...............................................    22.1285
Benton Harbor, MI............................................    16.6319
Bergen-Passaic, NJ...........................................    23.0426
Billings, MT.................................................    17.7662
Biloxi-Gulfport-Pascagoula, MS...............................    16.7252
Binghamton, NY...............................................    17.2505
Birmingham, AL...............................................    17.6684
Bismarck, ND.................................................    15.4928
Bloomington, IN..............................................    16.9184
Bloomington-Normal, IL.......................................    17.5793
Boise City, ID...............................................    18.3461
Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH.............    22.7074
Boulder-Longmont, CO.........................................    18.6194
Brazoria, TX.................................................    17.9908
Bremerton, WA................................................    21.3152
Brownsville-Harlingen-San Benito, TX.........................    16.7030
Bryan-College Station, TX....................................    17.3076
Buffalo-Niagara Falls, NY....................................    17.8073
Burlington, VT...............................................    19.6864
Caguas, PR...................................................     8.9423
Canton-Massillon, OH.........................................    16.9098
Casper, WY...................................................    17.2484
Cedar Rapids, IA.............................................    16.5386
Champaign-Urbana, IL.........................................    18.3634
Charleston-North Charleston, SC..............................    17.5265
Charleston, WV...............................................    18.6261
Charlotte-Gastonia-Rock Hill, NC-SC..........................    18.8112
Charlottesville, VA..........................................    17.9005
Chattanooga, TN-GA...........................................    17.2991
Cheyenne, WY.................................................    15.0126
Chicago, IL..................................................    21.0400
Chico-Paradise, CA...........................................    20.3689
Cincinnati, OH-KY-IN.........................................    18.7085
Clarksville-Hopkinsville, TN-KY..............................    15.0873
Cleveland-Lorain-Elyria, OH..................................    19.3308
Colorado Springs, CO.........................................    18.2642
Columbia, MO.................................................    17.4002
Columbia, SC.................................................    17.9118
Columbus, GA-AL..............................................    15.2114
Columbus, OH.................................................    18.9295
Corpus Christi, TX...........................................    17.3648
Cumberland, MD-WV............................................    16.9547
Dallas, TX...................................................    19.0236
Danville, VA.................................................    16.6152
Davenport-Moline-Rock Island, IA-IL..........................    16.4021
Dayton-Springfield, OH.......................................    18.6913
Daytona Beach, FL............................................    17.3459
Decatur, AL..................................................    16.3934
Decatur, IL..................................................    15.3452
Denver, CO...................................................    19.8786
Des Moines, IA...............................................    17.2370
Detroit, MI..................................................    20.9694
Dothan, AL...................................................    15.1351
Dover, DE....................................................    17.5916
Dubuque, IA..................................................    15.8624
Duluth-Superior, MN-WI.......................................    18.4105
Dutchess County, NY..........................................    20.7053
Eau Claire, WI...............................................    16.9692
El Paso, TX..................................................    18.5059
Elkhart-Goshen, IN...........................................    17.2083
Elmira, NY...................................................    16.4576
Enid, OK.....................................................    15.3724
Erie, PA.....................................................    17.9082
Eugene-Springfield, OR.......................................    22.0384
Evansville, Henderson, IN-KY.................................    17.5644
Fargo-Moorhead, ND-MN........................................    17.6861
Fayetteville, NC.............................................    17.6113
Fayetteville-Springdale-Rogers, AR...........................    14.1177
Flagstaff, AZ-UT.............................................    17.6344
Flint, MI....................................................    21.9933
Florence, AL.................................................    15.5219
Florence, SC.................................................    16.8047
Fort Collins-Loveland, CO....................................    20.6529
Fort Lauderdale, FL..........................................    20.6250
Fort Myers-Cape Coral, FL....................................    17.6607
Fort Pierce-Port St. Lucie, FL...............................    19.8836
Fort Smith, AR-OK............................................    15.3772
Fort Walton Beach, FL........................................    17.9727
Fort Wayne, IN...............................................    17.2067
Fort Worth-Arlington, TX.....................................    19.8533
Fresno, CA...................................................    21.8549
Gadsden, AL..................................................    17.3656
Gainesville, FL..............................................    18.4465
Galveston-Texas City, TX.....................................    21.5032
Gary, IN.....................................................    18.8504
Glens Falls, NY..............................................    16.7411
Goldsboro, NC................................................    16.4109
Grand Forks, ND-MN...........................................    17.6200
Grand Junction, CO...........................................    16.2997
Grand Rapids-Muskegon-Holland, MI............................    19.7853
Great Falls, MT..............................................    16.9748
Greeley, CO..................................................    18.9481
Green Bay, WI................................................    17.6730
Greensboro-Winston-Salem-High Point, NC......................    18.2112
Greenville, NC...............................................    17.7503
Greenville-Spartanburg-Anderson, SC..........................    17.4559
Hagerstown, MD...............................................    17.9394
Hamilton-Middletown, OH......................................    18.5562
Harrisburg-Lebanon-Carlisle, PA..............................    19.8630
Hartford, CT.................................................    24.1823
Hattiesburg, MS..............................................    14.1809
Hickory-Morganton-Lenoir, NC.................................    16.8672
Honolulu, HI.................................................    22.4099
Houma, LA....................................................    15.3561
Houston, TX..................................................    19.5534
Huntington-Ashland, WV-KY-OH.................................    17.9378
Huntsville, AL...............................................    16.0449
Indianapolis, IN.............................................    19.3630
Iowa City, IA................................................    18.3037
Jackson, MI..................................................    17.6864
Jackson, MS..................................................    15.4167
Jackson, TN..................................................    16.2068
Jacksonville, FL.............................................    17.7663
Jacksonville, NC.............................................    13.7955
Jamestown, NY................................................    14.9979
Janesville-Beloit, WI........................................    16.9030
Jersey City, NJ..............................................    22.2562
Johnson City-Kingsport-Bristol, TN-VA........................    17.3717
Johnstown, PA................................................    16.4213
Jonesboro, AR................................................    14.1168
Joplin, MO...................................................    14.9353
Kalamazoo-Battlecreek, MI....................................    20.6127
Kankakee, IL.................................................    17.8236
Kansas City, KS-MO...........................................    18.5333
Kenosha, WI..................................................    17.8819

[[Page 46265]]

                                                                        
Killeen-Temple, TX...........................................    20.3189
Knoxville, TN................................................    16.6250
Kokomo, IN...................................................    16.7962
La Crosse, WI-MN.............................................    16.8513
Lafayette, LA................................................    15.9607
Lafayette, IN................................................    17.1690
Lake Charles, LA.............................................    15.7084
Lakeland-Winter Haven, FL....................................    17.1559
Lancaster, PA................................................    18.7384
Lansing-East Lansing, MI.....................................    19.5719
Laredo, TX...................................................    13.8306
Las Cruces, NM...............................................    16.6145
Las Vegas, NV-AZ.............................................    21.2545
Lawrence, KS.................................................    16.8098
Lawton, OK...................................................    16.3566
Lewiston-Auburn, ME..........................................    18.3998
Lexington, KY................................................    16.2159
Lima, OH.....................................................    17.0746
Lincoln, NE..................................................    17.9136
Little Rock-North Little Rock, AR............................    16.8095
Longview-Marshall, TX........................................    16.9037
Los Angeles-Long Beach, CA...................................    24.1347
Louisville, KY-IN............................................    18.4730
Lubbock, TX..................................................    16.6400
Lynchburg, VA................................................    15.7441
Macon, GA....................................................    17.2534
Madison, WI..................................................    19.5953
Mansfield, OH................................................    16.6677
Mayaguez, PR.................................................     8.2422
McAllen-Edinburg-Mission, TX.................................    16.5901
Medford-Ashland, OR..........................................    19.6857
Melbourne-Titusville-Palm Bay, FL............................    17.7314
Memphis, TN-AR-MS............................................    15.9681
Merced, CA...................................................    20.8439
Miami, FL....................................................    19.4323
Middlesex-Somerset-Hunterdon, NJ.............................    21.2792
Milwaukee-Waukesha, WI.......................................    18.8591
Minneapolis-St. Paul, MN-WI..................................    21.0727
Mobile, AL...................................................    15.6052
Modesto, CA..................................................    20.7262
Monmouth-Ocean, NJ...........................................    21.1825
Monroe, LA...................................................    16.0553
Montgomery, AL...............................................    15.4009
Muncie, IN...................................................    18.9936
Myrtle Beach, SC.............................................    15.2321
Naples, FL...................................................    19.9423
Nashville, TN................................................    17.7573
Nassau-Suffolk, NY...........................................    26.4893
New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT..........    24.8405
New London-Norwich, CT.......................................    23.9754
New Orleans, LA..............................................    18.1738
New York, NY.................................................    27.6763
Newark, NJ...................................................    22.9987
Newburgh, NY-PA..............................................    21.1229
Norfolk-Virginia Beach-Newport News, VA-NC...................    16.3222
Oakland, CA..................................................    29.3127
Ocala, FL....................................................    17.8031
Odessa-Midland, TX...........................................    16.5854
Oklahoma City, OK............................................    16.3683
Olympia, WA..................................................    20.9003
Omaha, NE-IA.................................................    18.5371
Orange County, CA............................................    23.3969
Orlando, FL..................................................    18.5164
Owensboro, KY................................................    14.8119
Panama City, FL..............................................    15.7629
Parkersburg-Marietta, WV-OH..................................    15.4018
Pensacola, FL................................................    16.0371
Peoria-Pekin, IL.............................................    17.4120
Philadelphia, PA-NJ..........................................    21.9722
Phoenix-Mesa, AZ.............................................    19.1821
Pine Bluff, AR...............................................    15.4205
Pittsburgh, PA...............................................    18.9688
Pittsfield, MA...............................................    20.6334
Pocatello, ID................................................    17.1752
Ponce, PR....................................................     9.1599
Portland, ME.................................................    18.8079
Portland-Vancouver, OR-WA....................................    21.9679
Providence-Warwick, RI.......................................    21.6876
Provo-Orem, UT...............................................    19.7809
Pueblo, CO...................................................    16.1970
Punta Gorda, FL..............................................    16.3323
Racine, WI...................................................    17.2751
Raleigh-Durham-Chapel Hill, NC...............................    19.0221
Rapid City, SD...............................................    16.5325
Reading, PA..................................................    18.4690
Redding, CA..................................................    22.6922
Reno, NV.....................................................    21.5443
Richland-Kennewick-Pasco, WA.................................    19.4956
Richmond-Petersburg, VA......................................    17.9776
Riverside-San Bernardino, CA.................................    22.2475
Roanoke, VA..................................................    17.0151
Rochester, MN................................................    20.3908
Rochester, NY................................................    18.8662
Rockford, IL.................................................    17.5872
Rocky Mount, NC..............................................    17.5097
Sacramento, CA...............................................    24.1510
Saginaw-Bay City-Midland, MI.................................    18.7939
St. Cloud, MN................................................    18.4907
St. Joseph, MO...............................................    16.7196
St. Louis, MO-IL.............................................    17.6400
Salem, OR....................................................    19.0205
Salinas, CA..................................................    26.9904
Salt Lake City-Ogden, UT.....................................    18.9211
San Angelo, TX...............................................    14.8158
San Antonio, TX..............................................    16.4044
San Diego, CA................................................    23.7268
San Francisco, CA............................................    27.8836
San Jose, CA.................................................    28.3887
San Juan-Bayamon, PR.........................................     8.8111
San Luis Obispo-Atascadero-Paso Robles, CA...................    22.6053
Santa Barbara-Santa Maria-Lompoc, CA.........................    21.9816
Santa Cruz-Watsonville, CA...................................    26.4364
Santa Fe, NM.................................................    21.1622
Santa Rosa, CA...............................................    24.4155
Sarasota-Bradenton, FL.......................................    19.1406
Savannah, GA.................................................    18.8663
Scranton-Wilkes Barre-Hazleton, PA...........................    17.1121
Seattle-Bellevue-Everett, WA.................................    22.2595
Sharon, PA...................................................    17.3726
Sheboygan, WI................................................    15.1817
Sherman-Denison, TX..........................................    16.8423
Shreveport-Bossier City, LA..................................    18.2999
Sioux City, IA-NE............................................    16.2539
Sioux Falls, SD..............................................    16.8540
South Bend, IN...............................................    19.4248
Spokane, WA..................................................    20.5788
Springfield, IL..............................................    16.9538
Springfield, MO..............................................    15.2957
Springfield, MA..............................................    20.6983
State College, PA............................................    18.6507
Steubenville-Weirton, OH-WV..................................    16.1632
Stockton-Lodi, CA............................................    22.1532
Sumter, SC...................................................    15.0540
Syracuse, NY.................................................    18.3703
Tacoma, WA...................................................    21.2354
Tallahassee, FL..............................................    16.2555
Tampa-St. Petersburg-Clearwater, FL..........................    18.0859
Terre Haute, IN..............................................    16.7989
Texarkana, AR-Texarkana, TX..................................    16.6266
Toledo, OH...................................................    20.2601
Topeka, KS...................................................    19.7210
Trenton, NJ..................................................    20.6259
Tucson, AZ...................................................    17.7311
Tulsa, OK....................................................    15.8281
Tuscaloosa, AL...............................................    15.2197
Tyler, TX....................................................    19.5462
Utica-Rome, NY...............................................    16.4509
Vallejo-Fairfield-Napa, CA...................................    27.2708
Ventura, CA..................................................    22.3964
Victoria, TX.................................................    16.4116
Vineland-Millville-Bridgeton, NJ.............................    19.5394
Visalia-Tulare-Porterville, CA...............................    19.8483
Waco, TX.....................................................    15.1959
Washington, DC-MD-VA-WV......................................    21.1632
Waterloo-Cedar Falls, IA.....................................    17.0208
Wausau, WI...................................................    20.1856
West Palm Beach-Boca Raton, FL...............................    19.9482
Wheeling, OH-WV..............................................    14.7877
Wichita, KS..................................................    18.3188
Wichita Falls, TX............................................    15.7237
Williamsport, PA.............................................    16.5567
Wilmington-Newark, DE-MD.....................................    22.1249
Wilmington, NC...............................................    17.6887
Yakima, WA...................................................    19.6049
Yolo, CA.....................................................    22.3769
York, PA.....................................................    17.8006
Youngstown-Warren, OH........................................    19.0484
Yuba City, CA................................................    20.3622
Yuma, AZ.....................................................    18.5693
------------------------------------------------------------------------


             Table 4e.--Average Hourly Wage for Rural Areas             
------------------------------------------------------------------------
                                                                Average 
                        Nonurban area                            hourly 
                                                                  wage  
------------------------------------------------------------------------
Alabama......................................................    13.9255
Alaska.......................................................    24.3314
Arizona......................................................    15.5012
Arkansas.....................................................    13.5966
California...................................................    19.5577
Colorado.....................................................    15.8231
Connecticut..................................................    24.9480
Delaware.....................................................    18.4711
Florida......................................................    16.9485
Georgia......................................................    14.9642
Hawaii.......................................................    20.0330
Idaho........................................................    16.1848
Illinois.....................................................    14.7683
Indiana......................................................    15.8851
Iowa.........................................................    14.4039
Kansas.......................................................    13.8962
Kentucky.....................................................    15.1598
Louisiana....................................................    14.1417
Maine........................................................    16.2618
Maryland.....................................................    16.4777
Massachusetts................................................    21.0582
Michigan.....................................................    17.2651

[[Page 46266]]

                                                                        
Minnesota....................................................    15.9249
Mississippi..................................................    13.2829
Missouri.....................................................    14.1978
Montana......................................................    15.8928
Nebraska.....................................................    14.1063
Nevada.......................................................    17.1588
New Hampshire................................................    19.0549
New Jersey \1\...............................................  .........
New Mexico...................................................    15.6424
New York.....................................................    16.7329
North Carolina...............................................    15.5456
North Dakota.................................................    14.3865
Ohio.........................................................    16.2910
Oklahoma.....................................................    13.5735
Oregon.......................................................    18.8958
Pennsylvania.................................................    16.5277
Puerto Rico..................................................     7.8716
Rhode Island \1\.............................................  .........
South Carolina...............................................    14.9937
South Dakota.................................................    13.8107
Tennessee....................................................    14.3532
Texas........................................................    14.5903
Utah.........................................................    17.3014
Vermont......................................................    17.4440
Virginia.....................................................    15.0809
Washington...................................................    19.4229
West Virginia................................................    15.4544
Wisconsin....................................................    16.4842
Wyoming......................................................    15.9886
------------------------------------------------------------------------
\1\ All counties within the State are classified as 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           3.0486         7.7        11.1          32
                                          EXCEPT FOR TRAUMA.                                                    
2...........       01  SURG              CRANIOTOMY FOR TRAUMA        3.0134         8.4        11.6          32
                                          AGE >17.                                                              
3...........       01  SURG              *CRANIOTOMY AGE 0-17...      1.9167        12.7        12.7          37
4...........       01  SURG              SPINAL PROCEDURES......      2.3399         5.9         9.1          30
5...........       01  SURG              EXTRACRANIAL VASCULAR        1.5143         3.4         4.4          26
                                          PROCEDURES.                                                           
6...........       01  SURG              CARPAL TUNNEL RELEASE..       .7419         2.4         3.4          26
7...........       01  SURG              PERIPH & CRANIAL NERVE       2.4886         8.1        12.6          32
                                          & OTHER NERV SYST PROC                                                
                                          W CC.                                                                 
8...........       01  SURG              PERIPH & CRANIAL NERVE       1.0962         2.6         3.9          27
                                          & OTHER NERV SYST PROC                                                
                                          W/O CC.                                                               
9...........       01  MED               SPINAL DISORDERS &           1.2677         5.4         7.8          29
                                          INJURIES.                                                             
10..........       01  MED               NERVOUS SYSTEM               1.2196         5.7         8.1          30
                                          NEOPLASMS W CC.                                                       
11..........       01  MED               NERVOUS SYSTEM                .8000         3.5         5.0          28
                                          NEOPLASMS W/O CC.                                                     
12..........       01  MED               DEGENERATIVE NERVOUS          .9457         5.4         7.7          29
                                          SYSTEM DISORDERS.                                                     
13..........       01  MED               MULTIPLE SCLEROSIS &          .7770         5.0         6.2          29
                                          CEREBELLAR ATAXIA.                                                    
14..........       01  MED               SPECIFIC                     1.1999         5.5         7.5          30
                                          CEREBROVASCULAR                                                       
                                          DISORDERS EXCEPT TIA.                                                 
15..........       01  MED               TRANSIENT ISCHEMIC            .7231         3.5         4.5          27
                                          ATTACK & PRECEREBRAL                                                  
                                          OCCLUSIONS.                                                           
16..........       01  MED               NONSPECIFIC                  1.0371         4.9         6.6          29
                                          CEREBROVASCULAR                                                       
                                          DISORDERS W CC.                                                       
17..........       01  MED               NONSPECIFIC                   .6331         3.0         4.0          26
                                          CEREBROVASCULAR                                                       
                                          DISORDERS W/O CC.                                                     
18..........       01  MED               CRANIAL & PERIPHERAL          .9319         4.8         6.4          29
                                          NERVE DISORDERS W CC.                                                 
19..........       01  MED               CRANIAL & PERIPHERAL          .6230         3.4         4.5          27
                                          NERVE DISORDERS W/O CC.                                               
20..........       01  MED               NERVOUS SYSTEM               2.4854         8.6        11.6          33
                                          INFECTION EXCEPT VIRAL                                                
                                          MENINGITIS.                                                           
21..........       01  MED               VIRAL MENINGITIS.......      1.4910         5.8         7.8          30
22..........       01  MED               HYPERTENSIVE                  .8353         3.8         4.9          28
                                          ENCEPHALOPATHY.                                                       
23..........       01  MED               NONTRAUMATIC STUPOR &         .8089         3.6         5.1          28
                                          COMA.                                                                 
24..........       01  MED               SEIZURE & HEADACHE AGE        .9694         4.2         5.8          28
                                          >17 W CC.                                                             
25..........       01  MED               SEIZURE & HEADACHE AGE        .5793         3.0         3.9          24
                                          >17 W/O CC.                                                           
26..........       01  MED               SEIZURE & HEADACHE AGE        .7387         3.3         4.6          27
                                          0-17.                                                                 
27..........       01  MED               TRAUMATIC STUPOR &           1.3060         3.6         6.3          28
                                          COMA, COMA >1 HR.                                                     
28..........       01  MED               TRAUMATIC STUPOR &           1.2033         4.8         7.1          29
                                          COMA, COMA <1 HR AGE                                                  
                                          >17 W CC.                                                             
29..........       01  MED               TRAUMATIC STUPOR &            .6371         3.0         4.1          27
                                          COMA, COMA <1 HR AGE                                                  
                                          >17 W/O CC.                                                           
30..........       01  MED               *TRAUMATIC STUPOR &           .3241         2.0         2.0          17
                                          COMA, COMA <1 HR AGE 0-                                               
                                          17.                                                                   
31..........       01  MED               CONCUSSION AGE >17 W CC       .8412         3.7         5.4          28
32..........       01  MED               CONCUSSION AGE >17 W/O        .4861         2.3         3.1          20
                                          CC.                                                                   
33..........       01  MED               *CONCUSSION AGE 0-17...       .2037         1.6         1.6           9
34..........       01  MED               OTHER DISORDERS OF           1.0673         4.6         6.5          29
                                          NERVOUS SYSTEM W CC.                                                  
35..........       01  MED               OTHER DISORDERS OF            .6149         3.2         4.3          27
                                          NERVOUS SYSTEM W/O CC.                                                
36..........       02  SURG              RETINAL PROCEDURES.....       .6134         1.3         1.6           6
37..........       02  SURG              ORBITAL PROCEDURES.....       .9323         2.7         4.0          27
38..........       02  SURG              PRIMARY IRIS PROCEDURES       .4282         1.9         2.6          17
39..........       02  SURG              LENS PROCEDURES WITH OR       .5184         1.5         2.0          10
                                          WITHOUT VITRECTOMY.                                                   
40..........       02  SURG              EXTRAOCULAR PROCEDURES        .7072         2.2         3.4          26
                                          EXCEPT ORBIT AGE >17.                                                 
41..........       02  SURG              *EXTRAOCULAR PROCEDURES       .3299         1.6         1.6           7
                                          EXCEPT ORBIT AGE 0-17.                                                

[[Page 46267]]

                                                                                                                
42..........       02  SURG              INTRAOCULAR PROCEDURES        .5816         1.6         2.2          13
                                          EXCEPT RETINA, IRIS &                                                 
                                          LENS.                                                                 
43..........       02  MED               HYPHEMA................       .4520         3.3         4.2          27
44..........       02  MED               ACUTE MAJOR EYE               .6237         4.7         5.7          29
                                          INFECTIONS.                                                           
45..........       02  MED               NEUROLOGICAL EYE              .6525         3.1         3.8          22
                                          DISORDERS.                                                            
46..........       02  MED               OTHER DISORDERS OF THE        .7656         4.0         5.6          28
                                          EYE AGE >17 W CC.                                                     
47..........       02  MED               OTHER DISORDERS OF THE        .4664         2.8         3.8          27
                                          EYE AGE >17 W/O CC.                                                   
48..........       02  MED               *OTHER DISORDERS OF THE       .2907         2.9         2.9          27
                                          EYE AGE 0-17.                                                         
49..........       03  SURG              MAJOR HEAD & NECK            1.7245         4.1         5.7          28
                                          PROCEDURES.                                                           
50..........       03  SURG              SIALOADENECTOMY........       .7686         1.7         2.1           9
51..........       03  SURG              SALIVARY GLAND                .7345         1.9         2.9          20
                                          PROCEDURES EXCEPT                                                     
                                          SIALOADENECTOMY.                                                      
52..........       03  SURG              CLEFT LIP & PALATE           1.0271         2.1         3.4          24
                                          REPAIR.                                                               
53..........       03  SURG              SINUS & MASTOID              1.0128         2.2         3.6          26
                                          PROCEDURES AGE >17.                                                   
54..........       03  SURG              *SINUS & MASTOID              .4712         3.2         3.2          22
                                          PROCEDURES AGE 0-17.                                                  
55..........       03  SURG              MISCELLANEOUS EAR,            .7880         2.0         3.0          22
                                          NOSE, MOUTH & THROAT                                                  
                                          PROCEDURES.                                                           
56..........       03  SURG              RHINOPLASTY............       .8283         2.1         2.7          18
57..........       03  SURG              T&A PROC, EXCEPT              .9325         2.8         4.1          27
                                          TONSILLECTOMY &/OR                                                    
                                          ADENOIDECTOMY ONLY,                                                   
                                          AGE >17.                                                              
58..........       03  SURG              *T&A PROC, EXCEPT             .2676         1.5         1.5           4
                                          TONSILLECTOMY &/OR                                                    
                                          ADENOIDECTOMY ONLY,                                                   
                                          AGE 0-17.                                                             
59..........       03  SURG              TONSILLECTOMY &/OR            .7439         2.3         3.6          26
                                          ADENOIDECTOMY ONLY,                                                   
                                          AGE >17.                                                              
60..........       03  SURG              *TONSILLECTOMY &/OR           .2038         1.5         1.5           4
                                          ADENOIDECTOMY ONLY,                                                   
                                          AGE 0-17.                                                             
61..........       03  SURG              MYRINGOTOMY W TUBE           1.1960         2.7         5.1          27
                                          INSERTION AGE >17.                                                    
62..........       03  SURG              *MYRINGOTOMY W TUBE           .2885         1.3         1.3           5
                                          INSERTION AGE 0-17.                                                   
63..........       03  SURG              OTHER EAR, NOSE, MOUTH       1.2168         3.2         4.7          27
                                          & THROAT O.R.                                                         
                                          PROCEDURES.                                                           
64..........       03  MED               EAR, NOSE, MOUTH &           1.1737         4.8         7.6          29
                                          THROAT MALIGNANCY.                                                    
65..........       03  MED               DYSEQUILIBRIUM.........       .5195         2.7         3.4          20
66..........       03  MED               EPISTAXIS..............       .5366         2.9         3.6          21
67..........       03  MED               EPIGLOTTITIS...........       .8397         3.4         4.2          24
68..........       03  MED               OTITIS MEDIA & URI AGE        .7098         3.9         4.8          27
                                          >17 W CC.                                                             
69..........       03  MED               OTITIS MEDIA & URI AGE        .5239         3.1         3.8          20
                                          >17 W/O CC.                                                           
70..........       03  MED               OTITIS MEDIA & URI AGE        .3727         2.4         2.9          15
                                          0-17.                                                                 
71..........       03  MED               LARYNGOTRACHEITIS......       .7702         3.1         4.0          27
72..........       03  MED               NASAL TRAUMA &                .6532         3.1         4.4          27
                                          DEFORMITY.                                                            
73..........       03  MED               OTHER EAR, NOSE, MOUTH        .7505         3.7         5.0          28
                                          & THROAT DIAGNOSES AGE                                                
                                          >17.                                                                  
74..........       03  MED               *OTHER EAR, NOSE, MOUTH       .3278         2.1         2.1          20
                                          & THROAT DIAGNOSES AGE                                                
                                          0-17.                                                                 
75..........       04  SURG              MAJOR CHEST PROCEDURES.      3.1951         8.8        11.2          33
76..........       04  SURG              OTHER RESP SYSTEM O.R.       2.6036         9.1        12.5          33
                                          PROCEDURES W CC.                                                      
77..........       04  SURG              OTHER RESP SYSTEM O.R.       1.1593         3.8         5.5          28
                                          PROCEDURES W/O CC.                                                    
78..........       04  MED               PULMONARY EMBOLISM.....      1.4292         7.0         8.3          31
79..........       04  MED               RESPIRATORY INFECTIONS       1.6300         7.2         9.3          31
                                          & INFLAMMATIONS AGE                                                   
                                          >17 W CC.                                                             
80..........       04  MED               RESPIRATORY INFECTIONS        .9436         5.3         6.6          29
                                          & INFLAMMATIONS AGE                                                   
                                          >17 W/O CC.                                                           
81..........       04  MED               RESPIRATORY INFECTIONS       1.4845         6.3         7.8          30
                                          & INFLAMMATIONS AGE 0-                                                
                                          17.                                                                   
82..........       04  MED               RESPIRATORY NEOPLASMS..      1.3319         5.7         7.9          30
83..........       04  MED               MAJOR CHEST TRAUMA W CC       .9782         4.9         6.4          29
84..........       04  MED               MAJOR CHEST TRAUMA W/O        .5319         2.9         3.7          23
                                          CC.                                                                   
85..........       04  MED               PLEURAL EFFUSION W CC..      1.2200         5.6         7.4          30
86..........       04  MED               PLEURAL EFFUSION W/O CC       .7117         3.4         4.5          27
87..........       04  MED               PULMONARY EDEMA &            1.3615         5.1         6.9          29
                                          RESPIRATORY FAILURE.                                                  
88..........       04  MED               CHRONIC OBSTRUCTIVE           .9846         4.9         6.1          29
                                          PULMONARY DISEASE.                                                    
89..........       04  MED               SIMPLE PNEUMONIA &           1.1156         5.8         7.1          30
                                          PLEURISY AGE >17 W CC.                                                
90..........       04  MED               SIMPLE PNEUMONIA &            .6978         4.3         5.1          24
                                          PLEURISY AGE >17 W/O                                                  
                                          CC.                                                                   
91..........       04  MED               SIMPLE PNEUMONIA &            .7524         3.5         4.5          27
                                          PLEURISY AGE 0-17.                                                    
92..........       04  MED               INTERSTITIAL LUNG            1.2029         5.6         7.3          30
                                          DISEASE W CC.                                                         
93..........       04  MED               INTERSTITIAL LUNG             .7498         4.0         4.9          28
                                          DISEASE W/O CC.                                                       
94..........       04  MED               PNEUMOTHORAX W CC......      1.1780         5.3         7.1          29
95..........       04  MED               PNEUMOTHORAX W/O CC....       .5996         3.3         4.1          25
96..........       04  MED               BRONCHITIS & ASTHMA AGE       .8272         4.5         5.5          29
                                          >17 W CC.                                                             
97..........       04  MED               BRONCHITIS & ASTHMA AGE       .6035         3.6         4.3          22
                                          >17 W/O CC.                                                           
98..........       04  MED               BRONCHITIS & ASTHMA AGE       .7807         2.9         4.3          27
                                          0-17.                                                                 

[[Page 46268]]

                                                                                                                
99..........       04  MED               RESPIRATORY SIGNS &           .6869         2.7         3.5          22
                                          SYMPTOMS W CC.                                                        
100.........       04  MED               RESPIRATORY SIGNS &           .5113         2.0         2.4          12
                                          SYMPTOMS W/O CC.                                                      
101.........       04  MED               OTHER RESPIRATORY             .8748         3.9         5.2          28
                                          SYSTEM DIAGNOSES W CC.                                                
102.........       04  MED               OTHER RESPIRATORY             .5335         2.4         3.1          20
                                          SYSTEM DIAGNOSES W/O                                                  
                                          CC.                                                                   
103.........       05  SURG              HEART TRANSPLANT.......     15.3358        28.4        40.0          52
104.........       05  SURG              CARDIAC VALVE                7.3199        12.0        14.6          36
                                          PROCEDURES W CARDIAC                                                  
                                          CATH.                                                                 
105.........       05  SURG              CARDIAC VALVE                5.5998         9.0        11.0          33
                                          PROCEDURES W/O CARDIAC                                                
                                          CATH.                                                                 
106.........       05  SURG              CORONARY BYPASS W            5.5564        10.3        11.7          34
                                          CARDIAC CATH.                                                         
107.........       05  SURG              CORONARY BYPASS W/O          4.0685         7.8         8.8          32
                                          CARDIAC CATH.                                                         
108.........       05  SURG              OTHER CARDIOTHORACIC         5.9135         9.8        12.6          34
                                          PROCEDURES.                                                           
109.........           ................  NO LONGER VALID........       .0000          .0          .0           0
110.........       05  SURG              MAJOR CARDIOVASCULAR         4.1589         8.2        10.9          32
                                          PROCEDURES W CC.                                                      
111.........       05  SURG              MAJOR CARDIOVASCULAR         2.2875         5.9         6.7          30
                                          PROCEDURES W/O CC.                                                    
112.........       05  SURG              PERCUTANEOUS                 2.0946         3.5         4.7          27
                                          CARDIOVASCULAR                                                        
                                          PROCEDURES.                                                           
113.........       05  SURG              AMPUTATION FOR CIRC          2.6935        10.6        14.4          35
                                          SYSTEM DISORDERS                                                      
                                          EXCEPT UPPER LIMB &                                                   
                                          TOE.                                                                  
114.........       05  SURG              UPPER LIMB & TOE             1.5152         6.8         9.5          31
                                          AMPUTATION FOR CIRC                                                   
                                          SYSTEM DISORDERS.                                                     
115.........       05  SURG              PERM CARDIAC PACEMAKER       3.6827         9.1        11.5          33
                                          IMPLANT W AMI, HEART                                                  
                                          FAILURE OR SHOCK.                                                     
116.........       05  SURG              OTH PERM CARDIAC             2.4150         3.9         5.4          28
                                          PACEMAKER IMPLANT OR                                                  
                                          AICD LEAD OR GENERATOR                                                
                                          PROC.                                                                 
117.........       05  SURG              CARDIAC PACEMAKER            1.1764         2.7         4.1          27
                                          REVISION EXCEPT DEVICE                                                
                                          REPLACEMENT.                                                          
118.........       05  SURG              CARDIAC PACEMAKER            1.5825         2.1         3.2          25
                                          DEVICE REPLACEMENT.                                                   
119.........       05  SURG              VEIN LIGATION &              1.1435         3.3         5.5          27
                                          STRIPPING.                                                            
120.........       05  SURG              OTHER CIRCULATORY            1.9318         5.4         9.2          29
                                          SYSTEM O.R. PROCEDURES.                                               
121.........       05  MED               CIRCULATORY DISORDERS W      1.6482         6.4         7.8          30
                                          AMI & C.V. COMP DISCH                                                 
                                          ALIVE.                                                                
122.........       05  MED               CIRCULATORY DISORDERS W      1.1617         4.4         5.3          28
                                          AMI W/O C.V. COMP                                                     
                                          DISCH ALIVE.                                                          
123.........       05  MED               CIRCULATORY DISORDERS W      1.4555         2.7         4.7          27
                                          AMI, EXPIRED.                                                         
124.........       05  MED               CIRCULATORY DISORDERS        1.3258         3.8         5.0          28
                                          EXCEPT AMI, W CARD                                                    
                                          CATH & COMPLEX DIAG.                                                  
125.........       05  MED               CIRCULATORY DISORDERS         .9246         2.3         3.1          20
                                          EXCEPT AMI, W CARD                                                    
                                          CATH W/O COMPLEX DIAG.                                                
126.........       05  MED               ACUTE & SUBACUTE             2.5379        11.0        14.3          35
                                          ENDOCARDITIS.                                                         
127.........       05  MED               HEART FAILURE & SHOCK..      1.0265         4.8         6.2          29
128.........       05  MED               DEEP VEIN                     .7861         5.9         6.7          27
                                          THROMBOPHLEBITIS.                                                     
129.........       05  MED               CARDIAC ARREST,              1.1316         2.0         3.5          26
                                          UNEXPLAINED.                                                          
130.........       05  MED               PERIPHERAL VASCULAR           .9352         5.3         6.7          29
                                          DISORDERS W CC.                                                       
131.........       05  MED               PERIPHERAL VASCULAR           .6038         4.3         5.2          28
                                          DISORDERS W/O CC.                                                     
132.........       05  MED               ATHEROSCLEROSIS W CC...       .6840         2.9         3.6          20
133.........       05  MED               ATHEROSCLEROSIS W/O CC.       .5537         2.3         2.9          16
134.........       05  MED               HYPERTENSION...........       .5787         3.0         3.9          23
135.........       05  MED               CARDIAC CONGENITAL &          .8838         3.7         5.0          28
                                          VALVULAR DISORDERS AGE                                                
                                          >17 W CC.                                                             
136.........       05  MED               CARDIAC CONGENITAL &          .5629         2.6         3.3          18
                                          VALVULAR DISORDERS AGE                                                
                                          >17 W/O CC.                                                           
137.........       05  MED               *CARDIAC CONGENITAL &         .7999         3.3         3.3          27
                                          VALVULAR DISORDERS AGE                                                
                                          0-17.                                                                 
138.........       05  MED               CARDIAC ARRHYTHMIA &          .8008         3.5         4.6          27
                                          CONDUCTION DISORDERS W                                                
                                          CC.                                                                   
139.........       05  MED               CARDIAC ARRHYTHMIA &          .4971         2.4         2.9          16
                                          CONDUCTION DISORDERS W/                                               
                                          O CC.                                                                 
140.........       05  MED               ANGINA PECTORIS........       .6205         2.8         3.5          20
141.........       05  MED               SYNCOPE & COLLAPSE W CC       .7128         3.4         4.5          27
142.........       05  MED               SYNCOPE & COLLAPSE W/O        .5288         2.5         3.2          18
                                          CC.                                                                   
143.........       05  MED               CHEST PAIN.............       .5223         2.1         2.6          14
144.........       05  MED               OTHER CIRCULATORY            1.0857         4.1         5.7          28
                                          SYSTEM DIAGNOSES W CC.                                                
145.........       05  MED               OTHER CIRCULATORY             .6208         2.5         3.2          20
                                          SYSTEM DIAGNOSES W/O                                                  
                                          CC.                                                                   
146.........       06  SURG              RECTAL RESECTION W CC..      2.6363         9.8        11.2          34
147.........       06  SURG              RECTAL RESECTION W/O CC      1.6018         6.7         7.3          27
148.........       06  SURG              MAJOR SMALL & LARGE          3.3710        11.2        13.5          35
                                          BOWEL PROCEDURES W CC.                                                
149.........       06  SURG              MAJOR SMALL & LARGE          1.5999         7.0         7.7          25
                                          BOWEL PROCEDURES W/O                                                  
                                          CC.                                                                   
150.........       06  SURG              PERITONEAL ADHESIOLYSIS      2.6828         9.5        11.7          34
                                          W CC.                                                                 
151.........       06  SURG              PERITONEAL ADHESIOLYSIS      1.2910         5.2         6.5          29
                                          W/O CC.                                                               
152.........       06  SURG              MINOR SMALL & LARGE          1.9311         7.6         9.0          32
                                          BOWEL PROCEDURES W CC.                                                

[[Page 46269]]

                                                                                                                
153.........       06  SURG              MINOR SMALL & LARGE          1.1568         5.6         6.2          24
                                          BOWEL PROCEDURES W/O                                                  
                                          CC.                                                                   
154.........       06  SURG              *STOMACH, ESOPHAGEAL &       4.1817        11.6        15.0          36
                                          DUODENAL PROCEDURES                                                   
                                          AGE >17 W CC.                                                         
155.........       06  SURG              STOMACH, ESOPHAGEAL &        1.4059         4.5         5.9          29
                                          DUODENAL PROCEDURES                                                   
                                          AGE >17 W/O CC.                                                       
156.........       06  SURG              *STOMACH, ESOPHAGEAL &        .8238         6.0         6.0          30
                                          DUODENAL PROCEDURES                                                   
                                          AGE 0-17.                                                             
157.........       06  SURG              ANAL & STOMAL                1.1352         4.2         5.8          28
                                          PROCEDURES W CC.                                                      
158.........       06  SURG              ANAL & STOMAL                 .6077         2.3         2.9          18
                                          PROCEDURES W/O CC.                                                    
159.........       06  SURG              HERNIA PROCEDURES            1.2268         4.0         5.3          28
                                          EXCEPT INGUINAL &                                                     
                                          FEMORAL AGE >17 W CC.                                                 
160.........       06  SURG              HERNIA PROCEDURES             .7026         2.4         3.0          16
                                          EXCEPT INGUINAL &                                                     
                                          FEMORAL AGE >17 W/O CC.                                               
161.........       06  SURG              INGUINAL & FEMORAL           1.0066         3.0         4.4          27
                                          HERNIA PROCEDURES AGE                                                 
                                          >17 W CC.                                                             
162.........       06  SURG              INGUINAL & FEMORAL            .5707         1.7         2.2          11
                                          HERNIA PROCEDURES AGE                                                 
                                          >17 W/O CC.                                                           
163.........       06  SURG              *HERNIA PROCEDURES AGE        .7706         2.1         2.1          11
                                          0-17.                                                                 
164.........       06  SURG              APPENDECTOMY W               2.3386         8.0         9.4          32
                                          COMPLICATED PRINCIPAL                                                 
                                          DIAG W CC.                                                            
165.........       06  SURG              APPENDECTOMY W               1.2582         5.1         5.8          24
                                          COMPLICATED PRINCIPAL                                                 
                                          DIAG W/O CC.                                                          
166.........       06  SURG              APPENDECTOMY W/O             1.4497         4.5         5.7          29
                                          COMPLICATED PRINCIPAL                                                 
                                          DIAG W CC.                                                            
167.........       06  SURG              APPENDECTOMY W/O              .8431         2.8         3.2          15
                                          COMPLICATED PRINCIPAL                                                 
                                          DIAG W/O CC.                                                          
168.........       03  SURG              MOUTH PROCEDURES W CC..      1.0929         3.2         5.0          27
169.........       03  SURG              MOUTH PROCEDURES W/O CC       .6717         2.0         2.5          15
170.........       06  SURG              OTHER DIGESTIVE SYSTEM       2.7453         8.5        12.5          33
                                          O.R. PROCEDURES W CC.                                                 
171.........       06  SURG              OTHER DIGESTIVE SYSTEM       1.1202         4.0         5.4          28
                                          O.R. PROCEDURES W/O CC.                                               
172.........       06  MED               DIGESTIVE MALIGNANCY W       1.2920         5.7         8.2          30
                                          CC.                                                                   
173.........       06  MED               DIGESTIVE MALIGNANCY W/       .6769         3.0         4.4          27
                                          O CC.                                                                 
174.........       06  MED               G.I. HEMORRHAGE W CC...       .9952         4.4         5.6          28
175.........       06  MED               G.I. HEMORRHAGE W/O CC.       .5485         2.9         3.5          17
176.........       06  MED               COMPLICATED PEPTIC           1.0856         4.7         6.2          29
                                          ULCER.                                                                
177.........       06  MED               UNCOMPLICATED PEPTIC          .8335         4.0         5.0          28
                                          ULCER W CC.                                                           
178.........       06  MED               UNCOMPLICATED PEPTIC          .6091         3.0         3.6          19
                                          ULCER W/O CC.                                                         
179.........       06  MED               INFLAMMATORY BOWEL           1.1188         5.5         7.2          30
                                          DISEASE.                                                              
180.........       06  MED               G.I. OBSTRUCTION W CC..       .9194         4.7         6.1          29
181.........       06  MED               G.I. OBSTRUCTION W/O CC       .5338         3.3         4.0          22
182.........       06  MED               ESOPHAGITIS, GASTROENT        .7789         3.8         5.0          28
                                          & MISC DIGEST                                                         
                                          DISORDERS AGE >17 W CC.                                               
183.........       06  MED               ESOPHAGITIS, GASTROENT        .5553         2.8         3.4          20
                                          & MISC DIGEST                                                         
                                          DISORDERS AGE >17 W/O                                                 
                                          CC.                                                                   
184.........       06  MED               ESOPHAGITIS, GASTROENT        .5414         2.8         3.9          27
                                          & MISC DIGEST                                                         
                                          DISORDERS AGE 0-17.                                                   
185.........       03  MED               DENTAL & ORAL DIS             .8424         3.7         5.2          28
                                          EXCEPT EXTRACTIONS &                                                  
                                          RESTORATIONS, AGE >17.                                                
186.........       03  MED               *DENTAL & ORAL DIS            .3140         2.9         2.9          23
                                          EXCEPT EXTRACTIONS &                                                  
                                          RESTORATIONS, AGE 0-17.                                               
187.........       03  MED               DENTAL EXTRACTIONS &          .7104         3.1         4.2          27
                                          RESTORATIONS.                                                         
188.........       06  MED               OTHER DIGESTIVE SYSTEM       1.0591         4.5         6.1          28
                                          DIAGNOSES AGE >17 W CC.                                               
189.........       06  MED               OTHER DIGESTIVE SYSTEM        .5640         2.7         3.7          27
                                          DIAGNOSES AGE >17 W/O                                                 
                                          CC.                                                                   
190.........       06  MED               OTHER DIGESTIVE SYSTEM        .8769         3.9         5.1          28
                                          DIAGNOSES AGE 0-17.                                                   
191.........       07  SURG              PANCREAS, LIVER & SHUNT      4.4543        12.1        16.3          36
                                          PROCEDURES W CC.                                                      
192.........       07  SURG              PANCREAS, LIVER & SHUNT      1.7889         6.2         7.9          30
                                          PROCEDURES W/O CC.                                                    
193.........       07  SURG              BILIARY TRACT PROC           3.2878        11.4        13.9          35
                                          EXCEPT ONLY CHOLECYST                                                 
                                          W OR W/O C.D.E. W CC.                                                 
194.........       07  SURG              BILIARY TRACT PROC           1.7549         6.8         8.5          31
                                          EXCEPT ONLY CHOLECYST                                                 
                                          W OR W/O C.D.E. W/O CC.                                               
195.........       07  SURG              CHOLECYSTECTOMY W            2.6894         8.8        10.5          33
                                          C.D.E. W CC.                                                          
196.........       07  SURG              CHOLECYSTECTOMY W            1.6127         5.8         6.7          30
                                          C.D.E. W/O CC.                                                        
197.........       07  SURG              CHOLECYSTECTOMY EXCEPT       2.2679         7.5         9.2          31
                                          BY LAPAROSCOPE W/O                                                    
                                          C.D.E. W CC.                                                          
198.........       07  SURG              CHOLECYSTECTOMY EXCEPT       1.1738         4.3         4.9          23
                                          BY LAPAROSCOPE W/O                                                    
                                          C.D.E. W/O CC.                                                        

[[Page 46270]]

                                                                                                                
199.........       07  SURG              HEPATOBILIARY                2.3728         8.4        11.2          32
                                          DIAGNOSTIC PROCEDURE                                                  
                                          FOR MALIGNANCY.                                                       
200.........       07  SURG              HEPATOBILIARY                3.1772         7.9        12.4          32
                                          DIAGNOSTIC PROCEDURE                                                  
                                          FOR NON-MALIGNANCY.                                                   
201.........       07  SURG              OTHER HEPATOBILIARY OR       3.7669        12.1        16.8          36
                                          PANCREAS O.R.                                                         
                                          PROCEDURES.                                                           
202.........       07  MED               CIRRHOSIS & ALCOHOLIC        1.3675         5.7         7.8          30
                                          HEPATITIS.                                                            
203.........       07  MED               MALIGNANCY OF                1.2486         5.5         7.7          30
                                          HEPATOBILIARY SYSTEM                                                  
                                          OR PANCREAS.                                                          
204.........       07  MED               DISORDERS OF PANCREAS        1.2004         5.1         6.8          29
                                          EXCEPT MALIGNANCY.                                                    
205.........       07  MED               DISORDERS OF LIVER           1.2194         5.3         7.3          29
                                          EXCEPT MALIG, CIRR,                                                   
                                          ALC HEPA W CC.                                                        
206.........       07  MED               DISORDERS OF LIVER            .7159         3.6         4.7          28
                                          EXCEPT MALIG, CIRR,                                                   
                                          ALC HEPA W/O CC.                                                      
207.........       07  MED               DISORDERS OF THE             1.0508         4.4         5.8          28
                                          BILIARY TRACT W CC.                                                   
208.........       07  MED               DISORDERS OF THE              .6045         2.6         3.5          21
                                          BILIARY TRACT W/O CC.                                                 
209.........       08  SURG              MAJOR JOINT & LIMB           2.2606         5.9         6.7          23
                                          REATTACHMENT                                                          
                                          PROCEDURES OF LOWER                                                   
                                          EXTREMITY.                                                            
210.........       08  SURG              HIP & FEMUR PROCEDURES       1.8460         7.2         8.6          31
                                          EXCEPT MAJOR JOINT AGE                                                
                                          >17 W CC.                                                             
211.........       08  SURG              HIP & FEMUR PROCEDURES       1.2740         5.6         6.3          23
                                          EXCEPT MAJOR JOINT AGE                                                
                                          >17 W/O CC.                                                           
212.........       08  SURG              *HIP & FEMUR PROCEDURES      1.1487        11.1        11.1          35
                                          EXCEPT MAJOR JOINT AGE                                                
                                          0-17.                                                                 
213.........       08  SURG              AMPUTATION FOR               1.7049         7.0         9.7          31
                                          MUSCULOSKELETAL SYSTEM                                                
                                          & CONN TISSUE                                                         
                                          DISORDERS.                                                            
214.........       08  SURG              BACK & NECK PROCEDURES       1.9255         4.9         6.5          29
                                          W CC.                                                                 
215.........       08  SURG              BACK & NECK PROCEDURES       1.1119         3.0         3.7          20
                                          W/O CC.                                                               
216.........       08  SURG              BIOPSIES OF                  2.0784         7.9        11.1          32
                                          MUSCULOSKELETAL SYSTEM                                                
                                          & CONNECTIVE TISSUE.                                                  
217.........       08  SURG              WND DEBRID & SKN GRFT        2.8812        10.2        15.4          34
                                          EXCEPT HAND, FOR                                                      
                                          MUSCSKELET & CONN TISS                                                
                                          DIS.                                                                  
218.........       08  SURG              LOWER EXTREM & HUMER         1.4574         4.8         6.2          29
                                          PROC EXCEPT HIP, FOOT,                                                
                                          FEMUR AGE >17 W CC.                                                   
219.........       08  SURG              LOWER EXTREM & HUMER          .9553         3.1         3.8          19
                                          PROC EXCEPT HIP, FOOT,                                                
                                          FEMUR AGE >17 W/O CC.                                                 
220.........       08  SURG              *LOWER EXTREM & HUMER         .5706         5.3         5.3          29
                                          PROC EXCEPT HIP, FOOT,                                                
                                          FEMUR AGE 0-17.                                                       
221.........       08  SURG              KNEE PROCEDURES W CC...      1.8340         5.8         8.1          30
222.........       08  SURG              KNEE PROCEDURES W/O CC.      1.0177         3.1         4.0          27
223.........       08  SURG              MAJOR SHOULDER/ELBOW          .8720         2.2         2.9          16
                                          PROC, OR OTHER UPPER                                                  
                                          EXTREMITY PROC W CC.                                                  
224.........       08  SURG              SHOULDER, ELBOW OR            .7417         1.9         2.3          10
                                          FOREARM PROC, EXC                                                     
                                          MAJOR JOINT PROC, W/O                                                 
                                          CC.                                                                   
225.........       08  SURG              FOOT PROCEDURES........      1.0020         3.3         5.0          27
226.........       08  SURG              SOFT TISSUE PROCEDURES       1.3831         4.4         6.7          28
                                          W CC.                                                                 
227.........       08  SURG              SOFT TISSUE PROCEDURES        .7449         2.3         3.0          18
                                          W/O CC.                                                               
228.........       08  SURG              MAJOR THUMB OR JOINT          .9349         2.3         3.5          26
                                          PROC, OR OTH HAND OR                                                  
                                          WRIST PROC W CC.                                                      
229.........       08  SURG              HAND OR WRIST PROC,           .6512         1.8         2.4          13
                                          EXCEPT MAJOR JOINT                                                    
                                          PROC, W/O CC.                                                         
230.........       08  SURG              LOCAL EXCISION &             1.0567         3.3         5.2          27
                                          REMOVAL OF INT FIX                                                    
                                          DEVICES OF HIP & FEMUR.                                               
231.........       08  SURG              LOCAL EXCISION &             1.2263         3.3         5.1          27
                                          REMOVAL OF INT FIX                                                    
                                          DEVICES EXCEPT HIP &                                                  
                                          FEMUR.                                                                
232.........       08  SURG              ARTHROSCOPY............      1.0884         2.6         4.5          27
233.........       08  SURG              OTHER MUSCULOSKELET SYS      2.0170         6.4         9.1          30
                                          & CONN TISS O.R. PROC                                                 
                                          W CC.                                                                 
234.........       08  SURG              OTHER MUSCULOSKELET SYS      1.0675         3.1         4.1          27
                                          & CONN TISS O.R. PROC                                                 
                                          W/O CC.                                                               
235.........       08  MED               FRACTURES OF FEMUR.....       .8395         4.7         6.9          29
236.........       08  MED               FRACTURES OF HIP &            .7620         4.7         6.4          29
                                          PELVIS.                                                               
237.........       08  MED               SPRAINS, STRAINS, &           .5637         3.3         4.4          27
                                          DISLOCATIONS OF HIP,                                                  
                                          PELVIS & THIGH.                                                       
238.........       08  MED               OSTEOMYELITIS..........      1.3796         7.6        10.1          32
239.........       08  MED               PATHOLOGICAL FRACTURES       1.0115         5.8         7.6          30
                                          & MUSCULOSKELETAL &                                                   
                                          CONN TISS MALIGNANCY.                                                 
240.........       08  MED               CONNECTIVE TISSUE            1.2112         5.5         7.5          30
                                          DISORDERS W CC.                                                       
241.........       08  MED               CONNECTIVE TISSUE             .6029         3.5         4.6          28
                                          DISORDERS W/O CC.                                                     
242.........       08  MED               SEPTIC ARTHRITIS.......      1.0492         5.8         7.7          30

[[Page 46271]]

                                                                                                                
243.........       08  MED               MEDICAL BACK PROBLEMS..       .7241         4.3         5.6          28
244.........       08  MED               BONE DISEASES &               .7279         4.3         5.8          28
                                          SPECIFIC ARTHROPATHIES                                                
                                          W CC.                                                                 
245.........       08  MED               BONE DISEASES &               .4954         3.2         4.3          27
                                          SPECIFIC ARTHROPATHIES                                                
                                          W/O CC.                                                               
246.........       08  MED               NON-SPECIFIC                  .5887         3.6         4.6          28
                                          ARTHROPATHIES.                                                        
247.........       08  MED               SIGNS & SYMPTOMS OF           .5523         2.9         4.0          27
                                          MUSCULOSKELETAL SYSTEM                                                
                                          & CONN TISSUE.                                                        
248.........       08  MED               TENDONITIS, MYOSITIS &        .7325         3.9         5.3          28
                                          BURSITIS.                                                             
249.........       08  MED               AFTERCARE,                    .6522         2.9         4.3          27
                                          MUSCULOSKELETAL SYSTEM                                                
                                          & CONNECTIVE TISSUE.                                                  
250.........       08  MED               FX, SPRN, STRN & DISL         .6915         3.6         5.1          28
                                          OF FOREARM, HAND, FOOT                                                
                                          AGE >17 W CC.                                                         
251.........       08  MED               FX, SPRN, STRN & DISL         .4640         2.5         3.3          22
                                          OF FOREARM, HAND, FOOT                                                
                                          AGE >17 W/O CC.                                                       
252.........       08  MED               *FX, SPRN, STRN & DISL        .2479         1.8         1.8          15
                                          OF FOREARM, HAND, FOOT                                                
                                          AGE 0-17.                                                             
253.........       08  MED               FX, SPRN, STRN & DISL         .7438         4.3         5.8          28
                                          OF UPARM, LOWLEG EX                                                   
                                          FOOT AGE >17 W CC.                                                    
254.........       08  MED               FX, SPRN, STRN & DISL         .4451         2.9         3.9          25
                                          OF UPARM, LOWLEG EX                                                   
                                          FOOT AGE >17 W/O CC.                                                  
255.........       08  MED               *FX, SPRN, STRN & DISL        .2886         2.9         2.9          27
                                          OF UPARM, LOWLEG EX                                                   
                                          FOOT AGE 0-17.                                                        
256.........       08  MED               OTHER MUSCULOSKELETAL         .7651         4.0         5.7          28
                                          SYSTEM & CONNECTIVE                                                   
                                          TISSUE DIAGNOSES.                                                     
257.........       09  SURG              TOTAL MASTECTOMY FOR          .9015         2.8         3.4          17
                                          MALIGNANCY W CC.                                                      
258.........       09  SURG              TOTAL MASTECTOMY FOR          .7087         2.2         2.5          10
                                          MALIGNANCY W/O CC.                                                    
259.........       09  SURG              SUBTOTAL MASTECTOMY FOR       .8640         2.3         3.5          26
                                          MALIGNANCY W CC.                                                      
260.........       09  SURG              SUBTOTAL MASTECTOMY FOR       .6083         1.6         1.9           8
                                          MALIGNANCY W/O CC.                                                    
261.........       09  SURG              BREAST PROC FOR NON-          .8286         1.9         2.3          12
                                          MALIGNANCY EXCEPT                                                     
                                          BIOPSY & LOCAL                                                        
                                          EXCISION.                                                             
262.........       09  SURG              BREAST BIOPSY & LOCAL         .7695         2.7         3.9          27
                                          EXCISION FOR NON-                                                     
                                          MALIGNANCY.                                                           
263.........       09  SURG              SKIN GRAFT &/OR DEBRID       2.1226         9.9        13.9          34
                                          FOR SKIN ULCER OR                                                     
                                          CELLULITIS W CC.                                                      
264.........       09  SURG              SKIN GRAFT &/OR DEBRID       1.1270         6.0         8.3          30
                                          FOR SKIN ULCER OR                                                     
                                          CELLULITIS W/O CC.                                                    
265.........       09  SURG              SKIN GRAFT &/OR DEBRID       1.4993         4.8         7.7          29
                                          EXCEPT FOR SKIN ULCER                                                 
                                          OR CELLULITIS W CC.                                                   
266.........       09  SURG              SKIN GRAFT &/OR DEBRID        .7629         2.7         3.7          27
                                          EXCEPT FOR SKIN ULCER                                                 
                                          OR CELLULITIS W/O CC.                                                 
267.........       09  SURG              PERIANAL & PILONIDAL          .8330         2.8         4.3          27
                                          PROCEDURES.                                                           
268.........       09  SURG              SKIN, SUBCUTANEOUS            .9916         2.5         4.1          27
                                          TISSUE & BREAST                                                       
                                          PLASTIC PROCEDURES.                                                   
269.........       09  SURG              OTHER SKIN, SUBCUT TISS      1.6416         6.3         9.3          30
                                          & BREAST PROC W CC.                                                   
270.........       09  SURG              OTHER SKIN, SUBCUT TISS       .7003         2.4         3.4          26
                                          & BREAST PROC W/O CC.                                                 
271.........       09  MED               SKIN ULCERS............      1.0816         6.6         8.5          31
272.........       09  MED               MAJOR SKIN DISORDERS W       1.0158         5.6         7.5          30
                                          CC.                                                                   
273.........       09  MED               MAJOR SKIN DISORDERS W/       .6346         4.1         5.5          28
                                          O CC.                                                                 
274.........       09  MED               MALIGNANT BREAST             1.0760         5.3         7.9          29
                                          DISORDERS W CC.                                                       
275.........       09  MED               MALIGNANT BREAST              .5085         2.5         3.7          27
                                          DISORDERS W/O CC.                                                     
276.........       09  MED               NON-MALIGNANT BREAST          .6374         3.9         5.0          28
                                          DISORDERS.                                                            
277.........       09  MED               CELLULITIS AGE >17 W CC       .8526         5.5         6.7          29
278.........       09  MED               CELLULITIS AGE >17 W/O        .5774         4.3         5.2          25
                                          CC.                                                                   
279.........       09  MED               *CELLULITIS AGE 0-17...       .7190         4.2         4.2          24
280.........       09  MED               TRAUMA TO THE SKIN,           .6750         3.7         5.1          28
                                          SUBCUT TISS & BREAST                                                  
                                          AGE >17 W CC.                                                         
281.........       09  MED               TRAUMA TO THE SKIN,           .4560         2.7         3.6          24
                                          SUBCUT TISS & BREAST                                                  
                                          AGE >17 W/O CC.                                                       
282.........       09  MED               *TRAUMA TO THE SKIN,          .2509         2.2         2.2          19
                                          SUBCUT TISS & BREAST                                                  
                                          AGE 0-17.                                                             
283.........       09  MED               MINOR SKIN DISORDERS W        .6990         4.1         5.5          28
                                          CC.                                                                   
284.........       09  MED               MINOR SKIN DISORDERS W/       .4340         2.9         3.8          26
                                          O CC.                                                                 
285.........       10  SURG              AMPUTAT OF LOWER LIMB        2.2015         9.5        13.7          34
                                          FOR ENDOCRINE, NUTRIT,                                                
                                          & METABOL DISORDERS.                                                  
286.........       10  SURG              ADRENAL & PITUITARY          2.3775         6.6         8.7          31
                                          PROCEDURES.                                                           
287.........       10  SURG              SKIN GRAFTS & WOUND          1.9765         9.4        13.4          33
                                          DEBRID FOR ENDOC,                                                     
                                          NUTRIT & METAB                                                        
                                          DISORDERS.                                                            
288.........       10  SURG              O.R. PROCEDURES FOR          2.0104         5.2         6.9          29
                                          OBESITY.                                                              
289.........       10  SURG              PARATHYROID PROCEDURES.      1.0198         2.7         4.0          27
290.........       10  SURG              THYROID PROCEDURES.....       .8798         2.1         2.8          15

[[Page 46272]]

                                                                                                                
291.........       10  SURG              THYROGLOSSAL PROCEDURES       .5189         1.4         1.8           8
292.........       10  SURG              OTHER ENDOCRINE, NUTRIT      2.6450         8.4        12.8          32
                                          & METAB O.R. PROC W CC.                                               
293.........       10  SURG              OTHER ENDOCRINE, NUTRIT      1.2671         4.6         6.8          29
                                          & METAB O.R. PROC W/O                                                 
                                          CC.                                                                   
294.........       10  MED               DIABETES AGE >35.......       .7594         4.3         5.7          28
295.........       10  MED               DIABETES AGE 0-35......       .7159         3.3         4.3          27
296.........       10  MED               NUTRITIONAL & MISC            .8929         4.7         6.4          29
                                          METABOLIC DISORDERS                                                   
                                          AGE >17 W CC.                                                         
297.........       10  MED               NUTRITIONAL & MISC            .5364         3.3         4.3          26
                                          METABOLIC DISORDERS                                                   
                                          AGE >17 W/O CC.                                                       
298.........       10  MED               NUTRITIONAL & MISC            .5221         2.5         3.4          23
                                          METABOLIC DISORDERS                                                   
                                          AGE 0-17.                                                             
299.........       10  MED               INBORN ERRORS OF              .8330         3.9         5.4          28
                                          METABOLISM.                                                           
300.........       10  MED               ENDOCRINE DISORDERS W        1.0950         5.5         7.3          30
                                          CC.                                                                   
301.........       10  MED               ENDOCRINE DISORDERS W/O       .6182         3.4         4.4          27
                                          CC.                                                                   
302.........       11  SURG              KIDNEY TRANSPLANT......      3.9047        10.4        12.3          34
303.........       11  SURG              KIDNEY, URETER & MAJOR       2.6409         8.4        10.2          32
                                          BLADDER PROCEDURES FOR                                                
                                          NEOPLASM.                                                             
304.........       11  SURG              KIDNEY, URETER & MAJOR       2.3716         7.5        10.3          31
                                          BLADDER PROC FOR NON-                                                 
                                          NEOPL W CC.                                                           
305.........       11  SURG              KIDNEY, URETER & MAJOR       1.1776         3.9         4.9          28
                                          BLADDER PROC FOR NON-                                                 
                                          NEOPL W/O CC.                                                         
306.........       11  SURG              PROSTATECTOMY W CC.....      1.2258         4.3         6.2          28
307.........       11  SURG              PROSTATECTOMY W/O CC...       .6708         2.4         3.0          15
308.........       11  SURG              MINOR BLADDER                1.5252         4.7         7.0          29
                                          PROCEDURES W CC.                                                      
309.........       11  SURG              MINOR BLADDER                 .8860         2.3         3.0          18
                                          PROCEDURES W/O CC.                                                    
310.........       11  SURG              TRANSURETHRAL                1.0015         3.2         4.6          27
                                          PROCEDURES W CC.                                                      
311.........       11  SURG              TRANSURETHRAL                 .5670         1.8         2.2          11
                                          PROCEDURES W/O CC.                                                    
312.........       11  SURG              URETHRAL PROCEDURES,          .9124         3.2         4.8          27
                                          AGE >17 W CC.                                                         
313.........       11  SURG              URETHRAL PROCEDURES,          .5223         1.8         2.3          13
                                          AGE >17 W/O CC.                                                       
314.........       11  SURG              *URETHRAL PROCEDURES,         .4836         2.3         2.3          26
                                          AGE 0-17.                                                             
315.........       11  SURG              OTHER KIDNEY & URINARY       2.0574         5.3         9.3          29
                                          TRACT O.R. PROCEDURES.                                                
316.........       11  MED               RENAL FAILURE..........      1.3034         5.4         7.6          29
317.........       11  MED               ADMIT FOR RENAL               .4845         1.9         2.9          20
                                          DIALYSIS.                                                             
318.........       11  MED               KIDNEY & URINARY TRACT       1.1296         5.0         7.2          29
                                          NEOPLASMS W CC.                                                       
319.........       11  MED               KIDNEY & URINARY TRACT        .5772         2.3         3.2          24
                                          NEOPLASMS W/O CC.                                                     
320.........       11  MED               KIDNEY & URINARY TRACT        .9048         5.1         6.4          29
                                          INFECTIONS AGE >17 W                                                  
                                          CC.                                                                   
321.........       11  MED               KIDNEY & URINARY TRACT        .6077         3.9         4.7          24
                                          INFECTIONS AGE >17 W/O                                                
                                          CC.                                                                   
322.........       11  MED               KIDNEY & URINARY TRACT        .5133         3.6         4.4          23
                                          INFECTIONS AGE 0-17.                                                  
323.........       11  MED               URINARY STONES W CC, &/       .7496         2.7         3.6          24
                                          OR ESW LITHOTRIPSY.                                                   
324.........       11  MED               URINARY STONES W/O CC..       .4159         1.7         2.1          10
325.........       11  MED               KIDNEY & URINARY TRACT        .6377         3.4         4.6          27
                                          SIGNS & SYMPTOMS AGE                                                  
                                          >17 W CC.                                                             
326.........       11  MED               KIDNEY & URINARY TRACT        .4320         2.4         3.4          19
                                          SIGNS & SYMPTOMS AGE                                                  
                                          >17 W/O CC.                                                           
327.........       11  MED               *KIDNEY & URINARY TRACT       .2341         3.1         3.1          27
                                          SIGNS & SYMPTOMS AGE 0-                                               
                                          17.                                                                   
328.........       11  MED               URETHRAL STRICTURE AGE        .6886         3.1         4.3          27
                                          >17 W CC.                                                             
329.........       11  MED               URETHRAL STRICTURE AGE        .4567         2.1         2.8          17
                                          >17 W/O CC.                                                           
330.........       11  MED               *URETHRAL STRICTURE AGE       .3115         1.6         1.6           9
                                          0-17.                                                                 
331.........       11  MED               OTHER KIDNEY & URINARY        .9914         4.6         6.2          29
                                          TRACT DIAGNOSES AGE                                                   
                                          >17 W CC.                                                             
332.........       11  MED               OTHER KIDNEY & URINARY        .6070         2.8         3.9          27
                                          TRACT DIAGNOSES AGE                                                   
                                          >17 W/O CC.                                                           
333.........       11  MED               OTHER KIDNEY & URINARY        .8562         4.3         5.8          28
                                          TRACT DIAGNOSES AGE 0-                                                
                                          17.                                                                   
334.........       12  SURG              MAJOR MALE PELVIC            1.6653         5.3         6.1          23
                                          PROCEDURES W CC.                                                      
335.........       12  SURG              MAJOR MALE PELVIC            1.2610         4.2         4.6          17
                                          PROCEDURES W/O CC.                                                    
336.........       12  SURG              TRANSURETHRAL                 .8848         3.2         4.1          24
                                          PROSTATECTOMY W CC.                                                   
337.........       12  SURG              TRANSURETHRAL                 .6147         2.3         2.7          11
                                          PROSTATECTOMY W/O CC.                                                 
338.........       12  SURG              TESTES PROCEDURES, FOR       1.0499         3.5         5.3          27
                                          MALIGNANCY.                                                           
339.........       12  SURG              TESTES PROCEDURES, NON-      1.0194         3.1         5.3          27
                                          MALIGNANCY AGE >17.                                                   
340.........       12  SURG              *TESTES PROCEDURES, NON-      .2769         2.4         2.4          13
                                          MALIGNANCY AGE 0-17.                                                  
341.........       12  SURG              PENIS PROCEDURES.......      1.0745         2.3         3.3          21
342.........       12  SURG              CIRCUMCISION AGE >17...       .7578         2.7         4.0          27
343.........       12  SURG              *CIRCUMCISION AGE 0-17.       .1504         1.7         1.7           6

[[Page 46273]]

                                                                                                                
344.........       12  SURG              OTHER MALE REPRODUCTIVE      1.0083         2.3         3.5          25
                                          SYSTEM O.R. PROCEDURES                                                
                                          FOR MALIGNANCY.                                                       
345.........       12  SURG              OTHER MALE REPRODUCTIVE       .8422         2.8         4.0          27
                                          SYSTEM O.R. PROC                                                      
                                          EXCEPT FOR MALIGNANCY.                                                
346.........       12  MED               MALIGNANCY, MALE              .9559         4.8         6.8          29
                                          REPRODUCTIVE SYSTEM, W                                                
                                          CC.                                                                   
347.........       12  MED               MALIGNANCY, MALE              .5096         2.4         3.3          25
                                          REPRODUCTIVE SYSTEM, W/                                               
                                          O CC.                                                                 
348.........       12  MED               BENIGN PROSTATIC              .7107         3.6         4.9          28
                                          HYPERTROPHY W CC.                                                     
349.........       12  MED               BENIGN PROSTATIC              .3974         2.2         3.0          20
                                          HYPERTROPHY W/O CC.                                                   
350.........       12  MED               INFLAMMATION OF THE           .6611         3.9         4.8          24
                                          MALE REPRODUCTIVE                                                     
                                          SYSTEM.                                                               
351.........       12  MED               *STERILIZATION, MALE...       .2309         1.3         1.3           5
352.........       12  MED               OTHER MALE REPRODUCTIVE       .5877         2.8         3.9          27
                                          SYSTEM DIAGNOSES.                                                     
353.........       13  SURG              PELVIC EVISCERATION,         1.9174         6.7         8.3          31
                                          RADICAL HYSTERECTOMY &                                                
                                          RADICAL VULVECTOMY.                                                   
354.........       13  SURG              UTERINE, ADNEXA PROC         1.4643         5.2         6.3          28
                                          FOR NON-OVARIAN/                                                      
                                          ADNEXAL MALIG W CC.                                                   
355.........       13  SURG              UTERINE, ADNEXA PROC          .9056         3.6         3.9          11
                                          FOR NON-OVARIAN/                                                      
                                          ADNEXAL MALIG W/O CC.                                                 
356.........       13  SURG              FEMALE REPRODUCTIVE           .7376         2.6         3.0          12
                                          SYSTEM RECONSTRUCTIVE                                                 
                                          PROCEDURES.                                                           
357.........       13  SURG              UTERINE & ADNEXA PROC        2.3824         8.0         9.8          32
                                          FOR OVARIAN OR ADNEXAL                                                
                                          MALIGNANCY.                                                           
358.........       13  SURG              UTERINE & ADNEXA PROC        1.1713         4.1         4.8          19
                                          FOR NON-MALIGNANCY W                                                  
                                          CC.                                                                   
359.........       13  SURG              UTERINE & ADNEXA PROC         .8285         3.0         3.3          10
                                          FOR NON-MALIGNANCY W/O                                                
                                          CC.                                                                   
360.........       13  SURG              VAGINA, CERVIX & VULVA        .8459         2.9         3.5          17
                                          PROCEDURES.                                                           
361.........       13  SURG              LAPAROSCOPY &                1.1148         2.5         3.5          23
                                          INCISIONAL TUBAL                                                      
                                          INTERRUPTION.                                                         
362.........       13  SURG              *ENDOSCOPIC TUBAL             .2951         1.4         1.4           5
                                          INTERRUPTION.                                                         
363.........       13  SURG              D&C, CONIZATION & RADIO-      .6911         2.6         3.5          21
                                          IMPLANT, FOR                                                          
                                          MALIGNANCY.                                                           
364.........       13  SURG              D&C, CONIZATION EXCEPT        .6739         2.6         3.6          27
                                          FOR MALIGNANCY.                                                       
365.........       13  SURG              OTHER FEMALE                 1.7237         5.3         8.1          29
                                          REPRODUCTIVE SYSTEM                                                   
                                          O.R. PROCEDURES.                                                      
366.........       13  MED               MALIGNANCY, FEMALE           1.1941         5.3         7.8          29
                                          REPRODUCTIVE SYSTEM W                                                 
                                          CC.                                                                   
367.........       13  MED               MALIGNANCY, FEMALE            .5216         2.3         3.2          24
                                          REPRODUCTIVE SYSTEM W/                                                
                                          O CC.                                                                 
368.........       13  MED               INFECTIONS, FEMALE           1.0230         5.3         6.9          29
                                          REPRODUCTIVE SYSTEM.                                                  
369.........       13  MED               MENSTRUAL & OTHER             .5454         2.6         3.7          27
                                          FEMALE REPRODUCTIVE                                                   
                                          SYSTEM DISORDERS.                                                     
370.........       14  SURG              CESAREAN SECTION W CC..      1.0401         4.3         5.6          26
371.........       14  SURG              CESAREAN SECTION W/O CC       .6838         3.2         3.6          11
372.........       14  MED               VAGINAL DELIVERY W            .5439         2.4         3.4          20
                                          COMPLICATING DIAGNOSES.                                               
373.........       14  MED               VAGINAL DELIVERY W/O          .3602         1.7         1.9           7
                                          COMPLICATING DIAGNOSES.                                               
374.........       14  SURG              VAGINAL DELIVERY W            .6775         2.0         2.6          11
                                          STERILIZATION &/OR D&C.                                               
375.........       14  SURG              *VAGINAL DELIVERY W           .6698         4.4         4.4          28
                                          O.R. PROC EXCEPT                                                      
                                          STERIL &/OR D&C.                                                      
376.........       14  MED               POSTPARTUM & POST             .5638         2.3         3.4          25
                                          ABORTION DIAGNOSES W/O                                                
                                          O.R. PROCEDURE.                                                       
377.........       14  SURG              POSTPARTUM & POST             .8188         2.1         3.3          26
                                          ABORTION DIAGNOSES W                                                  
                                          O.R. PROCEDURE.                                                       
378.........       14  MED               ECTOPIC PREGNANCY......       .8054         2.4         2.9          15
379.........       14  MED               THREATENED ABORTION....       .3591         2.0         3.0          21
380.........       14  MED               ABORTION W/O D&C.......       .4775         1.7         2.3          12
381.........       14  SURG              ABORTION W D&C,               .5151         1.7         2.3          14
                                          ASPIRATION CURETTAGE                                                  
                                          OR HYSTEROTOMY.                                                       
382.........       14  MED               FALSE LABOR............       .2013         1.3         1.6           6
383.........       14  MED               OTHER ANTEPARTUM              .4655         2.8         4.1          27
                                          DIAGNOSES W MEDICAL                                                   
                                          COMPLICATIONS.                                                        
384.........       14  MED               OTHER ANTEPARTUM              .3921         1.8         3.1          22
                                          DIAGNOSES W/O MEDICAL                                                 
                                          COMPLICATIONS.                                                        
385.........       15  ................  *NEONATES, DIED OR           1.3443         1.8         1.8          26
                                          TRANSFERRED TO ANOTHER                                                
                                          ACUTE CARE FACILITY.                                                  
386.........       15  ................  *EXTREME IMMATURITY OR       4.4329        17.9        17.9          42
                                          RESPIRATORY DISTRESS                                                  
                                          SYNDROME, NEONATE.                                                    
387.........       15  ................  *PREMATURITY W MAJOR         3.0276        13.3        13.3          37
                                          PROBLEMS.                                                             
388.........       15  ................  *PREMATURITY W/O MAJOR       1.8268         8.6         8.6          33
                                          PROBLEMS.                                                             
389.........       15  ................  FULL TERM NEONATE W          2.2451         7.9        10.7          32
                                          MAJOR PROBLEMS.                                                       
390.........       15  ................  NEONATE W OTHER              1.2845         3.6         4.7          28
                                          SIGNIFICANT PROBLEMS.                                                 

[[Page 46274]]

                                                                                                                
391.........       15  ................  *NORMAL NEWBORN........       .1490         3.1         3.1          11
392.........       16  SURG              SPLENECTOMY AGE >17....      3.2443         8.9        11.7          33
393.........       16  SURG              *SPLENECTOMY AGE 0-17..      1.3168         9.1         9.1          33
394.........       16  SURG              OTHER O.R. PROCEDURES        1.5994         4.5         8.0          28
                                          OF THE BLOOD AND BLOOD                                                
                                          FORMING ORGANS.                                                       
395.........       16  MED               RED BLOOD CELL                .8362         3.9         5.4          28
                                          DISORDERS AGE >17.                                                    
396.........       16  MED               RED BLOOD CELL                .6966         2.7         3.8          27
                                          DISORDERS AGE 0-17.                                                   
397.........       16  MED               COAGULATION DISORDERS..      1.2612         4.4         6.1          28
398.........       16  MED               RETICULOENDOTHELIAL &        1.2106         5.2         6.6          29
                                          IMMUNITY DISORDERS W                                                  
                                          CC.                                                                   
399.........       16  MED               RETICULOENDOTHELIAL &         .7030         3.5         4.4          27
                                          IMMUNITY DISORDERS W/O                                                
                                          CC.                                                                   
400.........       17  SURG              LYMPHOMA & LEUKEMIA W        2.5572         6.7        10.4          31
                                          MAJOR O.R. PROCEDURE.                                                 
401.........       17  SURG              LYMPHOMA & NON-ACUTE         2.4834         8.5        12.4          32
                                          LEUKEMIA W OTHER O.R.                                                 
                                          PROC W CC.                                                            
402.........       17  SURG              LYMPHOMA & NON-ACUTE         1.0255         3.1         4.7          27
                                          LEUKEMIA W OTHER O.R.                                                 
                                          PROC W/O CC.                                                          
403.........       17  MED               LYMPHOMA & NON-ACUTE         1.6925         6.5         9.3          30
                                          LEUKEMIA W CC.                                                        
404.........       17  MED               LYMPHOMA & NON-ACUTE          .8059         3.7         5.1          28
                                          LEUKEMIA W/O CC.                                                      
405.........       17  ................  *ACUTE LEUKEMIA W/O          1.8669         4.9         4.9          29
                                          MAJOR O.R. PROCEDURE                                                  
                                          AGE 0-17.                                                             
406.........       17  SURG              MYELOPROLIF DISORD OR        2.6841         8.1        11.3          32
                                          POORLY DIFF NEOPL W                                                   
                                          MAJ O.R. PROC W CC.                                                   
407.........       17  SURG              MYELOPROLIF DISORD OR        1.1787         3.8         4.9          28
                                          POORLY DIFF NEOPL W                                                   
                                          MAJ O.R. PROC W/O CC.                                                 
408.........       17  SURG              MYELOPROLIF DISORD OR        1.7393         5.0         8.2          29
                                          POORLY DIFF NEOPL W                                                   
                                          OTHER O.R. PROC.                                                      
409.........       17  MED               RADIOTHERAPY...........       .9763         4.7         6.7          29
410.........       17  MED               CHEMOTHERAPY W/O ACUTE        .7514         2.6         3.4          20
                                          LEUKEMIA AS SECONDARY                                                 
                                          DIAGNOSIS.                                                            
411.........       17  MED               HISTORY OF MALIGNANCY W/      .3837         2.1         2.7          16
                                          O ENDOSCOPY.                                                          
412.........       17  MED               HISTORY OF MALIGNANCY W       .4080         2.1         3.0          23
                                          ENDOSCOPY.                                                            
413.........       17  MED               OTHER MYELOPROLIF DIS        1.3257         6.0         8.4          30
                                          OR POORLY DIFF NEOPL                                                  
                                          DIAG W CC.                                                            
414.........       17  MED               OTHER MYELOPROLIF DIS         .7337         3.7         5.2          28
                                          OR POORLY DIFF NEOPL                                                  
                                          DIAG W/O CC.                                                          
415.........       18  SURG              O.R. PROCEDURE FOR           3.4430        11.4        15.8          35
                                          INFECTIOUS & PARASITIC                                                
                                          DISEASES.                                                             
416.........       18  MED               SEPTICEMIA AGE >17.....      1.4838         6.2         8.3          30
417.........       18  MED               SEPTICEMIA AGE 0-17....       .8089         3.7         4.6          28
418.........       18  MED               POSTOPERATIVE & POST-         .9697         5.4         6.8          29
                                          TRAUMATIC INFECTIONS.                                                 
419.........       18  MED               FEVER OF UNKNOWN ORIGIN       .8991         4.4         5.7          28
                                          AGE >17 W CC.                                                         
420.........       18  MED               FEVER OF UNKNOWN ORIGIN       .6264         3.5         4.3          24
                                          AGE >17 W/O CC.                                                       
421.........       18  MED               VIRAL ILLNESS AGE >17..       .7153         3.6         4.7          28
422.........       18  MED               VIRAL ILLNESS & FEVER         .5347         2.9         3.8          25
                                          OF UNKNOWN ORIGIN AGE                                                 
                                          0-17.                                                                 
423.........       18  MED               OTHER INFECTIOUS &           1.5947         6.3         8.8          30
                                          PARASITIC DISEASES                                                    
                                          DIAGNOSES.                                                            
424.........       19  SURG              O.R. PROCEDURE W             2.3637        10.9        18.0          35
                                          PRINCIPAL DIAGNOSES OF                                                
                                          MENTAL ILLNESS.                                                       
425.........       19  MED               ACUTE ADJUST REACT &          .7051         3.5         4.9          27
                                          DISTURBANCES OF                                                       
                                          PSYCHOSOCIAL                                                          
                                          DYSFUNCTION.                                                          
426.........       19  MED               DEPRESSIVE NEUROSES....       .5680         3.9         5.5          28
427.........       19  MED               NEUROSES EXCEPT               .5495         3.7         5.2          28
                                          DEPRESSIVE.                                                           
428.........       19  MED               DISORDERS OF                  .7303         5.2         8.4          29
                                          PERSONALITY & IMPULSE                                                 
                                          CONTROL.                                                              
429.........       19  MED               ORGANIC DISTURBANCES &        .9075         5.9         9.0          30
                                          MENTAL RETARDATION.                                                   
430.........       19  MED               PSYCHOSES..............       .8391         6.9         9.8          31
431.........       19  MED               CHILDHOOD MENTAL              .6556         4.9         7.2          29
                                          DISORDERS.                                                            
432.........       19  MED               OTHER MENTAL DISORDER         .7363         3.9         6.5          28
                                          DIAGNOSES.                                                            
433.........       20  ................  ALCOHOL/DRUG ABUSE OR         .2986         2.5         3.4          25
                                          DEPENDENCE, LEFT AMA.                                                 
434.........       20  ................  ALC/DRUG ABUSE OR             .7141         4.3         5.8          28
                                          DEPEND, DETOX OR OTH                                                  
                                          SYMPT TREAT W CC.                                                     
435.........       20  ................  ALC/DRUG ABUSE OR             .4164         3.8         4.8          28
                                          DEPEND, DETOX OR OTH                                                  
                                          SYMPT TREAT W/O CC.                                                   
436.........       20  ................  ALC/DRUG DEPENDENCE W         .8183        12.1        14.8          36
                                          REHABILITATION THERAPY.                                               
437.........       20  ................  ALC/DRUG DEPENDENCE,          .7657         9.2        10.9          33
                                          COMBINED REHAB & DETOX                                                
                                          THERAPY.                                                              
438.........                             NO LONGER VALID........       .0000          .0          .0           0
439.........       21  SURG              SKIN GRAFTS FOR              1.6144         5.9         8.9          30
                                          INJURIES.                                                             

[[Page 46275]]

                                                                                                                
440.........       21  SURG              W/OUND DEBRIDEMENTS FOR      1.7725         6.3         9.9          30
                                          INJURIES.                                                             
441.........       21  SURG              HAND PROCEDURES FOR           .9294         2.4         4.4          26
                                          INJURIES.                                                             
442.........       21  SURG              OTHER O.R. PROCEDURES        2.1653         5.6         8.7          30
                                          FOR INJURIES W CC.                                                    
443.........       21  SURG              OTHER O.R. PROCEDURES         .8849         2.5         3.6          26
                                          FOR INJURIES W/O CC.                                                  
444.........       21  MED               TRAUMATIC INJURY AGE          .7312         4.0         5.3          28
                                          >17 W CC.                                                             
445.........       21  MED               TRAUMATIC INJURY AGE          .4845         2.9         3.9          25
                                          >17 W/O CC.                                                           
446.........       21  MED               *TRAUMATIC INJURY AGE 0-      .2894         2.4         2.4          22
                                          17.                                                                   
447.........       21  MED               ALLERGIC REACTIONS AGE        .4918         2.1         2.8          17
                                          >17.                                                                  
448.........       21  MED               ALLERGIC REACTIONS AGE        .0777         1.0         1.0           1
                                          0-17.                                                                 
449.........       21  MED               POISONING & TOXIC             .7902         3.0         4.5          27
                                          EFFECTS OF DRUGS AGE                                                  
                                          >17 W CC.                                                             
450.........       21  MED               POISONING & TOXIC             .4274         1.8         2.3          13
                                          EFFECTS OF DRUGS AGE                                                  
                                          >17 W/O CC.                                                           
451.........       21  MED               *POISONING & TOXIC            .2570         2.1         2.1          17
                                          EFFECTS OF DRUGS AGE 0-                                               
                                          17.                                                                   
452.........       21  MED               COMPLICATIONS OF              .9473         3.8         5.4          28
                                          TREATMENT W CC.                                                       
453.........       21  MED               COMPLICATIONS OF              .4822         2.4         3.2          20
                                          TREATMENT W/O CC.                                                     
454.........       21  MED               OTHER INJURY, POISONING       .8575         3.4         5.1          27
                                          & TOXIC EFFECT DIAG W                                                 
                                          CC.                                                                   
455.........       21  MED               OTHER INJURY, POISONING       .4467         2.1         2.8          18
                                          & TOXIC EFFECT DIAG W/                                                
                                          O CC.                                                                 
456.........       22  MED               BURNS, TRANSFERRED TO        1.8327         4.1         8.4          28
                                          ANOTHER ACUTE CARE                                                    
                                          FACILITY.                                                             
457.........       22  MED               EXTENSIVE BURNS W/O          1.4657         2.4         4.8          26
                                          O.R. PROCEDURE.                                                       
458.........       22  SURG              NON-EXTENSIVE BURNS W        3.4991        11.9        16.9          36
                                          SKIN GRAFT.                                                           
459.........       22  SURG              NON-EXTENSIVE BURNS W W/     1.6538         6.7        10.3          31
                                          OUND DEBRIDEMENT OR                                                   
                                          OTHER O.R. PROC.                                                      
460.........       22  MED               NON-EXTENSIVE BURNS W/O       .9547         4.6         6.6          29
                                          O.R. PROCEDURE.                                                       
461.........       23  SURG              O.R. PROC W DIAGNOSES         .9963         2.5         4.9          27
                                          OF OTHER CONTACT W                                                    
                                          HEALTH SERVICES.                                                      
462.........       23  MED               REHABILITATION.........      1.4298        11.0        13.9          35
463.........       23  MED               SIGNS & SYMPTOMS W CC..       .7101         3.8         5.2          28
464.........       23  MED               SIGNS & SYMPTOMS W/O CC       .5028         2.8         3.8          24
465.........       23  MED               AFTERCARE W HISTORY OF        .5571         2.3         3.9          26
                                          MALIGNANCY AS                                                         
                                          SECONDARY DIAGNOSIS.                                                  
466.........       23  MED               AFTERCARE W/O HISTORY         .5905         2.5         4.8          27
                                          OF MALIGNANCY AS                                                      
                                          SECONDARY DIAGNOSIS.                                                  
467.........       23  MED               OTHER FACTORS                 .4588         2.4         4.1          26
                                          INFLUENCING HEALTH                                                    
                                          STATUS.                                                               
468.........           ................  EXTENSIVE O.R.               3.6028        10.6        15.3          35
                                          PROCEDURE UNRELATED TO                                                
                                          PRINCIPAL DIAGNOSIS.                                                  
469.........           ................  **PRINCIPAL DIAGNOSIS         .0000          .0          .0           0
                                          INVALID AS DISCHARGE                                                  
                                          DIAGNOSIS.                                                            
470.........           ................  **UNGROUPABLE..........       .0000          .0          .0           0
471.........       08  SURG              BILATERAL OR MULTIPLE        3.5980         6.8         8.1          31
                                          MAJOR JOINT PROCS OF                                                  
                                          LOWER EXTREMITY.                                                      
472.........       22  SURG              EXTENSIVE BURNS W O.R.      10.9989        17.0        30.2          41
                                          PROCEDURE.                                                            
473.........       17  ................  ACUTE LEUKEMIA W/O           3.5740         8.5        14.7          33
                                          MAJOR O.R. PROCEDURE                                                  
                                          AGE >17.                                                              
474.........           ................  NO LONGER VALID........       .0000          .0          .0           0
475.........       04  MED               RESPIRATORY SYSTEM           3.6765         8.6        12.3          33
                                          DIAGNOSIS WITH                                                        
                                          VENTILATOR SUPPORT.                                                   
476.........           SURG              PROSTATIC O.R.               2.2479        10.3        13.9          34
                                          PROCEDURE UNRELATED TO                                                
                                          PRINCIPAL DIAGNOSIS.                                                  
477.........           SURG              NON-EXTENSIVE O.R.           1.7266         5.9         9.3          30
                                          PROCEDURE UNRELATED TO                                                
                                          PRINCIPAL DIAGNOSIS.                                                  
478.........       05  SURG              OTHER VASCULAR               2.2883         5.6         8.3          30
                                          PROCEDURES W CC.                                                      
479.........       05  SURG              OTHER VASCULAR               1.4080         3.5         4.6          27
                                          PROCEDURES W/O CC.                                                    
480.........           SURG              LIVER TRANSPLANT.......     13.9424        26.4        32.6          50
481.........           SURG              BONE MARROW TRANSPLANT.     11.2299        29.7        32.6          54
482.........           SURG              TRACHEOSTOMY FOR FACE,       3.6578        11.4        14.9          35
                                          MOUTH & NECK DIAGNOSES.                                               
483.........           SURG              TRACHEOSTOMY EXCEPT FOR     16.0413        36.0        46.4          60
                                          FACE, MOUTH & NECK                                                    
                                          DIAGNOSES.                                                            
484.........       24  SURG              CRANIOTOMY FOR MULTIPLE      5.6821        10.6        15.9          35
                                          SIGNIFICANT TRAUMA.                                                   
485.........       24  SURG              LIMB REATTACHMENT, HIP       3.2058         9.2        11.7          33
                                          AND FEMUR PROC FOR                                                    
                                          MULTIPLE SIGNIFICANT                                                  
                                          TR.                                                                   
486.........       24  SURG              OTHER O.R. PROCEDURES        4.7915         9.0        13.6          33
                                          FOR MULTIPLE                                                          
                                          SIGNIFICANT TRAUMA.                                                   
487.........       24  MED               OTHER MULTIPLE               2.0305         6.2         9.1          30
                                          SIGNIFICANT TRAUMA.                                                   
488.........       25  SURG              HIV W EXTENSIVE O.R.         4.7905        14.3        20.5          38
                                          PROCEDURE.                                                            
489.........       25  MED               HIV W MAJOR RELATED          1.8141         7.2        10.7          31
                                          CONDITION.                                                            

[[Page 46276]]

                                                                                                                
490.........       25  MED               HIV W OR W/O OTHER           1.0116         4.4         6.6          28
                                          RELATED CONDITION.                                                    
491.........       08  SURG              MAJOR JOINT & LIMB           1.6308         3.6         4.3          19
                                          REATTACHMENT                                                          
                                          PROCEDURES OF UPPER                                                   
                                          EXTREMITY.                                                            
492.........       17  MED               CHEMOTHERAPY W ACUTE         4.0299        11.2        17.4          35
                                          LEUKEMIA AS SECONDARY                                                 
                                          DIAGNOSIS.                                                            
493.........       07  SURG              LAPAROSCOPIC                 1.7100         4.2         5.9          28
                                          CHOLECYSTECTOMY W/O                                                   
                                          C.D.E. W CC.                                                          
494.........       07  SURG              LAPAROSCOPIC                  .9169         1.8         2.4          15
                                          CHOLECYSTECTOMY W/O                                                   
                                          C.D.E. W/O CC.                                                        
495.........           SURG              LUNG TRANSPLANT........      9.2870        18.0        22.7          42
----------------------------------------------------------------------------------------------------------------
* Medicare data have been supplemented by data from 19 States 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                
----------------------------------------------------------------------------------------------------------------
079.6.......  Respiratory syncytial virus (RSV)...  N                    15  387,\1\ 389 \1\                    
                                                                         18  421, 422                           
291.81......  Alcohol withdrawal..................  Y                    20  434, 435, 436, 437                 
291.89......  Other specified alcoholic psychosis,  Y                    20  434, 435, 436, 437                 
               not elsewhere classified.                                                                        
293.84......  Organic anxiety syndrome............  Y                    19  429                                
300.82......  Undifferentiated somatoform disorder  N                    19  427                                
315.32......  Receptive language disorder (mixed).  N                    19  431                                
414.04......  Coronary atherosclerosis of artery    N                     5  132, 133                           
               bypass graft.                                                                                    
414.05......  Coronary atherosclerosis of           N                     5  132, 133                           
               unspecified type of bypass graft.                                                                
466.11......  Acute bronchiolitis due to            N                     4  96, 97, 98                         
               respiratory syncytial virus (RSV).                                                               
466.19......  Acute bronchiolitis due to other      N                     4  96, 97, 98                         
               infectious organisms.                                                                            
483.1.......  Pneumonia due to Chlamydia..........  Y                     4  89, 90, 91                         
                                                                         15  387,\1\ 389 \1\                    
574.60......  Calculus of gallbladder and bile      Y                     7  207, 208                           
               duct with acute cholecystitis                                                                    
               without mention of obstruction.                                                                  
574.61......  Calculus of gallbladder and bile      Y                     7  207, 208                           
               duct with acute cholecystitis with                                                               
               obstruction.                                                                                     
574.70......  Calculus of gallbladder and bile      Y                     7  207, 208                           
               duct with other cholecystitis                                                                    
               without mention of obstruction.                                                                  
574.71......  Calculus of gallbladder and bile      Y                     7  207, 208                           
               duct with other cholecystitis with                                                               
               obstruction.                                                                                     
574.80......  Calculus of gallbladder and bile      Y                     7  207, 208                           
               duct with acute and chronic                                                                      
               cholecystitis without mention of                                                                 
               obstruction.                                                                                     
574.81......  Calculus of gallbladder and bile      Y                     7  207, 208                           
               duct with acute and chronic                                                                      
               cholecystitis with obstruction.                                                                  
574.90......  Calculus of gallbladder and bile      Y                     7  207, 208                           
               duct without cholecystitis without                                                               
               mention of obstruction.                                                                          
574.91......  Calculus of gallbladder and bile      Y                     7  207, 208                           
               duct without cholecystitis with                                                                  
               obstruction.                                                                                     
575.10......  Cholecystitis, unspecified..........  N                     7  207, 208                           
575.11......  Chronic cholecystitis...............  N                     7  207, 208                           
575.12......  Acute and chronic cholecystitis.....  Y                     7  207, 208                           
752.51......  Undescended testis..................  N                    12  352                                
                                                                         15  391 \1\                            
752.52......  Retractile testis...................  N                    12  352                                
                                                                         15  391 \1\                            
752.61......  Hypospadias.........................  N                    12  352                                
752.62......  Epispadias..........................  N                    12  352                                
752.63......  Congenital chordee..................  N                    12  352                                
752.64......  Micropenis..........................  N                    12  352                                
752.65......  Hidden penis........................  N                    12  352                                
752.69......  Other penile anomalies..............  N                    12  352                                
753.20......  Unspecified obstructive defect of     N                    11  331, 332, 333                      
               renal pelvis and ureter.                                                                         
753.21......  Congenital obstruction of             N                    11  331, 332, 333                      
               ureteropelvic junction.                                                                          
753.22......  Congenital obstruction of             N                    11  331, 332, 333                      
               ureterovesical junction.                                                                         
753.23......  Congenital ureterocele..............  N                    11  331, 332, 333                      
753.29......  Obstructive defects of renal pelvis   N                    11  331, 332, 333                      
               and ureter, not elsewhere classifed.                                                             
758.81......  Other conditions due to sex           N                    12  352                                
               chromosome anomalies.                                     13  358, 359, 369                      
758.89......  Other conditions due to chromosome    N                    12  352                                
               anomalies, not elsewhere classified.                      13  358, 359, 369                      
922.31......  Back contusion......................  N                     9  280, 281, 282                      
                                                                         24  484, 485, 486, 487                 

[[Page 46277]]

                                                                                                                
922.32......  Buttock contusion...................  N                     9  280, 281, 282                      
                                                                         24  484, 485, 486, 487                 
922.33......  Interscapular region contusion......  N                     9  280, 281, 282                      
                                                                         24  484, 485, 486, 487                 
995.50......  Child abuse, unspecified............  N                    21  454, 455                           
995.51......  Child emotional/psychological abuse.  N                    21  454, 455                           
995.52......  Child neglect (nutritional).........  N                    21  454, 455                           
995.53......  Child sexual abuse..................  N                    21  454, 455                           
995.54......  Child physical abuse................  N                    21  454, 455                           
995.55......  Shaken infant syndrome..............  N                    21  454, 455                           
995.59......  Other child abuse and neglect.......  N                    21  454, 455                           
995.80......  Adult maltreatment, unspecified.....  N                    21  454, 455                           
995.82......  Adult emotional/psychological abuse.  N                    21  454, 455                           
995.83......  Adult sexual abuse..................  N                    21  454, 455                           
995.84......  Adult neglect (nutritional).........  N                    21  454, 455                           
995.85......  Other adult abuse and neglect.......  N                    21  454, 455                           
998.11......  Hemorrhage complicating a procedure.  Y                    15  387,\1\ 389 \1\                    
                                                                         21  452, 453                           
998.12......  Hematoma complicating a procedure...  Y                    15  387,\1\ 389 \1\                    
                                                                         21  452, 453                           
998.13......  Seroma complicating a procedure.....  Y                    15  387,\1\ 389 \1\                    
                                                                         21  452, 453                           
998.51......  Infected postoperative seroma.......  Y                    15  387,\1\ 389 \1\                    
                                                                         18  418                                
998.59......  Other postoperative infection.......  Y                    15  387,\1\ 389 \1\                    
                                                                         18  418                                
998.83......  Non-healing surgical wound..........  Y                    21  452, 453                           
V15.41......  History of physical abuse...........  N                    23  467                                
V15.42......  History of emotional abuse..........  N                    23  467                                
V15.49......  Psychological trauma, not elsewhere   N                    23  467                                
               classified.                                                                                      
V61.10......  Counseling for marital and partner    N                    23  467                                
               problems, unspecified.                                                                           
V61.11......  Counseling for victim of spousal and  N                    23  467                                
               partner abuse.                                                                                   
V61.12......  Counseling for perpetrator of         N                    23  467                                
               spousal and partner abuse.                                                                       
V61.22......  Counseling for perpetrator of         N                    23  467                                
               parental child abuse.                                                                            
V62.83......  Counseling for perpetrator of         N                    23  467                                
               physical/sexual abuse.                                                                           
V66.7.......  Encounter for palliative care.......  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               
----------------------------------------------------------------------------------------------------------------
36.17.......  Abdominal-coronary artery     Y                              5  106, 107                          
               bypass.                                                                                          
39.90.......  Insertion of non-coronary     N                     ..........                                    
               artery stent or stents.                                                                          
47.01.......  Laparoscopic appendectomy...  Y                              6  164, 165, 166, 167                
47.09.......  Other appendectomy..........  Y                              6  164, 165, 166, 167                
47.11.......  Laparoscopic incidental       Y                             13  365                               
               appendectomy.                                              21  442, 443                          
                                                                              24                                
                                                                              486                               
47.19.......  Other incidental              Y                             13  365                               
               appendectomy.                                              21  442, 443                          
                                                                          24  486                               
51.21.......  Other partial                 Y                              7  195, 196, 197, 198                
               cholecystectomy.                                                                                 
                                                                          17  400, 406,                         
                                                                          17  407                               
                                                                          21  442, 443                          
                                                                          24  486                               
51.24.......  Laparoscopic partial          Y                              7  195, 196, 493, 494                
               cholecystectomy.                                           17  400, 406,                         
                                                                          17  407,                              
                                                                          21  442, 443                          
                                                                          24  486                               
52.84.......  Autotransplantation of cells  N                     ..........                                    
               of Islets of Langerhans.                                                                         
52.85.......  Allotransplantation of cells  N                     ..........                                    
               of Islets of Langerhans.                                                                         
52.86.......  Transplantation of cells of   N                     ..........                                    
               Islets of Langerhans, not                                                                        
               otherwise specified.                                                                             
54.51.......  Laparoscopiclysis of          Y                              6  150, 151                          
               peritoneal adhesions.                                       7  201                               
                                                                          13  365                               

[[Page 46278]]

                                                                                                                
                                                                          21  442, 443                          
                                                                          24  486                               
54.59.......  Otherlys is of peritoneal     Y                              6  150, 151                          
               adhesions.                                                  7  201                               
                                                                          13  365                               
                                                                          21  442, 443                          
                                                                          24  486                               
59.03.......  Laparoscopic lysis of         Y                             11  303, 304, 305                     
               perirenal or periureteral                                  12  344, 345                          
               adhesions.                                                 13  365                               
                                                                          17  400                               
                                                                          17  406, 407                          
                                                                          21  442, 443                          
                                                                          24  486                               
59.12.......  Laparoscopic lysis of         Y                             11  308, 309                          
               perivesical adhesions.                                     12  344, 345                          
                                                                          13  365                               
                                                                          17  400                               
                                                                          17  406, 407                          
                                                                          21  442, 443                          
                                                                          24  486                               
65.01.......  Laparoscopic oophorotomy....  Y                             13  354, 355, 357, 358, 359           
65.09.......  Other oophorotomy...........  Y                             13  354, 355, 357, 358, 359           
65.13.......  Laparoscopic biopsy of ovary  Y                             13  354, 355, 357, 358, 359           
65.14.......  Other laparoscopic            Y                             13  354, 355, 357,358, 359            
               diagnostic procedures on                                                                         
               ovaries.                                                                                         
65.23.......  Laparoscopic                  Y                             13  354, 355, 357, 358, 359           
               marsupialization of ovarian                                                                      
               cyst.                                                                                            
65.24.......  Laparoscopic wedge resection  Y                             10  292, 293                          
               of ovary.                                                  13  354, 355, 357, 358, 359           
65.25.......  Other laparoscopic local      Y                             13  354, 355, 357, 358, 359           
               excision or destruction of                                                                       
               ovary.                                                                                           
65.31.......  Laparoscopic unilateral       Y                             13  354, 355, 357, 358, 359           
               oophorectomy.                                                                                    
65.39.......  Other unilateral              Y                             13  354, 355, 357, 358, 359           
               oophorectomy.                                                                                    
65.41.......  Laparoscopic unilateral       Y                             13  354, 355, 357, 358, 359           
               salpingo-oophorectomy.                                                                           
65.49.......  Other unilateral salpingo-    Y                             13  354, 355, 357, 358, 359           
               oophorectomy.                                                                                    
65.53.......  Laparoscopic removal of both  Y                              9  269, 270                          
               ovaries at same operative                                  13  354, 355                          
               episode.                                                   13  357, 358, 359                     
65.54.......  Laparoscopic removal of       Y                              9  269, 270                          
               remaining ovary.                                           13  354, 355,                         
                                                                          13  357, 358, 359                     
65.63.......  Laparoscopic removal of both  Y                              9  269, 270                          
               ovaries and tubes at same                                  13  354, 355,                         
               operative episode.                                         13  357, 358, 359                     
65.64.......  Laparoscopic removal of       Y                             13  354, 355, 357, 358, 359           
               remaining ovary and tube.                                                                        
65.74.......  Laparoscopic simple suture    Y                             13  354, 355,                         
               of ovary.                                                  13  357, 358,                         
                                                                          13  359                               
                                                                          21  442, 443                          
                                                                          24  486                               
65.75.......  Laparoscopic reimplantation   Y                             13  354, 355,                         
               of ovary.                                                  13  357, 358,                         
                                                                          13  359                               
                                                                          21  442, 443                          
                                                                          24  486                               
65.76.......  Laparoscopic salpingo-        Y                             13  354, 355,                         
               oophoroplasty.                                             13  357, 358,                         
                                                                          13  359                               
                                                                          21  442, 443                          
                                                                          24  486                               

[[Page 46279]]

                                                                                                                
65.81.......  Laparoscopic lysis of         Y                             13  354, 355,                         
               adhesions of ovary and                                     13  357, 358,                         
               fallopian tube.                                                                                  
                                                                          13  359                               
                                                                          21  442, 443                          
                                                                          24  486                               
65.89.......  Other lysis of adhesions of   Y                             13  354, 355,                         
               ovary and fallopian tube.                                  13  357, 358,                         
                                                                          13  359                               
                                                                          21  442, 443                          
                                                                          24  486                               
68.23.......  Endometrial ablation........  Y                             13  354, 355, 357, 358, 359           
68.51.......  Laparoscopically assisted     Y                             13  354, 355,                         
               vaginal hysterectomy (LAVH).                                   13                                
                                                                              357, 358,                         
                                                                              13                                
                                                                              359                               
                                                                          14  375                               
                                                                          22  477                               
68.59.......  Other vaginal hysterectomy..  Y                             13  354, 355,                         
                                                                          13  357, 358,                         
                                                                          13  359                               
                                                                          14  375                               
                                                                          22  477                               
----------------------------------------------------------------------------------------------------------------


                                       Table 6c.--Invalid Diagnosis Codes                                       
----------------------------------------------------------------------------------------------------------------
  Diagnosis                                                                                                     
    code               Description                   CC               MDC                     DRG               
----------------------------------------------------------------------------------------------------------------
291.8.......  Other specified alcoholic     Y                             20  434, 435, 436, 437                
               psychosis.                                                                                       
466.1.......  Acute bronchiolitis.........  N                              4  96, 97, 98                        
575.1.......  Other cholecystitis.........  N                              7  207, 208                          
752.5.......  Undescended testicle........  N                             12  352                               
752.6.......  Hypospadias and epispadias..  N                             12  352                               
753.2.......  Obstructive defects of renal  N                             11  331, 332, 333                     
               pelvis and ureter.                                                                               
758.8.......  Other conditions due to sex   N                             12  352                               
               chromosome anomalies.                                      13  358, 359, 369                     
922.3.......  Contusion of back...........  N                              9  280, 281,                         
                                                                           9  282                               
                                                                          24  484, 485, 486, 487                
995.5.......  Child maltreatment syndrome.  N                             21  454, 455                          
998.1.......  Hemorrhage or hematoma        Y                             15  387,\1\ 389 \1\                   
               complicating a procedure.                                  21  452, 453                          
998.5.......  Postoperative infection.....  Y                             15  387,\1\ 389 \1\                   
                                                                          18  418                               
V15.4.......  Psychological trauma........  N                             23  467                               
V61.1.......  Marital problems............  N                             23  467                               
----------------------------------------------------------------------------------------------------------------
\1\ Diagnosis code is classified as a ``major problem'' in these DRGs.                                          


                                       Table 6d.--Invalid Procedure Codes                                       
----------------------------------------------------------------------------------------------------------------
  Procedure                                                                                                     
    code               Description                   OR               MDC                     DRG               
----------------------------------------------------------------------------------------------------------------
47.0........  Appendectomy................   Y                             6  164, 165, 166, 167                
47.1........  Incidental appendectomy.....   Y                            13   365,                             
                                                                          21  442, 443,                         
                                                                          24  486                               
54.5........  Lysis of peritoneal           Y                              6  150, 151,                         
               adhesions.                                                                                       
                                                                           7  201                               
                                                                          13  365                               
                                                                          21  442, 443                          
                                                                          24  486                               
59.01.......  Ureterolysis with freeing or  Y                             11  303, 304,                         
               repositioning of ureter for                                11  305                               
               retroperitoneal fibrosis.                                  12  344, 345                          
                                                                          13  365                               
                                                                          17  400, 406,                         

[[Page 46280]]

                                                                                                                
                                                                          17  407                               
                                                                          21  442, 443                          
                                                                          24  486                               
65.0........  Oophorotomy.................   Y                            13  354, 355 357, 358, 359            
65.3........  Unilateral oophorectomy.....   Y                            13  354, 355 357, 358, 359            
65.4........  Unilateral salpingo-          Y                             13  354, 355, 357, 358,               
               oophorectomy.                                                  359                               
65.8........  Lysis of adhesions of ovary   Y                             13  354, 355,                         
               and fallopian tube.                                        13  357, 358,                         
                                                                          13  359                               
                                                                          21  442, 443                          
                                                                          24  486                               
68.5........  Vaginal hysterectomy........  Y                             13  354, 355,                         
                                                                          13  357, 358,                         
                                                                          13   359                              
                                                                          14  375                               
                                                                          22   477                              
----------------------------------------------------------------------------------------------------------------


                                    Table 6e.--Revised Diagnosis Code Titles                                    
----------------------------------------------------------------------------------------------------------------
  Diagnosis                                                                                                     
    code               Description                   CC               MDC                     DRG               
----------------------------------------------------------------------------------------------------------------
414.00......  Coronary atherosclerosis of   N                              5  132, 133                          
               unspecified type of vessel,                                                                      
               native or graft.                                                                                 
995.81......  Adult physical abuse........  N                             21  454, 455                          
997.60......  Amputation stump              N                              8  256                               
               complication, unspecified                                                                        
               complication.                                                                                    
997.61......  Amputation stump              N                              8  256                               
               complication, neuroma of                                                                         
               amputation stump.                                                                                
997.62......  Amputation stump              Y                              8  256                               
               complication, infection                                                                          
               (chronic).                                                                                       
997.69......  Amputation stump              N                              8  256                               
               complication, not elsewhere                                                                      
               classified.                                                                                      
V61.20......  Counseling for parent-child   N                             23  467                               
               problem, unspecified.                                                                            
V61.21......  Counseling for victim of      N                             23  467                               
               child abuse.                                                                                     
V67.4.......  Follow-up examination,        N                             23  465, 466                          
               following treatment of                                                                           
               healed fracture.                                                                                 
----------------------------------------------------------------------------------------------------------------


[[Page 46281]]



                                    Table 6f.--Revised Procedure Code Titles                                    
----------------------------------------------------------------------------------------------------------------
   Procedure                                                                                                    
     code                Description                   OR              MDC                    DRG               
----------------------------------------------------------------------------------------------------------------
59.11.........  Other lysis of perivesical    Y                            11  308, 309                         
                 adhesions.                                                                                     
                                                                           12  344, 345                         
                                                                           13  365                              
                                                                           17  400, 406,                        
                                                                           17  407                              
                                                                           21  442, 443                         
                                                                           24  486                              
65.51.........  Other removal of both         Y                             9  269, 270                         
                 ovaries at same operative                                 13  354, 355                         
                 episode.                                                  13  357, 358, 359                    
65.52.........  Other removal of remaining    Y                             9  269, 270                         
                 ovary.                                                                                         
                                                                           13  354, 355                         
                                                                           13  357, 358, 359                    
65.61.........  Other removal of both         Y                             9  269, 270                         
                 ovaries and tubes at same                                                                      
                 operative episode.                                                                             
                                                                           13  354, 355,                        
                                                                           13  357, 358, 359                    
65.62.........  Other removal of remaining    Y                            13  354, 355, 357, 358, 359          
                 ovary and tube.                                                                                
65.71.........  Other simple suture of ovary  Y                            13  354, 355,                        
                                                                           13  357, 358,                        
                                                                           13   359                             
                                                                           21  442, 443                         
                                                                           24  486                              
65.72.........  Other reimplantation of       Y                            13  354, 355,                        
                 ovary.                                                    13  357, 358,                        
                                                                           13  359                              
                                                                           21  442, 443                         
                                                                           24  486                              
65.73.........  Other salpingo-oophoroplasty  Y                            11  308, 309,                        
                                                                           12  344, 345                         
                                                                           13  365                              
                                                                           17  400, 406,                        
                                                                           17  407                              
                                                                           21  442, 443                         
                                                                           24  486                              
----------------------------------------------------------------------------------------------------------------


[[Page 46282]]



             Table 6g.--Additions to the CC Exclusions List             
                            Page 1 of 5 Pages                           
   CCs that are added to the list are in Table 6G--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.
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
*0011       00844   *00800     00844  *0085      00844  *01133   *01182 
  00841     00845     00841    00845    00841    00845    4831     4831 
  00842     00846     00842    00846    00842    00846  *01134   *01183 
  00843     00847     00843    00847    00843    00847    4831     4831 
  00844   *0061       00844  *00841     00844  *0088    *01135   *01184 
  00845     00841     00845    00841    00845    00841    4831     4831 
  00846     00842     00846    00842    00846    00842  *01136   *01185 
  00847     00843     00847    00843    00847    00843    4831     4831 
*0020       00844   *00801     00844  *00861     00844  *01140   *01186 
  00841     00845     00841    00845    00841    00845    4831     4831 
  00842     00846     00842    00846    00842    00846  *01141   *01190 
  00843     00847     00843    00847    00843    00847    4831     4831 
  00844   *0062       00844  *00842     00844  *0090    *01142   *01191 
  00845     00841     00845    00841    00845    00841    4831     4831 
  00846     00842     00846    00842    00846    00842  *01143   *01192 
  00847     00843     00847    00843    00847    00843    4831     4831 
*0029       00844   *00802     00844  *00862     00844  *01144   *01193 
  00841     00845     00841    00845    00841    00845    4831     4831 
  00842     00846     00842    00846    00842    00846  *01145   *01194 
  00843     00847     00843    00847    00843    00847    4831     4831 
  00844   *0069       00844  *00843     00844  *01100   *01146   *01195 
  00845     00841     00845    00841    00845    4831     4831     4831 
  00846     00842     00846    00842    00846  *01101   *01150   *01196 
  00847     00843     00847    00843    00847    4831     4831     4831 
*0030       00844   *00803     00844  *00863   *01102   *01151   *01200 
  00841     00845     00841    00845    00841    4831     4831     4831 
  00842     00846     00842    00846    00842  *01103   *01152   *01201 
  00843     00847     00843    00847    00843    4831     4831     4831 
  00844   *0071       00844  *00844     00844  *01104   *01153   *01202 
  00845     00841     00845    00841    00845    4831     4831     4831 
  00846     00842     00846    00842    00846  *01105   *01154   *01203 
  00847     00843     00847    00843    00847    4831     4831     4831 
*0049       00844   *00804     00844  *00864   *01106   *01155   *01204 
  00841     00845     00841    00845    00841    4831     4831     4831 
  00842     00846     00842    00846    00842  *01110   *01156   *01205 
  00843     00847     00843    00847    00843    4831     4831     4831 
  00844   *0072       00844  *00845     00844  *01111   *01160   *01206 
  00845     00841     00845    00841    00845    4831     4831     4831 
  00846     00842     00846    00842    00846  *01112   *01161   *01210 
  00847     00843     00847    00843    00847    4831     4831     4831 
*0050       00844   *00809     00844  *00865   *01113   *01162   *01211 
  00841     00845     00841    00845    00841    4831     4831     4831 
  00842     00846     00842    00846    00842  *01114   *01163   *01212 
  00843     00847     00843    00847    00843    4831     4831     4831 
  00844   *0073       00844  *00846     00844  *01115   *01164   *01213 
  00845     00841     00845    00841    00845    4831     4831     4831 
  00846     00842     00846    00842    00846  *01116   *01165   *01214 
  00847     00843     00847    00843    00847    4831     4831     4831 
*0051       00844   *0081      00844  *00866   *01120   *01166   *01215 
  00841     00845     00841    00845    00841    4831     4831     4831 
  00842     00846     00842    00846    00842  *01121   *01170   *01216 
  00843     00847     00843    00847    00843    4831     4831     4831 
  00844   *0078       00844  *00847     00844  *01122   *01171   *01280 
  00845     00841     00845    00841    00845    4831     4831     4831 
  00846     00842     00846    00842    00846  *01123   *01172   *01281 
  00847     00843     00847    00843    00847    4831     4831     4831 
*0052       00844   *0082      00844  *00867   *01124   *01173   *01282 
  00841     00845     00841    00845    00841    4831     4831     4831 
  00842     00846     00842    00846    00842  *01125   *01174   *01283 
  00843     00847     00843    00847    00843    4831     4831     4831 
  00844   *0079       00844  *00849     00844  *01126   *01175   *01284 
  00845     00841     00845    00841    00845    4831     4831     4831 
  00846     00842     00846    00842    00846  *01130   *01176   *01285 
  00847     00843     00847    00843    00847    4831     4831     4831 
*0060       00844   *0083      00844  *00869   *01131   *01180   *01286 
  00841     00845     00841    00845    00841    4831     4831     4831 
  00842     00846     00842    00846    00842  *01132   *01181   *01480 
  00843     00847     00843    00847    00843    4831     4831   00841  
------------------------------------------------------------------------


[[Page 46283]]



                            Page 2 of 5 Pages                           
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
  00842     4831      29382    29284  *29212     29383    29614    29181
  00843   *11285      29383    29289    29181    29384    29634    29189
  00844     00841     29384    2929     29189    7105     29644    29384
  00845     00842     30300    29381    29384  *29389     29654  *30420 
  00846     00843     30301    29382  *2922      29181    29664    29181
  00847     00844     30302    29383    29181    29189    2980     29189
*01481      00845     30390    29384    29189    29384    2983     29384
  00841     00846     30391    30300    29384  *2939      2984   *30421 
  00842     00847     30392    30301  *29281     29181    29900    29181
  00843   *11505      30400    30302    29181    29189    29910    29189
  00844     4831      30401    30390    29189    29384    29980    29384
  00845   *11515      30402    30391    29384  *2940      29990  *30422 
  00846     4831      30410    30392  *29282     29181  *30300     29181
  00847   *11595      30411    30400    29181    29189    29181    29189
*01482      4831      30412    30401    29189    29384    29189    29384
  00841   *1221       30420    30402    29384  *2941      29384  *30423 
  00842     4831      30421    30410  *29283     29181  *30301     29181
  00843   *129                 30411    29181    29189    29181    29189
                     30422                                              
  00844     00841     30440    30412    29189    29384    29189    29384
  00845     00842     30441    30420    29384  *2948      29384  *30430 
  00846     00843     30442    30421  *29284     29181  *30302     29181
  00847     00844     30450    30422    29181    29189    29181    29189
*01483      00845     30451    30440    29189    29384    29189    29384
  00841     00846     30452    30441    29384  *2949      29384  *30431 
  00842     00847     30460    30442  *29289     29181  *30303     29181
  00843   *1304       30461    30450    29181    29189    29181    29189
  00844     4831      30462    30451    29189    29384    29189    29384
  00845   *1363       30470    30452    29384  *30082     29384  *30432 
  00846     4831      30471    30460  *2929      29500  *30390     29181
  00847   *2910       30472    30461    29181    29501    29181    29189
*01484      29181     30480    30462    29189    29502    29189    29384
  00841     29189     30481    30470    29384    29503    29384  *30433 
  00842     29384     30482    30471  *2930      29504  *30391     29181
  00843   *2911       30490    30472    29181    29510    29181    29189
  00844     29181     30491    30480    29189    29511    29189    29384
  00845     29189     30492    30481    29384    29512    29384  *30440 
  00846     29384     30500    30482  *2931      29513  *30392     29181
  00847   *2912       30501    30490    29181    29514    29181    29189
*01485      29181     30502    30491    29189    29521    29189    29384
  00841     29189     30530    30492    29384    29522    29384  *30441 
  00842     29384     30531    30500  *29381     29523  *30393     29181
  00843   *2913       30532    30501    29181    29524    29181    29189
  00844     29181     30540    30502    29189    29530    29189    29384
  00845     29189     30541    30530    29384    29531    29384  *30442 
  00846     29384     30542    30531  *29382     29532  *30400     29181
  00847   *2914       30550    30532    29181    29533    29181    29189
*01486      29181     30551    30540    29189    29534    29189    29384
  00841     29189     30552    30541    29384    29540    29384  *30443 
  00842     29384     30560    30542  *29383     29541  *30401     29181
  00843   *2915       30561    30550    29181    29542    29181    29189
  00844     29181     30562    30551    29189    29543    29189    29384
  00845     29189     30570    30552    29384    29544    29384  *30450 
  00846     29384     30571    30560  *29384     29560  *30402     29181
  00847   *29181      30572    30561    2910     29561    29181    29189
*01790      2910      30590    30562    2911     29562    29189    29384
  4831      2911      30591    30570    2912     29563    29384  *30451 
*01791      2912      30592    30571    2913     29564  *30403     29181
  4831      2913    *29189     30572    2914     29570    29181    29189
*01792      2914      2910     30590    29181    29571    29189    29384
  4831      29181     2911     30591    29189    29572    29384  *30452 
*01793      29189     2912     30592    2919     29573  *30410     29181
  4831      2919      2913   *2919      2920     29574    29181    29189
*01794      2920      2914     29181    29211    29580    29189    29384
  4831      29211     29181    29189    29212    29581    29384  *30453 
*01795      29212     29189    29384    2922     29582  *30411     29181
  4831      2922      2919   *2920      29281    29583    29181    29189
*01796      29281     2920     29181    29282    29584    29189    29384
  4831      29282     29211    29189    29283    29590    29384  *30460 
*0212       29283     29212    29384    29284    29591  *30412     29181
  4831      29284     2922   *29211     29289    29592    29181    29189
*0310       29289     29281    29181    2929     29593    29189    29384
  4831      2929      29282    29189    29381    29594    29384  *30461 
*0391       29381     29283    29384    29382    29604  *30413     29181
------------------------------------------------------------------------


[[Page 46284]]



                            Page 3 of 5 Pages                           
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
  29189     29384   *30562     29532  *48239     01180    5078     4831 
  29384   *30520      29181    29533    4831     01181    5080   *5062  
*30462      29181     29189    29534  *4824      01182    5081     4831 
  29181     29189     29384    29540    4831     01183    5171   *5063  
  29189     29384   *30563     29541  *48281     01184  *4838      4831 
  29384   *30521      29181    29542    4831     01185    4831   *5064  
*30463      29181     29189    29543  *48282     01186  *4841      4831 
  29181     29189     29384    29544    4831     01190    4831   *5069  
  29189     29384   *30570     29560  *48283     01191  *4843      4831 
  29384   *30522      29181    29561    4831     01192    4831   *5070  
*30470      29181     29189    29562  *48289     01193  *4845      4831 
  29181     29189     29384    29563    4831     01194    4831   *5071  
  29189     29384   *30571     29564  *4829      01195  *4846      4831 
  29384   *30523      29181    29570    4831     01196    4831   *5078  
*30471      29181     29189    29571  *4830      01200  *4847      4831 
  29181     29189     29384    29572    4831     01201    4831   *5080  
  29189     29384   *30572     29573  *4831      01202  *4848      4831 
  29384   *30530      29181    29574    01100    01203    4831   *5081  
*30472      29181     29189    29580    01101    01204  *485        4831
  29181     29189     29384    29581    01102    01205    4831   *5088  
  29189     29384   *30573     29582    01103    01206  *486        4831
  29384   *30531      29181    29583    01104    01210    4831   *5089  
*30473      29181     29189    29584    01105    01211  *4870      4831 
  29181     29189     29384    29590    01106    01212    4831   *5171  
  29189     29384   *30580     29591    01110    01213  *4871      4831 
  29384   *30532      29181    29592    01111    01214    4831   *5178  
*30480      29181     29189    29593    01112    01215  *4878      4831 
  29181     29189     29384    29594    01113    01216    00841  *51889 
  29189     29384   *30581     29604    01114    0310     00842    4831 
  29384   *30533      29181    29614    01115    11505    00843  *5198  
*30481      29181     29189    29634    01116    11515    00844    4831 
  29181     29189     29384    29644    01120    1304     00845  *5199  
  29189     29384   *30582     29654    01121    1363     00846    4831 
  29384   *30540      29181    29664    01122    481      00847  *53081 
*30482      29181     29189    2980     01123    4820   *494            
                                                                  99811 
  29181     29189     29384    2983     01124    4821     4831     99812
  29189     29384   *30583     2984     01125    4822   *4950      99813
  29384   *30541      29181    29900    01126    48230    4831   *53082 
*30483      29181     29189    29910    01130    48231  *4951      99811
  29181     29189     29384    29980    01131    48232    4831     99812
  29189     29384   *30590     29990    01132    48239  *4952      99813
  29384   *30542      29181  *4560      01133    4824     4831   *53083 
*30490      29181     29189    99811    01134    48281  *4953      99811
  29181     29189     29384    99812    01135    48282    4831     99812
  29189     29384   *30591     99813    01136    48283  *4954      99813
  29384   *30543      29181  *45620     01140    48289    4831   *53089 
*30491      29181     29189    99811    01141    4829   *4955      99811
  29181     29189     29384    99812    01142    4830     4831     99812
  29189     29384   *30592     99813    01143    4831   *4956      99813
  29384   *30550      29181  *4800      01144    4838     4831   *53100 
*30492      29181     29189    4831     01145    4841   *4957      99811
  29181     29189     29384  *4801      01146    4843     4831     99812
  29189     29384   *30593     4831     01150    4845   *4958      99813
  29384   *30551      29181  *4802      01151    4846     4831   *53101 
*30493      29181     29189    4831     01152    4847   *4959      99811
  29181     29189     29384  *4808      01153    4848     4831     99812
  29189     29384   *31532     4831     01154    485    *496            
                                                                  99813 
  29384   *30552      29500  *4809      01155    486      4831   *53120 
*30500      29181     29501    4831     01156    4870   *500            
                                                                  99811 
  29181     29189     29502  *481                4950     4831     99812
                                       01160                            
  29189     29384     29503    4831     01161    4951   *501            
                                                                  99813 
  29384   *30553      29504  *4820      01162    4952     4831   *53121 
*30501      29181     29510    4831     01163    4953   *502            
                                                                  99811 
  29181     29189     29511  *4821      01164    4954     4831     99812
  29189     29384     29512    4831     01165    4955   *503            
                                                                  99813 
  29384   *30560      29513  *4822      01166    4956     4831   *53140 
*30502      29181     29514    4831     01170    4957   *504            
                                                                  99811 
  29181     29189     29521  *48230     01171    4958     4831     99812
  29189     29384     29522    4831     01172    4959   *505            
                                                                  99813 
  29384   *30561      29523  *48231     01173    5060     4831   *53141 
*30503      29181     29524    4831     01174    5061   *5060      99811
  29181     29189     29530  *48232     01175    5070     4831     99812
  29189     29384     29531    4831     01176    5071   *5061      99813
------------------------------------------------------------------------


[[Page 46285]]



                            Page 4 of 5 Pages                           
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
*53160      99811     00846    00843    00844    57431    57400    57400
  99811     99812     00847    00844    00845    57440    57401    57401
  99812     99813   *53783     00845    00846    57441    57410    57410
  99813   *53401      99811    00846    00847    57450    57411    57411
*53161      99811     99812    00847  *56202     57451    57421    57421
  99811     99812     99813  *5565      99811    57460    57430    57430
  99812     99813   *5550      00841    99812    57461    57431    57431
  99813   *53420      00841    00842    99813    57470    57440    57440
*53200      99811     00842    00843  *56203     57471    57441    57441
  99811     99812     00843    00844    99811    57490    57450    57450
  99812     99813     00844    00845    99812    57491    57451    57451
  99813   *53421      00845    00846    99813    5750     57470    57460
*53201      99811     00846    00847  *56212   *57461     57471    57461
  99811     99812     00847  *5566      99811    57400    57480    57470
  99812     99813   *5551      00841    99812    57401    57481    57471
  99813   *53440      00841    00842    99813    57410    57490    57480
*53220      99811     00842    00843  *56213     57411    57491    57481
  99811     99812     00843    00844    99811    57421    5750     57490
  99812     99813     00844    00845    99812    57430  *57490     57491
  99813   *53441      00845    00846    99813    57431    57430    5750 
*53221      99811     00846    00847  *5641      57440    57431    57512
  99811     99812     00847  *5568      00841    57441    57440  *57512 
  99812     99813   *5552      00841    00842    57450    57441    57400
  99813   *53460      00841    00842    00843    57451    57450    57401
*53240      99811     00842    00843    00844    57460    57451    57410
  99811     99812     00843    00844    00845    57461    57470    57411
  99812     99813     00844    00845    00846    57470    57471    57421
  99813   *53461      00845    00846    00847    57471    57490    57430
*53241      99811     00846    00847  *5693      57490    57491    57431
  99811     99812     00847  *5569      99811    57491  *57491     57440
  99812     99813   *5559      00841    99812    5750     57430    57441
  99813   *53501      00841    00842    99813  *57470     57431    57450
*53260      99811     00842    00843  *56985     57430    57440    57451
  99811     99812     00843    00844    99811    57431    57441    57460
  99812     99813     00844    00845    99812    57440    57450    57461
  99813   *53511      00845    00846    99813    57441    57451    57470
*53261      99811     00846    00847  *57430     57450    57470    57471
  99811     99812     00847  *5570      57470    57451    57471    57480
  99812     99813   *5560      00841    57471    57470    57490    57481
  99813   *53521      00841    00842    57490    57471    57491    57490
*53300      99811     00842    00843    57491    57490  *5750      57491
  99811     99812     00843    00844  *57431     57491    57460    5750 
  99812     99813     00844    00845    57470  *57471     57461    57512
  99813   *53531      00845    00846    57471    57430    57470  *5759  
*53301      99811     00846    00847    57490    57431    57471    57460
  99811     99812     00847  *5571      57491    57440    57480    57461
  99812     99813   *5561      00841  *57440     57441    57481    57480
  99813   *53541      00841    00842    57470    57450    57490    57481
*53320      99811     00842    00843    57471    57451    57491    57512
  99811     99812     00843    00844    57490    57470    57512  *5768  
  99812     99813     00844    00845    57491    57471  *57510     57460
  99813   *53551      00845    00846  *57441     57490    57400    57461
*53321      99811     00846    00847    57470    57491    57401    57470
  99811     99812     00847  *5579      57471  *57480     57410    57471
  99812     99813   *5562      00841    57490    57400    57411    57480
  99813   *53561      00841    00842    57491    57401    57421    57481
*53340      99811     00842    00843  *57450     57410    57430    57490
  99811     99812     00843    00844    57470    57411    57431    57491
  99812     99813     00844    00845    57471    57421    57440    57512
  99813   *5363       00845    00846    57490    57430    57441  *5769  
*53341      00841     00846    00847    57491    57431    57450    57460
  99811     00842     00847  *5582    *57451     57440    57451    57461
  99812     00843   *5563      00841    57470    57441    57460    57470
  99813     00844     00841    00842    57471    57450    57461    57471
*53360      00845     00842    00843    57490    57451    57470    57480
  99811     00846     00843    00844    57491    57470    57471    57481
  99812     00847     00844    00845  *57460     57471    57480    57490
  99813   *5368       00845    00846    57400    57480    57481    57491
*53361      00841     00846    00847    57401    57481    57490    57512
  99811     00842     00847  *5589      57410    57490    57491  *5780  
  99812     00843   *5564      00841    57411    57491    5750     99811
  99813     00844     00841    00842    57421    5750     57512    99812
*53400      00845     00842    00843    57430  *57481   *57511     99813
------------------------------------------------------------------------


[[Page 46286]]



                            Page 5 of 5 Pages                           
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
*5781       5996      00841    99812    9971                            
  99811     78820     00842    99813    9972                            
  99812     78829     00843  *99813     9973                            
  99813   *75329      00844    9585     9974                            
*5789       5845      00845    9954     9975                            
  99811     5846      00846    9980     99762                           
  99812     5847      00847    99811    99799                           
  99813     5849    *7758      99812    9980                            
*74861      585       00841    99813    9982                            
  4831      5996      00842  *99851     9983                            
*75261      78820     00843    99851    9984                            
  5970      78829     00844    99859    9986                            
  5981    *7724       00845  *99859     9987                            
  5982      99811     00846    99851    99883                           
  5994      99812     00847    99859    99889                           
*75262      99813   *7759    *99881     9989                            
  5970    *7750       00841    99811  *99889                            
  5981      00841     00842    99812    99811                           
  5982      00842     00843    99813    99812                           
  5994      00843     00844    99851    99813                           
*75263      00844     00845    99859    99851                           
  5970      00845     00846    99883    99859                           
  5981      00846     00847  *99883     99883                           
  5982      00847   *7775      9580   *9989                             
  5994    *7751       00841    9581     99811                           
*75264      00841     00842    9582     99812                           
  5970      00842     00843    9583     99813                           
  5981      00843     00844    9584     99851                           
  5982      00844     00845    9585     99859                           
  5994      00845     00846    9587     99883                           
*75265      00846     00847    9954                                     
  5970      00847   *7778      99600                                    
  5981    *7752       00841    99601                                    
  5982      00841     00842    99602                                    
  5994      00842     00843    99603                                    
*75269      00843     00844    99604                                    
  5970      00844     00845    99609                                    
  5981      00845     00846    9961                                     
  5982      00846     00847    9962                                     
  5994      00847   *7903      99630                                    
*75320    *7753       29181    99639                                    
  5845      00841     29189    9964                                     
  5846      00842     29384    99660                                    
  5847      00843   *99791     99661                                    
  5849      00844     99811    99662                                    
  585       00845     99812    99663                                    
  5996      00846     99813    99664                                    
  78820     00847     99851    99665                                    
  78829   *7754       99859    99666                                    
*75321      00841     99883    99667                                    
  5845      00842   *99799     99669                                    
  5846      00843     99811    99670                                    
  5847      00844     99812    99671                                    
  5849      00845     99813    99672                                    
  585       00846     99851    99673                                    
  5996      00847     99859    99674                                    
  78820   *7755       99883    99675                                    
  78829     00841   *9980      99676                                    
*75322      00842     99811    99677                                    
  5845      00843     99812    99678                                    
  5846      00844     99813    99679                                    
  5847      00845   *99811     99690                                    
  5849      00846     9585     99691                                    
  585       00847     9954     99692                                    
  5996    *7756       9980     99693                                    
  78820     00841     99811    99694                                    
  78829     00842     99812    99695                                    
*75323      00843     99813    99696                                    
  5845      00844   *99812     99699                                    
  5846      00845     9585     99700                                    
  5847      00846     9954     99701                                    
  5849      00847     9980     99702                                    
  585     *7757       99811    99709                                    
------------------------------------------------------------------------


[[Page 46287]]



             Table 6h.--Deletions to the CC Exclusions List             
                            Page 1 of 1 Page                            
 CCs that are deleted from the list are in Table 6H--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.
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
*2910       30502     2918     2918     2918     9981     57421         
  2918      30530   *30303   *30471   *30563   *53261     57430         
*2911       30531     2918     2918     2918     9981     57431         
  2918      30532   *30390   *30472   *30570   *53300     57440         
*2912       30540     2918     2918     2918     9981     57441         
  2918      30541   *30391   *30473   *30571   *53301     57450         
*2913       30542     2918     2918     2918     9981     57451         
  2918      30550   *30392   *30480   *30572   *53320     5750          
*2914       30551     2918     2918     2918     9981   *5780           
  2918      30552   *30393   *30481   *30573   *53321     9981          
*2915       30560     2918     2918     2918     9981   *5781           
  2918      30561   *30400   *30482   *30580   *53340     9981          
*2918       30562     2918     2918     2918     9981   *5789           
  2910      30570   *30401   *30483   *30581   *53341     9981          
  2911      30571     2918     2918     2918     9981   *7526           
  2912      30572   *30402   *30490   *30582   *53360     5970          
  2913      30590     2918     2918     2918     9981     5981          
  2914      30591   *30403   *30491   *30583   *53361     5982          
  2918      30592     2918     2918     2918     9981     5994          
  2919    *2919     *30410   *30492   *30590   *53400   *7532           
  2920      2918      2918     2918     2918     9981     5845          
  29211   *2920     *30411   *30493   *30591   *53401     5846          
  29212     2918      2918     2918     2918     9981     5847          
  2922    *29211    *30412   *30500   *30592   *53420     5849          
  29281     2918      2918     2918     2918     9981     585           
  29282   *29212    *30413   *30501   *30593   *53421     5996          
  29283     2918      2918     2918     2918     9981     78820         
  29284   *2922     *30420   *30502   *4560    *53440     78829         
  29289     2918      2918     2918     9981     9981   *7724           
  2929    *29281    *30421   *30503   *45620   *53441     9981          
  29381     2918      2918     2918     9981     9981   *7903           
  29382   *29282    *30422   *30520   *53081   *53460     2918          
  29383     2918      2918     2918     9981     9981   *99791          
  30300   *29283    *30423   *30521   *53082   *53461     9981          
  30301     2918      2918     2918     9981     9981     9985          
  30302   *29284    *30430   *30522   *53083   *53501   *99799          
  30390     2918      2918     2918     9981     9981     9981          
  30391   *29289    *30431   *30523   *53089   *53511     9985          
  30392     2918      2918     2918     9981     9981   *9980           
  30400   *2929     *30432   *30530   *53100   *53521     9981          
  30401     2918      2918     2918     9981     9981   *9981           
  30402   *2930     *30433   *30531   *53101   *53531     9585          
  30410     2918      2918     2918     9981     9981     9954          
  30411   *2931     *30440   *30532   *53120   *53541     9980          
  30412     2918      2918     2918     9981     9981     9981          
  30420   *29381    *30441   *30533   *53121   *53551   *9985           
  30421     2918      2918     2918     9981     9981     9985          
  30422   *29382    *30442   *30540   *53140   *53561   *99881          
  30440     2918      2918     2918     9981     9981     9981          
  30441   *29383    *30443   *30541   *53141   *53783     9985          
  30442     2918      2918     2918     9981     9981   *99889          
  30450   *29389    *30450   *30542   *53160   *56202     9981          
  30451     2918      2918     2918     9981     9981     9985          
  30452   *2939     *30451   *30543   *53161   *56203   *9989           
  30460     2918      2918     2918     9981     9981     9981          
  30461   *2940     *30452   *30550   *53200   *56212     9985          
  30462     2918      2918     2918     9981     9981                   
  30470   *2941     30453    *30551   *53201   *56213                   
  30471     2918      2918     2918     9981     9981                   
  30472   *2948     *30460   *30552   *53220   *5693                    
  30480     2918      2918     2918     9981     9981                   
  30481   *2949     *30461   *30553   *53221   *56985                   
  30482     2918      2918     2918     9981     9981                   
  30490   *30300    *30462   *30560   *53240   *5751                    
  30491     2918      2918     2918     9981     57400                  
  30492   *30301    *30463   *30561   *53241     57401                  
  30500     2918      2918     2918     9981     57410                  
  30501   *30302    *30470   *30562   *53260     57411                  
------------------------------------------------------------------------


[[Page 46288]]



                                   Table 7a.--Medicare Prospective Payment System Selected Percentile Lengths of Stay                                   
                                                        [FY95 MEDPAR Update 06/96 Grouper V13.0]                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Number        Arithmetic         10th            25th            50th            75th            90th     
                   DRG                      discharges       mean LOS       percentile      percentile      percentile      percentile      percentile  
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................           34442         11.0870               3               4               8              14              23
2.......................................            6577         11.5545               3               5               8              14              23
3.......................................               1         10.0000              10              10              10              10              10
4.......................................            6221          9.1249               2               3               6              11              20
5.......................................          100697          4.4155               2               2               3               5               9
6.......................................             464          3.4030               1               1               2               4               7
7.......................................           11182         12.6678               3               5               8              14              25
8.......................................            2377          4.1586               1               1               3               5               9
9.......................................            1768          7.6697               2               3               5               9              16
10......................................           20201          7.9723               2               3               6              10              16
11......................................            3044          4.9152               1               2               4               6              10
12......................................           24534          7.6319               2               3               5               9              14
13......................................            6348          6.2098               2               4               5               7              11
14......................................          368912          7.4277               2               3               6               9              14
15......................................          145736          4.4476               1               2               3               5               8
16......................................           12479          6.5732               2               3               5               8              12
17......................................            3377          4.0269               1               2               3               5               7
18......................................           22488          6.3283               2               3               5               8              12
19......................................            7265          4.5076               1               2               4               6               8
20......................................            8354         10.1263               2               4               8              13              20
21......................................            1176          7.8180               2               3               6              10              16
22......................................            2753          4.8554               2               2               4               6               9
23......................................            6038          5.0600               1               2               4               6              10
24......................................           56498          5.8137               2               3               4               7              11
25......................................           23104          3.8625               1               2               3               5               7
26......................................              48          4.5625               1               2               3               6              10
27......................................            3729          6.3130               1               1               4               7              14
28......................................           11872          7.0601               1               3               5               8              14
29......................................            3959          4.0354               1               2               3               5               8
31......................................            3381          5.4590               1               2               4               6              10
32......................................            1848          3.1483               1               1               2               4               6
34......................................           17083          6.4969               2               3               5               8              13
35......................................            3832          4.3072               1               2               3               5               8
36......................................            9404          1.6325               1               1               1               2               3
37......................................            1995          4.0551               1               1               3               5               8
38......................................             246          2.6098               1               1               2               3               5
39......................................            3436          1.9744               1               1               1               2               4
40......................................            2958          3.3966               1               1               2               4               7
42......................................            7697          2.2076               1               1               1               2               5
43......................................             105          4.1524               1               2               3               5               8
44......................................            1705          5.7238               2               3               5               7              10
45......................................            2545          3.8310               1               2               3               5               7
46......................................            3116          5.5209               1               2               4               7              10
47......................................            1417          3.7890               1               1               3               5               7
49......................................            2260          5.6518               1               2               4               7              11
50......................................            3511          2.1191               1               1               2               2               3
51......................................             323          2.9195               1               1               1               2               7
52......................................              84          3.5357               1               1               2               3               8
53......................................            3546          3.5491               1               1               2               4               8
54......................................               2          4.0000               1               1               7               7               7
55......................................            2035          2.9666               1               1               2               3               6
56......................................             766          2.7454               1               1               2               3               6
57......................................             677          4.0694               1               1               3               5               8
59......................................              94          3.6064               1               1               2               4               7
60......................................               3          1.0000               1               1               1               1               1
61......................................             226          5.1372               1               1               2               7              14
62......................................               1          2.0000               2               2               2               2               2
63......................................            4238          4.6487               1               2               3               5              10
64......................................            3550          7.5346               1               2               5               9              16
65......................................           30917          3.4293               1               2               3               4               6
66......................................            6878          3.5650               1               2               3               4               6
67......................................             532          4.1992               2               2               3               5               8
68......................................           10392          4.7941               2               3               4               6               9
69......................................            3353          3.7739               1               2               3               5               7
70......................................              32          2.9375               1               2               3               3               5
71......................................              96          4.0313               1               2               3               5               8
72......................................             612          4.4167               1               2               3               5               9
73......................................            6332          4.9588               1               2               4               6               9
75......................................           41590         11.1419               4               6               8              14              22
76......................................           40960         12.4911               3               6              10              15              24

[[Page 46289]]

                                                                                                                                                        
77......................................            2446          5.5200               1               2               4               8              12
78......................................           30530          8.2292               4               5               7              10              13
79......................................          220024          9.2606               3               5               7              11              17
80......................................            9456          6.6214               2               4               5               8              12
81......................................              10          7.4000               1               4               6              12              15
82......................................           72211          7.8884               2               3               6              10              16
83......................................            7541          6.3896               2               3               5               8              12
84......................................            1582          3.6846               1               2               3               5               7
85......................................           19391          7.3326               2               3               6               9              14
86......................................            1444          4.5062               1               2               4               6               9
87......................................           62143          6.8199               1               3               6               9              13
88......................................          368008          6.0847               2               3               5               7              11
89......................................          442736          7.0834               3               4               6               9              12
90......................................           43190          5.1359               2               3               4               6               9
91......................................              53          4.4151               1               2               3               6               8
92......................................           12548          7.2620               2               4               6               9              13
93......................................            1332          4.9234               1               3               4               6               9
94......................................           13242          7.0497               2               3               5               9              14
95......................................            1458          4.1221               1               2               3               5               8
96......................................           65710          5.5228               2               3               5               7              10
97......................................           27798          4.2826               2               2               4               5               7
98......................................              20          4.3000               1               1               3               6              10
99......................................           26552          3.4947               1               2               3               4               7
100.....................................           10746          2.4205               1               1               2               3               4
101.....................................           20899          5.1925               1               2               4               7              10
102.....................................            4669          3.1371               1               1               2               4               6
103.....................................             487         39.8973              10              15              29              54              82
104.....................................           24152         14.5670               6               8              12              18              26
105.....................................           20847         10.9617               5               7               9              13              19
106.....................................          101038         11.7331               6               8              10              14              19
107.....................................           64206          8.8424               5               6               7              10              14
108.....................................            6883         12.5720               4               7              10              15              23
110.....................................           62140         10.7845               3               6               9              13              20
111.....................................            6119          6.6568               3               5               7               8              10
112.....................................          201028          4.7049               1               2               4               6               9
113.....................................           47381         14.3687               4               6              10              17              28
114.....................................            9250          9.4685               2               4               7              12              18
115.....................................           11017         11.4341               4               6               9              14              20
116.....................................           85879          5.4281               1               2               4               7              11
117.....................................            4837          4.1211               1               1               2               5               8
118.....................................            7120          3.2142               1               1               2               4               7
119.....................................            1791          5.5366               1               1               3               7              13
120.....................................           42743          9.1977               1               2               6              12              21
121.....................................          167116          7.4255               2               4               6               9              13
122.....................................           91508          5.0063               1               3               5               7               9
123.....................................           48692          4.6628               1               1               2               6              11
124.....................................          145526          4.9010               1               2               4               6               9
125.....................................           62240          3.0708               1               1               2               4               6
126.....................................            4864         14.0113               4               7              11              17              29
127.....................................          705511          6.2183               2               3               5               8              12
128.....................................           20583          6.7301               3               4               6               8              11
129.....................................            4847          3.5251               1               1               1               4               8
130.....................................           96345          6.6835               2               4               6               8              12
131.....................................           26865          5.1799               1               3               5               7               8
132.....................................          133374          3.5805               1               2               3               4               6
133.....................................            6162          2.9761               1               1               2               4               5
134.....................................           30025          3.9084               1               2               3               5               7
135.....................................            7497          4.9941               1               2               4               6               9
136.....................................            1079          3.2586               1               2               3               4               6
138.....................................          205732          4.5589               1               2               3               6               9
139.....................................           70666          2.9401               1               1               2               4               5
140.....................................          184595          3.4847               1               2               3               4               6
141.....................................           80056          4.4979               1               2               3               5               8
142.....................................           37589          3.2040               1               2               3               4               6
143.....................................          138969          2.6105               1               1               2               3               5
144.....................................           70455          5.7021               1               2               4               7              11
145.....................................            7063          3.2390               1               1               2               4               6
146.....................................            9116         11.2399               6               7               9              13              18
147.....................................            1716          7.3462               4               6               7               9              11
148.....................................          147240         13.4390               6               8              11              16              24

[[Page 46290]]

                                                                                                                                                        
149.....................................           16479          7.7172               4               6               7               9              11
150.....................................           23661         11.7462               4               7              10              14              21
151.....................................            4727          6.4637               2               4               6               8              11
152.....................................            4681          9.0305               4               6               8              10              15
153.....................................            1810          6.1663               3               4               6               8               9
154.....................................           37523         14.9701               5               8              12              18              28
155.....................................            4800          5.8863               2               3               5               8              10
156.....................................               4         15.7500               4               4              10              22              27
157.....................................           11976          5.8075               1               2               4               7              11
158.....................................            5338          2.9039               1               1               2               4               6
159.....................................           18014          5.3347               1               2               4               7              10
160.....................................           10461          2.9524               1               1               2               4               5
161.....................................           15500          4.3536               1               2               3               5               9
162.....................................            8397          2.1870               1               1               2               3               4
163.....................................               8          3.0000               1               1               3               4               5
164.....................................            5240          9.3945               4               6               8              11              16
165.....................................            1757          5.7518               3               4               5               7               9
166.....................................            3440          5.7122               2               3               4               7              10
167.....................................            2409          3.2333               1               2               3               4               6
168.....................................            1870          4.9610               1               2               3               6              10
169.....................................            1091          2.5371               1               1               2               3               5
170.....................................           13152         12.4993               2               5               9              15              25
171.....................................            1205          5.4008               1               2               4               7              11
172.....................................           32440          8.1497               2               3               6              10              16
173.....................................            2286          4.3994               1               2               3               5               9
174.....................................          243520          5.5478               2               3               4               7              10
175.....................................           24208          3.5122               1               2               3               4               6
176.....................................           16840          6.1428               2               3               5               7              11
177.....................................           12619          4.9756               2               3               4               6               9
178.....................................            4386          3.6147               1               2               3               5               7
179.....................................           11791          7.1640               2               4               6               9              14
180.....................................           82971          6.0508               2               3               5               7              11
181.....................................           23209          3.9601               1               2               3               5               7
182.....................................          237577          4.9658               2               2               4               6               9
183.....................................           75774          3.4541               1               2               3               4               6
184.....................................              77          3.8831               1               2               2               4               7
185.....................................            4037          5.1850               1               2               4               6              10
186.....................................               2          1.5000               1               1               2               2               2
187.....................................             944          4.2108               1               2               3               6               8
188.....................................           64209          6.1263               2               3               5               8              12
189.....................................            8146          3.6866               1               1               3               5               7
190.....................................              68          5.0882               1               2               4               7              10
191.....................................           11098         16.2616               5               8              12              20              32
192.....................................             930          7.9161               2               4               7              10              14
193.....................................            8975         13.9348               5               8              11              17              25
194.....................................             847          8.4652               3               5               7              10              15
195.....................................            9686         10.4650               4               6               9              12              18
196.....................................             845          6.7136               3               4               6               8              11
197.....................................           29491          9.1586               4               5               7              11              16
198.....................................            8311          4.9344               2               3               4               6               8
199.....................................            2348         11.1661               3               5               9              14              22
200.....................................            1655         12.3329               2               4               8              15              26
201.....................................            1557         16.7534               4               7              13              21              34
202.....................................           26477          7.7437               2               3               6              10              15
203.....................................           30205          7.6570               2               3               6              10              15
204.....................................           51448          6.7152               2               3               5               8              13
205.....................................           22675          7.2389               2               3               5               9              14
206.....................................            1783          4.7196               1               2               4               6              10
207.....................................           37006          5.7262               2               3               4               7              11
208.....................................           10751          3.5105               1               2               3               4               6
209.....................................          344259          6.6642               3               4               6               7              10
210.....................................          138205          8.5738               4               5               7              10              14
211.....................................           26619          6.2716               3               4               6               7              10
212.....................................               9          5.0000               2               3               4               5               8
213.....................................            7164          9.7067               3               4               7              12              19
214.....................................           53836          6.4605               2               3               5               8              12
215.....................................           43190          3.6846               1               2               3               5               7
216.....................................            6760         11.0719               2               5               8              14              22
217.....................................           20436         15.3636               3               6              10              18              31
218.....................................           23224          6.2155               2               3               5               7              11

[[Page 46291]]

                                                                                                                                                        
219.....................................           19076          3.7567               1               2               3               5               6
220.....................................               2          5.5000               5               5               6               6               6
221.....................................            5227          8.1037               2               4               6              10              16
222.....................................            3750          4.0496               1               2               3               5               8
223.....................................           19410          2.8704               1               1               2               3               5
224.....................................            8378          2.2731               1               1               2               3               4
225.....................................            6594          5.0059               1               2               3               6              11
226.....................................            5651          6.7383               1               2               4               8              14
227.....................................            4846          2.9610               1               1               2               4               6
228.....................................            3199          3.5261               1               1               2               4               7
229.....................................            1427          2.4043               1               1               2               3               5
230.....................................            2578          5.2002               1               2               3               6              11
231.....................................           10890          5.0626               1               2               3               6              11
232.....................................             602          4.4651               1               1               2               5              10
233.....................................            4808          9.0422               2               4               7              11              18
234.....................................            2363          4.1727               1               2               3               5               8
235.....................................            5827          6.7833               1               3               4               7              13
236.....................................           39844          6.2907               2               3               5               7              12
237.....................................            1586          4.4067               1               2               3               5               8
238.....................................            7925         10.0430               3               5               7              12              19
239.....................................           62430          7.6248               2               4               6               9              14
240.....................................           12701          7.5282               2               3               5               9              15
241.....................................            3183          4.5922               1               2               4               5               9
242.....................................            2644          7.6539               2               4               6               9              15
243.....................................           84034          5.6150               2               3               4               7              10
244.....................................           12036          5.8284               2               3               4               7              11
245.....................................            4477          4.3044               1               2               3               5               8
246.....................................            1391          4.6161               1               2               4               6               9
247.....................................           11132          3.9656               1               2               3               5               8
248.....................................            7135          5.2685               1               2               4               6              10
249.....................................           10593          4.2878               1               1               3               5               9
250.....................................            3359          5.0473               1               2               4               6               9
251.....................................            2228          3.3039               1               1               3               4               6
252.....................................               1          1.0000               1               1               1               1               1
253.....................................           18452          5.8248               2               3               4               7              11
254.....................................            9735          3.8817               1               2               3               5               7
255.....................................               1          2.0000               2               2               2               2               2
256.....................................            4819          5.6921               1               2               4               7              11
257.....................................           24829          3.4343               1               2               3               4               6
258.....................................           19718          2.4910               1               2               2               3               4
259.....................................            4225          3.5089               1               1               2               3               7
260.....................................            5083          1.8702               1               1               2               2               3
261.....................................            2489          2.3403               1               1               2               3               4
262.....................................             749          3.9439               1               1               2               5               8
263.....................................           30581         13.9228               4               6              10              16              28
264.....................................            3723          8.3503               2               4               6              10              17
265.....................................            4517          7.6810               1               3               5               9              16
266.....................................            2850          3.7140               1               1               3               5               8
267.....................................             238          4.3361               1               1               3               5               9
268.....................................             983          4.0651               1               1               2               4               9
269.....................................           10745          9.2352               2               4               7              12              19
270.....................................            3643          3.4161               1               1               2               4               8
271.....................................           22531          8.5207               3               4               7              10              15
272.....................................            6142          7.4650               2               3               6               9              14
273.....................................            1500          5.4860               2               2               4               7              11
274.....................................            2654          7.7939               2               3               5               9              16
275.....................................             258          3.6705               1               1               2               4               8
276.....................................             928          5.0151               1               2               4               6               9
277.....................................           82879          6.7243               3               4               5               8              12
278.....................................           27272          5.1610               2               3               4               6               9
279.....................................               6          4.1667               1               2               3               4               4
280.....................................           13880          5.0710               1               2               4               6               9
281.....................................            6277          3.6108               1               2               3               4               7
283.....................................            5522          5.4681               2               2               4               7              10
284.....................................            1841          3.8403               1               2               3               5               7
285.....................................            5132         13.6613               3               6              10              16              26
286.....................................            2035          8.6993               3               4               6               9              16
287.....................................            6605         13.3889               3               6               9              16              26
288.....................................            1020          6.8824               3               4               5               7              11
289.....................................            5276          3.9780               1               2               2               4               8

[[Page 46292]]

                                                                                                                                                        
290.....................................            8909          2.8289               1               1               2               3               5
291.....................................              91          1.7692               1               1               1               2               3
292.....................................            5308         12.7491               2               5               9              16              25
293.....................................             310          6.7935               1               3               5               8              14
294.....................................           90532          5.6749               2               3               4               7              10
295.....................................            3894          4.2766               1               2               3               5               8
296.....................................          230295          6.3598               2               3               5               8              12
297.....................................           33134          4.2911               1               2               3               5               8
298.....................................             108          3.3796               1               1               2               4               6
299.....................................             927          5.4132               1               2               4               7              10
300.....................................           14815          7.2798               2               3               6               9              14
301.....................................            2247          4.3796               1               2               3               5               9
302.....................................            8314         12.3018               6               7               9              14              21
303.....................................           19404         10.2201               4               6               8              12              18
304.....................................           13543         10.2916               3               5               7              13              21
305.....................................            2681          4.9276               1               3               4               6               9
306.....................................           11853          6.2378               2               2               4               8              13
307.....................................            2696          2.9841               1               2               2               3               5
308.....................................            9573          7.0330               1               2               5               9              15
309.....................................            3563          3.0230               1               1               2               4               6
310.....................................           30025          4.6157               1               2               3               6               9
311.....................................           10221          2.1764               1               1               2               3               4
312.....................................            2120          4.8198               1               2               3               6              10
313.....................................             788          2.2855               1               1               2               3               5
314.....................................               1          5.0000               5               5               5               5               5
315.....................................           29516          9.3027               1               2               6              12              20
316.....................................           73804          7.4996               2               3               6               9              15
317.....................................             838          2.9033               1               1               2               3               6
318.....................................            6303          7.1525               2               3               5               9              14
319.....................................             522          3.2184               1               1               2               4               7
320.....................................          177322          6.4439               2               3               5               8              11
321.....................................           26732          4.7118               2               3               4               6               8
322.....................................              87          4.3333               2               2               4               5               8
323.....................................           18552          3.5564               1               2               3               4               7
324.....................................            9159          2.0887               1               1               2               3               4
325.....................................            7781          4.5729               1               2               3               5               9
326.....................................            2305          3.4265               1               1               2               4               6
327.....................................               9          3.3333               1               2               2               4               5
328.....................................             853          4.2579               1               2               3               6               8
329.....................................             113          2.7965               1               1               2               3               5
330.....................................               1          1.0000               1               1               1               1               1
331.....................................           40267          6.1796               2               3               5               8              12
332.....................................            4973          3.8520               1               2               3               5               8
333.....................................             379          5.7968               1               3               4               7              13
334.....................................           19978          6.0539               3               4               5               7               9
335.....................................           10312          4.6223               2               3               4               6               7
336.....................................           63889          4.1249               1               2               3               5               8
337.....................................           40544          2.6722               1               2               2               3               4
338.....................................            5063          5.2558               1               2               3               6              11
339.....................................            2416          5.2562               1               2               3               6              11
340.....................................               2          3.0000               1               1               5               5               5
341.....................................            6766          3.2573               1               1               2               4               6
342.....................................             231          4.0649               1               1               2               5               8
344.....................................            4022          3.4510               1               1               2               4               7
345.....................................            1428          4.0210               1               2               3               5               9
346.....................................            5626          6.7600               1               3               5               8              14
347.....................................             443          3.2889               1               1               2               4               7
348.....................................            3187          4.8892               1               2               4               6               9
349.....................................             734          2.9646               1               1               2               4               6
350.....................................            7234          4.7432               2               3               4               6               8
352.....................................             603          3.9005               1               1               3               5               8
353.....................................            2743          8.3252               3               4               6               9              15
354.....................................           10187          6.3342               3               4               5               7              11
355.....................................            5884          3.8600               2               3               4               4               6
356.....................................           30093          3.0252               1               2               3               4               5
357.....................................            6842          9.8297               4               5               8              12              18
358.....................................           28152          4.7532               2               3               4               5               8
359.....................................           28825          3.2709               2               3               3               4               5
360.....................................           17592          3.5444               1               2               3               4               6
361.....................................             655          3.4580               1               1               2               4               7

[[Page 46293]]

                                                                                                                                                        
363.....................................            4555          3.5139               1               2               2               3               6
364.....................................            1879          3.6003               1               1               2               4               8
365.....................................            2522          8.1257               2               3               5              10              18
366.....................................            4694          7.6877               2               3               5              10              16
367.....................................             571          3.3135               1               1               2               4               7
368.....................................            2408          6.9049               2               3               5               8              13
369.....................................            2531          3.7246               1               1               3               5               7
370.....................................            1201          5.5679               3               3               4               5               9
371.....................................            1044          3.6236               2               3               3               4               5
372.....................................             872          3.3601               1               2               2               3               6
373.....................................            3961          1.9258               1               1               2               2               3
374.....................................             141          2.5957               1               2               2               3               4
375.....................................               5          2.2000               1               1               2               3               4
376.....................................             164          3.3537               1               1               2               4               7
377.....................................              27          3.2963               1               1               2               3               8
378.....................................             172          2.9186               1               2               3               3               5
379.....................................             332          3.0361               1               1               2               3               5
380.....................................              75          2.2800               1               1               2               2               4
381.....................................             209          2.2967               1               1               1               2               5
382.....................................              54          1.5741               1               1               1               1               3
383.....................................            1557          4.0873               1               2               3               5               8
384.....................................             135          3.1481               1               1               1               2               7
385.....................................               4         13.5000               1               1               1               3              49
386.....................................               1         36.0000              36              36              36              36              36
389.....................................              23         10.7391               3               4               8              10              18
390.....................................              11          4.7273               1               2               3               5               9
392.....................................            2622         11.6484               4               6               8              14              24
394.....................................            1734          7.9862               1               2               5               9              16
395.....................................           69281          5.3835               1               2               4               7              10
396.....................................              19          3.7895               1               1               3               5               8
397.....................................           16238          6.0846               2               3               5               7              12
398.....................................           17490          6.5883               2               3               5               8              12
399.....................................            1505          4.4399               1               2               4               6               8
400.....................................            7877         10.4160               2               4               7              13              23
401.....................................            6683         12.3822               2               5               9              16              25
402.....................................            1621          4.7218               1               1               3               6              10
403.....................................           36569          9.2960               2               4               7              12              19
404.....................................            4137          5.1047               1               2               4               7              10
406.....................................            3407         11.2548               3               5               8              14              23
407.....................................             761          4.9304               1               2               4               6               9
408.....................................            3100          8.1632               1               2               5              10              18
409.....................................            5931          6.7132               2               3               4               6              15
410.....................................           89997          3.3583               1               2               3               4               5
411.....................................              58          2.6724               1               1               2               3               7
412.....................................              37          2.9730               1               1               2               4               5
413.....................................            8878          8.3323               2               3               6              10              17
414.....................................             845          5.1361               1               2               4               7              11
415.....................................           40783         15.7224               4               7              12              19              31
416.....................................          201554          8.2165               2               4               7              10              15
417.....................................              54          4.5741               1               2               4               7              10
418.....................................           19614          6.7661               2               3               5               8              13
419.....................................           16484          5.6830               2               3               4               7              10
420.....................................            3023          4.3126               2               2               4               5               8
421.....................................           12216          4.6523               2               2               4               5               8
422.....................................              97          3.8041               1               2               3               4               7
423.....................................            9588          8.7110               2               4               6              10              18
424.....................................            2102         17.9139               3               6              12              20              35
425.....................................           16010          4.8731               1               2               3               6              10
426.....................................            4920          5.5150               1               2               4               7              11
427.....................................            1856          5.2333               1               2               4               6              11
428.....................................             956          8.3347               1               3               5              10              18
429.....................................           40733          8.9700               2               3               6              10              17
430.....................................           55753          9.7545               2               4               7              12              19
431.....................................             200          7.1500               1               3               5               9              13
432.....................................             457          6.5252               1               2               4               6              11
433.....................................            8283          3.4066               1               1               2               4               7
434.....................................           21933          5.8212               2               3               4               7              11
435.....................................           16378          4.8060               1               3               4               6               8
436.....................................            3128         14.3744               4               8              14              21              28
437.....................................           14927         10.8952               4               6              10              14              20

[[Page 46294]]

                                                                                                                                                        
439.....................................             910          8.9264               2               3               6              11              18
440.....................................            5007          9.8354               2               3               6              12              21
441.....................................             648          4.4213               1               1               2               4               8
442.....................................           14653          8.7421               1               3               6              11              18
443.....................................            3469          3.5509               1               1               2               5               7
444.....................................            3543          5.2882               1               3               4               6              10
445.....................................            1415          3.9046               1               2               3               5               7
446.....................................               1          1.0000               1               1               1               1               1
447.....................................            3991          2.8013               1               1               2               3               5
448.....................................              88          1.0000               1               1               1               1               1
449.....................................           30264          4.4273               1               2               3               5               9
450.....................................            7178          2.3403               1               1               2               3               5
451.....................................               8          6.0000               2               3               4               5               7
452.....................................           20326          5.4275               1               2               4               6              11
453.....................................            3831          3.1929               1               1               2               4               6
454.....................................            5391          5.1330               1               2               3               6              10
455.....................................            1181          2.8442               1               1               2               3               5
456.....................................             213          8.3803               1               1               4               9              21
457.....................................             135          4.8222               1               1               2               5              12
458.....................................            1650         16.8358               3               7              13              22              35
459.....................................             582         10.2887               2               4               7              13              21
460.....................................            2437          6.6422               1               3               5               8              13
461.....................................            3230          4.8920               1               1               2               5              12
462.....................................            9786         13.7570               4               6              12              18              26
463.....................................           12587          5.1722               1               2               4               6              10
464.....................................            3225          3.7479               1               2               3               5               7
465.....................................             202          3.8762               1               1               2               4               7
466.....................................            1943          4.8101               1               1               2               4              10
467.....................................            1820          4.1264               1               1               2               4               8
468.....................................           62094         15.2184               3               7              12              19              30
471.....................................            9604          8.0717               4               5               6               9              14
472.....................................             159         30.1635               1               9              28              40              61
473.....................................            8650         14.3808               2               4               8              21              36
475.....................................           94974         12.1639               2               5              10              16              24
476.....................................            7275         13.8367               3               7              11              17              25
477.....................................           29790          8.9095               1               3               6              11              18
478.....................................          123960          8.3140               1               3               6              10              17
479.....................................           18606          4.5577               1               2               4               6               9
480.....................................              43         33.5581              12              16              24              39              61
481.....................................             122         36.2787              21              25              31              42              60
482.....................................            7121         14.8666               5               8              11              17              28
483.....................................           38597         45.9566              15              23              37              56              85
484.....................................             366         15.8115               2               6              12              22              32
485.....................................            3426         11.6985               4               6               9              14              22
486.....................................            2316         13.4473               1               6              11              18              28
487.....................................            4136          8.9350               1               3               7              11              18
488.....................................            1694         17.6251               5               8              13              22              35
489.....................................           18721         10.4348               2               4               7              13              22
490.....................................            5263          6.5565               1               2               4               8              14
491.....................................            9897          4.2698               2               3               3               5               7
492.....................................            2139         17.3703               3               5              10              28              37
493.....................................           54769          5.8892               1               2               5               8              11
494.....................................           28573          2.4247               1               1               2               3               5
495.....................................             131         22.7176              10              12              17              26              39
                                         ----------------                                                                                               
                                                11135858                                                                                                
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                   Table 7b.--Medicare Prospective Payment System Selected Percentile Lengths of Stay                                   
                                                        [FY95 MEDPAR Update 06/96 Grouper V14.0]                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Number        Arithmetic         10th            25th            50th            75th            90th     
                   DRG                      discharges       mean LOS       percentile      percentile      percentile      percentile      percentile  
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................           34442         11.0870               3               4               8              14              23
2.......................................            6577         11.5545               3               5               8              14              23
3.......................................               1         10.0000              10              10              10              10              10
4.......................................            6221          9.1249               2               3               6              11              20
5.......................................          100697          4.4155               2               2               3               5               9
6.......................................             464          3.4030               1               1               2               4               7

[[Page 46295]]

                                                                                                                                                        
7.......................................           11326         12.5507               2               5               8              14              25
8.......................................            2651          3.8989               1               1               2               5               9
9.......................................            1768          7.6697               2               3               5               9              16
10......................................           20201          7.9723               2               3               6              10              16
11......................................            3044          4.9152               1               2               4               6              10
12......................................           24534          7.6319               2               3               5               9              14
13......................................            6348          6.2098               2               4               5               7              11
14......................................          368912          7.4277               2               3               6               9              14
15......................................          145736          4.4476               1               2               3               5               8
16......................................           12480          6.5737               2               3               5               8              12
17......................................            3376          4.0243               1               2               3               5               7
18......................................           23963          6.3732               2               3               5               8              12
19......................................            7792          4.5249               1               2               4               6               8
20......................................            6352         11.2835               3               5               9              15              22
21......................................            1176          7.8180               2               3               6              10              16
22......................................            2753          4.8554               2               2               4               6               9
23......................................            6038          5.0600               1               2               4               6              10
24......................................           56509          5.8142               2               3               4               7              11
25......................................           23093          3.8603               1               2               3               5               7
26......................................              48          4.5625               1               2               3               6              10
27......................................            3729          6.3130               1               1               4               7              14
28......................................           11873          7.0603               1               3               5               8              14
29......................................            3958          4.0341               1               2               3               5               8
31......................................            3382          5.4595               1               2               4               6              10
32......................................            1847          3.1462               1               1               2               4               6
34......................................           17085          6.4968               2               3               5               8              13
35......................................            3830          4.3065               1               2               3               5               8
36......................................            9404          1.6325               1               1               1               2               3
37......................................            1994          4.0341               1               1               3               5               8
38......................................             246          2.6098               1               1               2               3               5
39......................................            3436          1.9744               1               1               1               2               4
40......................................            2958          3.3966               1               1               2               4               7
42......................................            7697          2.2076               1               1               1               2               5
43......................................             105          4.1524               1               2               3               5               8
44......................................            1705          5.7238               2               3               5               7              10
45......................................            2545          3.8310               1               2               3               5               7
46......................................            3117          5.5201               1               2               4               7              10
47......................................            1416          3.7895               1               1               3               5               7
49......................................            2260          5.6518               1               2               4               7              11
50......................................            3511          2.1191               1               1               2               2               3
51......................................             323          2.9195               1               1               1               2               7
52......................................             100          3.3600               1               1               2               3               7
53......................................            3624          3.5566               1               1               2               4               8
54......................................               2          4.0000               1               1               7               7               7
55......................................            2035          2.9666               1               1               2               3               6
56......................................             766          2.7454               1               1               2               3               6
57......................................             637          4.1334               1               1               3               5               8
59......................................              94          3.6064               1               1               2               4               7
60......................................               3          1.0000               1               1               1               1               1
61......................................             226          5.1372               1               1               2               7              14
62......................................               1          2.0000               2               2               2               2               2
63......................................            4238          4.6487               1               2               3               5              10
64......................................            3550          7.5346               1               2               5               9              16
65......................................           30917          3.4293               1               2               3               4               6
66......................................            6878          3.5650               1               2               3               4               6
67......................................             532          4.1992               2               2               3               5               8
68......................................           10400          4.7953               2               3               4               6               9
69......................................            3345          3.7677               1               2               3               5               7
70......................................              32          2.9375               1               2               3               3               5
71......................................              96          4.0313               1               2               3               5               8
72......................................             612          4.4167               1               2               3               5               9
73......................................            6332          4.9588               1               2               4               6               9
75......................................           41590         11.1419               4               6               8              14              22
76......................................           40962         12.4917               3               6              10              15              24
77......................................            2444          5.5041               1               2               4               8              12
78......................................           30530          8.2292               4               5               7              10              13
79......................................          220099          9.2617               3               5               7              11              17
80......................................            9381          6.5760               2               4               5               8              12
81......................................              10          7.4000               1               4               6              12              15
82......................................           72211          7.8884               2               3               6              10              16

[[Page 46296]]

                                                                                                                                                        
83......................................            7541          6.3896               2               3               5               8              12
84......................................            1582          3.6846               1               2               3               5               7
85......................................           19393          7.3333               2               3               6               9              14
86......................................            1442          4.4938               1               2               4               6               9
87......................................           62143          6.8199               1               3               6               9              13
88......................................          368008          6.0847               2               3               5               7              11
89......................................          442908          7.0843               3               4               6               9              12
90......................................           43018          5.1184               2               3               4               6               9
91......................................              53          4.4151               1               2               3               6               8
92......................................           12552          7.2631               2               4               6               9              13
93......................................            1328          4.9059               1               3               4               6               9
94......................................           13243          7.0498               2               3               5               9              14
95......................................            1457          4.1187               1               2               3               5               8
96......................................           65750          5.5233               2               3               5               7              10
97......................................           27758          4.2796               2               2               4               5               7
98......................................              20          4.3000               1               1               3               6              10
99......................................           26556          3.4948               1               2               3               4               7
100.....................................           10742          2.4197               1               1               2               3               4
101.....................................           20903          5.1927               1               2               4               7              10
102.....................................            4665          3.1346               1               1               2               4               6
103.....................................             487         39.8973              10              15              29              54              82
104.....................................           24152         14.5670               6               8              12              18              26
105.....................................           20847         10.9617               5               7               9              13              19
106.....................................          101038         11.7331               6               8              10              14              19
107.....................................           64206          8.8424               5               6               7              10              14
108.....................................            6883         12.5720               4               7              10              15              23
110.....................................           62161         10.7839               3               6               9              13              20
111.....................................            6098          6.6496               3               5               6               8              10
112.....................................          201028          4.7049               1               2               4               6               9
113.....................................           47381         14.3687               4               6              10              17              28
114.....................................            9250          9.4685               2               4               7              12              18
115.....................................           11017         11.4341               4               6               9              14              20
116.....................................           85879          5.4281               1               2               4               7              11
117.....................................            4837          4.1211               1               1               2               5               8
118.....................................            7120          3.2142               1               1               2               4               7
119.....................................            1791          5.5366               1               1               3               7              13
120.....................................           42743          9.1977               1               2               6              12              21
121.....................................          167116          7.4255               2               4               6               9              13
122.....................................           91508          5.0063               1               3               5               7               9
123.....................................           48692          4.6628               1               1               2               6              11
124.....................................          145526          4.9010               1               2               4               6               9
125.....................................           62240          3.0708               1               1               2               4               6
126.....................................            4864         14.0113               4               7              11              17              29
127.....................................          705511          6.2183               2               3               5               8              12
128.....................................           20583          6.7301               3               4               6               8              11
129.....................................            4847          3.5251               1               1               1               4               8
130.....................................           96377          6.6838               2               4               6               8              12
131.....................................           26833          5.1772               1               3               5               7               8
132.....................................          133378          3.5806               1               2               3               4               6
133.....................................            6158          2.9737               1               1               2               4               5
134.....................................           30025          3.9084               1               2               3               5               7
135.....................................            7497          4.9941               1               2               4               6               9
136.....................................            1079          3.2586               1               2               3               4               6
138.....................................          205779          4.5592               1               2               3               6               9
139.....................................           70619          2.9382               1               1               2               4               5
140.....................................          184595          3.4847               1               2               3               4               6
141.....................................           80072          4.4984               1               2               3               5               8
142.....................................           37573          3.2025               1               2               3               4               6
143.....................................          138969          2.6105               1               1               2               3               5
144.....................................           70462          5.7020               1               2               4               7              11
145.....................................            7056          3.2372               1               1               2               4               6
146.....................................            9120         11.2398               6               7               9              13              18
147.....................................            1712          7.3376               4               6               7               9              11
148.....................................          147283         13.4382               6               8              11              16              24
149.....................................           16436          7.7095               4               6               7               9              11
150.....................................           23670         11.7463               4               7              10              14              21
151.....................................            4718          6.4532               2               4               6               8              11
152.....................................            4688          9.0299               4               6               8              10              15
153.....................................            1803          6.1570               3               4               6               8               9
154.....................................           37530         14.9694               5               8              12              18              28

[[Page 46297]]

                                                                                                                                                        
155.....................................            4793          5.8782               2               3               5               8              10
156.....................................               4         15.7500               4               4              10              22              27
157.....................................           11982          5.8109               1               2               4               7              11
158.....................................            5332          2.8931               1               1               2               4               6
159.....................................           18017          5.3350               1               2               4               7              10
160.....................................           10458          2.9512               1               1               2               4               5
161.....................................           15509          4.3541               1               2               3               5               9
162.....................................            8388          2.1838               1               1               2               3               4
163.....................................               8          3.0000               1               1               3               4               5
164.....................................            5242          9.3937               4               6               8              11              16
165.....................................            1755          5.7499               3               4               5               7               9
166.....................................            3444          5.7134               2               3               4               7              10
167.....................................            2405          3.2274               1               2               3               4               5
168.....................................            1837          4.9559               1               2               3               6              10
169.....................................            1070          2.5421               1               1               2               3               5
170.....................................           13155         12.5003               2               5               9              15              25
171.....................................            1202          5.3719               1               2               4               7              11
172.....................................           32447          8.1498               2               3               6              10              16
173.....................................            2279          4.3857               1               2               3               5               9
174.....................................          243715          5.5466               2               3               4               7              10
175.....................................           24013          3.5080               1               2               3               4               6
176.....................................           16840          6.1428               2               3               5               7              11
177.....................................           12681          4.9738               2               3               4               6               9
178.....................................            4324          3.6004               1               2               3               5               7
179.....................................           11791          7.1640               2               4               6               9              14
180.....................................           83016          6.0517               2               3               5               7              11
181.....................................           23164          3.9529               1               2               3               5               7
182.....................................          237845          4.9666               2               2               4               6               9
183.....................................           75506          3.4460               1               2               3               4               6
184.....................................              77          3.8831               1               2               2               4               7
185.....................................            4037          5.1850               1               2               4               6              10
186.....................................               2          1.5000               1               1               2               2               2
187.....................................             944          4.2108               1               2               3               6               8
188.....................................           64238          6.1261               2               3               5               8              12
189.....................................            8117          3.6789               1               1               3               5               7
190.....................................              68          5.0882               1               2               4               7              10
191.....................................           11104         16.2586               5               8              12              20              32
192.....................................             924          7.8983               2               4               7               9              14
193.....................................            8979         13.9328               5               8              11              17              25
194.....................................             843          8.4603               3               5               7              10              15
195.....................................            9690         10.4638               4               6               9              12              18
196.....................................             841          6.7099               3               4               6               8              11
197.....................................           29506          9.1575               4               5               7              11              16
198.....................................            8296          4.9306               2               3               4               6               8
199.....................................            2348         11.1661               3               5               9              14              22
200.....................................            1655         12.3329               2               4               8              15              26
201.....................................            1557         16.7534               4               7              13              21              34
202.....................................           26477          7.7437               2               3               6              10              15
203.....................................           30205          7.6570               2               3               6              10              15
204.....................................           51448          6.7152               2               3               5               8              13
205.....................................           22678          7.2389               2               3               5               9              14
206.....................................            1780          4.7163               1               2               4               6              10
207.....................................           37033          5.7267               2               3               4               7              11
208.....................................           10724          3.5030               1               2               3               4               6
209.....................................          344259          6.6642               3               4               6               7              10
210.....................................          138220          8.5746               4               5               7              10              14
211.....................................           26604          6.2664               3               4               6               7              10
212.....................................               9          5.0000               2               3               4               5               8
213.....................................            7164          9.7067               3               4               7              12              19
214.....................................           53845          6.4613               2               3               5               8              12
215.....................................           43181          3.6830               1               2               3               5               7
216.....................................            6760         11.0719               2               5               8              14              22
217.....................................           20436         15.3636               3               6              10              18              31
218.....................................           23230          6.2178               2               3               5               7              11
219.....................................           19070          3.7531               1               2               3               5               6
220.....................................               2          5.5000               5               5               6               6               6
221.....................................            5230          8.1076               2               4               6              10              16
222.....................................            3747          4.0408               1               2               3               5               8
223.....................................           19412          2.8709               1               1               2               3               5
224.....................................            8377          2.2724               1               1               2               3               4

[[Page 46298]]

                                                                                                                                                        
225.....................................            6594          5.0059               1               2               3               6              11
226.....................................            5654          6.7386               1               2               4               8              14
227.....................................            4843          2.9583               1               1               2               4               6
228.....................................            3200          3.5291               1               1               2               4               7
229.....................................            1426          2.3969               1               1               2               3               5
230.....................................            2578          5.2002               1               2               3               6              11
231.....................................           10890          5.0626               1               2               3               6              11
232.....................................             601          4.4609               1               1               2               4              10
233.....................................            4811          9.0518               2               4               7              11              18
234.....................................            2360          4.1470               1               2               3               5               8
235.....................................            5827          6.7833               1               3               4               7              13
236.....................................           39844          6.2907               2               3               5               7              12
237.....................................            1586          4.4067               1               2               3               5               8
238.....................................            7925         10.0430               3               5               7              12              19
239.....................................           62429          7.6246               2               4               6               9              14
240.....................................           12705          7.5277               2               3               5               9              15
241.....................................            3179          4.5908               1               2               4               5               9
242.....................................            2644          7.6539               2               4               6               9              15
243.....................................           84034          5.6150               2               3               4               7              10
244.....................................           12041          5.8294               2               3               4               7              11
245.....................................            4472          4.3001               1               2               3               5               8
246.....................................            1391          4.6161               1               2               4               6               9
247.....................................           11132          3.9656               1               2               3               5               8
248.....................................            7135          5.2685               1               2               4               6              10
249.....................................           10593          4.2878               1               1               3               5               9
250.....................................            3360          5.0461               1               2               3               6               9
251.....................................            2227          3.3049               1               1               3               4               6
252.....................................               1          1.0000               1               1               1               1               1
253.....................................           18457          5.8264               2               3               4               7              11
254.....................................            9730          3.8776               1               2               3               5               7
255.....................................               1          2.0000               2               2               2               2               2
256.....................................            4819          5.6921               1               2               4               7              11
257.....................................           24832          3.4341               1               2               3               4               6
258.....................................           19715          2.4910               1               2               2               3               4
259.....................................            4225          3.5089               1               1               2               3               7
260.....................................            5083          1.8702               1               1               2               2               3
261.....................................            2489          2.3403               1               1               2               3               4
262.....................................             749          3.9439               1               1               2               5               8
263.....................................           30590         13.9231               4               6              10              16              28
264.....................................            3714          8.3341               2               4               6              10              16
265.....................................            4518          7.6835               1               3               5               9              16
266.....................................            2849          3.7087               1               1               3               5               8
267.....................................             238          4.3361               1               1               3               5               9
268.....................................             983          4.0651               1               1               2               4               9
269.....................................           10750          9.2391               2               4               7              12              19
270.....................................            3638          3.3966               1               1               2               4               8
271.....................................           22531          8.5207               3               4               7              10              15
272.....................................            6144          7.4653               2               3               6               9              14
273.....................................            1498          5.4820               2               2               4               7              11
274.....................................            2654          7.7939               2               3               5               9              16
275.....................................             258          3.6705               1               1               2               4               8
276.....................................             928          5.0151               1               2               4               6               9
277.....................................           82941          6.7266               3               4               5               8              12
278.....................................           27210          5.1505               2               3               4               6               9
279.....................................               6          4.1667               1               2               3               4               4
280.....................................           13881          5.0709               1               2               4               6               9
281.....................................            6276          3.6109               1               2               3               4               7
283.....................................            5523          5.4677               2               2               4               7              10
284.....................................            1840          3.8408               1               2               3               5               7
285.....................................            5132         13.6613               3               6              10              16              26
286.....................................            2035          8.6993               3               4               6               9              16
287.....................................            6605         13.3889               3               6               9              16              26
288.....................................            1020          6.8824               3               4               5               7              11
289.....................................            5276          3.9780               1               2               2               4               8
290.....................................            8909          2.8289               1               1               2               3               5
291.....................................              91          1.7692               1               1               1               2               3
292.....................................            5308         12.7491               2               5               9              16              25
293.....................................             310          6.7935               1               3               5               8              14
294.....................................           90532          5.6749               2               3               4               7              10
295.....................................            3894          4.2766               1               2               3               5               8

[[Page 46299]]

                                                                                                                                                        
296.....................................          230483          6.3598               2               3               5               8              12
297.....................................           32946          4.2799               1               2               3               5               8
298.....................................             108          3.3796               1               1               2               4               6
299.....................................             927          5.4132               1               2               4               7              10
300.....................................           14816          7.2798               2               3               6               9              14
301.....................................            2246          4.3780               1               2               3               5               9
302.....................................            8314         12.3018               6               7               9              14              21
303.....................................           19404         10.2201               4               6               8              12              18
304.....................................           13549         10.2932               3               5               7              13              21
305.....................................            2675          4.9073               1               3               4               6               9
306.....................................           11854          6.2386               2               2               4               8              13
307.....................................            2695          2.9796               1               2               2               3               5
308.....................................            9574          7.0326               1               2               5               9              15
309.....................................            3562          3.0230               1               1               2               4               6
310.....................................           30028          4.6161               1               2               3               6               9
311.....................................           10218          2.1747               1               1               2               3               4
312.....................................            2120          4.8198               1               2               3               6              10
313.....................................             788          2.2855               1               1               2               3               5
314.....................................               1          5.0000               5               5               5               5               5
315.....................................           29516          9.3027               1               2               6              12              20
316.....................................           73804          7.4996               2               3               6               9              15
317.....................................             838          2.9033               1               1               2               3               6
318.....................................            6305          7.1543               2               3               5               9              14
319.....................................             520          3.1808               1               1               2               4               7
320.....................................          177433          6.4459               2               3               5               8              11
321.....................................           26621          4.6916               2               3               4               6               8
322.....................................              87          4.3333               2               2               4               5               8
323.....................................           18556          3.5566               1               2               3               4               7
324.....................................            9155          2.0877               1               1               2               3               4
325.....................................            7785          4.5742               1               2               3               5               9
326.....................................            2301          3.4203               1               1               2               4               6
327.....................................               9          3.3333               1               2               2               4               5
328.....................................             853          4.2579               1               2               3               6               8
329.....................................             113          2.7965               1               1               2               3               5
330.....................................               1          1.0000               1               1               1               1               1
331.....................................           40274          6.1795               2               3               5               8              12
332.....................................            4966          3.8494               1               2               3               5               8
333.....................................             379          5.7968               1               3               4               7              13
334.....................................           19982          6.0546               3               4               5               7               9
335.....................................           10308          4.6203               2               3               4               6               7
336.....................................           63893          4.1251               1               2               3               5               8
337.....................................           40540          2.6719               1               2               2               3               4
338.....................................            5063          5.2558               1               2               3               6              11
339.....................................            2416          5.2562               1               2               3               6              11
340.....................................               2          3.0000               1               1               5               5               5
341.....................................            6766          3.2573               1               1               2               4               6
342.....................................             231          4.0649               1               1               2               5               8
344.....................................            4022          3.4510               1               1               2               4               7
345.....................................            1428          4.0210               1               2               3               5               9
346.....................................            5626          6.7600               1               3               5               8              14
347.....................................             443          3.2889               1               1               2               4               7
348.....................................            3188          4.8943               1               2               4               6               9
349.....................................             733          2.9400               1               1               2               4               6
350.....................................            7234          4.7432               2               3               4               6               8
352.....................................             603          3.9005               1               1               3               5               8
353.....................................            2743          8.3252               3               4               6               9              15
354.....................................           10191          6.3351               3               4               5               7              11
355.....................................            5880          3.8566               2               3               4               4               6
356.....................................           30093          3.0252               1               2               3               4               5
357.....................................            6842          9.8297               4               5               8              12              18
358.....................................           28157          4.7538               2               3               4               5               8
359.....................................           28820          3.2702               2               3               3               4               5
360.....................................           17592          3.5444               1               2               3               4               6
361.....................................             655          3.4580               1               1               2               4               7
363.....................................            4555          3.5139               1               2               2               3               6
364.....................................            1879          3.6003               1               1               2               4               8
365.....................................            2522          8.1257               2               3               5              10              18
366.....................................            4697          7.6915               2               3               5              10              16
367.....................................             568          3.2588               1               1               2               4               7
368.....................................            2408          6.9049               2               3               5               8              13

[[Page 46300]]

                                                                                                                                                        
369.....................................            2531          3.7246               1               1               3               5               7
370.....................................            1201          5.5679               3               3               4               5               9
371.....................................            1044          3.6236               2               3               3               4               5
372.....................................             872          3.3601               1               2               2               3               6
373.....................................            3961          1.9258               1               1               2               2               3
374.....................................             141          2.5957               1               2               2               3               4
375.....................................               5          2.2000               1               1               2               3               4
376.....................................             164          3.3537               1               1               2               4               7
377.....................................              27          3.2963               1               1               2               3               8
378.....................................             172          2.9186               1               2               3               3               5
379.....................................             332          3.0361               1               1               2               3               5
380.....................................              75          2.2800               1               1               2               2               4
381.....................................             209          2.2967               1               1               1               2               5
382.....................................              54          1.5741               1               1               1               1               3
383.....................................            1557          4.0873               1               2               3               5               8
384.....................................             135          3.1481               1               1               1               2               7
385.....................................               4         13.5000               1               1               1               3              49
386.....................................               1         36.0000              36              36              36              36              36
389.....................................              23         10.7391               3               4               8              10              18
390.....................................              11          4.7273               1               2               3               5               9
392.....................................            2622         11.6484               4               6               8              14              24
394.....................................            1734          7.9862               1               2               5               9              16
395.....................................           69281          5.3835               1               2               4               7              10
396.....................................              19          3.7895               1               1               3               5               8
397.....................................           16238          6.0846               2               3               5               7              12
398.....................................           17498          6.5878               2               3               5               8              12
399.....................................            1496          4.4285               1               2               4               6               8
400.....................................            7875         10.4036               2               4               7              13              23
401.....................................            6682         12.3664               2               5               9              16              25
402.....................................            1619          4.7140               1               1               3               6              10
403.....................................           36528          9.2740               2               4               7              12              19
404.....................................            4124          5.0902               1               2               4               7              10
406.....................................            3407         11.2548               3               5               8              14              23
407.....................................             761          4.9304               1               2               4               6               9
408.....................................            3100          8.1632               1               2               5              10              18
409.....................................            5931          6.7132               2               3               4               6              15
410.....................................           89995          3.3580               1               2               3               4               5
411.....................................              58          2.6724               1               1               2               3               7
412.....................................              37          2.9730               1               1               2               4               5
413.....................................            8878          8.3323               2               3               6              10              17
414.....................................             845          5.1361               1               2               4               7              11
415.....................................           40783         15.7224               4               7              12              19              31
416.....................................          201554          8.2165               2               4               7              10              15
417.....................................              54          4.5741               1               2               4               7              10
418.....................................           19614          6.7661               2               3               5               8              13
419.....................................           16497          5.6833               2               3               4               7              10
420.....................................            3010          4.3050               2               2               4               5               8
421.....................................           12216          4.6523               2               2               4               5               8
422.....................................              97          3.8041               1               2               3               4               7
423.....................................            9588          8.7110               2               4               6              10              18
424.....................................            2102         17.9139               3               6              12              20              35
425.....................................           16010          4.8731               1               2               3               6              10
426.....................................            4920          5.5150               1               2               4               7              11
427.....................................            1856          5.2333               1               2               4               6              11
428.....................................             956          8.3347               1               3               5              10              18
429.....................................           40733          8.9700               2               3               6              10              17
430.....................................           55753          9.7545               2               4               7              12              19
431.....................................             200          7.1500               1               3               5               9              13
432.....................................             457          6.5252               1               2               4               6              11
433.....................................            8283          3.4066               1               1               2               4               7
434.....................................           21935          5.8210               2               3               4               7              11
435.....................................           16376          4.8062               1               3               4               6               8
436.....................................            3128         14.3744               4               8              14              21              28
437.....................................           14927         10.8952               4               6              10              14              20
439.....................................             910          8.9264               2               3               6              11              18
440.....................................            5007          9.8354               2               3               6              12              21
441.....................................             648          4.4213               1               1               2               4               8
442.....................................           14657          8.7406               1               3               6              11              18
443.....................................            3465          3.5512               1               1               2               5               7
444.....................................            3543          5.2882               1               3               4               6              10

[[Page 46301]]

                                                                                                                                                        
445.....................................            1415          3.9046               1               2               3               5               7
446.....................................               1          1.0000               1               1               1               1               1
447.....................................            3991          2.8013               1               1               2               3               5
448.....................................              88          1.0000               1               1               1               1               1
449.....................................           30267          4.4278               1               2               3               5               9
450.....................................            7175          2.3376               1               1               2               3               5
451.....................................               8          6.0000               2               3               4               5               7
452.....................................           20338          5.4282               1               2               4               6              11
453.....................................            3819          3.1825               1               1               2               4               6
454.....................................            5391          5.1330               1               2               3               6              10
455.....................................            1181          2.8442               1               1               2               3               5
456.....................................             213          8.3803               1               1               4               9              21
457.....................................             135          4.8222               1               1               2               5              12
458.....................................            1650         16.8358               3               7              13              22              35
459.....................................             582         10.2887               2               4               7              13              21
460.....................................            2437          6.6422               1               3               5               8              13
461.....................................            3230          4.8920               1               1               2               5              12
462.....................................            9786         13.7570               4               6              12              18              26
463.....................................           12591          5.1721               1               2               4               6              10
464.....................................            3221          3.7464               1               2               3               5               7
465.....................................             202          3.8762               1               1               2               4               7
466.....................................            1943          4.8101               1               1               2               4              10
467.....................................            1820          4.1264               1               1               2               4               8
468.....................................           59655         15.3127               3               7              12              19              30
471.....................................            9604          8.0717               4               5               6               9              14
472.....................................             159         30.1635               1               9              28              40              61
473.....................................            8643         14.3722               2               4               8              21              36
475.....................................           94974         12.1639               2               5              10              16              24
476.....................................            7280         13.8379               3               7              11              17              25
477.....................................           31806          9.3027               1               3               7              12              19
478.....................................          123973          8.3143               1               3               6              10              17
479.....................................           18593          4.5529               1               2               4               6               9
480.....................................              40         32.5750              12              16              24              34              55
481.....................................             193         32.6166              19              22              28              36              53
482.....................................            7121         14.8666               5               8              11              17              28
483.....................................           38600         45.9567              15              23              37              56              85
484.....................................             366         15.8115               2               6              12              22              32
485.....................................            3426         11.6985               4               6               9              14              22
486.....................................            2316         13.4473               1               6              11              18              28
487.....................................            4136          8.9350               1               3               7              11              18
488.....................................             843         20.4152               5               8              14              25              41
489.....................................           19523         10.6298               2               4               7              13              22
490.....................................            5312          6.5849               1               2               4               8              14
491.....................................            9897          4.2698               2               3               3               5               7
492.....................................            2139         17.3703               3               5              10              28              37
493.....................................           54799          5.8913               1               2               5               8              11
494.....................................           28543          2.4171               1               1               2               3               5
495.....................................             131         22.7176              10              12              17              26              39
                                         ----------------                                                                                               
                                                11135858                                                                                                
--------------------------------------------------------------------------------------------------------------------------------------------------------


 Table 8a.--Statewide Average Operating Cost-To-Charge Ratios for Urban 
             and Rural Hospitals (Case Weighted) August 1996            
------------------------------------------------------------------------
                         State                           Urban    Rural 
------------------------------------------------------------------------
ALABAMA...............................................    0.420    0.476
ALASKA................................................    0.505    0.796
ARIZONA...............................................    0.423    0.568
ARKANSAS..............................................    0.540    0.495
CALIFORNIA............................................    0.405    0.540
COLORADO..............................................    0.513    0.604
CONNECTICUT...........................................    0.553    0.551
DELAWARE..............................................    0.503    0.500
DISTRICT OF COLUMBIA..................................    0.525  .......
FLORIDA...............................................    0.414    0.418
GEORGIA...............................................    0.527    0.532
HAWAII................................................    0.484    0.567
IDAHO.................................................    0.580    0.635
ILLINOIS..............................................    0.478    0.599
INDIANA...............................................    0.564    0.613
IOWA..................................................    0.540    0.684
KANSAS................................................    0.449    0.649
KENTUCKY..............................................    0.506    0.574
LOUISIANA.............................................    0.475    0.540
MAINE.................................................    0.593    0.570
MARYLAND..............................................    0.765    0.816
MASSACHUSETTS.........................................    0.574    0.600
MICHIGAN..............................................    0.489    0.594
MINNESOTA.............................................    0.563    0.641
MISSISSIPPI...........................................    0.525    0.527
MISSOURI..............................................    0.459    0.529

[[Page 46302]]

                                                                        
MONTANA...............................................    0.513    0.615
NEBRASKA..............................................    0.526    0.684
NEVADA................................................    0.321    0.563
NEW HAMPSHIRE.........................................    0.591    0.611
NEW JERSEY............................................    0.479  .......
NEW MEXICO............................................    0.484    0.546
NEW YORK..............................................    0.584    0.679
NORTH CAROLINA........................................    0.539    0.498
NORTH DAKOTA..........................................    0.651    0.694
OHIO..................................................    0.557    0.594
OKLAHOMA..............................................    0.489    0.558
OREGON................................................    0.577    0.671
PENNSYLVANIA..........................................    0.436    0.580
PUERTO RICO...........................................    0.495    0.643
RHODE ISLAND..........................................    0.587  .......
SOUTH CAROLINA........................................    0.477    0.501
SOUTH DAKOTA..........................................    0.559    0.648
TENNESSEE.............................................    0.536    0.572
TEXAS.................................................    0.462    0.565
UTAH..................................................    0.462    0.675
VERMONT...............................................    0.576    0.587
VIRGINIA..............................................    0.499    0.536
WASHINGTON............................................    0.634    0.688
WEST VIRGINIA.........................................    0.578    0.542
WISCONSIN.............................................    0.604    0.665
WYOMING...............................................    0.495    0.734
------------------------------------------------------------------------


    Table 8b.--Statewide Average Capital Cost-To-Charge Ratios (Case    
                          Weighted) August 1996                         
------------------------------------------------------------------------
                             State                                Ratio 
------------------------------------------------------------------------
ALABAMA........................................................    0.055
ALASKA.........................................................    0.077
ARIZONA........................................................    0.050
ARKANSAS.......................................................    0.056
CALIFORNIA.....................................................    0.040
COLORADO.......................................................    0.052
CONNECTICUT....................................................    0.037
DELAWARE.......................................................    0.054
DISTRICT OF COLUMBIA...........................................    0.042
FLORIDA........................................................    0.051
GEORGIA........................................................    0.052
HAWAII.........................................................    0.051
IDAHO..........................................................    0.064
ILLINOIS.......................................................    0.044
INDIANA........................................................    0.058
IOWA...........................................................    0.056
KANSAS.........................................................    0.055
KENTUCKY.......................................................    0.056
LOUISIANA......................................................    0.069
MAINE..........................................................    0.044
MARYLAND.......................................................    0.013
MASSACHUSETTS..................................................    0.060
MICHIGAN.......................................................    0.049
MINNESOTA......................................................    0.055
MISSISSIPPI....................................................    0.056
MISSOURI.......................................................    0.053
MONTANA........................................................    0.061
NEBRASKA.......................................................    0.058
NEVADA.........................................................    0.034
NEW HAMPSHIRE..................................................    0.066
NEW JERSEY.....................................................    0.045
NEW MEXICO.....................................................    0.055
NEW YORK.......................................................    0.056
NORTH CAROLINA.................................................    0.049
NORTH DAKOTA...................................................    0.074
OHIO...........................................................    0.056
OKLAHOMA.......................................................    0.056
OREGON.........................................................    0.052
PENNSYLVANIA...................................................    0.045
PUERTO RICO....................................................    0.090
RHODE ISLAND...................................................    0.039
SOUTH CAROLINA.................................................    0.054
SOUTH DAKOTA...................................................    0.066
TENNESSEE......................................................    0.057
TEXAS..........................................................    0.055
UTAH...........................................................    0.055
VERMONT........................................................    0.049
VIRGINIA.......................................................    0.057
WASHINGTON.....................................................    0.063
WEST VIRGINIA..................................................    0.059
WISCONSIN......................................................    0.048
WYOMING........................................................    0.067
------------------------------------------------------------------------


 Table 10.--Percentage Difference in Wage Indexes for Areas That Qualify for a Wage Index Excluded Hospitals and
                                                      Units                                                     
----------------------------------------------------------------------------------------------------------------
                                     1982-1993    1984-1993    1988-1993    1990-1993    1991-1993    1992-1993 
               Area                  difference   difference   difference   difference   difference   difference
----------------------------------------------------------------------------------------------------------------
Rural Connecticut.................      22.9642      25.4054  ...........  ...........  ...........  ...........
Rural Delaware....................       8.2430      11.4258       8.2051       9.1337  ...........  ...........
Rural Hawaii......................  ...........      15.9050  ...........  ...........  ...........  ...........
Rural Massachusetts...............      20.2198      24.1342  ...........  ...........  ...........  ...........
Rural New Hampshire...............  ...........       9.8512  ...........  ...........  ...........  ...........
Albany, GA........................  ...........      10.3581  ...........  ...........  ...........  ...........
Anchorage, AK.....................  ...........  ...........  ...........       8.2863  ...........  ...........
Andreson, SC......................  ...........  ...........       9.1948      17.8927  ...........  ...........
Arecibo, PR.......................  ...........  ...........      11.1448      18.6084      15.7978  ...........
Athens, GA........................      15.1448      21.0519      13.7293      13.6463  ...........  ...........
Atlanta, GA.......................  ...........       8.6086  ...........  ...........  ...........  ...........
Atlantic City, NJ.................  ...........      12.4784  ...........  ...........  ...........  ...........
Bergen-Passaic, NJ................      10.5317      12.4189      14.3717  ...........  ...........  ...........
Biloxi-Gulfport, MS...............  ...........      11.1443      10.6209      12.4040  ...........  ...........
Boise City, ID....................  ...........  ...........  ...........       8.3390  ...........  ...........
Boston-Lowell-Brockton-Lawrence-                                                                                
 Salem, MA........................  ...........       9.8215  ...........  ...........  ...........  ...........
Bremerton, WA.....................      11.9762      13.8828      14.2288      14.3007      12.7288  ...........
Bridgeport-Stamford-Norwalk-                                                                                    
 Danbury, CT......................      10.0485      14.3994  ...........  ...........  ...........  ...........
Burlington, NC....................      11.2298      14.5664       9.4207  ...........  ...........  ...........
Burlington, VT....................  ...........       8.8170       9.1074  ...........  ...........      10.3206
Caguas, PR........................  ...........      15.1271  ...........  ...........  ...........  ...........
Charleston, WV....................  ...........  ...........       8.3229  ...........  ...........  ...........
Charlotte-Gastonia-Rock Hill, NC-                                                                               
 SC...............................  ...........      14.9051  ...........  ...........  ...........  ...........
Clarksville-Hopkinsville, TN-KY...  ...........  ...........      12.9537  ...........  ...........  ...........
Columbia, SC......................  ...........       8.4912  ...........  ...........  ...........  ...........
Danville, VA......................  ...........      11.3907      13.1106  ...........  ...........  ...........
Decatur, AL.......................  ...........      13.3721      11.9044  ...........  ...........  ...........
El Paso, TX.......................  ...........       8.5187  ...........  ...........       9.8283  ...........
Eugene-Springfield, OR............  ...........      10.5206      10.8031      18.7777  ...........  ...........
Fayetteville, NC..................       9.0029      10.4192       8.4909  ...........  ...........  ...........
Flint, MI.........................  ...........  ...........  ...........  ...........       9.2030  ...........
Florence, AL......................  ...........      11.9746  ...........  ...........  ...........  ...........
Florence, SC......................      12.7213      11.5654  ...........  ...........  ...........  ...........

[[Page 46303]]

                                                                                                                
Fort Walton Beach, FL.............  ...........      12.3564  ...........  ...........  ...........  ...........
Fresno, CA........................  ...........  ...........  ...........      10.8664       9.4732       8.0939
Gadsden, AL.......................  ...........  ...........       8.2379      14.6656       9.8985  ...........
Galveston-Texas City, TX..........  ...........  ...........      16.5166      11.3722       8.4081  ...........
Greeley, CO.......................  ...........  ...........  ...........      11.0971  ...........  ...........
Greensboro-Winston-Salem-High                                                                                   
 Point, NC........................       9.2662  ...........  ...........  ...........  ...........  ...........
Hamilton-Middleton, OH............  ...........  ...........  ...........  ...........       8.1472       8.0733
Hartford-Middletown-New Britain,                                                                                
 CT...............................       8.7767      12.4966       3.7059       2.2400      -0.1050      -0.1775
Houma-Thibodaux, LA...............  ...........  ...........       9.3263  ...........  ...........  ...........
Jackson, TN.......................  ...........       9.6429  ...........  ...........  ...........  ...........
Jersey City, NJ...................  ...........  ...........       8.0391  ...........  ...........  ...........
Killeen-Temple, TX................      18.3848  ...........  ...........  ...........  ...........  ...........
Lima, OH..........................  ...........  ...........       8.2156  ...........  ...........  ...........
Macon-Warner Robins, GA...........  ...........      13.0975  ...........  ...........  ...........  ...........
McAllen-Edinburg-Mission, TX......  ...........      10.4962       9.8809  ...........  ...........  ...........
Medford, OR.......................  ...........  ...........  ...........       8.0133  ...........  ...........
Merced, CA........................  ...........  ...........  ...........  ...........       8.1676  ...........
Middlesex-Somerset-Hunterdon, NJ..  ...........       9.6183  ...........  ...........  ...........  ...........
Monmouth-Ocean, NJ................      10.0345      15.4149       9.3349  ...........  ...........  ...........
Munice, IN........................  ...........  ...........      20.3096      13.5593  ...........  ...........
Nassau-Suffolk, NY................  ...........      11.9105  ...........  ...........  ...........  ...........
New Bedford-Fall River-Attleboro,                                                                               
 MA...............................      13.7683      16.6368      10.4385  ...........  ...........  ...........
New Haven-West Haven-Waterbury, CT      11.8620      16.2147  ...........  ...........  ...........  ...........
New London-Norwich, CT............      11.3300      14.9405  ...........  ...........  ...........  ...........
Newark, NJ........................  ...........       8.8979  ...........  ...........  ...........  ...........
Ocala, FL.........................  ...........      11.8261  ...........  ...........  ...........  ...........
Orange County, NY.................      17.1382      21.4157      11.8518  ...........  ...........  ...........
Portsmouth-Dover-Rochester, NH....       9.0870  ...........  ...........  ...........  ...........  ...........
Poughkeepsie, NY..................  ...........       8.8610  ...........  ...........  ...........  ...........
Providence-Pawtucket-Woonsocket,                                                                                
 RI...............................  ...........      13.9497  ...........  ...........  ...........  ...........
Provo-Orem, UT....................  ...........       9.0782  ...........  ...........  ...........  ...........
Redding, CA.......................  ...........      17.2205       9.9157  ...........  ...........  ...........
Richland-Kennewick, WA............  ...........  ...........  ...........       8.1102  ...........  ...........
Salinas-Seaside-Monterey, CA......      10.6879       9.7202  ...........  ...........  ...........  ...........
Santa Cruz, CA....................       9.6319       9.7120  ...........  ...........  ...........  ...........
Santa Fe, NM......................      11.2207      14.0809      18.3339       8.2941  ...........  ...........
Sarasota, FL......................  ...........       8.9573  ...........  ...........  ...........  ...........
Savannah, GA......................       9.0765      14.6762      15.7768      11.1239  ...........  ...........
Topeka, KS........................  ...........  ...........       8.3342       9.2849  ...........  ...........
Tyler, TX.........................  ...........  ...........  ...........       9.5202  ...........  ...........
Vallejo-Fairfield-Napa, CA........  ...........      13.6478  ...........      11.7807  ...........  ...........
Wilmington, DE-NJ-MD..............  ...........       8.9989  ...........  ...........  ...........  ...........
Wilmington, NC....................  ...........      12.2020  ...........  ...........  ...........  ...........
Worcester-Fitchburg-Leomister, MA.      10.9147      17.9463  ...........  ...........  ...........  ...........
Yuma, AZ..........................  ...........  ...........  ...........  ...........       9.4870  ...........
----------------------------------------------------------------------------------------------------------------

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 final 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 Social Security Act (the Act) requires 
the Secretary to prepare a regulatory impact analysis for any final 
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 (MSA) or New England County Metropolitan 
Area (NECMA). Section 601(g) of the Social Security Amendments of 1983 
(Public Law 98-21) designated hospitals in certain New England counties 
as belonging to the adjacent NECMA. Thus, for purposes of the 
prospective payment system, we classify these hospitals as urban 
hospitals.
    It is clear that the changes 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 final rule, 
constitutes a combined regulatory impact analysis and regulatory 
flexibility analysis.

II. Changes in the Final Rule

    Any differences in this final rule impact analysis compared to that 
in the proposed rule are the result of using more recent or more 
complete hospital data. For example, a more complete FY 1995 MedPAR 
file (June 1996 update) is

[[Page 46304]]

now available compared to the one available at the time of the proposed 
rule. In addition, more recent hospital-specific data, including cost 
reports, are used in this analysis.
    Our most recent hospital market basket forecasts are: 2.5 percent 
for prospective payment system hospitals and 2.5 percent for hospitals 
excluded from the prospective payment system. The respective update 
factors in the proposed rule were both 2.7 percent. Beyond this change 
in the hospital market basket forecast, there are no operating or 
capital prospective payment policy changes from those discussed in the 
impact analysis in the proposed rule.

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 final policy changes, as well as statutory changes 
effective for FY 1997, on various hospital groups. We estimate the 
effects of individual policy changes by estimating payments per case 
while holding all other payment policies 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.
    We received no comments on the methodology used for the impact 
analysis in the proposed rule.

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. There 
were 46 Indian Health Service hospitals in our data base, which we 
excluded from the analysis due to the special characteristics of the 
prospective payment method for these hospitals. Among other short-term, 
acute care hospitals, only the 50 such hospitals in Maryland remain 
excluded from the prospective payment system under the waiver at 
section 1814(b)(3) of the Act. Thus, we have included 5,129 hospitals 
in our analysis. This represents about 82 percent of all Medicare-
participating hospitals. The majority of this impact analysis focuses 
on this set of hospitals.
    The remaining 18 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, childrens', and 
cancer hospitals. The impacts of our policy changes on these hospitals 
are discussed below.

V. Impact on Excluded Hospitals and Units

    As of August 1996, there were 1,125 specialty hospitals excluded 
from the prospective payment system and instead paid on a reasonable 
cost basis subject to the rate-of-increase ceiling under Sec. 413.40. 
In addition, there were 2,315 psychiatric and rehabilitation units in 
hospitals otherwise subject to the prospective payment system. These 
excluded units are also paid in accordance with Sec. 413.40.
    In accordance with section 1886(b)(3)(B)(ii)(V) of the Act, the 
update factor applicable to the rate-of-increase limit for excluded 
hospitals and units for FY 1997 is 1.5 percent (excluded hospital 
market basket minus 1.0 percentage points), adjusted to account for the 
relationship between the hospital's allowable operating cost per case 
and its target amounts.
    The impact on excluded hospitals and units of the final 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, under Sec. 413.40(d)(3), an excluded 
hospital or unit whose costs exceed the rate-of-increase limit is 
allowed 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 payment 
adjustments for significant and justifiable increases in operating 
costs that exceed the limit. At the same time, however, by generally 
limiting payment increases, we continue to provide an incentive for 
excluded hospitals and units to restrain the growth in their spending 
for patient services.

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

A. Basis and Methodology of Estimates

    In this final 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 final 
changes to each system, beginning here with changes to the operating 
prospective payment system. Estimated payment impacts of final FY 1997 
changes to the capital prospective payment system are discussed below 
in section VII of this Appendix.
    The data used in developing the quantitative analyses presented 
below are taken from the FY 1995 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 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 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 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.
    Using cases in the FY 1995 MedPAR file, we simulated 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 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 analyzed here.
    The following changes are discussed separately below:
     The effects of the annual reclassification of diagnoses 
and procedures and the recalibration of the diagnosis-related group 
(DRG) relative

[[Page 46305]]

weights required by section 1886(d)(4)(C) of the Act.
     The effects of changes in hospitals' wage index values 
reflecting the wage index update (FY 1993 data).
     The effects of geographic reclassifications by the 
Medicare Geographic Classification Review Board (MGCRB) that will be 
effective in FY 1997.
     The effects of phasing out payments for extraordinarily 
lengthy cases (day outlier cases) with a corresponding increase in 
payments for extraordinarily costly cases (cost outliers), in 
accordance with section 1886(d)(5)(A)(v) of the Act.
     The total change in payments based on FY 1997 policies 
relative to payments based on FY 1996 policies.
    To illustrate the impacts of the FY 1997 final changes, our 
analysis begins with an FY 1997 baseline simulation model using: the FY 
1996 GROUPER (version 13.0); the FY 1996 wage indexes (based on FY 1992 
data); no MGCRB reclassifications; and current outlier policy (50 
percent phase-out of day outlier payments). Outlier payments are 
estimated to be 5.1 percent of total DRG payments.
    Each policy change is then added incrementally to this baseline 
model, finally arriving at an FY 1997 model incorporating all of the 
final rule and statutory changes. This allows us to isolate the effects 
of each change.
    Our final comparison illustrates the percent change in payments per 
case from FY 1996 to FY 1997. Four factors not displayed in the 
previous five columns have significant impacts here. First is the 
update to the standardized amounts for FY 1997. In accordance with 
section 1886(d)(3)(A)(iv) of the Act, we are updating the large urban 
and the other areas average standardized amounts for FY 1997 using the 
most recently forecasted hospital market basket increase for FY 1997 of 
2.5 percent, minus 0.5 percentage points. Thus, the update to the large 
urban and other areas standardized amounts is 2.0 percent. Similarly, 
section 1886(b)(3)(C)(ii) of the Act provides that the update factor 
applicable to the hospital-specific rates for sole community hospitals 
(SCHs) and essential access community hospitals (EACHs) (which are 
treated as SCHs for payment purposes) is also the market basket 
increase minus 0.5 percent, or 2.0 percent.
    A second significant factor impacting changes in hospitals' 
payments per case from FY 1996 to FY 1997 is a change in MGCRB 
reclassification status from one year to the next. That is, hospitals 
reclassified in FY 1996 that are no longer reclassified in FY 1997 may 
have a negative payment impact going from FY 1996 to FY 1997; 
conversely, hospitals not reclassified in FY 1996 that are reclassified 
in FY 1997 may have a positive impact. In some cases, these impacts can 
be quite substantial, so that if a relatively small number of hospitals 
in a particular category lose their reclassification status, the 
percentage increase in payments for the category may be below the 
national mean.
    A third significant factor is that we currently estimate that 
actual outlier payments during FY 1996 will be 4.0 percent of actual 
total DRG payments. When the FY 1996 final rule was published, we 
projected FY 1996 outlier payments would be 5.1 percent of total DRG 
payments, and the standardized amounts were reduced correspondingly. 
The effects of the lower than expected outlier payments during FY 1996 
(as discussed in the Addendum to this final rule) are reflected in the 
analyses below comparing our current estimates of FY 1996 payments per 
case to estimated FY 1997 payments per case.
    Finally, the regional floor provision (section 
1886(d)(1)(A)(iii)(II) of the Act) expires effective with discharges 
occurring on or after October 1, 1996. Under this provision (applicable 
during FY 1996), hospitals within any census division having a regional 
standardized amount greater than the national standardized amount 
(large urban or other, depending on which amount was applicable) 
received a blend of 85 percent of the national amount and 15 percent of 
the regional amount. Hospitals in census divisions where the regional 
floor was applicable during FY 1996 will be negatively impacted by its 
expiration when comparing FY 1996 to FY 1997.
    Table I demonstrates the results of our analysis. This 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 5,129 hospitals included in the analysis. This is 78 fewer 
hospitals than were included in the impact analysis in the FY 1996 
final rule (60 FR 45924). Data for 108 hospitals that were included in 
last year's analysis were not available for analysis this year; 
however, data were available this year for 30 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 urban, which is further 
divided into large urban and other urban, or rural). There are 2,881 
hospitals located in urban areas (MSAs or NECMAs) included in our 
analysis. Among these, there are 1,596 hospitals located in large urban 
areas (populations over 1 million), and 1,285 hospitals in other urban 
areas (populations of 1 million or fewer). In addition, there are 2,248 
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 hospital groups based on 
hospitals' FY 1997 payment classifications, including any 
reclassifications under section 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 2,981, 1,791, 
1,190, and 2,148, respectively.
    The next three groupings examine the impacts of the final changes 
on hospitals grouped by whether or not they have residency programs 
(teaching hospitals that receive an indirect medical education (IME) 
adjustment), receive disproportionate share (DSH) payments, or some 
combination of these two adjustments. There are 4,044 nonteaching 
hospitals in our analysis, 850 teaching hospitals with fewer than 100 
residents, and 235 teaching hospitals with 100 or more residents.
    In the DSH categories, hospitals are grouped according to their DSH 
payment status, and whether they are considered urban or rural after 
MGCRB reclassifications. Hospitals in the rural DSH categories, 
therefore, represent hospitals that were not reclassified for purposes 
of the standardized amount. (They may, however, have been reclassified 
for purposes of the wage index.) The next category groups hospitals 
considered urban after geographic reclassification, in terms of whether 
they receive the IME adjustment, the DSH adjustment, both, or neither.
    The next four rows examine the impacts of the final changes on 
rural hospitals by special payment groups (SCHs, rural referral centers 
(RRCs), and EACHs), as well as rural hospitals not receiving a special 
payment designation. Rural hospitals reclassified for FY 1997 for 
purposes of the standardized amount are not included here.
    The RRCs (90), SCH/EACHs (645), and SCH/EACH and RRCs (38) shown 
here were not reclassified for purposes of the standardized amount. 
There are seven EACHs included in our analysis and four EACH/RRCs.

[[Page 46306]]

    There are two RRCs and three SCHs that will be reclassified for the 
standardized amount in FY 1997 that, therefore, are not included in 
these rows. There are significantly fewer reclassifications among these 
groups than there were in FY 1996, owing to the new criterion under 
Sec. 412.230(a)(5)(ii) that a hospital may not be reclassified for 
purposes of the standardized amount if the area to which the hospital 
seeks reclassification does not have a higher standardized amount than 
that currently received by the hospital. (See the September 1, 1995 
final rule (60 FR 45799).) Before this change (effective with 
reclassifications for FY 1997), some rural hospitals reclassified to 
other urban areas in order to qualify for urban DSH payments. For other 
rural hospitals that already qualified for DSH payments, the urban 
designation enabled them to qualify for a higher DSH adjustment than 
they would receive as a rural hospital.
    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 primarily from the FY 1994 Medicare cost 
report files, if available (otherwise FY 1993 data are used). Cost 
report data needed to determine hospital ownership and to calculate 
Medicare utilization percentages were unavailable for 116 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 groupings display 
hospitals that were reclassified by the MGCRB for either FY 1996 or FY 
1997, or for both years, by urban/rural status. The next rows 
illustrate the overall number of FY 1997 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 Changes for FY 1997 Operating Prospective Payment System                                 
                                                         [Percent changes in payments per case]                                                         
                                                                                                                                                        
                                                                                                        Combined      MGCRB     Day outlier             
                                                                Number of   DRG recali-    New wage     wage and   reclassifi-     policy     All FY 97 
                                                                hospitals   bration \2\    data \3\    recal \4\    cation \5\  changes \6\  changes \7\
                                                                       (0)          (1)          (2)          (3)          (4)          (5)          (6)
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                (By Geographic Location)                                                                
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
All hospitals...............................................         5,129          0.1          0.1          0.0          0.0          0.0          2.9
Urban hospitals.............................................         2,881          0.1          0.1          0.0         -0.4         -0.1          2.9
    Large urban.............................................         1,596          0.1          0.1          0.0         -0.4         -0.1          2.9
    Other urban.............................................         1,285          0.1          0.1          0.0         -0.2          0.1          3.0
Rural hospitals.............................................         2,248          0.0          0.0         -0.1          2.3          0.1          2.4
Bed size (urban):                                                                                                                                       
    0-99 beds...............................................           715          0.0         -0.1         -0.3         -0.5          0.1          2.7
    100-199 beds............................................           945          0.0         -0.1         -0.2         -0.4          0.1          2.6
    200-299 beds............................................           576          0.1          0.0          0.0         -0.4          0.0          2.9
    300-499 beds............................................           478          0.1          0.1          0.1         -0.4         -0.1          3.1
    500 or more beds........................................           167          0.1          0.1          0.1         -0.2         -0.2          3.1
Bed size (rural):                                                                                                                                       
    0-49 beds...............................................         1,177         -0.1          0.1         -0.1          0.0          0.1          2.4
    50-99 beds..............................................           657         -0.1          0.1         -0.1          1.0          0.1          2.4
    100-149 beds............................................           241          0.0          0.1         -0.1          3.1          0.1          2.6
    150-199 beds............................................            98          0.1          0.0          0.0          2.7          0.1          2.7
    200 or more beds........................................            75          0.1         -0.1         -0.1          4.9          0.1          1.9
Urban by census division:                                                                                                                               
    New England.............................................           160          0.1          0.0          0.0         -0.2         -0.1          2.0
    Middle Atlantic.........................................           434          0.0          0.4          0.3         -0.2         -0.7          3.3
    South Atlantic..........................................           419          0.1         -0.2         -0.2         -0.4          0.1          3.1
    East North Central......................................           483          0.1          0.4          0.4         -0.3          0.1          2.5
    East South Central......................................           163          0.1         -0.2         -0.2         -0.5          0.2          3.1
    West North Central......................................           193          0.1          0.0          0.0         -0.5          0.2          3.3
    West South Central......................................           376          0.1          0.1          0.0         -0.5          0.2          3.6
    Mountain................................................           127          0.2         -0.3         -0.3         -0.4          0.2          2.9
    Pacific.................................................           478          0.1         -0.4         -0.4         -0.5          0.1          2.5
    Puerto Rico.............................................            48         -0.1         -1.2         -1.4         -0.5          0.0          1.9
Rural by census division:                                                                                                                               
    New England.............................................            53          0.1         -0.9         -1.0          2.0          0.2          1.2
    Middle Atlantic.........................................            85          0.0         -0.5         -0.6          0.9         -0.1          1.7
    South Atlantic..........................................           297         -0.1         -0.4         -0.5          3.0          0.1          2.3
    East North Central......................................           304          0.1          0.3          0.3          2.0          0.1          2.6
    East South Central......................................           278         -0.1          0.3          0.1          2.4          0.1          1.9
    West North Central......................................           525          0.0          0.1          0.0          2.1          0.1          2.5
    West South Central......................................           349         -0.1          0.5          0.2          3.1          0.1          2.8
    Mountain................................................           211          0.1         -0.1         -0.1          0.8          0.1          2.6
    Pacific.................................................           141          0.1          0.6          0.5          2.3          0.1          3.7
    Puerto Rico.............................................             5         -0.2         -4.2         -4.5          3.3          0.0          1.7
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 (By Payment Categories)                                                                
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
Urban hospitals.............................................         2,981          0.1          0.1          0.0         -0.3          0.0          2.9

[[Page 46307]]

                                                                                                                                                        
    Large urban.............................................         1,791          0.1          0.1          0.0         -0.2         -0.1          2.9
    Other urban.............................................         1,190          0.1          0.0          0.0         -0.4          0.1          3.0
Rural hospitals.............................................         2,148          0.0          0.0         -0.1          1.9          0.1          2.2
Teaching status:                                                                                                                                        
    Non-teaching............................................         4,044          0.0          0.0         -0.1          0.3          0.1          2.8
    Less than 100 residents.................................           850          0.1          0.1          0.0         -0.3          0.0          3.0
    100+ residents..........................................           235          0.1          0.2          0.2         -0.2         -0.4          2.8
Disproportionate Share Hospitals (DSH):                                                                                                                 
    Non-DSH.................................................         3,201          0.1          0.0          0.0          0.2          0.1          2.9
    Urban DSH:                                                                                                                                          
    100 beds or more........................................         1,410          0.0          0.1          0.0         -0.3         -0.1          2.9
    Fewer than 100 beds.....................................           101         -0.2         -0.3         -0.6         -0.3          0.2          2.2
    Rural DSH:                                                                                                                                          
        Sole community (SCH)................................           156         -0.1          0.0         -0.3          0.3          0.0          3.6
        Referral centers (RRC)..............................            27          0.0          0.1         -0.1          3.7          0.0          3.3
        Other rural DSH hospitals:                                                                                                                      
        100 beds or more....................................            83          0.0         -0.1         -0.2          2.4          0.2          0.3
        Fewer than 100 beds.................................           151         -0.2          0.0         -0.3         -0.3          0.1          2.0
Urban teaching and DSH:                                                                                                                                 
    Both teaching and DSH...................................           692          0.0          0.2          0.1         -0.4         -0.2          2.8
    Teaching and no DSH.....................................           339          0.2          0.0          0.1         -0.1          0.0          3.0
    No teaching and DSH.....................................           819          0.0         -0.1         -0.2          0.0          0.1          3.0
    No teaching and no DSH..................................         1,131          0.1          0.0         -0.1         -0.3          0.2          3.1
Rural   hospital   types Nonspecial status:                                                                                                             
    Hospitals...............................................         1,375          0.0          0.0         -0.1          1.7          0.1          1.6
    RRC.....................................................            90          0.1          0.1          0.1          5.0          0.1          3.4
    SCH/each................................................           645         -0.1          0.0         -0.2          0.3          0.0          2.6
    SCH/each and RRC........................................            38          0.1          0.1          0.0          1.1         -0.1          2.7
Type of ownership:                                                                                                                                      
    Voluntary...............................................         2,951          0.1          0.1          0.1         -0.1         -0.1          2.9
    Proprietary.............................................           696          0.0         -0.2         -0.4          0.3          0.2          2.9
    Government..............................................         1,366          0.0          0.0         -0.1          0.1          0.0          2.6
    Unknown.................................................           116         -0.2          0.6          0.3         -0.4         -1.3          2.1
Medicare utilization as a percent of inpatient days:                                                                                                    
    0-25....................................................           258         -0.1         -0.1         -0.3         -0.4         -0.2          2.0
    25-50...................................................         1,284          0.1          0.0          0.0         -0.2         -0.1          2.9
    50-65...................................................         2,097          0.1          0.1          0.0          0.2          0.0          2.9
    Over 65.................................................         1,374          0.0          0.0         -0.1          0.2          0.1          2.9
    Unknown.................................................           116         -0.2          0.6          0.3         -0.4         -1.3          2.1
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             Hospitals Reclassified by the Medicare Geographic Review Board                                             
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
Reclassification status during FY96 and FY97:                                                                                                           
    Reclassified during both FY96 and FY97..................           379          0.1          0.2          0.2          5.9          0.0          2.7
        Urban...............................................           130          0.1          0.4          0.4          3.5         -0.1          3.0
        Rural...............................................           249          0.0          0.0         -0.1          8.9          0.1          2.5
    Reclassified during FY97 only...........................            98          0.2          0.3          0.3          3.8         -0.3          8.3
        Urban...............................................            29          0.2          0.4          0.5          2.5         -0.5          7.6
        Rural...............................................            69          0.0         -0.1         -0.1          7.1          0.1         10.2
    Reclassified during FY96 only...........................           253          0.1         -0.5         -0.5         -1.2          0.1         -0.5
        Urban...............................................            91          0.1         -0.8         -0.8         -1.7          0.0          0.6
        Rural...............................................           162          0.0          0.0         -0.1         -0.4          0.2         -2.2
    FY 97 reclassifications:                                                                                                                            
        All reclassified hospitals..........................           477          0.1          0.2          0.2          5.4         -0.1          3.8
        Standard amount only................................           119          0.1          0.1          0.1          1.7          0.0          2.8
        Wage index only.....................................           272          0.1         -0.2         -0.2          8.2         -0.1          3.3
        Both................................................            86          0.1          0.9          0.9          4.7         -0.2          5.5
        Nonreclassified.....................................         4,625          0.1          0.0          0.0         -0.6          0.0          2.8
    All urban reclassifed...................................           159          0.1          0.4          0.4          3.3         -0.2          4.1
        Standard amount only................................            62          0.1          0.2          0.1          0.9          0.0          2.9
        Wage index only.....................................            27          0.2         -0.6         -0.5          7.2         -0.4          3.7
        Both................................................            70          0.1          1.0          1.0          3.4         -0.2          5.1

[[Page 46308]]

                                                                                                                                                        
        Nonreclassified.....................................         2,722          0.1          0.0          0.0         -0.6          0.0          2.9
    All rural reclassified..................................           318          0.0          0.0         -0.1          8.6          0.1          3.5
        Standard amount only................................            57          0.1         -0.1         -0.1          4.4          0.2          2.5
        Wage index only.....................................           245          0.0          0.0         -0.1          8.6          0.1          3.2
        Both................................................            16          0.1         -0.1         -0.1         18.5          0.2          9.2
        Nonreclassified.....................................         1,903          0.0          0.1         -0.1         -0.4          0.1          1.9
Other reclassifed:                                                                                                                                      
    Hospitals (section 1886(d)(8)(B)).......................            27          0.1          0.2          0.1          1.2          0.1          2.7
\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. Discharge data are from FY 1995, and hospital cost report data are from reporting periods beginning in FY 1993 and FY 1994.           
\2\ This column displays the payment impacts of the recalibration of the DRG weights, based on FY 1995 MedPAR data and the DRG classification changes,  
  in accordance with section 1886(d)(4)(C) of the Act.                                                                                                  
\3\ This column shows the payment effects of updating the data used to calculate the wage index with data from the FY 1993 cost reports.                
\4\ This column displays the combined impacts of the reclassification and recalibration of the DRGs, the updated wage data used to calculate the wage   
  index, and the budget neutrality adjustment factor for these two changes, in accordance with sections 1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act.
  Thus, it represents the combined impacts shown in columns 1 and 2, and the FY 1997 budget neutrality factor of 0.998702.                              
\5\ Shown here are the combined effects of geographic reclassification by the Medicare Geographic Classification Review Board (MGCRB). The effects shown
  here demonstrate the FY 1997 payment impacts of going from no reclassifications to the reclassifications scheduled to be in effect for FY 1997.       
  Reclassification for prior years has no bearing on the payment impacts shown here.                                                                    
\6\ This column illustrates the payment impacts of phasing out day outlier payments and increasing cost outlier payments, in accordance with section    
  1886(d)(5) of the Act.                                                                                                                                
\7\ This column shows changes in payments from FY 1996 to FY 1997. It incorporates all of the changes displayed in columns 3 through 5 (the changes     
  displayed in columns 1 and 2 are included in column 3). It also displays the impacts of the updates to the FY 1997 standardized amounts, changes in   
  hospitals' reclassification status in FY 1997 compared to FY 1996, the expiration of the regional floor provision at section 1886(d)(1)(A)(iii)(II) of
  the Act, and the difference in outlier payments from FY 1996 to FY 1997. The sum of the columns 3 through 5 plus these effects may be different from  
  the percentage changes shown here due to changes in hospitals' geographic reclassification status from FY 1996 to FY 1997, rounding errors and        
  interactive effects.                                                                                                                                  

B. The Impact of the Final Changes to the DRG Classifications and 
Relative Weights (Column 1)

    In column 1 of Table I, we present the combined effects of the DRG 
reclassifications and recalibration, as discussed in section II of the 
preamble to this final 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.
    Consistent with the minor changes we are proposing for the FY 1997 
GROUPER, the redistributional impacts across hospital groups are very 
small (an increase of 0.1 for large and other urban hospitals). Among 
other hospital categories, the net effects are slightly negative 
changes for small (up to 99 beds) rural hospitals and slightly positive 
changes for larger rural (over 150 beds) and urban (over 200 beds) 
hospitals.
    The largest negative effect on any of the hospital categories 
examined is a 0.2 percent decrease in payments for smaller urban (100 
or fewer beds) and rural hospitals that receive DSH payments, as well 
as rural hospitals in Puerto Rico.
    We attribute these negative changes to the increasing gap between 
the relative weights for medical, diagnostic, and less complicated 
surgical DRGs and the weights for the more complicated surgical DRGs. 
Since the cases associated with the former DRGs tend to be treated more 
often in smaller hospitals with fewer resources available, lowering the 
relative weights associated with those cases would disproportionately 
affect these hospitals. In general, small hospitals that serve a 
disproportionate share of low-income patients and hospitals in rural 
Puerto Rico fit this definition. We note, however, that these negative 
impacts are relatively minor and do not result solely from the limited 
DRG revisions we are making for FY 1997.

C. The Impact of Updating the Wage Data (Column 2)

    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 final wage index for FY 
1997 is based on data submitted for hospital cost reporting periods 
beginning on or after October 1, 1992 and before October 1, 1993. As 
with the previous column, the impact of the new data on hospital 
payments is isolated by holding the other payment parameters constant 
in the two simulations. That is, column 2 shows the percentage changes 
in payments when going from a model using the FY 1996 wage index before 
geographic reclassifications based on FY 1992 wage data to a model 
using the FY 1997 prereclassification wage index based on FY 1993 wage 
data.
    The results indicate that the new wage data do not have a 
significant overall impact on hospital payments. Thus, hospitals with 
significant changes in their wage indexes are not concentrated within 
any particular hospital group. Some of the largest changes are found 
among both urban and rural hospitals grouped by census division. Our 
review of the wage data (as described below) indicates that these 
changes were attributable to improved reporting, as well as relative 
changes in labor costs.
    Among urban hospitals in the 50 States and the District of 
Columbia, the largest increases (0.4 percent) are in the Middle 
Atlantic and the East North Central census divisions. Significantly, 
New York City's wage index rises by over 2.4 percent (this also 
contributes to the 0.2 percent increase among major

[[Page 46309]]

teaching hospitals and the 0.6 percent increase in the Unknown category 
under the Type of Ownership and the Medicare Utilization rows, where a 
cluster of New York City hospitals that file manual cost reports are 
grouped). Last year, the Middle Atlantic experienced one of the largest 
decreases (0.6 percent), which contributed to the 0.4 percent decline 
among major teaching hospitals--New York City's wage index fell by 
nearly 2.0 percent in FY 1996 (60 FR 45929). The largest decrease among 
urban hospitals (outside of Puerto Rico, which is discussed separately 
below) occurs in the Pacific census division, with a decline of 0.4 
percent.
    Among the rural hospitals, the largest increases are in the Pacific 
census division (0.6 percent) and the West South Central census 
division (0.5 percent); the largest decreases are in the census 
divisions of New England (0.9 percent), the Middle Atlantic (0.5 
percent) and the South Atlantic (0.4 percent). The decrease among rural 
New England hospitals is primarily due to a 2.7 percent decrease in the 
wage index for rural Connecticut and rural New Hampshire hospitals. 
Among rural hospitals last year, the Pacific rural hospitals 
experienced one of the greatest increases (0.6 percent), while the 
rural West South Central hospitals experienced one of the greatest 
decreases (0.4 percent).
    In Puerto Rico, payments decline by 4.2 percent for the five rural 
hospitals and by 1.2 percent for the urban hospitals. The average 
hourly wages reported in FY 1993 by two rural Puerto Rico hospitals 
fell from those reported in FY 1992 by 22.4 percent and 18.1 percent, 
leading to the 4.2 percent overall decline. Also, all six urban areas 
in Puerto Rico experience decreases in their wage index values. Two of 
these six experience a decline of more than 5 percent. These MSAs have 
relatively few hospitals (two and five), thus the decreases appear to 
be the result of one hospital in each area having a decrease of more 
than 5 percent in its average hourly wage.
    The final FY 1997 wage index represents the fourth annual update to 
the wage data, and will continue to include salaries, fringe benefits, 
home office salaries, and certain contract labor costs. In the past, 
updates to the wage data have resulted in significant payment shifts 
among hospitals. Since the wage index is now updated annually, we 
expect these payment fluctuations will continue to decrease.
    This expectation is borne out by comparing the FY 1997 wage index 
(after reclassifications under sections 1886(d)(8)(B) and 1886(d)(10) 
of the Act) to the FY 1996 wage index. The following chart compares the 
shifts in wage index values (after reclassifications) for labor markets 
for FY 1997 with those from FY 1996. The majority of labor market areas 
(334) experience less than a 5 percent change. Only 19 labor market 
areas experience a change between 5 and 10 percent; 10 of those 
experience increases. Still fewer labor markets experience a change of 
more than 10 percent; one experiences an increase and three experience 
decreases. For FY 1996, by comparison, 10 labor market areas 
experienced an increase in their wage index value of more than 10 
percent.

------------------------------------------------------------------------
                                                        Number of labor 
                                                         market areas   
     Percentage change in area wage index values     -------------------
                                                       FY 1997   FY 1996
------------------------------------------------------------------------
Increase more than 10 percent.......................         1         6
Increase between 5 and 10 percent, (inclusive)......        10        19
Increase/decrease below 5 percent...................       334       323
Decrease between 5 and 10 percent, (inclusive)......         9         6
Decrease more than 10 percent.......................         3        0 
------------------------------------------------------------------------
Note: There are two new MSAs in FY 1997. Also, there are some MSAs that,
  after geographic reclassification have no providers remaining and,    
  therefore, are not reflected in this table.                           

    Under the final FY 1997 wage index, 96.6 percent of urban hospitals 
and 93.9 percent of rural hospitals would experience a change in their 
wage index of less than 5 percent. Approximately 2.6 percent of urban 
hospitals and 1.4 percent of rural hospitals would experience a change 
of between 5 and 10 percent, and 0.9 percent of urban hospitals and 4.6 
percent of rural hospitals would experience a change of more than 10 
percent. The following chart shows the projected impact for urban and 
rural hospitals.

------------------------------------------------------------------------
                                                          Percent of    
                                                         hospitals (by  
     Percentage change in area wage index values         urban/rural)   
                                                     -------------------
                                                        Urban     Rural 
------------------------------------------------------------------------
Increase more than 10 percent.......................       0.3       2.6
Increase between 5 and 10 percent (inclusive).......       1.5       0.4
Increase or decrease less than 5 percent............      96.6      93.9
Decrease between 5 and 10 percent (inclusive).......       1.1       1.0
Decrease more than 10 percent.......................       0.6      2.0 
------------------------------------------------------------------------
Note: The sum of the columns may not total to 100 due to rounding.      

D. Combined Impact of DRG and Wage Index Changes--Including Budget 
Neutrality Adjustment (Column 3)

    The impact of DRG reclassifications and recalibration on aggregate 
payments is required by section 1886(d)(4)(C)(iii) of the Act to be 
budget neutral. In addition, section 1886(d)(3)(E) of the Act specifies 
that any updates or adjustments to the wage index are budget neutral. 
As pointed out in the Addendum to this final rule, we compared 
aggregate payments using the FY 1996 DRG relative weights and wage 
index to aggregate payments using the FY 1997 DRG relative weights and 
wage index. Based on this comparison, we computed a wage and 
recalibration budget neutrality factor of 0.998509. In Table I, the 
combined overall impacts of the effects of both the DRG 
reclassifications and recalibration and the updated wage index are 
shown in column 3. The 0.0 percent impact for All Hospitals 
demonstrates that these changes, in combination with the budget 
neutrality factor, are budget neutral.
    For the most part, the changes in this column are the sum of the 
changes in columns 1 and 2, minus the approximately 0.2 percent 
decrease attributable to the budget neutrality factor. In calculating 
the total changes shown in column 6, readers should begin with this 
column and add across, excluding the impacts shown in columns 1 and 2.

E. The Impact of MGCRB Reclassifications (Column 4)

    Our impact analysis to this point has assumed hospitals are paid on 
the basis of their actual 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 
hospitals in rural counties that are deemed urban under section 
1886(d)(8)(B) of the Act). The changes in column 4 reflect the per case 
payment impact of moving from this baseline to a simulation 
incorporating the MGCRB decisions for FY 1997. As noted below, these 
decisions affect hospitals' standardized amount and wage index area 
assignments. In addition, rural

[[Page 46310]]

hospitals reclassified for purposes of receiving the large urban 
standardized amount also qualify to be treated as urban for purposes of 
the DSH adjustment. However, effective FY 1997, rural hospitals can no 
longer be reclassified to an other urban area for purposes of the 
standardized amount in order to receive a higher DSH adjustment.
    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 for the 
purpose of using the other area's standardized amount, wage index 
value, or both. (RRCs and SCHs are exempt from the proximity 
requirement.)
    This impact analysis incorporates all of the MGCRB's 
reclassification decisions for FY 1997. It also reflects any decisions 
made by the HCFA Administrator through the appeals and review process. 
Additional changes that resulted from a request by a hospital to 
withdraw its application are also reflected in this final rule.
    The overall effect of geographic reclassification is required to be 
budget neutral by section 1886(d)(8)(D) of the Act. Therefore, we 
applied an adjustment of 0.993511 to ensure that the effects of 
reclassification are budget neutral. (See section II.A.4 of the 
Addendum to this final rule).
    As a group, rural hospitals benefit from geographic 
reclassification. Their payments rise 2.3 percent, while payments to 
urban hospitals decline 0.4 percent. Large urban hospitals lose 0.4 
percent because, as a group, they have the smallest percentage of 
hospitals that are reclassified (fewer than 3 percent of large urban 
hospitals are reclassified). There are enough hospitals in other urban 
areas that are reclassified to limit the decrease in payments to these 
urban hospitals stemming from the budget neutrality offset to 0.2 
percent. Among urban hospital groups generally (that is, bed size, 
census division, and special payment status), payments fall between 0.1 
and 0.5 percent.
    A positive impact is evident among all rural hospital groups except 
rural hospitals with up to 49 beds, which experience a 0.0 percent 
impact. The smallest effect among all rural census divisions is 0.8 
percent for the Mountain division. This division has relatively few 
MGCRB reclassifications. Among urban census divisions, the New England 
and the Middle Atlantic display the smallest negative impact, 0.2 
percent.
    Among the 90 rural hospitals designated as RRCs, 50 hospitals are 
reclassified for purposes of the wage index only and experience a 9.5 
percent increase in payments due to MGCRB reclassification. This group 
is not shown separately in the table, but this large increase is 
reflected in several of the rural hospital categories. For example, 
rural hospitals with 200 or more beds have a 4.9 percent increase in 
payments in column 4, largely due to this effect.
    Rural hospitals reclassified for FY 1996 and FY 1997 experience an 
8.9 percent increase in payments, the greatest of any group in the 
category. This may be due to the fact that these hospitals have the 
most to gain from reclassification and have been reclassified for a 
period of years. Rural hospitals reclassified for FY 1997 only 
experience a 7.1 percent increase in payments while rural hospitals 
reclassified for FY 1996 only experience a 0.4 decrease in payments. 
This is due to the budget neutrality adjustment, since the changes in 
this column reflect FY 1997 payments relative to no reclassifications, 
rather than to FY 1996 reclassifications. Urban hospitals reclassified 
for FY 1996 but not FY 1997 experience a 1.7 percent decline in 
payments overall. This appears to be due to the combined impacts of the 
budget neutrality adjustment and a number of hospitals in this category 
that experience a 6 percent drop in their wage index after 
reclassification. Urban hospitals reclassified for FY 1997 but not for 
FY 1996 experience a 2.5 percent increase in payments.
    The FY 1997 Reclassification rows of Table I show the changes in 
payments per case for all FY 1997 reclassified and nonreclassified 
hospitals in urban and rural locations for each of the three 
reclassification categories (standardized amount only, wage index only, 
or both). The table illustrates that the largest impact for 
reclassified rural hospitals is for those hospitals reclassified for 
both the standardized amount and the wage index. These hospitals 
receive an 18.5 percent increase in payments. The number of hospitals 
in this category has declined from 42 in FY 1996 to 16 in FY 1997. In 
addition, 245 rural hospitals reclassified for the wage index receive 
an 8.6 percent payment increase. The overall impact on reclassified 
hospitals is to increase their payments per case by an average of 5.4 
percent for FY 1997.
    Among the 27 rural hospitals deemed to be urban under section 
1886(d)(8)(B) of the Act, payments increase 1.2 percent due to MGCRB 
reclassification. This is because, although these hospitals are treated 
as being attached to an urban area in our baseline (their redesignation 
is ongoing, rather than subject to annual review, like the MGCRB 
reclassifications), they are still eligible for MGCRB reclassification. 
For FY 1997, one hospital in this category reclassified to a large 
urban area, resulting in a net increase due to reclassifications of 1.2 
percent.
    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 are not 
reclassified, the overall impact of hospital reclassifications is an 
average decrease in payments per case of 0.6 percent, which corresponds 
closely with the geographic reclassification budget neutrality factor. 
Rural nonreclassified hospitals decrease slightly less, a 0.4 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 purposes of the standardized 
amount, or for both the standardized amount and the wage index, has 
declined from 358 in FY 1996 to 205 in FY 1997. This is not surprising 
because of the elimination of standardized amount reclassifications 
from rural to other urban areas for individual hospitals. Individual 
rural (and other urban) hospitals can continue to reclassify to large 
urban areas for purposes of the standardized amount. The number of wage 
index only reclassifications increased slightly from 260 in FY 1996 to 
272 in FY 1997.

F. Outlier Changes (Column 5)

    Medicare provides extra payment in addition to the basic DRG 
payment amount for extremely costly or extraordinarily lengthy cases 
(cost outliers and day outliers, respectively). Section 
1886(d)(5)(A)(v) of the Act requires the Secretary to phase out payment 
for day outliers from FY 1994 day outlier levels in 25 percent 
increments beginning in FY 1995. Day outliers in FY 1997 should account 
for approximately 8 percent of total outlier payments (25 percent of FY 
1994 levels). This reduction in day outlier payments will be offset by 
an increase in cost outlier payments.
    As discussed in the Addendum, for FY 1997, the day outlier 
threshold will be equal to the geometric mean length of stay for each 
DRG plus the lesser of 24 days or 3.0 standard deviations. The marginal 
cost factor for day outliers is 33 percent. For FY 1997, a case would 
receive cost outlier payments if its costs exceed the DRG payment plus 
$9,700.

[[Page 46311]]

We are maintaining the marginal cost factor for cost outliers at 80 
percent.
    The payment impacts of these changes are minimal. Hospital 
categories negatively affected by phasing out day outliers are 
consistent with the categories negatively affected in previous years: 
urban New England (0.1 percent decline); urban and rural Middle 
Atlantic census divisions (0.7 percent and 0.1 percent declines, 
respectively); urban hospitals with 300-499 beds and those with 500 or 
more beds (0.1 and 0.2 percent declines, respectively); teaching 
hospitals with 100 or more residents (0.4 percent decline); and 
hospitals for which data were unavailable to calculate type of 
ownership or Medicare utilization rates (1.3 percent decline). As noted 
previously in the wage index discussion, this last category contains a 
number of New York City hospitals because they file manual cost 
reports. Because 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 categories have higher percentages 
of day outliers. The largest positive impact of 0.2 percent affected 
numerous hospital groups.

G. All Changes (Column 6)

    Column 6 compares our estimate of payments per case incorporating 
all of our changes for FY 1997 to our estimate of payments per case in 
FY 1996. It also includes the effects of the 2.0 percent update to the 
standardized amounts and the hospital-specific rates for SCHs and 
EACHs, and the difference between the percentage of projected outlier 
payments in FY 1997 (5.1 percent) and the current estimate of the 
percentage of actual outlier payments in FY 1996 (4.0 percent), as 
described in the introduction to this Appendix and the Addendum.
    Also, column 6 includes the impacts of FY 1997 MGCRB 
reclassifications compared to the payment impacts of FY 1996 
reclassifications. Therefore, when comparing FY 1997 payments to FY 
1996, the percent changes due to FY 1997 reclassifications shown in 
column 4 are offset by the effects of reclassification on hospitals' FY 
1996 payments (column 4 of Table I, September 1, 1995 final rule; 60 FR 
45926). That is, column 4 of Table I shows the impacts of going from no 
MGCRB reclassifications to the FY 1997 reclassifications. When 
comparing FY 1996 and FY 1997 payments, hospitals similarly 
reclassified during FY 1996 would not experience the full extent of the 
change shown in column 4. For example, the impact of MGCRB 
reclassifications on rural hospitals' FY 1996 payments was 
approximately a 2.3-percent increase, equal to the 2.3-percent increase 
for FY 1997. Therefore, the net increase in FY 1997 payments due to 
reclassification for rural hospitals is 0.0 percent.
    The FY 1996 standardized amounts were adjusted by a budget 
neutrality factor of 0.997575, in accordance with section 1886(d)(5)(I) 
of the Act, so that the change to the transfer payment methodology we 
implemented last year (doubling the per diem payment for the first day 
of a transfer) would not affect aggregate payments. As we indicated in 
last year's final rule (60 FR 45854), this adjustment was applied on a 
one-time basis to the FY 1996 standardized amounts. In the proposed 
rule, we indicated that this was interpreted to mean that there was no 
transfer budget neutrality factor applied after FY 1996, and we 
estimated the impact of this to be a 0.2 percent increase in FY 1997 
payments. As discussed in the Addendum to this final rule, we have 
corrected this interpretation so that we will continue to apply this 
budget neutrality factor of 0.997575 in FY 1997, and in the future.
    In addition, eliminating the regional floor provision effective for 
discharges occurring on or after October 1, 1996, results in 
approximately a 0.2 percent lower average payment in FY 1997 than would 
occur otherwise. This effect is attributable to particular census 
divisions, as discussed below.
    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 6 may not equal the sum of columns 
3 through 5 plus the other impacts that we are able to identify. The 
point should be repeated here, as well, that when comparing the percent 
changes in column 6 attributable to the isolated changes in the prior 
columns in this table, columns 1 and 2 are incorporated into column 3. 
Therefore, just the effect in column 3 should be added into the total 
change shown in column 6.
    The overall payment increase from FY 1997 to FY 1996 for all 
hospitals is a 2.9 percent increase. This reflects the 0.0 percent net 
change in total payments due to the final changes for FY 1997 shown in 
columns 3 through 5, the 2.0 percent update for FY 1997, the 1.1 
percent higher outlier payments in FY 1997 compared to FY 1996, and the 
0.2 overall negative effect of eliminating the regional floor.
    Hospitals in urban areas experience a 2.9 percent rise in payments 
per case over FY 1996. Similar to all hospitals nationally, this is 
primarily due to the factors discussed above: the 2.0 percent update; a 
1.1 percent impact of the higher level of outlier payments estimated 
for FY 1997; and the effect of the expiration of the regional floor.
    Hospitals in large and other urban areas experience 2.9 percent and 
3.0 percent increases, respectively. The lower increase for hospitals 
in large urban areas appears to be attributable primarily to the 0.1 
percent negative impact of the continuing phase-out of day outliers.
    Hospitals in rural areas experience a 2.4 percent increase. Their 
FY 1997 payments are estimated to be 0.4 percent higher than for FY 
1996 due to higher outlier payments, in contrast to the national 
average of 1.1 percent. Like urban hospitals, the impact of geographic 
reclassification in FY 1997 is offset by an identical 2.3 percent 
increase in FY 1996.
    Among urban bed size groups, column 6 shows changes in payments are 
higher for the largest urban hospitals compared to smaller urban 
hospitals. The relatively smaller increases for the smaller urban 
hospitals appear to be due to the negative impacts of the new wage 
data, as shown in column 2. Among rural bed size groups, the impacts 
range from 2.4 percent to 2.7 percent, with the exception of rural 
hospitals with 200 or more beds. Payments per case for this group of 
hospitals are estimated to increase 1.9 percent during FY 1997. This 
below average increase appears to be attributable primarily to a 
smaller, though still significant, impact of MGCRB reclassifications 
for FY 1997 compared to FY 1996. In column 4, the FY 1997 impact of 
reclassification is shown to be 4.9 percent. For FY 1996, however, this 
impact was 5.4 percent. Thus, the increase is 0.5 percent less for FY 
1997 due to a smaller reclassification impact.
    As discussed previously, effective for discharges on or after 
October 1, 1996, the regional floor, which benefitted certain census 
divisions, expires. The regional floor provided that, in those census 
divisions where the regional standardized amount exceeded the national 
standardized amount, hospitals would be paid a blend of 85 percent of 
the national amount and 15 percent of the regional amount. The census 
divisions affected by the regional floor during FY 1996 are New England 
and East North Central. In New England, the impacts of eliminating the 
regional floor are a 0.7 percent decrease for urban hospitals and a 0.6 
percent decrease among rural hospitals. In the East North Central 
census division, the impacts are a 1.0 percent reduction for urban

[[Page 46312]]

hospitals, and a 0.7 percent reduction for rural hospitals. The 
negative impacts of losing the regional floor for urban hospitals in 
the East North Central census division are largely offset by higher 
estimated outlier payments in FY 1997 compared to FY 1996, the 0.4 
percent higher payments due to the FY 1993 wage data (column 2), and 
the 0.1 percent increase due to the phase-out of day outliers (column 
5). Urban New England hospitals' higher outlier payments in FY 1997 are 
also offset by the negative impacts of the expiration of the regional 
floor. Rural New England hospitals also see a 0.9 percent decrease in 
payments stemming from the FY 1993 wage data.
    Other census divisions below the average payment increase are urban 
Pacific, urban Puerto Rico, rural Middle Atlantic, rural East South 
Central, and rural Puerto Rico. With the exception of the rural East 
South Central, the below average overall payment impacts of these 
census divisions are related to negative impacts of introducing the FY 
1993 wage data. In the rural Middle Atlantic, the negative impact of 
the new wage data is combined with a smaller impact stemming from MGCRB 
reclassifications in FY 1997 (0.9 percent compared to 1.5 percent in FY 
1996). A smaller FY 1997 reclassification impact (2.4 percent compared 
to 3.7 percent in FY 1996) is also the reason for the relatively small 
(1.9 percent) rate of increase in the rural East South Central census 
division. In rural Puerto Rico, although hospitals experience the 
greatest negative impact due to the updated wage data, this group 
benefits from reclassifications by the MGCRB in FY 1997 (of the five 
rural Puerto Rico hospitals, one is reclassified), with a 3.3 percent 
increase compared to a 0.5 percent decrease in their FY 1996 payments 
due to the reclassification budget neutrality factor.
    Conversely, the urban Middle Atlantic, urban West North Central, 
urban West South Central, and rural Pacific census divisions all have 
overall increases at least 0.4 percent above the national average. The 
urban West South Central gains from the continued phase-out of day 
outliers, as well as higher estimated FY 1997 outlier payments compared 
to FY 1996 (1.5 percent). As noted previously, the urban Middle 
Atlantic benefits significantly from the updated wage index data. These 
hospitals also have higher estimated FY 1997 outlier payments, which 
offset their 0.7 percent decrease due to the phase-out of day outliers. 
Rural Pacific hospitals benefit from geographic reclassification in FY 
1997 (2.3 percent compared to 1.4 percent in FY 1996) and the new wage 
data (0.5 percent).
    The only hospital groups with negative payment impacts from FY 1996 
to FY 1997 are hospitals that were reclassified for FY 1996 and are not 
reclassified for FY 1997. Overall, these hospitals lose 0.5 percent. 
The urban hospitals in this category actually experience a slight 
payment increase over FY 1996 (0.6 percent), while the rural hospitals 
lose 2.2 percent. On the other hand, hospitals reclassified for FY 1997 
that were not reclassified for FY 1996 experience the greatest payment 
increases: 10.2 percent for 69 rural hospitals in this category and 7.8 
percent for 29 urban hospitals.
    Reclassification appears to be a significant factor influencing the 
payment increases for a number of rural hospital groups with above 
average overall payment increases in column 6. For example, among 
hospital groups identified in the discussion of the impacts of MGCRB 
reclassifications for FY 1997 (column 4), all have overall increases 
above the national average. This outcome highlights the redistributive 
effects of reclassification decisions upon hospital payments. This 
impact is illustrated even more clearly when one examines the rows 
categorizing hospitals by their reclassification status for FY 1997. 
All nonreclassified hospitals have an average payment increase of 2.8 
percent. The average payment increase for all reclassified hospitals is 
3.8 percent.
    Among SCH/EACHs, the payment increase is 2.6 percent. Because these 
hospital groups receive their hospital- specific rate if it exceeds the 
applicable Federal amount (including outliers), there is less of an 
impact due to changes in outlier payment levels, which are not applied 
to the hospital-specific rate. In addition, nonspecial status rural 
hospitals experience only a 1.6 percent increase. This below average 
increase is largely attributable to 123 hospitals in this category that 
lost their reclassification status from FY 1996 to FY 1997.
    Another notably small increase appearing in this column is the 0.3 
percent increase for rural DSH hospitals with 100 or more beds. This 
impact is primarily due to a number of hospitals in this category that 
lost their MGCRB reclassification from FY 1996 to FY 1997, stemming 
from the elimination of standardized amount reclassifications solely 
for higher DSH payments.

             Table II.--Impact Analysis of Changes for FY 1997 Operating Prospective Payment System             
                                               [Payments per case]                                              
                                                                                                                
                                                                            Average FY   Average FY             
                                                               Number of       1996         1997                
                                                               hospitals   payment per  payment per  All changes
                                                                               case         case                
                                                                      (1)      (2) \1\      (3) \1\          (4)
----------------------------------------------------------------------------------------------------------------
                                            (By Geographic Location)                                            
----------------------------------------------------------------------------------------------------------------
All hospitals...............................................        5,129        6,478        6,664          2.9
Urban hospitals.............................................        2,881        7,013        7,218          2.9
Large urban areas...........................................        1,596        7,544        7,762          2.9
Other urban areas...........................................        1,285        6,313        6,502          3.0
Rural areas.................................................        2,248        4,297        4,400          2.4
Bed size (urban):                                                                                               
    0-99 beds...............................................          715        4,705        4,832          2.7
    100-199 beds............................................          945        5,951        6,108          2.6
    200-299 beds............................................          576        6,527        6,715          2.9
    300-499 beds............................................          478        7,444        7,674          3.1
    500 or more beds........................................          167        9,147        9,426          3.1
Bed size (rural):                                                                                               
    0-49 Beds...............................................        1,177        3,538        3,622          2.4
    50-99 beds..............................................          657        3,992        4,090          2.4

[[Page 46313]]

                                                                                                                
    100-149 beds............................................          241        4,462        4,579          2.6
    150-199 beds............................................           98        4,594        4,716          2.7
    200 or more beds........................................           75        5,417        5,518          1.9
Urban by census div.:                                                                                           
    New England.............................................          160        7,525        7,672          2.0
    Middle Atlantic.........................................          434        7,718        7,973          3.3
    South Atlantic..........................................          419        6,682        6,889          3.1
    East North Central......................................          483        6,735        6,905          2.5
    East South Central......................................          163        6,181        6,374          3.1
    West North Central......................................          193        6,645        6,866          3.3
    West South Central......................................          376        6,508        6,743          3.6
    Mountain................................................          127        6,766        6,962          2.9
    Pacific.................................................          478        8,102        8,304          2.5
    Puerto Rico.............................................           48        2,595        2,644          1.9
Rural by census div.:                                                                                           
    New England.............................................           53        5,242        5,304          1.2
    Middle Atlantic.........................................           85        4,691        4,769          1.7
    South Atlantic..........................................          297        4,473        4,578          2.3
    East North Central......................................          304        4,321        4,434          2.6
    East South Central......................................          278        3,969        4,045          1.9
    West North Central......................................          525        4,004        4,105          2.5
    West South Central......................................          349        3,845        3,952          2.8
    Mountain................................................          211        4,569        4,689          2.6
    Pacific.................................................          141        5,307        5,505          3.7
    Puerto Rico.............................................            5        2,038        2,073          1.7
----------------------------------------------------------------------------------------------------------------
                                             (By Payment Categories)                                            
----------------------------------------------------------------------------------------------------------------
Urban hospitals.............................................        2,981        6,968        7,174          2.9
Large urban areas...........................................        1,791        7,370        7,586          2.9
Other urban areas...........................................        1,190        6,317        6,504          3.0
Rural areas.................................................        2,148        4,263        4,358          2.2
Teaching status:                                                                                                
    Non-teaching............................................        4,044        5,288        5,437          2.8
    Fewer than 100 Residents................................          850        6,895        7,099          3.0
    100 or More residents...................................          235       10,565       10,865          2.8
Disproportionate share hospitals (DSH):                                                                         
    Non-DSH.................................................        3,201        5,595        5,755          2.9
    Urban DSH:                                                                                                  
        100 beds or more....................................        1,410        7,614        7,834          2.9
        Fewer than 100 beds.................................          101        4,806        4,911          2.2
    Rural DSH:                                                                                                  
        Sole community (SCH)................................          156        4,349        4,507          3.6
        Referral centers (RRC)..............................           27        5,179        5,352          3.3
    Other Rural DSH hosp.:                                                                                      
        100 beds or more....................................           83        4,198        4,211          0.3
        Fewer than 100 beds.................................          151        3,432        3,500          2.0
Urban teaching and DSH:                                                                                         
    Both teaching and DSH...................................          692        8,587        8,832          2.8
    Teaching and no DSH.....................................          339        7,095        7,310          3.0
    No teaching and DSH.....................................          819        6,126        6,309          3.0
     No teaching and no DSH.................................        1,131        5,438        5,605          3.1
Rural hospital types:                                                                                           
    Nonspecial status hospitals.............................        1,375        3,895        3,958          1.6
    RRC.....................................................           90        5,076        5,246          3.4
    SCH/Each................................................          645        4,405        4,519          2.6
    SCH/Each and RRC........................................           38        5,213        5,352          2.7
Type of ownership:                                                                                              
    Voluntary...............................................        2,951        6,629        6,823          2.9
    Proprietary.............................................          696        5,948        6,120          2.9
    Government..............................................        1,366        6,040        6,195          2.6
    Unknown.................................................          116        7,564        7,724          2.1
Medicare Utilization as a percent of Inpatient days:                                                            
    0-25....................................................          258        8,741        8,917          2.0
    25-50...................................................        1,284        7,878        8,103          2.9
    50-65...................................................        2,097        5,947        6,122          2.9

[[Page 46314]]

                                                                                                                
    Over 65.................................................        1,374        5,055        5,204          2.9
    Unknown.................................................          116        7,564        7,724          2.1
----------------------------------------------------------------------------------------------------------------
                         Hospitals Reclassified by the Medicare Geographic Review Board                         
----------------------------------------------------------------------------------------------------------------
Reclassification status during FY96 and FY97                                                                    
    Reclassified during both FY96 and FY97..................          379        5,780        5,939          2.7
        Urban...............................................          130        6,606        6,802          3.0
        Rural...............................................          249        5,012        5,136          2.5
    Reclassified during FY97 only...........................           98        6,132        6,642          8.3
        Urban...............................................           29        7,307        7,860          7.6
        Rural...............................................           69        4,369        4,815         10.2
    Reclassified during FY96 only...........................          253        5,893        5,861         -0.5
        Urban...............................................           91        7,497        7,543          0.6
        Rural...............................................          162        4,503        4,403         -2.2
    FY97 Reclassifications:                                                                                     
        All reclassified hosp...............................          477        5,845        6,069          3.8
        Stand. amt. only....................................          119        5,753        5,914          2.8
        Wage index only.....................................          272        5,665        5,854          3.3
        Both................................................           86        6,254        6,600          5.5
        Nonreclass..........................................        4,625        6,563        6,744          2.8
    All urban reclass.......................................          159        6,760        7,035          4.1
        Stand. amt. only....................................           62        6,218        6,398          2.9
        Wage index only.....................................           27        8,949        9,282          3.7
        Both................................................           70        6,446        6,777          5.1
        Nonreclass..........................................        2,722        7,031        7,231          2.9
    All Rural Reclass.......................................          318        4,916        5,088          3.5
        Stand. amt. only....................................           57        4,622        4,737          2.5
        Wage index only.....................................          245        4,977        5,136          3.2
        Both................................................           16        4,904        5,354          9.2
        Nonreclass..........................................        1,903        4,051        4,127          1.9
Other reclassifed:                                                                                              
    Hospitals (Section 1886(d)(8)(B)).......................           27        4,620        4,743          2.7
\1\ These payment amounts per case do not reflect any estimates of annual case-mix increase.                    

    Table II presents the projected impact of the final changes for FY 
1997 for urban and rural hospitals and for the different categories of 
hospitals shown in Table I. It compares the projected payments per case 
for FY 1997 with the average estimated per case payments for FY 1996, 
as calculated under our models. Thus, this table presents, in terms of 
the average dollar amounts paid per discharge, the combined effects of 
the changes presented in Table I. The percentage changes shown in the 
last column of Table I equal the percentage changes in average payments 
from column 6 of Table I.

VII. Impact of Changes in the Capital Prospective Payment System

A. General Considerations

    We now have data that were unavailable in previous impact analyses 
for the capital prospective payment system. Specifically, we have cost 
report data for the third year of the capital prospective payment 
system (cost reports beginning in FY 1994) available through the June 
1996 update of the Hospital Cost Report Information System (HCRIS). We 
also have updated information on the projected 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 several 
ways. Specifically, 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 individual hospitals. 
Moreover, our policy of recognizing certain obligated capital as old 
capital makes it difficult to project future capital-related costs for 
individual hospitals. Under Sec. 412.302(c), a hospital is required to 
notify its intermediary that it has obligated capital by 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

[[Page 46315]]

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 projected 
aggregate obligated capital amounts. However, we still do not know when 
these projects will actually be put into use for patient care, the 
actual 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 for 
purposes of the FY 1997 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 1997 capital 
cost projections.
    In Table III of this appendix, we present the redistributive 
effects that are expected to occur between ``hold-harmless'' hospitals 
and ``fully prospective'' hospitals in FY 1997. In addition, we have 
integrated sufficient hospital-specific information into our actuarial 
model to project the impact of the FY 1997 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 randomly generate 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. We continue to be unable to predict accurately FY 1997 capital 
costs for individual hospitals, but 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 IV. In Table V 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 1997 payment policies.

B. Projected Impact Based on the FY 1997 Actuarial Model

1. Assumptions
    In this impact analysis, we model dynamically the impact of the 
capital prospective payment system from FY 1996 to FY 1997 using a 
capital acquisition model. The FY 1997 model, described in Appendix B 
of this final rule, integrates actual data from individual hospitals 
with randomly generated capital cost amounts. We have capital cost data 
from cost reports beginning in FY 1989 through FY 1994 received through 
the June 1996 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 July 1, 1996 in the Provider-Specific file. 
We used this data to determine the FY 1997 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 1994, and we age that capital by a 
formula described in Appendix B. We therefore need to randomly generate 
only new capital acquisitions for any year after FY 1994. All Federal 
rate payment parameters are assigned to the applicable hospital.
    For purposes of this impact analysis, the FY 1997 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 
------------------------------------------------------------------------
1995.......................................................        -0.53
1996.......................................................         5.06
1997.......................................................         5.21
------------------------------------------------------------------------

     The Medicare case-mix index will increase by 1.4 percent 
in FY 1996 and 1.6 percent in FY 1997.
     The Federal capital rate as well as the hospital-specific 
rate is updated in FY 1996 by an analytical framework that considers 
changes in the prices associated with capital-related costs, and 
adjustments to account for forecast error, changes in the case-mix 
index, allowable changes in intensity, and other factors. The FY 1997 
update factor is .7 percent. (see Addendum, Part III).
2. Results
    We have used the actuarial model to estimate the change in payment 
for capital-related costs from FY 1996 to FY 1997. Table III shows the 
effect of the capital prospective payment system on low capital cost 
hospitals and high capital cost 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 1997      FY 1997  
                                                               Percent of    FY 1997     percent of   percent of
                      Type of hospital                         hospitals    percent of    capital      capital  
                                                                            discharges     costs       payments 
----------------------------------------------------------------------------------------------------------------
Low Cost Hospital...........................................           66           62           52           56
High Cost Hospital..........................................           34           38           48           44
----------------------------------------------------------------------------------------------------------------

    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 III.
    Assuming no behavioral changes in capital expenditures, Table III 
displays the percentage change in payments from

[[Page 46316]]

FY 1996 to FY 1997 using the above described actuarial model.

                                        Table III.--Impact of Final Changes for FY 1997 on Payments Per Discharge                                       
                                                             FY 1996 payments per discharge                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Adjusted     Average      Hospital       Hold                             
                                                   Number of    Discharges    federal      federal      specific     harmless    Exceptions     Total   
                                                   hospitals                  payment      percent      payment      payment      payment      payment  
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Cost Hospitals..............................        3,363    6,868,405      $411.84        54.85      $200.68       $15.75       $18.28      $646.55
    Fully Prospective...........................        1,548    3,287,821       375.12        50.00       237.10  ...........        11.40       623.62
    Rebase--Fully Prospective...................        1,483    2,743,898       371.61        50.00       218.24  ...........        27.88       617.74
    Rebase--100% Federal Rate...................          228      643,922       793.64       100.00  ...........  ...........         0.25       793.89
    Rebase--Hold Harmless.......................          104      192,764       335.30        46.49  ...........       561.32        59.11       955.72
High Cost Hospitals.............................        1,741    4,288,642       668.50        86.23  ...........       145.12        19.59       833.21
    100% Federal Rate...........................        1,135    3,010,570       785.30       100.00  ...........  ...........         2.23       787.53
    Hold Harmless...............................          606    1,278,072       393.38        52.33  ...........       486.95        60.48       940.81
        Total Hospitals.........................        5,104   11,157,046       510.50        67.15       123.54        65.48        18.78       718.30
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                             FY 1997 payments per discharge                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Adjusted     Average      Hospital       Hold                                          
                                      Number of    Discharges    federal      federal      specific     harmless    Exceptions     Total       Percent  
                                      hospitals                  payment      percent      payment      payment      payment      payment       change  
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low Cost Hospitals.................        3,363    7,056,653      $471.51        63.97      $157.25       $12.43       $40.25      $681.44         5.40
    Fully Prospective..............        1,548    3,377,933       441.20        60.00       185.78  ...........        30.53       657.51         5.43
    Rebase--Fully Prospective......        1,483    2,819,103       438.15        60.00       171.01  ...........        54.23       663.39         7.39
    Rebase--100% Federal Rate......          238      677,500       778.75       100.00  ...........  ...........         2.63       781.38        -1.58
    Rebase--Hold Harmless..........           94      182,117       407.13        56.47  ...........       481.80       144.04     1,032.97         8.08
High Cost Hospitals................        1,741    4,406,184       694.20        89.74  ...........       117.32        49.69       861.21         3.36
    100% Federal Rate..............        1,173    3,160,803       779.30       100.00  ...........  ...........        11.40       790.70         0.40
    Hold Harmless..................          568    1,245,382       478.21        63.00  ...........       415.08       146.89     1,040.17        10.56
        Total Hospitals............        5,104   11,462,838       557.11        74.17        96.80        52.75        43.88       750.54         4.49
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Under section 1886(g)(1)(A) of the Act, aggregate payments under 
the capital prospective payment system for FY 1992 through 1995 
respectively, were projected to equal 90 percent of payments that would 
have been payable on a reasonable cost basis in each year. With the 
expiration of the capital budget neutrality provision, we now estimate 
that there was an aggregate 27.50 percent increase in FY 1996 Medicare 
capital payments over the FY 1995 payments. We estimate aggregate 
Medicare capital payments will increase by 6.77 percent in FY 1997.
    We project that low capital cost hospitals paid under the fully 
prospective payment methodology will experience an average increase in 
payments per case of 4.75 percent, and high capital cost hospitals will 
experience an average increase of 2.86 percent.
    For hospitals paid under the fully prospective payment methodology, 
the Federal rate payment percentage will increase from 50 percent to 60 
percent and the hospital-specific rate payment percentage will decrease 
from 50 to 40 percent in FY 1997. The Federal rate payment percentage 
for hospitals 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 hospitals receiving a 
hold-harmless payment for old capital will increase from 52.33 percent 
to 62.81 percent. (We estimate the percentage of hold-harmless 
hospitals paid based on 100 percent of the Federal rate will increase 
from 65.8 percent to 67.8 percent.)
    We expect that the average hospital-specific rate payment per 
discharge will decrease from $123.54 in FY 1996 to $96.10 in FY 1997. 
This is partly due to the 4.32 percent decrease in the FY 1997 
hospital-specific rate compared to FY 1996.
    We proposed no changes in our exceptions policies for FY 1997. As a 
result, the minimum payment levels will 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 2.61 
percent of total capital payments in FY 1996 to 5.97 percent of 
payments in FY 1997. The number and amount of exceptions payments is 
expected to increase throughout the transition period. The projected 
distribution of the payments is shown in the table below:

                  Estimated FY 1997 Exceptions Payments                 
------------------------------------------------------------------------
                                                              Percent of
               Type of hospital                  Number of    exceptions
                                                 hospitals     payments 
------------------------------------------------------------------------
Low Capital Cost..............................          464           57
High Capital Cost.............................          348           43
                                               -------------------------
Total.........................................          812          100
------------------------------------------------------------------------

C. Cross-Sectional Comparison of Capital Prospective Payment 
Methodologies

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

[[Page 46317]]



  Table IV.--Distribution by Method of Payment (Hold-Harmless/Fully Prospective) of Hospitals Receiving Capital 
                                                    Payments                                                    
----------------------------------------------------------------------------------------------------------------
                                                                               (2) Hold-harmless                
                                                                          --------------------------     (3)    
                                                               (1) Total    Percentage                Percentage
                                                                 No. of     paid hold-   Percentage   paid fully
                                                               hospitals     harmless    paid fully  prospective
                                                                               (A)      federal (B)      rate   
----------------------------------------------------------------------------------------------------------------
By Geographic Location:                                                                                         
    All hospitals...........................................        5,104         13.0         27.6         59.4
    Large urban areas (populations over 1 million)..........        1,584         15.3         34.8         49.9
    Other urban areas (populations of 1 million or fewer)...        1,275         15.8         32.9         51.3
    Rural areas.............................................        2,245          9.7         19.6         70.7
    Urban hospitals.........................................        2,859         15.5         34.0         50.5
        0-99 beds...........................................          697         16.4         27.4         56.2
        100-199 beds........................................          941         19.2         36.9         43.9
        200-299 beds........................................          576         14.4         36.6         49.0
        300-499 beds........................................          478         10.3         34.5         55.2
        500 or more beds....................................          167         10.2         34.1         55.7
    Rural hospitals.........................................        2,245          9.7         19.6         70.7
        0-49 beds...........................................        1,175          7.0         14.6         78.5
        50-99 beds..........................................          656         12.5         21.6         65.9
        100-149 beds........................................          241         13.7         30.7         55.6
        150-199 beds........................................           98         15.3         22.4         62.2
        200 or more beds....................................           75          8.0         41.3         50.7
By Region:                                                                                                      
    Urban by Region.........................................        2,859         15.5         34.0         50.5
        New England.........................................          160          6.9         25.0         68.1
        Middle Atlantic.....................................          434         10.1         29.7         60.1
        South Atlantic......................................          418         20.1         40.2         39.7
        East North Central..................................          480          9.6         30.0         60.4
        East South Central..................................          162         22.8         34.6         42.6
        West North Central..................................          190         18.4         27.4         54.2
        West South Central..................................          367         27.8         46.0         26.2
        Mountain............................................          126         15.9         42.1         42.1
        Pacific.............................................          474         12.7         31.2         56.1
        Puerto Rico.........................................           48         10.4         25.0         64.6
    Rural by Region.........................................        2,245          9.7         19.6         70.7
        New England.........................................           53          7.5         15.1         77.4
        Middle Atlantic.....................................           84         10.7         15.5         73.8
        South Atlantic......................................          297         11.8         25.6         62.6
        East North Central..................................          304         10.2         11.8         78.0
        East South Central..................................          278          9.7         31.3         59.0
        West North Central..................................          525          7.0         15.2         77.7
        West South Central..................................          347          9.2         24.8         66.0
        Mountain............................................          211         12.3         15.2         72.5
        Pacific.............................................          141         11.3         15.6         73.0
    Large urban areas (populations over 1 million)..........        1,779         15.2         34.5         50.4
    Other urban areas (populations over 1 million or fewer).        1,180         15.8         32.2         51.9
    Rural areas.............................................        2,145          9.6         19.5         71.0
    Teaching Status:                                                                                            
        Non-teaching........................................        4,019         13.5         26.6         59.8
        Fewer than 100 Residents............................          850         11.3         32.4         56.4
        100 or more Residents...............................          235          9.4         27.7         63.0
    Disproportionate share hospitals (DSH):                                                                     
        Non-DSH.............................................        3,178         12.3         24.0         63.7
        Urban DSH:                                                                                              
            100 or more beds................................        1,409         15.4         36.1         48.5
            Less than 100 beds..............................          100         17.0         23.0         60.0
        Rural DSH:                                                                                              
            Sole Community (SCH/EACH).......................          156         11.5         18.6         69.9
            Referral Center (RRC/EACH)......................           27          7.4         37.0         55.6
            Other Rural:                                                                                        
                100 or more beds............................           83          8.4         45.8         45.8
                Less than 100 beds..........................          151          7.3         25.8         66.9
    Urban teaching and DSH:                                                                                     
        Both teaching and DSH...............................          692         11.1         32.2         56.6
        Teaching and no DSH.................................          339         11.2         29.8         59.0
        No teaching and DSH.................................          817         19.2         37.7         43.1
        No teaching and no DSH..............................        1,111         16.7         32.5         50.9
    Rural Hospital Types:                                                                                       
        Non special status hospitals........................        1,372          7.7         19.5         72.8
        RRC/EACH............................................           90         10.0         34.4         55.6
        SCH/EACH............................................          645         13.3         17.2         69.5

[[Page 46318]]

                                                                                                                
        SCH, RRC and EACH...................................           38         13.2         21.1         65.8
    Type of Ownership:                                                                                          
        Voluntary...........................................        2,951         12.3         27.6         60.1
        Proprietary.........................................          696         23.4         46.7         29.9
        Government..........................................        1,366          8.7         17.6         73.7
    Medicare Utilization as a Percent of Inpatient Days:                                                        
        0-25................................................          258         15.1         25.2         59.7
        25-50...............................................        1,284         14.5         33.4         52.1
        50-65...............................................        2,097         12.9         28.0         59.1
        Over 65.............................................        1,374         10.8         21.6         67.5
----------------------------------------------------------------------------------------------------------------

    As we explain in Appendix B, we were not able to determine a 
hospital-specific rate for 25 of the 5,129 hospitals in our data base. 
Consequently, the payment methodology distribution is based on 5,104 
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.
    The percentage of hospitals paid fully Federal (100 percent of the 
Federal rate) as hold-harmless hospitals is expected to increase to 
27.5 percent in FY 1997.
    Table IV indicates that 59.4 percent of hospitals are paid under 
the fully prospective payment methodology. (This figure, unlike the 
figure of 66 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 (70.7 percent and 73.7 percent, 
respectively by payment classification) are being paid under the fully 
prospective methodology. This is a reflection of their lower than 
average capital costs per case. In contrast, only 29.9 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 1997 actuarial model to estimate the potential 
impact of our changes for FY 1997 on total capital payments per case, 
using a universe of 5,104 hospitals. The individual hospital payment 
parameters are taken from the best available data, including: the July 
1, 1996 update to the Provider-Specific file, cost report data, and 
audit information supplied by intermediaries. Table V presents 
estimates of payments per case under our model for FY 1996 and FY 1997 
(columns 2 and 3). Column 4 shows the total percentage change in 
payments from FY 1996 to FY 1997. Column 5 presents the percentage 
change in payments that can be attributed to Federal rate changes 
alone.
    Federal rate changes represented in Column 5 include the 4.99 
percent decrease in the Federal rate, a 1.6 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. Column 4 includes the effects of the 
Federal rate changes represented in column 3. Column 4 also reflects 
the effects of all other changes, including: the change from 50 percent 
to 60 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, capital payments per 
case can be expected to increase 3.9 percent in FY 1997. The results 
show that the effect of the Federal rate changes alone is to decrease 
payments by 1.3 percent. The decrease attributable to the Federal rate 
changes is more than offset by a 5.2 percent increase attributable to 
the effects of all other changes.
    Our comparison by geographic location shows that overall, urban 
hospitals will gain slightly less than rural hospitals from the final 
rule changes (increases of 3.8 percent and 4.7 percent, respectively). 
Payments per case for urban hospitals will decrease at about the same 
rate as payments per case for rural hospitals (1.2 percent and 1.7 
percent, respectively) from the Federal rate changes alone. Urban 
hospitals will gain slightly less than rural hospitals (5.0 percent 
compared to 6.4 percent) from the effects of all other changes.
    By region, there is relatively little variation compared to some 
previous years. All regions are estimated to receive increases in total 
capital payments per case. Changes by region vary from a low of 2.1 
percent increase (rural hospitals of the West South Central region) to 
a high of 15.2 percent increase (rural hospitals of the New England 
region).
    By type of ownership, government hospitals are projected to have 
the largest rate of increase (5.1 percent, -1.5 percent due to Federal 
rate changes and a 6.6 percent positive offset from the effects of all 
other changes). Payments to voluntary hospitals will increase 3.8 
percent (a 1.3 percent decrease due to Federal rate changes and a 5.1 
percent

[[Page 46319]]

positive offset from the effects of all other changes) and payments to 
proprietary hospitals will increase 3.4 percent (a 0.9 percent decrease 
due to Federal rate changes and a 4.3 percent positive offset from the 
effects of all other changes).
    Section 1886(d)(10) of the Act established the Medicare Geographic 
Classification Review Board (MGCRB). Hospitals may apply for 
reclassification for purposes of the standardized amount, wage index, 
or both. Although the Federal capital rate is not affected, 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 
1997 compared to the effects of reclassification for FY 1996, we show 
the average payment percentage increase for hospitals reclassified in 
each fiscal year and in total. For FY 1997 reclassifications, we 
indicate 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 for FY 1997 as a whole are projected to 
experience a 4.5 percent increase in payments (a 0.8 percent decrease 
attributable to Federal rate changes and a 5.3 percent positive offset 
attributable to the effects of all other changes). Payments to 
nonreclassified hospitals will increase slightly less (3.9 percent) 
than reclassified hospitals (4.5 percent). Payments to nonreclassified 
hospitals will decrease slightly more than reclassified hospitals from 
the Federal rate changes (1.3 percent compared to 0.8 percent), but 
they will gain about the same from the effects of all other changes 
(5.2 percent compared to 5.3 percent).

                                 Table V.--Comparison Of Total Payments Per Case                                
                                 [FY 1996 Payments Compared to FY 1997 Payments]                                
----------------------------------------------------------------------------------------------------------------
                                                               Average FY   Average FY                 Portion  
                                                  Number of       1996         1997                  attibutable
                                                  hospitals    payments/    payments/   All changes   to federal
                                                                  case         case                  rate change
----------------------------------------------------------------------------------------------------------------
By Geographic Location:                                                                                         
    All hospitals..............................        5,104          718          746          3.9         -1.3
    Large urban areas (populations over 1                                                                       
     million)..................................        1,584          823          852          3.6         -1.2
    Other urban areas (populations of 1 million                                                                 
     of fewer).................................        1,275          715          745          4.1         -1.1
    Rural areas................................        2,245          478          501          4.7         -1.7
    Urban hospitals............................        2,859          776          806          3.8         -1.2
        0-99 beds..............................          697          566          589          4.0         -1.3
        100-199 beds...........................          941          705          732          3.7         -1.3
        200-299 beds...........................          576          744          774          4.0         -1.3
        300-499 beds...........................          478          801          830          3.7         -1.2
        500 or more beds.......................          167          944          980          3.8         -0.9
    Rural hospitals............................        2,245          478          501          4.7         -1.7
        0-49 beds..............................        1,175          367          385          5.0         -2.0
        50-99 beds.............................          656          447          468          4.8         -1.6
        100-149 beds...........................          241          511          532          4.2         -1.7
        150-199 beds...........................           98          511          540          5.6         -1.4
        200 or more beds.......................           75          612          638          4.3         -2.0
By Region:                                                                                                      
    Urban by Region............................        2,859          776          806          3.8         -1.2
        New England............................          160          784          817          4.3         -1.9
        Middle Atlantic........................          434          813          848          4.2         -1.2
        South Atlantic.........................          418          780          814          4.3         -1.1
        East North Central.....................          480          727          749          3.1         -1.2
        East South Central.....................          162          707          733          3.7         -0.8
        West North Central.....................          190          772          809          4.8         -1.0
        West South Central.....................          367          796          823          3.4         -0.4
        Mountain...............................          126          775          797          2.7         -1.5
        Pacific................................          474          855          883          3.3         -1.7
        Puerto Rico............................           48          305          326          6.8         -0.4
    Rural by Region............................        2,245          478          501          4.7         -1.7
        New England............................           53          606          698         15.2         -2.3
        Middle Atlantic........................           84          497          525          5.6         -2.7
        South Atlantic.........................          297          498          511          2.8         -2.0
        East North Central.....................          304          482          510          5.9         -1.3
        East South Central.....................          278          446          463          3.8         -1.8
        West North Central.....................          525          454          477          5.2         -1.7
        West South Central.....................          347          440          449          2.1         -1.3
        Mountain...............................          211          504          534          6.1         -0.8
        Pacific................................          141          555          587          5.9         -1.3
By Payment Classification:                                                                                      
    All hospitals..............................        5,104          718          746          3.9         -1.3
    Large urban areas (populations over 1                                                                       
     million)..................................        1,779          807          836          3.6         -1.2
    Other urban areas (populations of 1 million                                                                 
     of fewer).................................        1,180          715          746          4.2         -1.1
    Rural areas................................        2,145          472          494          4.7         -1.8

[[Page 46320]]

                                                                                                                
    Teaching Status:                                                                                            
        Non-teaching...........................        4,019          622          645          3.8         -1.3
        Fewer than 100 Residents...............          850          757          787          3.9         -1.2
        100 or more Residents..................          235        1,034        1,079          4.3         -1.2
        Urban DSH:                                                                                              
            100 or more beds...................        1,409          813          843          3.7         -1.2
            Less than 100 beds.................          100          576          607          5.4         -1.2
        Rural DSH:                                                                                              
            Sole Community (SCH/EACH)..........          156          449          486          8.1         -1.5
            Referral Center (RRC/EACH).........           27          533          541          1.5         -1.0
            Other Rural:                                                                                        
                100 or more beds...............           83          488          504          3.3         -2.5
                Less than 100 beds.............          151          367          379          3.3         -2.2
    Urban teaching and DSH:                                                                                     
        Both teaching and DSH..................          692          879          911          3.6         -1.2
        Teaching and no DHS....................          339          786          821          4.5         -1.1
    No teaching and DSH........................          817          710          737          3.9         -1.2
    No teaching and no DSH.....................        1,111          673          697          3.6         -1.1
Rural Hospital Types:                                                                                           
    Non special status hospitals...............        1,372          439          458          4.2         -2.2
    RRC/EACH...................................           90          559          573          2.6         -1.1
    SCH/EACH...................................          645          470          502          6.8         -1.6
    SCH, RRC and EACH..........................           38          582          6.5          5.7         -1.4
Hospitals Reclassified by the Medicare                                                                          
 Geographic Classification Review Board:                                                                        
    Reclassification Status During FY96 and                                                                     
     FY97:                                                                                                      
        Reclassified During Both FY96 and FY97.          379          662          685          3.5         -1.5
    Reclassified During FY97 Only..............           98          673          732          8.7          2.0
    Reclassified During FY96 Only..............          230          652          661          1.4         -3.9
    FY 97 Reclassifications:                                                                                    
        All Reclassified Hospitals.............          477          664          694          4.5         -0.8
        All Nonreclassified Hospitals..........        4,600          726          754          3.9         -1.3
        All Urban Reclassified Hospitals.......          159          756          782          3.5         -1.0
        Urban Nonreclassified Hospitals........        2,700          778          808          3.8         -1.2
        All Reclassified Rural Hospitals.......          318          570          604          5.9         -0.7
        Rural Nonreclassified Hospitals........        1,900          442          460          4.1         -2.2
    Other Reclassified Hospitals (Section 1886                                                                  
     (D)(8)(B))................................           27          541          561          3.7         -1.8
Type of Ownership:                                                                                              
    Voluntary..................................        2,951          731          760          3.8         -1.3
    Proprietary................................          696          751          777          3.4         -0.9
    Government.................................        1,366          625          657          5.1         -1.5
Medicare Utilization as a Percent of Inpatient                                                                  
 Days:                                                                                                          
    0-25.......................................          258          797          830          4.1         -2.0
    25-50......................................        1,284          843          875          3.9         -1.2
    50-60......................................        2,097          676          703          4.0         -1.2
    Over 65....................................        1,374          603          627          4.0         -1.3
----------------------------------------------------------------------------------------------------------------

Appendix B: Technical Appendix on the Capital Acquisition Model and 
Required Adjustments

    Under section 1886(g)(1)(A) of the Act, we set capital prospective 
payment rates for FY 1992 through FY 1995 so that aggregate prospective 
payments for capital costs were projected to be 10 percent lower than 
the amount that would have been payable on a reasonable cost basis for 
capital-related costs in that year. To implement this requirement, we 
developed the capital acquisition model to determine the budget 
neutrality adjustment factor. Even though the budget neutrality 
requirement expires effective with FY 1996, we must continue to 
determine the recalibration and geographic reclassification budget 
neutrality adjustment factor, and the reduction in the Federal and 
hospital-specific rates for exceptions payments. We continue to use the 
capital acquisition model to determine these factors.
    The following data are used in the capital acquisition model for FY 
1997: the June 30, 1996 update of the cost reports for PPS-IX (cost 
reporting periods beginning in FY 1992), PPS-X (cost reporting periods 
beginning in FY 1993) and PPS-XI (cost reporting periods beginning in 
FY 1994), the July 1, 1996 update of the provider-specific file, and 
the March 1994 update of the intermediary audit file. The available 
data still lack certain items that were required for the determination 
of budget neutrality, including each 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.
    Since hospitals under alternative payment system waivers (that is, 
hospitals in Maryland) are currently excluded from the capital 
prospective

[[Page 46321]]

payment system, we excluded these hospitals from our model.
    We then developed FY 1992, FY 1993, FY 1994, FY 1995, and FY 1996 
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), 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), that the FY 1995 increase in the 
hospital-specific rate was at least 0.05 percent (the net FY 1995 
update), and that the FY 1996 increase in the hospital-specific rate 
was at least 21.10 percent (the net FY 1996 update). We were able to 
match hospitals to the files as shown in the following table.

------------------------------------------------------------------------
                                                              Number of 
                           Source                             hospitals 
------------------------------------------------------------------------
Provider-Specific File Only................................           99
Provider-Specific and Audit File...........................         5029
Other......................................................            1
                                                            ------------
      Total................................................         5129
------------------------------------------------------------------------

    Sixty-six of these hospitals had unusable or missing data. We were 
able to backfill a hospital-specific rate for 41 of these hospitals 
from the cost reports as shown in the following table.

------------------------------------------------------------------------
                                                              Number of 
                           Source                             hospitals 
------------------------------------------------------------------------
PPS-VII Cost Reports.......................................            1
PPS-VIII Cost Reports......................................            2
PPS-IX Cost Reports........................................            3
PPS-X Cost Reports.........................................            7
PPS-XI Cost Reports........................................           28
                                                            ------------
      Total................................................           41
------------------------------------------------------------------------

    We did not have data for 25 hospitals, and had to eliminate them 
from the capital analysis. These hospitals likely are new hospitals or 
hospitals with very few Medicare admissions. This leaves us with 5104 
hospitals and should not affect the precision of the required 
adjustment factors.
    Next, we determined old and new capital amounts for FY 1992 using 
the PPS-IX cost reports as the first source of data. For FY 1993 
amounts, we used PPS-IX and PPS-X cost reports as the first source of 
data, weighting each cost report by the number of days in FY 1993. For 
FY 1994 amounts, we used PPS-X and PPS-XI cost reports as the first 
source of data, weighting each cost report by the number of days in FY 
1994. We were able to match 5,049 PPS-IX cost reports, 5,064 PPS-X cost 
reports, and 4,924 PPS-XI cost reports. In cases where cost reports 
could not be matched, we used the provider-specific file for old 
capital information. Even in cases where a cost report was available, 
the breakout 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. 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 does not reflect 
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 costs 
per discharge amount. Since we must project capital amounts for each 
hospital, we continued to use a Monte Carlo simulation to develop these 
amounts. (This model is described in detail in the August 30, 1991 
final rule (56 FR 43517).) 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 cost 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 0.85 (aging factor). The 0.85 aging factor is 
the average of changes in capital over its life due to the gradual 
decrease in interest payments and the retirement of fully depreciated 
capital. The aged new and old capital is subtracted from the projected 
capital described in the previous paragraph. The difference represents 
newly acquired capital. If the hospital has obligated capital, any 
increase in ``old'' capital up to the total amount of obligated capital 
in FY 1993 and FY 1994 is assigned to obligated capital. Any remaining 
obligated capital is assigned to FY 1995 up to the amount of the 
modeled increase in capital for FY 1995. Even though obligated capital 
must be put in use for patient care by October 1, 1994, the use of the 
obligated capital may have started late in FY 1994 with only part of 
the ``first year'' depreciation and interest realized in FY 1994. The 
remainder of the ``first year'' depreciation and interest would be 
realized in 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. Hence, no obligated capital is assigned to years FY 1996 and 
later. Once obligated capital is assigned, it is included with the 
``old'' capital and is capitalized into future years as part of ``old'' 
capital. 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

[[Page 46322]]

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-IX 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 
FY 1995 MedPAR file using the FY 1997 DRG relative weights published in 
this final rule. The case-mix index is increased each year after FY 
1995 based on analysis of past experiences in case-mix increases.
    We analyzed the case-mix increases for the recent past and found 
that case-mix increases have decelerated to about 1.53 percent in FY 
1992, 0.80 percent in FY 1993, and 0.75 percent in FY 1994. It appears 
that the case-mix increase for FY 1995 accelerated to around 1.6 
percent. Early indications show that FY 1996 case-mix is increasing at 
FY 1995 level, that is, approximately 1.6 percent. Thus, it appears 
that the deceleration of case-mix increases in FY 1993 and FY 1994 were 
anamolous, rather than the beginning of a trend. Therefore, in the 
model we are using the recent experience and have used a case-mix 
increase of 1.6 percent in FY 1995 and a projected case-mix increase of 
1.6 percent in both FY 1996 and FY 1997. (Since we are using FY 1995 
cases for our analysis, the FY 1995 increase in case mix has no effect 
on projected capital payments.)
    Changes in geographic classification and revisions to 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 1886(g)(1)(A) of the Act 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. 
Since budget neutrality expires effective with FY 1996, this adjustment 
affects the adjusted Federal rate starting in FY 1996.
    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 1996, the budget neutrality adjustment factor was 
1.0025. To determine the factor for FY 1997, we first determined the 
portion of the Federal rate that would be paid for each hospital in FY 
1997 based on its applicable payment methodology. Using our model, we 
then compared estimated aggregate Federal rate payments based on the FY 
1996 DRG relative weights and the FY 1996 geographic adjustment factor 
to estimated aggregate Federal rate payments based on the FY 1997 
relative weights and the FY 1997 geographic adjustment factor. In 
making the comparison, we held the FY 1997 Federal rate portion 
constant and set the other budget neutrality adjustment factor and the 
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 0.9987 for FY 1997 should be applied to the 
previous cumulative FY 1996 adjustment of 1.0025 (the product of the FY 
1993 incremental adjustment of 0.9980, the FY 1994 incremental 
adjustment of 1.0053, the FY 1995 incremental adjustment of 0.9998, and 
the FY 1996 incremental adjustment of 0.9994), yielding a cumulative 
adjustment of 1.0012 through FY 1997.
    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 relative 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 simulate total payments under the 
prospective payment system.
    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 the exceptions reduction 
factor. This exceptions reduction factor ensures that aggregate 
payments under the capital prospective payment system, including 
exceptions payments, are projected to equal the aggregate payments that 
would have been made 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 exceptions reduction factor must be determined through 
iteration.
    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, FY 1994, FY 1995, FY 
1996, the final FY 1997 factor, and the estimated factors that would be 
applicable through FY 2001. We caution that, except with respect to FY 
1992, FY 1993, FY 1994, FY 1995, FY 1996 and FY 1997, 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 1.0012 for FY 1997 and later because we do not 
have sufficient information to estimate the change that will occur in 
the factor for years after FY 1997.
    The projections are as follows:

[[Page 46323]]



----------------------------------------------------------------------------------------------------------------
                                                                                                       Federal  
                                                                 Update     Exceptions     Budget    rate (after
                         Fiscal year                             factor     reduction    neutrality    outlier) 
                                                                              factor       factor     reduction)
----------------------------------------------------------------------------------------------------------------
1992........................................................          N/A       0.9813       0.9602       415.59
1993........................................................         6.07        .9756        .9162   \1\ 417.29
1994........................................................         3.04        .9485        .8947   \2\ 378.34
1995........................................................         3.44        .9734        .8432   \3\ 376.83
1996........................................................         1.20        .9849          N/A   \4\ 461.96
1997........................................................         0.70        .9358          N/A   \5\ 438.92
1998........................................................         1.20        .9121          N/A       432.94
1999........................................................         1.20        .9206          N/A       442.22
2000........................................................         1.30         9148          N/A       445.15
2001........................................................         1.30      \6\ N/A          N/A      492.93 
----------------------------------------------------------------------------------------------------------------
\1\ 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.                                                                              
\2\ 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.                                                                                                         
\3\ Note: Includes the DRG/GAF adjustment factor of 1.0031 and the change in the outlier adjustment from 0.9454 
  in FY 1994 to 0.9414 in FY 1995.                                                                              
\4\ Note: Includes the transfer adjustment of .9972. Also includes the DRG/GAF adjustment factor of 1.0025 and  
  the change in the outlier adjustment from 0.9414 in FY 1995 to 0.9536 in FY 1996.                             
\5\ Note: Includes the DRG/GAF adjustment factor of 1.0012 and the change in the outlier adjustment from 0.9536 
  in FY 1996 to 0.9481 in FY 1997. Future adjustments are, for purposes of this projection, assumed to remain at
  the same level.                                                                                               
\6\ Note: We are unable to estimate exceptions payments for the year under the special exceptions provision     
  (Sec.  412.348(g) of the regulations) because the regular exceptions provision (Sec.  412.348(e)) expires.    

Appendix C: Rebased Market Basket Data Sources

I. Data Sources Used to Determine the Market Basket Relative 
Weights and Choice of Price Proxy Variables for the Operating 
Hospital Input Price Indexes

    As discussed in section IV of the preamble to this final rule, we 
are rebasing and revising the hospital market baskets. This appendix 
describes the technical features of the 1992-based indexes that we are 
implementing in this rule. For both the prospective payment and 
excluded hospital market baskets, the differences between the 1992-
based market basket and the previous 1987-based market basket are 
noted. In the September 4, 1990 final rule (55 FR 36170), we discussed 
in detail the 1987-based hospital market baskets.
    We present this description of the hospital operating market 
baskets in three steps:
     A synopsis of the structural differences between the 1987-
based market baskets and the proposed 1992-based market baskets.
     A description of the methodology used to develop the cost 
category weights in the 1992-based market baskets, making note of the 
differences from the methodology used to develop the 1987-based market 
baskets.
     A description of the data sources used to measure price 
change for each component of the 1992-based market baskets, making note 
of the differences from the price proxies used in the 1987-based 
hospital market baskets.

A. Synopsis of Structural Changes Adopted in the Rebased 1992 Operating 
Hospital Market Baskets.

    Three major structural differences exist between the 1987-based and 
the 1992-based operating hospital market baskets.
     The 1992-based hospital market baskets are based on more 
recent hospital expenditure data. The 1987-based market baskets 
contained skeletal cost shares that were derived from the 1987 cost 
data from the 1988 Annual Survey of the American Hospital Association 
(AHA). The 1992-based market baskets use data from the hospital cost 
reports for cost reporting periods beginning on or after October 1, 
1991 and before October 1, 1992.
     Some cost categories have been combined, namely Fuel, Oil, 
Coal, and Other Fuel with Motor Gasoline, and Blood Services with 
Chemicals. These category mergers reflect the Bureau of Economic 
Analysis (BEA) reclassification decisions in the 1987 update of the BEA 
Input-Output Tables.
     In the 1992-based market basket, the sample of excluded 
hospitals is restricted to more closely reflect the average Medicare 
length of stay in excluded hospitals. We have used cost report data for 
excluded hospitals from only those hospitals in which the average 
length of stay of Medicare patients in the hospital is within 15 
percent of the average length of stay of all patients in the hospital 
to more accurately reflect the structure of costs for Medicare cases. 
This is a change from the FY 1987-based market basket, for which data 
from all excluded hospitals were used.

B. Methodology for Developing the Cost Category Weights.

    Cost category weights for the 1992-based market baskets were 
developed in four stages. First, base weights for three (Wages and 
Salaries, Employee Benefits, Pharmaceuticals) of the six main 
categories were derived from the 1992 Medicare cost reports for 
operating costs. Second, the weight for Nonmedical Professional Fees 
was developed by subtracting Medical Professional Fees reported in the 
Hospital Cost Report Information System (HCRIS) file from AHA Annual 
Survey Total Professional Fees to obtain Nonmedical Professional Fees, 
and the weight for Professional Liability Insurance was developed using 
1989 HCRIS data trended forward to 1992, using the relative importance 
values in the previous market baskets. Third, the sum of Wages and 
Salaries, Employee Benefits, Pharmaceuticals, Nonmedical Professional 
Fees, and Professional Liability Insurance was subtracted from total 
expenses to obtain All Other Expenses. Finally, the weight for All 
Other Expenses was divided into subcategories using cost shares from 
the 1987 Input-Output Table for the hospital industry, produced by the 
U.S. Department of Commerce, Bureau of Economic Analysis, aged to 1992 
using price changes. As of this writing the Department of Commerce has 
not released final 1992 cost data. Therefore we plan to incorporate 
these data into the FY 1998 proposed rule.
    Below, we describe the source of the six main category weights and 
their subcategories in the 1992-based market

[[Page 46324]]

baskets. We make note of the differences between the methodologies used 
to develop the 1987-based and the 1992-based market baskets.
1. Wages and Salaries
    The cost weight for the Wages and Salaries category was derived 
using the 1992 Medicare cost reports. Contract Labor, which is also 
derived from the 1992 Medicare cost reports, is split between the Wages 
and Salaries and Employee Benefits cost categories, using the 
relationship for employed workers. Examples of Contract Labor are 
registered nurses and workers in hospital food service or security who 
are employed and paid by firms that contract for their work with the 
hospital. The Wages and Salaries cost category was disaggregated into 
nine occupational subcategories (professional and technical, managers 
and administration, sales, clerical, craft and kindred, operatives 
excluding transport, transport equipment operatives, nonfarm laborers 
and service workers) to reflect the mix of occupational inputs used by 
hospitals. The Contract Labor wages and salaries component was 
allocated proportionally to Professional-Technical and Service 
occupations. The 1987-based weights were developed from the 1987 
Current Population Survey, while the 1992-based weights were developed 
from the 1992 Current Population Survey.
2. Employee Benefits
    The cost weight for the employee benefits category was derived from 
the 1992 cost reports. Like wages and salaries, the employee benefit 
weight in each 1992-based market basket is a composite of nine labor 
subcategories. The employee benefits categories in the 1987-based 
market baskets were developed from the 1987 AHA Annual Survey and used 
the 1987 Current Population Survey. In 1987 Contract Labor's implied 
fringe benefits were allocated proportionally to Professional and 
Technical occupations, while in 1992 they were allocated to 
Professional-Technical and Service occupations.
3. Nonmedical Professional Fees
    The cost weight for the nonmedical professional fees category was 
derived from the 1992 Medicare Cost Reports and AHA Annual Survey data. 
Total professional fees were split into the subcategories medical and 
other (nonmedical) fees using AHA Total Professional Fees minus HCRIS 
Medical Professional Fees to equal Nonmedical Professional Fees. The 
1987-based nonmedical professional fees cost category was derived from 
the 1987 AHA Annual Survey and American Medical Association (AMA) data. 
It was split into the subcategories medical and other fees using data 
derived from the American Medical Association. The medical professional 
fees category is excluded from the hospital market basket since it is 
paid under Medicare Part B.
4. Professional Liability Insurance
    The 1987-based market baskets have weights for professional 
liability insurance that were derived from the June 30 and December 31, 
1987 HAS/Monitrend surveys. The cost weight for the 1992-based 
professional liability insurance category was derived from 1989 HCRIS 
cost shares trended to 1992 using the change in the relative importance 
factor for professional liability insurance (malpractice) from the 
previous 1987-based prospective payment hospital and excluded hospital 
market baskets.
5. Utilities
    For the 1987-based market baskets, the cost weight for utilities 
was derived by extrapolating the 1985 AHA Annual Survey utilities cost 
weight forward to 1987 using the rate of growth in the HAS/Monitrend 
cost weight for utilities between 1985 and 1987. The 1987 Utility 
subcategory weights were aged from their 1982-based index subcategory 
weights using price changes from 1982 to 1987. The 1992-based market 
basket cost weights for the subcategories (fuel, oil and gasoline; 
electricity; natural gas; and water and sewage) were derived from the 
Bureau of Economic Analysis' 1987 Input-Output table for the hospital 
industry, aged forward to 1992 by price changes and summed to a weight 
for utilities.
6. All Other Goods and Services
    The all other goods and services category has more subcategories 
than any other market basket category. Goods found in this category 
include: direct service food, contract service food, pharmaceuticals, 
chemicals, medical instruments, photo supplies, rubber and plastics, 
paper products, apparel, machinery and equipment and miscellaneous 
products. Services found in this category include: business services, 
computer services, transportation and shipping, telephone, postage, 
other labor-intensive services, and other nonlabor-intensive services. 
The share for pharmaceuticals was derived from the 1992 Medicare cost 
reports. Relative shares for the other subcategories were derived from 
the 1987 Bureau of Economic Analysis' Input-Output table for the 
hospital industry and were aged forward to 1992 using price changes.

C. Price Proxies Used To Measure Cost Category Growth

1. Wages and Salaries
    For measuring price growth in the 1992-based market basket, 10 
price proxies are applied to the 9 occupational subcategories within 
the wages and salaries component. As in the 1987-based market basket, 
the professional and technical subcategory was split in half. An 
Employee Cost Index (ECI) for hourly wages paid to civilian hospital 
workers was applied to one half. An ECI of hourly wages and salaries 
paid to professional and technical workers in private industry was 
applied to the other half of the professional and technical component. 
The other eight occupations subcategories of the wages and salaries 
component were proxied using ECIs for wages and salaries for private 
industry workers in their respective occupational categories.
2. Employee Benefits
    The 1992-based hospital market baskets use occupation-specific ECIs 
for employee benefits. The distribution of weights and price proxies is 
the same as for wages and salaries discussed above, but occupation-
specific employee benefit ECIs replace occupation-specific wages and 
salaries ECIs. The components are summed into a composite index, just 
as was done for the 1987-based market basket.
3. Nonmedical Professional Fees
    The ECI for compensation for professional and technical workers in 
private industry is applied to this category. This is a revision from 
the 1987-based market basket in which the ECI for wages and salaries 
for professional and technical workers in private industry was used.
4. Fuel, Oil, and Gasoline
    The percentage change in the price of refined petroleum products as 
measured by the Producer Price Index (PPI) (Commodity Code #057) was 
applied to this component. This is a revision from the 1987-based 
indexes in which the PPIs for Light Fuel Oil (Commodity Code #0573) and 
Gasoline (Commodity Code #0571) were used.
5. Electricity
    The percentage change in the price of commercial electric power as 
measured by the PPI (Commodity Code #0542) was applied to this 
component. This is a revision from the 1987-based indexes in

[[Page 46325]]

which the PPI for industrial power (Commodity Code #0543) was used.
6. Natural Gas
    The percentage change in the price of gas fuels as measured by the 
PPI (Commodity Code #0552) was applied to this component. This is a 
revision from the 1987-based indexes in which the PPI for Natural Gas 
(Commodity Code #0531) was used.
7. Water and Sewerage
    The percentage change in the price of water and sewerage 
maintenance as measured by the Consumer Price Index (CPI) for all urban 
consumers was applied to this component. The same price measure was 
used in the 1987-based market baskets.
8. Professional Liability Insurance
    The percentage change in the hospital professional liability 
insurance price as estimated by hospital industry professional 
liability insurance premium increase was applied to this component. The 
same price measure was used in the 1987-based market baskets.
9. Pharmaceuticals
    The percentage change in the price of ethical preparations as 
measured by the PPI (Commodity Code #0635) was applied to this 
variable. The same price measure was used in the 1987-based market 
baskets.
10. Food, Direct Purchases
    The percentage change in the price of processed foods and feeds as 
measured by the PPI (Commodity Code #02) was applied to this component. 
The same price measure was used in the 1987-based market baskets.
11. Food, Contract Services
    The percentage change in the price of food purchased away from home 
as measured by the CPI for all urban consumers was applied to this 
component. The same price measure was used in the 1987-based market 
baskets.
12. Chemicals
    The percentage change in the price of industrial chemical products 
as measured by the PPI (Commodity Code #061) was applied to this 
component. The same price measure was used in the 1987-based market 
baskets.
13. Surgical and Medical Equipment
    The percentage change in the price of medical and surgical 
instruments as measured by the PPI (Commodity Code #1562) was applied 
to this component. The same price measure was used in the 1987-based 
market baskets.
14. Photographic Supplies
    The percentage change in the price of photographic supplies as 
measured by the PPI (Commodity Code #1542) was applied to this 
component. The same price measure was used in the 1987-based market 
baskets.
15. Rubber and Plastics
    The percentage change in the price of rubber and plastic products 
as measured by the PPI (Commodity Code #07) was applied to this 
component. The same price measure was used in the 1987-based market 
baskets.
16. Paper Products
    The percentage change in the price of converted paper and 
paperboard products as measured by the PPI (Commodity Code #0915) was 
used. This is a revision from the 1987-based indexes in which a 
weighted average of the percentage change in the price of converted 
paper and paperboard products and the percentage change in the price of 
paper excluding newsprint and packaging paper (Commodity Code #091301) 
was used.
17. Apparel
    The percentage change in the price of apparel as measured by the 
PPI (Commodity Code #381) was applied to this component. This is a 
revision from the 1987-based indexes in which the PPI for textile house 
furnishings (Commodity Code #0382) was used.
18. Minor Machinery and Equipment
    The percentage change in the price of machinery and equipment as 
measured by the PPI (Commodity Code #11) was applied to this component. 
The same price measure was used in the 1987-based market baskets.
19. Miscellaneous Products
    The percentage change in the price of all finished goods as 
measured by the PPI was applied to this component. The same price 
measure was used in the 1987-based market baskets.
20. Business Services
    The ECI for compensation for workers in the business services 
industry was applied to this component. This is a revision from the 
1987-based indexes in which the percentage change in the AHE for wages 
and salaries for production and nonsupervisory workers in the business 
services industry as measured by the Bureau of Labor Statistics (SIC 
Code 73) was used.
21. Computer and Data Processing Services
    The percentage change in the AHE of production and nonsupervisory 
workers engaged in firms furnishing computer data processing services 
(SIC Code 737) was applied to this component. The same price measure 
was used in the 1987-based market baskets.
22. Transportation and Shipping
    The percentage change in the transportation component of the CPI 
for all urban consumers was applied to this component. The same price 
measure was used in the 1987-based market baskets.
23. Telephone
    The percentage change in the price of telephone services as 
measured by the CPI for all urban consumers was applied to this 
component. The same price measure was used in the 1987-based market 
baskets.
24. Postage
    The percentage change in the price of postage as measured by the 
CPI for all urban consumers was applied to this component. The same 
price measure was used in the 1987-based market baskets.
25. All Other Services, Labor Intensive
    The percentage change in the ECI for compensation paid to service 
workers employed in private industry was applied to this component. 
This is a revision from the 1987-based indexes in which the ECI for 
wages and salaries paid to service workers employed in private industry 
was used.
26. All Other Services, Nonlabor Intensive
    The percentage change in the all-items component of the CPI for all 
urban consumers was applied to this component. The same price measure 
was used in the 1987-based market baskets.
    For further discussion of the rationale for choosing specific price 
proxies, we refer the reader to the September 3, 1986 final rule (51 FR 
31582).

II. Data Sources Used to Determine the Cost Category Weights and 
Vintage Weights, and Choices of Price Proxy Variables for the Hospital 
Capital Input Price Index

    In the preamble to this final rule, we discuss the rebasing of the 
capital input price index (CIPI). This appendix describes certain 
technical features of the 1992-based index, as well as differences 
between the 1992-based CIPI and the 1987-based CIPI. We discussed

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the 1987-based CIPI in the September 1, 1995 final rule (60 FR 45817.)
    This discussion has the following three parts:
     A synopsis of the differences between the 1987-based CIPI 
and the 1992-based CIPI.
     A description of the methodology used to develop the cost 
category weights and vintage weights in the 1992-based CIPI, making 
note of the differences from the methodology used to develop the 1987-
based CIPI.
     A description of the data sources used to measure price 
change for each component of the 1992-based CIPI, making note of the 
differences from the price proxies used in the 1987-based CIPI.

A. Synopsis of Changes Adopted in the Rebased 1992 CIPI

    We made no structural changes in the 1992-based CIPI. The only 
major change is the use of more recent hospital capital expenditure 
data. The 1987-based CIPI contained cost category weights that were 
derived from 1987 Medicare cost report data and the 1987 Annual Survey 
of the AHA. The 1992-based CIPI uses data from the hospital Medicare 
cost reports for cost periods beginning between October 1, 1991 and 
September 30, 1992. The 1992-based CIPI also uses data from the 1992 
Annual Survey of the AHA.
    The 1987-based CIPI contained vintage weights that were derived 
from 1987 Medicare cost report data, the 1963-1987 Panel Survey of the 
AHA, and the 1980-1989 Securities Data Corporation data on hospital 
bonds. The 1992-based CIPI uses data from the 1992 Medicare cost 
reports, the 1963-1992 Panel Survey of the AHA, and 1980-1992 
Securities Data Corporation data on hospital bonds.

B. Methodology for Developing Cost Category Weights and Vintage Weights 
for the 1992-based CIPI

    There are five cost categories in the CIPI: Building and fixed 
equipment depreciation, movable equipment depreciation, capital-related 
interest expense from government/nonprofit debt instruments, capital-
related interest expense from for-profit debt instruments, and other 
capital-related expenses, such as taxes and insurance. The methodology 
for developing each of these cost category weights is described below:
    1. Building and Fixed Equipment Depreciation
    The 1992-based cost weight for building and fixed equipment 
depreciation was derived using the 1992 Medicare cost reports. The 
proportion of lease expenses attributable to building and fixed 
equipment was included in the cost weight based on the proportion of 
overall capital expenses allocated to building and fixed equipment 
depreciation. The 1987-based weight was developed from the 1987 
Medicare cost reports and the 1987 AHA Annual Survey.
2. Movable Equipment Depreciation
    The 1992-based cost weight for movable equipment depreciation was 
derived using the 1992 Medicare Cost Reports. The proportion of lease 
expenses attributable to movable equipment was included in the cost 
weight based on the proportion of overall capital expenses allocated to 
movable equipment depreciation. The 1987-based weight was developed 
from the 1987 Medicare cost reports and the 1987 AHA Annual Survey.
3. Government/Nonprofit Interest
    The 1992-based cost weight for government/nonprofit interest was 
derived using the 1992 AHA Annual Survey data. The government/nonprofit 
interest is 85 percent of total interest, reflecting the relative debts 
of the government/nonprofit hospital sector and the for-profit hospital 
sector. The proportion of lease expenses attributable to government/
nonprofit interest was included in the cost weight based on the 
proportion of overall capital expenses allocated to government/non-
profit interest expense. The 1987-based weight was developed from the 
1987 AHA Annual Survey.
4. For-Profit Interest
    The 1992-based cost weight of for-profit interest was derived using 
the 1992 AHA Annual Survey data. The for-profit interest is 15 percent 
of total interest, reflecting the relative debts of the government/
nonprofit hospital sector and the for-profit hospital sector. The 
proportion of lease expenses attributable to for-profit interest was 
included in the cost weight based on the proportion of overall capital 
expenses allocated to for-profit interest expense. The 1987-based 
weight was developed from the 1987 AHA Annual Survey.
5. Other Capital-Related Expenses
    The 1992-based cost weight for other capital-related expenses was 
derived using 1992 Medicare cost reports. The proportion of lease 
expenses attributable to other capital-related expenses was included in 
the cost weight based on the proportion of overall capital expenses 
allocated to other capital-related expenses. The 1987-based weight was 
developed from the 1987 Medicare cost reports and the 1987 Capital 
Expenditure Survey.
6. There are three sets of vintage weights in the CIPI
    Building and fixed equipment depreciation, movable equipment 
depreciation, and interest expense. The methodology for developing each 
of these vintage weights is described below.
    a. Building and Fixed Equipment: The 1992-based building and fixed 
equipment vintage weights were derived from the 1992 Medicare cost 
reports and the 1963-1992 AHA Panel Survey. The 1987-based weights were 
developed from the 1987 Medicare cost reports and the 1963-1987 AHA 
Panel Survey.
    b. Movable Equipment: The 1992-based movable equipment vintage 
weights were derived from the 1992 Medicare cost reports and the 1963-
1992 AHA Panel Survey. The 1987-based weights were developed from the 
1987 Medicare cost reports and the 1963-1987 AHA Panel Survey.
    c. Capital-Related Interest: The 1992-based movable equipment 
vintage weights were derived from the 1980-1992 Securities Data 
Corporation data on hospital bonds and the 1963-1992 AHA Panel Survey. 
The 1987-based weights were developed from the 1980-1989 Securities 
Data Corporation data on hospital bonds and the 1963-1987 AHA Panel 
Survey.

C. Price Proxies Used to Measure Cost Category Growth in the CIPI

1. Building and Fixed Equipment Depreciation
    The percentage change in the vintage-weighted price of building and 
fixed equipment depreciation as measured by the Boeckh institutional 
construction index was applied to this category in the 1992-based CIPI. 
The same price proxy was used in the 1987-based CIPI.
2. Movable Equipment Depreciation
    The percentage change in the vintage-weighted price of movable 
equipment depreciation as measured by the Producer Price Index (PPI) 
for machinery and equipment was applied to this category in the 1992-
based CIPI. The same price proxy was used in the 1987-based CIPI.
3. Government/Nonprofit Interest Expense
    The percentage change in the vintage-weighted price of government/
nonprofit interest expense as measured by the Average yield on Domestic 
Municipal Bonds from the Bond Buyer index of 20 bonds was applied to 
this category in

[[Page 46327]]

the 1992-based CIPI. The same price proxy was used in the 1987-based 
CIPI.
4. For-Profit Interest Expense
    The percentage change in the vintage-weighted price of for-profit 
interest expense as measured by the Average yield on Moody's Aaa Bonds 
was applied to this category in the 1992-based CIPI. The same price 
proxy was used in the 1987-based CIPI.
5. Other Capital-Related Expenses
    The percentage change in the price of other capital-related 
expenses as measured by the CPI for all urban consumers for residential 
rent was applied to this category in the 1992-based CIPI. The same 
price proxy was used in the 1987-based CIPI.
    We provided more detailed discussion of the rationale for the 
choice of these price proxies in the June 2, 1995 proposed rule (60 FR 
29227) and in the September 1, 1995 final rule (60 FR 45815).

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 inpatient services furnished in FY 1997 
by hospitals subject to the prospective payment system and those 
excluded from the prospective payment system. Section 
1886(b)(3)(B)(i)(XII) of the Act sets the FY 1997 percentage increase 
in the operating cost standardized amounts equal to the rate of 
increase in the hospital market basket minus 0.5 percentage points for 
prospective payment hospitals in all areas. Section 1886(b)(3)(B)(iv) 
of the Act sets the FY 1997 percentage increase in the hospital-
specific rates applicable to sole community hospitals equal to the rate 
set forth in section 1886(b)(3)(B)(i) of the Act, that is, the same 
update factor as all other hospitals subject to the prospective payment 
system, or the rate of increase in the market basket minus 0.5 
percentage points. Section 1886(b)(3)(B)(ii) of the Act sets the FY 
1997 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 the applicable 
reduction or, in the case of a hospital in a fiscal year for which the 
hospital's update adjustment percentage is at least 10 percent, the 
excluded hospital market basket percentage increase. Under section 
1886(b)(3)(B)(v) of the Act, a hospital's update adjustment percentage 
increase for FY 1997 is the percentage increase by which the hospital's 
allowable operating costs of inpatient hospital services recognized 
under this title for the cost reporting period beginning in FY 1990 
exceed the hospital's target amount for such cost reporting period, 
increased for each fiscal year (beginning with FY 1994) by the sum of 
any of the hospital's applicable reductions for previous years. The 
applicable reduction with respect to a hospital for FY 1997 is the 
lesser of 1 percentage point or the percentage point difference between 
10 percent and the hospital's update adjustment percentage for FY 1997.
    In accordance with section 1886(d)(3)(A) of the Act, we are 
updating the standardized amounts, the hospital-specific rates, and the 
rate-of-increase limits for hospitals excluded for the prospective 
payment system as provided in section 1886(b)(3)(B) of the Act. Based 
on the second quarter 1996 forecast of the FY 1997 rebased market 
basket increase of 2.5 percent for hospitals subject to the prospective 
payment system, the updates in the standardized amounts are 2.0 percent 
for hospitals in both large urban and other areas. The update in the 
hospital-specific rate applicable to sole community hospitals is 2.0 
percent (that is, the market basket rate of increase of 2.5 percent 
minus 0.5 percentage points). The update for hospitals excluded from 
the prospective payment system is based on the percentage increase in 
the excluded hospital market basket (currently estimated at 2.5 
percent) minus the applicable reduction factor. The applicable 
reduction factor is the lesser of 1 percentage point or the percentage 
point difference between 10 percent and the hospital's update 
adjustment percentage. Therefore, for excluded hospitals, the hospital-
specific update can vary between 1.5 and 2.5 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 of each year 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.
    Section 1886(e)(4) of the Act requires that the Secretary, taking 
into consideration the recommendations of ProPAC, recommend update 
factors for each fiscal year 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 published the FY 1996 update factors 
recommended under section 1886(e)(4) of the Act as Appendix E of the 
May 31, 1996 final rule (61 FR 27591).

II. Secretary's Final Recommendation for Updating the Prospective 
Payment System Standardized Amounts

    We did not receive any public comments concerning our proposed 
recommendation. Therefore, our final recommendation will be the same as 
our proposed recommendation. That is, we are recommending that the 
standardized amounts be increased by an amount equal to the market 
basket rate of increase minus 1.5 percentage points for hospitals 
located in large urban and other areas. We are also recommending an 
update of the market basket rate of increase minus 1.5 percentage 
points to the hospital-specific rate for sole community hospitals. 
These figures are consistent with the President's budget 
recommendation.
    In recommending these increases, we have followed section 
1886(e)(4) of the Act, which requires that we take into account the 
amounts necessary for the efficient and effective delivery of medically 
appropriate and necessary care of high quality. In addition, as 
required by section 1886(e)(4) of the Act, we have taken into 
consideration the recommendations of ProPAC. We believe our analyses, 
which measure changes in hospital productivity, scientific and 
technological advances, practice pattern changes, and changes in case 
mix, support our recommendations. These figures are consistent with the 
President's FY 1997 budget recommendation, which continues the 
reductions imposed by section 13501 of the Omnibus Budget 
Reconciliation Act of 1993 (Public Law 103-66), that is, reductions in 
the hospital market basket of 2.5 percentage points for FYs 1994 and 
1995 and 2.0 percentage points for FY 1996. We believe these 
recommended changes in the update factor would ensure that Medicare 
acts as a prudent purchaser and provide incentives to hospitals for 
increased efficiency, thereby contributing to the solvency of the 
Medicare Part A Trust Fund. When the President's budget was submitted, 
the market basket rate of increase was projected at 3.6 percent. As 
noted above, our final recommendation is based on the most recent 
forecast of the rebased market basket. (See section IV of the

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preamble to this final rule for a detailed discussion of the market 
basket.)

III. Secretary's Final Recommendation for Updating the Rate-of-Increase 
Limits for Excluded Hospitals and Units

    Our final recommendation is that hospitals and hospital units 
excluded from the prospective payment system receive an update equal to 
percentage increase in the rebased market basket that measures input 
price increases for services furnished by excluded hospitals minus 1.5 
percentage points. Thus, given the current estimate of the change in 
the market basket rate of increase for excluded hospitals of 2.5 
percent (compared with the earlier estimate of 2.7 percent used in the 
proposed rule), our final recommendation is for an update of 1.0 
percent. This recommendation is consistent with the President's budget, 
acknowledging that the market basket rate of increase for these 
hospitals was forecast at 3.6 percent at the time the budget was 
submitted.
[FR Doc. 96-22145 Filed 8-28-96; 8:45 am]
BILLING CODE 4120-03-P