[Federal Register Volume 62, Number 105 (Monday, June 2, 1997)]
[Proposed Rules]
[Pages 29902-30169]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-14248]



[[Page 29901]]

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Part III





Department of Health and Human Services





_______________________________________________________________________



Health Care Financing Administration



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42 CFR Parts 412, 413, and 489



Medicare Program; Changes to the Hospital Inpatient Prospective Payment 
Systems and Fiscal Year 1998 Rates; Proposed Rule

  Federal Register / Vol. 62, No. 105 / Monday, June 2, 1997 / Proposed 
Rules  

[[Page 29902]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 412, 413, and 489

[BPD-878-P]
RIN 0938-AH55


Medicare Program; Changes to the Hospital Inpatient Prospective 
Payment Systems and Fiscal Year 1998 Rates

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

ACTION: Proposed rule.

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SUMMARY: We are proposing to revise the Medicare hospital inpatient 
prospective payment systems for operating costs and capital-related 
costs to implement necessary changes arising from our continuing 
experience with the systems. In addition, in the addendum to this 
proposed rule, we are describing proposed changes in the amounts and 
factors necessary to determine prospective payment rates for Medicare 
hospital inpatient services for operating costs and capital-related 
costs. These changes would be applicable to discharges occurring on or 
after October 1, 1997. We are also setting forth proposed rate-of-
increase limits as well as proposing changes for hospitals and hospital 
units excluded from the prospective payment systems.

DATES: Comments will be considered if received at the appropriate 
address, as provided below, no later than 5 p.m. on August 1, 1997.

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

Health Care Financing Administration, Department of Health and Human 
Services, Attention: BPD-878-P, P.O. Box 7517, Baltimore, MD 21207-
0517.

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

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or
Room C5-09-26, Central Building, 7500 Security Boulevard, Baltimore, MD 
21244-1850.

    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code BPD-878-P. Comments received timely will be available for 
public inspection as they are received, generally beginning 
approximately three weeks after publication of a document, in Room 309-
G of the Department's offices at 200 Independence Avenue, SW., 
Washington, DC, on Monday through Friday of each week from 8:30 a.m. to 
5 p.m. (phone: (202) 690-7890).
    For comments that relate to information collection requirements, 
mail a copy of comments to:

Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503.

    Attn: Allison Herron Eydt, HCFA Desk Officer; and Office of 
Financial and Human Resources,

Management Planning and Analysis Staff, Room C2-26-17, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.

    Copies: To order copies of the Federal Register containing this 
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Register.

FOR FURTHER INFORMATION CONTACT:

Nancy Edwards, (410) 786-4531, Operating Prospective Payment, DRG, and 
Wage Index Issues.
Frank Emerson, (410) 786-4656, Capital Prospective Payment, Excluded 
Hospitals, and Graduate Medical Education Issues.

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. On August 
30, 1996, we published a final rule (61 FR 46166) to implement changes 
to the prospective payment system for hospital operating costs 
beginning with Federal fiscal year (FY) 1997.
    As required by section 1886(g) of the Act, effective with cost 
reporting periods beginning on or after October 1, 1991, we implemented 
a prospective payment methodology for hospital inpatient capital-
related costs. Under the new methodology, a predetermined payment 
amount per discharge is made for Medicare inpatient capital-related 
costs.

B. Major Contents of This Proposed Rule

    In this proposed rule, we are setting forth proposed changes to the 
Medicare hospital inpatient prospective payment systems for both 
operating costs and capital-related costs. This proposed rule would be 
effective for discharges occurring on or after October 1, 1997. 
Following is a summary of the major changes that we are proposing to 
make:
1. Changes to the DRG Classifications and Relative Weights
    As required by section 1886(d)(4)(C) of the Act, we must adjust the 
DRG classifications and relative weights at least annually. Our 
proposed changes for FY 1998 are set forth in section II. of this 
preamble.
2. Changes to the Hospital Wage Index
    In section III. of this preamble, we discuss proposed revisions to 
the wage index and the annual update of the wage data. Specific issues 
addressed in this section include:

     FY 1998 wage index update.
     Revisions to the wage index based on hospital 
redesignations.
     Revised process for wage data verification.
3. Revision of the Operating Hospital Market Baskets
    In section IV. of this preamble, we discuss our proposal to use a 
revised hospital market basket in developing the FY 1998 update factor 
for the operating prospective payment rates and the excluded hospital 
rate-of-increase limits.

[[Page 29903]]

4. Other Changes to the Prospective Payment System for Inpatient 
Operating Costs
    In section V. of this preamble, we discuss several provisions of 
the regulations in 42 CFR Parts 412 and 413 and set forth certain 
proposed changes concerning the following:

     Elimination of day outlier payments.
     Rural referral centers.
     Indirect medical education.
     Direct graduate medical education programs.
5. Changes to the Prospective Payment System for Capital-Related Costs
    In section VI. of this preamble, we discuss several provisions of 
the regulations in 42 CFR part 412, 413, and 489 and set forth certain 
proposed changes and clarifications concerning the following:

     Possible adjustments to capital minimum payment levels.
     Special exceptions application process.
6. Changes for Hospitals and Hospital Units Excluded From the 
Prospective Payment Systems
    In section VII. of this preamble, we discuss the criteria for 
``hospitals within hospitals'' seeking exclusion from the prospective 
payment system. We also discuss technical clarifications concerning 
exclusion of rehabilitation units.
7. Determining Prospective Payment Operating and Capital Rates and 
Rate-of-Increase Limits
    In the addendum to this proposed rule, we set forth proposed 
changes to the amounts and factors for determining the FY 1998 
prospective payment rates for operating costs and capital-related 
costs. We also are proposing update factors for determining the rate-
of-increase limits for cost reporting periods beginning in FY 1998 for 
hospitals and hospital units excluded from the prospective payment 
system.
8. Impact Analysis
    In Appendix A, we set forth an analysis of the impact that the 
proposed changes described in this proposed rule would have on affected 
entities.
9. Capital Acquisition Model
    Appendix B contains the technical appendix on the proposed FY 1998 
capital cost model.
10. Revised Market Basket Data Sources
    Appendix C sets forth the data sources used to determine the market 
basket relative weights and choice of price proxies.
11. Report to Congress on the Update Factor for Prospective Payment 
Hospitals and Hospitals Excluded From the Prospective Payment System
    Section 1886(e)(3)(B) of the Act requires that the Secretary report 
to Congress on our initial estimate of an update factor for FY 1998 for 
both hospitals included in and hospitals excluded from the prospective 
payment systems. This report is included as Appendix D to this proposed 
rule.
12. Proposed Recommendation of Update Factor for Hospital Inpatient 
Operating Costs
    As required by sections 1886 (e)(4) and (e)(5) of the Act, Appendix 
E provides our recommendation of the appropriate percentage change for 
FY 1998 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.
13. Discussion of Prospective Payment Assessment Commission 
Recommendations
    The Prospective Payment Assessment Commission (ProPAC) is directed 
by section 1886(e)(2)(A) of the Act to make recommendations on the 
appropriate percentage change factor to be used in updating the average 
standardized amounts. In addition, section 1886(e)(2)(B) of the Act 
directs ProPAC to make recommendations regarding changes in each of the 
Medicare payment policies under which payments to an institution are 
prospectively determined. In particular, the recommendations relating 
to the hospital inpatient prospective payment systems are to include 
recommendations concerning the number of DRGs used to classify 
patients, adjustments to the DRGs to reflect severity of illness, and 
changes in the methods under which hospitals are paid for capital-
related costs. Under section 1886(e)(3)(A) of the Act, the 
recommendations required of ProPAC under sections 1886(e)(2) (A) and 
(B) of the Act are to be reported to Congress not later than March 1 of 
each year.
    We are printing ProPAC's March 1, 1997 report, which includes its 
recommendations, as Appendix F of this document. The recommendations, 
and the actions we are proposing to take with regard to them (when an 
action is recommended), are discussed in detail in the appropriate 
sections of this preamble, the addendum, or the appendices to this 
proposed rule. See section VIII. of this preamble for specific 
information concerning where individual recommendations are addressed. 
For a brief summary of the ProPAC recommendations, we refer the reader 
to the beginning of the ProPAC report as set forth in Appendix F of 
this proposed rule. For further information relating specifically to 
the ProPAC report, contact ProPAC at (202) 401-8986.

II. Proposed Changes to DRG Classifications and Relative Weights

A. Background

    Under the prospective payment system, we pay for inpatient hospital 
services on the basis of a rate per discharge that varies by the DRG to 
which a beneficiary's stay is assigned. The formula used to calculate 
payment for a specific case takes an individual hospital's payment rate 
per case and multiplies it by the weight of the DRG to which the case 
is assigned. Each DRG weight represents the average resources required 
to care for cases in that particular DRG relative to the average 
resources used to treat cases in 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 proposed changes to the DRG 
classification system and the proposed recalibration of the DRG weights 
for discharges occurring on or after October 1, 1997 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

[[Page 29904]]

series of automated screens called the Medicare Code Editor (MCE). 
These screens are designed to identify cases that require further 
review before classification into a DRG can be accomplished.
    After screening through the MCE and any further development of the 
claims, cases are classified by the GROUPER software program into the 
appropriate DRG. The GROUPER program was developed as a means of 
classifying each case into a DRG on the basis of the diagnosis and 
procedure codes and demographic information (that is, sex, age, and 
discharge status). It is used both to classify past cases in order to 
measure relative hospital resource consumption to establish the DRG 
weights and to classify current cases for purposes of determining 
payment. The records for all Medicare hospital inpatient discharges are 
maintained in the Medicare Provider Analysis and Review (MedPAR) file. 
The data in this file are used to evaluate possible DRG classification 
changes and to recalibrate the DRG weights.
    Currently, cases are assigned to one of 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.
    The changes we are proposing to make to the DRG classification 
system for FY 1998 and other decisions concerning DRGs are set forth 
below. Unless otherwise noted, our DRG analysis is based on a 10 
percent random sample of the FY 1996 MedPAR file.
2. MDC 1 (Diseases and Disorders of the Nervous System)
    a. Stereotactic Radiosurgery. Effective October 1, 1995, procedure 
code 92.3 (stereotactic radiosurgery) was created and classified as a 
non-OR procedure. However, because this procedure had previously been 
coded to procedure codes that are classified as operating room 
procedures, we assigned procedure code 92.3 to the same surgical DRGs 
as the predecessor codes. Therefore, in the following DRGs, 
stereotactic radiosurgery is considered a non-OR procedure that affects 
DRG assignment: In MDC 1, DRG 1 (Craniotomy Age >17 Except for Trauma), 
DRG 2 (Craniotomy for Trauma Age >17), and DRG 3 (Craniotomy Age 0-17) 
and, in MDC 10 (Endocrine, Nutritional and Metabolic Diseases and 
Disorders), DRG 286 (Adrenal and Pituitary Procedures). In addition, in 
MDC 17 (Myeloproliferative Diseases and Disorders and Poorly 
Differentiated Neoplasms), procedure code 92.3 is considered a major OR 
procedure for purposes of assignment to DRG 400 (Lymphoma and Leukemia 
with Major OR Procedure) and DRGs 406 and 407 (Myeloproliferative 
Disorders or Poorly Differentiated Neoplasms with Major OR 
Procedure).1 We stated in the June 2, 1995 proposed rule (60 
FR 29207) that we would analyze the stereotactic radiosurgery cases as 
soon as the FY 1996 cases were available to ensure that these DRG 
assignments were appropriate.
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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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    In analyzing the FY 1996 MedPAR file, we find that there were 
stereotactic radiosurgery cases assigned to DRGs 1, 286, 400, and 407. 
In DRG 1, the average standardized charges for these cases is 
approximately $16,400 compared to approximately $27,800 for DRG 1 
overall and the lengths of stay are about 3 days and 10 days, 
respectively. In DRG 286, the average charges for procedure code 92.3 
are also much lower than all cases in that DRG, about $11,900 versus 
$19,400. Again the length of stay is also much lower for stereotactic 
radiosurgery, just over 1 day compared to almost 7 days for all DRG 286 
cases.
    Clearly, the cases associated with procedure code 92.3 are much 
less resource intensive than the other cases in the DRGs to which it is 
assigned. There are two courses of action that we could take. One, we 
could continue to consider code 92.3 a non-OR procedure that affects 
DRG assignment and reassign it to more appropriate surgical DRGs in MDC 
1 and 11. On the other hand, we could consider it a non-OR code that 
does not affect DRG assignment. In the latter situation, cases 
currently assigned to surgical DRGs because of the performance of 
stereotactic radiosurgery would be reassigned to medical DRGs in the 
same MDC.
    A review of the average charges for the medical DRGs in MDCs 1 and 
11 to which these cases would be assigned reveals that these DRGs are 
not as resource intensive as the stereotactic radiosurgery cases. 
Therefore, due to the higher charges associated with these cases, we 
are proposing to reassign procedure code 92.3 to DRGs 7 and 8 
(Peripheral and Cranial Nerve and Other Nervous System Procedures) in 
MDC 1 and DRGs 292 and 293 (Other Endocrine, Nutrition and Metabolic OR 
Procedures).
    We are also proposing to remove procedure code 92.3 from the list 
of major OR procedures in MDC 17. Again the average charges of those 
cases are lower than the other cases assigned to those DRGs. Therefore, 
these cases would be assigned to DRGs 401 and 402 (Lymphoma and Non-
Acute Leukemia with Other OR Procedure) and DRG 408 (Myeloproliferative 
Disorders or Poorly Differentiated Neoplasms with Other OR Procedure).
    b. Sleep Apnea. In our August 30, 1996 final rule (61 FR 46168), we 
discussed our review of the DRG assignment of cases in which surgery is 
performed to correct obstructive sleep apnea (diagnosis code 780.57). 
When coded as the principal diagnosis, sleep apnea is assigned to DRGs 
34 and 35 (Other Disorders of the Nervous System) in MDC 1.
    The result of our review was to assign several surgical procedures 
used to correct sleep apnea to DRGs 7 and 8 (Peripheral and Cranial 
Nerve and Other Nervous System Procedures). These procedures involved 
repair of the palate

[[Page 29905]]

or pharynx (procedure codes 27.69, 29.4, and 29.59). Previously, since 
none of these surgical procedures had been assigned to MDC 1, cases of 
sleep apnea treated with one of these procedures had been assigned to 
DRG 468 (Extensive OR Procedure Unrelated to Principal Diagnosis) or 
DRG 477 (Nonextensive OR Procedure Unrelated to Principal Diagnosis).
    An associated procedure that is also used to treat sleep apnea is 
correction of cleft palate (procedure code 27.62). Currently, 
correction of cleft palate is assigned only to DRG 52 (Cleft Lip and 
Palate Repair) in MDC 3 (Diseases and Disorders of the Ear, Nose, 
Mouth, and Throat). Thus, when this procedure is performed for sleep 
apnea cases, the cases would be assigned to DRG 477. We are proposing 
to add this surgical procedure to MDC 1. Like the palate and pharynx 
repair procedures that were addressed last year, these cases are not 
clinically similar to the other surgical DRGs in MDC 1; thus, we are 
proposing to include them in DRGs 7 and 8.
    c. Geniculate Herpes Zoster. Geniculate herpes zoster (diagnosis 
code 053.11) is an acute viral disease characterized by inflammation of 
spinal ganglia and by a vesicular eruption along the area of 
distribution of a sensory nerve. In the August 30, 1996 final rule (61 
FR 27447), we moved diagnosis codes 053.10 and 053.19 (Herpes zoster 
with unspecified nervous system complication and Other herpes zoster, 
respectively) from DRG 20 (Nervous System Infection Except Viral 
Meningitis) to DRGs 18 and 19 (Cranial and Peripheral Nerve Disorders). 
We considered moving diagnosis code 053.11 at that time, however, the 
higher average charges associated with geniculate herpes zoster and 
slightly higher length of stay led us to decide instead to leave 053.11 
in DRG 20 and to reassess this decision in upcoming years.
    We conducted an analysis of the cases assigned to DRG 20 using the 
FY 1996 MedPAR file. The average standardized charges for these cases 
is approximately $8,430, which is significantly lower than the average 
charges for the DRG, approximately $21,180. The average length of stay 
for the geniculate herpes zoster cases, approximately 6 days, is also 
less than the average length of stay for the DRG, approximately 10 
days. Based on these data, we are proposing to reassign diagnosis code 
053.11 to DRGs 18 and 19, which have average charges of approximately 
$8,460 and $5,460, respectively. The average length of stay for DRGs 18 
and 19 are approximately 6 days and 4 days, respectively.
3. MDC 5 (Diseases and Disorders of the Circulatory System)
    a. Heart Assist Devices. In November 1995, we amended our general 
noncoverage decision concerning artificial hearts and related devices. 
Section 65-15 of the Medicare Coverage Issues manual was revised to 
allow coverage of the HeartMate Implantable Pneumatic Left Ventricular 
Assist System (HeartMate IP LVAS) in accordance with its Food and Drug 
Administration-approved use as a temporary mechanical circulation 
support in nonreversible left ventricular failure as a bridge to 
cardiac transplant. In order to receive Medicare coverage, all of the 
following conditions must be met:

     The patient is listed as an approved heart transplant 
candidate by a Medicare-approved heart transplant center.
     The implantation of the system is done in a Medicare-
approved heart transplant center. Written permission from the 
listing center is needed if the patient has the implantation done at 
another Medicare-approved center.
     The patient is on inotropes.
     The patient is on an intra-aortic balloon pump (if 
possible).
     The patient has left atrial pressure or pulmonary 
capillary wedge pressure  20mm Hg with either--

--Systolic blood pressure 80 mm Hg; or
--Cardiac index of 2.0 1/min/m \2\.

    A procedure code for implant of an implantable, pulsatile heart 
assist system (37.66), which includes the HeartMate IP LVAS, was 
created effective October 1, 1995. At that time, the procedure code was 
assigned to DRGs 110 and 111 (Major Cardiovascular Procedures). Because 
we now have a full year of cases coded with this procedure (FY 1996 
MedPAR file), we have analyzed them to determine if this DRG assignment 
remains appropriate.
    In the full (100 percent) FY 1996 MedPAR file, there are 51 cases 
of implant of an internal heart assist system (procedure code 37.66) in 
MDC 5. Of these 51 cases, 18 were assigned to DRG 110 and none to DRG 
111. The other 33 cases were assigned to DRG 103 (Heart Transplant), 
DRG 104 (Cardiac Valve Procedures with Cardiac Cath), DRGs 106 and 107 
(Coronary Bypass), and DRG 108 (Other Cardiothoracic Procedures). Of 
the 18 cases assigned to DRG 110, the average charge is about $96,000 
and the average length of stay is 22.5 days. The average charges for 
all cases assigned to DRG 110 is about $36,500 and the average length 
of stay is 10.1 days.
    Thus, the cases coded with procedure code 37.66 are much more 
resource intensive than the other cases assigned to DRG 110. In 
reviewing the other surgical DRGs in MDC 5 for possible reassignment of 
this procedure, we find there are two DRGs that contain cases that are 
clinically similar to implant of heart assist device cases: DRG 103 and 
DRG 108. For FY 1996, the average charge of cases in DRG 103 is 
approximately $164,000 and the length of stay is 46 days. For DRG 108, 
these statistics are about $54,000 and 12.1 days. Thus, the average 
charge for DRG 103 is approximately $68,000 higher than the average 
charge of the heart assist device cases and the average charge for DRG 
108 is approximately $42,000 lower.
    Because our general policy is to assign a procedure code to a DRG 
with clinically similar cases that is the best match in terms of 
resource use, we are proposing to assign procedure code 37.66 to DRG 
108. We realize that there is still a large difference in the resource 
use for DRG 108 and the heart assist device cases; however, there is 
not a more appropriate assignment in MDC 5 for these cases. Our 
proposal would improve the payment for these cases by approximately 46 
percent. We note that because DRG 108 is ranked above DRGs 106 and 107 
in the MDC 5 surgical hierarchy, the cases coded with 37.66 that would 
have been classified to these DRGs would be assigned to DRG 108 
beginning in FY 1998.
    b. Automatic Implantable Cardioverter Defibrillators (AICD). For 
several years, we have received correspondence concerning the 
appropriate DRG assignment of procedures involving automatic 
implantable cardioverter defibrillators (AICDs). These cases are 
currently assigned to DRG 116 (Other Permanent Cardiac Pacemaker 
Implant or AICD Generator or Lead Procedure), and are represented by 
the following procedure codes:

37.95  Implantation of automatic cardioverter/defibrillator lead(s) 
only
37.96  Implantation of automatic cardioverter/defibrillator pulse 
generator only
37.97  Replacement of automatic cardioverter/defibrillator lead(s) 
only
37.98  Replacement of automatic cardioverter/defibrillator pulse 
generator only

    As explained in detail in the September 1, 1992 final rule (57 FR 
39749), the clinical composition and relative weights of the surgical 
DRGs in MDC 5 do not offer a perfect match with the AICD cases. 
However, review of those DRGs in terms of clinical coherence and 
similar resource consumption led to the determination

[[Page 29906]]

that DRG 116 was the best possible fit. In that document, we stated 
that we would continue to monitor these cases.
    We last discussed this issue in the September 1, 1995 final rule 
(60 FR 45780). At that time, we concluded that, although the average 
charge for AICD cases was much higher than the average charge for DRG 
116 overall, the AICD cases were clinically similar to the DRG 116 
cases and should not be moved. In addition, a slight decrease in the 
average charge for the cases between the FY 1993 and FY 1994 MedPAR 
files led us to believe further reductions might be forthcoming since 
there were new AICD devices entering the market that might lead to 
increased price competition.
    We reviewed the most current AICD cases as contained in the FY 1996 
MedPAR file and found that the average standardized charge for AICD 
cases assigned to DRG 116 was $28,777 compared to an average charge of 
$21,330 for all cases in DRG 116. These data demonstrate that the 
average charge for AICD cases continues to be much higher than the 
average charge for all other DRG 116 cases. Therefore, in order to more 
appropriately compensate hospitals for these cases, we are proposing to 
move them to DRG 115 (Permanent Cardiac Pacemaker Implantation with 
AMI, Heart Failure or Shock). Although the resource consumption of DRG 
115 cases is similar to the AICD cases, they are not clinically 
similar. In general, the patients classified to DRG 115 are seriously 
ill and have a relatively long length of stay (10.2 days). However, 
there are no other suitable DRGs in MDC 5 and we do not wish to create 
a separate DRG for the AICD cases. As we have often stated in the past, 
we are reluctant to create device-specific DRGs where the cost of the 
device dominates the charges. We continue to believe that it is the 
cost of the AICD device which is responsible for the high average 
charge for these cases and not the intensity of hospital services 
required to treat the patient. We are also proposing to revise the 
title of DRG 115 to ``Permanent Cardiac Pacemaker Implant with AMI, 
Heart Failure or Shock or AICD Lead or Generator Procedure.''
    c. Coronary Artery Stent. Effective October 1, 1995, procedure code 
36.06 (Insertion of coronary artery stent(s)) was introduced. As 
dictated by our longstanding practice, we assigned this code to the 
same DRG category as its predecessor codes. Therefore, procedure code 
36.06 was assigned to DRG 112 (Percutaneous Cardiovascular Procedures), 
as insertion of a stent is usually performed in conjunction with 
percutaneous transluminal coronary angioplasty (PTCA).
    We discussed this assignment and public comments we received in 
both the September 1, 1995 final rule (60 FR 45785) and the August 30, 
1996 final rule (61 FR 46171). Commenters protested the assignment of 
procedure code 36.06 to DRG 112 because the hospital costs for 
inserting coronary stents along with an angioplasty are significantly 
greater than those for conventional angioplasty alone. The commenters 
presented an analysis of the average charges and length of stay for 
stent and nonstent cases assigned to DRG 112. Our response to these 
commenters was that we would review the stent cases as soon as the FY 
1996 MedPAR file was available, as these would be the first Medicare 
data available for these cases.
    Our analysis of the FY 1996 MedPAR data on coronary stent 
implantation in Medicare beneficiaries has shown the following 
findings:

     The difference between the average length of stay for 
the stent cases and the nonstent cases is 0.19 days (4.39 days 
versus 4.20 days).
     Charges for patients receiving a stent were 
approximately $23,650, while charges for patients without stent 
implant were approximately $17,480, for a difference of $6,170.
     Of those beneficiaries who had a PTCA procedure in FY 
1996, approximately 34 percent received a stent.

    As review of stent cases in DRG 112 has shown a significant 
variation in hospital charges, we are proposing to move these cases out 
of that DRG. Although the coronary artery stent cases are not 
clinically similar to the pacemaker cases in DRG 116, the resource 
consumption of those cases is very similar. Therefore, absent any other 
appropriate DRG, we are proposing to add cases including procedure 
codes for PTCA in combination with insertion of coronary stent into DRG 
116. Therefore, we are proposing to move into DRG 116 the following 
procedure codes when performed in conjunction with procedure code 
36.06:

35.96  Percutaneous valvuloplasty
36.01  Single vessel percutaneous transluminal coronary angioplasty 
[PTCA] or coronary atherectomy without mention of thrombolytic agent
36.02  Single vessel percutaneous transluminal coronary angioplasty 
[PTCA] or coronary atherectomy with mention of thrombolytic agent
36.05  Multiple vessel percutaneous transluminal coronary 
angioplasty [PTCA] or coronary atherectomy performed during the same 
operation, with or without mention of thrombolytic agent
36.09  Other removal of coronary artery obstruction
37.34  Catheter ablation of lesion or tissues of the heart

    We further propose to change the title of DRG 116 to ``Other 
Permanent Cardiac Pacemaker Implant or PTCA with Coronary Artery Stent 
Implant.''
    We will continue to monitor the stent cases and their assignment to 
DRG 116. If PTCA cases with stent become a higher percentage of the 
PTCA cases or the average charge for stent cases falls, we may 
reconsider this assignment.
    d. Circulatory Disorders (DRGs 121 and 122). In response to a 
comment on the May 31, 1996 proposed rule, we stated in the August 30, 
1996 final rule (61 FR 46172) that we would conduct a comprehensive 
review of cases currently assigned to DRG 121 (Circulatory Disorders 
with Acute Myocardial Infarction (AMI) and Cardiovascular 
Complications, Discharged Alive) and DRG 122 (Circulatory Disorders 
with AMI without Cardiovascular Complications, Discharged Alive) to 
determine whether changes were needed to the list of complicating 
conditions that can result in assignment to DRG 121. To carry out this 
review, we analyzed the cases in the FY 1996 MedPAR file that were 
assigned to either DRG 121 or 122. Through a variety of statistical 
analyses of length of stay and standardized charge data, we assessed 
the impact on resource use of all coded secondary diagnoses.
    Our analysis of these secondary diagnosis codes revealed many cases 
now assigned to DRG 122 in which certain secondary diagnoses are 
associated with resource use comparable to cases assigned to DRG 121. 
Although many of these cases involve secondary diagnoses that are not 
strictly cardiovascular in nature, such as diagnosis code category 482 
(Other bacterial pneumonia), we now believe that it is appropriate to 
expand DRG 121 to include such major complications when they are 
represented in significant volume among the cases in the DRG. 
Continuing to limit DRG 121 only to cases involving the existing list 
of cardiovascular complications would contribute to large variations in 
the charges and lengths of stay for cases in DRG 122.
    Therefore, we are proposing to change the title of DRG 121 to 
``Circulatory Disorders with AMI and Major Complications, Discharged 
Alive,'' and to add the following diagnosis codes to the list of 
complications that would produce assignment to DRG 121 when present in 
conjunction with the existing list of AMI diagnoses:


[[Page 29907]]


398.91  Rheumatic heart failure
416.0  Primary pulmonary hypertension
430  Subarachnoid hemorrhage
431  Intracerebral hemorrhage
432.0  Nontraumatic extradural hemorrhage
432.1  Subdural hemorrhage
432.9  Unspecified intracranial hemorrhage
433.01  Occluded basilar artery with cerebral infarction
433.11  Occluded carotid artery with cerebral infarction
433.21  Occluded vertebral artery with cerebral infarction
433.31  Occluded multiple and bilateral artery with cerebral 
infarction
433.81  Occluded specified precerebral artery with cerebral 
infarction
433.91  Occluded precerebral artery NOS with cerebral infarction
434.00  Cerebral thrombosis
434.01  Cerebral thrombosis with cerebral infarction
434.10  Cerebral embolism
434.11  Cerebral embolism with cerebral infarction
434.90  Cerebral artery occlusion
434.91  Cerebral artery occlusion with cerebral infarction
436  Acute, but ill-defined, cerebrovascular disease
481  Pneumococcal pneumonia
482.xx  Other bacterial pneumonia (all 4th and 5th digits)
483.x  Pneumonia due to other specified organism (all 4th digits)
484.x  Pneumonia in infectious diseases classified elsewhere (all 
4th digits)
485  Bronchopneumonia, organism unspecified
486  Pneumonia, organism unspecified
487.0  Influenza with pneumonia
507.x  Pneumonitis due to solids and liquids (all 4th digits)
518.0  Pulmonary collapse
518.5  Pulmonary insufficiency following trauma and surgery
518.81  Respiratory failure
707.0  Decubitus ulcer
996.62  Infection and inflammatory reaction due to other vascular 
device, implant, and graft
996.72  Other complications due to other cardiac device, implant, 
and graft

    In conjunction with these proposed changes, we note that the title 
of DRG 122 would be revised to read ``Circulatory Disorders with AMI 
without Major Complications, Discharged Alive.''
4. MDC 8 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue)
    a. Introduction. As discussed in detail below, we are proposing to 
create several new DRGs in MDC 8 effective for discharges on or after 
October 1, 1997. Specifically, we would replace current DRGs 214 and 
215 (Back and Neck Procedures) with the following new DRGs:

DRG 496  Combined Anterior/Posterior Spinal Fusion
DRG 497  Spinal Fusion with CC
DRG 498  Spinal Fusion without CC
DRG 499  Back and Neck Procedures Except Spinal Fusion with CC
DRG 500  Back and Neck Procedures Except Spinal Fusion without CC

    In addition, we are proposing to replace existing DRGs 221 and 222 
(Knee Procedures) with new DRGs 501 and 502 (Knee Procedures with 
Principal Diagnosis of Infection) and DRG 503 (Knee Procedures without 
Principal Diagnosis of Infection). We believe that both of these 
proposals would improve payment equity by increasing the DRG system's 
ability to capture variations in resource costs for these cases.
    b. Back and Neck Procedures. Currently, hospital inpatient cases 
involving back and neck procedures generally are assigned to DRGs 214 
and 215 (assuming a principal diagnosis that groups the case to MDC 8). 
We have received correspondence indicating that within these DRGs, 
cases involving spinal fusion procedures represent a distinctly more 
complex and resource-intensive subset, and that payment under DRGs 214 
and 215 is inadequate to cover the costs of treating patients that 
require spinal fusion. Therefore, we conducted an analysis of the cases 
assigned to DRGs 214 and 215 using the FY 1996 MedPAR file.
    Within our sample, cases involving fusion procedures (procedure 
codes 81.00-81.09) constituted approximately 35 percent of cases in DRG 
214 (Back and Neck Procedures with CC) and 23 percent of those in DRG 
215 (Back and Neck Procedures without CC). In DRG 214, the average 
standardized charges for the fusion cases were nearly double the 
charges of the nonfusion cases (approximately $25,300 versus $12,900). 
There were also significant differences in charges in DRG 215; $14,400 
for fusion cases and $8,500 for nonfusion cases. Lengths of stay for 
fusion cases were also longer, although not dramatically so; 7.1 days 
for fusion cases versus 5.4 days for other cases in DRG 214, and 3.8 
days versus 3.1 days in DRG 215. In view of the volume of cases 
involved and the clear differences in resource use, we concluded that 
it would be appropriate to create additional DRGs to separate spinal 
fusion cases from the other back and neck procedures.
    Next, we expanded our analysis to determine whether it would be 
appropriate to subdivide the spinal fusion cases according to whether 
both anterior and posterior spinal fusion were performed. This 
combination of procedures, which involves fusing both the front and 
rear of the vertebrae, typically is performed on patients who have had 
previous fusions that have not bonded effectively or who have several 
vertebrae that need extensive fusion on both sides of the spine. As the 
table below illustrates, the average charges and lengths of stay for 
the cases involving both anterior and posterior spinal fusion were 
markedly greater than for the other spinal fusion cases in either DRG 
214 or 215.

------------------------------------------------------------------------
                                                                 Avg.   
                                                     Avg.     length  of
                  Type of case                      charges    stay  (in
                                                                 days)  
------------------------------------------------------------------------
Anterior and Posterior Spinal Fusion............     $51,200        12.3
DRG 214--Other Spinal Fusion....................      24,300         6.9
DRG 215--Other Spinal Fusion....................      14,300         3.8
------------------------------------------------------------------------

    Even though the cases in which both anterior and posterior spinal 
fusions were performed represented only about 3 percent of all spinal 
fusion cases in our sample, we concluded that the magnitude of the 
differences in both average charges and lengths of stay warranted a 
further subdivision of the spinal fusion cases.
    Based on this analysis, we are proposing to replace the two 
existing DRGs for back and neck procedures with five new DRGs. For ease 
of reference and classification, current DRGs 214 and 215 would be made 
invalid and we would establish new DRGs 496 through 500 to contain all 
the cases that are currently grouped in DRGs 214 and 215. We believe 
that the division of these cases into the new DRGs would improve 
clinical coherence and provide for more appropriate payment for both 
spinal fusion cases and cases involving other back and neck procedures. 
Discharges would be assigned to each of the five proposed DRGs as 
follows:

DRG 496  Combined Anterior/Posterior Spinal Fusion

    DRG 496 would include any combination of procedure codes as 
follows:

    One or more of the following procedure codes--

81.02  Other cervical fusion anterior
81.04  Dorsal/dorsulum fusion anterior
81.06  Lumbar/lumbosac fusion anterior

AND
    One or more of the following procedure codes--

81.03  Other cervical fusion posterior
81.05  Dorsal/dorsulum fusion posterior
81.08  Lumbar/lumbosac fusion posterior

[[Page 29908]]

DRGs 497 and 498 Spinal Fusion With and Without CC

    DRGs 497 and 498 would include any of the following procedure 
codes, as long as any combination of procedure codes would not 
otherwise result in assignment to proposed DRG 496--

81.00  Spinal fusion NOS
81.01  Atlas-axis fusion
81.02  Other cervical fusion anterior
81.03  Other cervical fusion posterior
81.04  Dorsal/dorsulum fusion anterior
81.05  Dorsal/dorsulum fusion posterior
81.06  Lumbar/lumbosac fusion anterior
81.07  Lumbar/lumbosac fusion lateral
81.08  Lumbar/lumbosac fusion posterior
81.09  Refusion of spine

DRGs 499 and 500  Back and Neck Procedures Except Spinal Fusion With 
and Without CC

    All procedure codes in current DRGs 214 and 215 other than 
procedure codes 81.00 through 81.09 would be assigned to DRGs 499 and 
500.
    c. Knee Procedures. On several occasions, most recently in our 
September 1, 1993 final rule (58 FR 46286), we have examined cases in 
DRG 209 (Major Joint and Limb Reattachment of the Lower Extremity) to 
see whether hip replacement cases that involve infections or other 
complications should be classified separately from the less complicated 
cases in DRG 209. We have found that the average charges and lengths of 
stay for cases with principal diagnoses of infection or complications 
were only slightly higher than for all cases in DRG 209. When we 
limited our analysis to cases with a principal diagnosis of infection, 
we found that the cases had significantly higher charges than for DRG 
209 overall, but in view of the small volume of cases (less than 0.5 
percent of the total DRG 209 cases), we decided that changes in the 
classification of cases in DRG 209 were not warranted.
    In recent months, we have received several letters asking that we 
revisit the issue of whether DRG refinements are needed to address 
differences in resource use associated with orthopedic procedures where 
deep infections are present. Our correspondents stated that these cases 
are extremely resource intensive, and, because these complex cases are 
often referred to specialty hospitals, such hospitals routinely receive 
DRG payments for these cases that are much lower than the costs 
incurred by the hospital. They believe that we should investigate the 
possibility of creating a separate DRG for orthopedic surgical cases 
that have serious infections, specifically, a new DRG for cases 
involving orthopedic procedures of the lower extremities or spine with 
a principal diagnosis of deep orthopedic infection of the lower 
extremity or spine.
    To evaluate this issue, we analyzed various classifications of 
cases in MDC 8. We began by identifying all cases with a principal 
diagnosis indicating deep orthopedic infection of the lower extremities 
or spine. The diagnosis codes used were as follows:

711.05  Pyogenic arthritis pelvic region and thigh
711.06  Pyogenic arthritis lower leg
711.07  Pyogenic arthritis ankle and foot
711.08  Pyogenic arthritis other specified sites
730.05  Acute osteomyelitis pelvic region and thigh
730.06  Acute osteomyelitis lower leg
730.07  Acute osteomyelitis ankle and foot
730.08  Acute osteomyelitis other specified sites
730.15  Chronic osteomyelitis pelvic region and thigh
730.16  Chronic osteomyelitis lower leg
730.17  Chronic osteomyelitis ankle and foot
730.18  Chronic osteomyelitis other specified sites
730.25  Unspecified osteomyelitis pelvic region and thigh
730.26  Unspecified osteomyelitis lower leg
730.27  Unspecified osteomyelitis ankle and foot
730.28  Unspecified osteomyelitis other specified sites
996.66  Infection and inflammatory reaction due to internal joint 
prosthesis
996.67  Infection and inflammatory reaction due to other internal 
orthopedic device

    For each of the DRGs into which these cases grouped, we then 
compared the average standardized charges and average length of stay 
for cases with any of the infection diagnoses listed above with other 
cases in the DRGs. Unlike in the past, we did not limit our analysis to 
DRG 209 but examined all DRGs within MDC 8 that focus on surgical 
procedures of the lower extremities or spine, including DRGs 209; 210, 
211, and 212 (Hip and Femur Procedures Except Major Joint); 214 and 215 
(Back and Neck Procedures); and 221 and 222 (Knee Procedures).
    For the most part, we again found that these cases represented only 
a very small proportion of the total cases in the DRGs in question. In 
DRG 209, for example, cases with one of the above diagnosis codes as 
the principal diagnosis continued to constitute less than 1 percent of 
all cases in the DRG. Moreover, although the average standardized 
charges for the deep infection cases ($24,834) were approximately 21 
percent higher than the charges for the remaining cases in the DRG 
($19,297), the differences are well within one standard deviation of 
the average charge. Given the small volume of cases, we again conclude 
that changes in DRG 209 are not justified.
    The only DRGs that we examined in which cases with a principal 
diagnosis of deep infection represented more than 1 percent of total 
cases in our sample were DRGs 221 and 222. As illustrated in the chart 
below, there are significant differences in both average charges and 
average length of stay between infection cases in these DRGs and other 
cases in the DRGs.

------------------------------------------------------------------------
                                                               Average  
                                    Number of     Average     length of 
           Type of case              cases *    charges (in    stay (in 
                                                  dollars)      days)   
------------------------------------------------------------------------
DRG 221 (All cases)..............          451       16,529          7.2
DRG 221 with infection...........          152       23,174         11.4
DRG 221 w/out infection..........          299       13,151          5.1
DRG 222 (All cases)..............          340        9,149          3.9
DRG 222 with infection...........           37       14,452          7.0
DRG 222 w/out infection..........          303        8,502          3.5
------------------------------------------------------------------------
* Based on the 10-percent random sample of the FY 1996 MedPAR file.     

    Thus, more than one-third of cases in DRG 221 had a principal 
diagnosis of deep infection, the average length of stay for these cases 
was more than twice as long as for the remaining cases, and average 
charges were approximately 76 percent higher. Similarly, for the 12 
percent of total DRG 222 cases with infection as the principal 
diagnosis, the average length of stay was double that for other cases, 
with average charges approximately 70 percent higher. Given

[[Page 29909]]

the proportional volume of cases involved, and the significant 
differences in both average charges and length of stay for infection 
cases in these DRGs, we concluded that DRG refinements are appropriate.
    Based on this analysis, we are proposing to replace the two 
existing DRGs for knee procedures with three new DRGs. Again, for ease 
of reference and classification, current DRGs 221 and 222 would be made 
invalid and we would establish new DRGs 501 through 503 to contain all 
the cases that are currently grouped in DRGs 221 and 222. Discharges 
would be assigned to each of the 3 proposed DRGs as follows:

DRG 501  Knee Procedures With Principal Diagnosis of Infection With CC

DRG 502  Knee Procedures With Principal Diagnosis of Infection Without 
CC

    DRG 501 and 502 would include any of the operating room procedures 
now assigned to DRGs 221 and 222, when the principal diagnosis is any 
of the following:

711.06  Pyogenic arthritis lower leg
730.06  Acute osteomyelitis lower leg
730.16  Chronic osteomyelitis lower leg
730.26  Unspecified osteomyelitis lower leg
996.66  Infection and inflammatory reaction due to internal joint 
prosthesis
996.67  Infection and inflammatory reaction due to other internal 
orthopedic device

DRG 503  Knee Procedures Without Principal Diagnosis of Infection

    DRG 503 would include any of the operating room procedures now 
assigned to DRGs 221 and 222 when the principal diagnosis is not listed 
above under DRGs 501 and 502.
5. MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract)
    Among the ICD-9-CM coding changes that took effect October 1, 1995 
was the addition of new procedure code 59.72 (injection of implant into 
urethra or bladder neck). Although this procedure is not routinely 
performed in an operating room, the code was previously included within 
codes classified as operating room procedures. Thus, as is our 
practice, we assigned this procedure code to the surgical DRGs to which 
the procedure had formerly been assigned as a non-OR procedure that 
affects DRG assignment. Therefore, procedure code 59.72 was assigned to 
DRGs 308 and 309 (Minor Bladder Procedures) and DRG 356 (Female 
Reproductive System Reconstructive Procedures).
    In the June 2, 1995 proposed rule (60 FR 29209), we stated that we 
would reevaluate the DRG classification of this code when data on its 
use became available for analysis in 2 years, that is, in preparation 
for the FY 1998 rulemaking process. We indicated that possible changes 
would include moving the procedure code to a different surgical DRG or 
classifying the code as a non-OR procedure that did not affect DRG 
assignment.
    In the FY 1996 MedPAR file, there were several cases with procedure 
code 59.72 assigned to DRGs 308 and 309. The chart below compares 
average charges and length of stay for cases in these DRGs with and 
without the injection procedure.

------------------------------------------------------------------------
                                                Avg. charge  Avg. length
           Type of case             Number of        (in       of stay  
                                     cases *      dollars)    (in days) 
------------------------------------------------------------------------
DRG 308 with procedure 59.72.....            5        6,978          4.2
DRG 308 w/out procedure 59.72....          910       13,254          6.5
DRG 309 with procedure 59.72.....            7        5,879          1.4
DRG 309 w/out procedure 59.72....          311        7,888         2.7 
------------------------------------------------------------------------
* Based on the 10-percent random sample of the FY 1996 MedPAR file.     

    As the table illustrates, cases in which injection of implant into 
the urethra or bladder neck is the only relevant procedure for DRG 
assignment purposes constitute a very small minority of the cases in 
DRGs 308 and 309. However, these cases have lower average charges and 
length of stay than other cases in the DRGs. Thus, we are proposing to 
reclassify the procedure code as a non-OR procedure that does not 
affect DRG assignment.
    Under this proposal, cases currently assigned to DRGs 308 and 309 
because of the performance of an implant injection would be reassigned 
to medical DRGs in MDC 11. We believe that most of the cases involved 
would be assigned to either DRGs 320, 321, and 322 (Kidney and Urinary 
Tract Infections) or DRGs 331 and 332 (Other Kidney and Urinary Tract 
Diagnoses). Both of these sets of DRGs have average charges closely in 
line with the charges for cases in which procedure 59.72 now determines 
DRG assignment.
    We note that this change would also affect DRG 356 in MDC 13 
(Diseases and Disorders of the Female Reproductive System). Within the 
10 percent sample used for this analysis, only 2 of the 2,689 cases in 
DRG 356 were assigned based on the presence of procedure code 59.72, 
and as in DRGS 308 and 309, both the average charges and length of stay 
were lower than for other cases.
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 surgical class can be composed of one or more DRGs. For example, 
in MDC 5, the surgical class ``heart transplant'' consists of a single 
DRG (DRG 103) and the class ``coronary bypass'' consists of two DRGs 
(DRGs 106 and 107). Consequently, in many cases, the surgical hierarchy 
has an impact on more than one DRG. The methodology for determining the 
most resource-intensive surgical class, therefore, involves weighting 
each DRG for frequency to determine the average resources for each 
surgical class. For example, assume surgical class A includes DRGs 1 
and 2 and surgical class B includes DRGs 3, 4, and 5, and that the 
average charge of DRG 1 is higher than that of DRG 3, but the average 
charges of DRGs 4 and 5 are higher than the average charge of DRG 2. To 
determine whether surgical class A should be higher or lower than

[[Page 29910]]

surgical class B in the surgical hierarchy, we would weight the average 
charge of each DRG by frequency (that is, by the number of cases in the 
DRG) to determine average resource consumption for the surgical class. 
The surgical classes would then be ordered from the class with the 
highest average resource utilization to that with the lowest, with the 
exception of ``other OR procedures'' as discussed below.
    This methodology may occasionally result in a case involving 
multiple procedures being assigned to the lower-weighted DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER searches for the procedure in the 
most resource-intensive surgical class, which may sometimes occur in 
cases involving multiple procedures, this result is unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average relative 
weight is ordered above a surgical class with a higher average relative 
weight. For example, the ``other OR procedures'' surgical class is 
uniformly ordered last in the surgical hierarchy of each MDC in which 
it occurs, regardless of the fact that the relative weight for the DRG 
or DRGs in that surgical class may be higher than that for other 
surgical classes in the MDC. The ``other OR procedures'' class is a 
group of procedures that are least likely to be related to the 
diagnoses in the MDC but are occasionally performed on patients with 
these diagnoses. Therefore, these procedures should only be considered 
if no other procedure more closely related to the diagnoses in the MDC 
has been performed.
    A second example occurs when the difference between the average 
weights for two surgical classes is very small. We have found that 
small differences generally do not warrant reordering of the hierarchy 
since, by virtue of the hierarchy change, the relative weights are 
likely to shift such that the higher-ordered surgical class has a lower 
average weight than the class ordered below it.
    Based on the preliminary recalibration of the DRGs, we are 
proposing to modify the surgical hierarchy as set forth below. As we 
stated in the September 1, 1989 final rule (54 FR 36457), we are unable 
to test the effects of the proposed revisions to the surgical hierarchy 
and to reflect these changes in the proposed relative weights due to 
the unavailability of revised GROUPER software at the time this 
proposed rule is prepared. Rather, we simulate most major 
classification changes to approximate the placement of cases under the 
proposed reclassification and then determine the average charge for 
each DRG. These average charges then serve as our best estimate of 
relative resource use for each surgical class. We test the proposed 
surgical hierarchy changes after the revised GROUPER is received and 
reflect the final changes in the DRG relative weights in the final 
rule. Further, as discussed below in section II.C of this preamble, we 
anticipate that the final recalibrated weights will be somewhat 
different from those proposed, since they will be based on more 
complete data. Consequently, further revision of the hierarchy, using 
the above principles, may be necessary in the final rule.
    We propose to revise the surgical hierarchy for the Pre-MDC DRGs, 
MDC 9 (Diseases and Disorders of the Skin, Subcutaneous Tissue and 
Breast), MDC 10 (Endocrine, Nutritional and Metabolic Diseases and 
Disorders), and MDC 12 (Diseases and Disorders of the Male Reproductive 
System) as follows:

     In the Pre-MDC DRGs, we would reorder Bone Marrow 
Transplant (DRG 481) above Liver Transplant (DRG 480).
     In MDC 9, we would reorder Perianal and Pilonidal 
Procedures (DRG 267) above Breast Procedures (DRGs 257-262).
     In MDC 10, we would reorder OR Procedures for Obesity 
(DRG 288) above Skin Graft and Wound Debridement (DRG 287).
     In MDC 12, we would reorder Circumcision (DRGs 342 and 
343) above Transurethral Prostatectomy (DRGs 336 and 337).
7. Refinement of Complications and Comorbidities List
    There is a standard list of diagnoses that are considered 
complications or comorbidities (CCs). We developed this list using 
physician panels to include those diagnoses that, when present as a 
secondary condition, would be considered a substantial complication or 
comorbidity.
    In previous years, we have made changes to the standard list of 
CCs, either by adding new CCs or deleting CCs already on the list. At 
this time, we do not propose to delete any of the diagnosis codes on 
the CC list.
    In the September 1, 1987 final notice concerning changes to the DRG 
classification system (52 FR 33143), we modified the GROUPER logic so 
that certain diagnoses included on the standard list of CCs would not 
be considered a valid CC in combination with a particular principal 
diagnosis. Thus, we created the CC Exclusions List. We made these 
changes to preclude coding of CCs for closely related conditions, to 
preclude duplicative coding or inconsistent coding from being treated 
as CCs, and to ensure that cases are appropriately classified between 
the complicated and uncomplicated DRGs in a pair.
    In the May 19, 1987 proposed notice concerning changes to the DRG 
classification system (52 FR 18877), we explained that the excluded 
secondary diagnoses were established using the following five 
principles:

     Chronic and acute manifestations of the same condition 
should not be considered CCs for one another (as subsequently 
corrected in the September 1, 1987 final notice (52 FR 33154)).
     Specific and nonspecific (that is, not otherwise 
specified (NOS)) diagnosis codes for a condition should not be 
considered CCs for one another.
     Conditions that may not co-exist, such as partial/
total, unilateral/bilateral, obstructed/unobstructed, and benign/
malignant, should not be considered CCs for one another.
     The same condition in anatomically proximal sites 
should not be considered CCs for one another.
     Closely related conditions should not be considered CCs 
for one another.

    The creation of the CC Exclusions List was a major project 
involving hundreds of codes. The FY 1988 revisions were intended to be 
only a first step toward refinement of the CC list in that the criteria 
used for eliminating certain diagnoses from consideration as CCs were 
intended to identify only the most obvious diagnoses that should not be 
considered complications or comorbidities of another diagnosis. For 
that reason, and in light of comments and questions on the CC list, we 
have continued to review the remaining CCs to identify additional 
exclusions and to remove diagnoses from the master list that have been 
shown not to meet the definition of a CC. (See the September 30, 1988 
final rule for the revision made for the discharges occurring in FY 
1989 (53 FR 38485); the September 1, 1989 final rule for the FY 1990 
revision (54 FR 36552); the September 4, 1990 final rule for the FY 
1991 revision (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 
FY 1993 revision (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); the September 1, 1995 final 
rule for the FY 1996 revisions (60 FR 45782); and the August 30, 1996 
final rule for the FY 1997 revisions (61 FR 46171).
    We are proposing a limited revision of the CC Exclusions List to 
take into account the changes that will be made

[[Page 29911]]

in the ICD-9-CM diagnosis coding system effective October 1, 1997, as 
well as the proposed CC changes described above. (See section II.B.9, 
below, for a discussion of ICD-9-CM changes.) These proposed 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 6E, Additions 
to the CC Exclusions List, in section V. of the Addendum to this 
proposed rule.
    Tables 6E and 6F in section V. of the Addendum to this proposed 
rule contain the proposed revisions to the CC Exclusions List that 
would be effective for discharges occurring on or after October 1, 
1997. Each table shows the principal diagnoses with proposed changes to 
the excluded CCs. Each of these principal diagnoses is shown with an 
asterisk and the additions or deletions to the CC Exclusions List are 
provided in an indented column immediately following the affected 
principal diagnosis.
    CCs that are added to the list are in Table 6E--Additions to the CC 
Exclusions List. Beginning with discharges on or after October 1, 1997, 
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 6F--Deletions from 
the CC Exclusions List. Beginning with discharges on or after October 
1, 1997 the indented diagnoses will be recognized by the GROUPER as 
valid CCs for the asterisked principal diagnosis.
    Copies of the original CC Exclusions List applicable to FY 1988 can 
be obtained from the National Technical Information Service (NTIS) of 
the Department of Commerce. It is available in hard copy for $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, 1996, 
and 1997) and those in Tables 6E and 6F 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, 1997.
    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 14.0, is available for $195.00, 
which includes $15.00 for shipping and handling. Version 15.0 of this 
manual, which will include the final FY 1998 DRG changes, will be 
available in October 1997 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, September 1, 1995, and August 30, 1996, 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, 60 FR 45783, and 61 FR 46173, 
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. 
Based on this year's review, we are proposing to move procedure code 
54.92 (Removal of foreign body from peritoneal cavity) to MDC 11 and 
assign it to DRG 315 (Other Kidney and Urinary Tract OR Procedures). We 
note that, under the current DRGs, when procedure code 54.92 is coded 
in addition to a principal diagnosis code of 868.14 (injury with open 
wound into retroperitoneum), the case is assigned to DRG 468.
    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 are proposing to move 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 two procedures--other surgical occlusion of 
abdominal arteries (procedure code 38.86) and other arthrotomy of knee 
(procedure code 80.16)--that are significantly less resource intensive 
than the other procedures assigned to DRG 468.

[[Page 29912]]

Therefore, we are proposing to move procedure codes 38.86 and 80.16 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.
    All of these proposed changes would be effective with discharges 
occurring on or after October 1, 1997.
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 classification system.
    The Committee is co-chaired by the National Center for Health 
Statistics (NCHS) and HCFA. The NCHS has lead responsibility for the 
ICD-9-CM diagnosis codes included in Volume 1--Diseases: Tabular List 
and Volume 2--Diseases: Alphabetic Index, while HCFA has lead 
responsibility for the ICD-9-CM procedure codes included in Volume 3--
Procedures: Tabular List and Alphabetic Index. 
    The Committee encourages participation in the above process by 
health-related organizations. In this regard, the Committee holds 
public meetings for discussion of educational issues and proposed 
coding changes. These meetings provide an opportunity for 
representatives of recognized organizations in the coding fields, such 
as the American Health Information Management Association (AHIMA) 
(formerly American Medical Record Association (AMRA)), the American 
Hospital Association (AHA), and various physician specialty groups as 
well as physicians, medical record administrators, health information 
management professionals, and other members of the public to contribute 
ideas on coding matters. After considering the opinions expressed at 
the public meetings and in writing, the Committee formulates 
recommendations, which then must be approved by the agencies.
    The Committee presented proposals for coding changes at public 
meetings held on June 6 and December 5 and 6, 1996, and finalized the 
coding changes after consideration of comments received at the meetings 
and in writing within 60 days following the December 1996 meeting. The 
initial meeting for consideration of coding issues for implementation 
in FY 1999 will be held on June 6, 1997. Copies of the minutes of the 
June 1996 meeting may be obtained by writing to one of the co-
chairpersons representing NCHS and HCFA. The minutes of the December 
1996 meeting can be obtained from the HCFA Home Page @ http://
www.hcfa.gov.pubaffr.htm. Paper copies of these minutes will no longer 
be available and the mailing list will be discontinued. 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 code changes that have been approved will become 
effective October 1, 1997. The new ICD-9-CM codes are listed, along 
with their proposed DRG classifications, in Tables 6A and 6B (New 
Diagnosis Codes and New Procedure Codes, respectively) in section V. of 
the Addendum to this proposed rule. As we stated above, the code 
numbers and their titles were presented for public comment in the ICD-
9-CM Coordination and Maintenance Committee meetings. Both oral and 
written comments were considered before the codes were approved. 
Therefore, we are soliciting comments only on the proposed DRG 
classification.
    Further, the Committee has approved the expansion of certain ICD-9-
CM codes to require an additional digit for valid code assignment. 
Diagnosis codes that have been replaced by expanded codes, other codes, 
or have been deleted are in Table 6C (Invalid Diagnosis Codes). These 
invalid diagnosis codes will not be recognized by the GROUPER beginning 
with discharges occurring on or after October 1, 1997. The 
corresponding new or expanded diagnosis codes are included in Table 6A. 
Revisions to diagnosis code titles are in Table 6D (Revised Diagnosis 
Code Titles), which also include the proposed DRG assignments for these 
revised codes. For FY 1998, there are no procedure codes that have been 
replaced or deleted nor are there any revisions to procedure code 
titles.
10. Other Issues--MDC 22 (Burns)
    Under the current DRG system, burn cases generally are assigned to 
one of six DRGs in MDC 22 (Burns). These DRGs-- DRGs 456 through 460 
and 472--have been in place without change since 1986. Recently, we 
have received several letters from representatives of facilities that 
specialize in treating burn cases asserting that the existing DRGs do 
not adequately capture the variation in resource use associated with 
different types of burn cases. Among these correspondents' concerns are 
the following:
     In general, burn centers are disadvantaged because these 
facilities tend to treat the most complicated and costly burn cases, 
which are not always adequately defined and compensated under the 
existing burn DRGs. At the same time, less complicated cases (with 
lower costs and shorter lengths of stay) in the same DRGs can be 
treated by hospitals that do not specialize in the treatment of burn 
cases. As a result, some burn centers are experiencing a net loss of 
income on cases in each of the burn DRGs. In some cases, this has led 
to coding decisions that result in burn patients being assigned to non-
burn DRGs because these DRGs result in higher payments to hospitals.
     DRG 456 (Burns, Transferred to Another Acute Care 
Facility) either should be revised to include only cases transferred to 
hospitals with a burn center or should be eliminated. This DRG 
originally was designed to encourage transfers of burn patients to 
hospitals with burn centers. Although it provides appropriate payment 
in these situations, problems arise when burn centers treat patients 
with extensive burns and then transfer them to hospitals closer to the 
patients' homes for the final stages of acute care. Burn centers might 
be severely penalized financially for such transfers, even though the 
transfers may be both cost-effective and in the best interests of the 
patient.
     DRG 472 (Extensive Burns with OR Procedure) does not 
capture fully the universe of critically ill, high cost

[[Page 29913]]

patients with extensive burn injuries. Currently, a patient must have a 
burn of at least 50 percent of the total body surface area (or a third 
degree burn covering at least 10 percent of the body) to be assigned to 
DRG 472, which is by far the highest-weighted burn DRG. However, some 
patients not assigned to this DRG experience equally high rates of 
mortality and morbidity, with concomitant high resource use and long 
lengths of stay. To address this problem, a new critical care burn DRG 
should be created that would define patients by age, burn size, and 
presence of co-morbidities, such as the presence of smoke inhalation, 
liver or renal failure, and others.
    To begin to examine these assertions, we have conducted a 
preliminary analysis of cases assigned to the burn DRGs. Although the 
overall volume of cases assigned to the burn DRGs is relatively small 
(a combined total of about 5,000 Medicare cases in FY 1996), there is 
clearly a large degree of heterogeneity in both charges and lengths of 
stay for burn cases. For example, although approximately 75 percent of 
cases in DRG 456 show lengths of stay below the mean of 7.3 days, a 
small but significant group of cases have lengths of stay of 21 days or 
more, resulting in DRG 456 having the largest length of stay 
coefficient of variation of all DRGs (The coefficient of variation is a 
statistical measure used to evaluate relative dispersions among all 
values in a set of data.) Other DRGs in MDC 22 also have above-average 
coefficients of variation. Although indications of statistical 
heterogeneity are not uncommon in small volume DRGs, we believe that a 
more in-depth analysis of the burn DRGs is appropriate.
    Therefore, as part of our FY 1999 rulemaking agenda, we intend to 
conduct a comprehensive review of MDC 22 to determine whether changes 
in these DRGs can increase their ability to explain the variation in 
resource use among burn cases. We welcome public comments on this 
issue, particularly specific suggestions on the most appropriate ways 
to categorize related diagnosis and procedure codes to produce DRG 
groupings that would reflect more homogeneous resource use. We note 
that any suggestions involving other types of payment adjustments for 
hospitals designated as burn centers would require legislative action. 
We intend to discuss our findings and, if appropriate, propose 
modifications to MDC 22, in the FY 1999 proposed rule.

C. Recalibration of DRG Weights

    We are proposing to use the same basic methodology for the FY 1998 
recalibration as we did for FY 1997. (See the August 30, 1996 final 
rule (61 FR 46176).) That is, we would recalibrate the weights based on 
charge data for Medicare discharges. However, we would use the most 
current charge information available, the FY 1996 MedPAR file, rather 
than the FY 1995 MedPAR file. The MedPAR file is based on fully-coded 
diagnostic and surgical procedure data for all Medicare inpatient 
hospital bills.
    The proposed recalibrated DRG relative weights are constructed from 
FY 1996 MedPAR data, based on bills received by HCFA through December 
1996, from all hospitals subject to the prospective payment system and 
short-term acute care hospitals in waiver States. The FY 1996 MedPAR 
file includes data for approximately 11.1 million Medicare discharges.
    The methodology used to calculate the proposed DRG relative weights 
from the FY 1996 MedPAR file is as follows:
     To the extent possible, all the claims were regrouped 
using the proposed DRG classification revisions discussed above in 
section II.B of this preamble. As noted in section II.B.6, due to the 
unavailability of revised GROUPER software, we simulate most major 
classification changes to approximate the placement of cases under the 
proposed reclassification. However, there are some changes that cannot 
be modeled.
     Charges were standardized to remove the effects of 
differences in area wage levels, indirect medical education costs, 
disproportionate share payments, and, for hospitals in Alaska and 
Hawaii, the applicable cost-of-living adjustment.
     The average standardized charge per DRG was calculated by 
summing the standardized charges for all cases in the DRG and dividing 
that amount by the number of cases classified in the DRG.
     We then eliminated statistical outliers, using the same 
criteria as was used in computing the current weights. That is, 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 costs 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 propose to use that same case threshold 
in recalibrating the DRG weights for FY 1998. Using the FY 1996 MedPAR 
data set, there are 36 DRGs that contain fewer than 10 cases. We 
computed the weights for the 36 low-volume DRGs by adjusting the FY 
1997 weights of these DRGs by the percentage change in the average 
weight of the cases in the other DRGs.
    The weights developed according to the methodology described above, 
using the proposed DRG classification changes, result in an average 
case weight that is different from the average case weight before 
recalibration. Therefore, the new weights are normalized by an 
adjustment factor, so that the average case weight after recalibration 
is equal to the average case weight before recalibration. This 
adjustment is intended to ensure that recalibration by itself neither 
increases

[[Page 29914]]

nor decreases total payments under the prospective payment system.
    Section 1886(d)(4)(C)(iii) of the Act requires that beginning with 
FY 1991, reclassification and recalibration changes be made in a manner 
that assures that the aggregate payments are neither greater than nor 
less than the aggregate payments that would have been made without the 
changes. Although normalization is intended to achieve this effect, 
equating the average case weight after recalibration to the average 
case weight before recalibration does not necessarily achieve budget 
neutrality with respect to aggregate payments to hospitals because 
payment to hospitals is affected by factors other than average case 
weight. Therefore, as we have done in past years and as discussed in 
section II.A.4.b of the Addendum to this proposed rule, we are 
proposing to make a budget neutrality adjustment to assure that the 
requirement of section 1886(d)(4)(C)(iii) of the Act is met.

III. Proposed 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 under the Act, we 
currently define hospital labor market areas based on the definitions 
of Metropolitan Statistical Areas (MSAs), Primary MSAs (PMSAs), and New 
England County Metropolitan Areas (NECMAs) issued by the Office of 
Management and Budget (OMB). OMB also designates Consolidated MSAs 
(CMSAs). A CMSA is a metropolitan area with a population of one million 
or more, comprised of two or more PMSAs (identified by their separate 
economic and social character). For purposes of the hospital wage 
index, we use the PMSAs rather than CMSAs since they allow a more 
precise breakdown of labor costs. If a metropolitan area is not 
designated as part of a PMSA, we use the applicable MSA. Rural areas 
are areas outside a designated MSA, PMSA, or NECMA.
    We note that effective April 1, 1990, the term Metropolitan Area 
(MA) replaced the term Metropolitan Statistical Area (MSA) (which had 
been used since June 30, 1983) to describe the set of metropolitan 
areas comprised of MSAs, PMSAs, and CMSAs. The terminology was changed 
by OMB in the March 30, 1990 Federal Register to distinguish between 
the individual metropolitan areas known as MSAs and the set of all 
metropolitan areas (MSAs, PMSAs, and CMSAs) (55 FR 12154). For purposes 
of the prospective payment system, we will continue to refer to these 
areas as MSAs.
    Section 1886(d)(3)(E) of the Act also 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. We also adjust the wage index, as discussed below in section 
III.B.3, to take into account the geographic reclassification of 
hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of 
the Act.

B. FY 1998 Wage Index Update

    The proposed FY 1998 wage index in section V. of the Addendum 
(effective for hospital discharges occurring on or after October 1, 
1997 and before October 1, 1998) is based on the data collected from 
the Medicare cost reports submitted by hospitals for cost reporting 
periods beginning in FY 1994 (the FY 1997 wage index was based on FY 
1993 wage data). We propose to use the same categories of data that 
were used in the FY 1997 wage index. Therefore, the proposed FY 1998 
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.

    We are proposing to calculate a separate Puerto Rico-specific wage 
index to be applied to the Puerto Rico standardized amount. This wage 
index will be calculated in the same manner as the national wage index 
described below, but will be based solely on Puerto Rico's data. For 
further explanation, see sections II.B.5 and III.A.6 of the Addendum to 
this proposed rule.
    Also, in response to a comment in the August 30, 1996 final rule, 
we considered using data from Worksheet A-8-2 for the purpose of 
excluding physician Part A salaries from the FY 1998 wage index 
calculation (61 FR 46177). We stated that we would explore the 
technical feasibility of using the data from that worksheet. However, 
primarily because the intermediaries had already begun reviewing the FY 
1994 cost report data and finalizing the Worksheet S-3 data, we did not 
believe it would be appropriate to revise their instructions and 
require them to make a change to their procedure. Therefore, we will 
wait for the data from cost reporting periods beginning on or after 
October 1, 1994, for which we revised the Medicare cost report to 
provide for the separate reporting of physician salaries. As we have 
stated previously, we will review and evaluate these salary cost data 
when considering appropriate changes to the FY 1999 wage index.
1. Verification of Wage Data From the Medicare Cost Report
    The data for the proposed FY 1998 wage index were obtained from 
Worksheet S-3, Part II of the Medicare cost report. The data file used 
to construct the proposed wage index includes FY 1994 data submitted to 
the Health Care Provider Cost Report Information System (HCRIS) as of 
the end of January 1997. As in past years, we performed an intensive 
review of the wage data, mostly through the use of edits designed to 
identify aberrant data.
    Of the 5,197 hospitals in the database, 2,652 hospitals had data 
elements that failed an initial edit. From mid-February 1997 through 
early March 1997, intermediaries contacted hospitals to revise or 
verify data elements that resulted in the edit failures. In addition, 
intermediaries reviewed the database to ensure that no hospitals had 
been inadvertently excluded from the database. As a result of that 
review, data for two hospitals were added to the database.
    Next, to check any revisions since the first edit, as well as to 
apply additional edits based on the distribution of the data, we 
subjected all of the data to edits a second time. As of March 14, 1997, 
70 hospitals still had unresolved data elements. These unresolved data 
elements are included in the calculation of the proposed FY 1998 wage 
index pending their resolution before calculation of the final FY 1998 
wage index. We have instructed the intermediaries to complete their 
verification of questionable data elements and to transmit any changes 
to the wage data (through HCRIS) no later

[[Page 29915]]

than June 16, 1997. We expect that all unresolved data elements will be 
resolved by that date, and that the revised data will be reflected in 
the final rule.
2. Computation of the Wage Index
    The method used to compute the proposed wage index is as follows:
    Step 1--As noted above, we are proposing to base the FY 1998 wage 
index on wage data reported on the FY 1994 Medicare cost reports. 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 period 
beginning on or after October 1, 1993 and before October 1, 1994. In 
addition, we included data from a few hospitals that had cost reporting 
periods beginning in September 1993 and reported a cost reporting 
period exceeding 52 weeks. These 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 1994 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 salaries. To make the wage inflation adjustment, we used 
the percentage change in average hourly earnings estimated for each 30-
day increment from October 14, 1993 through April 15, 1995, for 
hospital industry workers from Standard Industry Classification 806, 
Bureau of Labor Statistics Employment and Earnings Bulletin. The annual 
inflation rates used were 3.6 percent for FY 1993, 2.7 percent for FY 
1994, and 3.3 percent for FY 1995. 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  
------------------------------------------------------------------------
10/14/93...............           11/15/93                 1.038679     
11/14/93...............           12/15/93                 1.036376     
12/14/93...............           01/15/94                 1.034077     
01/14/94...............           02/15/94                 1.031784     
02/14/94...............           03/15/94                 1.029496     
03/14/94...............           04/15/94                 1.027213     
04/14/94...............           05/15/94                 1.024935     
05/14/94...............           06/15/94                 1.022662     
06/14/94...............           07/15/94                 1.020394     
07/14/94...............           08/15/94                 1.018131     
08/14/94...............           09/15/94                 1.015873     
09/14/94...............           10/15/94                 1.013620     
10/14/94...............           11/15/94                 1.010881     
11/14/94...............           12/15/94                 1.008150     
12/14/94...............           01/15/95                 1.005426     
01/14/95...............           02/15/95                 1.002709     
02/14/95...............           03/15/95                 1.000000     
03/14/95...............           04/15/95                 0.997298     
------------------------------------------------------------------------

    For example, the midpoint of a cost reporting period beginning 
January 1, 1994 and ending December 31, 1994 is June 30, 1994. An 
inflation adjustment factor of 1.020394 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 1994 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 17 
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 1994 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 salaries plus fringe 
benefits obtained in Step 3 for all hospitals in that area to determine 
the total adjusted salaries plus fringe benefits for the labor market 
area.
    Step 7--We divided the total adjusted salaries plus fringe benefits 
obtained in Step 6 by the sum of the total hours (from Step 4) for all 
hospitals in each labor market area to determine an average hourly wage 
for the area.
    Step 8--We added the total adjusted salaries plus fringe benefits 
obtained in Step 3 for all hospitals in the Nation and then divided the 
sum by the national sum of total hours from Step 4 to arrive at a 
national average hourly wage. Using the data as described above, the 
national average hourly wage is $20.0804.
    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.
    Step 10--Following the process set forth above, we developed a 
separate Puerto Rico-specific wage index for purposes of adjusting the 
Puerto Rico standardized amounts. We added the total adjusted salaries 
plus fringe benefits (as calculated in Step 3) for all hospitals in 
Puerto Rico and divided the sum by the total hours for Puerto Rico (as 
calculated in Step 4) to arrive at an overall average hourly wage of 
$9.1956 for Puerto Rico. For each labor market area in Puerto Rico, we 
calculated the hospital wage index value by dividing the area average 
hourly wage (as calculated in Step 7) by the overall Puerto Rico 
average hourly wage.
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 the wage index 
value for the area to

[[Page 29916]]

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 
would reduce the wage index value for the area to which the hospitals 
are redesignated by 1 percentage point or less, the area 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 that combined wage index value.
     If including the wage data for the redesignated hospitals 
increases the wage index value for the area to which the hospitals are 
redesignated, both the area and the redesignated hospitals receive the 
combined wage index value.
     The wage index value for a redesignated rural hospital 
cannot be reduced below the wage index value for the rural areas of the 
State in which the hospital is located.
     Rural areas whose wage index values would be reduced by 
excluding the wage data for hospitals that have been redesignated to 
another area continue to have their wage index values calculated as if 
no redesignation had occurred.
     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 index values calculated 
exclusive of the wage data 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 value for an urban area below the statewide rural wage index 
value, provided the urban area's wage index value prior to 
reclassification was greater than the statewide rural wage index value.
     Reclassification of hospitals may not result in the 
reduction of the wage index value for any urban area whose wage index 
value is below the statewide rural wage index value. 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 statewide rural wage index 
value and would be reduced by redesignations, the wage index value for 
each area is computed exclusive of the wage data for hospitals that 
have been redesignated from the area for purposes of their wage index. 
As a result, several urban areas listed in Table 4a have no hospitals 
remaining in the area. This is because all the hospitals originally in 
these urban areas have been reclassified to another area by the MGCRB. 
These areas with no remaining hospitals receive the prereclassified 
wage index value. The prereclassified wage index value will apply as 
long as the area remains empty.
    The proposed revised wage index values for FY 1998 are shown in 
Tables 4A, 4B, 4C, and 4F in the Addendum to this proposed rule. 
Hospitals that are redesignated should use the wage index values shown 
in Table 4C. Areas in Table 4C may have more than one wage index value 
because the wage index value for a redesignated rural hospital cannot 
be reduced below the wage index value for the rural areas of the State 
in which the hospital is located. When the wage index value of the area 
to which a rural hospital is redesignated is lower than the wage index 
value for the rural areas of the State in which the rural hospital is 
located, the redesignated rural hospital receives the higher wage index 
value, that is, the wage index value for the rural areas of the State 
in which it is located, rather 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 1994 wage data. In 
addition, Table 3C in the Addendum to this proposed rule includes the 
adjusted (inflated) average hourly wage for each hospital based on the 
FY 1994 data. 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. Hospitals 
that choose to apply before publication of the final rule can use the 
proposed wage data in applying to the MGCRB for wage index 
reclassifications that would be effective for FY 1999. We note that in 
adjudicating these wage index reclassification requests during FY 1998, 
the MGCRB will use the average hourly wages for each hospital and labor 
market area that are reflected in the final FY 1998 wage index.
    At the time this proposed wage index was constructed, the MGCRB had 
completed its review. The proposed FY 1998 wage index values 
incorporate all 364 hospitals redesignated for purposes of the wage 
index (hospitals redesignated under section 1886(d)(8)(B) or 
1886(d)(10) of the Act) for FY 1998. The final number of 
reclassifications may be different because some MGCRB decisions are 
still under review by the Administrator and because some hospitals may 
withdraw their requests for reclassification.
    Any changes to the wage index that result from withdrawals of 
requests for reclassification, wage index corrections, appeals, and the 
Administrator's review process will be incorporated into the wage index 
values published in the final rule. The changes may affect not only the 
wage index value for specific geographic areas, but also whether 
redesignated hospitals receive the wage index value for the area to 
which they are redesignated, or a wage index value that includes the 
data for both the hospitals already in the area and the redesignated 
hospitals. Further, the wage index value for the area from which the 
hospitals are redesignated may be affected.
    Under Sec. 412.273, hospitals that have been reclassified by the 
MGCRB are permitted to withdraw their applications within 45 days of 
the publication of this Federal Register document. The request for 
withdrawal of an application for reclassification that would be 
effective in FY 1998 must be received by the MGCRB by July 17, 1997. A 
hospital that requests to withdraw its application may not later 
request that the MGCRB decision be reinstated.

C. Requests for Wage Data Corrections

    To allow hospitals more time to evaluate the wage data used to 
construct the proposed FY 1998 hospital wage index, we have made 
available to the public a data file containing the FY 1994 hospital 
wage data. In a memorandum dated February 28, 1997, we instructed all 
Medicare intermediaries to inform the prospective payment hospitals 
they serve that the wage data file would be available approximately 
mid-March 1997. The intermediaries were also instructed to advise 
hospitals of the alternative availability of these data through the 
Internet at HCFA's home page (http://www.hcfa.gov), their 
representative hospital organizations, or directly from HCFA (using 
order forms provided by the intermediary). Additional details on 
ordering this data file are discussed in

[[Page 29917]]

section IX.A. of this preamble, ``Requests for Data from the Public.''
    In addition, as discussed in section III.B.3 of this preamble, 
Table 3C in the Addendum to this proposed rule contains each hospital's 
adjusted average hourly wage used to construct the proposed 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. An updated Table 3C 
(along with applicable wage inflation adjustment factors) will be 
included in the final rule.
    We believe hospitals have had ample time to ensure the accuracy of 
their FY 1994 wage data. Moreover, the ultimate responsibility for 
accurately completing the cost report rests with the hospital, which 
must attest to the accuracy of the data at the time the cost report is 
filed. However, if after review of the wage data file or Table 3C, a 
hospital believes that its FY 1994 wage data have been incorrectly 
reported, the hospital must submit corrections along with complete, 
detailed supporting documentation to its intermediary by May 15, 1997. 
To be reflected in the final wage index, any wage data corrections must 
be reviewed and verified by the intermediary and transmitted to HCFA 
(through HCRIS) on or before June 16, 1997. These deadlines, which 
correspond to the deadlines we used last year for developing the FY 
1997 wage index, are necessary to allow sufficient time to review and 
process the data so that the final wage index calculation can be 
completed for development of the final prospective payment rates to be 
published by August 29, 1997. We cannot guarantee that corrections 
transmitted to HCFA after June 16, 1997, will be reflected in the final 
wage index.
    After reviewing requested changes submitted by hospitals, 
intermediaries will transmit any revised cost reports to HCRIS and 
forward a copy of the revised Worksheet S-3, Part II to the hospitals. 
If requested changes are not accepted, fiscal intermediaries will 
notify hospitals in writing of reasons why the changes were not 
accepted. This procedure will ensure that hospitals have every 
opportunity to verify the data that will be used to construct their 
wage index values. We believe that fiscal intermediaries are generally 
in the best position to make evaluations regarding the appropriateness 
of a particular cost and whether it should be included in the wage 
index data. However, if a hospital disagrees with the intermediary's 
resolution of a requested change, the hospital may contact HCFA in an 
effort to resolve the dispute. We note that the June 16 deadline also 
applies to these requested changes, and we will not consider requests 
to resolve such disputes that are not received by June 16.
    We have created the process described above to resolve all 
substantive wage data correction disputes before we finalize the wage 
data for the FY 1998 payment rates. Accordingly, hospitals that do not 
meet the procedural deadlines set forth above will not be afforded a 
later opportunity to submit wage corrections or to dispute the 
intermediary's decision with respect to requested changes.
    We intend to make another file available in mid-August that will 
contain the wage data that will be used to construct the wage index 
values in the final rule. As with the file made available in March 
1997, HCFA will make the August wage data file available to hospital 
associations and the public. This August file, however, is being made 
available only for the limited purpose of identifying any potential 
errors made by HCFA or the intermediary in the entry of the final wage 
data that result from the process described above, not for the 
initiation of new wage data correction requests. Hospitals are 
encouraged to review their hospital wage data promptly after the 
release of the second file.
    If, after reviewing the August file, 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, including dates. These requests must be received by HCFA 
and the intermediaries no later than September 15, 1997. Requests 
mailed 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, MD 21244-1850. Each request also must be 
sent to the hospital's fiscal intermediary. The intermediary will 
review requests upon receipt and contact HCFA immediately to discuss 
its findings.
    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 wage data file. 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 HCRIS on or 
before June 16, 1997.
     Requests for correction of errors that were not, but 
could have been, identified during the hospital's review of the 
March 1997 data.
     Requests to revisit factual determinations or policy 
interpretations made by the intermediary or HCFA during the wage 
data correction process.

    Verified corrections to the wage index received timely (that is, by 
September 15, 1997) will be effective October 1, 1997.
    Again, we believe the wage data correction process described above 
provides hospitals with sufficient opportunity to bring errors in their 
wage data to the intermediary's attention. Moreover, because hospitals 
will have access to the wage data in mid-August, they will have the 
opportunity to detect any data entry or tabulation errors made by the 
intermediary or HCFA before the implementation of the FY 1998 wage 
index on October 1, 1997. 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 1998 (that is, by the 
September 15, 1997 deadline). As indicated earlier, since a hospital 
will have the opportunity to verify its data, and the intermediary will 
notify the hospital of any changes, we do not foresee any specific 
circumstances under which midyear corrections would be made. However, 
should a midyear correction be necessary, the wage index change for the 
affected area will be effective prospectively from the date the 
correction is made.

[[Page 29918]]

D. Modification of the Process and Timetable for Updating the Wage 
Index

    Although the wage data correction process described above has 
proven successful in the past for ensuring that the wage data used each 
year to calculate the wage indexes are generally reliable and accurate, 
we are concerned that there have been an excessive number of wage data 
revisions occurring after the release of the wage data in mid-March. 
Last year, in developing the FY 1997 wage index, the wage data were 
revised between the proposed and the final rules for more than 13 
percent of the hospitals (approximately 700 of 5,200). Since hospitals 
are expected to submit complete and accurate data, and the data are 
reviewed and edited by the intermediaries and HCFA, we believe that we 
should be making few revisions after the release of the March wage data 
file. According to information received from the intermediaries, these 
late revisions are partly due to the lack of responsiveness of 
hospitals in providing sufficient information to the intermediaries 
during the desk reviews (that is, during the intermediary's review of 
the hospital's cost report).
    Our analysis of last year's wage data also shows that, although the 
volume of revisions was high, the effect of the changes on the wage 
index was minimal. Of the 368 labor market areas affected, only 4 (1.1 
percent) experienced a change of 5 percent or more in their wage index 
value and 39 (10.6 percent) experienced a change of 1 percent or more. 
Thus, the intensity of work that must be performed in order to 
incorporate these revisions in the 1 month available between the mid-
June date for revision requests and the mid-July date by which we must 
begin calculation of the final wage index is not warranted in light of 
the minimal changes to the actual wage index values.
    Another problem with the current process is that it results in 
corrections to the final wage index after the September 1 final rule 
publication and before the October 1 effective date of the wage index. 
Immediately following the development of the final wage index, a second 
wage data file is made available in mid-August so that hospitals may 
again verify the accuracy of their wage data. If a hospital detects an 
error made by the intermediary or HCFA in the handling (entry or 
transmission) of the wage data, the hospital may request a correction 
(this year, by September 15). The corrections are published in the 
Federal Register after the October 1 implementation date in a 
correction notice to the final rule. We would prefer to eliminate the 
need to republish certain wage index values after the final rule is in 
effect.
    Finally, hospitals base their geographic reclassification decisions 
(whether or not to withdraw their applications) on the wage index 
published in the proposed rule. Although the FY 1997 proposed and final 
wage indexes were quite similar, we cannot ensure this will happen each 
year if increasing numbers of hospitals delay the submittal to their 
intermediaries of wage data supporting documentation until the May 15 
deadline. We believe that a more informed reclassification decision 
could be made if the proposed wage index more closely resembles the 
final wage index. Therefore, we are proposing to revise the wage data 
verification process beginning with the FY 1999 wage index.
1. Proposed Process and Timetable
    The major change we are proposing to the current process would be 
the requirement that wage data revisions be requested (and resolved) 
earlier, before publication of the proposed rule. Subsequent 
corrections would be allowed only for errors in handling the data (our 
current timetable allows for such corrections after the final rule is 
published). For example, the FY 1999 wage index will use FY 1995 cost 
report data (that is, cost reports beginning in FY 1995) and become 
effective October 1, 1998. Under the proposed timetable, hospitals 
would be required to submit all requests for wage data revisions to 
their intermediary by mid-December 1997. This would provide ample 
opportunity for hospitals to evaluate the results of intermediaries' 
desk reviews and prepare any requests for corrections. We note that the 
desk reviews are performed on an ongoing basis as cost reports are 
received from hospitals and, for the FY 1995 wage data, must be 
completed prior to the mid-November 1997 deadline for submitting all FY 
1995 wage data to HCRIS.
    As under the current process, after reviewing requests for wage 
data revisions submitted by hospitals, fiscal intermediaries will 
transmit any revised cost report to HCRIS and forward a copy of the 
revised Worksheet S-3, Part II to the hospital. If requested revisions 
are not accepted, the fiscal intermediaries will notify the hospital in 
writing of reasons why the changes were not accepted. We believe that 
fiscal intermediaries are generally in the best position to make 
evaluations regarding the appropriateness of a particular cost and 
whether it should be included in the wage index data. However, if a 
hospital disagrees with the intermediary's resolution of a requested 
change, the hospital may contact HCFA in an effort to resolve the 
dispute. All policy issues must be resolved by mid-January.
    The proposed timetable for developing the annual update to the wage 
index is as follows (an asterisk indicates no change from prior years):

Mid-November *
    All desk reviews for hospital wage data are completed and revised 
data transmitted by intermediaries to HCRIS.
Mid-December
    Deadline for hospitals to request wage data revisions and provide 
adequate documentation to support the request.
Mid-January
    Deadline for intermediaries to submit to HCRIS all revisions 
resulting from hospitals' requests for adjustments (as of mid-December) 
(and verification of data submitted to HCRIS (as of mid-November)).
Early April
    Edited wage data are available for release to the public.
May 1 *
    Proposed rule published with 60-day comment period and 45-day 
withdrawal deadline for geographic reclassification.
June 16, 1997
    Deadline for hospitals to notify HCFA and intermediary that wage 
data are incorrect due to mishandling of data (that is, error in data 
entry or transmission) by intermediary or HCFA.
June 30, 1997
    Deadline for intermediaries to transmit all revisions to HCRIS.
September 1 *
    Publication of the final rule.
October 1 *
    Effective date of updated wage index.
2. Cost Reporting Timetable
    This proposed change will not significantly alter the time 
hospitals have to ensure the accuracy of their data. In developing the 
wage index for a given fiscal year, we use the most recent, reviewed 
wage data, that is, wage data from cost reports that began in the 
fiscal year 4 years earlier. For example, for the FY 1999 wage index, 
we will use data from cost reporting periods beginning in FY 1995. 
Hospitals must submit cost reports to their intermediaries within 150 
days of the end of their cost reporting periods. Once the cost report 
is received, the intermediary has 12 months to review and settle it.
    As part of the settlement process, we require intermediaries to 
conduct a desk

[[Page 29919]]

review of the wage data. The desk review program for hospital wage data 
targets potentially aberrant data and checks the completeness and 
accuracy of the data, including verifying that reported costs are in 
conformance with our policy, before it is used in calculating the wage 
index. The intermediary checks the wage data and supporting 
documentation submitted by the hospital and contacts the hospital if 
additional information is needed to verify the accuracy of the data. 
When it is necessary for the intermediary to adjust a hospital's wage 
data, the intermediary notifies the hospital in writing of the change 
to the cost report and hospitals then have the opportunity to request 
adjustments. This would continue to be the case.
    Since intermediaries must settle cost reports within 12 months of 
their receipt, most of the cost reports are settled by the time we 
compile the data to calculate the wage index. We note, however, that 
the annual update of the wage index is not tied directly to the cost 
report settlement process since extensions or reopenings of settled 
cost reports may be granted.
    The following is an illustration of the process for settling a 
typical cost report beginning in FY 1995. Of course, hospitals' cost 
reporting periods may begin at any time during the year.

January 1, 1995
    Cost reporting period begins.
December 31, 1995
    Cost reporting period ends.
May 31, 1996
    Cost report must be submitted by the hospital to the intermediary.
July 31, 1996
    Cost report must be transmitted by the intermediary to HCRIS.
May 31, 1997
    Cost report must be settled by the intermediary. (Desk review of 
hospital wage data is performed on an ongoing basis by the intermediary 
before the cost report is settled.)
July 31, 1997
    Settled cost report must be transmitted by the intermediary to 
HCRIS.
3. Impact of the Proposed Revised Timetable for Finalizing Wage Data
    The most significant change from our current process is that we 
would no longer release a preliminary wage data file prior to 
hospitals' final opportunity to request corrections. We would instead 
release a single data file in early April for the limited purpose of 
identifying errors made by the intermediaries or HCFA in handling the 
data. We no longer believe that the benefit of releasing the 
preliminary data file outweighs the disadvantages in terms of increased 
workload for the intermediaries. Under the current process, 
intermediaries are required to verify the inclusion and accuracy of all 
hospitals' wage data twice during the wage index development. 
Verification is done in December and in July before the wage data 
public use files are released in mid-March and mid-August.
    Therefore, hospitals would no longer have until mid-May to request 
wage data revisions. Instead, hospitals would have to request revisions 
and provide supporting documentation by mid-December of the previous 
year, and all policy issues would have to be resolved by mid-January. 
We believe this proposed timetable for finalizing the wage data used in 
the hospital wage index gives hospitals ample opportunity to ensure the 
accuracy of the data and at the same time addresses the concerns we 
have discussed (the number of revisions, the necessity of making 
numerous corrections after the final rule, and the differences between 
the proposed and final wage indexes). Moreover, we do not believe the 
timetable change would impose any increased burden. Hospitals are 
required to certify the completeness and the accuracy of the wage data 
when they submit their cost reports, and the intermediaries complete 
desk reviews before we begin to develop the wage index for a given 
year. Hospitals would still have an opportunity to request revisions to 
the cost report data. Although those requests would have to be made 
earlier, hospitals would continue to have ample time to request 
appropriate revisions given the timetable for cost report submission 
and review.
    We believe the proposed timetable is a logical step in the 
evolution of the process for compiling the wage data used to calculate 
the hospital wage index. For a number of years, the hospital wage index 
was based on a wage survey that was not updated every year. Applicable 
policies permitted hospitals to request and receive mid-year 
corrections to the data on the wage survey. Beginning with FY 1994 
(beginning on October 1, 1993), we used wage data submitted by 
hospitals on Worksheet S-3, Part II of the hospital cost report, and we 
update the wage data every year. We revised our wage data process 
accordingly--we stopped making mid-year corrections to the wage data, 
and instead attempted to finalize the wage data by the final rule.
    The proposed timetable would shorten the time for revisions 
somewhat further, in order to finalize wage data as much as possible 
before publication of the proposed rule. Because we have used cost 
report data for 5 years now, hospitals should be well aware of the 
importance of submitting accurate wage data on the worksheet S-3, Part 
II. And as intermediaries and hospitals have become increasingly 
familiar with the data collection and verification process, handling 
the data has become more routine and streamlined. For instance, over 
the past year, we have greatly improved the overall efficiency of our 
communications with the intermediaries through greater reliance on 
electronic transmission of wage data. In short, then, there should be 
less need for revising wage data after desk reviews, and we believe it 
is reasonable and appropriate to revise the timetable for requesting 
and resolving wage data revisions.
    We would continue to make midyear corrections to the wage index in 
accordance with Sec. 412.63(s)(2), 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 the fiscal year. Although we do not anticipate 
that such situations would arise, this regulatory authority would 
remain unchanged.

E. Proposed Wage Index Workgroup

    We are concerned that the rapid and dramatic changes occurring in 
hospitals' operating environments, combined with the current time lag 
in the data used to construct the wage index, is leading to a situation 
where the wage index may be becoming less representative of hospitals' 
current labor costs. Hospitals' increasing reliance on contract labor 
for a broadening array of functions, hospital mergers and the 
development of integrated delivery systems, and the probable expansion 
of the prospective payment system to other sites of care are factors 
that indicate a need for a concerted effort to ensure that the data 
required for calculating the wage index are available and reliable. 
Furthermore, despite the improvements that resulted from the work of 
the special Medicare Technical Advisory Group (MTAG) several years ago, 
technical questions about the treatment of certain types of labor costs 
continue to arise.
    For these reasons, we believe there is a need for an ongoing 
workgroup to address wage index related issues periodically. We are 
interested in receiving input from representatives of the hospital 
industry (and other provider types interested in the collection of wage 
data) regarding the

[[Page 29920]]

need for such a workgroup and their willingness to participate. We are 
also seeking public input regarding the structure and scope of such a 
workgroup. In particular, we welcome comments on whether the workgroup 
should be formally established (for example, a special MTAG), encompass 
other provider types, or operate on an ongoing basis. We will respond 
to comments we receive on this issue in the final rule.

IV. Revising the Hospital Operating Market Baskets

A. General Discussion

    We use a hospital input price index (that is, the hospital ``market 
basket'') to develop the inflation component update factors 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 terms rebasing and revising, although often used 
interchangeably, actually denote different activities. Rebasing moves 
the base year for the structure of costs of an input price index (for 
example, 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 for a given base year. In the August 30, 
1996 final rule, effective for FY 1997, we both rebased and revised the 
hospital operating market baskets (61 FR 46186).

B. Revising the Hospital Market Basket

    We propose this year to use a revised hospital market basket in 
developing the FY 1998 update factor for the operating prospective 
payment rates. In the August 30, 1996 final rule, we discussed the 
possibility of revising the market basket when additional data became 
available (61 FR 46187). Consistent with that discussion, we propose to 
use a revised market basket which would still have a base year of FY 
1992, but would incorporate additional data, specifically the Asset and 
Expenditure Survey, 1992 Census of Service Industries, by the Bureau of 
the Census, Economics and Statistics Administration, U.S. Department of 
Commerce, which did not become available until after the FY 1997 final 
rule was published. (For further discussion of the differences between 
the proposed revised market basket and the current market basket, see 
Appendix C of this proposed rule.)
    In the current market basket, data for four major expense 
categories (wages and salaries, employee benefits, pharmaceuticals, and 
a residual category) are from Medicare hospital cost reports for 
periods beginning in FY 1992 (that is, periods beginning on or after 
October 1, 1991 and before October 1, 1992). These cost reports, which 
we refer to as PPS-9 cost reports (the 9th year of PPS), are reported 
in the Health Care Provider Cost Report Information System (HCRIS). In 
the proposed hospital market basket, we still use the cost report data, 
and categories and weights are unchanged from the current market 
basket. Within the residual category, the categories and weights for 
nonmedical professional fees and professional liability insurance are 
also unchanged. (For a detailed discussion of the determination of 
weights, see the August 30, 1996 final rule (61 FR 46187)).
    Table 1 shows a comparison of the current and the proposed revised 
operating market basket cost categories, weights, and price proxies. 
For the proposed market basket, weights for the ``Utilities'' and ``All 
Other'' cost categories, as well as most subcategories, were derived 
using the Asset and Expenditure Survey, published by the Bureau of the 
Census, Economics and Statistics Administration, U.S. Department of 
Commerce, in conjunction with the latest available (1987) Input-Output 
Table, produced by the Bureau of Economic Analysis (BEA), U.S. 
Department of Commerce. The 1987 input-output cost shares, aged to 1992 
using historical price changes between 1987 and 1992 for each category, 
were allocated to be consistent with the newly available 1992 asset and 
expenditure data.
    The resulting combined data were allocated to be consistent with 
the 1992 hospital cost report data. Revised relative weights for the 
base year were then calculated for various expenditure categories. This 
work resulted in the identification of 22 separate cost categories in 
the revised market basket. Four categories previously separate were 
combined with existing categories. Specifically, Business Services, and 
Computer and Data Processing Services were combined with All Other 
Labor-Intensive Services. Transportation Services was combined with All 
Other Nonlabor-Intensive Services, and the Fuel, Oil, Coal etc. 
category was split between Fuels (nonhighway) and Miscellaneous 
Products. We combined these categories so that the market basket would 
conform more closely with the 1992 Asset and Expenditure Survey. 
Detailed descriptions of each of the four categories and their 
respective price proxies can be found in the August 30, 1996 final rule 
(61 FR 46323). Changing the structure of the market basket using the 
1992 Asset and Expenditure Survey allows for a more accurate reflection 
of the cost structures faced by hospitals. When the Bureau of the 
Census or the BEA improves methodologies for the collection and 
categorization of data, it is likely the weights will also change.

Table 1.--Comparison of Current 1992-Based Prospective Payment Hospital Market Basket With Proposed Revised 1992-
                                Based Prospective Payment Hospital Market Basket                                
----------------------------------------------------------------------------------------------------------------
                                                                                                       Proposed 
                                                                                          Current      revised  
                                                                                         1992-based   1992-based
              Expense categories                              Price proxy                 excluded     excluded 
                                                                                           market       market  
                                                                                         basket \1\     basket  
----------------------------------------------------------------------------------------------------------------
1. Compensation...............................  ......................................       61.390       61.390
    A. Wages and Salaries.....................  HCFA Occupational Wage Index..........       50.244       50.244
    B. Employee Benefits......................  HCFA Occupational Benefits Index......       11.146       11.146
2. Nonmedical Professional Fees...............  ECI-Compensation for Professional,            2.127        2.127
                                                 Specialty, and Technical.                                      
3. Utilities..................................  ......................................        2.470        1.542
    A. Electricity............................  PPI Commercial Electric Power.........        1.349        0.927
    B. Fuels (Nonhighway).....................  PPI Commercial Natural Gas............        1.015        0.369
    C. Water and Sewerage.....................  CPI-U Water and Sewerage Maintenance..        0.106        0.246

[[Page 29921]]

                                                                                                                
4. Professional Liability Insurance...........  HCFA Professional Liability Insurance         1.189        1.189
                                                 Premium Index.                                                 
5. All Other Expenses.........................  ......................................       32.825       33.752
    A. All Other Products.....................  ......................................       24.033       24.825
        (1) Pharmaceuticals...................  PPI Ethical (Prescription) Drugs......        4.162        4.162
        (2) Food..............................  ......................................        3.459        3.386
            (a) Direct Purchase...............  PPI Processed Foods and Feeds.........        2.363        2.314
            (b) Contract Service..............  CPI Food Away From Home...............        1.096        1.072
        (3) Chemicals.........................  PPI Industrial Chemicals..............        3.795        3.666
        (4) Medical Instruments...............  PPI Medical Instruments and Equipment.        3.128        3.080
        (5) Photographic Supplies.............  PPI Photographic Supplies.............        0.399        0.391
        (6) Rubber and Plastics...............  PPI Rubber and Plastic Products.......        4.868        4.750
        (7) Paper Products....................  PPI Converted Paper and Paperboard            2.062        2.078
                                                 Products.                                                      
        (8) Apparel...........................  PPI Apparel...........................        0.875        0.869
        (9) Machinery and Equipment...........  PPI Machinery and Equipment...........        0.211        0.207
        (10) Miscellaneous Products...........  PPI Finished Goods....................        1.074        2.236
    B. All Other Services.....................  ......................................        8.792        8.927
        (1) Postage...........................  CPI-U Postage.........................        0.272        0.272
        (2) Telephone Services................  CPI-U Telephone Services..............        0.531        0.581
        (3) All Other: Labor Intensive........  ECI Compensation for Private Service          7.457        7.277
                                                 Occupations.                                                   
        (4) All Other: Nonlabor Intensive.....  CPI-U All Items.......................        0.532        0.796
                                                                                       -------------------------
            Total.............................  ......................................      100.000     100.000 
----------------------------------------------------------------------------------------------------------------
Note: Due to rounding, weights may not sum to total.                                                            
                                                                                                                
\1\ Expense categories based on proposed 1992-based hospital market basket for comparison purposes.             

    In calculating payments to hospitals, the labor-related portion of 
the standardized amounts is adjusted by the hospital wage index. As 
discussed in the August 30, 1996 final rule (61 FR 46189), for purposes 
of determining the labor-related portion of the standardized amounts, 
we sum the percentages of the labor-related items (that is, wages and 
salaries, employee benefits, professional fees, business services, 
computer and data processing services, postage, and all other labor-
intensive services) in the operating hospital market basket. Effective 
for FY 1997, this summation resulted in a labor-related portion of the 
hospital market basket of 71.246 percent, and a nonlabor-related 
portion of 28.754 percent. Thus, since October 1, 1996, we have 
considered 71.2 percent of operating costs to be labor-related for 
purposes of the prospective payment system (we rounded to the nearest 
tenth).
    In connection with the revisions to the hospital market basket, we 
have reestimated the labor-related share of the standardized amounts. 
Based on the relative weights described in Table 2, the labor-related 
portion (wages and salaries, employee benefits, professional fees, 
postage, and all other labor-intensive services) is 71.066 percent, and 
the nonlabor-related portion is 28.934 percent. Accordingly, effective 
with discharges occurring on or after October 1, 1997, we are proposing 
to revise the labor-related and nonlabor-related shares of the large 
urban and other areas' standardized amounts used to establish the 
prospective payment rates to 71.1 and 28.9, respectively. The amounts 
in Table 2 reflect the revised labor-related and nonlabor-related 
portions. We note that the labor-related portions of the rates 
published in Table 2 have remained approximately the same. The labor-
related portion has decreased from 71.246 percent to 71.066 percent.

Table 2.--Labor-Related Share of Proposed 1992-Based Prospective Payment
                         Hospital Market Basket                         
------------------------------------------------------------------------
                        Cost category                            Weight 
------------------------------------------------------------------------
Wages and salaries...........................................     50.244
Employee benefits............................................     11.146
Professional fees............................................      2.127
Postal services..............................................      0.272
All other labor intensive....................................      7.277
                                                              ----------
    Total labor-related......................................     71.066
                                                              ==========
    Total nonlabor-related...................................     28.934
------------------------------------------------------------------------

C. Selection of Price Proxies

    Only four categories that are part of the current hospital market 
basket do not appear in the proposed revised hospital market basket. Of 
the 22 categories that are part of both the current and the proposed 
revised market baskets, only the weights might differ. The wage and 
price proxies selected for these cost categories are the same as those 
selected last year. A description and discussion of each price proxy 
are set forth in the August 30, 1996 final rule (61 FR 46324). The 
price proxies are shown in Table 1, above. The makeup of the HCFA 
Blended Occupational Wage Index and the HCFA Blended Occupational 
Benefits Index used as proxies for Wages and Salaries and Employee 
Benefits, respectively, remain the same as last year. (See 61 FR 
27463.)
    To examine the impact of the changes to the weights and the 
reduction of the number of cost categories, we developed a comparison 
for the period FY 1994 through FY 1999. Using historical data for FY 
1994 through FY 1996, and forecasts for FY 1997 through FY 1999 for the 
prospective payment market basket, we compared the percentage changes 
for the current and the proposed revised market baskets.

[[Page 29922]]



Table 3.--Comparison of the Proposed Prospective Payment Hospital Market
    Basket and the Current Prospective Payment Hospital Market Basket   
                      Percent Change, FY 1994-1999                      
------------------------------------------------------------------------
                                           Current  Proposed            
                                          hospital  hospital            
           Federal fiscal year             market    market   Difference
                                           basket    basket             
------------------------------------------------------------------------
Historical:                                                             
  1994..................................       2.6       2.6        0.0 
  1995..................................       3.2       3.2        0.0 
  1996..................................       2.5       2.4       -0.1 
Forecasted:                                                             
  1997..................................       2.4       2.3       -0.1 
  1998..................................       2.7       2.8        0.1 
  1999..................................       3.0       2.9       -0.1 
Historical Average:                                                     
  1994-1996.............................       2.8       2.7       -0.1 
Forecasted Average:                                                     
  1997-1999.............................       2.7       2.7        0.0 
------------------------------------------------------------------------

    Note that the historical average rate of growth for 1994 through 
1996 for the improved proposed revised prospective payment hospital 
market basket is almost equal to that of the current market basket. The 
0.1 percentage point difference is less than the +/-0.25 percent 
threshold for corrections for forecast error. The forecasted average 
rate of growth for 1997 through 1999 for the revised market basket is 
equal to that of the current market basket.

D. Separate Market Basket for Hospitals and Hospital Units Excluded 
From the Prospective Payment System

    As in the prospective payment hospital market basket, weights for 
the six main cost categories contained in the excluded hospital market 
basket (that is, weights for wages and salaries, employee benefits, 
professional fees, malpractice insurance, pharmaceuticals, and the 
residual category) remain the same. Only the weights for ``Utilities'' 
and the categories within ``All Other'' have been revised. Table 4 
below shows weights for the current and proposed excluded hospital 
market basket.

   Table 4.--Comparison of Current 1992-Based Excluded Hospital Market Basket With Proposed Revised 1992-Based  
                                         Excluded Hospital Market Basket                                        
----------------------------------------------------------------------------------------------------------------
                                                                                                       Proposed 
                                                                                          Current      revised  
                                                                                         1992-based   1992-based
              Expense categories                              Price proxy                 excluded     excluded 
                                                                                           market       market  
                                                                                         basket \1\     basket  
----------------------------------------------------------------------------------------------------------------
1. Compensation...............................  ......................................       63.721       63.721
    A. Wages and Salaries.....................  HCFA Occupational Wage Index..........       52.152       52.152
    B. Employee Benefits......................  HCFA Occupational Benefits Index......       11.569       11.569
2. Nonmedical Professional Fees...............  ECI-Compensation for Professional,            2.098        2.098
                                                 Specialty, and Technical.                                      
3. Utilities..................................  ......................................        2.557        1.675
    A. Electricity............................  WPI Commercial Electric Power.........        1.396        1.007
    B. Fuels (Nonhighway).....................  WPI Commercial Natural Gas............        1.051        0.401
    C. Water and Sewerage.....................  CPI-U Water and Sewerage Maintenance..        0.110        0.267
4. Professional Liability Insurance...........  HCFA Professional Liability Insurance         1.081        1.081
                                                 Premium Index.                                                 
5. All Other Expenses.........................  ......................................       30.541       31.425
    A. All Other Products.....................  ......................................       23.640       24.227
        (1) Pharmaceuticals...................  PPI Ethical (Prescription) Drugs......        3.070        3.070
        (2) Food..............................  ......................................        3.581        3.468
            (a) Direct Purchase...............  PPI Processed Foods and Feeds.........        2.446        2.370
            (b) Contract Service..............  CPI Food Away From Home...............        1.135        1.098
        (3) Chemicals.........................  PPI Industrial Chemicals..............        3.929        3.754
        (4) Medical Instruments...............  PPI Medical Instruments and Equipment.        3.238        3.154
        (5) Photographic Supplies.............  PPI Photographic Supplies.............        0.413        0.400
        (6) Rubber and Plastics...............  PPI Rubber and Plastic Products.......        5.039        4.865
        (7) Paper Products....................  PPI Converted Paper and Paperboard            2.134        2.182
                                                 Products.                                                      
        (8) Apparel...........................  PPI Apparel...........................        0.906        0.890
        (9) Machinery and Equipment...........  PPI Machinery and Equipment...........        0.218        0.212
        (10) Miscellaneous Products...........  PPI Finished Goods....................        1.112        2.232
    B. All Other Services.....................  ......................................        6.901        7.198
        (1) Postage...........................  CPI-U Postage.........................        0.282        0.295
        (2) Telephone Services................  CPI-U Telephone Services..............        0.549        0.631
        (3) All Other: Labor Intensive........  ECI Compensation for Private Service          5.519        5.439
                                                 Occupations.                                                   
        (4) All Other: Nonlabor Intensive.....  CPI-U All Items.......................        0.551        0.833
                                                                                       -------------------------
            Total.............................  ......................................      100.000     100.000 
----------------------------------------------------------------------------------------------------------------
Note: Due to rounding, weights may not sum to total.                                                            
\1\ Expense categories based on proposed 1992-based hospital market basket for comparison purposes.             


[[Page 29923]]

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

A. Elimination of Day Outlier Payments (Secs. 412.80 and 412.82)

    Section 1886(d)(5)(A) of the Act provides for payments in addition 
to the basic prospective payments for ``outlier'' cases, that is, cases 
involving extraordinarily high costs (cost outliers) or long lengths of 
stay (day outliers). That section also provides that, beginning with FY 
1995, payments for day outliers will be phased out over 3 years. We 
have discussed this phase out and its implementation in detail in the 
September 1, 1994, September 1, 1995, and August 30, 1996 final rules 
(59 FR 45366, 60 FR 45854, and 61 FR 46228, respectively). Since 
payment for day outliers will be eliminated effective with discharges 
occurring in FY 1998, we are proposing to make conforming revisions to 
the regulations at Secs. 412.80, 412.82, 412.84, and 412.86. At the 
same time, we are making a technical change to the provision concerning 
outlier payments for transfer cases to conform the regulations text to 
policies that we have stated in previous prospective payment system 
rules but did not codify. See the final rules published September 1, 
1995 (60 FR 45804) and September 1, 1993 (58 FR 46306-07).

B. Rural Referral Centers (Sec. 412.96)

    Under section 1886(d) of the Act, hospitals generally are paid by 
the Medicare program for inpatient hospital services covered by 
Medicare in accordance with the prospective payment system. Certain 
hospitals, however, receive special treatment under that system. 
Section 1886(d)(5)(C)(i) of the Act specifically provides for 
exceptions and adjustments to prospective payment amounts, as the 
Secretary deems appropriate, to take into account the special needs of 
rural referral centers.
    Section 412.96(d) of the regulations provides that, for discharges 
occurring before October 1, 1994, rural referral centers received the 
benefit of payment for inpatient operating costs per discharge based on 
the other urban payment amount rather than the rural standardized 
amount. As of October 1, 1994, 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 ways that a rural hospital may qualify as 
a rural referral center is to meet two mandatory criteria (specifying a 
minimum case-mix index and a minimum number of discharges) and at least 
one of three optional criteria (relating to specialty composition of 
medical staff, source of inpatients, or volume of referrals). These 
criteria are described in detail in 42 CFR 412.96(c).
1. Case-Mix Index Criteria
    Section 412.96(c)(1) sets forth the case-mix index criteria and 
provides that, for cost reporting periods beginning on or after October 
1, 1986, a hospital's case-mix index for discharges ``during the 
Federal fiscal year that ended 1 year prior to the beginning of the 
cost reporting period for which the hospital is seeking referral center 
status'' must be at least equal to the national case-mix index value as 
established by HCFA or the median case-mix value for urban hospitals in 
the region in which the hospital is located (excluding hospitals 
receiving indirect medical education payments), whichever is lower. It 
has come to our attention that the language in Sec. 412.96(c)(1) does 
not clearly address situations in which the Federal fiscal year does 
not end exactly 1 year prior to the beginning of the cost reporting 
period for which the hospitals are seeking referral center status. In 
order to minimize any confusion, we propose to clarify which case-mix 
index values are used to determine referral center status.
    Our policy, which we have applied consistently since 1986, is that 
the case-mix index used for an individual hospital in the determination 
of whether it meets the case-mix index criterion is the case-mix index 
for discharges during the most recent Federal fiscal year that ended at 
least 1 year prior to the beginning of the cost reporting period for 
which the hospital is seeking referral center status.
    In this proposed rule, we would revise Sec. 412.96(c)(1) to clarify 
the time period used to calculate the case-mix index. We emphasize that 
this clarification represents no substantive change in policy.
2. Updated Case-Mix and Discharge Criteria
    As noted above, a rural hospital can qualify as a rural referral 
center if the hospital meets two mandatory criteria (case-mix index and 
number of discharges) 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.)
    a. 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 includes all urban hospitals nationwide, 
and the proposed regional values are the median values of urban 
hospitals within each census region, excluding those with approved 
teaching programs (that is, those hospitals receiving indirect medical 
education payments as provided in Sec. 412.105).
    These values are based on discharges occurring during FY 1996 
(October 1, 1995 through September 30, 1996) and include bills posted 
to HCFA's records through December 1996. Therefore, in addition to 
meeting other criteria, we are proposing 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, 1997, a 
hospital's case-mix index value for FY 1996 would have to be at least--
     1.3525; or
     Equal to the median case-mix index value for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec. 412.105) calculated by HCFA for the census region in 
which the hospital is located.
    The median case-mix values by region are set forth in the table 
below:

------------------------------------------------------------------------
                                                                  Case- 
                                                                   mix  
                             Region                               index 
                                                                  value 
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)........................   1.2324
2. Middle Atlantic (PA, NJ, NY)................................   1.2424
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).........   1.3671
4. East North Central (IL, IN, MI, OH, WI).....................   1.2625
5. East South Central (AL, KY, MS, TN).........................   1.3076

[[Page 29924]]

                                                                        
6. West North Central (IA, KS, MN, MO, NE, ND, SD).............   1.2089
7. West South Central (AR, LA, OK, TX).........................   1.3270
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)...................   1.3449
9. Pacific (AK, CA, HI, OR, WA)................................   1.3429
------------------------------------------------------------------------

    The above numbers will be revised in the final rule to the extent 
required to reflect the updated MedPAR file, which will contain data 
from additional bills received for discharges through September 30, 
1996.
    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 1996 case-mix index 
value in Table 3C in section IV. of the Addendum to this proposed rule. 
In keeping with our policy on discharges, these case-mix index values 
are computed based on all Medicare patient discharges subject to DRG-
based payment.
    b. Discharges. Section 412.96(c)(2)(i) provides that HCFA will set 
forth the national and regional numbers of discharges in each year's 
annual notice of prospective payment rates for purposes of determining 
referral center status. As specified in section 1886(d)(5)(C)(ii) of 
the Act, the national standard is set at 5,000 discharges. However, we 
are proposing to update the regional standards. The proposed regional 
standards are based on discharges for urban hospitals' cost reporting 
periods that began during FY 1995 (that is, October 1, 1994 through 
September 30, 1995). That is the latest year for which we have complete 
discharge data available.
    Therefore, in addition to meeting other criteria, we are proposing 
that to qualify for initial rural referral center status or to meet the 
triennial review standards for cost reporting periods beginning on or 
after October 1, 1997, the number of discharges a hospital must have 
for its cost reporting period that began during FY 1996 would have to 
be at least--
     5,000; or
     Equal to the median number of discharges for urban 
hospitals in the census region in which the hospital is located, as 
indicated in the table below.

------------------------------------------------------------------------
                                                               Number of
                           Region                             discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).....................        6725
2. Middle Atlantic (PA, NJ, NY).............................        8511
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)......        6991
4. East North Central (IL, IN, MI, OH, WI)..................        6607
5. East South Central (AL, KY, MS, TN)......................        5805
6. West North Central (IA, KS, MN, MO, NE, ND, SD)..........        4625
7. West South Central (AR, LA, OK, TX)......................        5085
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)................        8167
9. Pacific (AK, CA, HI, OR, WA).............................        5945
------------------------------------------------------------------------

    We reiterate that, to qualify for rural referral center status for 
cost reporting periods beginning on or after October 1, 1997, an 
osteopathic hospital's number of discharges for its cost reporting 
period that began during FY 1996 would have to be at least 3,000.
3. Retention of Referral Center Status
    Section 412.96(f) states that each hospital receiving the referral 
center adjustment is reviewed every 3 years to determine if the 
hospital continues to meet the criteria for referral center status. To 
retain status as a referral center, a hospital must meet the criteria 
for classification as a referral center specified in Sec. 412.96 (b)(1) 
or (b)(2) or (c) for 2 of the last 3 years, or for the current year. A 
hospital may meet any one of the three sets of criteria for individual 
years during the 3-year period or the current year. For example, a 
hospital may meet the two mandatory requirements in Sec. 412.96(c)(1) 
(case-mix index) and (c)(2) (number of discharges) and the optional 
criterion in paragraph (c)(3) (medical staff) during the first year. 
During the second or third year, the hospital may meet the criteria 
under Sec. 412.96(b)(1) (rural location and appropriate bed size).
    A hospital must meet all of the criteria within any one of these 
three sections of the regulations in order to meet the retention 
requirement for a given year. That is, it will have to meet all of the 
criteria of Sec. 412.96(b)(1) or Sec. 412.96(b)(2) or Sec. 412.96(c). 
For example, if a hospital meets the case-mix index standards in 
Sec. 412.96(c)(1) in years 1 and 3 and the number of discharge 
standards in Sec. 412.96(c)(2) in years 2 and 3, it will not meet the 
retention criteria. All of the standards would have to be met in the 
same year.
    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 1998 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 1998, a hospital must meet 
the criteria in Sec. 412.96(c) for FY 1998 or it must meet the criteria 
for 2 of the last 3 years as follows:

----------------------------------------------------------------------------------------------------------------
                                                              Use the discharges for                            
  For the cost reporting period     Use hospital's case-mix     the hospital's cost     Use numerical standards 
       beginning during FY               index for FY            reporting period         as published in the   
                                                                beginning during FY       Federal Register on   
----------------------------------------------------------------------------------------------------------------
1997.............................  1995....................  1995....................  Aug. 30, 1996.           
1996.............................  1994....................  1994....................  Sept. 1, 1995.           
1995.............................  1993....................  1993....................  Sept. 1, 1994.           
----------------------------------------------------------------------------------------------------------------

    Example: A hospital with a cost reporting period beginning July 
1 qualified as a referral center effective July 1, 1995. The 
hospital has fewer than 275 beds. Its 3-year status as a referral 
center is protected through June 30, 1998 (the end of its cost 
reporting period beginning July 1, 1997). To determine if the 
hospital should retain its status as a referral center for an 
additional 3-year period, we will review its compliance with the 
applicable criteria for its cost reporting periods beginning July 1, 
1995, July 1, 1996, and July 1, 1997. The hospital must meet the 
criteria in effect either for its cost reporting period beginning 
July 1, 1998, 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,

[[Page 29925]]

1996, the hospital's case-mix index value during FY 1994 must have 
equaled or exceeded the lower of the national or the appropriate 
regional standard as published in the September 1, 1995 final rule 
with comment period. The hospital's total number of discharges 
during its cost reporting year beginning July 1, 1994, must have 
equaled or exceeded 5,000 or the regional standard as published in 
the September 1, 1995 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.

C. Determining the Total Number of Full-Time Equivalent Residents for 
Indirect Medical Education Adjustment (Sec. 412.105)

    Section 1886(d)(5)(B) of the Act provides that prospective payment 
hospitals that have residents in an approved graduate medical education 
program receive an additional payment to reflect the higher indirect 
operating costs associated with graduate medical education. The 
regulations regarding the calculation of this additional payment, known 
as the indirect medical education (IME) adjustment, are at 
Sec. 412.105. The additional payment is calculated by multiplying a 
hospital's DRG revenue (including outlier payments) by the applicable 
IME adjustment factor. The adjustment factor is calculated by using a 
hospital's ratio of residents-to-beds in the formula set forth at 
section 1886(d)(5)(B)(ii) of the Act.
    The criteria governing whether a program is considered approved are 
at Sec. 412.105(g)(1)(i). These criteria are the same as those used to 
identify approved programs for the direct graduate medical education 
payment under Sec. 413.86(b). In the August 30, 1991 final rule (56 FR 
43237), we added a criterion to Sec. 413.86(b), but inadvertently did 
not add it to Sec. 412.105(g)(1)(i). This criterion added the Annual 
Report and Reference Handbook of the American Board of Medical 
Specialties (ABMS) as another publication to be used to identify 
approved programs. To correct this inadvertent omission, we are 
proposing a technical change to Sec. 412.105(g)(1) to parallel the 
provisions of Sec. 413.86(b).
    In addition, we are proposing to delete Sec. 412.105(g)(1)(iv), 
which excludes from the IME resident count any anesthesiology residents 
employed to replace anesthetists. This exclusion was originally 
intended to prevent hospitals from hiring residents in lieu of 
nonphysician anesthetists. Given that certain rural hospitals continue 
to receive pass-through cost reimbursement for their anesthetist costs, 
we no longer believe this provision is warranted. Nor are we aware of 
any specific instances where it has been applied.

D. Direct Graduate Medical Education: Newly Participating Hospitals 
(Sec. 413.86)

    Under section 1886(h) of the Act and implementing regulations, 
Medicare pays hospitals for the direct costs of graduate medical 
education on the basis of per resident costs in a 1984 base year. Under 
existing regulations at Sec. 413.86(e)(4), if a hospital did not have 
residents in the 1984 base period but later participates in teaching 
activities, the fiscal intermediaries calculate a per resident amount 
based on a weighted average of all the hospitals in the same geographic 
wage area. There must be at least three hospitals for this calculation. 
If there are fewer than three hospitals, the regulations require the 
fiscal intermediary to contact the HCFA Central Office for a 
determination of the appropriate amount to use.
    We are proposing to modify the regulations for determining base 
year per resident amounts for hospitals that participated in residency 
training after the 1984 base period. Under the proposed changes to 
Sec. 413.86(e)(4)(i)(B), we would sequentially follow the criteria 
listed below until we can base the weighted average calculation on a 
minimum of 3 per resident amounts:
     If there are fewer than three hospitals in the hospital's 
geographic wage area, the intermediary will determine a weighted 
average based on the per resident amounts for all hospitals in the 
hospital's own wage area, plus hospitals in geographically contiguous 
wage areas.
     If there are still fewer than three hospitals in the 
hospital's own wage area, plus hospitals in contiguous wage areas, the 
weighted average will be based on the per resident amounts for all 
hospitals in the State.
     If there are fewer than three hospitals in the entire 
State, the weighted average will be based on the per resident amounts 
for all hospitals in that State plus hospitals in contiguous States.
     If there are fewer than three hospitals in that State and 
contiguous States, the weighted average per resident amount will be 
based on the national average per resident amount.

E. Technical Change: Correction of Statutory Citation

    The August 30, 1996 final rule (61 FR 46165) included an amendment 
to Sec. 489.27 that reprinted the statutory reference governing the 
distribution of an ``Important Message from Medicare.'' This reference, 
``section 1886(a)(1)(M)'', was incorrect. We propose to correct this 
reference to read ``section 1866(a)(1)(M)''.

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

A. 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, any 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 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 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(g) also provides for a separate special exceptions 
process for hospitals undertaking major renovations or replacement of 
aging facilities during the decade of the transition. For as long

[[Page 29926]]

as 10 years beyond the end of the transition period, certain hospitals 
may be eligible to receive special exceptions payments at a 70 percent 
minimum payment level. For hospitals that qualify for the special 
exceptions provision before the end of the transition, the general and 
special exceptions provisions will run concurrently during the later 
years of the transition. However, since the minimum payment level for 
the special exceptions provision is at the same level that applies to 
all hospitals under the general provision (currently 70 percent), the 
special exceptions provision will generate no additional payment to 
hospitals until the end of the transition period.
    Section 412.348(h) further provides that total estimated exceptions 
payments under both the regular exceptions process and the special 
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 FY 1997 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 this proposed rule, we discuss 
the factors and adjustments used to develop the FY 1998 Federal and 
hospital-specific rates. In particular, we discuss the FY 1998 
exceptions payment reduction factor. This factor adjusts the annual 
payment rates for the estimated amount of additional payments for 
exceptions in FY 1998. In this proposed rule, we estimate that 
exceptions will equal 7.24 percent of aggregate payments based on the 
Federal rate and the hospital-specific rate. We will develop a new 
estimate of the level of exceptions payments in FY 1998, and revise the 
exceptions payment adjustment factor accordingly, on the basis of the 
data that becomes available to us in time for developing the final rule 
for FY 1998. While it is not necessary at this time to propose 
reductions in the minimum payment levels, it is possible that it will 
be necessary to implement adjustments to the minimum payment levels in 
the final rule. Our current projections show that it will almost 
certainly be necessary to adjust the minimum payment levels for FY 
1999. We are therefore providing public notification that adjustments 
to the minimum payment levels are possible in the final rule, and 
almost certain for FY 1999.
    When it does become necessary to adjust the minimum payment levels 
in accordance with Sec. 412.348(h), our current intent is 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 hospitals and special exceptions) by 5 percentage point 
increments until estimated exceptions payments are within the 10 
percent limit. For example, we would set minimum payment levels at 85 
percent for sole community hospitals, 75 percent for large urban DSH 
hospitals, and 65 percent for all other hospitals and special 
exceptions, provided that aggregate exceptions payments at those 
minimum payment levels were projected to be no more than 10 percent of 
total rate-based payments. We believe that this policy appropriately 
provides for all classes of hospitals to share in the reduction in 
exceptions payments, while simultaneously preserving the special 
protections provided by higher minimum payment levels for sole 
community hospitals and large urban DSH hospitals relative to all other 
hospitals. If aggregate exceptions payments at those minimum payment 
levels still exceed 10 percent of total rate-based payments, we would 
continue to reduce the minimum payment levels by 5 percentage point 
increments each until the requirement of Sec. 412.348(h) was satisfied. 
We are providing notification of our current thinking on this issue in 
order to allow opportunity for public comment on the appropriate method 
for adjusting the minimum payment levels.
    We made a similar proposal on the possibility of adjusting minimum 
payment levels in the FY 1997 proposed rule (61 FR 27481). In the FY 
1997 final rule (61 FR 46219) we noted that some commenters objected to 
our 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. We will take these comments into consideration when it 
becomes necessary to adjust the minimum payment levels in accordance 
with Sec. 412.348(h). We welcome other comments on this matter as well.

B. Special Exceptions Application Process

    As discussed section VI.A. above, a separate special exceptions 
provision extends protection to certain hospitals undertaking major 
renovation or replacement of aging facilities during the decade of the 
transition. The regulation establishing eligibility for this special 
exceptions provision, and describing the criteria by which eligible 
hospitals qualify for special exceptions payments (Sec. 412.348(g)), 
was finalized on September 1, 1994 (59 FR 45385). At this time, we are 
not proposing to make any policy changes to the special exceptions 
provision. (We are (or may be), however, revising the minimum payment 
level for this exceptions provision, along with the minimum payment 
levels under the regular exceptions provision, as described in section 
VI.A. above). However, we have received questions from hospitals and 
intermediaries about the special exceptions process, and we would 
therefore like to clarify a few aspects of that process.
    Providers seeking special exceptions payments should submit 
documentation to their fiscal intermediary to demonstrate that they 
meet the eligibility and qualifying requirements in Sec. 412.348(g). 
Documentation establishing that the hospital meets one of the 
eligibility criteria, the project need requirement, the age of assets 
test, and the project size requirement must be submitted to the 
intermediary no later than the date on which the cost report is due for 
the first cost reporting period in which the exceptions payment is 
expected. (As noted in section VI.A. above, since the 70-percent 
minimum payment level for the special exceptions provision is at the 
same level that applies to all hospitals under the general provision, 
the special exceptions provision will generate no additional payment to 
hospitals until the end of the transition period.) The fiscal 
intermediary will make an initial determination of whether the provider 
has met these criteria for receiving special exceptions payments. 
Further documentation demonstrating that the hospital continues to meet 
one of the eligibility criteria, that it meets the excess capacity 
test, as required, and that the hospital's regular payments fall short 
of the minimum payment level (accounting for the cumulative payment 
comparison and offsetting amounts, Sec. 412.348(g)(8)) will be required 
for each successive cost reporting period in which the exception is 
claimed.
    To qualify, an eligible hospital must meet both project need and 
project size

[[Page 29927]]

requirements. For hospitals in States with CON requirements, the 
project need requirement is satisfied by obtaining CON approval. A copy 
of the State CON approval should be submitted to the intermediary. For 
other hospitals, the project need requirement is satisfied by meeting 
an age of assets test. To meet the age of asset test, a hospital must 
have an average age of buildings and fixed equipment at or above the 
75th percentile nationally in the first year of capital prospective 
payment. The hospital should submit to the intermediary copies of 
Worksheets A-7 and G from the first cost reporting under the capital 
prospective payment system, and a calculation of its average age of 
assets for that cost reporting year. The average age of assets is 
determined as the ratio of accumulated depreciation for buildings and 
fixed equipment to current depreciation for buildings and fixed 
equipment. (The data required for the age of assets computation are 
found on HCFA 2552-92, Worksheet G, lines 14, 14.01, 16, 16.01, 18, 
18.01, 20, and 20.01, and Worksheet A-7, Part III, Column 9, lines 1 
and 3.)
    At the time that the special exceptions process was finalized in 
the September 1, 1994 final rule (59 FR 45385), data from the June 1994 
update of the cost report file showed that the 75th percentile for 
buildings and fixed equipment was 16.4 years. At that time, we stated 
that we would make a final determination of the 75th percentile on the 
basis of more complete cost report information for FY 1992. We believe 
that the cost report information for FY 1992 is now sufficiently 
complete and reliable to make the final determination of the 75th 
percentile. As computed from the December 1996 update of the cost 
report data, the 75th percentile nationally for buildings and fixed 
equipment is 15.4 years.
    We note that, in making this computation, we took account of the 
fact that hospitals do not always report accumulated and current year 
depreciation amounts consistently. For example, a hospital might report 
accumulated depreciation amounts on Worksheet G on an accelerated 
depreciation basis. In such a case, current year depreciation amounts 
on Worksheet A-7 should be adjusted to reflect straight line 
depreciation. This is because the program recognizes only straight line 
depreciation for cost accounting and payment purposes. Obviously, the 
numerator and denominator of the ratio used to establish average age of 
assets must be consistent. In determining the 75th percentile of 
average age of assets for FY 1992, we have employed only 4,611 
hospitals. We eliminated hospitals that did not report both accumulated 
and current year depreciation on a straight line basis in their FY 1992 
cost reports. We also eliminated any hospital whose computed age of 
assets was greater than 35.0 years. We took this step to eliminate 
obvious outliers and to assure that hospitals are not disadvantaged in 
meeting the 75th percentile requirement by the inclusion of hospitals 
whose computed age of assets is relatively higher merely because the 
Worksheet G data were not thoroughly audited. Eliminating these latter 
hospitals is to the advantage of hospitals trying to qualify for an 
exception, since it results in a lower threshold for meeting the 
average age of assets test. Eliminating these latter hospitals from the 
computation is the major reason why the 75th percentile has declined to 
15.4 years from the 16.4 years that we previously estimated.
    We note that, in the case of an individual hospital that reported 
accumulated and current depreciation on a different basis, it would be 
necessary to reconstruct accumulated depreciation for fixed assets that 
were in use for patient care in FY 1992 for purposes of determining 
whether that hospital met the average age of assets test. The following 
information would be necessary for this purpose: the purchase prices 
for each fixed asset in use in 1992, useful life of each asset, and the 
number of years each asset had been in use prior to FY 1992. 
Reconstructing FY 1992 accumulated depreciation for each asset would 
involve dividing the purchase price by the useful life and multiplying 
the result by the years in which the asset had been in service.
    A hospital must also demonstrate that it meets a project size 
requirement to qualify for a special exceptions payment. The project 
size requirement is satisfied if the hospital completes, during the 
capital PPS transition period, a project whose costs for replacement 
and/or renovation of fixed assets (buildings and fixed equipment, but 
not movable equipment) are at least $200 million, or 100 percent of its 
operating costs during the first cost reporting period under the 
prospective payment system. The hospital should, therefore, submit to 
the intermediary auditable documentation establishing the costs for its 
project to replace and/or renovate fixed assets. This documentation 
also should establish that this project was completed during the 
capital PPS transition period (that is, not before the start of its 
first cost reporting period beginning on or before October 1, 1991, and 
not later than the end of its last cost reporting period beginning 
before October 1, 2001). Relevant documentation would include, but 
would not be restricted to, the plans for the relevant construction 
and/or renovation project, the total bills for construction and/or 
renovation related to the project, and records showing that the new or 
renovated facilities entered service for patient care during the 
capital PPS transition period.
    For hospitals in States without CON requirements, an urban hospital 
must demonstrate either that it is in a MSA that does not have an 
overall occupancy rate less than 80 percent, or that its capacity is no 
more than 80 percent of its capacity (in terms of bed size) prior to 
the completion of its qualifying project of construction or renovation 
of fixed assets. (This test does not apply to rural hospitals.) An 
urban hospital in a non-CON State must thus meet one of two tests in 
order to satisfy the excess capacity requirement. We have been 
contacted by hospitals and fiscal intermediaries about how to determine 
if the excess capacity requirement has been met. Therefore, we would 
like to clarify what is necessary to satisfy both the excess capacity 
tests for urban hospitals.
    For the bed size test, we use the same definition of bed size that 
is used for indirect graduate medical education and DSH payments. Under 
Sec. 412.105(b), the number of beds in a hospital is determined by 
counting the number of available bed days during the cost reporting 
period, not including beds or bassinets in the healthy newborn nursery, 
custodial care beds, or beds in excluded distinct part hospital units, 
and dividing that number by the number of days in the cost reporting 
period. The number of beds is computed, using this formula, and entered 
on Worksheet S-3 of the cost report. Section 2405.3 of the Medicare 
Provider Reimbursement Manual provides additional information on bed 
size. Bed size must be determined for the last cost reporting period 
prior to completion of the qualifying project, and for each cost 
reporting period, subsequent to the completion of that project, for 
which a special exceptions payment is claimed. The ratio of bed size in 
the latter period to bed size in the former period must be less than or 
equal to 0.80. Hospitals electing to satisfy the excess capacity 
requirement by meeting the bed size test must satisfy this requirement 
for each year in which an exceptions payment might be claimed. In other 
words, a hospital does not qualify for an exceptions payment during any 
year in which its bed size ratio is greater than 0.80, even if its 
ratio

[[Page 29928]]

was less than or equal to 0.80 in a previous year.
    For the MSA occupancy test, overall average occupancy is determined 
by dividing total patient days for all PPS hospitals in the MSA by 
available beds days (as defined in prior paragraph) for all those 
hospitals. Total patient days and available bed days are found on 
Worksheet S-3 of the Medicare cost report. We would use the same 
restrictions, as applicable, that were used in the definition of bed 
size. HMO, organ acquisition, or observation bed days are not included. 
Hospitals electing to meet the excess capacity requirement by 
satisfying the MSA occupancy test must satisfy this requirement for 
each year in which an exceptions payment might be claimed. In other 
words, a hospital does not qualify for an exceptions payment during any 
year in which overall average occupancy in its MSA is less than 80 
percent, even if the occupancy in its MSA was greater than or equal to 
80 percent in a previous year.
    We welcome further questions and requests for clarification of 
these requirements. As appropriate we will respond to the questions and 
requests in future PPS rules.

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

A. New Requirements for Certain Hospitals Excluded From the Prospective 
Payment System (Sec. 412.22(e))

    In the September 1, 1994 final rule (59 FR 45330), we established 
several additional criteria for excluding long-term care hospitals that 
occupy space in the same building or on the same campus as another 
hospital from the PPS (Sec. 412.23(e)). Under these criteria, such 
facilities (sometimes called ``hospitals within hospitals'') could 
qualify for exclusion only if the two entities have separate governing 
bodies, chief executive officers, medical staffs, and chief medical 
officers. In addition, they were required to be capable of performing 
certain basic hospital functions without assistance from the hospitals 
with which they are co-located, or they had to receive at least 75 
percent of their inpatients from sources other than the co-located 
hospital. We further revised these regulations on September 1, 1995 (60 
FR 45778), by adding a third option under which hospitals that did not 
meet the criteria specified above could establish separate operation by 
showing that no more than 15 percent of their inpatient operating costs 
were attributable to the hospital with which they share space.
    The regulations were necessary to prevent inappropriate Medicare 
payments to entities that are effectively long-stay units of other 
hospitals. At the same time, the regulations set forth criteria to 
ensure that entities may qualify for exclusion from the PPS if an 
exclusion is warranted. Exclusion of long-term care hospitals from the 
PPS is appropriate when hospitals have few short-stay or low-cost cases 
and might be systematically underpaid if the PPS were applied to them. 
These reasons for exclusion do not apply if the entity that provides 
the long-term care is part of a larger hospital, which does have short-
stay and low-cost cases and can be paid appropriately under the PPS.
    ProPAC has recommended that HCFA monitor the growth in the number 
of long term care hospitals within hospitals and evaluate whether the 
current Medicare certification rules that apply to these facilities 
should be changed (Recommendation 31). ProPAC noted that there is 
concern that the hospital within a hospital model was devised as a way 
for acute care hospitals to receive higher payments for their long-stay 
cases. At the same time, the model may be an appropriate and efficient 
alternative to acute inpatient care for cases that require additional 
services, but at a more intensive level than those provided in other 
post-acute settings. ProPAC recommended that HCFA conduct a 
comprehensive study of the characteristics, patient mix, treatment 
patterns, costs, and financial performance of hospitals within 
hospitals.
    We have been monitoring the development of the hospital within a 
hospital model. We agree with ProPAC that our policy should 
simultaneously strive to prevent inappropriate exclusions of units as 
separate hospitals, while allowing an appropriate degree of flexibility 
for facilities to respond to changing patient care needs. As a result 
of our monitoring efforts, we are proposing two changes to the 
hospital-within-a-hospital regulations. We propose to add a new 
Sec. 412.22(f) to address hospitals that are unable to meet certain 
exclusion criteria solely because of State law. In addition, we propose 
to extend the application of these rules to other classes of facilities 
that might seek exclusion from the PPS as hospitals within hospitals.
    The first proposed change concerns the relationship between the 
exclusion criteria and State laws. Following publication of the 
original regulations governing long-term care hospitals within 
hospitals, we received comments stating that it would not be equitable 
to abruptly impose new criteria on long-term care hospitals that had 
operated for many years under other organizational patterns. To 
accommodate these hospitals, we allowed them an additional one-year 
delay in the effective date of the ``hospital within a hospital'' 
regulations. Thus, a hospital that was excluded under prior rules was 
not required to meet the new criteria until its first cost reporting 
period beginning on or after October 1, 1995. (For other hospitals, the 
rule was effective for the first cost reporting period beginning on or 
after October 1, 1994.)
    By delaying the effective date of these regulations for hospitals 
within hospitals that had been excluded from the PPS before October 1, 
1994, we intended to allow the hospitals adequate time to restructure 
themselves to comply with the new criteria. However, it has since 
become clear that some hospitals within hospitals operated by State 
universities have not been able to make the necessary changes, because 
the hospitals are required by State law to be subject to the ultimate 
authority of the governing body of the same entity (the university) 
that operates the hospital from which they obtain space. Thus, these 
hospitals have not been able to comply with the hospital-within-a-
hospital criteria.
    We continue to believe that it is important to exclude, as 
hospitals, only facilities that actually operate as separate hospitals, 
not as units of larger hospitals. At the same time, however, we are 
concerned that certain hospitals might, as a matter of State law, be 
unable to make the necessary organizational changes to meet our 
criteria. We believe two considerations justify exclusion of these 
facilities. First, the organizational arrangements under which they 
operate were in place when the new regulation was adopted, and to the 
extent the arrangements are required by State law, we believe they do 
not reflect attempts by entities to establish nominal hospitals and, in 
turn, seek inappropriate exclusions. Second, we believe it would be 
inequitable to deny exclusions to hospitals solely because State 
statutory requirements prevent them from having the same flexibility as 
other institutions to reorganize themselves to meet our criteria.
    Accordingly, we propose to add Sec. 412.22(f) to provide that if a 
hospital cannot meet the criteria in Secs. 412.23(e)(3) (i) or (iii) 
(proposed to be redesignated as Secs. 412.22(e) (1) and (3)) solely 
because its governing body or medical staff is under the control of a 
third entity that also controls the

[[Page 29929]]

hospital with which it shares a building or a campus or cannot meet the 
criteria in Secs. 412.23(e)(3) (ii) or (iv) (proposed to be 
redesignated as Secs. 412.22 (e)(2) and (e)(4)) solely because its 
chief medical officer or chief executive officer is employed by, or 
under contract with such a third entity, the hospital can nevertheless 
qualify for an exclusion if that hospital meets the other applicable 
criteria and:
     Is owned and operated by a State university;
     Has been continuously owned and operated by that 
university since October 1, 1994;
     Is required by State law to be subject to the ultimate 
authority of the university's governing body; and
     Was excluded from the prospective payment system as a 
long-term care hospital for any cost reporting period beginning on or 
after October 1, 1993, but before October 1, 1994.
    We wish to emphasize that we intend to allow an exception to the 
criteria in Sec. 412.23(e)(3) (i) through (iv) only if the hospital 
cannot meet those criteria because of State law. We do not intend to 
provide similar treatment for other State university or other hospitals 
which are not subject to such statutory requirements but have chosen 
not to undertake such a reorganization. We welcome comments and 
suggestions on this issue and on whether the language of the proposed 
rule effectively addresses the situation of hospitals disadvantaged by 
State law.
    We also propose to redesignate the specific criteria for hospitals 
within hospitals now in Sec. 412.23 (e)(3) through (e)(5) under a new 
Sec. 412.22 (e), (g), and (h). At the time of the adoption of the final 
rule governing long-term care hospitals within hospitals, we did not 
extend its application to other types of excluded facilities that might 
seek to organize themselves on that model. Since the publication of the 
final rule governing long-term care hospitals within hospitals, we have 
received scattered inquiries from some providers and regional offices 
about the appropriateness of other types of facilities organizing 
themselves as hospitals within hospitals. It has become apparent that, 
while rehabilitation and psychiatric facilities may be granted 
exemptions from the PPS as units of larger hospitals, there may be 
cases where such facilities may rather seek exclusion as hospitals 
within hospitals in order to take advantage of certain payment rules 
that favor hospitals. For example, new hospitals within hospitals 
qualify for the new hospital exemption from the rate of increase 
ceiling, which is not available to new units.
    We believe that extension of the hospital-within-a-hospital rules 
is appropriate to avoid recognizing nominal hospitals, while allowing 
adequate flexibility for legitimate and efficient sharing of services. 
We continue to believe it is important to exclude only separate long-
term care hospitals, not units, of larger hospitals. We believe that 
the same principle should apply to cancer and children's facilities, 
which the statute provides for excluding only as hospitals, not as 
units. We also believe that it is important to exclude, as hospitals, 
only separate rehabilitation and psychiatric hospitals that may share 
space with another hospital. Rehabilitation and psychiatric facilities 
that actually function as units of larger hospitals should seek 
exclusion as units rather than as hospitals.
    As stated earlier, we are proposing to extend the application of 
the hospital-within-a-hospital rules to all types of facilities that 
can be excluded from the PPS. We would also incorporate, within this 
extended hospital-within-a-hospital rule, the provision that we have 
proposed above for facilities owned and operated by a State university. 
At the same time, we are considering whether it is appropriate for new 
hospitals within hospitals to receive the exemption from the TEFRA 
rate-of-increase ceiling during the first 2 years of operation. The 
purpose of the new hospital exemption is to recognize that a hospital 
might face a period of cost distortions as it begins operations and 
tries to establish its presence in its market. We do not believe that 
newly established hospitals within hospitals would necessarily face the 
same degree of cost distortion during their initial periods of 
operation. This is because such hospitals begin operation within other 
hospitals that have established facilities and identifiable market 
presence. While we are not formally proposing elimination of the new 
hospital exemption for hospitals within hospitals at this time, we are 
considering whether to adopt such a provision in this year's final 
rule. We invite comment on whether elimination of the new hospital 
exemption for hospitals within hospitals would be advisable.
    Finally, we will continue monitoring the development of the 
hospital within a hospital model. While we have not yet conducted the 
kind of comprehensive study of these facilities that ProPAC has 
recommended, we will consider whether doing so is worthwhile within the 
limits our available resources.

B. Exclusion of New Rehabilitation Units and Expansion of Existing 
Rehabilitation Units (Sec. 412.30(b)(4))

    In the September 1, 1995 final rule (60 FR 45839), we made certain 
changes to clarify the regulations applicable to the exclusion of new 
rehabilitation units and the expansion of units already excluded. These 
changes were intended only to clarify existing policy, not to change 
it. However, in making these changes we inadvertently omitted a 
paragraph that explicitly allowed newly participating hospitals to open 
new rehabilitation units and also to allow the new rehabilitation units 
to be excluded immediately from the PPS. In omitting this paragraph, we 
had no intention of rescinding the policy. We are proposing to restore 
this paragraph to the regulations, which this proposed rule would 
redesignate at Sec. 412.30(b)(4), to correct this omission and to 
reaffirm current policy. (For further information on this policy, see 
the Federal Register published September 1, 1992 (57 FR 39746).)

C. Delicensing and Relicensing of Beds (Sec. 412.30)

    We have received a number of questions about cases in which 
hospitals remove some bed capacity from their State license and 
Medicare certifications, then later increase the number of their 
licensed and certified beds and seek to have the bed capacity ``added'' 
and considered part of a new, or newly expanded, PPS-exempt 
rehabilitation unit. Assuming that simultaneous delicensure and 
relicensure of beds would not be accepted as the addition of new bed 
capacity, we also have been asked how long bed capacity would have to 
be excluded from a hospital's licensure and certification to be 
considered ``new'' for purposes of the PPS exclusion rules at 
Sec. 412.30.
    Section 412.30 establishes separate ways for new and converted 
units to meet the exclusion criterion related to the type of patient 
population treated. New units are allowed to qualify for initial 
exclusion based in part on a certification regarding their intent to 
treat a patient population of the kind described in Sec. 412.23(b)(2), 
rather than on a showing that they have actually treated such a 
population during the hospital's most recent cost reporting period. 
Converted units may not be excluded based on a certification, but must 
show that they actually met the Sec. 412.23(b) requirement during the 
hospital's most recent 12-month cost reporting period. New units are 
defined as those that are part of a hospital that

[[Page 29930]]

has not previously sought exclusion for any rehabilitation unit and 
that comprise greater than 50 percent of the newly licensed and 
certified bed capacity, while converted units are those that do not 
qualify as new. Section 412.30 also provides for separate treatment of 
new and converted bed capacity that is used to expand existing units.
    Different rules apply to the addition of new (as opposed to 
converted) bed capacity, and it would not be appropriate to recognize 
an ``increase'' in the bed capacity that coincides with a decrease in 
bed capacity in another area, resulting in no net increase in the 
hospital's total licensed and certified bed capacity. Similarly, it 
would not be appropriate to allow a hospital to circumvent those rules 
simply by removing some bed capacity from its licensure and 
certification on a temporary basis, and then increasing its bed size a 
few days, weeks, or months later. Thus, when a hospital seeks to add a 
new PPS-excluded rehabilitation unit, or to increase the size of an 
existing unit by adding new bed capacity, the bed size of the hospital 
in the past must be taken into account.
    The current regulations do not specify how long a decrease in a 
hospital's bed capacity must be effective before a subsequent increase 
in the hospital's licensure and certification can be considered as 
``new'' capacity. However, to ensure consistent and equitable treatment 
of all hospitals with PPS-excluded rehabilitation units, we propose to 
provide in the regulations (proposed Sec. 412.30(a)) that a decrease in 
capacity must remain effective for at least a full 12-month cost 
reporting period before an equal or lesser number of beds can be added 
to the hospital's licensure and certification and considered ``new''. 
This means that when a hospital seeks to establish a new unit, or to 
enlarge an existing unit, under the criteria in Sec. 412.30, the 
Regional Office will review its records on the facility to determine 
whether any beds have been delicensed and decertified during the 12-
month cost reporting period before the period for which the new beds 
are to be added. To the extent that bed capacity was removed from the 
hospital's licensure and certification during that period, that amount 
of bed capacity cannot be considered ``new'' under Sec. 412.30. For 
example, if a hospital with a calendar year cost reporting period had 
removed 15 beds from its licensure and certification in calendar year 
1997 and, for calendar year 1998, sought to set up a new rehabilitation 
unit that would include 20 beds that would be added to its licensure 
and certification as of January 1, 1998, only 5 of those beds could be 
considered ``new'' under section 412.30. The remaining beds would be 
considered converted beds.
    This guideline applies to changes in a hospital's total licensed 
and certified bed capacity, regardless of whether specific beds or 
physical areas within a hospital have previously been operational and 
available to rehabilitation patients. Thus, if a hospital delicenses 25 
beds on one floor in the third month of a cost reporting period and, 2 
months later, increases its licensure and certification by adding a 25-
bed unit in a previously unoccupied area on another floor, that unit 
could not be considered ``new'' under Sec. 412.30 even though it 
occupies different space from the beds that represented the delicensed 
capacity. This guideline applies only for purposes of PPS exclusion and 
is not intended to limit a hospital's ability to add to its licensed 
and certified bed capacity for the provision of services paid for under 
the PPS.

VIII. ProPAC Recommendations

    We have reviewed the March 1, 1997 report submitted by ProPAC to 
Congress and have given its recommendations careful consideration in 
conjunction with the proposals set forth in this document. 
Recommendation 2, concerning the update for the prospective payment 
system operating payment rates, is discussed in Appendix E of this 
proposed rule. Recommendations 3 and 4, concerning the prospective 
payment system capital payment rates, are discussed in section III. of 
the Addendum of this proposed rule. Recommendation 13, concerning 
updating the target amounts for PPS-excluded hospitals and distinct 
part units, is discussed in section VII. of this proposed rule. 
Recommendation 31, concerning long-term care hospitals within 
hospitals, is discussed in section VI. of this proposed rule. The 
remaining recommendations are discussed below.

A. Ensuring Quality of Care (Recommendation 1)

    Recommendation: The Medicare program needs to be vigilant in 
monitoring and improving the quality of care delivered to its 
beneficiaries in both the fee-for-service and risk contracting options. 
ProPAC supports a comprehensive approach to quality assurance that 
includes both pattern analysis and systematic review of individual 
cases.
    Response: We concur with ProPAC's recommendation that ``continuous 
quality improvement activities need to be accompanied by effective 
methods to identify and monitor providers with questionable 
performance.'' We are pursuing two complementary strategies in this 
area: strengthening the mechanisms for soliciting, investigating, and 
monitoring complaints; and establishing an ongoing pattern monitoring 
system. We believe that there is ample evidence that returning to case 
review of randomly selected cases would not be an effective way to 
monitor providers with questionable performance.
Beneficiary Complaints
    Peer Review Organizations (PROs) have had greater success 
identifying quality of care concerns through the beneficiary complaint 
process than through traditional case review. The number of such 
complaints is relatively small but has proven in the past to be an 
excellent source of problem identification. Complaints provide PROs 
with the opportunity to identify and remedy instances of poor quality. 
We are committed to improving the beneficiary complaint process. We 
have formed the Beneficiary Protection and Documentation Issues Task 
Force as a subgroup of the Medicare Technical Advisory Group. This task 
force includes representatives from PROs, intermediaries, carriers, 
provider groups, consumer organizations, the Office of the Inspector 
General, and the Office of the General Counsel. The task force is 
charged with reexamining the PRO beneficiary complaint process. Its 
work plan includes the development of a proposed rule concerning the 
beneficiary complaint process (expected to be published soon) that will 
enable the PRO to be more responsive to beneficiary needs; and to 
conduct studies that evaluate potential alternative approaches to 
handling beneficiary complaints. The studies are being designed to test 
a variety of new and innovative methods of investigating complaints 
including exploring the possibility of working with other entities such 
as licensing agencies, private accreditation bodies, State medical 
societies, and consumer groups, in the resolution of beneficiary 
complaints. The final report is due to the Medicare Technical Advisory 
Group in January 1999.
    A vital element of our strategy is to increase awareness among 
beneficiaries of their rights as patients to file complaints, and the 
ease with which they can submit their complaints. A number of efforts 
are underway. HCFA plans to test a toll free hotline in four States 
that will, for the first time, provide a single 1-800 number for all

[[Page 29931]]

beneficiary inquiries. Complaints about the quality of care will be 
automatically routed to the appropriate HCFA agent (for example, the 
PRO or the End Stage Renal Disease (ESRD) Network) for action. This 
hotline will be advertised to ensure that Medicare beneficiaries are 
aware of this service.
    The conditions of participation for Medicare providers are being 
revised to transition towards a patient outcome-based system, and to 
stimulate improvements in processes, outcomes of care, and patient 
satisfaction. Under the revised conditions, providers would be required 
to prominently display a list of patient's rights, including the 
patient's right to complain about the quality of the care provided.
    In response to concerns expressed about the managed care appeals 
process, we have recently published a final rule with comment period 
that will require managed care plans contracting with Medicare to add 
an expedited appeals procedure to their appeals process. This will 
allow Medicare enrollees to obtain coverage decisions as well as to 
have those decisions reconsidered within very short timeframes in 
certain time-sensitive situations. We also are developing a separate 
notice of proposed rulemaking that would shorten the timeframes for 
standard appeals that are not time-sensitive and therefore not 
expedited. Currently, Health Maintenance Organizations (HMOs) and 
Competitive Medical Plans (CMPs) have 60 days to make decisions 
regarding the necessity of beneficiary requests for services and 60 
days to complete reconsiderations. These timeframes will be reduced 
significantly.
    In addition to improving the beneficiary complaint process, there 
are efforts underway to ensure that these complaints are consolidated 
and analyzed to improve our ability to identify and correct problems. 
They currently arrive at a variety of points of contact, including HCFA 
central office, 10 regional offices, PROs, ESRD Networks, fiscal 
intermediaries, and carriers. We are developing a standard set of 
definitions for use by HCFA and all of its agents in categorizing 
inquiries, along with developing an integrated automated system to 
continually track issues, provide timely and accurate responses, and 
effectuate improvements.
    The enhancements in the responsiveness of PROs to beneficiary 
complaints, the pilots to improve our accessibility to beneficiaries, 
the activities underway to improve beneficiary awareness of their right 
to file a complaint, and the development of systems to categorize, 
track, and analyze beneficiary inquiries will all improve our 
effectiveness in identifying providers with questionable performance.
Pattern Monitoring
    We recently implemented a national surveillance system for PROs to 
use in identifying patterns, trends, and variations in the health and 
health care of Medicare beneficiaries and in identifying sentinel 
events or clusters that may indicate less-than-optimal care. We are 
analyzing data from HCFA's National Claims History files to present 
national and State-specific descriptive epidemiology of the Medicare 
population, overall health care utilization, and selected markers of 
potential quality issues. Updates will be provided on a quarterly 
basis. PROs have the capacity to refine the analyses to the community 
or hospital-specific level, in order to identify providers with 
questionable performance and will use the surveillance information to 
identify and act on opportunities to improve care.
    We do not currently have encounter data for managed care plans, and 
thus the national surveillance system does not focus on managed care 
providers. There is a pilot program underway to test the development 
and use of such data. In addition, there are efforts underway to ensure 
that managed care plans with questionable performance are identified, 
and actions taken to resolve concerns. All managed care plans will be 
required to provide Health Plan Employer Data and Information System 
(HEDIS) quality measures by the summer of 1997. In addition, we are 
participating in the development of the Foundation for Accountability 
(FACCT) measures and will be testing their use in at least five States. 
To complement the collection of these quality of care measures from the 
plans, we have developed a Medicare-specific consumer satisfaction 
survey in collaboration with the Agency for Health Care Policy and 
Research through its Consumer Assessment of Health Plan Study (CAHPS) 
process. The survey will be plan-specific and administered on an annual 
basis. It is designed to collect information on satisfaction with 
quality of care, access, and utilization of care and will provide 
another source of information about care provided by managed care 
plans.
Other Sources
    We also have other sources for identifying poor performers. PROs 
are still obligated to review cases referred to them by carriers and 
intermediaries, usually for quality concerns that may affect coverage 
and payment. Hospitals are required to provide patients with a Notice 
of Noncoverage if they believe that a beneficiary does not require 
inpatient level of care. If the beneficiary disagrees with the 
hospital's decision, he or she may ask the PRO to review the case. The 
PRO may identify a quality concern in the process that would require 
some type of intervention at the hospital or physician level.

B. Improving the Distribution of Medicare's Indirect Medical Education 
(IME) Payments (Recommendation 5)

    Recommendation: Medicare's IME payments should reflect the 
historical relationship between hospital costs and teaching intensity. 
Further, they should continue to be based on the hospital's volume of 
Medicare patients. These payments should no longer change in proportion 
to annual variations in the number of residents or beds. In addition, 
the payment method should be flexible enough to allow and support 
training in settings outside of the hospital.
    Response: The President's FY 1998 budget includes several proposals 
consistent with ProPAC's recommendations. As set forth in those 
proposals, the total number of residents and the number of nonprimary 
care residents would be capped on a hospital-specific basis; the 
resident-to-bed ratios would be capped at the level of hospitals' cost 
reporting periods ending on or before December 31, 1996; residents 
would be counted based on a multi-year rolling average; and hospitals 
could include residents training in nonhospital-based training sites in 
their resident-to-bed ratios (as long as the hospital continues to pay 
the residents' salaries).
    We believe the incentives associated with the current IME 
adjustment are contrary to the Administration's policy of decreasing 
the number of residents trained in the United States, increasing the 
relative number of residents trained in primary care, and encouraging 
more training in nonhospital-based sites. Our proposals would end the 
incentives to increase the number of residents, encourage more training 
in primary care, decrease the financial penalty for reducing the number 
of residents trained (thereby encouraging that reduction over time), 
and provide funding for training in nonhospital-based sites.

C. Reducing the Level of Medicare's Indirect Medical Education Payments 
(Recommendation 6)

    Recommendation: The indirect medical education adjustment should be

[[Page 29932]]

reduced from its current level of 7.7 percent to 7.0 percent in fiscal 
year 1998.
    Response: We agree with ProPAC that the current level of payment 
for the indirect costs of medical education is too high. The 
President's FY 1998 budget would reduce the adjustment to 7.4 percent 
in FY 1998, 7.0 percent in FY 1999, 6.8 percent in FY 2000, 6.6 percent 
in FY 2001, and 5.5 percent in FY 2002 and thereafter. A gradual 
reduction in IME adjustment over several years would allow teaching 
hospitals time to adjust to lower payments, while accomplishing our 
objective of reducing the adjustment to a more analytically justifiable 
level, which we estimate to be in the 4-to-5 percent range.

D. Improving Medicare's Payments for Direct Graduate Medical Education 
(GME) Costs (Recommendation 7)

    Recommendation: Medicare's payments to hospitals for the direct 
costs of GME programs should not change in proportion to annual 
variations in the number of residents trained. The method for 
determining the level and distribution of these payments should be as 
neutral as possible concerning the number and speciality mix of 
residents and the site of their training.
    Response: We share many of ProPAC's concerns regarding the way 
Medicare currently pays for direct medical education, and we are 
hopeful that the graduate medical education demonstration in New York 
State will provide insights into how Medicare can establish more 
appropriate incentives. Under the demonstration, participating New York 
hospitals will receive declining financial protections for residency 
reductions. We believe that these financial protections, which will 
phase out over 6 years, will provide incentives for participating 
hospitals to realize appropriate reductions in their residency 
programs, to increase the proportion of residents in primary care 
training, and to provide more training opportunities in ambulatory 
sites.
    Although we do not support lump sum payments to hospitals for 
direct graduate medical education, the President's FY 1998 budget 
includes proposals that would address ProPAC concerns. For instance, 
the budget provisions would base a hospital's direct graduate medical 
education payment on a 3-year rolling average of full-time equivalent 
(FTE) residents. This measure would reduce the adverse financial impact 
on a hospital that reduces the size of its residency programs. The 
proposals would further encourage training in primary care specialties 
by providing payments to nonhospitals (federally qualified health 
centers, rural health clinics, and health maintenance organizations) 
for residents when the residents' salaries are not paid by hospitals.

E. Establishing a Broader-Based Financing Mechanism for Graduate 
Medical Education and Teaching Hospitals (Recommendation 8)

    Recommendation: Explicit payments for graduate medical education 
and teaching hospital costs should not be limited to the Medicare 
program. Mechanisms to broaden financial support for training 
physicians in hospitals and other locations should be developed. The 
payments should reflect the reasonable costs of training at each 
facility and protect the access of beneficiaries and other populations 
to the services they provide.
    Response: We agree that all payers should contribute their fair 
share toward physician training, particularly for the patient care 
services that are provided in the course of this training. In addition, 
we agree that academic medical centers play an important role as 
training and research centers and are an integral part of our health 
care system.
    In response to ProPAC's observation that Medicare is the only payer 
that explicitly supports graduate medical education, we note that some 
Medicaid programs explicitly pay hospitals for the indirect and direct 
costs of graduate medical education in a manner similar to Medicare. In 
addition, some States (for example, New York, through the New York 
Health Care Reform Act) provide explicit support for teaching hospitals 
using private payers.
    We note that although the President's health care reform bill in 
1993 attempted to involve private insurers in directly supporting 
medical education, we do not currently have a proposal to broaden 
support for teaching hospitals beyond that currently provided by 
Medicare. We have, however, proposed to broaden financial support for 
teaching hospitals by changing the way Medicare funds medical education 
through its managed care programs. Currently, Medicare payments to HMOs 
are based on the average cost of providing services to Medicare 
patients in the fee-for-service part of Medicare. These Medicare 
payments to HMOs include payments for medical education. We have 
proposed revising Medicare's payments to HMOs to exclude the portion 
associated with medical education. Instead, we would pay these funds 
directly to teaching hospitals and managed care plans with teaching 
programs. Our proposal would thus benefit teaching hospitals, by 
increasing their Medicare payments, as well as more appropriately 
target Medicare funds designated for medical education.

F. Principles for Improving Medicare's Disproportionate Share (DSH) 
Payment Adjustment (Recommendation 9)

    Recommendation: Medicare's DSH payments should be aimed at 
protecting access to hospital care for its beneficiaries. Payments 
should be distributed based on each hospital's share of low-income 
patient care and volume of Medicare cases. The low-income share measure 
should reflect the costs of services provided to low-income groups in 
both inpatient and outpatient settings. These groups include Medicare 
patients eligible for SSI, patients sponsored by Medicaid and local 
indigent care programs, and uninsured and underinsured patients as 
represented by uncompensated care.
    Response: The Medicare disproportionate share adjustment is linked 
to hospital payments under the prospective payment system. In this way, 
Medicare funds a share of the inpatient costs generated by hospitals 
that are caring for a large number of indigent patients. The Medicare 
disproportionate share adjustment was established by Congress effective 
May 1, 1986, under section 1886(d)(5)(F) of the Act. It was intended to 
be a mechanism through which hospitals that treated a high proportion 
of indigent patients could be compensated for the higher Medicare costs 
associated with treating that population. Medicaid also provides a 
disproportionate share adjustment.
    When the disproportionate share adjustment was enacted, eligible 
hospitals were expected to be the exception, not the rule. However, 
almost half of the hospitals under the prospective payment system 
currently receive some level of Medicare disproportionate share 
payments. In addition, as a result of recent court decisions concerning 
HCFA's interpretation of Medicaid eligible days, not only will payments 
increase to currently eligible disproportionate share hospitals, but we 
expect that additional hospitals will qualify for disproportionate 
share payments.
    ProPAC believes that HCFA should continue to use a combination of 
Medicare, Supplemental Security Income (SSI), and Medicaid data as 
eligibility criteria and, in addition, uncompensated care data should 
be collected on an individual hospital basis and included in the 
calculation. We are

[[Page 29933]]

seeking to move away from the SSI and Medicaid measures that currently 
exist within this adjustment formula due to the concerns outlined in 
the May 31, 1996 proposed rule (61 FR 27473). None of the public 
comments we received in response to these concerns suggested the 
collection of uncompensated care data. In addition, such data would be 
unverifiable, except through arduous auditing procedures, which would 
be expensive and time-consuming for the fiscal intermediaries and the 
hospitals.
    The President's FY 1998 budget includes a provision to freeze 
disproportionate share payment adjustments for 2 years while we develop 
an alternative methodology for identifying and paying hospitals that 
treat a disproportionate share of low-income patients. Our intention is 
to move away from the current eligibility measures and to target 
payments to those hospitals with the highest shares of low-income 
patients.

G. Improving the Distribution of Disproportionate Share Payments 
(Recommendation 10)

    Recommendation: DSH payments should be concentrated among hospitals 
with the highest shares of poor patients. Therefore, a minimum 
threshold should be established for the low-income patient cost share. 
Hospitals falling just above the threshold should receive only a 
minimal per case payment, with the amount then increasing as low-income 
share rises. The same general approach for distributing payments should 
apply to all PPS hospitals.
    Response: Congress set the current threshold payments for Medicare 
disproportionate share hospitals in section 6003(c) of the Omnibus 
Budget Reconciliation Act of 1989. This provision expanded both the 
number of hospitals that could qualify for disproportionate share 
payments as well as the level of those payments for some categories. We 
note that large urban hospitals already receive payments based on this 
graduated payment structure. ProPAC notes that 95 percent of the 
hospitals receiving disproportionate share payments are designated as 
large urban hospitals. A May 1990 Congressional Budget Office (CBO) 
report to Congress, found that only large urban hospitals were 
overburdened by the cost of caring for the indigent population.
    We agree with ProPAC that the disproportionate share payments 
should be concentrated on the hospitals in greatest need of assistance.

H. Collecting Data To Support Disproportionate Share Payment Reform 
(Recommendation 11)

    Recommendation: The Secretary should collect the data necessary to 
implement a revised DSH payment mechanism. Due to recent and planned 
changes in the Medicaid and SSI programs, the measure now used to 
distribute DSH payments is becoming increasingly untenable. Although 
several new data elements would be required, this need not 
substantially increase the current hospital reporting burden. Periodic 
audits of these data would also be necessary.
    Response: Currently, hospitals are not required to distinguish 
between bad debts and uncollectible accounts. When a patient does not 
pay a bill, the hospital is required to proceed through a series of 
steps in an attempt to collect the amount before it can be declared a 
bad debt. If the hospital were also seeking to collect data on 
uncompensated care, it would be required to further investigate whether 
or not the patient had the ability to pay. This could be a very 
burdensome task. ProPAC's solution to this problem is to include bad 
debts and charity care as a lump sum. However, Medicare currently pays 
hospitals for bad debts, and bad debts are removed from the exception 
to the disproportionate share adjustment calculation under our 
regulations at Sec. 412.106(c)(2). In addition, we believe that the 
inclusion of bad debts in this calculation would encourage some 
hospitals to relax their collection efforts, at Medicare's expense. In 
any event, cost reporting forms would have to be changed and any data 
collected would have to be audited extensively by the fiscal 
intermediaries. Therefore, we question whether a data collection effort 
is feasible.
    Our preference would be to use data that are already available and 
verifiable on a national basis for the Medicare disproportionate share 
adjustment calculation. We are currently pursuing such data sources as 
we fashion our legislative proposal.

I. Making Teaching and Disproportionate Share Payments to Facilities 
That Treat Medicare Risk Plan Enrollees (Recommendation 12)

    Recommendation: Facilities that receive explicit direct GME, IME, 
or DSH payments for their Medicare fee-for-service patients should also 
receive additional payments for their Medicare risk plan patients. 
Mechanisms should be developed to distribute these payments in a way 
that reflects the policy goals of the Medicare program.
    Response: ProPAC is concerned that explicit support for teaching 
and disproportionate share hospitals is eroding as managed care plans 
enroll more Medicare patients. According to ProPAC, managed care plans 
may be unwilling to pay the extra costs that these hospitals incur and 
separate mechanisms need to be developed to allow teaching and 
disproportionate share hospitals to remain competitive with other 
hospitals.
    We are concerned that Medicare's payment to managed care plans 
includes compensation for direct and indirect graduate medical 
education and a disproportionate share adjustment that may not be 
reflected in the payments managed care plans are making to teaching and 
disproportionate share hospitals. The President's FY 1998 budget 
includes a proposal to remove funding included in Medicare's payment to 
managed care plans for teaching and disproportionate share activities 
and to pay these funds directly to teaching and disproportionate share 
hospitals based on their Medicare risk plan discharges.

J. Modifying the Tax Equity and Fiscal Responsibility Act (TEFRA) 
Payment System (Recommendation 14)

    Recommendation: Congress should consider modifying the TEFRA 
payment system to correct for the payment disparity between new and old 
providers.
    Response: HCFA has developed legislative proposals to modify the 
TEFRA payment system. Our proposals include rebasing the target rates 
for excluded hospitals and units using an average of each facility's 
two most recent cost reporting periods. This measure would realign 
payment rates with costs for both old and new providers. In conjunction 
with rebasing, the new target rates would be capped at 150 percent of a 
national mean rate for each type of facility in order to prevent newer 
high cost hospitals from receiving excessive target rates. Lower cost 
hospitals would be protected by establishing a floor of 70 percent of 
the national mean rate for each type of facility. Incentive payments 
would be modified by providing that no such payment would be made where 
a provider incurs costs that are less than or equal to 110 percent of 
the target amount. Finally, the President's FY 1998 budget proposal 
would revise the payment of capital costs to excluded hospitals and 
units by reducing reimbursement for capital to 85 percent of reasonable 
costs. TEFRA providers are the only hospitals that continue to be 
reimbursed for capital on a dollar-for-

[[Page 29934]]

 dollar basis; consequently, they have no incentive to control their 
capital expenditures. This policy would make capital reimbursement 
policy more consistent among all hospitals and provide a needed 
incentive for cost control, particularly for newer excluded hospitals 
and units that may have more resources for capital expenditures because 
they are not as limited by the target rates on inpatient operating 
costs.

K. Prospective Payment System for Hospital Outpatient Services 
(Recommendation 15)

    Recommendation: The Secretary should implement a prospective 
payment system for hospital outpatient services as soon as possible. 
Such a system should incorporate methods for controlling the volume of 
services.
    Response: We agree with the need to implement a prospective payment 
system for outpatient services. Under the President's FY 1998 budget, a 
prospective payment system for outpatient services would be implemented 
on January 1, 1999.
    While we await legislative authority, we will continue to develop 
and refine the Medicare-specific factors of the ambulatory patient 
group (APG) classification system that we recommend using. We plan to 
analyze the payments that would be made across sites (for example in 
ambulatory surgical centers (ASCs) or physician radiology practices) to 
ensure that we have not created unwarranted incentives to perform 
procedures in a given setting for financial reasons.
    We are concerned as well about the potential for increases in the 
volume of services provided, both in outpatient departments and in 
other settings. We are examining approaches to volume measurement and 
control, including the level of packaging for ancillary services and 
the monitoring of patterns of care. For example, we could track whether 
Medicare beneficiaries received more clinic visits per patient under 
APGs than they did under reasonable cost-based payment. If so, we could 
take corrective action in one of two ways: We could adjust for the over 
utilization of outpatient services under a prospective payment system 
by incorporating the adjustments into the total system, which may 
impact on all hospitals; or we could target the specific hospitals 
identified as over utilizing services and apply the corrective action 
specifically to them.

L. Reducing Beneficiary Liability for Hospital Outpatient Services 
(Recommendation 16)

    Recommendation: Beneficiary liability for hospital outpatient 
services should be reduced from 20 percent of charges to 20 percent of 
the allowed payment, as it is for other services. Further, Congress 
should correct the blended payment formula. This would help offset the 
increase in Medicare outlays resulting from a reduction in beneficiary 
liability.
    Response: We agree that the issue of beneficiary coinsurance should 
be addressed and that the blended payment formula should be corrected. 
As part of the President's FY 1998 budget proposal, coinsurance for 
outpatient services would be reduced to 20 percent by 2007 as part of 
the implementation of a prospective payment system for these services.

M. Improving Dialysis Facility Data (Recommendation 17)

    Recommendation: HCFA should regularly audit a representative sample 
of dialysis facility cost reports to ensure that it has accurate data 
to assess the adequacy of the composite rates. Further, it should 
systematically track quality indicators for these providers.
    Response: HCFA does not audit renal facilities on a regular basis 
since audits do not result in recoupment of Medicare funds. This is 
because renal facilities are paid the composite rate, which is a set 
fee. Thus, there is no cost reimbursement. In recent years, Medicare 
funds for audits have been reduced. To manage these limited resources, 
HCFA has instructed contractors to audit those entities that generate 
the most return on audit dollars spent. With renal audits, the only 
payback is recoupment of unallowable bad debts, which are limited under 
the current payment system. Generally, audit funds in the budget are 
not used to review cost reports that have little or no effect on 
Medicare providers' payments.
    We are also concerned about the quality of the data regarding 
dialysis facility costs in the Health Care Provider Cost Report 
Information System (HCRIS). Procedures and edits are in place to review 
data that do not appear reasonable. However, these procedures and edits 
cannot guarantee that renal facilities report their costs in accordance 
with Medicare reasonable cost principles. To accomplish this task, 
fiscal intermediaries perform desk reviews of cost reports for the 
purpose of finding errors or for identifying cost reports that should 
be audited. Because of limited resources, only in rare instances would 
a fiscal intermediary audit a renal facility's cost report. HCRIS edits 
are designed to ensure that data are within acceptable ranges or to 
identify facilities with missing data. The best way to ensure that cost 
reports are completed correctly is through education of individuals who 
are responsible for completing renal cost reports. The National Renal 
Administrator Association has been helpful in accomplishing this task 
and in improving the quality of the renal cost reporting data in HCRIS.
    To address ProPAC's concern, we will review the current procedures 
and edits in HCRIS for renal facilities to address cost reporting data 
elements that appear out of line. We also will revise instructions to 
clarify problem areas in renal facility cost reporting. In addition, if 
and when our contractors' funding levels permit, we will conduct a 
limited set of audits on independent renal facilities. However, based 
on our prior experience, we do not believe it is necessary to audit 
hospital-based renal facilities, since these audits resulted in only 
minor changes to reported costs. Since independent facilities furnish 
about 75 percent of all dialysis treatments, we believe audit activity 
should focus on those facilities. As in prior years, we would provide 
ProPAC with the results of any audits and the percentage adjustment 
between reported and audited costs.
    To improve the quality of care renal patients are receiving, we are 
in the process of developing revised ESRD conditions for coverage. The 
proposed regulations are 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. When 
published, these regulations should address ProPAC's recommendation 
that HCFA monitor treatment patterns and patient outcomes. After 
publication of a notice of proposed rulemaking, we plan 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 renal 
facilities. In the short term, we are planning to require renal 
facilities to report values for Kt/V (which indicates whether the 
patient has too much urea in the blood after dialysis) or urea rate 
reduction to assess the adequacy of patient dialysis treatments 
furnished by facilities.

[[Page 29935]]

N. Update to the Composite Rate for Dialysis Services (Recommendation 
18)

    Recommendation: For FY 1998, the composite rate for dialysis 
services should be increased by 2.8 percent to ensure that 
beneficiaries receive quality care. This level reflects the projected 
increase in the market basket index for dialysis services and the 
Commission's judgment about the likely effects of scientific and 
technological advances and productivity gains on facilities' costs.
    Response: We share ProPAC's concerns about the relationship among 
patient outcomes, adequacy of dialysis, and payment. As we acknowledged 
in last year's response to a similar recommendation, we recognize that 
an increase in the composite payment rate may be appropriate in the 
future. However, we do not believe an across-the-board rate increase is 
warranted. It may be appropriate to recommend payment increases based 
on the number of treatments that a renal facility furnishes, since 
dialysis facilities exhibit economies of scale. In proposing a future 
increase, we would want to examine the need to adjust payment increases 
for volume and the effects a new wage index would have on payments. The 
results of the National Kidney Foundation Dialysis Outcomes Quality 
Initiatives should provide us with information on the relationship 
between patient outcomes and costs and thus provide us with a basis for 
recommending an appropriate payment rate increase. However, our 
position is that any payment increase should be linked to 
implementation of the revised conditions for coverage for ESRD 
facilities. Until these conditions are published in final, we will 
continue to monitor facilities' costs and other factors to determine if 
it is appropriate to recommend a payment rate increase. Moreover, any 
dialysis rate increase must be considered within the context of the 
Medicare budgetary concerns.

O. Prospective Payment System for Skilled Nursing Facilities (SNFs) 
(Recommendation 19)

    Recommendation: A case-mix adjusted prospective payment system for 
skilled nursing facilities should be implemented as soon as possible.
    Response: We concur with the recommendation to implement a 
prospective payment system for SNFs as soon as possible. The 
President's FY 1998 budget includes a provision for a prospective 
payment system for SNFs to be implemented on July 1, 1998. This system 
will include payment for all costs (routine, ancillary, and capital) 
related to the services furnished to beneficiaries under Medicare Part 
A. By including all costs of services in the payment rates, spending 
growth per day of care can be contained. In addition, the provision 
includes authority to adjust payments to providers where inappropriate 
utilization (that is, excessive lengths of stay) of SNF services is 
found. Finally, the proposed prospective payment system would include 
case-mix adjustments using a resident classification system based on 
resource utilization groups. These resource utilization groups are tied 
to elements contained on the Minimum Data Set (MDS) 2.0 resident 
assessment instrument for nursing homes.

P. Controlling Payments for Skilled Nursing Facility Ancillary Services 
(Recommendation 20)

    Recommendation: Until a prospective payment system is developed, 
the Secretary should take steps to control SNF expenditures by limiting 
payments for ancillary services.
    Response: We agree that the rapid growth in payments for SNF 
ancillary services must be curbed. As indicated in the previous 
response, the President's FY 1998 budget includes a provision for an 
SNF prospective payment system, to be implemented on July 1, 1998, that 
will include payment for all the costs of services furnished to 
Medicare beneficiaries in a single prospective rate. Under this system, 
spending growth for ancillary and other services will be appropriately 
contained.
    In addition, on March 28, 1997, we issued proposed revised salary 
equivalency guidelines for physical and respiratory therapy and new 
guidelines for occupational and speech therapy (62 FR 14851). We hope 
to finalize these guidelines prior to implementation of a SNF 
prospective payment system. The guidelines will have a significant 
impact on cost containment per hour of service billed for therapies 
provided in SNFs and other providers. However, it is unlikely that we 
will be able to implement other limits on ancillary services in the 
limited time available before implementation of the SNF prospective 
payment system. The suggestion that prospective payment rates for 
ancillary services could be adopted is obviated by the absence of any 
implementing authority in the current statute. Cost limits could be 
adopted but would take time to develop and implement. For example, 
using the resource based relative value scale (RBRVS) to set payment 
limits on ancillary services would require SNFs (as well as HCFA and 
fiscal intermediary claims processing systems) to begin using the HCFA 
Common Procedure Coding System (HCPCS) on Part A SNF bills in order to 
match a service with the appropriate fee schedule amount. With the 
planned implementation of the SNF prospective payment system in only a 
year, it would not seem practical to invest resources in the 
development and implementation of a RBRVS-based limit system that would 
not have any impact on the volume of services provided.

Q. Consolidated Billing for Skilled Nursing Facility Services 
(Recommendation 21)

    Recommendation: The Secretary should require consolidated billing 
for all services furnished to beneficiaries during a Part A-covered SNF 
stay. Further, SNFs should use consistent, procedure-level codes for 
these services.
    Response: We concur with ProPAC's observations regarding the need 
for and potential benefits of establishing such requirements, and we 
note that the President's FY 1998 budget proposal includes provisions 
that adopt this recommendation by requiring consolidated billing for 
Medicare services provided to SNF residents beginning in FY 1998, as 
well as the use of HCPCS codes on SNF bills.
    We would like to comment in greater detail on ProPAC's suggestion 
that the consolidated billing proposal should specifically define the 
ancillary services to be included. We note that a similar comprehensive 
Medicare billing requirement for hospitals (section 1862(a)(14) of the 
Act), which has been in effect for well over a decade, defines the 
hospital's billing responsibility in terms of a blanket inclusion of 
all services that a hospital patient receives, with specific exemptions 
for the services of certain types of medical practitioners (for 
example, physicians, certified nurse-midwives, qualified psychologists, 
and certified registered nurse anesthetists) that are not regarded as 
falling within the scope of the hospital benefit. Existing law in the 
material following section 1861(h)(7) of the Act, defines the scope of 
the SNF benefit, in part, as excluding those types of services that 
would not be coverable under the inpatient hospital benefit when 
furnished to a hospital inpatient. Accordingly, our SNF consolidated 
billing proposal would similarly provide for a blanket inclusion of all 
services that the SNF's resident receives (with specific exceptions for 
certain types of medical practitioner services), in order to maintain 
consistency with the longstanding hospital provision.

[[Page 29936]]

R. Eliminating the Cost Limit Exemption for New Skilled Nursing 
Facilities (Recommendation 22)

    Recommendation: The exemption from Medicare's routine cost limits 
for new providers should be eliminated. All SNFs should be subject to 
these limits.
    Response: We concur with the recommendation to eliminate the 
exemption to the Medicare routine cost limits for new skilled nursing 
facilities. The rapid rise in the number of SNF beds and significant 
growth in payments both generally and specifically to SNFs with 
exemptions have demonstrated the diminished value of the exemption to 
the Medicare program and necessitated its elimination.
    Under the SNF prospective payment system proposed in the 
President's FY 1998 budget, exemptions, as an artifact of reasonable 
cost-based payment, will be eliminated with the implementation of the 
system on July 1, 1998. Even so, we are moving to eliminate the new 
provider exemption through issuance of regulations in the near future. 
The issue of how the new policy will be applied relative to providers 
currently operating under the exemption is being addressed as part of 
the development of this regulation.

S. Defining the Home Health Care Benefit (Recommendation 23)

    Recommendation: Congress should more specifically define the scope 
of Medicare's home health care benefit. The absence of clear coverage 
constraints limits the program's ability to control home health 
utilization.
    Response: We agree with ProPAC's recommendation that clearer 
eligibility and coverage guidelines would aid the program's ability to 
control improper and abusive home health care utilization. The 
President's FY 1998 budget contains provisions regarding the definition 
of homebound and intermittent skilled nursing care, as well as the 
statutory authority for HCFA to develop and apply normative standards.

T. Prospective Payment System for Home Health Care Agencies 
(Recommendation 24)

    Recommendation: A case-mix adjusted prospective payment system for 
home health care agencies should be implemented as soon as possible.
    Response: We concur with ProPAC's recommendations. We agree that 
research to develop a robust case-mix measure is necessary and we have 
taken all available actions to expedite such research. In August 1996, 
a contract was awarded to develop a case-mix measurement for a home 
health prospective payment system. Under the terms of this contract, 
extensive information about the characteristics of patients and 
resource utilization will be collected. Agencies participating in this 
project will collect patient information using the Outcome and 
Assessment Information Set (OASIS) for home health, supplemented by 
additional items that may be predictive of resource utilization. 
Information will also be collected about visit lengths and procedures 
performed during all home health visits during an episode of care. We 
hope to recruit 90 agencies from 8 States for this project. Recruitment 
began in April 1997. We expect to have recommendations for a case-mix 
measurement for home health services by January 1999.

U. Interim Home Health Payment Method (Recommendation 25)

    Recommendation: Congress should implement an interim home health 
payment method to control Medicare outlays until a fully prospective 
payment system is in place.
    Response: The President's FY 1998 budget proposal includes an 
interim system, which would be effective on October 1, 1997. We are 
prepared to begin implementation of this system as soon as we are 
granted the necessary statutory authority.

V. Home Health Visit Coding (Recommendation 26)

    Recommendation: Medicare should require consistent home health 
visit coding. Such information is essential for monitoring and 
evaluating the home health benefit and developing an effective case-mix 
adjustment system.
    Response: Currently, there is no standard definition of what 
comprises a visit and there is variation in the type of service and 
length of time for providing those services. We agree such information 
is critical to developing an effective case-mix measure for a home 
health prospective payment system. In the case-mix research we are 
beginning, we will collect information on the length of time and 
procedures performed during a visit. This information will feed into 
the development of a prospective payment system and related coding 
system. We cannot proceed with specific coding refinements until the 
findings are available and a prospective payment system is designed. We 
are researching aspects of that approach rather than imposing reporting 
burdens on all home health agencies.

W. Home Health Copayments (Recommendation 27)

    Recommendation: Modest beneficiary copayments, subject to an annual 
limit, should be introduced for home health care services.
    Response: We are concerned about the impact that higher beneficiary 
out-of-pocket expenses would have on poorer Medicare beneficiaries who 
are not covered by Medicaid and cannot afford supplemental insurance. 
Poorer beneficiaries spend a greater proportion of their income on out-
of-pocket costs. Our proposed interim system of limits should help 
control the growth in service use.

X. Controlling Long-Term Home Health Use (Recommendation 28)

    Recommendation: The Secretary should analyze the growing number of 
beneficiaries who are receiving home health care for prolonged periods. 
Additional policies may be needed to address the spending associated 
with these beneficiaries.
    Response: This is one of the many areas that are under evaluation 
in several payment-related research projects that are currently 
underway. We agree with ProPAC that there may need to be special 
provisions under the payment system we develop to address the needs of 
this type of patient. As the findings from the research become 
available, we are sure that this issue will be more clearly identified 
and we will propose whatever changes appear to best address these 
patient's needs.

Y. Prospective Payment System for Rehabilitation Hospitals and 
Distinct-Part Units (Recommendation 29)

    Recommendation: A case-mix adjusted prospective payment system for 
rehabilitation hospitals and distinct-part units should be implemented 
as soon as possible.
    Response: We have sponsored research on possible patient 
classification systems for rehabilitation care. In particular, a study 
by the RAND Corporation evaluated the prospects for a prospective 
payment system based on the rehabilitation coding system known as 
Functional Independence Measure (FIM) and the patient classification 
system known as Function-Related Groups (FRGs). The final report on 
this research will soon be complete. However, the preliminary results 
indicate much work would be necessary before a prospective payment 
system based on FRGs could be implemented. There are at least two 
important implementation issues: The reliability of the patient status 
measures and the

[[Page 29937]]

recognition of patient complications and comorbidities. In addition, 
implementation of a case-mix payment system for rehabilitation 
hospitals and units would require significant program resources and 
impose data reporting and collection requirements on providers. As a 
result, fewer resources would be available for research into developing 
an integrated payment approach for payment of rehabilitation care 
across all settings (excluded hospitals, SNFs, HHAs, comprehensive 
outpatient rehabilitation facilities, etc.) Thus, we prefer to focus 
our efforts on developing a coordinated payment system for post acute 
care that relies on a core assessment tool.

Z. Prospective Payment System for Long-Term Care Hospitals 
(Recommendation 30)

    Recommendation: A case-mix adjusted prospective payment system for 
long-term care hospitals should be developed and implemented as soon as 
possible.
    Response: We continually examine data and analyze proposals to 
simplify payment mechanisms and ensure that Medicare payments reflect 
efficient and high quality health care. We will be interested in 
evaluating the results of independent studies on case-mix measurement 
for long-stay hospital patients. At the same time, it is evident that 
many long-term care hospitals furnish extensive rehabilitation care 
that overlaps with care furnished in rehabilitation hospitals. Thus, a 
prospective payment system for post-acute care providers which includes 
SNFs and rehabilitation hospitals and units could conceivably be used 
for patients in long-term care hospitals. As a result, we have concerns 
that the development and implementation of a separate prospective 
payment system for fewer than 200 Medicare-certified, long-term care 
hospitals may not be an efficient use of program resources and may 
result in overlapping complexity and manipulation of payment.

AA. Elimination of the New Provider Exemption Period (Recommendation 
32)

    Recommendation: The initial exemption period for new PPS-excluded 
providers should be eliminated. Medicare payments for new providers 
should be based on an average target amount for facilities serving 
comparable types of patients.
    Response: New hospitals that are excluded from the prospective 
payment system are exempt from the rate-of-increase ceiling during 
their first 2 years of operation. The purpose of this exemption is to 
recognize certain cost distortions that may be present as a hospital 
begins operation and tries to establish its presence in the market. 
However, the growth of new excluded hospitals increasingly includes a 
large number of hospitals that are reconfigurations of existing 
structures. These new hospitals do not require the same length of time 
to establish market presence and increase patient load. As a result, 
there is evidence that the new hospital exemption does not always serve 
its original purpose and might create incentives to increase its costs 
in the exempt years when it is not subject to cost limitation. The 
President's budget proposal would limit payment during the exempt years 
to reasonable costs not to exceed 150 percent of the national mean cost 
per case for each type of excluded hospital. This modification should 
eliminate the incentive to increase costs in the first years of a new 
excluded hospital's operation.

BB. Coordinating Post-Acute Care Provider Payment Methods 
(Recommendation 33)

    Recommendation: The Commission urges the Congress and the Secretary 
to consider the overlap in services and beneficiaries across post-acute 
care providers as they modify Medicare payment policies. Changes to one 
provider's payment method could shift utilization to other sites and 
thus fail to curb overall spending. To this end, ProPAC commends HCFA's 
efforts to identify elements common to the various facility-specific 
patient classification systems to use in comparing beneficiaries across 
settings.
    Response: We concur with the recommendation to coordinate payment 
methods for post-acute providers. Our long-term strategy for Medicare 
post-acute services centers on the development of a fully integrated 
payment and delivery system for post-acute care that is as neutral as 
possible regarding physicians' and patients' decisions about the use of 
particular services. This system should provide payments sufficient to 
ensure that beneficiaries receive quality care in the appropriate 
settings and that transfers between settings occur when medically 
necessary and not to generate higher or duplicate revenues for 
comparable services. In addition, we believe that care should be 
beneficiary-specific, relying on a standardized assessment of each 
patient's care needs while offering them choices in the care that they 
will receive. This system must have long-term financial integrity 
through controlling both payment per service and the volume of services 
offered.
    Essential to achieving this long-term goal is the near-term 
coordination of the separate payment methods for post-acute providers. 
Through the development and implementation of prospective payment 
systems that complement each other, Medicare can impose greater 
coordination in the financing and delivery of post-acute services. This 
will minimize quality and payment problems associated with site/service 
substitution and allow for an easier transition to a fully integrated 
system in the future. The key to the function of these prospective 
payment systems, as well as any future integrated system for post-acute 
services, is the adoption of principles for identifying patient 
resource needs that have common elements from system to system so that 
ultimately there can be a broader classification system and more 
standardized methods for grouping patients and payments. Basic to this 
process is the development of a core screening and assessment tool. An 
assessment methodology is critical to addressing systematic issues 
related to quality, payment, and utilization.
    The President's FY 1998 budget contains proposed language giving 
the Secretary authority to implement an integrated payment system for 
Medicare post-acute services after FY 2001. This language also provides 
authority to collect the data necessary to develop and implement such a 
system prior to that date. We are in the early stages of designing the 
post-acute core screening and assessment tool that will provide much of 
the necessary data.

CC. Linking Payments for an Episode of Care (Recommendation 34)

    Recommendation: The Secretary should begin a demonstration project 
that links payments for the acute and post-acute portions of an episode 
of care. It should be designed to test whether this approach can reduce 
expenditures and improve continuity of care.
    Response: As discussed in our previous response to recommendation 
33, our long-term strategy for Medicare post-acute services centers on 
the development of a fully integrated payment and delivery system. 
Within the framework of this strategy and the basic concepts we have 
outlined, there are a variety of different options for structuring a 
payment and delivery system for Medicare post-acute services. These 
include various case management approaches, integrated delivery/payment 
systems, and more traditional resource based prospective payment 
models. Certainly a system that links payment for the acute and post-
acute

[[Page 29938]]

portions of an episode would fall within the scope of this framework.
    Conceptually, the idea of linking (or ``bundling'') payment for the 
acute and post-acute portions of an episode makes sense and has great 
potential for effective cost containment under the Medicare model. As a 
practical matter, this approach is extremely complex, involving a range 
of difficult technical and policy issues related to rate setting, 
patient classification, quality, outcomes, accountability, and payment 
arrangements (that is, which entity should receive the payment). HCFA 
has funded several studies in this area. These studies have discussed 
the complexity of this approach and concluded by citing the need for 
additional research before going forward with a demonstration. In 
addition, two other provisions in the President's FY 1998 budget 
proposal give HCFA the authority to try this approach in certain 
circumstances. The Centers of Excellence proposal expands the set of 
conditions for which we could pay a single flat rate for all diagnostic 
and physician services to include other heart procedures, knee surgery 
and hip replacement. This might allow us to experiment with including 
some postacute services in the bundled package of services. We are also 
seeking legislative authority that would allow us to selectively 
contract with providers for a package of services for a specific 
condition, which would be another opportunity to experiment with 
arrangements including postacute care.

DD. Improving the Risk Adjustment Method (Recommendation 35)

    Recommendation: A combination of techniques should be used to 
adjust Medicare's capitation payments so that they better reflect 
enrollees' likely use of services. The Secretary should adopt risk 
adjusters based on diagnosis, health status, or both as well as an 
outlier policy for costly cases. Partial capitation arrangements should 
be tested. Plans should provide data to Medicare to support improved 
risk adjustment. The new risk adjustment system should be phased in.
    Response: ProPAC recommends using risk adjustment methods that 
would explain more of the variances in health care spending. Currently, 
we are testing risk adjusters as part of the Medicare Choices 
demonstration. The Administration is developing a new payments 
methodology that incorporates more refined health status adjusters. A 
proposal could be ready for Congressional consideration as early as 
1999, with implementation beginning as early as 2001. HCFA would want 
to apply risk adjusters as soon as technically feasible.
    Also, ProPAC has suggested, as a part of risk adjustment, a partial 
capitation method of payment, using an outlier approach to capitation 
payment. We are trying to establish an outlier demonstration in the 
Seattle area. One of the problems we have encountered is finding a 
sufficient number of plans able to supply encounter data. We wanted at 
least three plans included in the demonstration. To date, two of the 
three plans have not demonstrated an ability to produce the data 
required. The President's budget proposal includes a partial risk 
method that we prefer to the outlier approach recommended by ProPAC. 
Under the President's budget proposal, the partial risk method would 
replace cost based payments. This method would allow organizations to 
share with HCFA in either savings or losses if the payment mechanism 
requires amounts to be paid either below or above the risk capitation 
rate.

EE. Excluding Teaching and Disproportionate Share Payments From the 
Capitation Rates (Recommendation 36)

    Recommendation: The fee-for-service spending estimates Medicare 
uses to calculate capitation rates should exclude special payments to 
hospitals with graduate medical education (GME) programs and to those 
serving a disproportionate share of low-income patients.
    Response: We agree with ProPAC's recommendation to remove GME and 
DSH components from the capitation rates. The President's budget 
proposal removes these components from the capitation payments over a 
2-year period. The funds removed from the capitation rates will be paid 
directly to teaching and DSH hospitals when they care for managed care 
enrollees. Managed care plans with approved teaching programs would 
also be eligible for direct payment for graduate medical education 
expenses.

FF. Increasing Capitation Rates to Reflect Use of Services Covered by 
Other Government Programs (Recommendation 37)

    Recommendation: Medicare should increase the capitation rates to 
include estimated spending for covered services that program 
beneficiaries receive in facilities operated by the Departments of 
Veterans Affairs and Defense.
    Response: Under the Administration's proposal to revise the payment 
methodology, the current link between local fee-for-service payments 
and managed care payments rates is not retained. By 2002, 30 percent of 
the county rate will be based on national average payment levels. In 
addition, rates will be updated based on the national average per 
capita rate of growth in the Medicare program. In view of the reduced 
weight of local fee-for-service payment levels and the anticipated 
transition to a new methodology, we believe the need to further examine 
the impact of spending for services provided to Medicare beneficiaries 
in Veterans Affairs and Defense facilities is significantly reduced. 
Additionally, when we undertook such an examination a few years ago, we 
had problems with the data submitted and could not establish an 
appropriate adjustment to the capitation payments.

GG. Reducing the Variation in Payment Rates (Recommendation 38)

    Recommendation: The variation in capitation rates across counties 
should be narrowed. The lowest rates should be raised to a minimum 
amount, without increasing aggregate program spending. Medicare should 
evaluate the adequacy and appropriateness of its payment rates, however 
they are determined.
    Response: The Administration supports narrowing the variation in 
capitation rates across counties and creating a minimum payment amount. 
The FY 1998 budget proposal to revise the payment methodology includes 
both of these elements. By 2002, the difference between the highest and 
the lowest county rates is reduced from the current difference of about 
250 percent to about 100 percent. The Administration's proposal also 
addresses the appropriateness of the rates by making an adjustment for 
favorable selection into managed care plans, beginning in 2000. This 
adjustment is consistent with the judgement of the General Accounting 
Office, the Physician Payment Review Commission, as well as ProPAC, 
that managed care plans are currently significantly overpaid because of 
favorable selection. Also, as noted above, the Administration is 
developing a new payment methodology that incorporates more refined 
health status adjusters. A proposal could be ready for Congressional 
consideration as early as 1999, with phase-in beginning as early as 
2001.

HH. Updating Capitation Rates (Recommendation 39)

    Recommendation: Medicare should use a national update framework 
rather than fee-for-service spending increases to determine the annual 
changes in risk plan payment rates.

[[Page 29939]]

    Response: Under the current methodology, rates are updated based on 
local fee-for-service spending patterns. Under the Administration's 
proposal to revise the payment methodology, rates would be updated 
based on the national average per capita rate of growth in the Medicare 
program, which incorporates changes at the national level in both price 
and utilization of services. In developing the revised methodology 
noted above, which we expect to have ready for Congressional 
consideration as early as 1999, we will examine appropriate update 
mechanisms.

II. Evaluating Alternative Methods for Determining Capitation Rates 
(Recommendation 40)

    Recommendation: The Medicare program should continue to evaluate 
other methods for determining payment rates, including competitive 
bidding and negotiation between the program and risk plans.
    Response: We are in the process of developing several demonstration 
projects for evaluation purposes. One project concentrates on 
competitive bids, including the use of a third party enroller. In this 
project, HMOs could be paid an amount based on bids they submit. In 
addition, the Choices project will have participants receiving payments 
that start with 95 percent of the Adjusted Average per Capita Cost 
(AAPCC) (HCFA's normal payment method). Later in the project, these 
payments will be modified using risk adjusters. This project will also 
include contracting with organizations that may not qualify as HMOs. 
Finally, we are trying to establish an outlier project in Seattle, as 
mentioned above. However, we have not yet been able to acquire 
sufficient data to begin this project.

JJ. Data to Improve Plan Payments (Recommendation 41)

    Recommendation: The Secretary should require risk plans to provide 
information on the costs of furnishing services to Medicare enrollees. 
These data are necessary to determine the appropriateness of payment 
rates and improve Medicare payment methods.
    Response: We are in the process of revising the adjusted community 
rate (ACR) proposal and process. Some of the concepts included in this 
review include requiring the ACR to contain and use certain cost data 
to establish the plan's charge structure. In addition, we are 
considering incorporating into the approval process a comparison of ACR 
data to other required financial reports.

KK. Evaluating Plan Quality of Care (Recommendation 42)

    Recommendation: The Commission supports the Secretary's efforts to 
evaluate Medicare risk plans through the use of the Health Plan 
Employer Data and Information Set (HEDIS) and satisfaction surveys. The 
Secretary should, in cooperation with the appropriate organizations, 
continue to adapt and improve measurement tools to evaluate plan 
performance.
    Response: In addition to our use of HEDIS to evaluate Medicare risk 
plans, we will survey all of the enrollees of HMO and CMP contractors 
(both risk and cost) on their satisfaction with various aspects of 
their plan. This effort is in cooperation with the Agency for Health 
Care Policy and Research.

LL. Improving Information for Beneficiary Choice (Recommendation 43)

    Recommendation: The Commission supports the Secretary's efforts to 
improve beneficiary information about managed care options. All 
beneficiaries should receive quality and satisfaction data for risk 
plans and the fee-for-service option to help them decide about 
enrolling in a risk plan. Cost and benefit definitions should be 
standardized so that beneficiaries can better compare plans. 
Additionally, the Secretary should periodically assess whether such 
information could be improved.
    Response: We are continually trying to improve the information 
given to the Medicare beneficiary. We are in the process of developing 
a comparison chart comparing benefits and charges among HMOs within a 
specified service area. Later this year, HEDIS data and consumer survey 
results will be released. In addition, HCFA is in the process of 
releasing national marketing guidelines that require HMOs to produce 
marketing materials that fully disclose, in a clear and understandable 
manner, information to be used by the Medicare beneficiary.
    The Administration's FY 1998 budget also includes proposals 
addressing the provision of information to beneficiaries. It would 
require the Secretary to develop and provide comparative information to 
beneficiaries on all managed care plans and Medigap plans in their 
area, and it would require Medigap and managed care plans to finance 
the associated costs. It would also require the Secretary to establish 
standardized packages for certain additional benefits offered by 
Medicare managed care plans. For example, if the Secretary established 
a standardized package for outpatient prescription drugs, plans could 
only offer enrollees this benefit according to the benefit structure 
established by the Secretary.

IX. Other Required Information

A. 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. Data files are 
listed below with the cost of each. Anyone wishing to purchase data 
tapes, cartridges, or diskettes should submit a written request along 
with a company check or money order (payable to HCFA-PUF) to cover the 
cost, to the following address: Health Care Financing Administration, 
Public Use Files, Accounting Division, P.O. Box 7520, Baltimore, 
Maryland 21207-0520, (410) 786-3691. Files on the Internet may be 
downloaded without charge.
1. Expanded Modified MEDPAR-Hospital (National)
    The Medicare Provider Analysis and Review (MEDPAR) file contains 
records for 100 percent of Medicare beneficiaries using hospital 
inpatient services in the United States. (The file is a Federal fiscal 
year file which means discharges occurring October 1 through September 
30.) The records are stripped of most data elements that will permit 
identification of beneficiaries. The hospital is identified by the 6-
position Medicare billing number. The file is available to persons 
qualifying under the terms of the Notice of Proposed New Routine Uses 
for an Existing System of Records published in the Federal Register on 
December 24, 1984 (49 FR 49941), and amended by the July 2, 1985 notice 
(50 FR 27361). The national file consists of approximately 11 million 
records. Under the requirements of these notices, a data release 
agreement must be signed by the purchaser before release of these data. 
For all files requiring a signed data release agreement, please write 
or call to obtain a blank agreement form before placing an order. Two 
versions of this file are created each year. They support the 
following:
     Notice of Proposed Rulemaking (NPRM) published in the 
Federal Register, usually available by the end of May. This file is 
derived from the MedPAR file with a cutoff of 3 months

[[Page 29940]]

after the end of the fiscal year (December file).
     Final Rule published in the Federal Register, usually 
available by the first week of September. This file is derived from the 
MedPAR file with a cutoff of 9 months after the end of the fiscal year 
(June file).

Media: Tape/Cartridge
File Cost: $3,415.00 per fiscal year
Periods Available: FY 1988 through FY 1996
2. Expanded Modified MedPAR-Hospital (State)

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

Media: Tape/Cartridge
File Cost: $1,050.00 per State per year
Periods Available: FY 1988 through FY 1996
3. HCFA Hospital Wage Index Data File
    This file is composed of four separate diskettes. Included are: (1) 
The hospital hours and salaries for FY 1994 used to create the proposed 
FY 1998 prospective payment system wage index; (2) a history of all 
wage indexes used since October 1, 1983; (3) a list of State and county 
codes used by SSA and FIPS (Federal Information Processing Standards), 
county name, and Metropolitan Statistical Area (MSA); and (4) a file of 
hospitals that were reclassified for the purpose of the proposed FY 
1998 wage index. Two versions of these files are created each year. 
They support the following:
     NPRM published in the Federal Register, usually by the end 
of May.
     Final Rule published in the Federal Register, usually by 
the first week of September.

Media: Diskette/Internet
File Cost: $500.00
Periods Available: FY 1998 PPS Update

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

Media: Diskette/Internet
File cost: $145.00 per file
4. PPS-IV to PPS-XIII Minimum Data Sets
    The Minimum Data Set contains cost, statistical, financial, and 
other information from Medicare hospital cost reports. The data set 
includes only the most current cost report (as submitted, final 
settled, or reopened) submitted for a Medicare participating hospital 
by the Medicare Fiscal Intermediary to HCFA. This data set is updated 
at the end of each calendar quarter and is available on the last day of 
the following month.

                          Media: Tape/Cartridge                         
------------------------------------------------------------------------
                                                  Periods               
                                                 beginning    And before
                                                on or after             
------------------------------------------------------------------------
PPS IV........................................     10/01/86     10/01/87
PPS V.........................................     10/01/87     10/01/88
PPS VI........................................     10/01/88     10/01/89
PPS VII.......................................     10/01/89     10/01/90
PPS VIII......................................     10/01/90     10/01/91
PPS IX........................................     10/01/91     10/01/92
PPS X.........................................     10/01/92     10/01/93
PPS XI........................................     10/01/93     10/01/94
PPS XII.......................................     10/01/94     10/01/95
PPS XIII......................................     10/01/95     10/01/96
------------------------------------------------------------------------

    (Note: The PPS XIII Minimum Data Set covering FY 1996 will not 
be available until July 31, 1997.)

File Cost: $715.00 per year
5. PPS-IX to PPS-XIII Capital Data Set
    The Capital Data Set contains selected data for capital-related 
costs, interest expense and related information and complete balance 
sheet data from the Medicare hospital cost report. The data set 
includes only the most current cost report (as submitted, final settled 
or reopened) submitted for a Medicare certified hospital by the 
Medicare fiscal intermediary to HCFA. This data set is updated at the 
end of each calendar quarter and is available on the last day of the 
following month.

                          Media: Tape/Cartridge                         
------------------------------------------------------------------------
                                                  Periods               
                                                 beginning    And before
                                                on or after             
------------------------------------------------------------------------
PPS IX........................................     10/01/91     10/01/92
PPS X.........................................     10/01/92     10/01/93
PPS XI........................................     10/01/93     10/01/94
PPS XII.......................................     10/01/94     10/01/95
PPS XIII......................................     10/01/95     10/01/96
------------------------------------------------------------------------

    (Note: The PPS XIII Capital Data Set covering FY 1996 will not 
be available until July 31, 1997.)

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

Media: Tape/Cartridge
File Cost: $500.00 per file
Periods Available: FY 1987 through FY 1997 (December updates)

Media: Diskette/Internet
File Cost: $265.00
Periods Available: FY 1997 PPS Update
7. HCFA Medicare Case-Mix Index File
    This file contains the Medicare case-mix index by provider number 
as published in each year's update of the Medicare hospital inpatient 
prospective payment system. The case-mix index is a measure of the 
costliness of cases treated by a hospital relative to the cost of the 
national average of all Medicare hospital cases, using DRG weights as a 
measure of relative costliness of cases. Two versions of this file are 
created each year. They support the following:
     NPRM published in the Federal Register, usually by the end 
of May.
     Final rule published in the Federal Register, usually by 
the first week of September.

Media: Diskette/Internet

[[Page 29941]]

Price: $145.00 per year
Periods Available: FY 1985 through FY 1996 (Internet--FY 1996)
8. Table 5 DRG File
    This file contains a listing of DRGs, DRG narrative description, 
relative weight, and geometric and arithmetic mean lengths of stay as 
published in the Federal Register. The hardcopy image has been copied 
to diskette. There are two versions of this file as published in the 
Federal Register: a. NPRM, usually published by the end of May. b. 
Final rule, usually published by the first week of September.

Media: Diskette/Internet
File Cost: $145.00
Periods Available: FY 1998 PPS Update
9. PPS Payment Impact File
    This file contains data used to estimate payments under Medicare's 
hospital inpatient prospective payment systems for operating and 
capital-related costs. The data are taken from various sources, 
including the Provider-Specific File, Minimum Data Sets, and prior 
impact files. The data set is abstracted from an internal file used for 
the impact analysis of the changes to the prospective payment systems 
published in the Federal Register. This file is available for release 1 
month after the proposed and final rules are published in the Federal 
Register.

Media: Diskette/Internet
File Cost: $145.00
Periods Available: FY 1998 PPS Update
10. AOR/BOR Tables
    This file contains data used to develop the DRG relative weights. 
It contains mean, maximum, minimum, standard deviation, and coefficient 
of variation statistics by DRG for length of stay and standardized 
charges. The BOR tables are ``Before Outliers Removed'' and the AOR is 
``After Outliers Removed.'' (Outliers refers to statistical outliers, 
not payment outliers.) Two versions of this file are created each year. 
They support the following:
     NPRM published in the Federal Register, usually by the end 
of May.
     Final rule published in the Federal Register, usually by 
the first week of September.

Media: Diskette/Internet
File Cost: $145.00
Periods Available: FY 1998 PPS Update
11. HCFA FY 1992 Capital-Related Tax File
    This file contains data used to develop a proposed FY 1996 special 
property tax adjustment to the capital prospective payment system for 
capital-related costs. This proposed adjustment was not implemented. 
The data set includes a preliminary hospital-specific add-on amount for 
all PPS hospitals. The data set also contains the information used to 
propose an adjustment to the Federal rate so that the tax add-on is 
budget neutral. The proposed property tax adjustment provides special 
treatment to qualified hospitals who pay capital-related property 
taxes. The add-on was determined using base year tax costs per 
discharge attributable to Medicare. The data are taken from the FY 1992 
Medicare hospital cost report and a special request for validation by 
the fiscal intermediaries.

Media: Diskette
File cost: $145.00
Period available: FY 1992

    For further information concerning these data tapes, contact Mary 
R. White at (410) 786-0168.
    Commenters interested in obtaining or discussing any other data 
used in constructing this rule should contact Stephen Phillips at (410) 
786-4548.

B. Public Comments

    Because of the large number of items of correspondence we normally 
receive on a proposed rule, we are not able to acknowledge or respond 
to them individually. However, in preparing the final rule, we will 
consider all comments concerning the provisions of this proposed rule 
that we receive by the date and time specified in the ``Dates'' section 
of this preamble and respond to those comments in the preamble to that 
rule. We emphasize that, given the statutory requirement under section 
1886(e)(5) of the Act that our final rule for FY 1998 be published by 
September 1, 1997, we will consider only those comments that deal 
specifically with the matters discussed in this proposed rule. Subject 
to the provisions of the Contract With America Advancement Act of 1996, 
(Pub. L. 104-121), these changes would be applicable to discharges 
occurring on or after October 1, 1997.

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, Reporting and recordkeeping 
requirements.

    42 CFR chapter IV would be 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).

    2. Section 412.22 is amended by adding new paragraphs (e), (f), 
(g), and (h) to read as follows:


Sec. 412.22  Excluded hospitals and hospital units: General rules.

* * * * *
    (e) Hospitals within hospitals. Except as provided in paragraph (f) 
of this section, for cost reporting periods beginning on or after 
October 1, 1994, a hospital that occupies space in a building also used 
by another hospital, or in one or more entire buildings located on the 
same campus as buildings used by another hospital, must meet the 
following criteria:
    (1) Separate governing body. The hospital has a governing body that 
is separate from the governing body of the hospital occupying space in 
the same building or on the same campus. The hospital's governing body 
is not under the control of the hospital occupying space in the same 
building or on the same campus, or of any third entity that controls 
both hospitals.
    (2) Separate chief medical officer. The hospital has a single chief 
medical officer who reports directly to the governing body and who is 
responsible for all medical staff activities of the hospital. The chief 
medical officer of the hospital is not employed by or under contract 
with either the hospital occupying space in the same building or on the 
same campus or any third entity that controls both hospitals.
    (3) Separate medical staff. The hospital has a medical staff that 
is separate from the medical staff of the hospital occupying space in 
the same building or on the same campus. The hospital's medical staff 
is directly accountable to the governing body for the quality of 
medical care provided in the hospital, and adopts and enforces bylaws 
governing medical staff activities, including criteria and procedures 
for recommending to the governing body the privileges to be granted to 
individual practitioners.

[[Page 29942]]

    (4) Chief executive officer. The hospital has a single chief 
executive officer through whom all administrative authority flows, and 
who exercises control and surveillance over all administrative 
activities of the hospital. The chief executive office is not employed 
by, or under contract with, either the hospital occupying space in the 
same building or on the same campus or any third entity that controls 
both hospitals.
    (5) Performance of basic hospital functions. The hospital meets one 
of the following criteria:
    (i) The hospital performs the basic functions specified in 
Secs. 482.21 through 482.27, 482.30, and 482.42 of this chapter through 
the use of employees or under contracts or other agreements with 
entities other than the hospital occupying space in the same building 
or on the same campus, or a third entity that controls both hospitals. 
Food and dietetic services and housekeeping, maintenance, and other 
services necessary to maintain a clean and safe physical environment 
could be obtained under contracts or other agreements with the hospital 
occupying space in the same building or on the same campus, or with a 
third entity that controls both hospitals.
    (ii) For the same period of at least 6 months used to determine 
compliance with the length-of-stay criterion in Sec. 412.23(e)(2), the 
cost of the services that the hospital obtained under contracts or 
other agreements with the hospital occupying space in the same building 
or on the same campus, or with a third entity that controls both 
hospitals, is no more than 15 percent of the hospital's total inpatient 
operating costs, as defined in Sec. 412.2(c). For purposes of this 
paragraph (e)(5)(ii), however, the costs of preadmission services are 
those specified under Sec. 413.40(c)(2) rather than those specified 
under Sec. 412.2(b)(5).
    (iii) For the same period of at least 6 months used to determine 
compliance with the length-of-stay criterion in Sec. 412.23(e)(2), the 
hospital has an inpatient population of whom at least 75 percent were 
referred to the hospital from a source other than another hospital 
occupying space in the same building or on the same campus.
    (f) Special provision for certain hospitals. If a hospital cannot 
meet the criteria in paragraph (e)(1) or (e)(3) of this section solely 
because its governing body or medical staff is under the control of a 
third entity that also controls the hospital with which it shares a 
building or campus, or cannot meet the criteria in paragraph (e)(2) or 
(e)(4) of this section solely because its chief medical officer or 
chief executive officer is employed by or under contract with such a 
third entity, the hospital can nevertheless qualify for an exclusion if 
it meets other applicable criteria and--
    (1) Is owned and operated by a State university, and has been 
continuously owned and operated by that university since October 1, 
1994;
    (2) Is required by State law to be subject to the ultimate 
authority of the university's governing body; and
    (3) Was excluded from the prospective payment systems under this 
section for any cost reporting period beginning on or after October 1, 
1993, but before October 1, 1994.
    (g) Effective date for certain hospitals. If a hospital has been 
excluded from the prospective payment systems under this section for 
any cost reporting period beginning on or after October 1, 1993, but 
before October 1, 1994, the criteria in paragraph (e) of this section 
do not apply to the hospital until the hospital's first cost reporting 
period beginning on or after October 1, 1995.
    (h) Definition of control. For purposes of this section, control 
exists if an individual or an organization has the power, directly or 
indirectly, significantly to influence or direct the actions or 
policies of an organization or institution.


Sec. 412.23  [Amended]

    3. Section 412.23 is amended by removing paragraphs (e)(3) through 
(e)(5).
    4. Section 412.30 is amended by redesignating paragraphs (a) 
through (d) as paragraphs (b) through (e), respectively, and adding a 
new paragraph (a). Redesignated paragraph (b) is further amended by 
redesignating paragraph (b)(4) as paragraph (b)(5), and adding a new 
paragraph (b)(4) to read as follows:


Sec. 412.30  Exclusion of new rehabilitation units and expansion of 
units already excluded.

    (a) Bed capacity in units. A decrease in bed capacity must remain 
in effect for at least a full 12-month cost reporting period before an 
equal or lesser number of beds can be added to the hospital's licensure 
and certification and considered ``new'' under paragraph (b) of this 
section. Thus, when a hospital seeks to establish a new unit under the 
criteria under paragraph (b) of this section, or to enlarge an existing 
unit under the criteria under paragraph (d) of this section, the 
regional office will review its records on the facility to determine 
whether any beds have been delicensed and decertified during the 12-
month cost reporting period before the period for which the hospital 
seeks to add the beds. To the extent bed capacity was removed from the 
hospital's licensure and certification during that period, that amount 
of bed capacity may not be considered ``new'' under paragraph (b) of 
this section.
    (b) New units.
    (5) * * *
* * * * *
    (4) If a hospital that has not previously participated in the 
Medicare program seeks exclusion of a rehabilitation unit, it may 
designate certain beds as a new rehabilitation unit for the first full 
12-month cost reporting period that occurs after it becomes a Medicare-
participating hospital. The written certification described in 
paragraph (b)(2) of this section also is effective for any cost 
reporting period of not less than 1 month and not more than 11 months 
occurring between the date the hospital began participating in Medicare 
and the start of the hospital's regular 12-month cost reporting period.
* * * * *
    5. Section 412.80 is revised to read as follows:


Sec. 412.80  General provisions.

    (a) Basic rule--(1) Discharges occurring on or after October 1, 
1994 and before October 1, 1997. For discharges occurring on or after 
October 1, 1994, and before October 1, 1997, except as provided in 
paragraph (b) of this section concerning transferring hospitals, HCFA 
provides for additional payment, beyond standard DRG payments, to a 
hospital for covered inpatient hospital services furnished to a 
Medicare beneficiary if either of the following conditions is met:
    (i) The beneficiary's length of stay (including days at the SNF 
level of care if a SNF bed is not available in the area) exceeds the 
mean length-of-stay for the applicable DRG by the lesser of the 
following:
    (A) A fixed number of days, as specified by HCFA; or
    (B) A fixed number of standard deviations, as specified by HCFA.
    (ii) The beneficiary's length of stay does not exceed criteria 
established under paragraph (a)(1)(i) of this section, but the 
hospital's charges for covered services furnished to the beneficiary, 
adjusted to operating costs and capital costs by applying cost-to-
charge ratios as described in Sec. 412.84(h), exceed the DRG payment 
for the case plus a fixed dollar amount (adjusted for geographic 
variation in costs) as specified by HCFA.
    (2) Discharges occurring on or after October 1, 1997. For 
discharges occurring on or after October 1, 1997,

[[Page 29943]]

except as provided in paragraph (b) of this section concerning 
transfers, HCFA provides for additional payment, beyond standard DRG 
payments, to a hospital for covered inpatient hospital services 
furnished to a Medicare beneficiary if the hospital's charges for 
covered services, adjusted to operating costs and capital costs by 
applying cost-to-charge ratios as described in Sec. 412.84(h), exceed 
the DRG payment for the case plus a fixed dollar amount (adjusted for 
geographic variation in costs) as specified by HCFA.
    (b) Outlier cases in transferring hospitals. HCFA provides cost 
outlier payments to a transferring hospital that does not receive 
payment under Sec. 412.2(b) for discharges specified in 
Sec. 412.4(d)(2), if the hospital's charges for covered services 
furnished to the beneficiary, adjusted to cost by applying a national 
cost/charge ratio, exceed the DRG payment for the case plus a fixed 
dollar amount (adjusted for geographic variation in costs) as specified 
by HCFA, divided by the geometric mean length of stay for the DRG and 
multiplied by the beneficiary's length of stay plus 1 day.
    (c) Publication and revision of outlier criteria. HCFA will issue 
threshold criteria for determining outlier payment in the annual notice 
of the prospective payment rates published in accordance with 
Sec. 412.8(b).
    (d) Relation to hospitals that incur indirect costs for graduate 
medical education programs and that serve as disproportionate share of 
low-income patients. The outlier payment amounts are included in total 
DRG revenue for purposes of determining payments to hospitals that 
incur indirect costs for graduate medical education programs under 
Sec. 412.105 and to hospitals that serve a disproportionate share of 
low-income patients under Sec. 412.106.


Sec. 412.82  [Amended]

    6. In Sec. 412.82(a), in the first sentence, the word ``If'' is 
removed and the phrase ``For discharges occurring before October 1, 
1997, if'' is added in its place.


Sec. 412.84  [Amended]

    7. In Sec. 412.84 in the first sentence of paragraph (a), the 
reference ``Sec. 412.80(a)(1)(ii)'' is revised to read 
``Sec. 412.80(a)''.


Sec. 412.86  [Amended]

    8. In the introductory text to Sec. 412.86, the word ``If'' is 
removed and the phrase ``For discharges occurring before October 1, 
1997, if'' is added in its place.
    9. In Sec. 412.96, the introductory text of paragraph (c)(1) is 
revised to read as follows:


Sec. 412.96  Special treatment: Referral centers.

* * * * *
    (c) * * *
    (1) Case mix index. HCFA sets forth national and regional case-mix 
index values in each year's annual notice of prospective payment rates 
published under Sec. 412.8(b). The methodology HCFA uses to calculate 
these criteria is described in paragraph (g) of this section. The case-
mix index value to be used for an individual hospital in the 
determination of whether it meets the case-mix index criteria is that 
calculated by HCFA from the hospital's own billing records for Medicare 
discharges as processed by the fiscal intermediary and submitted to 
HCFA. The hospital's case-mix index for discharges (not including 
discharges from units excluded from the prospective payment system 
under subpart B of this part) during the most recent Federal fiscal 
year that ended at least one year prior to the beginning of the cost 
reporting period for which the hospital is seeking referral center 
status must be at least equal to--
* * * * *
    10. In Sec. 412.105, paragraph (g)(1)(i) is republished, paragraph 
(g)(1)(i)(B) is revised, and paragraph (g)(1)(iv) is removed, 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 residents must be enrolled in an approved teaching program. 
An approved teaching program is one that meets one of the following 
requirements:
* * * * *
    (B) May count towards certification of the participant in a 
specialty or subspecialty listed in the current edition of either of 
the following publications:
    (1) The Directory of Graduate Medical Education Programs published 
by the American Medical Association.
    (2) The Annual Report and Reference Handbook published by the 
American Board of Medical Specialties.
* * * * *
    B. Part 413 is amended as set forth below:

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).

    2. In Sec. 413.86, paragraph (e)(4)(i)(B) is revised to read as 
follows:


Sec. 413.86  Direct graduate medical education payments.

* * * * *
    (e) Determining per resident amounts for the base period. * * *
    (4) Exceptions.
    (i) Base period for certain hospitals. * * *
    (B) The mean value of per resident amounts of hospitals located in 
the same geographic wage area, as that term is used in the prospective 
payment system under part 412 of this chapter, for cost reporting 
periods beginning in the same fiscal years. If there are fewer than 
three amounts that can be used to calculate the mean value, the 
calculation of the per resident amounts includes all hospitals in the 
hospital's geographic wage area and in geographically contiguous wage 
areas. If there are still fewer than three hospitals with per resident 
amounts in the hospital's own wage area, plus contiguous wage areas, 
this calculation will include all hospitals with per resident amounts 
in the State. If there are fewer than three hospitals with per resident 
amounts in the State, this calculation will include the per resident 
amounts for all hospitals in the State plus hospitals in contiguous 
States. If there are still fewer than three hospitals in that State 
plus contiguous States, this calculation will be based on the national 
average per resident amount.
* * * * *
    C. Part 489 is amended as set forth below:

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

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

    Authority: Secs. 1102, 1819, 1861, 1864(m), 1866, and 1871 of 
the Social Security Act (42 U.S.C. 1302, 1395i-3, 1395x, 1395aa(m), 
1395cc, and 1395hh).

[[Page 29944]]

Sec. 489.27  [Amended]

    2. In Sec. 489.27, the reference ``section 1886(a)(1)(M) of the 
Act'' is revised to read ``section 1866(a)(1)(M) of the Act''.

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

    Dated: May 1, 1997.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Dated: May 23, 1997.
Donna E. Shalala,
Secretary.

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

Addendum--Proposed Schedule of Standardized Amounts Effective With 
Discharges Occurring on or After October 1, 1997 and Update Factors and 
Rate-of-Increase Percentages Effective With Cost Reporting Periods 
Beginning on or After October 1, 1997

I. Summary and Background

    In this addendum, we are setting forth the proposed amounts and 
factors for determining prospective payment rates for Medicare 
inpatient operating costs and Medicare inpatient capital-related 
costs. We are also setting forth proposed rate-of-increase 
percentages for updating the target amounts for hospitals and 
hospital units excluded from the prospective payment system.
    For discharges occurring on or after October 1, 1997, 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 proposing to make 
changes in the determination of the prospective payment rates for 
Medicare inpatient operating costs. The changes, to be applied 
prospectively, would affect the calculation of the Federal rates. In 
section III, we discuss our proposed changes for determining the 
prospective payment rates for Medicare inpatient capital-related 
costs. Section IV sets forth our proposed changes for determining 
the rate-of-increase limits for hospitals excluded from the 
prospective payment system. The tables to which we refer in the 
preamble to the proposed rule are presented at the end of this 
addendum in section V.

II. Proposed Changes to Prospective Payment Rates for Inpatient 
Operating Costs for FY 1998

    The basic methodology for determining prospective payment rates 
for inpatient operating costs is set forth at Sec. 412.63 for 
hospitals located outside of Puerto Rico. The basic methodology for 
determining the prospective payment rates for inpatient operating 
costs for hospitals located in Puerto Rico is set forth at 
Secs. 412.210 and 412.212. Below, we discuss the manner in which we 
are changing some of the factors used for determining the 
prospective payment rates. The Federal and Puerto Rico rate changes, 
once issued as final, would be effective with discharges occurring 
on or after October 1, 1997. 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 1998.
    In summary, the proposed standardized amounts set forth in 
Tables 1A and 1C of section V of this addendum reflect--
     Updates of 2.8 percent for all areas (that is, the 
market basket percentage increase);
     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 1997 
budget neutrality factor and applying a revised factor;
     An adjustment to apply the revised outlier offset by 
removing the FY 1997 outlier offsets and applying a new offset; and
     An adjustment in the Puerto Rico standardized amounts 
to reflect the application of a Puerto Rico-specific wage index.

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) (B) and (C) of the Act required that the 
base-year per discharge costs be updated for FY 1984 and then 
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.
    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, 1996, when the market 
basket was last revised and rebased, we have considered 71.2 percent 
of costs to be labor-related for purposes of the prospective payment 
system. As discussed in section IV of the preamble, we are proposing 
to include data not available when the market basket was last 
rebased to adjust the market basket effective for FY 1998. Based on 
the proposed revised market basket, we are revising the labor and 
nonlabor proportions of the standardized amounts. Effective with 
discharges occurring on or after October 1, 1997, we are proposing a 
labor-related proportion of 71.1 percent and a nonlabor-related 
proportion of 28.9 percent. (We are revising the Puerto Rico 
standardized amounts by the average labor share in Puerto Rico of 
71.3 percent. We are revising the discharged-weighted national 
standardized amount to reflect the proportion of discharges in large 
urban and other areas from the FY 1996 MedPAR file.)

2. Computing Large Urban and Other Area Averages

    Sections 1886(d) (2)(D) and (3) of the Act require 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 area'' 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) of the Act. Payment for 
discharges from hospitals located in large urban areas will be

[[Page 29945]]

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 1998. These areas are identified by an asterisk in 
Table 4A.

3. Updating the Average Standardized Amounts

    Under section 1886(d)(3)(A) of the Act, we update the area 
average standardized amounts each year. In accordance with section 
1886(d)(3)(A)(iv) of the Act, we are proposing to update the large 
urban and the other areas average standardized amounts for FY 1998 
using the applicable percentage increases specified in section 
1886(b)(3)(B)(i) of the Act. Section 1886(b)(3)(B)(i)(XIII) of the 
Act specifies that, for hospitals in all areas, the update factor 
for the standardized amounts for FY 1998 is equal to the market 
basket percentage increase.
    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 proposed 
revised hospital market basket increase for FY 1998 is 2.8 percent. 
Thus, for FY 1998, the proposed update to the average standardized 
amounts equals 2.8 percent. (See section IV. of the preamble of this 
proposed rule for a discussion of the adjustments to the market 
basket.)
    As in the past, we are adjusting the FY 1997 standardized 
amounts to remove the effects of the FY 1997 geographic 
reclassifications and outlier payments before applying the FY 1998 
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 offsets to the 
standardized amounts for outliers and geographic reclassification, 
we estimate that there will be an overall increase of 2.9 percent to 
the large urban and other area standardized amounts.
    Although the update factor for FY 1998 is set by law, we are 
required by section 1886(e)(3)(B) of the Act to report to Congress 
on our initial recommendation of update factors for FY 1998 for both 
prospective payment hospitals and hospitals excluded from the 
prospective payment system. For general information purposes, we 
have included the report to Congress as Appendix D to this proposed 
rule. Our proposed recommendation on the update factors (which is 
required by sections 1886 (e)(4)(A) and (e)(5)(A) of the Act), as 
well as our responses to ProPAC's recommendation concerning the 
update factor, are set forth as Appendix E to this proposed rule.

4. Other Adjustments to the Average Standardized Amounts

    a. Recalibration of DRG Weights and Updated Wage Index--Budget 
Neutrality Adjustment. Section 1886(d)(4)(C)(iii) of the Act 
specifies that beginning in FY 1991, the annual DRG reclassification 
and recalibration of the relative weights must be made in a manner 
that ensures that aggregate payments to hospitals are not affected. 
As discussed in section II of the preamble, we normalized the 
recalibrated DRG weights by an adjustment factor, so that the 
average case weight after recalibration is equal to the average case 
weight prior to recalibration.
    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 used historical discharge data to simulate payments and 
compared aggregate payments using the FY 1997 relative weights and 
wage index to aggregate payments using the proposed FY 1998 relative 
weights and wage index. The same methodology was used for the FY 
1997 budget neutrality adjustment. (See the discussion in the 
September 1, 1992 final rule (57 FR 39832).) Based on this 
comparison, we computed a budget neutrality adjustment factor equal 
to 0.998400. We adjust the Puerto Rico-specific standardized amounts 
for the effect of DRG reclassification and recalibration. We 
computed a budget neutrality adjustment factor for Puerto Rico-
specific standardized amounts equal to 0.999224. These budget 
neutrality adjustment factors are applied to the standardized 
amounts without removing the effects of the FY 1997 budget 
neutrality adjustments. 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 are proposing to continue to apply the same FY 
1998 adjustment factor to the hospital-specific rates that are 
effective for cost reporting periods beginning on or after October 
1, 1997, 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 1998 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 IME and DSH payments) prior to any 
reclassifications to total prospective payments after 
reclassifications. We are applying an adjustment factor of 0.995127 
to ensure that the effects of reclassification are budget neutral.
    The adjustment factor is applied to the standardized amounts 
after removing the effects of the FY 1997 budget neutrality 
adjustment factor. We note that the proposed FY 1998 adjustment 
reflects wage index and standardized amount reclassifications 
approved by the MGCRB or the Administrator as of February 27, 1997. 
The effects of any additional reclassification changes resulting 
from appeals and reviews of the MGCRB decisions for FY 1998 or from 
a hospital's request for the withdrawal of a reclassification 
request will be reflected in the final budget neutrality adjustment 
required under section 1886(d)(8)(D) of the Act and published in the 
final rule for FY 1998.
    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 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. 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. Proposed FY 1998 Outlier Payment Thresholds. For FY 1997, the 
day outlier threshold is the geometric mean length of stay for each 
DRG plus the lesser of 24 days

[[Page 29946]]

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 33 percent for FY 1997. The fixed loss cost 
outlier threshold is equal to the prospective payment for the DRG 
plus $9,700 ($8,850 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 1997 standardized amounts of 0.948766 
for the large urban and other areas rates and 0.9481 for the capital 
Federal rate.
    As noted above, section 1886(d)(5)(A)(v) of the Act provides 
that payment will not be made for day outliers beginning with 
discharges occurring in FY 1998.
    We are proposing a fixed loss cost outlier threshold in FY 1998 
equal to the prospective payment rate for the DRG plus $7,600 
($6,950 for hospitals that have not yet entered the prospective 
payment system for capital-related costs). In addition, we are 
proposing to maintain the marginal cost factor for cost outliers at 
80 percent.
    In accordance with section 1886(d)(5)(A)(iv) of the Act, we 
calculated proposed 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 proposed FY 1998 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 proposed thresholds for FY 1998 will result in 
outlier payments equal to 5.1 percent of operating DRG payments and 
5.5 percent of capital payments based on the Federal rate.
    The proposed outlier adjustment factors applied to the 
standardized amounts for FY 1998 are as follows:

------------------------------------------------------------------------
                                                              Operating 
                                                            standardized
                                                               amounts  
------------------------------------------------------------------------
National..................................................      0.949117
Puerto Rico...............................................      0.961488
------------------------------------------------------------------------

    (Note: The proposed outlier adjustment factors applied to the 
capital Federal rate are found at section III.A.2. of the Addendum.)

    We would apply the proposed outlier adjustment factors after 
removing the effects of the FY 1997 outlier adjustment factors on 
the standardized amounts.
    ii. Other Changes Concerning Outliers. Table 8A in section V of 
this addendum contains the updated Statewide average operating cost-
to-charge ratios for urban hospitals and for rural hospitals to be 
used in calculating cost outlier payments for those hospitals for 
which the intermediary is unable to compute a reasonable hospital-
specific cost-to-charge ratio. These Statewide average ratios would 
replace the ratios published in the August 30, 1996 final rule (61 
FR 46302), effective October 1, 1997. Table 8B contains comparable 
Statewide average capital cost-to-charge ratios. These average 
ratios would be used to calculate cost outlier payments for those 
hospitals for which the intermediary computes operating cost-to-
charge ratios lower than 0.230118 or greater than 1.30054 and 
capital cost-to-charge ratios lower than 0.01289 or greater than 
0.19057. 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 would be used for all cost reports settled during 
FY 1998 (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 1996 and FY 1997 Outlier Payments. In the August 30, 
1996 final rule (61 FR 46229), we stated that, based on available 
data, we estimated that actual FY 1996 outlier payments would be 
approximately 4.0 percent of actual total DRG payments. This was 
computed by simulating payments using actual FY 1995 bill data 
available at the time. That is, the estimate of actual outlier 
payments did not reflect actual FY 1996 bills but instead reflected 
the application of FY 1996 rates and policies to available FY 1995 
bills. Our current estimate, using available FY 1996 bills, is that 
actual outlier payments for FY 1996 were approximately 4.1 percent 
of actual total DRG payments. We note that the MedPAR file for FY 
1996 discharges continues to be updated.
    We currently estimate that actual outlier payments for FY 1997 
will be approximately 4.9 percent of actual total DRG payments 
(slightly lower than the 5.1 percent we projected in setting outlier 
policies for FY 1997). This estimate is based on simulations using 
the December 1996 update of the provider-specific file and the 
December 1996 update of the FY 1996 MedPAR file (discharge data for 
FY 1996 bills). We used these data to calculate an estimate of the 
actual outlier percentage for FY 1997 by applying FY 1997 rates and 
policies to available FY 1996 bills.
    In FY 1994, we began using a cost inflation factor rather than a 
charge inflation factor to update billed charges for purposes of 
estimating outlier payments. This refinement was made to improve our 
estimation methodology. We believe that actual FY 1996 and FY 1997 
outlier payments as a percentage of total DRG payments may be lower 
than expected in part because actual hospital costs may be lower 
than reflected in the methodology used to set outlier thresholds for 
those years. Our most recent data on hospital costs show that rates 
of increase are continuing to decline. Thus, the cost inflation 
factor of 0.871 percent used to set FY 1996 outlier policy (based on 
the best data then available) appears to have been overstated. For 
FY 1997, we used a cost inflation factor of minus 1.906 percent (a 
cost per case decrease of 1.906 percent). For FY 1998, based on more 
recent data, we are proposing a cost inflation factor of minus 1.969 
percent to set outlier thresholds. We will reevaluate this factor 
when we develop the final rule for FY 1998. At that time, more 
recent data should be available for analysis, specifically, cost 
report data for cost reporting periods beginning in FY 1996.
    Although we estimate that FY 1996 outlier payments will 
approximate 4.1 percent of total DRG payments, we note that the 
estimate of the market basket rate of increase used to set the FY 
1996 rates was 3.5 percentage points, while the latest FY 1996 
market basket rate of increase forecast is 2.7 percent. Thus, the 
net effect is that hospitals received higher FY 1996 payments than 
would have been established based on a more recent forecast of the 
market basket rate of increase.

5. FY 1998 Standardized Amounts

    The adjusted standardized amounts are divided into labor and 
nonlabor portions. Table 1A contains the two national standardized 
amounts that we are proposing be applicable to all hospitals, except 
for hospitals in Puerto Rico. Under section 1886(d)(9)(A)(ii) of the 
Act, the Federal portion of the Puerto Rico payment rate is based on 
the discharge-weighted average of the national large urban 
standardized amount and the national other standardized amount (as 
set forth in Table 1A). The labor and nonlabor portions of the 
national average standardized amounts for Puerto Rico hospitals are 
set forth in Table 1C. This table also includes the Puerto Rico 
standardized amounts.
    The Puerto Rico standardized amounts reflect application of 
Puerto Rico-specific wage index for FY 1998. Thus, before 
application of the wage index, the proposed FY 1998 Puerto Rico 
standardized amounts are lower than the FY 1997 standardized 
amounts. However, after application of the wage index, the FY 1998 
Puerto Rico rate is higher than for FY 1997. This is due to the 
higher Puerto Rico wage index values that will be applied to these 
standardized amounts in calculating the FY 1998 Puerto Rico rate. 
Below, we use two wage areas to illustrate that the proposed FY 1998 
Puerto Rico wage-adjusted standardized amounts are higher than the 
FY 1997 Puerto Rico wage-adjusted standardized amounts.

[[Page 29947]]



                                        Puerto Rico Standardized Amounts                                        
----------------------------------------------------------------------------------------------------------------
                                                              FY 1997                    Proposed FY 1998       
                      Area                       ---------------------------------------------------------------
                                                       Labor         Nonlabor          Labor         Nonlabor   
----------------------------------------------------------------------------------------------------------------
Large Urban.....................................       $2,488.70         $518.65       $1,346.08         $541.83
Other Areas.....................................        2,449.31          510.45        1,324.77          533.25
----------------------------------------------------------------------------------------------------------------


 Puerto Rico Wage Adjusted Standardized Amount for the San Juan MSA and 
                            Rural Puerto Rico                           
------------------------------------------------------------------------
                                                            Proposed FY 
                                              FY 1997          1998     
------------------------------------------------------------------------
San Juan Wage Index.....................          0.4506          1.0273
Wage-Adjusted Standardized Amount.......       $1,640.06       $1,924.66
Rural Wage Index........................          0.4026          0.8732
Wage-Adjusted Standardized Amount.......       $1,496.54       $1,690.04
------------------------------------------------------------------------

B. Adjustments for Area Wage Levels and Cost of Living

    Tables 1A and 1C, as set forth in this addendum, contain the 
proposed labor-related and nonlabor-related shares that would 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. These changes include the 
calculation of a Puerto Rico-specific wage index that would be 
applied to the Puerto Rico standardized amounts. The wage index is 
set forth in Tables 4A through 4F of this addendum.

2. Adjustment for Cost of Living in Alaska and Hawaii

    Section 1886(d)(5)(H) of the Act authorizes an adjustment to 
take into account the unique circumstances of hospitals in Alaska 
and Hawaii. Higher labor-related costs for these two States are 
taken into account in the adjustment for area wages described above. 
For FY 1998, we propose to adjust 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. If the Office of Personnel Management releases 
revised cost-of-living adjustment factors before August 1, 1997, we 
will publish them in the final rule and use them in determining FY 
1998 payments.

 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.............................................     1.225
  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 propose to use for discharges 
occurring in FY 1998. These factors have been recalibrated as 
explained in section II. of the preamble.

D. Calculation of Prospective Payment Rates for FY 1998

General Formula for Calculation of Prospective Payment Rates for FY 
1998

    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, 1997 and before 
October 1, 1998, 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 of 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 of 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 1998. We are

[[Page 29948]]

proposing to increase the hospital-specific rates by 2.8 percent 
(the hospital market basket percentage increase) for sole community 
hospitals located in all areas in FY 1998. 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 1998, is the market basket rate of increase.
    b. Calculation of Hospital-Specific Rate. For sole community 
hospitals, the applicable FY 1998 hospital-specific rate would be 
calculated by multiplying a hospital's hospital-specific rate for 
the preceding fiscal year by the applicable update factor (2.8 
percent), which is the same as the update for all prospective 
payment hospitals. In addition, the hospital-specific rate would be 
adjusted by the budget neutrality adjustment factor (that is, 
0.998400) as discussed in section II.A.4.a of this Addendum. This 
resulting rate would be used in determining under which rate a sole 
community hospital is paid for its discharges beginning on or after 
October 1, 1997, 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, 1997 
and Before October 1, 1998

    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 of section V of the addendum).
    Step 2--Multiply the labor-related portion of the standardized 
amount by the appropriate Puerto Rico-specific wage index (see Table 
4F of 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 of 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 of section V of the 
addendum) by the appropriate national wage index (see Tables 4A and 
4B of section V of the addendum).
    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 of section V of the addendum).
    The sum of the Puerto Rico rate and the national rate computed 
above equals the prospective payment for a given discharge for a 
hospital located in Puerto Rico.

III. Proposed Changes to Payment Rates for Inpatient Capital-Related 
Costs for FY 1998

    The prospective payment system for hospital inpatient capital-
related costs was implemented for cost reporting periods beginning 
on or after October 1, 1991. Effective with that cost reporting 
period and during a 10-year transition period extending through FY 
2001, hospital inpatient capital-related costs are paid on the basis 
of an increasing proportion of the capital prospective payment 
system Federal rate and a decreasing proportion of a 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 proposed 
Federal rate and the hospital-specific rates for FY 1998. The rates 
will be effective for discharges occurring on or after October 1, 
1997.
    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 proportion of outlier 
payments under the Federal rate to total capital payments under the 
Federal rate. In addition, Sec. 412.308(c)(3) requires that the 
Federal rate be reduced by an adjustment factor equal to the 
estimated proportion of payments for exceptions under Sec. 412.348. 
Furthermore, 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 FYs 1992 through 1995, 
Sec. 412.352 required that the Federal rate also be adjusted by a 
budget neutrality factor so that aggregate payments for inpatient 
hospital capital costs were projected to equal 90 percent of the 
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.
    For each hospital, the hospital-specific rate 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. Since FY 1992, the hospital-specific rate 
has been updated annually for inflation and for changes in the 
exceptions payment adjustment factor. For FYs 1992 through 1995, the 
hospital-specific rate was also adjusted by a budget neutrality 
adjustment factor.
    To determine the appropriate budget neutrality adjustment factor 
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 in greater detail 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 is 
comprised of 75 percent of the applicable standardized amount 
specific to Puerto Rico hospitals and 25 percent of the applicable 
national average standardized amount. Section 412.374 provides for 
the use of this blended payment system for payments to Puerto Rico 
hospitals under the prospective payment system for inpatient 
capital-related costs. Accordingly, for capital-related costs we 
compute a separate payment rate specific to Puerto Rico hospitals 
using the same methodology used to compute the national Federal rate 
for capital. Hospitals in Puerto Rico are paid based on 75 percent 
of the Puerto Rico rate and 25 percent of the Federal rate.

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

    For FY 1997, the Federal rate is $438.92. With the changes we 
are proposing to the factors used to establish the Federal rate, the 
proposed FY 1998 Federal rate is $438.43.
    In the discussion that follows, we explain the factors that were 
used to determine the proposed FY 1998 Federal rate. In particular, 
we explain why the FY 1998 Federal rate has decreased 0.11 percent 
compared to the FY 1997 Federal rate. Nevertheless, as explained in 
section VII of Appendix A, capital payments per case are estimated 
to increase 4.68 percent. Taking into account the effects of 
increases in projected discharges, we also estimate that aggregate 
capital payments will increase 7.19 percent.
    The major factor contributing to the decrease in the proposed FY 
1998 rate in comparison to the FY 1997 rate 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 unaffected by changes in the capital prospective 
payments. Since capital payments constitute 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 1998 compared to 
FY 1997. Specifically, we estimate that aggregate payments in FY 
1998 will be 7.19 percent higher than they were in FY 1997. Changes 
in aggregate payments

[[Page 29949]]

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 4.68 percent in FY 1998 compared to FY 1997.
    ProPAC recommends that the rate be adjusted to a more 
appropriate level (Recommendation 3). ProPAC believes that the rate 
is 15 to 17 percent too high and attributes this to overstatement of 
the 1992 base payment rates and the method used to update the rates 
prior to implementation of the update framework. ProPAC notes that 
there are several approaches for adjusting the rate. For example, 
they note that the base capital rates could be replaced by the 
actual rates used in FY 1995, which reflected the budget neutrality 
adjustment, updated to the current year using the update factor.
    We agree with ProPAC that the capital rates are too high. The 
President's FY 1998 budget includes a provision to reduce the base 
Federal and hospital-specific rates by approximately the magnitude 
suggested by ProPAC. This proposal incorporates ProPAC's suggestion 
that the FY 1995 budget neutrality adjustment could be built 
permanently into the rates. As we stated in the final rule for FY 
1997 (61 FR 46216), we continue to believe that it is most 
appropriate to make such adjustments to the capital rates in the 
context of a comprehensive package of Medicare program changes. We 
are, therefore, not proposing to implement this revision to the base 
capital rates by regulation at this time.

1. Standard Federal Rate Update

    a. Description of the Update Framework. Section 412.308(c)(1) 
has provided that the standard Federal rate is updated on the basis 
of 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 (CIPI) and several policy 
adjustment factors. Specifically, we have adjusted the projected 
CIPI rate of increase as appropriate each year for case-mix index 
related changes, for intensity, and for errors in previous CIPI 
forecasts. The proposed update factor for FY 1998 under that 
framework is 1.1 percent. This proposal is based on a projected 1.3 
percent increase in the CIPI, and on policy adjustment factors of 
-0.2. We explain the basis for the FY 1998 CIPI projection in 
section D of this addendum. Here we describe the policy adjustments 
that have been applied.
    The case-mix index 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 case-mix index corresponds to an equal 
percentage increase in hospital payments.
    The case-mix index can change for any of several reasons:
     The average resource use of Medicare patients changes 
(``real'' case-mix change);
     Changes in hospital coding of patient records result in 
higher weight DRG assignments (``coding effects''); and
     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 
case-mix index. 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 case-mix index-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 case-mix index 
adjustment in the capital update framework as well.
    For FY 1998, we are projecting a 1.0 percent increase in the 
case-mix index. We estimate that real case-mix increase will equal 
0.8 percent in FY 1998. Therefore, the proposed net adjustment for 
case-mix change in FY 1998 is -0.2 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. 
We estimate that the FY 1996 CIPI was .20 percentage points higher 
than our current data show, which means that we estimate a forecast 
error of .20 percentage points for FY 1996. Therefore no adjustment 
for forecast error will be made in FY 1998.
    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 1998, 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, 1.7 percent in FY 1995, 
and 1.6 percent in FY 1996. For FY 1992, FY 1995, and FY 1996, 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. Based on this analysis, we believe that all 
of the observed case-mix increase for FY 1993 and FY 1994 is real.
    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

[[Page 29950]]

case-mix. Given estimates of real case-mix increase of 1.0 percent 
for FY 1992, 0.9 percent for FY 1993, 0.8 percent for FY 1994, 1.0 
percent for FY 1995, and 1.0 percent for FY 1996, we estimate that 
case-mix constant intensity declined by an average 1.4 percent 
during FYs 1992 through 1996, for a cumulative decrease of 7.0 
percent. If we assume that real case-mix increase was 1.4 percent 
for FY 1992, 0.9 percent for FY 1993, 0.8 percent for FY 1994, 1.4 
percent for FY 1995, and 1.4 percent for FY 1996, we estimate that 
case-mix constant intensity declined by an average 1.6 percent 
during FYs 1992 through 1996, for a cumulative decrease of 7.5 
percent. Since we estimate that intensity has declined during that 
period, we are recommending a 0.0 percent intensity adjustment for 
FY 1998.
    b. Comparison of HCFA and ProPAC Update Recommendations. ProPAC 
recommends (Recommendation 4) a zero update to the standard Federal 
rate and we have recommended a 1.1 percent update. There are some 
significant differences between the HCFA and ProPAC update 
frameworks, which account for the difference in the respective 
update recommendations. A major difference is the input price index 
which each framework uses as a beginning point to estimate the 
change in input prices since the previous year. The HCFA input price 
index (the CIPI) includes price measures for interest expense, which 
are an indicator of the interest rates facing hospitals during their 
capital purchasing decisions. The ProPAC capital market basket does 
not include interest expense; instead the ProPAC update framework 
includes an adjustment when necessary to account for the prolonged 
changes in interest rates. HCFA's CIPI is vintage-weighted, meaning 
that it takes into account price changes from past purchases of 
capital when determining the current period update. ProPAC's capital 
market basket is not vintage-weighted, accounting only for the 
current year price changes. This year, due to the difference between 
HCFA's and ProPAC's input price index, the percentage change in 
HCFA's CIPI is 1.3 percent, and the percentage change in ProPAC's 
market basket is 2.4 percent.
    ProPAC and HCFA also differ in the adjustments they make to 
their price indices. (See Table 1 for a comparison of HCFA and 
ProPAC's update recommendations.) ProPAC makes an adjustment for 
productivity, while HCFA has not adopted an adjustment for capital 
productivity or efficiency. ProPAC employs the same productivity 
adjustment in its operating and capital framework. We have 
identified a total intensity factor but have not identified an 
adequate total productivity measure. We discuss the differences 
related to the intensity adjustment in section III of Appendix E of 
this proposed rule in our discussion of the operating update 
framework. For FY 1998 ProPAC recommends a -3.0 to a -1.0 
productivity adjustment. We recommend a 0.0 intensity adjustment.
    We recommend a -0.2 total case mix adjustment since we are 
projecting a 1.0 percent increase in the case mix index and we 
estimate that real case-mix increase will equal 0.8 percent in FY 
1998. ProPAC recommends no case mix adjustment. We also discuss the 
differences in these recommendations in section III of Appendix E.
    The net result of these adjustments is that ProPAC's capital 
update framework suggests a -0.2 to a 1.8 percent update. ProPAC has 
recommended a zero update to the rate for FY 1998 because they 
believe that a zero update applied to revised base rates would 
permit hospitals to maintain quality of care while meeting 
Medicare's responsibility to act as a prudent purchaser. We describe 
the basis for our proposed 1.1 percent total update in the preceding 
section.
    The two update recommendations are quite close, with ProPAC 
recommending no update and HCFA recommending a modest one. As stated 
previously, the President's FY 1998 budget contains a provision to 
reduce the rate by 15.7 percent in order to extend the expired 
budget neutrality provision. We believe that legislation is the 
appropriate mechanism for dealing with cutting the rate.

   Table 1.--HCFA's FY 1998 Update Factor and ProPAC's Recommendation   
------------------------------------------------------------------------
                                             HCFA's                     
                                             update         ProPAC's    
                                             factor      recommendation 
------------------------------------------------------------------------
Capital Input Price Index...............          1.3                2.4
Policy Adjustment Factors:                                              
    Productivity........................  ...........       -3.0 to -1.0
    Intensity...........................          0.0  .................
        Science and Technology..........  ...........                0.4
        Intensity.......................  ...........              (\1\)
        Real within DRG Change..........  ...........              (\2\)
                                         -------------------------------
            Subtotal....................          0.0       -2.6 to -0.6
Case-Mix Adjustment Factors:                                            
    Projected Case-Mix Change...........         -1.0  .................
    Real across DRG Change..............          0.8  .................
    Real within DRG Change..............        (\3\)                0.0
                                         -------------------------------
            Subtotal....................         -0.2                0.0
Effect of FY 1996 Reclassification and                                  
 Recalibration..........................          0.0  .................
Forecast Error Correction...............          0.0                0.0
    Total Update........................          1.1       -0.2 to 1.8 
------------------------------------------------------------------------
\1\ Included in ProPAC's productivity measure.                          
\2\ Included in ProPAC's case-mix adjustment.                           
\3\ Included in HCFA's intensity factor.                                

2. Outlier Payment Adjustment Factor

    Section 412.312(c) establishes a unified outlier methodology for 
inpatient operating and inpatient capital-related costs. A single 
set of thresholds is used to identify outlier cases for both 
inpatient operating and inpatient capital-related payments. Outlier 
payments are made only on the portion of the Federal rate that is 
used to calculate the hospital's inpatient capital-related payments 
(for example, 70 percent for cost reporting periods beginning in FY 
1998 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 proportion of outlier payments under the 
Federal rate to total inpatient capital-related payments under the 
Federal rate. The outlier thresholds are set so that operating 
outlier payments are projected to be 5.1 percent of total operating 
DRG payments. The inpatient capital-related outlier reduction factor 
reflects the 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 they were 
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 August 30, 1996 final rule, we estimated that outlier 
payments for capital in FY 1997 would equal 5.19 percent of 
inpatient capital-related payments based on

[[Page 29951]]

the Federal rate. Accordingly, we applied an outlier adjustment 
factor of 0.9481 to the Federal rate. Based on the thresholds as set 
forth in section II.A.4.d of this Addendum, we estimate that outlier 
payments for capital will equal 5.51 percent of inpatient capital-
related payments based on the Federal rate in FY 1998. We are, 
therefore, proposing an outlier adjustment factor of 0.9449 to the 
Federal rate. Thus, estimated capital outlier payments for FY 1998 
represent a higher percentage of total capital standard payments 
than in FY 1997.
    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 proposed net change in the outlier 
adjustment to the Federal rate for FY 1998 is 0.9966 (0.9449/
0.9481). Thus, the outlier adjustment decreases the FY 1998 Federal 
rate by 0.34 percent (0.9966--1) compared with the FY 1997 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 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 GAF are 
projected to equal aggregate payments that would have been made on 
the basis of 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 
GAF. 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 GAF.
    For FY 1997, we calculated a GAF/DRG budget neutrality factor of 
0.9987. For FY 1998, we are proposing a GAF/DRG budget neutrality 
factor of 1.0001. 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 GAF. The proposed incremental 
change in the adjustment from FY 1997 to FY 1998 is 1.0001. The 
proposed cumulative change in the rate due to this adjustment is 
1.0013 (the product of the incremental factors for FY 1993, FY 1994, 
FY 1995, FY 1996, FY 1997 and the proposed incremental factor for FY 
1998: 0.9980 x 1.0053 x 0.9998 x 0.9994 x 0.9987 x 1.0001 = 1.0014).
    This factor accounts for DRG reclassifications and recalibration 
and for changes in the GAF. It also incorporates the effects on the 
GAF of FY 1998 geographic reclassification decisions made by the 
MGCRB compared to FY 1997 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 proportion of additional payments for 
exceptions under Sec. 412.348 relative to total payments under the 
hospital-specific rate and Federal rate. We use the model originally 
developed for determining the budget neutrality adjustment factor to 
determine the exceptions payment adjustment factor. We describe that 
model in Appendix B to this proposed rule.
    For FY 1997, we estimated that exceptions payments would equal 
6.42 percent of aggregate payments based on the Federal rate and the 
hospital-specific rate. Therefore, we applied an exceptions 
reduction factor of 0.9358 (1--0.0642) in determining the Federal 
rate. For this proposed rule, we estimate that exceptions payments 
for FY 1998 will equal 7.24 percent of aggregate payments based on 
the Federal rate and the hospital-specific rate. We are, therefore, 
proposing an exceptions payment reduction factor of 0.9276 to the 
Federal rate for FY 1998.
    The proposed exceptions reduction factor for FY 1998 is thus 
0.88 percent lower than the factor for FY 1997. 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 proposed net adjustment 
to the FY 1998 Federal rate is 0.9276/0.9358, or 0.9912.

5. Standard Capital Federal Rate for FY 1998

    For FY 1997, the capital Federal rate was $438.92. With the 
changes we are proposing to the factors used to establish the 
Federal rate, the FY 1998 Federal rate would be $438.43. The 
proposed Federal rate for FY 1998 was calculated as follows:
     The proposed FY 1998 update factor is 1.0110, that is, 
the proposed update is 1.10 percent.
     The proposed FY 1998 budget neutrality adjustment 
factor that is applied to the standard Federal payment rate for 
changes in the DRG relative weights and in the GAF is 1.0001.
     The proposed FY 1998 outlier adjustment factor is 
0.9449.
     The proposed FY 1998 exceptions payments adjustment 
factor is 0.9276.
    Since the Federal rate has already been adjusted for differences 
in case mix, wages, cost of living, indirect medical education 
costs, and payments to hospitals serving a disproportionate share of 
low-income patients, we propose to make no additional adjustments in 
the standard Federal rate for these factors other than the budget 
neutrality factor for changes in the DRG relative weights and the 
GAF.
    We are providing a chart that shows how each of the factors and 
adjustments for FY 1998 affected the computation of the proposed FY 
1998 Federal rate in comparison to the FY 1997 Federal rate. The 
proposed FY 1998 update factor has the effect of increasing the 
Federal rate by 1.10 percent compared to the rate in FY 1997, while 
the proposed geographic and DRG budget neutrality factor has the 
effect of increasing the Federal rate by 0.01 percent. The proposed 
FY 1998 outlier adjustment factor has the effect of decreasing the 
Federal rate by 0.34 percent compared to FY 1997. The proposed FY 
1998 exceptions reduction factor has the effect of decreasing the 
Federal rate by 0.88 percent compared to the exceptions reduction 
for FY 1997. The combined effect of all the proposed changes is to 
decrease the proposed Federal rate by 0.11 percent compared to the 
Federal rate for FY 1997.

          Comparison of Factors and Adjustments: FY 1997 Federal Rate and Proposed FY 1998 Federal Rate         
----------------------------------------------------------------------------------------------------------------
                                                       FY 97      Proposed FY 98      Change      Percent change
----------------------------------------------------------------------------------------------------------------
Update factor \1\...............................          1.0070          1.0110          1.0110            1.10
GAF/DRG Adjustment Factor \1\...................          0.9987          1.0001          1.0001            0.01
Outlier Adjustment Factor \2\...................          0.9481          0.9449          0.9966           -0.34
Exceptions Adjustment Factor \2\................          0.9358          0.9276          0.9912           -0.88
Federal Rate....................................         $438.92         $438.43          0.9988          -0.11 
----------------------------------------------------------------------------------------------------------------
\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 1997 to FY 1998 resulting from the application of the 1.0001 GAF/DRG  
  budget neutrality factor for FY 1998 is 1.0001.                                                               
\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 1998 outlier reduction factor is 0.9449/0.9481, or 0.9966.    


[[Page 29952]]

6. Special Rate for Puerto Rico Hospitals

    As explained at the beginning of this section, hospitals in 
Puerto Rico are paid based on 75 percent of the Puerto Rico rate and 
25 percent of the Federal rate. The Puerto Rico rate is derived from 
the costs of Puerto Rico hospitals only, while the Federal rate is 
derived from the costs of all acute care hospitals participating in 
the prospective payment system (including Puerto Rico). To adjust 
hospitals' capital payments for geographic variations in capital 
costs, we apply a geographic adjustment factor (GAF) to both 
portions of the blended rate. The GAF is calculated using the 
operating PPS wage index and varies depending on the MSA or rural 
area in which the hospital is located. Since the GAF is based on the 
wage index, we plan to revise the method of accounting for 
geographical variation in Puerto Rico, to parallel the change that 
is being proposed on the operating rate, where a Puerto Rico-
specific wage index is being calculated (section III.B.). 
Specifically, we propose to use the new Puerto Rico wage index to 
determine the GAF for the Puerto Rico part of the capital blended 
rate and retain the use of the national wage index to determine the 
GAF for the national part of the blended rate. Hospitals in Puerto 
Rico would still be paid based on 75 percent of the Puerto Rico rate 
and 25 percent of the Federal rate. This means that, in computing 
the payment for a particular Puerto Rico hospital, the Puerto Rico 
portion of the rate will be multiplied by the Puerto Rico-specific 
GAF for the MSA in which the hospital is located, and the national 
portion of the rate will be multiplied by the national GAF for the 
MSA in which the hospital is located (which is computed from 
national data for all hospitals in the United States and Puerto 
Rico).
    We have adjusted the Puerto Rico rate to account for the 
application of Puerto Rico-specific GAFs. We did this in order to be 
consistent with the method by which we originally determined the 
national and Puerto Rico rates. This resulting standard Puerto Rico 
rate does not translate into a reduction in payments to Puerto Rico 
hospitals. The Puerto Rico-specific GAFs are higher than the 
national GAFs because they use the Puerto Rico mean only rather than 
the national mean. As a result, application of Puerto Rico-specific 
GAFs means Puerto Rico hospitals receive more money.
    For FY 1997, before application of the GAF, the special rate for 
Puerto Rico hospitals was $337.63. With the changes we are proposing 
to the factors used to determine the rate, the proposed FY 1998 
special rate for Puerto Rico is $204.46. After application of the 
GAF, the proposed FY 1998 capital rates for Puerto Rico hospitals 
are higher than the FY 1997 rates.
    The example below is based on the proposed FY 1998 San Juan-
Bayamon GAF and Puerto Rico capital rate in comparison to the final 
FY 1997 San Juan-Bayamon GAF and Puerto Rico capital rate. (For 
purposes of simplicity we have not included all elements involved in 
computing a payment to a particular hospital. For a more complete 
description of calculating the payment for a specific discharge see 
Section C. below. In addition the Puerto Rico rate and GAF would be 
used to compute 75 percent of a Puerto Rico hospital's payment. The 
remaining 25 percent would be based on the national rate and GAF.)

                          San Juan-Bayamon MSA                          
------------------------------------------------------------------------
                                                     FY 1997    Proposed
                                                      final     FY 1998 
------------------------------------------------------------------------
Rate..............................................    $337.63    $204.46
GAF...............................................      .5793     1.0186
Rate X GAF =......................................    $195.59    $208.26
------------------------------------------------------------------------

    The example illustrates that based on the changes we are 
proposing to the FY 1998 Puerto Rico GAF and capital rate, all other 
factors being equal, a hospital in the San Juan-Bayamon MSA would 
receive a larger payment with the proposed FY 1998 capital rate and 
GAF compared with the final FY 1997 capital rate and GAF.

B. Determination of Hospital-Specific Rate Update

    Section 412.328(e) of the regulations provides that the 
hospital-specific rate for FY 1998 be determined by adjusting the FY 
1997 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 1998, we are proposing that the hospital-
specific rate be updated by a factor of 1.0110.

2. Exceptions Payment Adjustment Factor

    For FYs 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 1998, we 
estimate that exceptions payments will be 7.24 percent of aggregate 
payments based on the Federal rate and the hospital-specific rate. 
We therefore propose that the updated hospital-specific rate be 
reduced by a factor of 0.9276. 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 proposed net adjustment to the FY 1998 hospital-
specific rate is 0.9276/0.9358, or 0.9912.

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 1997 and FY 1998 
and the net adjustment for each factor. It also shows that the 
proposed cumulative net adjustment from FY 1997 to FY 1998 is 
1.0021, which represents a proposed increase of 0.21 percent to the 
hospital-specific rate. For each hospital, the proposed FY 1998 
hospital-specific rate is determined by multiplying the FY 1997 
hospital-specific rate by the cumulative net adjustment of 1.0021.

                       Proposed FY 1998 Update and Adjustments to Hospital-Specific Rates                       
----------------------------------------------------------------------------------------------------------------
                                                       FY 97      Proposed FY 98  Net adjustment  Percent change
----------------------------------------------------------------------------------------------------------------
Update Factor...................................          1.0070          1.0110          1.0110            1.10
Exceptions Payment Adjustment Factor............          0.9358          0.9276          0.9912           -0.88
Cumulative Adjustments..........................          0.9424          0.9444          1.0021            0.21
----------------------------------------------------------------------------------------------------------------

    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 1997 to FY 1998 is 1.0110. In 
contrast, the exceptions payment adjustment factor is not applied 
cumulatively. Thus, for example, the incremental increase in the 
exceptions reduction factor from FY 1997 to FY 1998 is 0.9276/
0.9358, or 0.9912.

C. Calculation of Inpatient Capital-Related Prospective Payments 
for FY 1998

    During the capital prospective payment system transition period, 
a hospital is paid for the inpatient capital-related costs under one 
of two alternative payment methodologies; the fully prospective 
payment methodology or the hold-harmless methodology. The payment 
methodology applicable to a particular hospital is determined when a 
hospital comes under the prospective payment system for capital-
related costs by comparing its hospital-specific rate to the Federal 
rate applicable to the hospital's first cost reporting period under 
the prospective payment system.
    The applicable Federal rate was determined by making adjustments 
as follows:
     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 GAF, the disproportionate share 
adjustment factor, and the indirect medical

[[Page 29953]]

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  (GAF)  x  (Large Urban 
Add-on, if applicable) x (COLA adjustment for hospitals located in 
Alaska and Hawaii) x (1+Disproportionate Share Adjustment Factor+IME 
Adjustment Factor, if applicable).

The result is termed the adjusted Federal rate.
    Payments under the hold-harmless methodology are determined 
under one of two formulas. A hold-harmless hospital is paid the 
higher of:
     100 percent of the adjusted Federal rate for each 
discharge; or
     An old capital payment equal to 85 percent (100 percent 
for sole community hospitals) of the hospital's allowable Medicare 
inpatient old capital costs per discharge for the cost reporting 
period plus a new capital payment based on a percentage of the 
adjusted Federal rate for each discharge. The percentage of the 
adjusted Federal rate equals the ratio of the hospital's allowable 
Medicare new capital costs to its total Medicare inpatient capital-
related costs in the cost reporting period.
    Once a hospital receives payment based on 100 percent of the 
adjusted Federal rate in a cost reporting period beginning on or 
after October 1, 1994 (or the first cost reporting period after 
obligated capital that is recognized as old capital under 
Sec. 412.302(c) is put in use for patient care, if later), the 
hospital continues to receive capital prospective payment system 
payments on that basis for the remainder of the transition period.
    Payment for each discharge under the fully prospective 
methodology is the sum of:
     The hospital-specific rate multiplied by the DRG 
relative weight for the discharge and by the applicable hospital-
specific transition blend percentage for the cost reporting period; 
and
     The adjusted Federal rate multiplied by the Federal 
transition blend percentage.
    The blend percentages for cost reporting periods beginning in FY 
1998 are 70 percent of the adjusted Federal rate and 30 percent of 
the hospital-specific rate.
    Hospitals may also receive outlier payments for those cases that 
qualify under the thresholds established for each fiscal year. 
Section 412.312(c) provides for a single set of thresholds to 
identify outlier cases for both inpatient operating and inpatient 
capital-related payments. Outlier payments are made only on that 
portion of the Federal rate that is used to calculate the hospital's 
inpatient capital-related payments. For fully prospective hospitals, 
that portion is 70 percent of the Federal rate for discharges 
occurring in cost reporting periods beginning during FY 1998. Thus, 
a fully prospective hospital will receive 70 percent of the capital-
related outlier payment calculated for the case for discharges 
occurring in cost reporting periods beginning in FY 1998. For hold-
harmless hospitals paid 85 percent of their reasonable costs for old 
inpatient capital, the portion of the Federal rate that is included 
in the hospital's outlier payments is based on the hospital's ratio 
of Medicare inpatient costs for new capital to total Medicare 
inpatient capital costs. For hold-harmless hospitals that are paid 
100 percent of the Federal rate, 100 percent of the Federal rate is 
included in the hospital's outlier payments.
    The proposed outlier thresholds for FY 1998 are published in 
section II.A.4.c of this Addendum. For FY 1998, 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 $7,600.
    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 proposed 
minimum payment levels for portions of cost reporting periods 
occurring in FY 1998 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.

D. Capital Input Price Index

1. Background

    In the following section we explain why we are not proposing to 
revise the Capital Input Price Index (CIPI) as we are the operating 
input price index to incorporate more recent data from Bureau of the 
Census. (This change to the operating price index is described in 
section IV. of the preamble.)
    Like the prospective payment hospital operating input price 
index, the Capital Input Price Index (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 indices, the base period is 
selected and cost category weights are determined using available 
data on hospitals. Next, appropriate price proxy indices 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 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). 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. 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. Currently, both the operating input 
price index and the CIPI are based on FY 1992. They were rebased in 
FY 1997. The process for updating the CIPI was explained in the May 
31, 1996 Federal Register (61 FR 27466) and the August 30, 1996 
Federal Register (61 FR 46196). The following Federal Register 
documents also describe development and

[[Page 29954]]

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)

2. Research on Reweighting the CIPI

    After analyzing various data sources and methodologies for 
determining capital weights for the HCFA PPS CIPI, we propose to 
continue using the weights published in the August 30, 1996 Federal 
Register. In developing the rebased CIPI for the FY 1997 proposed 
and final rules, we stated that we had planned to use the 1992 
Department of Commerce data for developing capital cost category 
weights but the data was not available in time. The data has since 
become available, and although we are planning to use it to revise 
the operating market basket, we are not planning to do so for the 
capital input price index.
    The weights for the 1992 rebased CIPI were developed from the 
1992 Medicare Cost Reports and the 1992 AHA Annual Survey. We 
analyzed the newly available 1992 Census of Service Industries Asset 
and Expenditures Survey from the Bureau of the Census, Department of 
Commerce. There are three major reasons we are proposing to continue 
using the current 1992 HCFA PPS CIPI without modifying the weights 
using the 1992 Asset and Expenditures Survey.
    First, HCFA's preference in determining index weights is to 
continue to use the Medicare Cost Reports for the Medicare subset of 
hospitals (PPS only). Beginning in 1992, detailed capital cost data 
for PPS hospitals was available from the Medicare Cost Reports. This 
data includes depreciation, interest, and other capital-related 
expenses. We used the 1992 AHA Annual Survey as the source for 
interest expenses because of its strength in measuring interest 
compared to the Medicare Cost Reports. All of the other cost 
category weights in the HCFA PPS CIPI were developed from the 1992 
Medicare Cost Reports. Using these two data sources we were able to 
produce weights for PPS hospitals only, as opposed to all nonfederal 
hospitals as reported in the Asset and Expenditures Survey. Because 
this detailed capital data will be available in Medicare Cost 
Reports in future years, we believe the Medicare Cost Reports are 
the most appropriate source for determining the weights in the HCFA 
PPS CIPI.
    The second major reason we are proposing to continue using the 
current HCFA PPS CIPI is that the capital cost shares are similar to 
those provided by the 1992 Asset and Expenditures Survey. The 1992 
Asset and Expenditures Survey reports capital cost shares for 
buildings, structures, and related facilities depreciation (fixed) 
and machinery, equipment, and other depreciation (movable), as well 
as total depreciation as a percentage of total hospital 
``operating'' expenses (operating and capital expenses). Hospital 
expenses in the 1992 Asset and Expenditures Survey are based on 
information collected from a probability sample of both PPS and non-
PPS hospitals. The CIPI weights from the 1992 Medicare Cost Reports 
and the 1992 AHA Annual Survey are based on a universal count of PPS 
hospitals only. Despite these methodological differences, capital 
cost shares as measured by these data sources are similar. 
Specifically, the 1992 Medicare Cost Reports show building and fixed 
equipment depreciation was 46.4 percent of total depreciation and 
movable equipment depreciation was 53.6 percent. The distribution 
for the 1992 Asset and Expenditures Survey was 44.4 percent for 
buildings, structures, and related facilities depreciation and 55.6 
percent for machinery, equipment, and other depreciation. These 
differences are acceptable given the differences in universe and 
methodologies of the two data sources. A simulation of the CIPI 
using each set of weights showed a less than 0.1 percentage point 
impact on the percent change of the CIPI for each year between 1980-
2007.
    Another comparison between cost shares in the Medicare Cost 
Reports and the Asset and Expenditures Survey produced minor 
differences as well. The 1992 Asset and Expenditures Survey shows 
depreciation as a percentage of total ``operating'' expenses 
(operating and capital expenses) of 5.0 percent. A similar 
calculation of PPS hospitals from the 1992 Medicare Cost Reports 
shows depreciation as 5.3 percent of total ``operating'' expenses. 
Given the differences in universe and methodologies between the 
Asset and Expenditure Survey and the Medicare Cost Reports we 
consider this 0.3 percentage point difference to be within the range 
of reasonableness.
    The last major reason for continuing to use the 1992 Medicare 
Cost Reports in determining capital weights for the HCFA PPS CIPI is 
that the detail needed for future rebasing of the index will be 
available from this data source. The 1997 Asset and Expenditures 
Survey, which is being renamed the Business Expenditures survey, 
will not include data on fixed assets, interest expense, and capital 
leases. Also, detail on capital expenditures and depreciation, 
including the breakout of structures and movable equipment, will not 
be part of the 1997 survey. The lack of this detailed capital data 
would create an obstacle to rebasing in the future.
    This survey data is appropriate for use in the operating PPS 
index because it provides operating expense information not 
available from the Medicare cost reports and which will be available 
in the 1997 survey. The Bureau of Census now considers the principal 
source of data on fixed assets and capital expenditures for health 
industries to be the Annual Capital Expenditures Survey, which began 
in 1993. The Annual Capital Expenditures Survey will not include the 
detail needed for determining weights for the CIPI, such as 
depreciation at the hospital level. However, we will continue to 
consider and monitor the Annual Capital Expenditures Survey as a 
possible data source for future rebasing.
    For the three major reasons explained above we are proposing to 
stay with the current HCFA PPS CIPI and to not modify the index 
using the newly available 1992 Asset and Expenditures Survey.

3. Forecast of the CIPI for Federal Fiscal Year 1998

    DRI forecasts a 1.3 percent increase in the CIPI for FY 1998. 
This is the outcome of a projected 2.3 percent increase in vintage-
weighted depreciation prices (building and fixed equipment, and 
movable equipment) and a 3.0 percent increase in other capital 
expense prices in FY 1998, partially offset by a 1.6 percent decline 
in vintage-weighted interest rates in FY 1998. The weighted average 
of these three factors produces the 1.3 percent increase for the 
CIPI as a whole.

IV. Proposed Changes to Payment Rates for Excluded Hospitals and 
Hospital Units: Rate-of-Increase Percentages

    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, 1997 and 
before October 1, 1998, the applicable rate-of-increase percentage 
is the market basket percentage. In order to determine a hospital's 
target amount for its cost reporting period beginning in FY 1998, 
the hospital's target amount for its cost reporting period that 
began in FY 1997 is increased by the market basket percentage 
increase for FY 1998. The most recent forecast of the market basket 
increase for FY 1998 for hospitals and hospital units excluded from 
the prospective payment system is 2.8 percent.

[[Page 29955]]

V. Tables

    This section contains the tables referred to throughout the 
preamble to this proposed rule and in this Addendum. For purposes of 
this proposed rule, and to avoid confusion, we have retained the 
designations of Tables 1 through 5 that were first used in the 
September 1, 1983 initial prospective payment final rule (48 FR 39844). 
Tables 1A, 1C, 1D, 3C, 4A, 4B, 4C, 4D, 4E, 4F, 5, 6A, 6B, 6C, 6D, 6E, 
6F, 7A, 7B, 8A, and 8B 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 1996 and Hospital Average Hourly Wage for Federal Fiscal 
Year 1998 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 4F--Puerto Rico Wage Index and Captial Geographic Adjustment 
Factor (GAF)
Table 5--List of Diagnosis Related Groups (DRGs), Relative Weighting 
Factors, Geometric and Arithmetic Mean Length of Stay.
Table 6A--New Diagnosis Codes
Table 6B--New Procedure Codes
Table 6C--Invalid Diagnosis Codes
Table 6D--Revised Diagnosis Code Titles
Table 6E--Additions to the CC Exclusions List
Table 6F--Deletions to the CC Exclusions List
Table 7A--Medicare Prospective Payment System; Selected Percentile 
Lengths of Stay (FY 96 MEDPAR Update 12/96 GROUPER V14.0)
Table 7B--Medicare Prospective Payment System; Selected Percentile 
Lengths of Stay (FY 96 MEDPAR Update 12/96 GROUPER V15.0)
Table 8A--Statewide Average Operating Cost-to-Charge Ratios [for Urban 
and Rural Hospitals] (Case Weighted) April 1997
Table 8B--Statewide Average Capital Cost-to-Charge Ratios for Urban and 
Rural Hospitals (Case Weighted) April 1997

                   Table 1A.--National Adjusted Operating Standardized Amounts, Labor/Nonlabor                  
----------------------------------------------------------------------------------------------------------------
                    Large urban areas                                           Other areas                     
----------------------------------------------------------------------------------------------------------------
       Labor-related               Nonlabor-related              Labor-related             Nonlabor-related     
----------------------------------------------------------------------------------------------------------------
$2,857.85..................                  $1,161.63                   $2,812.62                   $1,143.24  
----------------------------------------------------------------------------------------------------------------


               Table 1C.--Adjusted Operating Standardized Amounts For Puerto Rico, Labor/Nonlabor               
----------------------------------------------------------------------------------------------------------------
                                                                  Large urban areas            Other areas      
                                                             ---------------------------------------------------
                                                                 Labor       Nonlabor      Labor       Nonlabor 
----------------------------------------------------------------------------------------------------------------
National....................................................    $2,833.30    $1,151.64    $2,833.30    $1,151.64
Puerto Rico.................................................     1,346.08       541.83     1,324.77       533.25
----------------------------------------------------------------------------------------------------------------


            Table 1D.--Capital Standard Federal Payment Rate            
------------------------------------------------------------------------
                                                                 Rate   
------------------------------------------------------------------------
National...................................................      $438.43
Puerto Rico................................................       204.46
------------------------------------------------------------------------


[[Page 29956]]


                 Table 3C.--Hospital Case Mix Indexes for Discharges Occurring in Federal Fiscal Year 1996; Hospital Average Hourly Wage for Federal Fiscal Year 1998 Wage Index                
                                                                                          Page 1 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
010001.......................   01.4816   15.78   010095..........   00.9851   12.06   030004.........   01.0965   13.75   040002.........   01.1972   12.84   040107.........   01.2002   15.29
010004.......................   00.9673   11.63   010097..........   00.9083   14.47   030006.........   01.5609   18.02   040003.........   01.0142   12.72   040109.........   01.1817   13.56
010005.......................   01.2080   15.57   010098..........   01.2511   11.65   030007.........   01.3217   16.96   040004.........   01.6321   15.84   040114.........   01.8843   17.60
010006.......................   01.4488   15.81   010099..........   01.1678   14.38   030008.........   02.3039   19.75   040005.........   01.0108   12.83   040116.........   01.3793   19.05
010007.......................   01.0717   13.52   010100..........   01.2630   15.26   030009.........   01.3451   16.25   040007.........   01.8418   17.91   040118.........   01.2192   14.54
010008.......................   01.1631   12.11   010101..........   01.0605   14.05   030010.........   01.4365   17.79   040008.........   01.0326   11.22   040119.........   01.1562   14.58
010009.......................   01.1280   15.17   010102..........   01.0060   13.60   030011.........   01.5199   18.32   040010.........   01.3163   15.80   040124.........   01.1377   13.82
010010.......................   01.0749   14.78   010103..........   01.8573   18.70   030012.........   01.2362   16.41   040011.........   00.9931   10.85   040126.........   00.9510   11.98
010011.......................   01.6404   19.62   010104..........   01.7047   18.20   030013.........   01.2703   19.56   040014.........   01.1907   16.40   040132.........   00.5050   11.69
010012.......................   01.3067   16.65   010108..........   01.2350   14.48   030014.........   01.4912   18.50   040015.........   01.2905   13.52   050002.........   01.5782   35.29
010015.......................   01.0958   13.70   010109..........   01.1090   13.36   030016.........   01.2444   17.47   040016.........   01.6623   16.02   050006.........   01.4562   19.54
010016.......................   01.2774   16.88   010110..........   01.0535   14.12   030017.........   01.5058   18.11   040017.........   01.3308   11.89   050007.........   01.6175   27.21
010018.......................   00.9336   16.77   010112..........   01.1875   15.28   030018.........   01.8046   19.31   040018.........   01.2282   18.03   050008.........   01.5162   26.68
010019.......................   01.3220   14.52   010113..........   01.6944   15.80   030019.........   01.2816   19.75   040019.........   01.1372   13.94   050009.........   01.7341   29.57
010021.......................   01.2458   15.75   010114..........   01.3221   16.45   030022.........   01.4807   15.25   040020.........   01.6074   15.06   050013.........   01.8298   21.70
010022.......................   01.0181   17.25   010115..........   00.8522   12.02   030023.........   01.3285   18.26   040021.........   01.2537   14.96   050014.........   01.1688   22.16
010023.......................   01.6504   15.43   010117..........   00.8712   13.59   030024.........   01.7123   20.56   040022.........   01.6764   14.96   050015.........   01.3865   23.94
010024.......................   01.4635   15.95   010118..........   01.3322   18.41   030025.........   01.1326   14.24   040024.........   01.0654   14.26   050016.........   01.1635   17.87
010025.......................   01.4620   13.24   010119..........   00.9593   18.53   030027.........   01.0596   15.39   040025.........   00.9155   12.38   050017.........   02.0494   25.36
010027.......................   00.8288   14.12   010120..........   00.9722   15.39   030030.........   01.7325   18.21   040026.........   01.6071   16.65   050018.........   01.3046   20.37
010029.......................   01.5715   15.54   010121..........   01.3081   15.80   030033.........   01.2195   15.72   040027.........   01.2929   12.96   050021.........   01.5263   25.59
010031.......................   01.2306   15.57   010123..........   01.3122   15.81   030034.........   01.0042   15.05   040028.........   01.0932   11.93   050022.........   01.5026   23.58
010032.......................   00.9618   12.86   010124..........   01.3739   13.53   030035.........   01.2767   18.82   040029.........   01.2899   15.78   050024.........   01.2995   21.10
010033.......................   01.9459   17.26   010125..........   01.0064   15.83   030036.........   01.1913   18.51   040030.........   00.9480   11.36   050025.........   01.6853   21.84
010034.......................   01.0864   12.64   010126..........   01.1851   14.11   030037.........   02.0991   19.86   040032.........   00.9572   10.60   050026.........   01.4624   28.03
010035.......................   01.2549   15.94   010127..........   01.3443   16.36   030038.........   01.6421   18.39   040035.........   00.9651   10.26   050028.........   01.3776   15.43
010036.......................   01.1249   16.08   010128..........   01.0020   12.39   030040.........   01.1481   16.07   040036.........   01.5225   17.87   050029.........   01.4317   22.42
010038.......................   01.3209   17.78   010129..........   01.0948   14.62   030041.........   00.9799   13.77   040037.........   01.1133   11.92   050030.........   01.3242   20.23
010039.......................   01.6825   17.26   010130..........   01.0351   14.47   030043.........   01.2510   17.86   040039.........   01.2290   13.00   050032.........   01.2355   26.01
010040.......................   01.5937   18.14   010131..........   01.3336   18.57   030044.........   01.0839   16.15   040040.........   00.9725   14.02   050033.........   01.4509   26.08
010043.......................   01.1350   10.75   010134..........   00.8545   09.70   030046.........   00.9632   18.53   040041.........   01.3625   15.91   050036.........   01.6816   19.57
010044.......................   01.1641   14.54   010137..........   01.2902   16.93   030047.........   00.9383   20.45   040042.........   01.2370   14.76   050038.........   01.4549   28.87
010045.......................   01.1886   13.05   010138..........   00.9275   10.96   030049.........   00.9881   14.67   040044.........   01.0305   11.22   050039.........   01.6191   21.51
010046.......................   01.5217   16.79   010139..........   01.6895   19.60   030054.........   00.8543   12.51   040045.........   01.0233   15.07   050040.........   01.2696   22.01
010047.......................   00.9803   10.30   010143..........   01.2914   16.04   030055.........   01.2187   16.56   040047.........   01.1375   15.13   050042.........   01.3519   20.78
010049.......................   01.1619   14.77   010144..........   01.3019   16.49   030059.........   01.3916   18.88   040048.........   01.1836   14.02   050043.........   01.6119   30.35
010050.......................   01.1203   13.88   010145..........   01.3030   15.59   030060.........   01.1395   16.21   040050.........   01.1609   12.27   050045.........   01.2819   18.28
010051.......................   00.8551   09.93   010146..........   01.1732   15.81   030061.........   01.6802   17.13   040051.........   01.1004   13.76   050046.........   01.2703   21.20
010052.......................   01.0499   09.88   010148..........   01.0017   12.52   030062.........   01.2660   15.94   040053.........   01.1198   13.04   050047.........   01.5698   31.60
010053.......................   01.0792   13.31   010149..........   01.3645   16.73   030064.........   01.7579   18.53   040054.........   01.0614   12.44   050051.........   01.0469   17.04
010054.......................   01.2098   17.02   010150..........   01.1036   16.28   030065.........   01.7255   19.65   040055.........   01.4708   15.29   050054.........   01.2054   20.60
010055.......................   01.4421   16.99   010152..........   01.4914   17.56   030067.........   01.0541   15.78   040058.........   01.0292   13.64   050055.........   01.4035   27.81
010056.......................   01.4314   18.78   010155..........   01.0479   06.99   030068.........   01.0721   15.77   040060.........   00.9858   10.20   050056.........   01.3667   29.73
010058.......................   01.0865   12.93   020001..........   01.5659   26.31   030069.........   01.3277   20.13   040062.........   01.6837   15.85   050057.........   01.5598   19.64
010059.......................   01.1118   14.92   020002..........   01.2468   23.88   030071.........   00.9685  .......  040064.........   01.0588   11.19   050058.........   01.4525   21.47
010061.......................   01.1872   15.20   020004..........   01.1123   25.46   030072.........   00.8385  .......  040066.........   01.2238   15.86   050060.........   01.5314   20.46
010062.......................   01.0345   14.36   020005..........   00.8208   25.53   030073.........   01.0067  .......  040067.........   01.0916   12.18   050061.........   01.4666   21.87
010064.......................   01.7943   18.52   020006..........   01.2547   25.07   030074.........   00.8781  .......  040069.........   01.1556   14.87   050063.........   01.3998   21.02
010065.......................   01.3457   15.39   020007..........   01.0349   22.76   030075.........   00.8559  .......  040070.........   00.9325   13.68   050065.........   01.6382   22.84
010066.......................   00.9485   10.41   020008..........   01.1378   29.10   030076.........   01.1098  .......  040071.........   01.6792   15.73   050066.........   01.2676   20.99
010068.......................   01.3084   16.70   020009..........   00.9842   21.88   030077.........   00.8398  .......  040072.........   01.0978   13.94   050067.........   01.3721   21.53
010069.......................   01.1900   13.10   020010..........   01.0900   26.44   030078.........   01.1353  .......  040074.........   01.3194   14.39   050068.........   01.0664   18.92
010072.......................   01.2155   13.45   020011..........   00.9844   22.61   030079.........   00.8800  .......  040075.........   01.1179   11.73   050069.........   01.6450   24.14
010073.......................   01.0213   10.31   020012..........   01.2438   24.23   030080.........   01.5975   21.05   040076.........   01.0526   16.33   050070.........   01.2820   33.06
010078.......................   01.2760   16.51   020013..........   01.0503   24.21   030083.........   01.3152   21.06   040077.........   00.9257   11.30   050071.........   01.3290   32.76
010079.......................   01.2562   15.43   020014..........   01.1749   22.13   030084.........   01.0320  .......  040078.........   01.5605   17.77   050072.........   01.3209   32.63
010080.......................   01.0102   11.89   020017..........   01.6705   24.50   030085.........   01.5592   23.63   040080.........   01.1210   14.65   050073.........   01.3310   32.63
010081.......................   01.8549   14.84   020018..........   00.7773  .......  030086.........   01.3315   18.01   040081.........   00.9561   10.75   050074.........   01.3610   38.56
010083.......................   01.0100   15.43   020019..........   00.7868  .......  030087.........   01.6332   18.93   040082.........   01.1568   14.31   050075.........   01.3928   32.75
010084.......................   01.4845   17.66   020020..........   00.7727  .......  030088.........   01.4131   19.07   040084.........   01.1207   14.18   050076.........   01.8220   32.11
010085.......................   01.2689   17.11   020021..........   00.9217  .......  030089.........   01.5795   19.68   040085.........   01.1916   14.81   050077.........   01.5826   22.86
010086.......................   01.0829   13.70   020024..........   01.0856   23.72   030092.........   01.6107   20.36   040088.........   01.4006   14.36   050078.........   01.2964   24.76
010087.......................   01.8442   18.51   020025..........   00.9808   24.32   030093.........   01.4071   17.81   040090.........   00.9231   13.54   050079.........   01.5662   29.34
010089.......................   01.2639   15.60   020026..........   01.3114  .......  030094.........   01.3476   18.46   040091.........   01.2636   19.81   050080.........   01.3940   20.59
010090.......................   01.5840   17.57   020027..........   01.0992  .......  030095.........   01.1396   18.24   040093.........   01.0221   10.11   050081.........   01.7055   22.17
010091.......................   01.0096   14.57   030001..........   01.3338   20.07   030098.........   00.9581  .......  040100.........   01.3213   13.29   050082.........   01.5543   21.60
010092.......................   01.4078   16.49   030002..........   01.8051   21.04   030099.........   00.9322  .......  040105.........   01.0263   13.29   050084.........   01.6775   23.55
010094.......................   01.2357   15.11   030003..........   01.9788   20.23   040001.........   01.1189   12.95   040106.........   01.2177   14.08   050088.........   01.0368   23.02
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[[Page 29957]]


                                                                                          Page 2 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
050089.......................   01.4270   20.50   050188..........   01.3814   26.59   050298.........   01.2566   21.05   050421.........   01.3715   24.84   050546.........   00.7841   22.14
050090.......................   01.2899   23.06   050189..........   01.0628   21.87   050299.........   01.3557   22.62   050423.........   01.0305   19.52   050547.........   00.8692   21.94
050091.......................   01.1899   22.02   050191..........   01.4973   20.99   050300.........   01.3977   22.60   050424.........   01.8000   22.86   050549.........   01.7307   25.79
050092.......................   00.9919   15.98   050192..........   01.1874   18.17   050301.........   01.3383   22.43   050425.........   01.3230   33.00   050550.........   01.5796   23.60
050093.......................   01.5661   23.33   050193..........   01.3126   23.13   050302.........   01.3709   27.57   050426.........   01.3336   15.00   050551.........   01.3057   24.63
050095.......................   00.7794   29.00   050194..........   01.2784   28.01   050305.........   01.5728   30.80   050427.........   00.8401   17.79   050552.........   01.2447   21.99
050096.......................   01.3114   19.75   050195..........   01.6021   32.79   050307.........   01.3612   21.59   050430.........   00.8449   17.06   050557.........   01.5644   21.58
050097.......................   01.4624   18.53   050196..........   01.4108   17.33   050308.........   01.5171   28.30   050431.........   01.0903   19.94   050559.........   01.4051   24.92
050099.......................   01.4748   23.23   050197..........   01.8369   28.44   050309.........   01.3657   24.67   050432.........   01.6711   24.04   050560.........   01.4220  ......
050100.......................   01.7332   28.66   050204..........   01.4986   24.18   050310.........   01.2224   19.66   050433.........   01.1020   17.37   050561.........   01.1900   32.17
050101.......................   01.4316   28.42   050205..........   01.3796   17.74   050312.........   01.9978   24.02   050434.........   01.2094   20.09   050564.........   01.1456   17.84
050102.......................   01.4300   18.79   050207..........   01.2951   20.37   050313.........   01.2181   21.97   050435.........   01.2977   23.02   050565.........   01.1278   21.68
050103.......................   01.6336   26.99   050208..........   00.9009   28.83   050315.........   01.2135   19.97   050436.........   00.9672   14.81   050566.........   00.9102   23.47
050104.......................   01.5240   22.61   050211..........   01.3135   30.44   050317.........   01.3276   18.92   050438.........   01.7527   25.46   050567.........   01.6176   24.19
050107.......................   01.4804   20.75   050213..........   01.5230   21.12   050320.........   01.2950   27.83   050440.........   01.3228   21.46   050568.........   01.3603   19.64
050108.......................   01.7167   21.54   050214..........   01.4986   20.90   050324.........   01.9039   25.52   050441.........   01.9990   28.23   050569.........   01.3434   23.05
050109.......................   02.4142   24.01   050215..........   01.5369   28.12   050325.........   01.2371   21.42   050443.........   00.9281   16.07   050570.........   01.7731   23.41
050110.......................   01.3001   19.33   050217..........   01.3369   20.45   050327.........   01.5881   22.32   050444.........   01.3847   23.82   050571.........   01.4455   22.36
050111.......................   01.3067   19.39   050219..........   01.1287   20.76   050328.........   01.5403   30.01   050446.........   00.9652   21.02   050573.........   01.6557   23.85
050112.......................   01.5378   24.56   050222..........   01.5800   32.40   050329.........   01.3530   22.38   050447.........   01.1539   19.37   050575.........   01.2038  ......
050113.......................   01.3294   29.69   050224..........   01.6083   22.29   050331.........   01.4116   26.07   050448.........   01.2603   20.75   050577.........   01.4073   19.70
050114.......................   01.4974   20.53   050225..........   01.4961   20.34   050333.........   01.1134   19.36   050449.........   01.3295   20.38   050578.........   01.2091   24.65
050115.......................   01.5820   20.21   050226..........   01.3728   23.58   050334.........   01.7827   31.52   050454.........   01.8485   27.56   050579.........   01.5011   27.75
050116.......................   01.4915   23.17   050228..........   01.3595   27.09   050335.........   01.4150   21.78   050455.........   01.8798   21.07   050580.........   01.3781   26.95
050117.......................   01.3267   20.76   050230..........   01.2951   25.94   050336.........   01.4130   20.42   050456.........   01.1970   20.18   050581.........   01.3780   24.80
050118.......................   01.2333   23.37   050231..........   01.6985   24.69   050337.........   01.1495  .......  050457.........   01.9703   28.16   050583.........   01.6354   23.49
050121.......................   01.3937   19.17   050232..........   01.7553   25.52   050342.........   01.3623   18.03   050459.........   01.2277   28.95   050584.........   01.3226   19.70
050122.......................   01.6961   25.77   050233..........   01.2032   27.97   050343.........   01.0670   16.57   050464.........   01.8576   23.28   050585.........   01.3155   25.79
050124.......................   01.2423   19.10   050234..........   01.3174   22.79   050348.........   01.6714   23.57   050468.........   01.4960   16.95   050586.........   01.3724   21.47
050125.......................   01.3763   27.26   050235..........   01.6109   27.60   050349.........   00.9553   14.75   050469.........   01.1143   18.34   050588.........   01.3158   27.41
050126.......................   01.4878   23.86   050236..........   01.4932   23.47   050350.........   01.3648   23.74   050470.........   01.1174   18.14   050589.........   01.3257   24.78
050127.......................   01.3437   23.71   050238..........   01.5338   22.98   050351.........   01.4728   25.95   050471.........   01.8590   22.75   050590.........   01.4087   23.26
050128.......................   01.6436   23.71   050239..........   01.5382   23.40   050352.........   01.3239   24.08   050476.........   01.3723   21.89   050591.........   01.3400   24.97
050129.......................   01.6051   21.10   050240..........   01.4190   25.28   050353.........   01.6095   24.23   050477.........   01.5035   30.71   050592.........   01.3555   10.96
050131.......................   01.2869   30.45   050241..........   01.1960   25.59   050355.........   00.9765   14.97   050478.........   00.9902   20.58   050593.........   01.2968   29.77
050132.......................   01.3955   24.69   050242..........   01.4397   28.77   050357.........   01.6573   22.99   050481.........   01.4393   25.47   050594.........   01.7813   24.64
050133.......................   01.3425   21.73   050243..........   01.5606   20.95   050359.........   01.3035   19.88   050482.........   00.9919   17.87   050597.........   01.2725   22.40
050135.......................   01.4336   26.20   050245..........   01.4468   22.03   050360.........   01.4611   31.81   050483.........   01.2206   22.32   050598.........   01.3740   28.26
050136.......................   01.3719   29.32   050248..........   01.2339   24.55   050366.........   01.4397   20.59   050485.........   01.6234   22.39   050599.........   01.6928   23.22
050137.......................   01.4283   33.54   050251..........   01.0786   18.41   050367.........   01.2671   27.02   050486.........   01.4114   24.19   050601.........   01.5776   28.97
050138.......................   01.8936   33.14   050253..........   00.4249   18.80   050369.........   01.3266   23.77   050488.........   01.3891   29.71   050603.........   01.4318   20.95
050139.......................   01.3165   32.31   050254..........   01.1859   20.57   050373.........   01.4503   23.73   050491.........   01.2715   24.39   050604.........   01.5600   32.65
050140.......................   01.3987   31.70   050256..........   01.7909   19.46   050376.........   01.5219   29.05   050492.........   01.3803   21.96   050607.........   01.1803   21.26
050144.......................   01.6121   25.92   050257..........   01.1417   21.76   050377.........   01.0124   16.26   050494.........   01.3433   24.67   050608.........   01.3295   18.75
050145.......................   01.3641   30.22   050260..........   00.9856   19.43   050378.........   01.1789   21.42   050496.........   01.7109   32.54   050609.........   01.4415   33.78
050146.......................   01.3641  .......  050261..........   01.2236   18.54   050379.........   01.2054   16.93   050497.........   00.7910  .......  050613.........   01.1557   19.90
050147.......................   00.7180   22.54   050262..........   01.9911   26.95   050380.........   01.6584   29.85   050498.........   01.2855   22.93   050615.........   01.6609   25.67
050148.......................   01.0787   19.07   050264..........   01.4171   28.04   050382.........   01.4257   22.15   050502.........   01.6392   21.94   050616.........   01.3575   21.21
050149.......................   01.4959   22.14   050267..........   01.6375   27.72   050385.........   01.3302   23.94   050503.........   01.3527   23.35   050618.........   01.1704   20.05
050150.......................   01.2339   22.69   050270..........   01.3328   22.02   050388.........   00.9225   18.08   050506.........   01.3768   24.66   050623.........   01.1288   23.78
050152.......................   01.4212   25.51   050272..........   01.3318   20.79   050390.........   01.2320   22.09   050510.........   01.3484   32.12   050624.........   01.3772   22.51
050153.......................   01.6647   27.98   050274..........   00.9872   19.47   050391.........   01.3468   23.34   050512.........   01.5363   33.56   050625.........   01.6035   25.18
050155.......................   01.1114   25.69   050276..........   01.1317   26.93   050392.........   01.0001   18.23   050515.........   01.3442   31.82   050630.........   01.4327   21.18
050158.......................   01.3645   25.37   050277..........   01.5093   19.57   050393.........   01.4457   23.72   050516.........   01.5803   24.92   050633.........   01.2943   21.92
050159.......................   01.3879   21.88   050278..........   01.6159   22.89   050394.........   01.6193   20.12   050517.........   01.3033   20.14   050635.........   01.3173   32.77
050167.......................   01.2549   22.00   050279..........   01.2261   21.00   050396.........   01.6130   22.02   050522.........   01.3420   31.46   050636.........   01.4701   22.13
050168.......................   01.5423   23.71   050280..........   01.6858   24.62   050397.........   01.0483   18.22   050523.........   01.3228   29.32   050638.........   01.0334   19.35
050169.......................   01.5157   21.82   050281..........   01.4700   15.36   050401.........   01.1322   19.06   050526.........   01.3239   24.45   050641.........   01.1904   18.27
050170.......................   01.5731   21.33   050282..........   01.3631   23.18   050404.........   01.1013   16.60   050528.........   01.3543   21.06   050643.........   00.7614  ......
050172.......................   01.2439   18.44   050283..........   01.1133   26.91   050406.........   01.0326   15.92   050531.........   01.1911   20.24   050644.........   00.8962   22.79
050173.......................   01.3510   20.24   050286..........   00.9424   17.82   050407.........   01.3244   28.37   050534.........   01.4107   24.32   050660.........   01.3534  ......
050174.......................   01.6347   29.60   050289..........   01.8865   26.67   050410.........   01.0841   16.71   050535.........   01.4621   22.87   050661.........   00.8437   20.15
050175.......................   01.3595   27.08   050290..........   01.6523   20.42   050411.........   01.3695   31.16   050537.........   01.2746   21.53   050662.........   00.8828   22.31
050177.......................   01.2512   20.35   050291..........   01.2337   25.51   050414.........   01.3022   24.60   050539.........   01.2842   22.25   050663.........   01.1210   25.63
050179.......................   01.3096   19.55   050292..........   01.0680   21.76   050417.........   01.3212   21.54   050541.........   01.5481   32.88   050666.........   00.8825   20.95
050180.......................   01.6205   30.28   050293..........   01.1601   18.95   050418.........   01.3206   22.71   050542.........   01.2260   14.92   050667.........   00.9872   24.80
050183.......................   01.1407   20.36   050295..........   01.4637   21.39   050419.........   01.3491   20.46   050543.........   00.9027   21.76   050668.........   01.1151   28.90
050186.......................   01.3286   23.83   050296..........   01.2014   22.43   050420.........   01.5295   23.03   050545.........   00.7731   21.20   050670.........   00.8073  ......
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 29958]]


                                                                                          Page 3 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
050674.......................   01.2954   30.71   060047..........   01.1034   11.84   080004.........   01.3341   18.52   100071.........   01.3325   16.21   100167.........   01.4623   19.21
050675.......................   01.8399   17.60   060049..........   01.4757   17.92   080005.........   01.3296   18.53   100072.........   01.3143   16.55   100168.........   01.3935   20.23
050676.......................   00.9699   14.37   060050..........   01.2723   14.36   080006.........   01.3738   19.73   100073.........   01.7698   21.99   100169.........   01.8560   16.01
050677.......................   01.4370   34.53   060052..........   01.1001   13.04   080007.........   01.4058   17.29   100075.........   01.5932   18.14   100170.........   01.4614   16.86
050678.......................   01.1080   24.44   060053..........   01.0018   14.81   090001.........   01.5364   21.36   100076.........   01.3528   16.80   100172.........   01.3770   13.93
050680.......................   01.2311   26.19   060054..........   01.3927   17.69   090002.........   01.3037   19.74   100077.........   01.4090   15.42   100173.........   01.6803   16.87
050682.......................   00.8934   15.55   060056..........   00.9289   14.05   090003.........   01.3498   23.25   100078.........   01.1911   16.86   100174.........   01.5814   20.80
050684.......................   01.2017   21.85   060057..........   01.0787   21.47   090004.........   01.8148   23.95   100079.........   01.6046   20.49   100175.........   01.2544   16.65
050685.......................   01.2131   28.69   060058..........   00.9425   13.87   090005.........   01.3491   17.58   100080.........   01.6282   23.98   100176.........   02.1176   22.94
050686.......................   01.3182   32.30   060060..........   00.8513   12.53   090006.........   01.3510   19.70   100081.........   01.0520   17.93   100177.........   01.3700   18.76
050688.......................   01.2694   27.87   060062..........   00.9321   14.11   090007.........   01.2584   20.10   100082.........   01.4548   17.52   100179.........   01.6364   19.38
050689.......................   01.3900   29.96   060063..........   00.9561   11.82   090008.........   01.5315   23.59   100083.........   01.3327   17.98   100180.........   01.3695   19.01
050690.......................   01.5039   32.26   060064..........   01.4618   20.71   090010.........   01.1727   22.39   100084.........   01.4579   18.10   100181.........   01.2703   19.10
050693.......................   01.6237   28.58   060065..........   01.3182   14.86   090011.........   01.9773   24.55   100085.........   01.4195   18.83   100183.........   01.3921   19.62
050694.......................   01.5207   22.78   060066..........   00.9712   12.79   090015.........   01.1274  .......  100086.........   01.3141   22.05   100187.........   01.4035   18.31
050695.......................   01.1018   25.42   060068..........   01.1354   13.46   100001.........   01.5673   18.08   100087.........   01.8739   21.91   100189.........   01.4259   20.87
050696.......................   02.1043   28.17   060070..........   01.0209   16.03   100002.........   01.4874   19.11   100088.........   01.7311   17.43   100191.........   01.3112   18.63
050697.......................   01.2505   18.05   060071..........   01.2358   14.39   100004.........   01.0671   13.13   100090.........   01.4104   16.46   100199.........   01.4317   18.30
050698.......................   00.8012  .......  060073..........   00.9705   15.25   100006.........   01.6470   19.01   100092.........   01.4498   16.27   100200.........   01.3445   22.72
050699.......................   00.6001   23.01   060075..........   01.3273   21.20   100007.........   01.8747   19.21   100093.........   01.5386   15.36   100203.........   01.3411   19.70
050700.......................   01.4896   32.32   060076..........   01.4849   13.62   100008.........   01.7746   20.00   100098.........   01.1597   18.36   100204.........   01.6738   20.97
050701.......................   01.3527   29.00   060085..........   00.9510   10.30   100009.........   01.5014   19.22   100099.........   01.2979   13.12   100206.........   01.4404   19.98
050702.......................   00.9243   19.02   060087..........   01.7036   21.04   100010.........   01.5354   22.50   100102.........   01.0888   17.62   100207.........   01.0774   20.37
050704.......................   01.0827   20.41   060088..........   01.0237   13.86   100012.........   01.6869   15.28   100103.........   01.0707   15.41   100208.........   01.5797   16.92
050707.......................   01.0506   25.90   060090..........   00.8707   14.19   100014.........   01.4598   18.79   100105.........   01.4627   18.87   100209.........   01.6114   18.40
050708.......................   00.9840   27.17   060096..........   01.0806   21.65   100015.........   01.3417   18.06   100106.........   01.1273   16.92   100210.........   01.6360   19.34
050709.......................   01.3181   20.44   060100..........   01.4796   21.75   100017.........   01.5577   16.86   100107.........   01.4057   18.26   100211.........   01.3500   18.47
050710.......................   01.3371  .......  060103..........   01.3605   22.66   100018.........   01.3518   20.31   100108.........   01.0616   13.74   100212.........   01.6492   18.75
050711.......................   02.0879  .......  060104..........   01.2898   21.84   100019.........   01.5364   18.40   100109.........   01.3631   18.44   100213.........   01.5701   18.46
050712.......................   01.5251  .......  060107..........   01.0436  .......  100020.........   01.3436   20.82   100110.........   01.4229   16.99   100217.........   01.2964  ......
050713.......................   00.8063  .......  070001..........   01.7262   26.42   100022.........   01.8721   23.14   100112.........   01.0127   12.61   100220.........   01.9442   18.82
050714.......................   01.3703  .......  070002..........   01.7806   26.03   100023.........   01.3697   16.89   100113.........   02.1202   19.34   100221.........   01.6958   19.65
050715.......................   02.2781  .......  070003..........   01.1168   25.30   100024.........   01.4016   19.26   100114.........   01.4427   19.70   100222.........   01.4041   18.63
060001.......................   01.5984   20.29   070004..........   01.2524   23.33   100025.........   01.8800   16.92   100117.........   01.3105   18.77   100223.........   01.4932   16.45
060003.......................   01.2655   18.34   070005..........   01.4032   25.79   100026.........   01.7148   16.88   100118.........   01.2401   17.18   100224.........   01.4284   21.35
060004.......................   01.3542   20.06   070006..........   01.3358   28.36   100027.........   00.9139   14.31   100121.........   01.3113   15.75   100225.........   01.4062   20.63
060006.......................   01.1546   16.89   070007..........   01.4037   23.69   100028.........   01.2619   17.30   100122.........   01.3634   16.54   100226.........   01.4159   18.07
060007.......................   01.2449   14.98   070008..........   01.2639   23.02   100029.........   01.3393   19.04   100124.........   01.3671   18.33   100228.........   01.3737   20.28
060008.......................   01.0674   14.75   070009..........   01.3504   23.68   100030.........   01.4017   18.54   100125.........   01.3002   16.50   100229.........   01.3309   16.98
060009.......................   01.4335   19.81   070010..........   01.6217   23.63   100032.........   01.9242   18.08   100126.........   01.4880   19.41   100230.........   01.4372   15.90
060010.......................   01.5793   21.74   070011..........   01.3434   25.98   100034.........   01.7166   18.88   100127.........   01.6988   18.39   100231.........   01.6893   16.90
060011.......................   01.2307   20.17   070012..........   01.2220   23.53   100035.........   01.6482   17.26   100128.........   02.1378   21.19   100232.........   01.2861   18.29
060012.......................   01.4715   17.66   070013..........   01.3776   26.05   100038.........   01.5648   21.34   100129.........   01.2621   17.91   100234.........   01.5404   19.22
060013.......................   01.3133   19.42   070015..........   01.4373   24.61   100039.........   01.5732   21.69   100130.........   01.2312   19.48   100235.........   01.4464   18.19
060014.......................   01.7955   22.41   070016..........   01.3392   24.32   100040.........   01.6729   17.79   100131.........   01.3970   19.68   100236.........   01.4010   18.22
060015.......................   01.5779   20.04   070017..........   01.3520   24.82   100043.........   01.4528   15.07   100132.........   01.3756   15.46   100237.........   02.1842   21.32
060016.......................   01.1926   13.66   070018..........   01.4167   27.48   100044.........   01.4332   19.66   100134.........   01.0399   14.63   100238.........   01.5887   16.14
060018.......................   01.2616   16.68   070019..........   01.1970   25.50   100045.........   01.4239   16.32   100135.........   01.6195   16.63   100239.........   01.4591   19.01
060020.......................   01.6409   14.96   070020..........   01.3560   25.82   100046.........   01.4950   18.40   100137.........   01.3807   21.08   100240.........   00.9283   19.10
060022.......................   01.6775   18.46   070021..........   01.2941   25.42   100047.........   01.8196   18.47   100138.........   00.9561   12.12   100241.........   00.9737   13.68
060023.......................   01.6634   15.59   070022..........   01.8463   24.06   100048.........   00.9771   12.80   100139.........   01.0680   14.97   100242.........   01.4962   16.47
060024.......................   01.7967   23.68   070024..........   01.3761   24.79   100049.........   01.3198   18.49   100140.........   01.1669   17.64   100243.........   01.4282   17.93
060027.......................   01.6756   20.38   070025..........   01.8566   25.92   100050.........   01.2296   15.21   100142.........   01.3324   18.12   100244.........   01.4739   18.36
060028.......................   01.5305   20.69   070026..........   01.1905   25.91   100051.........   01.1793   17.96   100144.........   01.2104   15.29   100246.........   01.4073   20.33
060029.......................   00.9064   11.90   070027..........   01.2373   25.65   100052.........   01.3796   15.15   100145.........   01.3341   19.01   100248.........   01.7055   17.76
060030.......................   01.2935   18.79   070028..........   01.5062   24.91   100053.........   01.3598   17.17   100146.........   01.0783   16.01   100249.........   01.3764   19.46
060031.......................   01.6877   18.97   070029..........   01.4135   22.06   100054.........   01.2986   18.00   100147.........   01.0937   13.18   100252.........   01.2389   19.72
060032.......................   01.5162   17.36   070030..........   01.3100   26.51   100055.........   01.4205   17.02   100150.........   01.4297   19.30   100253.........   01.4813   19.73
060033.......................   01.1006   12.53   070031..........   01.2796   22.20   100056.........   01.5140   18.89   100151.........   01.7801   19.37   100254.........   01.6127   17.99
060034.......................   01.4657   22.34   070033..........   01.3636   26.22   100057.........   01.3902   16.01   100154.........   01.6729   19.96   100255.........   01.2334   19.80
060036.......................   01.0976   14.70   070034..........   01.3693   27.52   100060.........   01.8124   16.57   100156.........   01.1557   19.34   100256.........   01.9105   18.54
060037.......................   01.0476   13.16   070035..........   01.4415   23.11   100061.........   01.4729   20.71   100157.........   01.6173   20.46   100258.........   01.6459   21.27
060038.......................   01.0356   12.96   070036..........   01.6087   27.46   100062.........   01.7513   17.75   100159.........   00.9174   12.79   100259.........   01.4894   17.21
060041.......................   00.9054   14.99   070038..........   00.6569  .......  100063.........   01.3311   16.56   100160.........   01.2252   18.48   100260.........   01.4652   18.18
060042.......................   01.1308   16.83   070039..........   00.9118  .......  100067.........   01.4572   16.77   100161.........   01.7302   20.07   100262.........   01.4437   18.87
060043.......................   00.9450   13.31   080001..........   01.6693   24.79   100068.........   01.3737   16.37   100162.........   01.4419   17.78   100263.........   01.4108   17.42
060044.......................   01.2748   16.98   080002..........   01.2468   17.15   100069.........   01.3912   17.95   100165.........   01.1801   17.55   100264.........   01.3963   17.27
060046.......................   01.0985   16.64   080003..........   01.3453   20.79   100070.........   01.4493   18.13   100166.........   01.5356   20.44   100265.........   01.3893   14.57
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                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
100266.......................   01.3543   16.53   110066..........   01.5373   18.78   110163.........   01.4677   18.54   130010.........   00.9218   15.97   140045.........   01.0701   13.11
100267.......................   01.3514   15.67   110069..........   01.2620   17.45   110164.........   01.4743   19.38   130011.........   01.3019   17.11   140046.........   01.3156   14.84
100268.......................   01.2084   23.23   110070..........   01.0204   12.19   110165.........   01.3629   18.35   130012.........   01.0249   20.53   140047.........   01.1477   14.21
100269.......................   01.4373   19.39   110071..........   01.1790   10.43   110166.........   01.5340   17.45   130013.........   01.2660   17.73   140048.........   01.4300   22.08
100270.......................   00.8331   14.31   110072..........   01.0020   12.37   110168.........   01.7276   21.92   130014.........   01.3861   16.50   140049.........   01.5619   20.48
100271.......................   01.7336   20.00   110073..........   01.2235   13.04   110169.........   01.1751   21.80   130015.........   00.8553   13.50   140051.........   01.5442   19.42
100275.......................   01.4056   21.30   110074..........   01.4581   18.47   110171.........   01.4776   23.10   130016.........   00.9448   17.37   140052.........   01.3719   18.11
100276.......................   01.3013   22.26   110075..........   01.3606   15.50   110172.........   01.4150   19.98   130017.........   01.1906   12.16   140053.........   01.9805   18.04
100277.......................   01.0705   13.03   110076..........   01.4330   18.51   110174.........   00.9635   13.19   130018.........   01.7039   17.05   140054.........   01.3509   24.77
100279.......................   01.3599   18.73   110078..........   01.7041   20.66   110176.........   01.4679   20.47   130019.........   01.1199   14.30   140055.........   01.0282   12.61
100280.......................   01.3737   16.76   110079..........   01.3878   19.53   110177.........   01.5641   26.95   130021.........   01.0063   11.89   140058.........   01.2459   15.74
100281.......................   01.2632   20.52   110080..........   01.2776   18.15   110178.........   01.4847   17.04   130022.........   01.2181   16.88   140059.........   01.1721   13.96
100282.......................   01.1209   14.86   110082..........   02.0374   20.53   110179.........   01.2260   21.81   130024.........   01.1046   16.52   140061.........   01.0962   14.14
110001.......................   01.3058   17.26   110083..........   01.7844   20.63   110181.........   00.9761   12.32   130025.........   01.0914   14.90   140062.........   01.2671   25.30
110002.......................   01.3046   15.75   110086..........   01.2415   16.50   110183.........   01.4246   19.97   130026.........   01.1239   17.95   140063.........   01.4646   24.56
110003.......................   01.3363   12.66   110087..........   01.3388   19.53   110184.........   01.2673   18.82   130027.........   00.9775   17.34   140064.........   01.3532   17.02
110004.......................   01.3702   14.62   110088..........   00.9425   12.52   110185.........   01.1239   12.44   130028.........   01.2678   18.86   140065.........   01.5856   23.89
110005.......................   01.1514   19.77   110089..........   01.2376   16.07   110186.........   01.3833   16.69   130029.........   01.0342   15.77   140066.........   01.3043   14.92
110006.......................   01.3756   17.90   110091..........   01.3391   20.01   110187.........   01.3434   18.27   130030.........   00.9961   17.62   140067.........   01.7847   18.79
110007.......................   01.5428   15.29   110092..........   01.1754   12.84   110188.........   01.4308   18.16   130031.........   01.0830   12.21   140068.........   01.2187   18.58
110008.......................   01.3479   16.25   110093..........   00.9511   12.42   110189.........   01.1175   18.39   130034.........   00.9851   17.80   140069.........   01.0051   14.69
110009.......................   00.9912   13.65   110094..........   01.0069   11.90   110190.........   01.1013   14.95   130035.........   01.0837   19.75   140070.........   01.2390   17.12
110010.......................   02.1120   21.49   110095..........   01.3192   14.45   110191.........   01.3753   18.34   130036.........   01.3057   13.11   140074.........   00.9695   14.23
110011.......................   01.2439   16.73   110096..........   01.1454   13.95   110192.........   01.4536   18.88   130037.........   01.1830   16.09   140075.........   01.4767   18.16
110013.......................   01.1025   14.97   110097..........   01.0230   13.43   110193.........   01.2409   17.43   130043.........   01.0042   15.45   140077.........   01.1605   16.68
110014.......................   01.0251   14.25   110098..........   01.0549   12.75   110194.........   01.0103   13.81   130044.........   01.1615   12.49   140079.........   01.2434   19.72
110015.......................   01.2373   16.42   110100..........   01.0948   12.76   110195.........   01.0547   11.35   130045.........   01.0107   12.07   140080.........   01.6408   21.22
110016.......................   01.3073   14.79   110101..........   01.1688   11.58   110198.........   01.3706   24.04   130048.........   01.0862   13.31   140081.........   01.0883   13.46
110017.......................   00.8645   13.54   110103..........   00.9623   10.15   110200.........   01.8308   17.05   130049.........   01.2816   18.00   140082.........   01.4304   19.59
110018.......................   01.1509   17.79   110104..........   01.0884   14.01   110201.........   01.5058   17.52   130054.........   00.8937   17.61   140083.........   01.2423   17.22
110020.......................   01.3489   16.21   110105..........   01.1793   14.60   110203.........   00.9981   16.30   130056.........   00.8623   11.05   140084.........   01.2287   18.60
110023.......................   01.3467   18.43   110107..........   01.8204   18.50   110204.........   00.8066   14.34   130058.........   00.7980   14.21   140086.........   01.0844   14.36
110024.......................   01.4873   15.86   110108..........   00.9459   11.26   110205.........   01.1262   17.06   130060.........   01.3289   19.41   140087.........   01.3932   16.15
110025.......................   01.4274   17.54   110109..........   01.0965   13.22   110207.........   01.0879   14.02   130061.........   00.9433  .......  140088.........   01.6631   24.52
110026.......................   01.2118   14.59   110111..........   01.0973   16.55   110208.........   00.9425   16.97   140001.........   01.2830   14.89   140089.........   01.2551   16.59
110027.......................   01.0878   13.41   110112..........   01.0848   19.36   110209.........   00.7485   16.39   140002.........   01.3158   18.78   140090.........   01.5315   27.83
110028.......................   01.6494   19.36   110113..........   01.0936   12.40   110211.........   00.8833  .......  140003.........   01.0172   14.52   140091.........   01.8017   17.27
110029.......................   01.4094   18.29   110114..........   01.0742   14.35   110212.........   01.1701  .......  140004.........   01.1085   16.34   140093.........   01.2049   17.01
110030.......................   01.3314   17.58   110115..........   01.6026   18.83   110213.........   00.5511  .......  140005.........   00.9613   09.56   140094.........   01.3951   19.46
110031.......................   01.3083   19.99   110118..........   00.9744   13.49   120001.........   01.8187   25.27   140007.........   01.4808   21.10   140095.........   01.3952   20.09
110032.......................   01.2678   12.68   110120..........   01.0246   12.28   120002.........   01.1919   21.80   140008.........   01.5798   19.43   140097.........   00.9670   12.49
110033.......................   01.4341   19.79   110121..........   01.2022   12.83   120003.........   00.9988   22.69   140010.........   01.3776   22.90   140100.........   01.2499   18.78
110034.......................   01.6158   17.89   110122..........   01.3880   15.07   120004.........   01.2650   21.72   140011.........   01.1965   16.24   140101.........   01.2224   18.49
110035.......................   01.4328   20.02   110124..........   01.0850   15.63   120005.........   01.2505   18.94   140012.........   01.2713   18.60   140102.........   01.1118   14.37
110036.......................   01.6901   18.85   110125..........   01.2330   15.97   120006.........   01.3095   24.62   140013.........   01.5804   15.59   140103.........   01.3585   16.25
110037.......................   01.1697   11.02   110127..........   00.9362   18.26   120007.........   01.6730   20.90   140014.........   01.1703   16.36   140105.........   01.3031   20.28
110038.......................   01.4654   15.98   110128..........   01.1824   19.01   120009.........   01.0345   20.40   140015.........   01.2864   14.20   140107.........   01.0708   11.82
110039.......................   01.3778   18.62   110129..........   01.7854   15.69   120010.........   01.8705   22.71   140016.........   00.9579   11.89   140108.........   01.3575   21.81
110040.......................   01.1216   15.52   110130..........   01.1667   11.11   120011.........   01.2427   31.56   140018.........   01.4000   19.38   140109.........   01.1766   13.08
110041.......................   01.2723   15.82   110132..........   01.1264   12.99   120012.........   00.9018   20.20   140019.........   01.1706   12.65   140110.........   01.1931   17.31
110042.......................   01.2740   14.90   110134..........   00.8904   12.19   120014.........   01.4446   22.59   140024.........   01.0067   13.99   140112.........   01.2240   13.42
110043.......................   01.7886   16.83   110135..........   01.2960   14.04   120015.........   00.9683   22.77   140025.........   01.0618   16.65   140113.........   01.5112   17.90
110044.......................   01.1491   14.51   110136..........   01.1904   17.74   120016.........   00.8833   24.58   140026.........   01.2848   15.90   140114.........   01.3527   19.55
110045.......................   01.3219   21.18   110140..........   01.0308   16.75   120018.........   00.9540   20.92   140027.........   01.3401   16.37   140115.........   01.3235   19.66
110046.......................   01.3498   17.14   110141..........   00.9566   12.29   120019.........   01.2393   19.16   140029.........   01.3537   21.43   140116.........   01.3021   20.98
110048.......................   01.3678   13.59   110142..........   00.9492   11.78   120021.........   00.9401   18.74   140030.........   01.8105   21.56   140117.........   01.5387   20.42
110049.......................   01.1275   14.58   110143..........   01.4530   20.77   120022.........   01.7012   20.74   140031.........   01.2692   13.76   140118.........   01.6525   23.74
110050.......................   01.2031   13.35   110144..........   01.1556   17.41   120026.........   01.2605   24.26   140032.........   01.2649   16.71   140119.........   01.7173   23.27
110051.......................   01.0351   16.68   110146..........   01.1397   15.09   120027.........   01.5865   23.43   140033.........   01.2696   19.82   140120.........   01.4595   15.45
110052.......................   01.1211   10.83   110149..........   01.1585   17.31   120028.........   01.0161  .......  140034.........   01.1737   17.31   140121.........   01.5411   11.54
110054.......................   01.3426   16.74   110150..........   01.3211   17.62   130001.........   01.0074   15.75   140035.........   00.9195   11.22   140122.........   01.6593   21.47
110056.......................   01.1733   14.40   110152..........   01.1023   14.44   130002.........   01.4327   15.30   140036.........   01.2057   16.60   140124.........   01.2337   23.81
110059.......................   01.3170   13.38   110153..........   01.0180   17.19   130003.........   01.3671   19.28   140037.........   01.1044   12.49   140125.........   01.3616   15.71
110061.......................   01.0750   12.61   110154..........   00.8218   13.98   130005.........   01.5290   19.49   140038.........   01.1781   16.23   140127.........   01.3910   17.45
110062.......................   00.8945   10.97   110155..........   01.0541   13.62   130006.........   01.8432   17.59   140040.........   01.2866   14.72   140128.........   01.1137   14.92
110063.......................   01.1481   12.76   110156..........   01.0382   12.34   130007.........   01.6299   18.20   140041.........   01.3305   16.02   140129.........   01.2232   14.94
110064.......................   01.3361   17.46   110161..........   01.3274   21.00   130008.........   01.0035   11.00   140042.........   01.0146   14.16   140130.........   01.3672   21.74
110065.......................   01.0387   13.40   110162..........   00.7936  .......  130009.........   00.9623   10.74   140043.........   01.2329   17.04   140132.........   01.4410   19.03
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                                                                                          Page 5 of 16                                                                                          
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                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
140133.......................   01.3400   21.21   140231..........   01.5870   20.80   150044.........   01.2616   18.32   150128.........   01.2192   19.14   160074.........   01.0986   14.30
140135.......................   01.3070   14.91   140233..........   01.7833   18.47   150045.........   01.1013   15.68   150129.........   01.2359   22.47   160075.........   01.1442   13.73
140137.......................   01.0581   14.58   140234..........   01.2879   16.47   150046.........   01.5287   15.90   150130.........   01.3560   16.61   160076.........   01.0721   15.50
140138.......................   00.9783   12.15   140236..........   00.9655   13.24   150047.........   01.5605   22.77   150132.........   01.4103   19.24   160077.........   01.1832   10.60
140139.......................   01.1368   14.70   140239..........   01.6835   18.73   150048.........   01.2059   16.52   150133.........   01.2128   14.12   160079.........   01.4062   16.28
140140.......................   01.1377   13.06   140240..........   01.4846   20.44   150049.........   01.1576   13.29   150134.........   01.1751   17.17   160080.........   01.2016   16.06
140141.......................   01.2472   13.84   140242..........   01.6315   21.68   150050.........   01.2017   14.73   150136.........   01.0663   18.42   160081.........   01.0645   14.77
140143.......................   01.1457   16.54   140245..........   01.1638   14.66   150051.........   01.4787   18.34   150138.........   01.2073   17.33   160082.........   01.8251   16.81
140144.......................   01.0257   17.83   140246..........   01.0831   12.05   150052.........   01.1501   14.14   150139.........   01.4731   14.62   160083.........   01.6764   18.37
140145.......................   01.1812   15.14   140250..........   01.3778   21.98   150053.........   01.0493   18.10   160001.........   01.2878   17.61   160085.........   01.0834   11.50
140146.......................   01.0443   16.38   140251..........   01.3828   19.16   150054.........   01.1551   12.55   160002.........   01.1687   13.74   160086.........   00.9998   13.93
140147.......................   01.2805   16.29   140252..........   01.4489   23.41   150056.........   01.7685   22.38   160003.........   01.0196   12.61   160088.........   01.1633   12.63
140148.......................   01.8467   17.11   140253..........   01.4151   17.49   150057.........   02.3203   18.94   160005.........   01.1311   13.80   160089.........   01.1878   14.80
140150.......................   01.6206   25.55   140258..........   01.5776   20.93   150058.........   01.7210   19.57   160007.........   01.0312   12.37   160090.........   00.9814   15.58
140151.......................   01.1093   16.64   140271..........   01.0919   13.06   150059.........   01.4075   19.81   160008.........   01.1302   13.78   160091.........   01.0794   10.80
140152.......................   01.1163   22.91   140275..........   01.2383   16.50   150060.........   01.1786   14.93   160009.........   01.2377   13.73   160092.........   01.0801   13.23
140155.......................   01.2995   16.96   140276..........   01.9625   21.37   150061.........   01.2371   15.73   160012.........   01.0291   13.15   160093.........   01.1951   13.86
140158.......................   01.3072   21.36   140280..........   01.3139   17.16   150062.........   01.1015   16.55   160013.........   01.2292   15.35   160094.........   01.1253   14.17
140160.......................   01.2239   15.93   140281..........   01.6445   20.89   150063.........   01.0944   17.57   160014.........   01.0153   12.59   160095.........   01.0906   12.79
140161.......................   01.2177   17.76   140285..........   01.2804   15.37   150064.........   01.2152   15.84   160016.........   01.2509   16.32   160097.........   01.1359   13.00
140162.......................   01.7534   17.96   140286..........   01.1234   17.93   150065.........   01.1597   18.49   160018.........   00.9242   13.27   160098.........   00.9679   14.70
140164.......................   01.3867   17.44   140288..........   01.8467   23.17   150066.........   00.9997   15.93   160020.........   01.0709   12.38   160099.........   00.9646   11.69
140165.......................   01.1387   12.90   140289..........   01.3203   15.75   150067.........   01.1300   15.48   160021.........   01.0687   13.57   160101.........   01.1660   18.64
140166.......................   01.3636   17.21   140290..........   01.4618   20.95   150069.........   01.2618   16.90   160023.........   01.0402   12.35   160102.........   01.3899   17.51
140167.......................   01.1291   14.97   140291..........   01.4050   22.95   150070.........   01.0287   18.09   160024.........   01.5249   16.77   160103.........   01.0446   13.57
140168.......................   01.1873   15.57   140292..........   01.1495   20.63   150071.........   01.1161   13.86   160026.........   01.0600   14.43   160104.........   01.3168   17.37
140170.......................   01.1138   12.53   140294..........   01.1852   16.20   150072.........   01.2073   15.48   160027.........   01.1589   13.19   160106.........   01.0593   14.03
140171.......................   00.9150   13.87   140297..........   01.5631   27.06   150073.........   01.0115   19.47   160028.........   01.3379   17.39   160107.........   01.1798   14.12
140172.......................   01.6113   18.71   140300..........   01.4454   18.71   150074.........   01.5934   18.80   160029.........   01.5125   18.14   160108.........   01.2054   14.95
140173.......................   00.9277   13.77   150001..........   01.1133   17.36   150075.........   01.1691   14.49   160030.........   01.3826   17.37   160109.........   01.0404   12.35
140174.......................   01.5699   18.33   150002..........   01.5414   18.35   150076.........   01.2161   20.39   160031.........   01.1167   13.37   160110.........   01.5247   17.97
140176.......................   01.3078   21.33   150003..........   01.7125   19.57   150077.........   01.1793   16.58   160032.........   01.0998   15.56   160111.........   01.0180   11.04
140177.......................   01.1662   16.52   150004..........   01.4341   19.97   150078.........   01.0763   15.66   160033.........   01.7830   16.80   160112.........   01.4226   15.00
140179.......................   01.3202   20.12   150005..........   01.1919   18.43   150079.........   01.1320   13.96   160034.........   01.2076   14.53   160113.........   01.0012   12.03
140180.......................   01.5077   21.03   150006..........   01.2247   17.31   150082.........   01.5096   17.44   160035.........   01.0372   12.57   160114.........   01.0662   14.21
140181.......................   01.3839   19.20   150007..........   01.2098   17.98   150084.........   01.8769   22.28   160036.........   00.9736   14.66   160115.........   01.0262   14.32
140182.......................   01.3671   20.67   150008..........   01.3547   20.70   150086.........   01.3257   16.45   160037.........   01.1645   15.14   160116.........   01.1796   15.68
140184.......................   01.2548   14.26   150009..........   01.3733   17.26   150088.........   01.3481   17.20   160039.........   01.0816   15.84   160117.........   01.4541   15.96
140185.......................   01.4162   16.78   150010..........   01.1830   15.87   150089.........   01.4270   18.39   160040.........   01.3227   16.30   160118.........   01.0209   13.15
140186.......................   01.3504   17.74   150011..........   01.2275   17.83   150090.........   01.2518   18.72   160041.........   01.0845   13.45   160120.........   01.0221   10.62
140187.......................   01.4914   16.54   150012..........   01.6921   21.01   150091.........   01.1366   15.75   160043.........   01.0364   13.44   160122.........   01.1309   16.24
140188.......................   01.0421   10.77   150013..........   01.1237   13.90   150092.........   01.0316   15.04   160044.........   01.3189   13.86   160123.........   01.0588   13.19
140189.......................   01.1944   16.64   150014..........   01.5046   19.79   150094.........   01.0077   16.85   160045.........   01.7635   17.72   160124.........   01.2795   15.87
140190.......................   01.1407   15.99   150015..........   01.2149   18.14   150095.........   01.1046   17.97   160046.........   01.0030   12.75   160126.........   01.0158   13.59
140191.......................   01.4516   21.87   150017..........   01.8590   17.20   150096.........   01.1653   17.34   160047.........   01.3670   15.37   160129.........   01.0246   13.75
140193.......................   01.0427   13.31   150018..........   01.2907   18.23   150097.........   01.1390   17.09   160048.........   01.0373   11.54   160130.........   01.1767   13.02
140197.......................   01.2638   16.96   150019..........   01.1001   15.47   150098.........   01.1528   13.03   160049.........   00.9469   12.21   160131.........   01.0519   13.55
140199.......................   01.1019   15.72   150020..........   01.1480   12.96   150099.........   01.2917   17.79   160050.........   01.0771   14.64   160134.........   01.0526   11.84
140200.......................   01.4726   21.79   150021..........   01.6365   18.34   150100.........   01.7156   17.65   160051.........   00.9637   13.54   160135.........   01.0985   13.67
140202.......................   01.3552   19.71   150022..........   01.0915   16.65   150101.........   01.1103   14.50   160052.........   01.0883   14.79   160138.........   01.1359   14.36
140203.......................   01.1613   19.32   150023..........   01.5060   18.19   150102.........   01.0408   14.93   160054.........   01.0719   12.37   160140.........   01.1723   14.75
140205.......................   00.8789   13.64   150024..........   01.4332   15.82   150103.........   01.0084   15.02   160055.........   00.9789   12.37   160142.........   01.0866   13.98
140206.......................   01.0990   20.81   150025..........   01.3792   17.57   150104.........   01.0962   15.63   160056.........   01.0863   13.11   160143.........   01.0288   14.24
140207.......................   01.3958   19.86   150026..........   01.1848   18.29   150105.........   01.3476   16.20   160057.........   01.3468   15.91   160145.........   01.1210   14.16
140208.......................   01.6902   24.07   150027..........   01.0464   15.55   150106.........   01.0814   16.06   160058.........   01.7356   19.00   160146.........   01.4325   14.59
140209.......................   01.6613   15.85   150029..........   01.3153   20.17   150109.........   01.4622   16.85   160060.........   01.0454   13.44   160147.........   01.3032   16.09
140210.......................   01.1163   14.00   150030..........   01.2106   16.69   150110.........   00.9996   17.16   160061.........   01.0424   14.27   160151.........   01.0503   13.74
140211.......................   01.1915   20.84   150031..........   01.0708   15.56   150111.........   01.1600   14.02   160062.........   00.9471   12.22   160152.........   00.9953   13.78
140212.......................   01.2953   22.47   150032..........   01.8803   19.50   150112.........   01.3072   17.78   160063.........   01.1653   15.88   160153.........   01.7411   17.48
140213.......................   01.2786   22.67   150033..........   01.6072   21.09   150113.........   01.2223   17.88   160064.........   01.7118   17.38   170001.........   01.1836   16.35
140215.......................   01.1334   13.49   150034..........   01.3818   21.18   150114.........   01.0013   14.58   160065.........   01.0236   14.73   170004.........   01.0749   13.28
140217.......................   01.3176   21.67   150035..........   01.5327   18.97   150115.........   01.3813   17.55   160066.........   01.1729   14.74   170006.........   01.1484   15.02
140218.......................   00.9967   13.65   150036..........   01.0338   17.43   150122.........   01.1229   17.11   160067.........   01.4129   17.13   170008.........   01.0274   14.53
140220.......................   01.0930   15.16   150037..........   01.2700   18.20   150123.........   01.2055   12.98   160068.........   01.0648   13.52   170009.........   01.1970   16.31
140223.......................   01.6460   28.23   150038..........   01.4024   17.22   150124.........   01.1018   15.97   160069.........   01.4530   16.42   170010.........   01.2510   15.77
140224.......................   01.3861   22.97   150039..........   00.9659   16.33   150125.........   01.3901   18.69   160070.........   01.0492   14.47   170011.........   01.2378   15.40
140228.......................   01.6912   18.22   150042..........   01.2935   16.00   150126.........   01.5100   20.17   160072.........   01.0731   11.60   170012.........   01.4736   16.07
140230.......................   00.9252   10.84   150043..........   01.0842   21.96   150127.........   01.0222   13.90   160073.........   00.9698   12.18   170013.........   01.3223   15.33
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                                                                                          Page 6 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
170014.......................   01.0370   16.40   170099..........   01.2690   11.34   180024.........   01.3887   17.24   180123.........   01.4782   20.98   190089.........   01.0797   11.47
170015.......................   01.0654   14.36   170100..........   00.9894   14.47   180025.........   01.2127   17.17   180124.........   01.4883   16.52   190090.........   01.1658   16.84
170016.......................   01.6878   19.52   170101..........   00.9489   13.26   180026.........   01.2402   12.39   180125.........   00.9989   16.46   190092.........   01.3924  ......
170017.......................   01.2514   15.34   170102..........   00.9926   13.11   180027.........   01.2872   15.58   180126.........   01.2403   12.22   190095.........   01.0682   14.66
170018.......................   01.1580   13.13   170103..........   01.2089   15.62   180028.........   00.9956   16.39   180127.........   01.4064   17.22   190098.........   01.5365   18.91
170019.......................   01.2248   15.65   170104..........   01.4523   19.81   180029.........   01.2726   15.97   180128.........   01.1777   16.64   190099.........   01.1522   17.98
170020.......................   01.2902   14.98   170105..........   01.0963   15.91   180030.........   01.2394   13.31   180129.........   01.0122   14.45   190102.........   01.5599   17.77
170022.......................   01.1764   14.80   170106..........   00.8931   12.18   180031.........   01.2156   12.60   180130.........   01.4719   17.90   190103.........   00.8797   09.75
170023.......................   01.4631   16.42   170109..........   01.0364   14.50   180032.........   00.9268   15.83   180132.........   01.2955   15.20   190106.........   01.1725   17.69
170024.......................   01.1492   12.84   170110..........   00.9602   13.67   180033.........   01.1365   12.86   180133.........   01.3516   24.67   190109.........   01.2172   13.50
170025.......................   01.2269   15.81   170112..........   00.9859   13.90   180034.........   01.2666   14.14   180134.........   01.0388   13.87   190110.........   00.9373   12.43
170026.......................   01.0364   12.83   170113..........   01.1485   14.95   180035.........   01.5519   18.73   180136.........   01.6117   16.47   190111.........   01.5969   18.33
170027.......................   01.3447   15.50   170114..........   01.0128   13.80   180036.........   01.2054   17.01   180137.........   01.8051   18.38   190112.........   01.5890   19.46
170030.......................   01.0153   13.99   170115..........   01.0256   11.34   180037.........   01.3404   19.24   180138.........   01.2089   17.99   190113.........   01.3609   18.49
170031.......................   00.9092   12.62   170116..........   01.0473   15.74   180038.........   01.4099   15.04   180139.........   01.1534   18.64   190114.........   01.0160   12.20
170032.......................   01.1650   14.89   170117..........   00.9415   13.50   180040.........   02.0155   19.20   180140.........   00.8781  .......  190115.........   01.2261   18.33
170033.......................   01.3716   14.59   170119..........   00.9812   12.09   180041.........   01.1039   13.42   180141.........   01.7722  .......  190116.........   01.1859  ......
170034.......................   00.9986   14.61   170120..........   01.2988   16.06   180042.........   01.1997   13.59   190001.........   00.8676   17.98   190118.........   01.0970   12.38
170035.......................   00.8593   14.82   170122..........   01.7448   19.93   180043.........   01.0024   15.90   190002.........   01.6866   18.15   190120.........   00.9968   13.75
170036.......................   00.9019   13.19   170123..........   01.7674   18.76   180044.........   01.1640   16.29   190003.........   01.3870   17.41   190122.........   01.2395   15.70
170037.......................   01.2455   16.31   170124..........   01.0109   14.25   180045.........   01.2625   16.79   190004.........   01.4157   15.24   190124.........   01.6469   20.23
170038.......................   00.9237   11.46   170126..........   00.9450   11.50   180046.........   01.2350   16.65   190005.........   01.6124   17.60   190125.........   01.5554   17.99
170039.......................   01.1505   13.62   170128..........   00.9794   14.42   180047.........   01.0274   13.80   190006.........   01.3045   14.32   190128.........   01.0863   18.56
170040.......................   01.6034   18.83   170131..........   01.2140   09.38   180048.........   01.2862   16.16   190007.........   01.0078   13.52   190130.........   01.0375   12.09
170041.......................   00.9985   11.29   170133..........   01.1290   14.20   180049.........   01.3311   15.45   190008.........   01.6673   17.72   190131.........   01.2029   17.84
170043.......................   01.0095   13.49   170134..........   00.9481   12.48   180050.........   01.2534   16.12   190009.........   01.1641   13.79   190133.........   00.9749   12.08
170044.......................   01.1071   14.42   170137..........   01.1889   17.30   180051.........   01.4337   14.78   190010.........   01.0476   16.62   190134.........   01.0178   14.79
170045.......................   01.0563   10.72   170139..........   01.0392   11.82   180053.........   01.0870   14.30   190011.........   01.1711   14.41   190135.........   01.4595   22.58
170049.......................   01.2895   18.28   170142..........   01.3506   16.49   180054.........   01.1032   13.92   190013.........   01.3959   15.95   190136.........   01.2005   11.22
170051.......................   00.9202   13.66   170143..........   01.1130   13.82   180055.........   01.1664   14.00   190014.........   01.1136   15.35   190138.........   00.8846   17.51
170052.......................   01.0579   12.60   170144..........   01.6118   14.73   180056.........   01.0755   16.38   190015.........   01.2530   17.78   190140.........   01.0159   12.16
170053.......................   00.9493   15.39   170145..........   01.1398   14.83   180058.........   00.9913   12.63   190017.........   01.4476   16.02   190142.........   00.9058   12.39
170054.......................   01.0865   13.19   170146..........   01.5215   19.54   180059.........   00.9162   12.59   190018.........   01.1915   15.92   190144.........   01.3106   15.22
170055.......................   01.0974   14.55   170147..........   01.2724   20.70   180060.........   01.0317   10.17   190019.........   01.6064   18.39   190145.........   00.9991   13.66
170056.......................   00.9193   13.72   170148..........   01.4116   17.64   180063.........   00.9932   10.79   190020.........   01.1832   15.85   190146.........   01.6309   19.61
170057.......................   01.0322   13.90   170150..........   01.0943   13.41   180064.........   01.3330   14.03   190025.........   01.3568   13.62   190147.........   01.0221   13.69
170058.......................   01.1684   15.80   170151..........   01.0380   11.66   180065.........   01.0489   10.82   190026.........   01.4936   16.17   190148.........   00.9041   12.77
170060.......................   01.0552   13.41   170152..........   00.9840   12.99   180066.........   01.1569   18.09   190027.........   01.5788   16.49   190149.........   01.0591   11.47
170061.......................   01.1327   12.90   170160..........   00.9803   11.17   180067.........   01.8083   16.40   190029.........   01.1538   15.40   190151.........   01.2260   11.73
170063.......................   00.8933   10.92   170164..........   00.9859   14.42   180069.........   01.0091   15.33   190033.........   00.9378   09.66   190152.........   01.5214   21.27
170064.......................   01.0420   12.09   170166..........   01.1972   13.65   180070.........   01.1191   14.66   190034.........   01.2430  .......  190155.........   01.0392   12.29
170066.......................   00.9793   12.58   170168..........   00.9222   09.33   180072.........   01.0659   13.91   190035.........   01.4118  .......  190156.........   00.8732   11.99
170067.......................   01.1330   11.76   170171..........   01.0743   11.22   180075.........   00.9983   14.13   190036.........   01.6967   19.09   190158.........   01.1908   21.59
170068.......................   01.3072   15.24   170175..........   01.3540   17.53   180078.........   01.1598   17.57   190037.........   00.8920   10.84   190160.........   01.3271   17.03
170069.......................   00.8338   14.01   170176..........   01.6202   19.83   180079.........   01.3369   13.03   190039.........   01.4018   17.21   190161.........   01.1264   12.65
170070.......................   01.0108   12.56   170182..........   01.2299   19.43   180080.........   01.0551   15.57   190040.........   01.4401   19.32   190162.........   01.0457   18.47
170073.......................   01.0686   14.67   170183..........   02.0352  .......  180085.........   02.3962   17.70   190041.........   01.5646   19.72   190164.........   01.2250   16.05
170074.......................   01.2471   14.34   170184..........   01.1905  .......  180087.........   01.1701   13.74   190043.........   01.0428   10.34   190166.........   00.9327   14.04
170075.......................   00.9439   10.67   180001..........   01.2316   17.03   180088.........   01.5598   19.99   190044.........   01.1694   17.11   190167.........   01.2322   18.49
170076.......................   01.0567   11.60   180002..........   01.0603   16.78   180092.........   01.2643   15.25   190045.........   01.4023   20.17   190170.........   00.9471   13.08
170077.......................   00.9418   12.07   180004..........   01.1035   14.42   180093.........   01.3779   16.05   190046.........   01.4623   17.58   190173.........   01.4783   20.12
170079.......................   01.0260   12.66   180005..........   01.1740   18.54   180094.........   01.0364   11.51   190048.........   01.2789   13.72   190175.........   01.3210   20.26
170080.......................   00.9810   10.65   180006..........   00.9885   08.94   180095.........   01.2462   12.94   190049.........   00.9967   15.70   190176.........   01.7349   19.11
170081.......................   01.0204   10.44   180007..........   01.5360   16.29   180099.........   01.3197   12.31   190050.........   01.0290   14.58   190177.........   01.6625   22.84
170082.......................   01.0284   10.80   180009..........   01.4054   19.11   180101.........   01.3214   18.01   190053.........   01.0739   12.11   190178.........   00.9580   10.87
170084.......................   00.9523   10.93   180010..........   01.8420   18.19   180102.........   01.4763   16.35   190054.........   01.3377   14.09   190182.........   00.9720   20.02
170085.......................   00.9654   12.69   180011..........   01.2795   15.29   180103.........   02.1547   17.93   190059.........   00.9194   13.44   190183.........   01.1242   14.79
170086.......................   01.7214   18.21   180012..........   01.4058   17.50   180104.........   01.5746   18.07   190060.........   01.4488   15.43   190184.........   01.0785   13.09
170087.......................   16.1090   18.78   180013..........   01.4535   16.63   180105.........   01.0040   12.82   190064.........   01.5938   18.33   190185.........   01.3607   18.53
170088.......................   00.9760   10.80   180014..........   01.7162   19.99   180106.........   00.8943   12.27   190065.........   01.4991   14.71   190186.........   00.9454   13.16
170089.......................   00.9506   15.53   180015..........   01.3127   15.02   180108.........   00.8581   13.54   190071.........   00.9010   12.15   190189.........   01.0752   13.17
170090.......................   01.0355   09.80   180016..........   01.3250   14.50   180115.........   01.0279   14.65   190077.........   00.9526   13.65   190190.........   00.9250   12.66
170092.......................   00.8276   11.80   180017..........   01.3434   13.87   180116.........   01.4586   15.66   190078.........   01.1684   11.60   190191.........   01.3301   17.54
170093.......................   01.0000   11.76   180018..........   01.2521   15.27   180117.........   01.1156   17.03   190079.........   01.2501   16.98   190196.........   00.8663   16.29
170094.......................   00.9536   15.42   180019..........   01.3262   16.70   180118.........   01.0381   12.03   190081.........   00.9078   10.23   190197.........   01.2379   18.98
170095.......................   01.1355   13.69   180020..........   01.0743   15.86   180120.........   01.0578   13.12   190083.........   01.0626   15.02   190199.........   01.1913   16.26
170097.......................   01.0695   13.17   180021..........   01.1152   13.69   180121.........   01.2250   13.68   190086.........   01.4134   15.47   190200.........   01.5587   21.70
170098.......................   01.0500   17.00   180023..........   00.8814   13.12   180122.........   01.0903   15.01   190088.........   01.3480  .......  190201.........   01.2833   18.93
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                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
190202.......................   01.4766   17.85   210016..........   01.7183   23.30   220052.........   01.3219   23.88   230020.........   01.7229   22.21   230119.........   01.2933   22.31
190203.......................   01.5123   20.83   210017..........   01.2282   14.51   220053.........   01.2587   19.48   230021.........   01.6139   17.90   230120.........   01.1815   17.47
190204.......................   01.5847   20.85   210018..........   01.2505   21.26   220055.........   01.3458   23.52   230022.........   01.3630   18.27   230121.........   01.2515   19.69
190205.......................   01.9222   17.90   210019..........   01.4996   18.17   220057.........   01.4090   21.39   230024.........   01.4377   23.71   230122.........   01.4048   19.20
190206.......................   01.5538   21.53   210022..........   01.4510   20.79   220058.........   01.0836   16.26   230027.........   01.1378   15.73   230124.........   01.1675   16.89
190207.......................   01.2984   16.42   210023..........   01.3643   20.78   220060.........   01.3023   25.32   230029.........   01.5813   20.36   230125.........   01.2969   14.51
190208.......................   00.8122   11.17   210024..........   01.5608   19.73   220062.........   00.5837   18.78   230030.........   01.2185   16.47   230128.........   01.3868   21.24
190218.......................   01.2002   15.33   210025..........   01.4079   18.21   220063.........   01.2284   19.40   230031.........   01.4399   19.72   230129.........   01.7831   19.91
190223.......................   00.4249   16.58   210026..........   01.3745   19.52   220064.........   01.2327   20.51   230032.........   01.7422   19.08   230130.........   01.6706   23.74
190227.......................   00.8285  .......  210027..........   01.3025   18.58   220065.........   01.2262   19.58   230034.........   01.2308   17.99   230132.........   01.4109   23.25
190231.......................   01.3101   16.00   210028..........   01.2213   17.19   220066.........   01.3308   20.73   230035.........   01.1162   16.17   230133.........   01.2205   15.07
190233.......................   02.1157  .......  210029..........   01.3148   17.99   220067.........   01.2855   22.58   230036.........   01.2797   19.20   230134.........   01.1074   17.91
190234.......................   01.0506  .......  210030..........   01.1531   19.44   220068.........   00.5284   16.67   230037.........   01.1244   17.40   230135.........   01.2667   20.25
190235.......................   01.2925  .......  210031..........   01.5487   16.42   220070.........   01.2510   18.77   230038.........   01.7094   21.21   230137.........   01.1940   18.51
190236.......................   01.2520  .......  210032..........   01.1786   17.97   220071.........   01.9203   21.67   230040.........   01.2241   20.53   230141.........   01.6811   22.44
200001.......................   01.3789   16.92   210033..........   01.2619   18.58   220073.........   01.4122   24.14   230041.........   01.2166   20.75   230142.........   01.2194   18.90
200002.......................   01.0690   17.70   210034..........   01.3724   20.34   220074.........   01.1891   22.82   230042.........   01.2296   19.32   230143.........   01.3149   16.58
200003.......................   01.0950   16.03   210035..........   01.2687   18.11   220075.........   01.2648   19.51   230046.........   01.8829   25.32   230144.........   01.2245   21.19
200006.......................   01.0479   14.97   210037..........   01.2430   17.38   220076.........   01.1779   25.46   230047.........   01.3366   20.37   230145.........   01.1813   15.96
200007.......................   01.1177   17.01   210038..........   01.3268   21.63   220077.........   01.7898   22.92   230053.........   01.6418   24.16   230146.........   01.3082   19.56
200008.......................   01.2260   20.19   210039..........   01.1902   15.94   220079.........   01.1685   21.68   230054.........   01.8205   21.45   230147.........   01.4359   19.70
200009.......................   01.8101   19.95   210040..........   01.3322   21.01   220080.........   01.2694   19.58   230055.........   01.1631   18.26   230149.........   01.1837   15.51
200012.......................   01.1118   16.55   210043..........   01.3061   21.32   220081.........   01.0022   24.81   230056.........   00.9878   14.55   230151.........   01.3894   22.02
200013.......................   01.1203   15.69   210044..........   01.2653   19.38   220082.........   01.3094   23.04   230058.........   01.1530   18.69   230153.........   01.1308   19.70
200015.......................   01.2329   17.41   210045..........   01.0746   11.42   220083.........   01.1973   20.43   230059.........   01.4442   19.01   230154.........   00.9371   12.43
200016.......................   01.0114   15.76   210048..........   01.2062   23.30   220084.........   01.3131   23.23   230060.........   01.3135   17.97   230155.........   00.9376   16.93
200017.......................   01.2508   17.94   210049..........   01.1553   17.77   220086.........   01.6454   26.01   230062.........   01.0219   14.41   230156.........   01.7147   22.91
200018.......................   01.1950   15.20   210051..........   01.4237   20.03   220088.........   01.6091   22.68   230063.........   01.3162   19.15   230157.........   01.2050   20.15
200019.......................   01.2411   18.59   210054..........   01.3298   21.05   220089.........   01.3364   22.69   230065.........   01.3398   19.44   230159.........   01.4900   19.64
200020.......................   01.1431   20.96   210055..........   01.2663   24.26   220090.........   01.2573   20.95   230066.........   01.3895   20.58   230162.........   01.0467   15.60
200021.......................   01.1730   17.78   210056..........   01.3807   17.67   220092.........   01.2338   20.66   230068.........   01.4452   22.15   230165.........   01.8500   21.91
200023.......................   00.9047   16.15   210057..........   01.4127   25.76   220094.........   01.4159   19.82   230069.........   01.1623   21.95   230167.........   01.8077   19.21
200024.......................   01.3239   19.84   210058..........   01.5368   18.09   220095.........   01.2495   19.06   230070.........   01.5719   19.57   230169.........   01.3462   20.88
200025.......................   01.0831   19.51   210059..........   01.2633   21.44   220098.........   01.2547   19.71   230071.........   01.1318   22.00   230171.........   01.0260   14.42
200026.......................   01.0264   15.97   210060..........   01.1827   23.61   220100.........   01.2637   23.69   230072.........   01.2319   19.32   230172.........   01.2802   18.87
200027.......................   01.1198   17.27   210061..........   01.1772   17.65   220101.........   01.4389   23.41   230075.........   01.4721   19.41   230174.........   01.2980   19.50
200028.......................   00.9739   16.24   220001..........   01.2891   21.80   220104.........   01.2663   24.79   230076.........   01.3549   22.67   230175.........   03.2600   11.15
200031.......................   01.2810   15.26   220002..........   01.5403   23.02   220105.........   01.2690   22.16   230077.........   02.0661   18.62   230176.........   01.2365   20.69
200032.......................   01.3464   18.90   220003..........   01.0737   16.71   220106.........   01.2609   22.14   230078.........   01.1320   15.79   230178.........   01.0169   17.92
200033.......................   01.7900   20.16   220004..........   01.1625   18.66   220107.........   01.1935   19.21   230080.........   01.2235   20.92   230180.........   01.1055   15.79
200034.......................   01.2370   18.05   220006..........   01.4299   21.04   220108.........   01.1996   21.13   230081.........   01.2880   16.73   230184.........   01.1528   17.45
200037.......................   01.1965   16.09   220008..........   01.2944   20.45   220110.........   02.0104   31.74   230082.........   01.2051   15.97   230186.........   01.2241   17.37
200038.......................   01.1089   18.23   220010..........   01.3126   21.44   220111.........   01.2673   21.76   230085.........   01.1173   17.76   230188.........   01.1832   16.01
200039.......................   01.2710   19.03   220011..........   01.1495   27.00   220116.........   01.9996   24.40   230086.........   00.9982   14.88   230189.........   00.9248   14.93
200040.......................   01.1083   17.37   220012..........   01.3759   30.46   220118.........   02.0700   27.44   230087.........   01.0511   17.12   230190.........   01.0342   20.21
200041.......................   01.0939   16.19   220015..........   01.2326   20.94   220119.........   01.3155   24.27   230089.........   01.2833   21.86   230191.........   00.9127   16.65
200043.......................   00.5261   16.46   220016..........   01.3818   20.87   220123.........   01.0410   22.86   230092.........   01.3125   18.29   230193.........   01.2154   16.97
200050.......................   01.1881   17.84   220017..........   01.3923   23.16   220126.........   01.3402   20.63   230093.........   01.2189   18.91   230194.........   01.1126   15.94
200051.......................   00.9540   18.29   220019..........   01.1528   17.57   220128.........   01.2030   22.97   230095.........   01.1979   16.51   230195.........   01.3113   20.94
200052.......................   00.9785   14.12   220020..........   01.2405   18.68   220133.........   00.8368   29.15   230096.........   01.1742   20.60   230197.........   01.3274   21.41
200055.......................   01.1748   15.29   220021..........   01.3591   23.88   220135.........   01.2410   24.67   230097.........   01.5896   19.03   230199.........   01.1798   16.61
200062.......................   00.9125   15.03   220023..........   01.1731   19.92   220153.........   00.9842   19.37   230099.........   01.1193   18.90   230201.........   01.1765   14.03
200063.......................   01.2559   18.27   220024..........   01.1999   20.61   220154.........   01.0045   20.83   230100.........   01.2045   14.82   230204.........   01.3907   20.13
200066.......................   01.2145   15.65   220025..........   01.2157   19.07   220162.........   01.1096  .......  230101.........   01.0786   17.28   230205.........   01.0309   13.00
210001.......................   01.4356   19.45   220028..........   01.4895   21.29   220163.........   02.0500   24.21   230103.........   01.0544   17.37   230207.........   01.2603   21.19
210002.......................   02.0230   16.46   220029..........   01.1509   23.54   220171.........   01.6484   21.72   230104.........   01.6079   21.24   230208.........   01.2419   18.18
210003.......................   01.5440   22.78   220030..........   01.1149   17.02   230001.........   01.1916   18.72   230105.........   01.6872   19.47   230211.........   00.9353   14.11
210004.......................   01.3603   21.20   220031..........   02.0045   27.24   230002.........   01.2647   18.80   230106.........   01.3041   18.64   230212.........   01.0711   22.89
210005.......................   01.2340   18.52   220033..........   01.3841   19.62   230003.........   01.1461   18.79   230107.........   00.9245   11.54   230213.........   01.0327   13.19
210006.......................   01.0978   17.09   220035..........   01.3154   19.49   230004.........   01.6848   24.03   230108.........   01.2343   18.02   230216.........   01.6063   19.50
210007.......................   01.6805   20.55   220036..........   01.5943   22.33   230005.........   01.2552   18.69   230110.........   01.3941   17.31   230217.........   01.2397   19.60
210008.......................   01.3375   19.03   220038..........   01.2899   21.60   230006.........   01.1051   15.91   230111.........   00.9878   20.02   230219.........   00.9329   16.58
210009.......................   01.8279   19.93   220041..........   01.2094   21.02   230007.........   01.0602   17.82   230113.........   00.9779   18.07   230221.........   01.1053   17.78
210010.......................   01.1891   16.40   220042..........   01.2025   25.43   230012.........   00.8670   11.92   230114.........   00.6687   25.66   230222.........   01.3897   18.46
210011.......................   01.2786   21.24   220046..........   01.3746   22.27   230013.........   01.3024   20.55   230115.........   01.0054   15.79   230223.........   01.3120   21.86
210012.......................   01.6309   21.50   220049..........   01.3183   21.16   230015.........   01.1332   19.54   230116.........   00.9536   14.84   230227.........   01.4688   22.63
210013.......................   01.2397   18.65   220050..........   01.0938   18.78   230017.........   01.5764   20.51   230117.........   01.9408   25.77   230230.........   01.6754   21.30
210015.......................   01.2814   18.58   220051..........   01.2100   20.56   230019.........   01.4991   22.60   230118.........   01.2214   16.37   230232.........   00.9775   18.31
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                                                                                          Page 8 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
230235.......................   01.0781   14.12   240066..........   01.4071   18.87   240153.........   01.0196   15.01   250058.........   01.1577   13.20   260013.........   01.1118   13.85
230236.......................   01.2952   21.82   240069..........   01.2110   18.58   240154.........   01.0483   14.45   250059.........   01.0878   14.15   260014.........   01.7489   18.62
230239.......................   01.1617   16.38   240071..........   01.1304   17.67   240155.........   00.9544   16.25   250060.........   00.7824   10.79   260015.........   01.3467   12.13
230241.......................   01.1064   17.56   240072..........   01.0864   17.53   240157.........   01.1171   11.54   250061.........   00.8592   09.59   260017.........   01.2916   14.90
230244.......................   01.3649   21.20   240073..........   00.9499   15.03   240160.........   00.9811   15.61   250063.........   00.8532   12.96   260018.........   00.9287   10.14
230253.......................   00.9665   18.09   240075..........   01.1872   19.26   240161.........   00.9741   14.77   250065.........   00.9879   11.60   260019.........   01.0354   12.50
230254.......................   01.2851   21.85   240076..........   01.1127   20.82   240162.........   00.9969   15.08   250066.........   00.9303   14.05   260020.........   01.6667   20.95
230257.......................   00.8588   18.77   240077..........   00.9355   12.01   240163.........   00.9492   14.68   250067.........   01.1448   15.22   260021.........   01.5105   18.46
230259.......................   01.1900   19.63   240078..........   01.5064   21.81   240166.........   01.0768   15.70   250068.........   00.8507   09.05   260022.........   01.2935   16.51
230264.......................   01.0350   19.01   240079..........   01.0497   13.53   240169.........   00.9590   15.46   250069.........   01.4085   13.92   260023.........   01.3238   16.81
230269.......................   01.3679   22.82   240080..........   01.4036   21.73   240170.........   01.1704   14.40   250071.........   00.9017   10.90   260024.........   00.9481   12.58
230270.......................   01.2231   20.42   240082..........   01.0921   15.87   240171.........   01.0490   14.30   250072.........   01.3515   16.19   260025.........   01.2386   14.22
230273.......................   01.5750   21.61   240083..........   01.3718   16.80   240172.........   01.0622   14.86   250076.........   01.5698   08.95   260027.........   01.5497   20.66
230275.......................   00.5014   16.62   240084..........   01.3050   17.76   240173.........   00.9755   14.79   250077.........   00.9412   11.54   260029.........   01.1498   16.88
230276.......................   00.6978   17.39   240085..........   00.9625   15.55   240179.........   01.0886   15.05   250078.........   01.4494   14.35   260030.........   01.1773   10.35
230277.......................   01.2413   21.07   240086..........   01.0751   15.22   240184.........   01.0883   11.77   250079.........   00.8992   13.59   260031.........   01.5413   18.47
230278.......................   01.8525   21.54   240087..........   01.1768   15.74   240187.........   01.1726   18.89   250081.........   01.3362   15.13   260032.........   01.6098   18.24
230279.......................   00.6928   15.06   240088..........   01.4371   18.72   240193.........   01.0850   15.54   250082.........   01.2704   12.99   260034.........   01.0286   15.30
230280.......................   01.0834   14.88   240089..........   00.9741   15.79   240196.........   00.6150   22.86   250083.........   01.0222   10.67   260035.........   01.0464   11.67
240001.......................   01.5829   22.07   240090..........   01.0683   13.53   240200.........   00.9031   13.54   250084.........   01.1161   15.95   260036.........   01.0354   18.28
240002.......................   01.7321   20.58   240093..........   01.3423   16.86   240205.........   01.0263  .......  250085.........   00.9835   12.43   260037.........   01.4487   15.56
240004.......................   01.5187   21.05   240094..........   00.9944   17.38   240206.........   00.9489  .......  250088.........   00.9095   14.66   260039.........   01.1663   12.17
240005.......................   01.0260   15.07   240096..........   00.9798   14.74   240207.........   01.2775   22.23   250089.........   01.1705   13.27   260040.........   01.6606   15.94
240006.......................   01.1157   20.02   240097..........   01.1033   16.59   240210.........   01.2460   22.69   250093.........   01.1086   12.75   260042.........   01.2618   16.91
240007.......................   01.0770   15.81   240098..........   00.9404   16.39   240211.........   00.9749   11.52   250094.........   01.2615   14.92   260044.........   01.0947   14.86
240008.......................   01.0674   16.32   240099..........   01.0613   10.76   250001.........   01.4462   16.92   250095.........   01.0173   14.72   260047.........   01.4608   15.90
240009.......................   01.0015   14.35   240100..........   01.2931   18.57   250002.........   00.8377   14.44   250096.........   01.2796   15.77   260048.........   01.2353   19.25
240010.......................   01.9721   21.16   240101..........   01.1796   17.70   250003.........   01.0188   15.17   250097.........   01.3210   13.86   260050.........   01.0944   14.63
240011.......................   01.1609   15.71   240102..........   00.9246   12.87   250004.........   01.4728   16.68   250098.........   00.8666   14.72   260052.........   01.3374   16.89
240013.......................   01.3128   16.96   240103..........   01.0718   13.76   250005.........   01.0621   10.43   250099.........   01.3193   12.67   260053.........   01.1600   10.83
240014.......................   01.0888   19.10   240104..........   01.1878   21.72   250006.........   00.9609   14.73   250100.........   01.2720   14.27   260054.........   01.3127   14.83
240016.......................   01.3772   16.31   240105..........   01.0170   12.35   250007.........   01.2969   18.24   250101.........   00.8782   09.75   260055.........   01.0240   08.93
240017.......................   01.1960   15.66   240106..........   01.3854   23.85   250008.........   00.9267   11.91   250102.........   01.6506   14.59   260057.........   01.1561   14.12
240018.......................   01.3341   17.17   240107..........   00.9699   14.74   250009.........   01.1981   15.81   250104.........   01.4465   16.31   260059.........   01.2358   11.75
240019.......................   01.1978   20.69   240108..........   00.9818   12.35   250010.........   01.0279   11.88   250105.........   00.9253   11.52   260061.........   01.1336   11.91
240020.......................   01.1520   20.05   240109..........   00.9741   12.06   250012.........   00.9496   13.18   250107.........   00.8880   14.99   260062.........   01.2041   17.75
240021.......................   01.0040   13.13   240110..........   00.9880   14.66   250015.........   01.1038   10.43   250109.........   00.9626   12.97   260063.........   01.1241   15.61
240022.......................   01.1175   18.13   240111..........   01.0008   15.65   250017.........   00.9756   14.92   250112.........   00.9502   14.95   260064.........   01.3140   15.06
240023.......................   01.1030   16.17   240112..........   01.0031   14.22   250018.........   01.0885   11.21   250117.........   01.0120   13.39   260065.........   01.7943   16.07
240025.......................   01.1264   14.54   240114..........   00.8987   13.21   250019.........   01.4959   16.51   250119.........   01.1151   11.59   260066.........   01.0288   15.31
240027.......................   01.0390   15.50   240115..........   01.6552   21.53   250020.........   00.9499   11.47   250120.........   01.0895   13.47   260067.........   00.9511   10.89
240028.......................   01.1812   18.14   240116..........   00.9626   12.54   250021.........   00.9247   08.33   250122.........   01.2652  .......  260068.........   01.6948   19.07
240029.......................   01.2178   17.00   240117..........   01.1416   17.40   250023.........   00.8534  .......  250123.........   01.3253   18.31   260070.........   01.0659   12.16
240030.......................   01.2841   17.33   240119..........   00.8875   17.45   250024.........   00.9649   08.37   250124.........   00.9106   11.28   260073.........   01.0302   11.87
240031.......................   00.9917   13.83   240121..........   00.9321   17.85   250025.........   01.1328   15.43   250125.........   01.3287   18.00   260074.........   01.3216   17.26
240036.......................   01.5683   19.89   240122..........   01.0774   16.25   250027.........   01.0193   11.14   250126.........   00.9981   13.81   260077.........   01.7111   16.86
240037.......................   01.0458   17.05   240123..........   01.0910   13.80   250029.........   00.8793   11.91   250127.........   00.7920   10.67   260078.........   01.2189   14.84
240038.......................   01.4741   24.33   240124..........   00.9979   16.84   250030.........   00.9896   11.25   250128.........   01.1005   11.81   260079.........   01.0347   11.96
240040.......................   01.1842   19.00   240125..........   00.8791   12.16   250031.........   01.3389   17.65   250131.........   00.9868   10.41   260080.........   01.0511   10.85
240041.......................   01.2649   15.42   240127..........   01.1121   12.16   250032.........   01.2654   15.27   250134.........   00.9827   15.67   260081.........   01.5218   18.50
240043.......................   01.2140   17.60   240128..........   01.1105   14.99   250033.........   01.1181   12.63   250136.........   00.9255   15.06   260082.........   01.1931   13.85
240044.......................   01.1785   16.75   240129..........   01.0693   13.13   250034.........   01.6285   13.70   250138.........   01.2517   16.52   260085.........   01.5637   18.89
240045.......................   01.1184   18.25   240130..........   01.0707   15.14   250035.........   00.8781   13.38   250141.........   01.2420   16.11   260086.........   00.9979   13.83
240047.......................   01.5057   19.66   240132..........   01.2513   21.26   250036.........   01.0177   10.97   250145.........   00.9900  .......  260089.........   01.0806   12.16
240048.......................   01.2505   21.83   240133..........   01.1407   16.89   250037.........   00.8362   09.52   250146.........   01.0321   12.44   260091.........   01.6471   20.21
240049.......................   01.7838   21.16   240135..........   00.8896   11.98   250038.........   00.9499   12.49   250148.........   01.1361   15.43   260094.........   01.2145   17.53
240050.......................   01.1393   22.26   240137..........   01.2269   15.99   250039.........   01.0330   12.23   250149.........   00.9132   13.16   260095.........   01.4120   15.92
240051.......................   00.9412   14.60   240138..........   00.9554   12.39   250040.........   01.3374   16.36   260001.........   01.6349   16.67   260096.........   01.5939   23.01
240052.......................   01.2644   18.14   240139..........   00.9722   14.07   250042.........   01.2430   13.72   260002.........   01.4569   20.60   260097.........   01.1570   16.79
240053.......................   01.5109   19.37   240141..........   01.1688   18.92   250043.........   01.0013   11.48   260003.........   00.9755   13.10   260100.........   01.0555   13.31
240056.......................   01.2706   21.66   240142..........   01.1018   15.56   250044.........   00.9982   14.17   260004.........   01.0307   12.81   260102.........   01.0503   17.58
240057.......................   01.7848   21.08   240143..........   01.1208   11.76   250045.........   01.1343   17.75   260005.........   01.6937   20.17   260103.........   01.3951   16.96
240058.......................   00.9673   10.32   240144..........   01.0057   13.66   250047.........   00.9900   11.39   260006.........   01.4647   16.81   260104.........   01.7016   19.61
240059.......................   01.1120   19.63   240145..........   00.9274   12.01   250048.........   01.5333   14.39   260007.........   01.6398   14.42   260105.........   01.8395   21.04
240061.......................   01.7782   21.05   240146..........   00.9883   18.68   250049.........   00.9030   11.19   260008.........   01.2717   16.18   260107.........   01.4283   19.39
240063.......................   01.5142   22.26   240148..........   01.0886   08.84   250050.........   01.2902   12.79   260009.........   01.2279   15.64   260108.........   01.8648   18.57
240064.......................   01.2569   20.39   240150..........   00.8880   12.16   250051.........   00.8720   08.88   260011.........   01.6382   17.12   260109.........   00.9885   11.86
240065.......................   01.0639   10.79   240152..........   01.0422   18.29   250057.........   01.2899   14.84   260012.........   01.1117   12.21   260110.........   01.5646   14.92
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[[Page 29964]]


                                                                                          Page 9 of 16                                                                                          
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
260113.......................   01.0840   14.31   270036..........   00.9396   09.94   280051.........   01.1961   13.85   290022.........   01.6834   20.50   310043.........   01.2814   19.99
260115.......................   01.2379   14.59   270039..........   01.0701   12.96   280052.........   00.9828   12.52   290027.........   00.9705   15.03   310044.........   01.3355   20.03
260116.......................   01.1035   13.89   270040..........   01.0918   19.79   280054.........   01.2699   16.10   290032.........   01.4454   18.24   310045.........   01.4264   27.62
260119.......................   01.1902   13.28   270041..........   01.0742   11.52   280055.........   00.9226   12.19   290036.........   01.0395   13.90   310047.........   01.3550   24.05
260120.......................   01.2141   14.60   270044..........   01.1489   14.40   280056.........   01.0135   13.28   290038.........   00.9396   17.61   310048.........   01.2514   21.34
260122.......................   01.1460   13.40   270046..........   00.9270   13.70   280057.........   00.9801   15.61   290039.........   01.3445  .......  310049.........   01.3215   23.91
260123.......................   01.0152   14.74   270048..........   01.0798   14.13   280058.........   01.3647   14.36   300001.........   01.3832   21.03   310050.........   01.2306   21.48
260127.......................   00.9860   13.88   270049..........   01.8351   19.31   280060.........   01.5777   18.24   300003.........   01.8909   21.59   310051.........   01.3464   23.27
260128.......................   01.0214   09.22   270050..........   01.0761   17.43   280061.........   01.4895   15.95   300005.........   01.2724   19.13   310052.........   01.2876   21.19
260129.......................   01.2044   13.52   270051..........   01.3392   18.76   280062.........   01.1457   12.55   300006.........   01.1393   17.36   310054.........   01.3052   23.97
260131.......................   01.4057   15.91   270052..........   01.0912   12.73   280064.........   01.0808   13.94   300007.........   01.1629   17.04   310056.........   01.3867   20.63
260134.......................   01.1566   14.28   270053..........   00.9396   09.78   280065.........   01.2724   17.49   300008.........   01.2128   18.30   310057.........   01.2933   23.67
260137.......................   01.5528   14.25   270057..........   01.2166   12.70   280066.........   01.0334   11.48   300009.........   01.1536   18.16   310058.........   01.0905   26.79
260138.......................   01.8916   21.17   270058..........   00.9506   11.51   280068.........   01.0867   09.89   300010.........   01.2286   17.88   310060.........   01.1999   18.73
260141.......................   01.9538   17.10   270059..........   00.8656   15.65   280070.........   01.0111   10.30   300011.........   01.3592   22.07   310061.........   01.2544   20.23
260142.......................   01.2385   13.99   270060..........   00.9132   13.26   280073.........   01.0115   13.94   300012.........   01.3391   21.42   310062.........   01.2896   24.98
260143.......................   00.9915   11.96   270063..........   00.9457   14.23   280074.........   01.1316   12.68   300013.........   01.1451   17.06   310063.........   01.3667   21.28
260147.......................   01.0192   12.91   270068..........   00.9009   15.59   280075.........   01.2286   13.10   300014.........   01.2207   19.36   310064.........   01.2739   22.29
260148.......................   00.9522   09.30   270072..........   00.7732   11.39   280076.........   01.0462   12.93   300015.........   01.1783   18.08   310067.........   01.3277   23.76
260158.......................   01.1073   11.77   270073..........   01.1623   11.16   280077.........   01.3438   17.26   300016.........   01.2027   15.73   310069.........   01.2844   20.03
260159.......................   01.0850   19.81   270074..........   00.8727  .......  280079.........   01.2143   10.42   300017.........   01.2359   21.96   310070.........   01.4051   22.98
260160.......................   01.0956   11.84   270075..........   00.9757  .......  280080.........   01.0583   12.11   300018.........   01.2174   19.62   310072.........   01.2857   20.57
260162.......................   01.5758   19.55   270076..........   00.7920  .......  280081.........   01.6898   18.79   300019.........   01.2701   18.77   310073.........   01.6784   23.53
260163.......................   01.3316   15.35   270079..........   00.9171   13.66   280082.........   01.0127   13.48   300020.........   01.2718   20.72   310074.........   01.4649   22.61
260164.......................   00.9996   12.17   270080..........   01.2061   15.83   280083.........   01.0991   14.54   300021.........   01.1855   15.34   310075.........   01.3852   23.13
260166.......................   01.2350   21.39   270081..........   01.0741   12.39   280084.........   01.0433   11.01   300022.........   01.1119   17.22   310076.........   01.4347   28.74
260172.......................   00.9974   13.47   270082..........   01.0739   14.18   280088.........   01.7879   17.98   300023.........   01.2955   19.78   310077.........   01.5659   23.51
260173.......................   01.0051   11.78   270083..........   01.0517   16.28   280089.........   01.0322   14.37   300024.........   01.1815   16.74   310078.........   01.2978   24.59
260175.......................   01.1637   14.99   270084..........   00.9318   14.12   280090.........   00.9935   13.49   300028.........   01.2393   16.75   310081.........   01.2833   21.29
260176.......................   01.7266   18.43   280001..........   01.1165   12.98   280091.........   01.2101   14.18   300029.........   01.3274   22.44   310083.........   01.2856   22.33
260177.......................   01.3281   20.42   280003..........   02.0364   18.79   280092.........   00.8896   12.18   300033.........   01.1182   13.69   310084.........   01.3535   20.99
260178.......................   01.4918   18.91   280005..........   01.4366   16.76   280094.........   01.0535   14.07   300034.........   02.0357   23.32   310086.........   01.2273   21.30
260179.......................   01.6454   18.70   280009..........   01.7536   17.25   280097.........   01.0852   12.27   310001.........   01.7927   25.90   310087.........   01.2824   19.26
260180.......................   01.6989   20.07   280011..........   00.8644   11.91   280098.........   00.9677   10.40   310002.........   01.7252   26.26   310088.........   01.2278   20.64
260183.......................   01.5585   16.14   280012..........   01.3033   15.43   280101.........   01.0917   13.18   310003.........   01.2649   24.08   310090.........   01.2311   24.50
260186.......................   01.2994   15.97   280013..........   01.8329   20.31   280102.........   01.1442   12.76   310005.........   01.2313   20.54   310091.........   01.3337   20.80
260188.......................   01.2526   18.64   280014..........   00.9614   13.39   280104.........   00.9770   10.84   310006.........   01.2035   19.56   310092.........   01.3119   20.70
260189.......................   00.8480   11.26   280015..........   01.0138   15.19   280105.........   01.3787   17.28   310008.........   01.3813   22.73   310093.........   01.1685   19.79
260190.......................   01.2487   18.90   280017..........   01.1011   13.94   280106.........   00.9285   13.93   310009.........   01.2826   22.80   310096.........   01.8614   23.17
260191.......................   01.2524   17.92   280018..........   01.0931   13.35   280107.........   01.0876   11.13   310010.........   01.2543   20.81   310105.........   01.2399   23.63
260193.......................   01.2325   18.75   280020..........   01.6141   18.93   280108.........   01.2094   13.96   310011.........   01.2880   21.55   310108.........   01.4305   21.85
260195.......................   01.1677   14.49   280021..........   01.3229   15.49   280109.........   00.9160   09.80   310012.........   01.5919   24.30   310110.........   01.2375   20.38
260197.......................   01.1436   17.26   280022..........   01.0087   12.52   280110.........   01.0169   11.19   310013.........   01.2782   21.84   310111.........   01.3032   20.46
260198.......................   01.3417   15.86   280023..........   01.4104   14.77   280111.........   01.2167   15.63   310014.........   01.6890   24.26   310112.........   01.3240   21.02
260200.......................   01.3591   19.10   280024..........   00.9413   13.05   280114.........   00.9785   12.99   310015.........   01.9538   24.97   310113.........   01.2381   20.60
270002.......................   01.2857   15.06   280025..........   00.9422   12.14   280115.........   00.9481   14.77   310016.........   01.2557   22.34   310115.........   01.2937   19.31
270003.......................   01.2209   19.76   280026..........   01.0322   15.28   280117.........   01.1926   14.47   310017.........   01.3633   23.40   310116.........   01.2358   21.84
270004.......................   01.7072   19.74   280028..........   01.0549   14.53   280118.........   00.9922   15.17   310018.........   01.1279   20.55   310118.........   01.2541   22.53
270006.......................   01.0910   14.78   280029..........   01.2160   14.02   280119.........   00.8653  .......  310019.........   01.6089   23.53   310119.........   01.6063   30.37
270007.......................   00.9226   13.18   280030..........   01.7242   24.40   280123.........   00.9506   15.63   310020.........   01.2426   21.55   310120.........   01.0681   17.44
270009.......................   01.0828   15.34   280031..........   01.0182   13.10   290001.........   01.6689   21.85   310021.........   01.3936   22.03   310121.........   01.1650   20.34
270011.......................   01.0735   15.52   280032..........   01.3285   15.57   290002.........   00.9842   17.79   310022.........   01.2809   21.47   320001.........   01.4673   17.14
270012.......................   01.6735   18.11   280033..........   01.1021   14.24   290003.........   01.6564   20.74   310024.........   01.3576   22.85   320002.........   01.3450   20.13
270013.......................   01.4138   17.77   280034..........   01.3125   13.86   290005.........   01.4911   19.03   310025.........   01.2579   22.27   320003.........   01.1854   15.65
270014.......................   01.7993   16.86   280035..........   00.9238   11.81   290006.........   01.1665   16.15   310026.........   01.2329   22.67   320004.........   01.2651   17.19
270016.......................   00.9333   13.23   280037..........   01.0189   14.28   290007.........   01.9072   27.06   310027.........   01.3359   20.94   320005.........   01.3181   18.87
270017.......................   01.3074   18.67   280038..........   01.0809   14.53   290008.........   01.1850   18.73   310028.........   01.1829   21.21   320006.........   01.3623   15.96
270019.......................   01.0378   14.02   280039..........   01.1314   13.99   290009.........   01.5619   22.25   310029.........   01.9763   22.49   320009.........   01.5982   16.52
270021.......................   01.1585   16.23   280040..........   01.6182   18.67   290010.........   01.1281   11.93   310031.........   02.8592   24.35   320011.........   01.0288   17.06
270023.......................   01.3591   20.08   280041..........   00.9200   11.80   290011.........   01.0270   14.67   310032.........   01.3459   21.17   320012.........   00.9809   16.21
270024.......................   00.9898   13.05   280042..........   01.1024   13.11   290012.........   01.3986   20.67   310034.........   01.2650   21.26   320013.........   01.1612   19.19
270026.......................   00.9412   12.95   280043..........   01.0606   14.76   290013.........   01.0582   15.39   310036.........   01.1459   19.86   320014.........   01.1014   11.24
270027.......................   01.0785   11.91   280045..........   01.2844   13.63   290014.........   01.0288   16.38   310037.........   01.3381   26.92   320016.........   01.1858   13.77
270028.......................   01.0843   15.37   280046..........   01.1494   11.04   290015.........   01.0017   15.15   310038.........   02.0243   23.35   320017.........   01.1639   16.85
270029.......................   00.9485   16.24   280047..........   01.0939   15.34   290016.........   01.2292   19.81   310039.........   01.2854   21.42   320018.........   01.5091   17.37
270032.......................   01.1184   15.80   280048..........   01.1833   12.06   290019.........   01.3453   19.06   310040.........   01.2606   24.06   320019.........   01.5428   22.95
270033.......................   00.8853   12.19   280049..........   01.0480   13.30   290020.........   01.0868   17.66   310041.........   01.3379   21.96   320021.........   01.7525   17.31
270035.......................   01.0156   17.11   280050..........   00.9680   13.11   290021.........   01.6469   19.51   310042.........   01.2137   22.13   320022.........   01.2437   16.07
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                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
320023.......................   00.9909   16.72   330059..........   01.5929   29.90   330171.........   01.3206   21.95   330268.........   01.0351   14.44   340023.........   01.4078   17.97
320030.......................   01.0522   18.27   330061..........   01.3120   23.60   330175.........   01.1547   14.34   330270.........   01.9728   32.47   340024.........   01.1778   15.07
320031.......................   00.9076   12.36   330062..........   01.1602   15.58   330177.........   01.0010   13.74   330273.........   01.3703   23.35   340025.........   01.1795   14.80
320032.......................   00.9382   15.10   330064..........   01.4487   29.63   330179.........   00.8711   14.38   330275.........   01.3086   18.58   340027.........   01.1882   15.59
320033.......................   01.1251   20.90   330065..........   01.1874   17.24   330180.........   01.1878   16.40   330276.........   01.1943   17.02   340028.........   01.5461   17.32
320035.......................   00.9732   14.60   330066..........   01.3105   17.53   330181.........   01.3086   30.46   330277.........   01.1399   16.32   340030.........   02.0657   20.58
320037.......................   01.2259   15.59   330067..........   01.3362   20.60   330182.........   02.4681   28.41   330279.........   01.3463   18.52   340031.........   01.0087   11.97
320038.......................   01.2177   13.85   330072..........   01.3519   27.86   330183.........   01.5110   18.72   330285.........   01.7826   22.52   340032.........   01.3862   18.60
320046.......................   01.2515   18.15   330073..........   01.1568   14.87   330184.........   01.3693   26.85   330286.........   01.3178   24.25   340035.........   01.1812   15.73
320048.......................   01.3042   17.40   330074..........   01.2164   17.15   330185.........   01.3284   25.44   330290.........   01.7803   29.90   340036.........   01.2483   17.33
320056.......................   00.9777  .......  330075..........   01.0811   17.25   330186.........   00.8858   19.79   330293.........   01.1544   13.43   340037.........   01.1212   15.85
320057.......................   00.9961  .......  330078..........   01.3881   17.05   330188.........   01.2058   18.28   330304.........   01.2543   26.20   340038.........   01.0711   15.42
320058.......................   00.8563  .......  330079..........   01.2322   17.05   330189.........   01.4328   16.85   330306.........   01.4671   27.44   340039.........   01.2888   19.52
320059.......................   01.1577  .......  330080..........   01.4470   27.21   330191.........   01.3327   17.06   330307.........   01.2478   19.43   340040.........   01.7915   18.22
320060.......................   00.9420  .......  330084..........   01.0602   16.46   330193.........   01.3167   27.97   330308.........   01.2513   29.68   340041.........   01.2345   17.24
320061.......................   01.1055  .......  330085..........   01.3285   18.64   330194.........   01.8377   25.39   330309.........   01.2698   24.10   340042.........   01.1974   14.01
320062.......................   00.9114  .......  330086..........   01.2430   24.99   330195.........   01.6497   29.85   330314.........   01.4597   22.18   340044.........   01.0183   13.44
320063.......................   01.2900   12.84   330088..........   01.0583   24.62   330196.........   01.3112   28.36   330315.........   16.1090   25.23   340045.........   00.9957   09.61
320065.......................   01.3717   16.38   330090..........   01.5512   16.76   330197.........   01.0557   14.99   330316.........   01.2631   21.85   340047.........   01.8712   18.39
320067.......................   00.8637   17.64   330091..........   01.3277   18.50   330198.........   01.4009   22.87   330327.........   00.9920   16.17   340048.........   00.9368   14.02
320068.......................   00.8811   14.99   330092..........   01.1181   14.07   330199.........   01.4019   26.06   330331.........   01.2272   29.77   340049.........   00.6961   13.94
320069.......................   00.9953   10.67   330094..........   01.1757   16.51   330201.........   01.6400   27.62   330332.........   01.2979   25.01   340050.........   01.1971   17.37
320070.......................   00.9025  .......  330095..........   01.2329   17.55   330202.........   01.6494   28.76   330333.........   01.2530   23.81   340051.........   01.3335   16.08
320074.......................   01.0790   17.04   330096..........   01.0910   15.45   330203.........   01.3914   19.06   330336.........   01.3462   28.99   340052.........   01.0094   18.41
320079.......................   01.1541   17.22   330097..........   01.2372   15.36   330204.........   01.3917   28.09   330338.........   01.2385   23.09   340053.........   01.6620   19.08
330001.......................   01.1750   25.49   330100..........   00.7187   26.07   330205.........   01.1520   20.29   330339.........   00.8847   18.73   340054.........   01.1119   13.09
330002.......................   01.4149   25.22   330101..........   01.7628   33.56   330208.........   01.2512   24.55   330340.........   01.1888   21.17   340055.........   01.1909   17.40
330003.......................   01.3160   17.67   330102..........   01.3509   17.47   330209.........   01.2145   23.11   330350.........   01.8002   28.27   340060.........   01.1481   16.69
330004.......................   01.3302   19.08   330103..........   01.2729   16.46   330211.........   01.1985   17.23   330353.........   01.3364   30.33   340061.........   01.6989   19.91
330005.......................   01.7965   20.49   330104..........   01.3856   26.74   330212.........   01.1045   21.12   330354.........   01.5239  .......  340063.........   01.0467   13.08
330006.......................   01.2737   23.92   330106..........   01.5963   34.42   330213.........   01.1784   15.72   330357.........   01.3755   33.49   340064.........   01.2127   17.10
330007.......................   01.3460   17.71   330107..........   01.3256   21.55   330214.........   01.7511   29.72   330359.........   00.9233   19.54   340065.........   01.3418   14.39
330008.......................   01.2046   15.62   330108..........   01.2169   16.28   330215.........   01.2278   15.66   330372.........   01.2025   24.47   340067.........   01.2760   15.88
330009.......................   01.3758   30.32   330111..........   01.0618   14.81   330218.........   01.1332   17.94   330381.........   01.1984   28.03   340068.........   01.2350   14.77
330010.......................   01.2804   15.07   330114..........   00.9802   16.13   330219.........   01.6757   19.13   330385.........   01.1745   26.83   340069.........   01.7385   19.47
330011.......................   01.3292   17.98   330115..........   01.2205   15.23   330221.........   01.3401   27.53   330386.........   01.1994   23.03   340070.........   01.3821   17.57
330012.......................   01.7032   31.01   330116..........   00.9768   14.21   330222.........   01.2792   17.64   330387.........   01.0268   23.95   340071.........   01.0850   15.08
330013.......................   02.0647   17.36   330118..........   01.6278   18.94   330223.........   01.0631   15.37   330389.........   01.7543   29.43   340072.........   01.0658   15.20
330014.......................   01.3775   28.72   330119..........   01.7614   33.48   330224.........   01.2427   18.20   330390.........   01.2733   30.36   340073.........   01.5479   20.23
330016.......................   01.0528   15.47   330121..........   01.0392   16.10   330225.........   01.1712   24.38   330393.........   01.7116   27.22   340075.........   01.2024   16.26
330019.......................   01.2906   25.33   330122..........   01.0841   21.84   330226.........   01.2737   16.28   330394.........   01.5398   18.37   340080.........   01.0616   12.72
330020.......................   01.0589   15.26   330125..........   01.8638   19.53   330229.........   01.3073   15.69   330395.........   01.2975   30.64   340084.........   01.0587   15.61
330023.......................   01.2488   23.30   330126..........   01.1887   22.34   330230.........   01.4289   28.69   330396.........   01.3518   31.58   340085.........   01.1725   15.65
330024.......................   01.8102   30.17   330127..........   01.3382   25.03   330231.........   01.0965   29.91   330397.........   01.2796   25.47   340087.........   01.1033   16.01
330025.......................   01.1843   16.20   330128..........   01.3718   27.71   330232.........   01.2398   16.42   330398.........   01.2707   26.92   340088.........   01.1389   16.22
330027.......................   01.4582   30.93   330132..........   01.0795   14.60   330233.........   01.5355   29.70   330399.........   01.2655   29.65   340089.........   01.0362   12.85
330028.......................   01.4159   24.95   330133..........   01.3670   30.50   330234.........   02.2504   29.60   340001.........   01.5501   19.47   340090.........   01.1535   17.15
330029.......................   01.0093   19.09   330135..........   01.1584   18.28   330235.........   01.1446   18.33   340002.........   01.8976   18.38   340091.........   01.7185   19.42
330030.......................   01.2056   16.22   330136..........   01.2983   16.54   330236.........   01.4017   27.87   340003.........   01.1485   17.08   340093.........   01.0725   12.10
330033.......................   01.2685   13.82   330140..........   01.7550   17.51   330238.........   01.2317   14.19   340004.........   01.4880   17.16   340094.........   01.4425   17.65
330034.......................   00.7483   32.72   330141..........   01.3513   24.27   330239.........   01.1938   15.39   340005.........   01.1584   13.24   340096.........   01.1689   17.33
330036.......................   01.2233   22.66   330144..........   00.9795   13.70   330240.........   01.3306   27.41   340006.........   01.0906   14.60   340097.........   01.1822   16.61
330037.......................   01.1592   14.92   330148..........   01.0842   14.58   330241.........   01.9041   22.30   340007.........   01.1627   16.20   340098.........   01.7248   19.46
330038.......................   01.2091   14.81   330151..........   01.0739   14.55   330242.........   01.3798   23.99   340008.........   01.1478   16.55   340099.........   01.1578   12.70
330039.......................   00.8379   14.25   330152..........   01.4451   28.88   330245.........   01.3025   17.35   340009.........   01.4763   19.70   340101.........   01.1697   11.80
330041.......................   01.3314   30.19   330153..........   01.7110   17.15   330246.........   01.3563   25.33   340010.........   01.3230   16.97   340104.........   00.8557   12.36
330043.......................   01.3067   26.43   330154..........   01.6447  .......  330247.........   00.7683   25.98   340011.........   01.1353   14.36   340105.........   01.3824   17.94
330044.......................   01.2714   17.50   330157..........   01.3606   19.48   330249.........   01.1711   15.98   340012.........   01.3201   15.92   340106.........   01.2125   18.52
330045.......................   01.4023   26.05   330158..........   01.4101   23.06   330250.........   01.3091   16.77   340013.........   01.2494   15.63   340107.........   01.4157   16.68
330046.......................   01.4855   29.75   330159..........   01.3179   18.08   330252.........   00.8801   15.72   340014.........   01.5841   22.01   340109.........   01.3465   16.84
330047.......................   01.2553   16.37   330160..........   01.4447   28.65   330254.........   01.1655   15.21   340015.........   01.2963   17.05   340111.........   01.1815   13.75
330048.......................   01.2233   16.94   330161..........   00.7222   16.75   330258.........   01.3709   26.99   340016.........   01.2058   15.58   340112.........   01.0676   13.87
330049.......................   01.3230   17.81   330162..........   01.2585   26.51   330259.........   01.5058   22.66   340017.........   01.2663   15.96   340113.........   01.9984   21.03
330053.......................   01.1834   15.15   330163..........   01.2525   18.88   330261.........   01.2898   25.24   340018.........   01.1806   15.29   340114.........   01.5616   19.74
330055.......................   01.4840   31.04   330164..........   01.3791   19.40   330263.........   01.0205   18.52   340019.........   01.0455   13.86   340115.........   01.5419   18.15
330056.......................   01.3098   27.72   330166..........   01.0009   15.11   330264.........   01.2445   23.18   340020.........   01.2079   17.65   340116.........   01.8193   20.54
330057.......................   01.6936   16.97   330167..........   01.7072   28.82   330265.........   01.3598   16.53   340021.........   01.2692   16.22   340119.........   01.2909   16.28
330058.......................   01.3085   16.22   330169..........   01.4102   32.57   330267.........   01.2237   23.35   340022.........   01.0376   14.98   340120.........   01.0939   12.31
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[[Page 29966]]


                                                                                          Page 11 of 16                                                                                         
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                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
340121.......................   01.1272   15.36   350043..........   01.7063   16.69   360064.........   01.6051   21.61   360145.........   01.6513   17.67   370015.........   01.2714   14.88
340123.......................   01.1203   16.92   350044..........   00.8706   10.29   360065.........   01.2767   17.59   360147.........   01.2402   15.85   370016.........   01.4234   15.52
340124.......................   01.0590   13.70   350047..........   01.1747   16.78   360066.........   01.4340   18.88   360148.........   01.1244   17.65   370017.........   01.0984   11.48
340125.......................   01.4925   18.36   350049..........   01.2578   10.74   360067.........   01.2694   12.77   360149.........   01.2274   17.72   370018.........   01.3359   16.48
340126.......................   01.4255   16.47   350050..........   00.9351   10.74   360068.........   01.7278   22.41   360150.........   01.2493   19.17   370019.........   01.2722   13.17
340127.......................   01.2939   15.72   350051..........   00.9967   15.46   360069.........   01.1325   16.74   360151.........   01.3575   17.46   370020.........   01.2996   12.51
340129.......................   01.2947   17.50   350053..........   01.0948   10.34   360070.........   01.7308   17.18   360152.........   01.4717   17.88   370021.........   00.8951   09.76
340130.......................   01.4418   17.46   350055..........   00.8596   12.12   360071.........   01.3511   16.78   360153.........   01.1783   14.12   370022.........   01.2960   16.91
340131.......................   01.5306   17.10   350056..........   00.9765   12.81   360072.........   01.2123   16.99   360154.........   01.0363   12.79   370023.........   01.3264   15.36
340132.......................   01.4381   13.48   350058..........   00.8581   12.32   360074.........   01.3755   19.42   360155.........   01.3328   19.43   370025.........   01.3632   16.03
340133.......................   01.0955   14.59   350060..........   00.7725   07.81   360075.........   01.4503   20.74   360156.........   01.3471   17.17   370026.........   01.4139   16.34
340137.......................   01.1470   16.93   350061..........   01.0750   14.05   360076.........   01.3497   17.88   360159.........   01.2236   19.63   370028.........   01.9000   19.01
340138.......................   01.0564   14.77   350063..........   00.8496  .......  360077.........   01.5372   19.34   360161.........   01.2522   19.38   370029.........   01.2231   13.67
340141.......................   01.6712   19.46   350064..........   00.9598  .......  360078.........   01.3085   20.54   360162.........   01.2461   18.42   370030.........   01.2222   15.66
340142.......................   01.2328   14.52   350066..........   00.4249  .......  360079.........   01.8680   21.00   360163.........   01.8359   19.83   370032.........   01.5723   15.46
340143.......................   01.4477   17.07   360001..........   01.3378   16.97   360080.........   01.1089   15.47   360164.........   00.9012   14.82   370033.........   01.0214   11.30
340144.......................   01.3647   18.62   360002..........   01.2156   16.93   360081.........   01.3825   19.32   360165.........   01.1732   14.70   370034.........   01.2608   13.35
340145.......................   01.4178   16.83   360003..........   01.7711   21.00   360082.........   01.3422   20.33   360166.........   01.2022   14.95   370035.........   01.6224   16.49
340146.......................   01.0449   12.52   360006..........   01.7569   20.88   360083.........   01.2835   16.28   360170.........   01.3679   17.38   370036.........   01.1150   10.48
340147.......................   01.3116   18.57   360007..........   01.0845   16.02   360084.........   01.6050   19.41   360172.........   01.3918   16.51   370037.........   01.7463   17.69
340148.......................   01.5003   18.58   360008..........   01.2538   17.40   360085.........   01.7758   20.40   360174.........   01.3082   17.57   370038.........   00.9813   11.67
340151.......................   01.2153   15.08   360009..........   01.3941   17.80   360086.........   01.4419   18.21   360175.........   01.2537   18.78   370039.........   01.4120   14.24
340153.......................   01.8958   19.07   360010..........   01.1953   16.42   360087.........   01.4087   17.90   360176.........   01.1682   14.85   370040.........   01.0735   12.21
340155.......................   01.4075   20.03   360011..........   01.3112   18.17   360088.........   01.2554   16.38   360177.........   01.3012   16.97   370041.........   01.0348   14.17
340156.......................   00.8391  .......  360012..........   01.2910   19.29   360089.........   01.1463   17.74   360178.........   01.1912   16.88   370042.........   00.8602   12.67
340158.......................   01.2118   16.64   360013..........   01.1166   17.72   360090.........   01.2393   19.06   360179.........   01.2984   19.34   370043.........   00.9396   13.83
340159.......................   01.1739   17.58   360014..........   01.1725   17.98   360091.........   01.2353   19.17   360180.........   02.1422   22.61   370045.........   01.0172   10.45
340160.......................   01.1173   13.34   360016..........   01.5863   17.93   360092.........   01.1745   18.70   360184.........   00.4826   16.57   370046.........   01.0071   11.67
340162.......................   01.1881   17.44   360017..........   01.8234   20.42   360093.........   01.2346   16.69   360185.........   01.2323   17.09   370047.........   01.3660   15.46
340164.......................   01.5854   18.61   360018..........   01.6349   19.27   360094.........   01.3179   19.51   360186.........   01.1303   14.23   370048.........   01.2382   14.10
340166.......................   01.3581   20.11   360019..........   01.2464   19.11   360095.........   01.2963   17.00   360187.........   01.3922   16.45   370049.........   01.3876   15.65
340168.......................   00.5171   14.86   360020..........   01.4455   19.77   360096.........   01.1048   16.11   360188.........   00.9743   15.83   370051.........   00.9683   12.64
340171.......................   01.1309   20.34   360021..........   01.2171   17.75   360098.........   01.3545   17.96   360189.........   01.0832   16.02   370054.........   01.4892   15.09
340173.......................   01.2673  .......  360024..........   01.4066   18.60   360099.........   01.0438   15.01   360192.........   01.3251   20.42   370056.........   01.5847   18.24
350001.......................   01.0123   11.96   360025..........   01.2789   18.44   360100.........   01.2631   16.54   360193.........   01.3592   16.93   370057.........   01.1516   13.78
350002.......................   01.7485   15.76   360026..........   01.3183   16.15   360101.........   01.5633   19.00   360194.........   01.2185   16.98   370059.........   01.1145   17.59
350003.......................   01.1883   16.16   360027..........   01.5006   19.53   360102.........   01.3173   20.31   360195.........   01.1450   18.15   370060.........   01.0938   12.84
350004.......................   01.9386   17.55   360028..........   01.3927   16.15   360103.........   01.3791   19.64   360197.........   01.2415   18.15   370063.........   01.0275   13.43
350005.......................   01.1692   12.94   360029..........   01.1968   17.00   360106.........   01.0835   14.96   360200.........   01.0110   14.16   370064.........   01.0078   10.63
350006.......................   01.4616   15.92   360030..........   01.2855   16.35   360107.........   01.2884   17.73   360203.........   01.1551   15.13   370065.........   00.9984   15.50
350007.......................   00.9387   11.95   360031..........   01.3350   18.56   360108.........   01.0393   15.34   360204.........   01.1958   17.97   370071.........   01.0541   11.99
350008.......................   00.9665   15.65   360032..........   01.0939   18.26   360109.........   01.0943   17.32   360210.........   01.1513   19.78   370072.........   00.9059   12.83
350009.......................   01.2060   15.95   360034..........   01.2933   13.90   360112.........   01.8152   22.51   360211.........   01.2508   18.78   370076.........   01.2821   12.00
350010.......................   01.2000   12.15   360035..........   01.5996   20.13   360113.........   01.3358   19.54   360212.........   01.3943   19.17   370077.........   01.1968   16.27
350011.......................   01.9051   17.35   360036..........   01.3867   17.62   360114.........   01.0899   17.10   360213.........   01.1498   17.17   370078.........   01.6755   14.49
350012.......................   01.2168   11.99   360037..........   02.0410   20.51   360115.........   01.2893   17.95   360218.........   01.3251   16.46   370079.........   00.9520   12.41
350013.......................   01.0734   15.32   360038..........   01.5770   18.07   360116.........   01.1193   16.64   360230.........   01.5118   19.37   370080.........   00.9631   11.68
350014.......................   01.0043   15.46   360039..........   01.3058   16.07   360118.........   01.3823   18.32   360231.........   01.0811   12.11   370082.........   00.8621   13.46
350015.......................   01.6873   15.63   360040..........   01.4255   17.31   360121.........   01.2332   17.90   360234.........   01.3514   18.54   370083.........   00.9402   11.35
350016.......................   01.0383   10.92   360041..........   01.3554   18.33   360123.........   01.1988   18.37   360236.........   01.2821   17.59   370084.........   01.1283   11.02
350017.......................   01.4320   15.24   360042..........   01.1544   17.62   360125.........   01.0770   17.38   360239.........   01.3231   19.51   370085.........   00.8919   14.52
350018.......................   01.0665   11.21   360044..........   01.1752   15.64   360126.........   01.2087   20.09   360241.........   00.5984   18.86   370086.........   01.1210   07.79
350019.......................   01.6314   18.43   360045..........   01.5364   20.90   360127.........   01.2267   16.48   360242.........   01.6845  .......  370089.........   01.2563   13.16
350020.......................   01.7038   20.24   360046..........   01.1470   19.88   360128.........   01.1952   14.73   360243.........   00.7548   15.52   370091.........   01.7651   17.18
350021.......................   01.0657   11.41   360047..........   01.1546   13.65   360129.........   01.0119   14.59   360244.........   00.6196   15.74   370092.........   01.0486   14.38
350023.......................   00.9037   15.30   360048..........   01.7847   21.55   360130.........   01.1375   15.59   360245.........   00.7558   14.33   370093.........   01.8654   18.71
350024.......................   01.0898   15.40   360049..........   01.2053   18.18   360131.........   01.3635   17.38   360247.........   00.4249  .......  370094.........   01.4086   17.00
350025.......................   01.0197   13.34   360050..........   01.1555   12.37   360132.........   01.3113   18.78   370001.........   01.7020   18.73   370095.........   00.9433   11.66
350027.......................   00.9438   12.32   360051..........   01.6065   22.36   360133.........   01.4867   18.44   370002.........   01.2595   13.98   370097.........   01.4514   18.02
350029.......................   00.8818   13.02   360052..........   01.7593   18.41   360134.........   01.7147   19.43   370004.........   01.3100   15.35   370099.........   01.1946   12.65
350030.......................   00.9790   15.93   360054..........   01.2902   15.83   360135.........   01.1776   16.82   370005.........   01.0107   13.12   370100.........   00.9605   13.45
350033.......................   00.9672   14.33   360055..........   01.2729   19.12   360136.........   01.0797   15.96   370006.........   01.2229   15.08   370103.........   00.9375   15.07
350034.......................   00.9622   14.56   360056..........   01.4338   16.47   360137.........   01.6205   18.82   370007.........   01.2258   13.82   370105.........   01.9925   16.23
350035.......................   00.8570   09.95   360057..........   01.1143   13.87   360140.........   01.0283   16.19   370008.........   01.4034   16.68   370106.........   01.5287   16.46
350038.......................   01.0474   14.07   360058..........   01.3442   16.66   360141.........   01.4692   21.06   370011.........   01.0552   12.95   370108.........   01.0528   11.73
350039.......................   01.0412   13.84   360059..........   01.5702   20.39   360142.........   00.9974   15.98   370012.........   00.8901   09.07   370112.........   01.0761   13.21
350041.......................   00.9787   14.99   360062..........   01.5152   19.27   360143.........   01.3979   18.13   370013.........   01.7959   19.41   370113.........   01.2411   16.23
350042.......................   01.0876   11.16   360063..........   01.1537   18.08   360144.........   01.3184   20.77   370014.........   01.2915   18.49   370114.........   01.6734   15.49
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 29967]]


                                                                                          Page 12 of 16                                                                                         
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
370121.......................   01.1456   17.38   380035..........   01.3707   19.01   390037.........   01.3363   18.93   390118.........   01.2116   16.26   390211.........   01.2753   16.99
370122.......................   01.1334   07.58   380036..........   01.0573   20.26   390039.........   01.1242   15.66   390119.........   01.3751   17.59   390213.........   01.0005   16.41
370123.......................   01.2119   12.32   380037..........   01.1645   19.53   390040.........   00.9636   13.13   390121.........   01.3408   17.47   390215.........   01.2741   21.06
370125.......................   01.0078   13.37   380038..........   01.3353   22.64   390041.........   01.3184   17.07   390122.........   01.0708   17.57   390217.........   01.2339   18.51
370126.......................   00.9515   15.34   380039..........   01.3785   29.30   390042.........   01.5616   21.73   390123.........   01.3538   20.71   390219.........   01.3280   19.67
370131.......................   01.0025   12.88   380040..........   01.2637   19.96   390043.........   01.1718   14.85   390125.........   01.2277   15.61   390220.........   01.1974   19.37
370133.......................   01.1482   10.09   380042..........   01.1658   20.57   390044.........   01.6542   19.63   390126.........   01.2947   21.03   390222.........   01.3127   20.33
370138.......................   01.1319   15.23   380047..........   01.7042   22.12   390045.........   01.7640   18.05   390127.........   01.2463   20.96   390223.........   01.5485   23.11
370139.......................   01.1351   12.56   380048..........   01.0410   14.68   390046.........   01.6118   19.79   390128.........   01.2129   18.14   390224.........   00.9185   13.35
370140.......................   00.9528   10.99   380050..........   01.3882   17.45   390047.........   01.7879   28.26   390130.........   01.1528   17.20   390225.........   01.2038   17.25
370141.......................   01.3712   17.30   380051..........   01.5603   20.05   390048.........   01.1662   16.60   390131.........   01.2893   16.30   390226.........   01.7722   24.15
370146.......................   01.0068   10.73   380052..........   01.1841   16.75   390049.........   01.6471   20.69   390132.........   01.3456   15.42   390228.........   01.2584   19.38
370148.......................   01.5163   18.46   380055..........   01.1753   24.14   390050.........   02.1332   22.39   390133.........   01.8248   21.71   390231.........   01.3380   25.11
370149.......................   01.2715   15.35   380056..........   01.0662   17.36   390051.........   02.2314   25.28   390135.........   01.3067   21.05   390233.........   01.3166   17.22
370153.......................   01.1566   13.86   380060..........   01.4332   21.98   390052.........   01.2173   19.41   390136.........   01.1980   15.39   390235.........   01.6737   24.38
370154.......................   00.9918   13.05   380061..........   01.5328   22.07   390054.........   01.2362   16.08   390137.........   01.5014   16.35   390236.........   01.2218   15.88
370156.......................   01.0804   12.49   380062..........   01.1673   14.40   390055.........   01.8446   21.81   390138.........   01.3175   17.93   390237.........   01.5879   20.36
370158.......................   00.9865   11.75   380063..........   01.2839   19.01   390056.........   01.1627   16.81   390139.........   01.5583   23.54   390238.........   01.4187   16.51
370159.......................   01.2579   15.59   380064..........   01.3699   21.25   390057.........   01.2722   18.70   390142.........   01.6478   23.18   390242.........   01.2892   18.48
370163.......................   00.8584   12.16   380065..........   01.0989   22.49   390058.........   01.3320   18.67   390145.........   01.3920   19.48   390244.........   00.8955   09.83
370165.......................   01.2002   12.46   380066..........   01.4293   18.58   390060.........   01.1507   16.92   390146.........   01.2908   16.44   390245.........   01.3725   23.05
370166.......................   01.1412   16.32   380068..........   01.0536   19.05   390061.........   01.4904   19.08   390147.........   01.2386   19.08   390246.........   01.2495   17.25
370169.......................   01.0923   11.25   380069..........   01.1444   18.59   390062.........   01.2096   16.01   390150.........   01.1114   18.10   390247.........   01.0371   18.26
370170.......................   01.0998  .......  380070..........   01.3975   21.24   390063.........   01.7632   19.24   390151.........   01.2811   18.58   390249.........   00.9800   12.06
370171.......................   01.0602  .......  380071..........   01.3430   20.07   390065.........   01.2783   19.30   390152.........   01.0751   18.81   390256.........   01.8447   23.21
370172.......................   00.9962  .......  380072..........   00.9558   14.66   390066.........   01.3181   17.77   390153.........   01.2365   22.46   390258.........   01.2636   20.08
370173.......................   01.1720  .......  380075..........   01.4074   19.72   390067.........   01.7805   18.91   390154.........   01.2353   16.67   390260.........   01.2223   21.36
370174.......................   01.1211  .......  380078..........   01.1136   17.41   390068.........   01.2705   17.23   390155.........   01.2835   19.44   390262.........   02.1044   17.77
370176.......................   01.1786   15.29   380081..........   01.0882   18.84   390069.........   01.2052   17.75   390156.........   01.4384   21.37   390263.........   01.4788   19.16
370177.......................   01.0146   10.09   380082..........   01.3415   22.96   390070.........   01.2877   20.39   390157.........   01.3442   17.99   390265.........   01.2975   18.82
370178.......................   01.0038   10.96   380083..........   01.2329   20.06   390071.........   01.1345   13.41   390158.........   01.5815   18.96   390266.........   01.1903   16.81
370179.......................   00.8178   17.33   380084..........   01.3178   21.43   390072.........   01.0884   15.91   390160.........   01.2481   18.50   390267.........   01.2766   19.80
370180.......................   00.9743  .......  380087..........   01.0131   15.38   390073.........   01.6228   19.03   390161.........   01.1216   14.43   390268.........   01.3984   20.44
370183.......................   01.0112   12.06   380088..........   01.0312   16.16   390074.........   01.3104   16.05   390162.........   01.4567   19.59   390270.........   01.3195   16.67
370186.......................   01.0207   13.15   380089..........   01.3743   22.25   390075.........   01.3024   16.41   390163.........   01.2442   15.99   390272.........   00.5086  ......
370189.......................   00.9532   07.82   380090..........   01.3216   25.71   390076.........   01.3560   21.07   390164.........   02.1520   20.37   390277.........   00.5135   22.55
370190.......................   01.5726   15.31   380091..........   01.2636   25.13   390078.........   01.0405   16.88   390166.........   01.1028   18.31   390278.........   00.6667   18.42
370192.......................   01.3093   17.57   390001..........   01.3377   18.25   390079.........   01.7573   16.81   390167.........   01.3539   21.30   390279.........   01.0585   15.32
370194.......................   01.8498  .......  390002..........   01.3642   18.62   390080.........   01.3310   19.14   390168.........   01.2630   18.43   390281.........   02.6697  ......
370195.......................   01.7510  .......  390003..........   01.2533   15.88   390081.........   01.3720   22.88   390169.........   01.2861   18.72   390282.........   02.8720  ......
370196.......................   01.2186  .......  390004..........   01.4312   18.12   390083.........   01.1651   22.01   390170.........   01.9027   21.25   400001.........   01.3075   08.65
370197.......................   01.0898  .......  390005..........   01.0800   14.24   390084.........   01.1937   15.57   390173.........   01.1957   17.78   400002.........   01.5650   11.00
380001.......................   01.3595   21.21   390006..........   01.7512   18.17   390086.........   01.2015   15.86   390174.........   01.7556   25.41   400003.........   01.2778   08.44
380002.......................   01.1948   19.35   390007..........   01.1629   21.90   390088.........   01.3108   22.62   390176.........   01.1738   18.14   400004.........   01.1644   08.18
380003.......................   01.2011   20.71   390008..........   01.1581   15.47   390090.........   01.8609   18.97   390178.........   01.2971   18.44   400005.........   01.0829   06.61
380004.......................   01.7699   23.34   390009..........   01.6156   17.81   390091.........   01.1345   17.40   390179.........   01.3028   22.12   400006.........   01.1988   07.59
380005.......................   01.2498   21.15   390010..........   01.1928   17.10   390093.........   01.1545   14.99   390180.........   01.5562   23.40   400007.........   01.2163   07.46
380006.......................   01.3682   19.26   390011..........   01.2677   16.82   390095.........   01.1947   14.46   390181.........   01.0663   18.59   400009.........   01.0136   07.71
380007.......................   01.5884   23.43   390012..........   01.2600   19.73   390096.........   01.3337   17.00   390183.........   01.2197   18.03   400010.........   00.9361   08.53
380008.......................   01.0562   17.82   390013..........   01.2411   16.90   390097.........   01.3295   21.56   390184.........   01.1453   18.07   400011.........   00.9932   08.12
380009.......................   01.8380   23.30   390015..........   01.1668   13.12   390098.........   01.7987   20.75   390185.........   01.2103   16.34   400012.........   01.2302   07.40
380010.......................   01.1162   20.67   390016..........   01.2453   16.40   390100.........   01.6689   20.03   390189.........   01.0957   15.96   400013.........   01.2495   08.19
380011.......................   01.0890   20.97   390017..........   01.1322   15.43   390101.........   01.2433   16.62   390191.........   01.1789   14.33   400014.........   01.3919   09.06
380013.......................   01.2719   17.76   390018..........   01.3522   20.05   390102.........   01.3985   20.58   390192.........   01.1862   16.36   400015.........   01.2207   10.98
380014.......................   01.5562   20.77   390019..........   01.1189   15.59   390103.........   01.0990   18.00   390193.........   01.2159   16.13   400016.........   01.3485   10.89
380017.......................   01.8262   23.17   390022..........   01.3277  .......  390104.........   01.0912   14.99   390194.........   01.0905   18.91   400017.........   01.2423   07.70
380018.......................   01.7650   21.22   390023..........   01.3020   18.98   390106.........   01.0779   15.15   390195.........   01.8842   22.93   400018.........   01.2939   09.80
380019.......................   01.3206   19.33   390024..........   00.9902   23.26   390107.........   01.2940   19.04   390196.........   01.4403  .......  400019.........   01.8123   09.34
380020.......................   01.4383   21.87   390025..........   00.6319   15.97   390108.........   01.3549   20.08   390197.........   01.3000   18.49   400021.........   01.4962   08.79
380021.......................   01.2983   19.44   390026..........   01.2842   20.94   390109.........   01.1618   14.14   390198.........   01.2260   15.75   400022.........   01.3207   10.01
380022.......................   01.2237   21.01   390027..........   01.9139   25.88   390110.........   01.5969   18.05   390199.........   01.3087   15.40   400024.........   00.9888   07.79
380023.......................   01.2422   17.43   390028..........   01.9063   17.78   390111.........   01.8405   27.77   390200.........   01.0941   14.88   400026.........   00.9734   06.74
380025.......................   01.2509   22.55   390029..........   01.9567   18.83   390112.........   01.1937   12.26   390201.........   01.2601   19.26   400027.........   01.1951   09.06
380026.......................   01.1673   17.54   390030..........   01.2362   17.37   390113.........   01.2115   16.25   390203.........   01.3880   20.96   400028.........   01.0432   07.89
380027.......................   01.3334   23.09   390031..........   01.1652   17.15   390114.........   01.2440   22.27   390204.........   01.2807   18.56   400029.........   01.1384   09.92
380029.......................   01.1591   18.45   390032..........   01.2748   18.10   390115.........   01.3799   22.31   390205.........   01.4152   20.63   400031.........   01.1944   08.50
380031.......................   01.0213   18.48   390035..........   01.2522   17.79   390116.........   01.2575   21.78   390206.........   01.4067   20.14   400032.........   01.1883   08.21
380033.......................   01.7400   24.13   390036..........   01.4191   18.06   390117.........   01.1969   15.62   390209.........   01.0490   15.09   400044.........   01.2161   09.13
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                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
400048.......................   01.2242   07.12   420056..........   01.1507   13.66   430062.........   00.8088   10.50   440072.........   01.4213   14.81   440208.........   01.9916  ......
400061.......................   01.5742   13.14   420057..........   01.1643   15.20   430064.........   01.1702   12.48   440073.........   01.3464   18.39   440209.........   01.7950  ......
400079.......................   01.3004   08.37   420059..........   00.9868   13.80   430065.........   01.0035   10.34   440078.........   01.0317   13.14   440211.........   00.8607  ......
400087.......................   01.4245   08.10   420061..........   01.1719   16.99   430066.........   00.9891   11.87   440081.........   01.1813   15.86   450002.........   01.5247   15.76
400094.......................   01.1019   09.07   420062..........   01.3818   16.51   430073.........   01.0151   13.25   440082.........   02.0414   21.47   450004.........   01.2254   12.21
400098.......................   01.2325   07.84   420064..........   01.1548   14.32   430076.........   00.9907   10.30   440083.........   01.1353   12.16   450005.........   01.2214   13.65
400102.......................   01.2159   07.59   420065..........   01.3523   17.37   430077.........   01.6483   16.77   440084.........   01.1861   12.89   450007.........   01.2627   13.51
400103.......................   01.4404   09.09   420066..........   00.9284   15.38   430079.........   01.0189   11.63   440090.........   00.8532   11.62   450008.........   01.3666   14.74
400104.......................   01.4125   09.01   420067..........   01.2688   16.48   430081.........   00.9311  .......  440091.........   01.6476   16.91   450010.........   01.4032   15.09
400105.......................   01.3335   09.08   420068..........   01.3427   17.07   430082.........   00.9287  .......  440100.........   01.0717   13.60   450011.........   01.6018   14.66
400106.......................   01.2054   07.87   420069..........   01.0615   14.29   430083.........   00.7707  .......  440102.........   01.0749   12.64   450014.........   01.0418   14.53
400109.......................   01.4891   09.67   420070..........   01.2880   15.76   430084.........   00.9960  .......  440103.........   01.2611   16.57   450015.........   01.5262   15.25
400110.......................   01.1489   08.39   420071..........   01.3268   17.29   430085.........   00.8973  .......  440104.........   01.6975   18.53   450016.........   01.6392   17.49
400111.......................   01.1258   08.52   420072..........   01.0362   11.62   430087.........   00.9273   08.64   440105.........   01.0672   16.52   450018.........   01.5953   21.98
400112.......................   01.2481   08.03   420073..........   01.3173   18.17   430089.........   00.8485  .......  440109.........   01.1135   12.71   450020.........   01.0239   16.23
400113.......................   01.2690   07.41   420074..........   00.9872   11.49   440001.........   01.1428   12.99   440110.........   00.9608   16.41   450021.........   01.8331   21.68
400114.......................   01.0608   07.55   420075..........   00.9616   14.51   440002.........   01.6292   16.75   440111.........   01.3704   18.75   450023.........   01.4566   16.60
400115.......................   01.0263   07.86   420078..........   01.7953   19.92   440003.........   01.1369   15.46   440114.........   01.0812   12.28   450024.........   01.3230   16.74
400117.......................   01.1722   09.01   420079..........   01.5952   17.29   440006.........   01.4817   18.40   440115.........   01.0718   15.34   450025.........   01.5940   15.72
400118.......................   01.2085   09.52   420080..........   01.3266   21.07   440007.........   00.9709   11.94   440120.........   01.5405   18.26   450028.........   01.5631   18.19
400120.......................   01.3142   09.23   420081..........   01.2360   19.59   440008.........   01.0209   12.34   440125.........   01.4775   18.20   450029.........   01.4549   14.12
400121.......................   01.0939   06.53   420082..........   01.4198   19.00   440009.........   01.2686   14.38   440130.........   01.2126   13.33   450031.........   01.5168   16.40
400122.......................   01.0238   06.66   420083..........   01.2843   17.31   440010.........   00.9443   10.15   440131.........   01.1300   13.71   450032.........   01.2480   12.89
400123.......................   01.1445   09.36   420085..........   01.5070   17.06   440011.........   01.3311   16.51   440132.........   01.1379   14.75   450033.........   01.6134   17.70
400124.......................   02.3594   11.32   420086..........   01.3720   16.96   440012.........   01.5149   18.04   440133.........   01.5674   18.67   450034.........   01.7067   18.08
410001.......................   01.3373   22.95   420087..........   01.6970   16.86   440014.........   01.1197   09.84   440135.........   01.2783   17.25   450035.........   01.5310   19.16
410004.......................   01.3108   20.70   420088..........   01.1977   15.27   440015.........   01.7227   18.12   440137.........   01.0167   13.14   450037.........   01.6277   18.03
410005.......................   01.3532   22.65   420089..........   01.2349   20.60   440016.........   00.9968   12.59   440141.........   01.0482   14.12   450039.........   01.3300   15.55
410006.......................   01.3138   20.73   420091..........   01.2859   15.25   440017.........   01.6389   20.72   440142.........   01.0271   11.05   450040.........   01.5616   17.73
410007.......................   01.7020   21.60   420093..........   01.0323  .......  440018.........   01.4094   17.06   440143.........   01.1050   15.73   450042.........   01.7484   15.78
410008.......................   01.2204   21.52   420094..........   01.0179  .......  440019.........   01.7169   17.21   440144.........   01.2388   18.01   450044.........   01.6262   18.91
410009.......................   01.3136   21.34   430004..........   01.1109   15.06   440020.........   01.2203   15.78   440145.........   00.9912   14.42   450046.........   01.3343   15.81
410010.......................   01.0657   25.32   430005..........   01.3614   14.44   440022.........   01.1220   14.01   440147.........   01.5238   23.56   450047.........   01.0984   11.06
410011.......................   01.2324   23.69   430007..........   01.0857   12.77   440023.........   01.0808   13.04   440148.........   01.1480   15.54   450050.........   01.0051   14.35
410012.......................   01.8245   20.26   430008..........   01.1123   13.56   440024.........   01.3172   16.88   440149.........   01.1537   15.28   450051.........   01.6250   18.53
410013.......................   01.3313   27.36   430010..........   01.1579   11.70   440025.........   01.1300   13.54   440150.........   01.2962   19.97   450052.........   01.0403   13.01
420002.......................   01.3770   20.19   430011..........   01.2798   14.49   440029.........   01.2918   16.93   440151.........   01.3053   16.20   450053.........   01.0959   13.82
420004.......................   01.8223   18.16   430012..........   01.2820   15.03   440030.........   01.2279   12.15   440152.........   01.7854   17.68   450054.........   01.6711   21.71
420005.......................   01.2080   14.51   430013..........   01.2916   15.39   440031.........   01.0160   13.14   440153.........   01.2929   15.19   450055.........   01.1378   13.89
420006.......................   01.1685   17.19   430014..........   01.3110   16.99   440032.........   01.0578   14.47   440156.........   01.5822   19.18   450056.........   01.6884   17.92
420007.......................   01.4966   16.92   430015..........   01.2134   15.17   440033.........   01.1116   14.61   440157.........   01.0406   13.83   450058.........   01.5849   16.46
420009.......................   01.2388   16.92   430016..........   01.8671   17.78   440034.........   01.5553   17.68   440159.........   01.3164   14.02   450059.........   01.2856   13.85
420010.......................   01.1193   15.13   430018..........   00.9520   13.13   440035.........   01.3293   16.53   440161.........   01.8760   20.06   450063.........   00.9511   10.66
420011.......................   01.1234   15.28   430022..........   00.9351   11.95   440039.........   01.6928   17.44   440162.........   01.0104   16.30   450064.........   01.4865   15.57
420014.......................   01.0951   14.36   430023..........   00.9521   10.34   440040.........   01.0082   10.81   440166.........   01.5684   18.25   450065.........   01.1163   14.73
420015.......................   01.3662   16.84   430024..........   00.9521   12.07   440041.........   01.0593   12.23   440168.........   01.0424   12.43   450068.........   01.8875   21.36
420016.......................   01.0745   14.21   430026..........   01.0086   11.18   440046.........   01.2853   15.30   440173.........   01.5484   17.50   450072.........   01.2285   18.67
420018.......................   01.8185   20.00   430027..........   01.7827   17.63   440047.........   00.9404   14.52   440174.........   01.0215   12.74   450073.........   01.1020   12.06
420019.......................   01.1984   14.70   430028..........   01.1366   13.29   440048.........   01.8480   17.82   440175.........   01.1777   18.60   450076.........   01.6669  ......
420020.......................   01.3480   16.94   430029..........   00.9657   13.84   440049.........   01.6757   16.37   440176.........   01.4491   19.17   450078.........   00.9704   11.75
420023.......................   01.4482   18.50   430031..........   00.9226   11.58   440050.........   01.3472   16.52   440178.........   01.2515   17.07   450079.........   01.4553   21.93
420026.......................   01.8746  .......  430033..........   01.0529   13.10   440051.........   00.9680   13.82   440180.........   01.2303   16.96   450080.........   01.2792   15.99
420027.......................   01.3574   16.82   430034..........   01.1146   11.59   440052.........   01.1954   14.76   440181.........   01.0357   12.37   450081.........   01.0888   14.50
420030.......................   01.2767   16.95   430036..........   01.0229   11.83   440053.........   01.3492   16.28   440182.........   01.0196   12.53   450082.........   01.0008   14.70
420031.......................   00.9777   11.88   430037..........   00.9883   13.15   440054.........   01.2010   14.55   440183.........   01.5112   19.69   450083.........   01.7831   19.58
420033.......................   01.1637   18.91   430038..........   01.0476   10.83   440056.........   01.1009   13.57   440184.........   01.3998   18.96   450085.........   01.0851   17.24
420036.......................   01.3500   16.42   430040..........   01.0238   12.64   440057.........   01.0218   12.15   440185.........   01.2194   17.48   450087.........   01.4649   18.74
420037.......................   01.2806   20.66   430041..........   00.9678   12.47   440058.........   01.2498   16.30   440186.........   01.0749   15.77   450090.........   01.2173   13.26
420038.......................   01.2733   14.80   430043..........   01.2174   11.82   440059.........   01.3794   14.85   440187.........   01.1423   14.65   450092.........   01.2090   11.88
420039.......................   01.1655   15.64   430044..........   00.8368   14.07   440060.........   01.3032   14.20   440189.........   01.5094   19.13   450094.........   01.3357   17.87
420042.......................   01.1364   14.05   430047..........   01.0865   11.92   440061.........   01.1966   15.89   440192.........   01.1998   15.37   450096.........   01.5725   17.19
420043.......................   01.2714   19.12   430048..........   01.2962   15.48   440063.........   01.6337   17.90   440193.........   01.2956   18.60   450097.........   01.4817   18.51
420048.......................   01.1481   15.56   430049..........   00.9274   12.70   440064.........   01.1162   14.56   440194.........   01.2216   17.13   450098.........   01.1764   15.10
420049.......................   01.2072   15.85   430051..........   00.9319   13.84   440065.........   01.2912   17.78   440197.........   01.3735   19.23   450099.........   01.3101   23.18
420051.......................   01.6308   18.01   430054..........   01.0413   12.79   440067.........   01.2815   14.99   440200.........   01.0981   15.64   450101.........   01.4883   15.44
420053.......................   01.2774   14.99   430056..........   00.8740   09.56   440068.........   01.2253   17.28   440203.........   00.9109   13.09   450102.........   01.7049   17.58
420054.......................   01.2582   17.08   430057..........   00.9229   10.73   440070.........   01.1015   14.28   440205.........   01.1096   15.47   450104.........   01.2444   14.23
420055.......................   01.0221   14.59   430060..........   00.9262   08.64   440071.........   01.3899   16.32   440206.........   01.0802   13.80   450107.........   01.6233   22.05
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[[Page 29969]]


                                                                                          Page 14 of 16                                                                                         
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                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
450108.......................   00.9815   12.48   450222..........   01.6052   18.35   450388.........   01.8099   17.12   450597.........   01.0314   14.53   450716.........   01.2930   19.56
450109.......................   00.9148   14.70   450224..........   01.3658   20.66   450389.........   01.3230   17.71   450603.........   00.7195   16.81   450717.........   01.2558   23.86
450110.......................   01.2769   19.30   450229..........   01.5642   15.41   450393.........   01.3196   19.70   450604.........   01.4409   14.00   450718.........   01.2324   19.03
450111.......................   01.2174   18.93   450231..........   01.6420   18.25   450395.........   01.0474   13.74   450605.........   01.3903   17.67   450723.........   01.3871   18.21
450112.......................   01.3148   14.31   450234..........   01.0004   13.07   450399.........   01.0593   15.59   450609.........   00.9173   11.77   450724.........   01.3694   17.44
450113.......................   01.2852   17.93   450235..........   01.0302   13.46   450400.........   01.1860   11.76   450610.........   01.5468   17.21   450725.........   00.9483   17.49
450118.......................   01.5829   20.36   450236..........   01.2196   13.99   450403.........   01.2999   21.22   450614.........   01.0061   12.53   450727.........   01.2086   10.80
450119.......................   01.3813   17.13   450237..........   01.6231   16.83   450411.........   00.9126   12.20   450615.........   01.0935   12.80   450728.........   00.9365   12.62
450121.......................   01.5542   19.99   450239..........   01.0605   13.70   450417.........   01.0959   19.31   450617.........   01.3517   20.12   450730.........   01.3301   21.46
450123.......................   01.0936   15.98   450241..........   00.9264   12.67   450418.........   01.4986   21.43   450620.........   01.1357   12.16   450733.........   01.3644   16.88
450124.......................   01.7106   16.25   450243..........   00.7792   09.65   450419.........   01.2778   17.19   450623.........   01.1891   16.71   450735.........   01.0419   12.02
450126.......................   01.3628   16.01   450246..........   00.9464   17.09   450422.........   00.8249   24.65   450626.........   01.0657   16.03   450742.........   01.2935   19.47
450128.......................   01.1960   12.44   450249..........   00.9685   09.95   450423.........   01.5847   21.56   450628.........   00.9294   12.34   450743.........   01.4234   17.79
450130.......................   01.4849   16.93   450250..........   00.9480   11.36   450424.........   01.2491   17.77   450630.........   01.6663   23.25   450746.........   01.0195   13.81
450131.......................   01.4085   18.24   450253..........   01.3010   11.92   450429.........   01.1054   12.87   450631.........   01.7531   20.15   450747.........   01.3630   17.04
450132.......................   01.7189   16.46   450258..........   01.1072   10.85   450431.........   01.6301   18.76   450632.........   00.9769   11.39   450749.........   01.0131   14.63
450133.......................   01.5938   17.90   450259..........   01.1636   18.29   450438.........   01.2603   11.50   450633.........   01.6373   20.20   450750.........   01.0217   12.20
450135.......................   01.6826   23.54   450264..........   00.8770   13.08   450446.........   00.6484   12.67   450634.........   01.6146   23.56   450751.........   01.3430   15.58
450137.......................   01.5005   22.19   450269..........   01.0728   13.96   450447.........   01.3879   18.07   450638.........   01.5891   22.00   450754.........   00.9520   13.49
450140.......................   00.9941   17.44   450270..........   01.2548   08.84   450451.........   01.1562   16.96   450639.........   01.4390   21.06   450755.........   01.1665   15.54
450142.......................   01.4559   20.28   450271..........   01.2644   14.84   450457.........   01.7826   17.34   450641.........   01.0419   13.24   450757.........   00.9463   13.62
450143.......................   01.0346   11.10   450272..........   01.3480   15.38   450460.........   01.0543   12.46   450643.........   01.2287   17.43   450758.........   02.0308   21.92
450144.......................   01.0940   15.29   450276..........   01.0121   12.63   450462.........   01.7703   20.49   450644.........   01.5108   19.07   450760.........   01.2570   18.35
450145.......................   00.8190   13.36   450278..........   00.9870   13.64   450464.........   01.0046   15.15   450646.........   01.6546   31.36   450761.........   01.1320   09.57
450146.......................   00.9883   20.32   450280..........   01.5295   23.09   450465.........   01.3413   16.93   450647.........   01.9647   23.27   450763.........   01.0156   16.60
450147.......................   01.4166   17.72   450283..........   01.1089   12.43   450467.........   00.9719   14.01   450648.........   00.9843   09.48   450766.........   02.0743   20.76
450148.......................   01.2606   20.21   450286..........   01.0057   16.36   450469.........   01.3764   17.25   450649.........   01.0397   14.06   450769.........   00.9968   13.40
450149.......................   01.4187   19.53   450288..........   01.2657   13.67   450473.........   00.9945   15.03   450651.........   01.7497   22.80   450770.........   01.0425   14.57
450150.......................   00.9226   13.75   450289..........   01.4333   19.14   450475.........   01.1405   14.96   450652.........   00.8637   13.96   450771.........   01.7860   22.32
450151.......................   01.1247   14.16   450292..........   01.2492   21.03   450484.........   01.4464   18.03   450653.........   01.2233   15.20   450774.........   01.0941   21.24
450152.......................   01.2598   15.74   450293..........   00.9756   12.41   450488.........   01.3242   16.08   450654.........   00.9512   12.28   450775.........   01.2818   17.09
450153.......................   01.6202   18.44   450296..........   01.3760   15.38   450489.........   01.0196   12.72   450656.........   01.5372   17.19   450776.........   00.9164   11.18
450154.......................   01.1969   13.12   450299..........   01.3407   13.00   450497.........   01.1733   12.88   450658.........   00.9714   12.32   450777.........   01.0384   16.60
450155.......................   01.0262   14.09   450303..........   00.9926   11.50   450498.........   01.0536   13.15   450659.........   01.5376   20.54   450779.........   01.2550   21.36
450157.......................   00.9708   12.80   450306..........   01.2021   12.82   450508.........   01.4210   13.21   450661.........   01.2312   18.51   450780.........   01.4170   16.91
450160.......................   00.9461   17.12   450307..........   00.7810   14.25   450514.........   01.1932   18.47   450662.........   01.6120   17.38   450781.........   01.5749   11.01
450162.......................   01.2508   18.76   450309..........   01.0665   14.17   450517.........   00.9085   11.11   450665.........   00.9174   12.95   450785.........   01.0228   16.39
450163.......................   01.1399   16.82   450315..........   01.0404   18.63   450518.........   01.5597   16.38   450666.........   01.3365   19.72   450788.........   01.4465   19.31
450164.......................   01.1216   12.83   450320..........   01.3540   18.45   450523.........   01.5809   19.54   450668.........   01.5985   19.60   450794.........   01.4278   16.20
450165.......................   01.0205   10.46   450321..........   01.0170   13.51   450530.........   01.3722   14.27   450669.........   01.3372   19.26   450795.........   00.8684   20.22
450166.......................   01.0252   13.06   450322..........   00.8216   16.61   450534.........   01.0396   18.02   450670.........   01.3101   17.24   450797.........   00.7374   16.67
450169.......................   01.0085   11.97   450324..........   01.6983   15.77   450535.........   01.2947   21.25   450672.........   01.6189   20.69   450798.........   00.8432   08.88
450170.......................   00.9952   12.46   450325..........   00.9022   11.47   450537.........   01.3071   19.69   450673.........   01.0516   12.14   450801.........   01.4775   22.80
450176.......................   01.2954   15.32   450327..........   01.0143   12.60   450538.........   01.2092   20.77   450674.........   00.9786   19.88   450802.........   01.2334  ......
450177.......................   01.2766   11.10   450330..........   01.1500   15.62   450539.........   01.4110   14.67   450675.........   01.5234   20.99   450803.........   00.8631  ......
450178.......................   01.0184   15.84   450334..........   01.0516   12.11   450544.........   01.3641   19.25   450677.........   01.4283   17.43   450804.........   01.5585  ......
450181.......................   01.0644   14.13   450337..........   01.1601   13.85   450545.........   01.2684   20.93   450678.........   01.5025   20.85   450807.........   00.9198  ......
450184.......................   01.5231   13.53   450340..........   01.3229   12.68   450547.........   01.1540   15.13   450683.........   01.3410   17.23   450808.........   00.9783  ......
450185.......................   01.0793   08.69   450341..........   01.0487   15.87   450550.........   01.0672   18.37   450684.........   01.3031   21.41   450809.........   01.6796  ......
450187.......................   01.2402   16.51   450346..........   01.4259   15.73   450551.........   01.2241   13.01   450686.........   01.6052   14.14   450810.........   01.3049  ......
450188.......................   01.0927   12.80   450347..........   01.1507   16.68   450558.........   01.7279   20.85   450688.........   01.3639   19.63   450811.........   02.1669  ......
450190.......................   01.1709  .......  450348..........   00.9843   11.20   450559.........   00.9392   12.26   450690.........   01.4058   21.41   450812.........   01.5923  ......
450191.......................   01.0842   15.87   450351..........   01.1951   17.71   450561.........   01.6915   17.18   450691.........   00.9630  .......  460001.........   01.8018   20.73
450192.......................   01.2916   17.51   450352..........   01.1046   16.53   450563.........   01.2766   23.92   450694.........   01.1385   18.16   460003.........   01.6984   17.86
450193.......................   02.0357   21.80   450353..........   01.2637   16.98   450565.........   01.2685   16.10   450696.........   01.9697   22.02   460004.........   01.7275   21.45
450194.......................   01.2661   17.65   450355..........   01.1523   13.03   450570.........   01.0784   15.81   450697.........   01.4970   13.82   460005.........   01.6827   18.56
450196.......................   01.4873   16.93   450358..........   02.0795   20.80   450571.........   01.4769   15.53   450698.........   00.9778   11.65   460006.........   01.4501   19.40
450200.......................   01.4249   17.40   450362..........   01.1675   13.83   450573.........   01.0612   14.35   450700.........   00.9476   13.15   460007.........   01.3572   20.40
450201.......................   01.0038   15.45   450369..........   01.0553   13.10   450574.........   00.9359   11.72   450702.........   01.5805   18.94   460008.........   01.3860   15.91
450203.......................   01.2170   17.46   450370..........   01.2765   11.11   450575.........   01.0735   16.62   450703.........   01.5428   18.24   460009.........   01.8462   19.39
450209.......................   01.4952   21.78   450371..........   01.1605   12.16   450578.........   00.9338   12.99   450704.........   01.4192   18.02   460010.........   02.0177   20.86
450210.......................   01.1667   12.30   450372..........   01.3132   21.02   450580.........   01.1376   13.29   450705.........   00.9145   18.50   460011.........   01.4613   16.34
450211.......................   01.4111   16.52   450373..........   01.1587   13.38   450583.........   00.9816   13.04   450706.........   01.2508   22.63   460013.........   01.5206   16.74
450213.......................   01.6457   15.42   450374..........   00.9148   11.66   450584.........   01.1817   13.02   450709.........   01.3400   19.78   460014.........   01.0850   15.12
450214.......................   01.4227   19.51   450376..........   01.4827   17.78   450586.........   01.0491   11.16   450711.........   01.5979   18.18   460015.........   01.2184   20.40
450217.......................   01.0015   11.56   450378..........   01.1028   19.87   450587.........   01.2525   15.98   450712.........   00.7899   11.12   460016.........   00.9611   12.50
450219.......................   01.1518   14.78   450379..........   01.5239   21.62   450591.........   01.1497   18.92   450713.........   01.4954   20.85   460017.........   01.5581   16.40
450221.......................   01.1688   14.40   450381..........   00.9929   12.86   450596.........   01.3942   17.15   450715.........   01.3740   18.59   460018.........   00.9973   15.45
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[[Page 29970]]


                                                                                          Page 15 of 16                                                                                         
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Avg.                                 Avg.                                Avg.                                Avg.                               Avg. 
           Provider            Case mix    hour       Provider      Case mix    hour       Provider     Case mix    hour       Provider     Case mix    hour       Provider     Case mix   hour 
                                 index     wage                       index     wage                      index     wage                      index     wage                      index    wage 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
460019.......................   01.1179   14.45   490035..........   01.1338   13.02   490130.........   01.2939   15.07   500097.........   01.2116   17.46   510071.........   01.3174   15.64
460020.......................   01.0427   16.33   490037..........   01.2373   13.99   490131.........   00.9879   14.74   500098.........   01.0380   15.44   510072.........   01.0597   13.24
460021.......................   01.3861   19.46   490038..........   01.2643   13.43   490132.........   01.0342  .......  500101.........   01.0064   15.92   510077.........   01.1812   15.36
460022.......................   00.9383   19.23   490040..........   01.4769   21.68   500001.........   01.3664   21.66   500102.........   01.0235   19.46   510080.........   01.2137   11.53
460023.......................   01.2249   21.08   490041..........   01.2707   16.21   500002.........   01.4348   19.10   500104.........   01.3261   19.88   510081.........   01.1592   12.97
460024.......................   01.0133   14.78   490042..........   01.3538   15.75   500003.........   01.3881   25.32   500106.........   00.9016   20.08   510082.........   01.2159   12.89
460025.......................   00.8148   13.73   490043..........   01.4488   20.60   500005.........   01.8225   21.58   500107.........   01.1551   15.79   510084.........   00.9547   13.24
460026.......................   00.9812   17.03   490044..........   01.3525   17.15   500007.........   01.3876   21.79   500108.........   01.7177   21.74   510085.........   01.3537   17.90
460027.......................   00.9312   19.08   490045..........   01.2318   18.29   500008.........   01.9449   23.18   500110.........   01.2300   19.44   510086.........   01.0856   15.08
460029.......................   01.0389   18.60   490046..........   01.4958   17.80   500011.........   01.4259   22.64   500118.........   01.1761   21.92   520002.........   01.2177   18.84
460030.......................   01.1718   17.32   490047..........   01.0908   16.50   500012.........   01.4808   21.18   500119.........   01.3377   20.39   520003.........   01.1201   15.41
460032.......................   01.0291   21.16   490048..........   01.6102   17.44   500014.........   01.4972   20.92   500122.........   01.2814   21.99   520004.........   01.1861   16.78
460033.......................   00.9685   17.97   490050..........   01.4630   21.02   500015.........   01.3782   21.85   500123.........   00.8465   18.56   520006.........   01.0231   18.17
460035.......................   00.9265   12.17   490052..........   01.6078   15.45   500016.........   01.4757   23.26   500124.........   01.3142   22.83   520007.........   01.2287   14.55
460036.......................   01.0220   20.05   490053..........   01.2686   14.77   500019.........   01.3364   21.38   500125.........   01.0100   11.61   520008.........   01.5752   22.49
460037.......................   00.9878   17.48   490054..........   01.1012   14.36   500021.........   01.5592   21.91   500129.........   01.7381   23.35   520009.........   01.6581   17.31
460039.......................   01.0927   20.36   490057..........   01.5483   17.69   500023.........   01.2130   19.53   500132.........   00.9524   18.51   520010.........   01.1686   19.33
460041.......................   01.2537   20.90   490059..........   01.6177   19.41   500024.........   01.6817   22.23   500134.........   00.6974   15.59   520011.........   01.2161   16.85
460042.......................   01.4822   17.04   490060..........   01.0839   17.79   500025.........   01.8740   23.44   500138.........   03.9749  .......  520013.........   01.3799   18.80
460043.......................   01.2702   21.71   490063..........   01.7052   22.93   500026.........   01.4019   23.85   500139.........   01.5091   21.25   520014.........   01.1396   16.08
460044.......................   01.1845   19.83   490066..........   01.3637   18.00   500027.........   01.5352   25.23   500141.........   01.3275   22.22   520015.........   01.1912   16.72
460046.......................   00.9068   12.27   490067..........   01.2271   15.82   500028.........   01.1235   14.69   500143.........   00.7385   15.20   520016.........   01.1027   13.21
460047.......................   01.7432   19.82   490069..........   01.4520   14.96   500029.........   00.9534   13.71   500146.........   01.1734   26.11   520017.........   01.1540   17.45
460049.......................   01.9647   17.85   490071..........   01.5024   18.60   500030.........   01.5279   22.55   510001.........   01.8125   17.35   520018.........   01.1214   16.17
460050.......................   01.2748   21.99   490073..........   01.4695   17.55   500031.........   01.3419   20.58   510002.........   01.2928   14.18   520019.........   01.3048   16.63
460051.......................   01.2923   32.89   490074..........   01.3688   16.77   500033.........   01.2759   18.41   510004.........   01.1211   13.65   520021.........   01.3122   19.90
470001.......................   01.1614   18.73   490075..........   01.3977   16.37   500036.........   01.3202   19.95   510005.........   00.9608   14.19   520024.........   01.0463   13.11
470003.......................   01.7901   20.70   490077..........   01.2584   17.87   500037.........   01.1682   18.70   510006.........   01.2948   17.42   520025.........   01.1116   18.58
470004.......................   01.1007   15.85   490079..........   01.3240   15.15   500039.........   01.3867   22.10   510007.........   01.4908   17.98   520026.........   01.0837   17.49
470005.......................   01.2726   20.26   490083..........   00.7754   15.02   500041.........   01.2893   23.23   510008.........   01.1457   15.55   520027.........   01.2413   19.27
470006.......................   01.2468   17.83   490084..........   01.3000   15.43   500042.........   01.3518   22.37   510012.........   01.1036   14.37   520028.........   01.3033   17.76
470008.......................   01.1912   16.76   490085..........   01.2391   13.39   500043.........   01.1927   17.16   510013.........   01.1691   15.80   520029.........   00.9692   16.94
470010.......................   01.1212   19.03   490088..........   01.1817   14.44   500044.........   01.9850   20.96   510015.........   00.9444   12.51   520030.........   01.6451   21.19
470011.......................   01.1945   19.82   490089..........   01.1287   16.18   500045.........   01.1350   20.81   510016.........   00.9168   12.66   520031.........   01.1198   15.24
470012.......................   01.2433   17.88   490090..........   01.2018   15.17   500048.........   00.9633   16.46   510018.........   01.1807   15.26   520032.........   01.2371   15.25
470015.......................   01.2218   16.67   490091..........   01.2793   18.78   500049.........   01.4916   19.24   510020.........   01.1194   10.56   520033.........   01.1663   16.22
470018.......................   01.2205   20.53   490092..........   01.2074   15.13   500050.........   01.4321   20.96   510022.........   01.8872   19.16   520034.........   01.1973   17.64
470020.......................   00.9787   15.18   490093..........   01.3622   15.83   500051.........   01.6718   23.18   510023.........   01.1987   16.62   520035.........   01.3370   15.87
470023.......................   01.2848   19.08   490094..........   01.1740   14.52   500052.........   01.3138  .......  510024.........   01.4379   18.43   520037.........   01.6533   19.06
470024.......................   01.1442   18.26   490095..........   01.4751   16.79   500053.........   01.3072   20.42   510026.........   01.0140   12.33   520038.........   01.3030   16.45
490001.......................   01.2391   19.51   490097..........   01.1539   14.52   500054.........   01.8790   21.08   510027.........   00.9461   14.62   520039.........   00.9943   16.33
490002.......................   01.0988   14.56   490098..........   01.2285   11.67   500055.........   01.1227   20.13   510028.........   01.0819   18.99   520040.........   01.4729   19.34
490003.......................   00.5817   17.19   490099..........   00.9532   16.51   500057.........   01.3062   17.22   510029.........   01.2900   16.78   520041.........   01.1752   14.93
490004.......................   01.2302   16.97   490100..........   01.4486   17.21   500058.........   01.5259   20.32   510030.........   01.0514   14.39   520042.........   01.0956   16.42
490005.......................   01.5903   16.31   490101..........   01.2168   22.93   500059.........   01.1436   20.76   510031.........   01.4818   15.97   520044.........   01.4078   16.15
490006.......................   01.1307   13.82   490104..........   00.8468   16.07   500060.........   01.4042   23.27   510033.........   01.3546   15.30   520045.........   01.7365   18.68
490007.......................   02.0885   17.16   490105..........   00.6278   18.83   500061.........   01.0337   18.19   510035.........   01.3607   16.81   520047.........   00.9913   15.41
490009.......................   01.8640   18.27   490106..........   00.8554   16.48   500062.........   01.1311   18.80   510036.........   01.0693   11.64   520048.........   01.4698   18.11
490010.......................   01.1608   17.32   490107..........   01.3315   22.98   500064.........   01.5874   22.08   510038.........   01.1630   13.36   520049.........   02.0300   18.52
490011.......................   01.4254   17.33   490108..........   00.9003   15.39   500065.........   01.2122   18.72   510039.........   01.3322   15.48   520051.........   01.7856   20.21
490012.......................   01.2232   15.30   490109..........   00.9328   17.44   500068.........   01.0306   18.40   510043.........   00.9306   11.52   520053.........   01.1223   15.45
490013.......................   01.2160   16.75   490110..........   01.4165   15.07   500069.........   01.2223   19.76   510046.........   01.2749   15.91   520054.........   01.0828   17.03
490014.......................   01.4808   22.42   490111..........   01.2440   15.83   500071.........   01.2861   19.80   510047.........   01.2457   18.06   520056.........   01.7830   18.87
490015.......................   01.4311   18.76   490112..........   01.6006   18.51   500072.........   01.2065   22.83   510048.........   01.0990   18.22   520057.........   01.1254   16.59
490017.......................   01.3601   16.73   490113..........   01.3494   21.59   500073.........   01.0524   16.74   510050.........   01.5722   16.11   520058.........   01.1042   18.17
490018.......................   01.2981   17.15   490114..........   01.1413   15.47   500074.........   01.1555   15.67   510053.........   01.0304   14.12   520059.........   01.4123   18.74
490019.......................   01.1876   16.46   490115..........   01.2226   14.46   500077.........   01.3811   21.68   510055.........   01.2691   19.68   520060.........   01.4284   15.26
490020.......................   01.2060   15.76   490116..........   01.3299   15.48   500079.........   01.3672   21.40   510058.........   01.1974   17.03   520062.........   01.3510   16.73
490021.......................   01.2422   17.30   490117..........   01.1828   12.41   500080.........   00.8662   11.72   510059.........   01.4747   14.25   520063.........   01.1983   17.63
490022.......................   01.4383   19.31   490118..........   01.7803   21.05   500084.........   01.1847   20.78   510060.........   01.1523   15.55   520064.........   01.7057   20.15
490023.......................   01.2993   18.01   490119..........   01.3740   16.40   500085.........   01.0690   19.55   510061.........   01.0363   13.37   520066.........   01.5302   18.82
490024.......................   01.8166   16.27   490120..........   01.3266   17.49   500086.........   01.3071   20.03   510062.........   01.1784   15.77   520068.........   00.9859   16.85
490027.......................   01.1596   13.29   490122..........   01.4671   21.19   500088.........   01.3442   23.37   510063.........   00.9557   16.84   520069.........   01.1921   17.13
490028.......................   01.3111   20.17   490123..........   01.1856   15.29   500089.........   01.0273   15.05   510065.........   01.0484   11.49   520070.........   01.6335   17.38
490030.......................   01.1728   10.83   490124..........   01.2023   17.12   500090.........   00.9361   13.67   510066.........   01.1335   11.93   520071.........   01.1575   17.53
490031.......................   01.1124   13.00   490126..........   01.4227   14.85   500092.........   01.0544   17.86   510067.........   01.2735   17.97   520074.........   01.0679   15.42
490032.......................   01.7731   19.42   490127..........   01.0020   14.52   500094.........   00.9089   15.30   510068.........   01.1169   14.34   520075.........   01.4644   18.02
490033.......................   01.2333   16.48   490129..........   01.1425   19.20   500096.........   00.9886   18.51   510070.........   01.3315   15.86   520076.........   01.1607   15.11
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 29971]]


                                                                                                              Page 16 of 16                                                                                                             
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                        
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Case      Avg.                              Case      Avg.                                                                                                                                      
              Provider                   mix      hour           Provider            mix      hour                                                                                                                                      
                                        index     wage                              index     wage                                                                                                                                      
----------------------------------------------------------------------------------------------------                                                                                                                                    
520077..............................   00.8551   14.03   530003.................   01.0202   12.47                                                                                                                                      
520078..............................   01.6182   18.63   530004.................   00.9980   14.18                                                                                                                                      
520082..............................   01.2818   16.43   530005.................   01.0061   13.47                                                                                                                                      
520083..............................   01.6772   21.60   530006.................   01.1369   16.52                                                                                                                                      
520084..............................   01.0951   16.87   530007.................   01.0829   12.98                                                                                                                                      
520087..............................   01.6988   18.12   530008.................   01.3394   16.82                                                                                                                                      
520088..............................   01.3099   17.98   530009.................   01.0060   16.77                                                                                                                                      
520089..............................   01.5179   19.50   530010.................   01.4102   16.12                                                                                                                                      
520090..............................   01.2381   16.18   530011.................   01.1085   16.94                                                                                                                                      
520091..............................   01.3629   18.13   530012.................   01.5449   18.11                                                                                                                                      
520092..............................   01.1204   15.74   530014.................   01.4213   15.18                                                                                                                                      
520094..............................   00.7915   16.12   530015.................   01.2755   18.00                                                                                                                                      
520095..............................   01.3651   17.84   530016.................   01.2972   14.93                                                                                                                                      
520096..............................   01.4356   18.94   530017.................   00.8748   16.97                                                                                                                                      
520097..............................   01.3151   18.65   530018.................   01.0355   18.67                                                                                                                                      
520098..............................   01.8153   20.17   530019.................   01.0136   15.32                                                                                                                                      
520100..............................   01.2531   16.72   530022.................   01.0909   16.71                                                                                                                                      
520101..............................   01.1237   16.09   530023.................   00.8526   18.57                                                                                                                                      
520102..............................   01.2023   19.37   530025.................   01.2398   18.76                                                                                                                                      
520103..............................   01.3275   17.94   530026.................   01.0928   15.48                                                                                                                                      
520107..............................   01.3021   17.50   530027.................   00.9181   10.62                                                                                                                                      
520109..............................   01.0056   17.63   530029.................   01.0278   13.46                                                                                                                                      
520110..............................   01.1489   17.94   530031.................   00.8952   11.67                                                                                                                                      
520111..............................   00.9540   16.01   530032.................   01.0874   17.89                                                                                                                                      
520112..............................   01.1191   16.89                                                                                                                                                                                  
520113..............................   01.2037   19.18                                                                                                                                                                                  
520114..............................   01.0845   13.27                                                                                                                                                                                  
520115..............................   01.2574   16.02                                                                                                                                                                                  
520116..............................   01.2507   18.13                                                                                                                                                                                  
520117..............................   01.0619   15.78                                                                                                                                                                                  
520118..............................   00.9442   10.53                                                                                                                                                                                  
520120..............................   00.9138   12.70                                                                                                                                                                                  
520121..............................   00.9503   15.67                                                                                                                                                                                  
520122..............................   00.9742   14.73                                                                                                                                                                                  
520123..............................   01.0924   16.93                                                                                                                                                                                  
520124..............................   01.1427   14.93                                                                                                                                                                                  
520130..............................   01.0475   13.47                                                                                                                                                                                  
520131..............................   01.0271   16.78                                                                                                                                                                                  
520132..............................   01.1689   14.48                                                                                                                                                                                  
520134..............................   01.0805   15.97                                                                                                                                                                                  
520135..............................   00.9428   17.28                                                                                                                                                                                  
520136..............................   01.5019   19.05                                                                                                                                                                                  
520138..............................   01.8566   19.44                                                                                                                                                                                  
520139..............................   01.2786   19.89                                                                                                                                                                                  
520140..............................   01.6085   21.15                                                                                                                                                                                  
520141..............................   01.0486   15.86                                                                                                                                                                                  
520142..............................   00.8723   13.20                                                                                                                                                                                  
520144..............................   01.0324   16.42                                                                                                                                                                                  
520145..............................   00.9102   16.59                                                                                                                                                                                  
520146..............................   01.0848   13.94                                                                                                                                                                                  
520148..............................   01.0827   15.34                                                                                                                                                                                  
520149..............................   00.9713   13.44                                                                                                                                                                                  
520151..............................   01.0919   15.42                                                                                                                                                                                  
520152..............................   01.1630   17.07                                                                                                                                                                                  
520153..............................   00.9224   13.81                                                                                                                                                                                  
520154..............................   01.0978   17.71                                                                                                                                                                                  
520156..............................   01.1062   16.69                                                                                                                                                                                  
520157..............................   01.0441   13.77                                                                                                                                                                                  
520159..............................   00.9343   16.85                                                                                                                                                                                  
520160..............................   01.7963   19.07                                                                                                                                                                                  
520161..............................   01.0063   15.94                                                                                                                                                                                  
520170..............................   01.2376   19.95                                                                                                                                                                                  
520171..............................   00.9321   13.23                                                                                                                                                                                  
520173..............................   01.1559   18.34                                                                                                                                                                                  
520174..............................   01.3534   21.51                                                                                                                                                                                  
520177..............................   01.5919   20.16                                                                                                                                                                                  
520178..............................   01.0908   15.23                                                                                                                                                                                  
530002..............................   01.1953  19.16                                                                                                                                                                                   
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Case mix indexes do not include discharges from PPS-exempt units.                                                                                                                                                                 
Case mix indexes include cases received in HCFA central office through December 1996                                                                                                                                                    


[[Page 29972]]


Table 4A.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                               Urban Areas                              
------------------------------------------------------------------------
                                                        Wage            
          Urban area (constituent counties)             index      GAF  
------------------------------------------------------------------------
0040  Abilene, TX...................................    0.8294    0.8798
  Taylor, TX                                                            
0060  Aguadilla, PR.................................    0.4191    0.5513
  Aguada, PR                                                            
  Aguadilla, PR                                                         
  Moca, PR                                                              
0080  Akron, OH.....................................    0.9736    0.9818
  Portage, OH                                                           
  Summit, OH                                                            
0120  Albany, GA....................................    0.7920    0.8524
  Dougherty, GA                                                         
  Lee, GA                                                               
0160  Albany-Schenectady-Troy, NY...................    0.8485    0.8936
  Albany, NY                                                            
  Montgomery, NY                                                        
  Rensselaer, NY                                                        
  Saratoga, NY                                                          
  Schenectady, NY                                                       
  Schoharie, NY                                                         
0200  Albuquerque, NM...............................    0.9336    0.9540
  Bernalillo, NM                                                        
  Sandoval, NM                                                          
  Valencia, NM                                                          
0220  Alexandria, LA................................    0.8275    0.8784
  Rapides, LA                                                           
0240  Allentown-Bethlehem-Easton, PA................    1.0093    1.0064
  Carbon, PA                                                            
  Lehigh, PA                                                            
  Northampton, PA                                                       
0280  Altoona, PA...................................    0.9144    0.9406
  Blair, PA                                                             
0320  Amarillo, TX..................................    0.9503    0.9657
  Potter, TX                                                            
  Randall, TX                                                           
0380  Anchorage, AK.................................    1.3015    1.1978
  Anchorage, AK                                                         
0440  Ann Arbor, MI.................................    1.1794    1.1196
  Lenawee, MI                                                           
  Livingston, MI                                                        
  Washtenaw, MI                                                         
0450  Anniston, AL..................................    0.8272    0.8782
  Calhoun, AL                                                           
0460  Appleton-Oshkosh-Neenah, WI...................    0.9003    0.9306
  Calumet, WI                                                           
  Outagamie, WI                                                         
  Winnebago, WI                                                         
0470  Arecibo, PR...................................    0.4221    0.5540
  Arecibo, PR                                                           
  Camuy, PR                                                             
  Hatillo, PR                                                           
0480  Asheville, NC.................................    0.9078    0.9359
  Buncombe, NC                                                          
  Madison, NC                                                           
0500  Athens, GA....................................    0.9093    0.9370
  Clarke, GA                                                            
  Madison, GA                                                           
  Oconee, GA                                                            
0520  *Atlanta, GA..................................    0.9812    0.9871
  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.........................    1.0732    1.0496
  Atlantic, NJ                                                          
  Cape May, NJ                                                          
0600  Augusta-Aiken, GA-SC..........................    0.9341    0.9544
  Columbia, GA                                                          
  McDuffie, GA                                                          
  Richmond, GA                                                          
  Aiken, SC                                                             
  Edgefield, SC                                                         
0640  Austin-San Marcos, TX.........................    0.8690    0.9083
  Bastrop, TX                                                           
  Caldwell, TX                                                          
  Hays, TX                                                              
  Travis, TX                                                            
  Williamson, TX                                                        
0680  Bakersfield, CA...............................    1.0021    1.0014
  Kern, CA                                                              
0720  *Baltimore, MD................................    0.9696    0.9791
  Anne Arundel, MD                                                      
  Baltimore, MD                                                         
  Baltimore City, MD                                                    
  Carroll, MD                                                           
  Harford, MD                                                           
  Howard, MD                                                            
  Queen Anne's, MD                                                      
0733  Bangor, ME....................................    0.9485    0.9644
  Penobscot, ME                                                         
0743  Barnstable-Yarmouth, MA.......................    1.4302    1.2777
  Barnstable, MA                                                        
0760  Baton Rouge, LA...............................    0.8416    0.8886
  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................................    1.1229    1.0826
  Whatcom, WA                                                           
0870  Benton Harbor, MI.............................    0.8640    0.9047
  Berrien, MI                                                           
0875  *Bergen-Passaic, NJ...........................    1.1573    1.1052
  Bergen, NJ                                                            
  Passaic, NJ                                                           
0880  Billings, MT..................................    0.9728    0.9813
  Yellowstone, MT                                                       
0920  Biloxi-Gulfport-Pascagoula, MS................    0.8422    0.8890
  Hancock, MS                                                           
  Harrison, MS                                                          
  Jackson, MS                                                           
0960  Binghamton, NY................................    0.9088    0.9366
  Broome, NY                                                            
  Tioga, NY                                                             
1000  Birmingham, AL................................    0.8933    0.9256
  Blount, AL                                                            
  Jefferson, AL                                                         
  St. Clair, AL                                                         
  Shelby, AL                                                            
1010  Bismarck, ND..................................    0.7874    0.8490
  Burleigh, ND                                                          
  Morton, ND                                                            
1020  Bloomington, IN...............................    0.9134    0.9399
  Monroe, IN                                                            
1040  Bloomington-Normal, IL........................    0.8783    0.9150
  McLean, IL                                                            
1080  Boise City, ID................................    0.8893    0.9228
  Ada, ID                                                               
  Canyon, ID                                                            
1123  *Boston-Worcester-Lawrence-Lowell-Brockton, MA-                   
 NH.................................................    1.1430    1.0958
  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..........................    1.0023    1.0016
  Boulder, CO                                                           
1145  Brazoria, TX..................................    0.9136    0.9400
  Brazoria, TX                                                          
1150  Bremerton, WA.................................    1.1007    1.0679
  Kitsap, WA                                                            
1240  Brownsville-Harlingen-San Benito, TX..........    0.8699    0.9090
  Cameron, TX                                                           
1260  Bryan-College Station, TX.....................    0.7040    0.7864
  Brazos, TX                                                            
1280  *Buffalo-Niagara Falls, NY....................    0.9266    0.9491
  Erie, NY                                                              
  Niagara, NY                                                           
1303  Burlington, VT................................    1.0098    1.0067
  Chittenden, VT                                                        
  Franklin, VT                                                          
  Grand Isle, VT                                                        
1310  Caguas, PR....................................    0.4551    0.5833
  Caguas, PR                                                            
  Cayey, PR                                                             
  Cidra, PR                                                             
  Gurabo, PR                                                            
  San Lorenzo, PR                                                       
1320  Canton-Massillon, OH..........................    0.8968    0.9281

[[Page 29973]]

                                                                        
  Carroll, OH                                                           
  Stark, OH                                                             
1350  Casper, WY....................................    0.9019    0.9317
  Natrona, WY                                                           
1360  Cedar Rapids, IA..............................    0.8535    0.8972
  Linn, IA                                                              
1400  Champaign-Urbana, IL..........................    0.8740    0.9119
  Champaign, IL                                                         
1440  Charleston-North Charleston, SC...............    0.8739    0.9118
  Berkeley, SC                                                          
  Charleston, SC                                                        
  Dorchester, SC                                                        
1480  Charleston, WV................................    0.9148    0.9408
  Kanawha, WV                                                           
  Putnam, WV                                                            
1520  *Charlotte-Gastonia-Rock Hill, NC-SC..........    0.9758    0.9834
  Cabarrus, NC                                                          
  Gaston, NC                                                            
  Lincoln, NC                                                           
  Mecklenburg, NC                                                       
  Rowan, NC                                                             
  Union, NC                                                             
  York, SC                                                              
1540  Charlottesville, VA...........................    0.9065    0.9350
  Albemarle, VA                                                         
  Charlottesville City, VA                                              
  Fluvanna, VA                                                          
  Greene, VA                                                            
1560  Chattanooga, TN-GA............................    0.8664    0.9065
  Catoosa, GA                                                           
  Dade, GA                                                              
  Walker, GA                                                            
  Hamilton, TN                                                          
  Marion, TN                                                            
1580  Cheyenne, WY..................................    0.7560    0.8257
  Laramie, WY                                                           
1600  *Chicago, IL..................................    1.0829    1.0561
  Cook, IL                                                              
  DeKalb, IL                                                            
  DuPage, IL                                                            
  Grundy, IL                                                            
  Kane, IL                                                              
  Kendall, IL                                                           
  Lake, IL                                                              
  McHenry, IL                                                           
  Will, IL                                                              
1620  Chico-Paradise, CA............................    1.0394    1.0268
  Butte, CA                                                             
1640  *Cincinnati, OH-KY-IN.........................    0.9565    0.9700
  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...............    0.7857    0.8478
  Christian, KY                                                         
  Montgomery, TN                                                        
1680*  Cleveland-Lorain-Elyria, OH..................    0.9811    0.9870
  Ashtabula, OH                                                         
  Cuyahoga, OH                                                          
  Geauga, OH                                                            
  Lake, OH                                                              
  Lorain, OH                                                            
  Medina, OH                                                            
1720  Colorado Springs, CO..........................    0.9323    0.9531
  El Paso, CO                                                           
1740  Columbia, MO..................................    0.8887    0.9224
  Boone, MO                                                             
1760  Columbia, SC..................................    0.9222    0.9460
  Lexington, SC                                                         
  Richland, SC                                                          
1800  Columbus, GA-AL...............................    0.8294    0.8798
  Russell, AL                                                           
  Chattahoochee, GA                                                     
  Harris, GA                                                            
  Muscogee, GA                                                          
1840  *Columbus, OH.................................    0.9800    0.9863
  Delaware, OH                                                          
  Fairfield, OH                                                         
  Franklin, OH                                                          
  Licking, OH                                                           
  Madison, OH                                                           
  Pickaway, OH                                                          
1880  Corpus Christi, TX............................    0.8951    0.9269
  Nueces, TX                                                            
  San Patricio, TX                                                      
1900  Cumberland, MD-WV.............................    0.8829    0.9182
  Allegany, MD                                                          
  Mineral, WV                                                           
1920  *Dallas, TX...................................    0.9624    0.9741
  Collin, TX                                                            
  Dallas, TX                                                            
  Denton, TX                                                            
  Ellis, TX                                                             
  Henderson, TX                                                         
  Hunt, TX                                                              
  Kaufman, TX                                                           
  Rockwall, TX                                                          
1950  Danville, VA..................................    0.8152    0.8694
  Danville City, VA                                                     
  Pittsylvania, VA                                                      
1960  Davenport-Moline-Rock Island, IA-IL...........    0.8411    0.8883
  Scott, IA                                                             
  Henry, IL                                                             
  Rock Island, IL                                                       
2000  Dayton-Springfield, OH........................    0.9292    0.9510
  Clark, OH                                                             
  Greene, OH                                                            
  Miami, OH                                                             
  Montgomery, OH                                                        
2020  Daytona Beach, FL.............................    0.8356    0.8843
  Flagler, FL                                                           
  Volusia, FL                                                           
2030  Decatur, AL...................................    0.8292    0.8796
  Lawrence, AL                                                          
  Morgan, AL                                                            
2040  Decatur, IL...................................    0.7920    0.8524
  Macon, IL                                                             
2080  *Denver, CO...................................    1.0299    1.0204
  Adams, CO                                                             
  Arapahoe, CO                                                          
  Denver, CO                                                            
  Douglas, CO                                                           
  Jefferson, CO                                                         
2120  Des Moines, IA................................    0.8718    0.9103
  Dallas, IA                                                            
  Polk, IA                                                              
  Warren, IA                                                            
2160  *Detroit, MI..................................    1.0844    1.0571
  Lapeer, MI                                                            
  Macomb, MI                                                            
  Monroe, MI                                                            
  Oakland, MI                                                           
  St. Clair, MI                                                         
  Wayne, MI                                                             
2180  Dothan, AL....................................    0.8076    0.8639
  Dale, AL                                                              
  Houston, AL                                                           
2190  Dover, DE.....................................    0.9222    0.9460
  Kent, DE                                                              
2200  Dubuque, IA...................................    0.8094    0.8652
  Dubuque, IA                                                           
2240  Duluth-Superior, MN-WI........................                    
  St. Louis, MN                                         0.9786    0.9853
  Douglas, WI                                                           
2281  Dutchess County, NY...........................    1.0644    1.0437
  Dutchess, NY                                                          
2290  Eau Claire, WI................................    0.8771    0.9141
  Chippewa, WI                                                          
  Eau Claire, WI                                                        
2320  El Paso, TX...................................    0.9719    0.9807
  El Paso, TX                                                           
2330  Elkhart-Goshen, IN............................    0.9087    0.9365
  Elkhart, IN                                                           
2335  Elmira, NY....................................    0.8253    0.8768
  Chemung, NY                                                           
2340  Enid, OK......................................    0.7968    0.8559
  Garfield, OK                                                          
2360  Erie, PA......................................    0.8869    0.9211
  Erie, PA                                                              
2400  Eugene-Springfield, OR........................    1.1700    1.1135
  Lane, OR                                                              
2440  Evansville-Henderson, IN-KY...................    0.8648    0.9053
  Posey, IN                                                             
  Vanderburgh, IN                                                       
  Warrick, IN                                                           
  Henderson, KY                                                         
2520  Fargo-Moorhead, ND-MN.........................    0.8844    0.9193
  Clay, MN                                                              
  Cass, ND                                                              

[[Page 29974]]

                                                                        
2560  Fayetteville, NC..............................    0.8740    0.9119
  Cumberland, NC                                                        
2580  Fayetteville-Springdale-Rogers, AR............    0.7466    0.8186
  Benton, AR                                                            
  Washington, AR                                                        
2620  Flagstaff, AZ-UT..............................    0.9122    0.9390
  Coconino, AZ                                                          
  Kane, UT                                                              
2640  Flint, MI.....................................    1.1191    1.0801
  Genesee, MI                                                           
2650  Florence, AL..................................    0.7722    0.8378
  Colbert, AL                                                           
  Lauderdale, AL                                                        
2655  Florence, SC..................................    0.8243    0.8761
  Florence, SC                                                          
2670  Fort Collins-Loveland, CO.....................    1.0255    1.0174
  Larimer, CO                                                           
2680  *Ft. Lauderdale, FL...........................    1.0802    1.0543
  Broward, FL                                                           
2700  Fort Myers-Cape Coral, FL.....................    0.8384    0.8863
  Lee, FL                                                               
2710  Fort Pierce-Port St. Lucie, FL................    0.9782    0.9850
  Martin, FL                                                            
  St. Lucie, FL                                                         
2720  Fort Smith, AR-OK.............................    0.7775    0.8417
  Crawford, AR                                                          
  Sebastian, AR                                                         
  Sequoyah, OK                                                          
2750  Fort Walton Beach, FL.........................    0.8555    0.8986
  Okaloosa, FL                                                          
2760  Fort Wayne, IN................................    0.8907    0.9238
  Adams, IN                                                             
  Allen, IN                                                             
  De Kalb, IN                                                           
  Huntington, IN                                                        
  Wells, IN                                                             
  Whitley, IN                                                           
2800  *Forth Worth-Arlington, TX....................    0.9691    0.9787
  Hood, TX                                                              
  Johnson, TX                                                           
  Parker, TX                                                            
  Tarrant, TX                                                           
2840  Fresno, CA....................................    1.0601    1.0408
  Fresno, CA                                                            
  Madera, CA                                                            
2880  Gadsden, AL...................................    0.8821    0.9177
  Etowah, AL                                                            
2900  Gainesville, FL...............................    0.9603    0.9726
  Alachua, FL                                                           
2920  Galveston-Texas City, TX......................    1.0572    1.0388
  Galveston, TX                                                         
2960  Gary, IN......................................    0.9276    0.9498
  Lake, IN                                                              
  Porter, IN                                                            
2975  Glens Falls, NY...............................    0.8359    0.8845
  Warren, NY                                                            
  Washington, NY                                                        
2980  Goldsboro, NC.................................    0.8449    0.8910
  Wayne, NC                                                             
2985  Grand Forks, ND-MN............................    0.8853    0.9200
  Polk, MN                                                              
  Grand Forks, ND                                                       
2995  Grand Junction, CO............................    0.8557    0.8988
  Mesa, CO                                                              
3000  Grand Rapids-Muskegon-Holland, MI.............    1.0154    1.0105
  Allegan, MI                                                           
  Kent, MI                                                              
  Muskegon, MI                                                          
  Ottawa, MI                                                            
3040  Great Falls, MT...............................    0.9321    0.9530
  Cascade, MT                                                           
3060  Greeley, CO...................................    1.0104    1.0071
  Weld, CO                                                              
3080  Green Bay, WI.................................    0.9592    0.9719
  Brown, WI                                                             
3120  *Greensboro-Winston-Salem-High Point, NC......    0.9357    0.9555
  Alamance, NC                                                          
  Davidson, NC                                                          
  Davie, NC                                                             
  Forsyth, NC                                                           
  Guilford, NC                                                          
  Randolph, NC                                                          
  Stokes, NC                                                            
  Yadkin, NC                                                            
3150  Greenville, NC................................    0.9071    0.9354
  Pitt, NC                                                              
3160  Greenville-Spartanburg-Anderson, SC...........    0.9066    0.9351
  Anderson, SC                                                          
  Cherokee, SC                                                          
  Greenville, SC                                                        
  Pickens, SC                                                           
  Spartanburg, SC                                                       
3180  Hagerstown, MD................................    0.9688    0.9785
  Washington, MD                                                        
3200  Hamilton-Middletown, OH.......................    0.8862    0.9206
  Butler, OH                                                            
3240  Harrisburg-Lebanon-Carlisle, PA...............    1.0159    1.0109
  Cumberland, PA                                                        
  Dauphin, PA                                                           
  Lebanon, PA                                                           
  Perry, PA                                                             
3283  *Hartford, CT.................................    1.2572    1.1697
  Hartford, CT                                                          
  Litchfield, CT                                                        
  Middlesex, CT                                                         
  Tolland, CT                                                           
3285  Hattiesburg, MS...............................    0.7197    0.7983
  Forrest, MS                                                           
  Lamar, MS                                                             
3290  Hickory-Morganton-Lenoir, NC..................    0.8291    0.8796
  Alexander, NC                                                         
  Burke, NC                                                             
  Caldwell, NC                                                          
  Catawba, NC                                                           
3320  Honolulu, HI..................................    1.1826    1.1217
  Honolulu, HI                                                          
3350  Houma, LA.....................................    0.7859    0.8479
  Lafourche, LA                                                         
  Terrebonne, LA                                                        
3360  *Houston, TX..................................    0.9633    0.9747
  Chambers, TX                                                          
  Fort Bend, TX                                                         
  Harris, TX                                                            
  Liberty, TX                                                           
  Montgomery, TX                                                        
  Waller, TX                                                            
3400  Huntington-Ashland, WV-KY-OH..................    0.9159    0.9416
  Boyd, KY                                                              
  Carter, KY                                                            
  Greenup, KY                                                           
  Lawrence, OH                                                          
  Cabell, WV                                                            
  Wayne, WV                                                             
3440  Huntsville, AL................................    0.8491    0.8940
  Limestone, AL                                                         
  Madison, AL                                                           
3480  *Indianapolis, IN.............................    0.9851    0.9898
  Boone, IN                                                             
  Hamilton, IN                                                          
  Hancock, IN                                                           
  Hendricks, IN                                                         
  Johnson, IN                                                           
  Madison, IN                                                           
  Marion, IN                                                            
  Morgan, IN                                                            
  Shelby, IN                                                            
3500  Iowa City, IA.................................    0.9408    0.9591
  Johnson, IA                                                           
3520  Jackson, MI...................................    0.9058    0.9345
  Jackson, MI                                                           
3560  Jackson, MS...................................    0.7799    0.8435
  Hinds, MS                                                             
  Madison, MS                                                           
  Rankin, MS                                                            
3580  Jackson, TN...................................    0.8529    0.8968
  Madison, TN                                                           
  Chester, TN                                                           
3600  Jacksonville, FL..............................    0.8986    0.9294
  Clay, FL                                                              
  Duval, FL                                                             
  Nassau, FL                                                            
  St. Johns, FL                                                         
3605  Jacksonville, NC..............................    0.6978    0.7816
  Onslow, NC                                                            
3610  Jamestown, NY.................................    0.7551    0.8250
  Chautauqua, NY                                                        
3620  Janesville-Beloit, WI.........................    0.8831    0.9184
  Rock, WI                                                              
3640  Jersey City, NJ...............................    1.1420    1.0952
  Hudson, NJ                                                            
3660  Johnson City-Kingsport-Bristol, TN-VA.........    0.9120    0.9389
  Carter, TN                                                            
  Hawkins, TN                                                           
  Sullivan, TN                                                          
  Unicoi, TN                                                            
  Washington, TN                                                        
  Bristol City, VA                                                      

[[Page 29975]]

                                                                        
  Scott, VA                                                             
  Washington, VA                                                        
3680  Johnstown, PA.................................    0.8384    0.8863
  Cambria, PA                                                           
  Somerset, PA                                                          
3700  Jonesboro, AR.................................    0.7449    0.8174
  Craighead, AR                                                         
3710  Joplin, MO....................................    0.7519    0.8226
  Jasper, MO                                                            
  Newton, MO                                                            
3720  Kalamazoo-Battlecreek, MI.....................    1.0676    1.0458
  Calhoun, MI                                                           
  Kalamazoo, MI                                                         
  Van Buren, MI                                                         
3740  Kankakee, IL..................................    0.8655    0.9058
  Kankakee, IL                                                          
3760  *Kansas City, KS-MO...........................    0.9571    0.9704
  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...................................    0.9203    0.9447
  Kenosha, WI                                                           
3810  Killeen-Temple, TX............................    1.0259    1.0177
  Bell, TX                                                              
  Coryell, TX                                                           
3840  Knoxville, TN.................................    0.8837    0.9188
  Anderson, TN                                                          
  Blount, TN                                                            
  Knox, TN                                                              
  Loudon, TN                                                            
  Sevier, TN                                                            
  Union, TN                                                             
3850  Kokomo, IN....................................    0.8422    0.8890
  Howard, IN                                                            
  Tipton, IN                                                            
3870  La Crosse, WI-MN..............................    0.8755    0.9130
  Houston, MN                                                           
  La Crosse, WI                                                         
3880  Lafayette, LA.................................    0.8226    0.8748
  Acadia, LA                                                            
  Lafayette, LA                                                         
  St. Landry, LA                                                        
  St. Martin, LA                                                        
3920  Lafayette, IN.................................    0.9181    0.9432
  Clinton, IN                                                           
  Tippecanoe, IN                                                        
3960  Lake Charles, LA..............................    0.7781    0.8421
  Calcasieu, LA                                                         
3980  Lakeland-Winter Haven, FL.....................    0.8812    0.9170
  Polk, FL                                                              
4000  Lancaster, PA.................................    0.9492    0.9649
  Lancaster, PA                                                         
4040  Lansing-East Lansing, MI......................    1.0093    1.0064
  Clinton, MI                                                           
  Eaton, MI                                                             
  Ingham, MI                                                            
4080  Laredo, TX....................................    0.7330    0.8084
  Webb, TX                                                              
4100  Las Cruces, NM................................    0.8664    0.9065
  Dona Ana, NM                                                          
4120  *Las Vegas, NV-AZ.............................    1.0601    1.0408
  Mohave, AZ                                                            
  Clark, NV                                                             
  Nye, NV                                                               
4150  Lawrence, KS..................................    0.8615    0.9029
  Douglas, KS                                                           
4200  Lawton, OK....................................    0.9052    0.9341
  Comanche, OK                                                          
4243  Lewiston-Auburn, ME...........................    0.9543    0.9685
  Androscoggin, ME                                                      
4280  Lexington, KY.................................    0.8422    0.8890
  Bourbon, KY                                                           
  Clark, KY                                                             
  Fayette, KY                                                           
  Jessamine, KY                                                         
  Madison, KY                                                           
  Scott, KY                                                             
  Woodford, KY                                                          
4320  Lima, OH......................................    0.9192    0.9439
  Allen, OH                                                             
  Auglaize, OH                                                          
4360  Lincoln, NE...................................    0.9093    0.9370
  Lancaster, NE                                                         
4400  Little Rock-North Little Rock, AR.............    0.8496    0.8944
  Faulkner, AR                                                          
  Lonoke, AR                                                            
  Pulaski, AR                                                           
  Saline, AR                                                            
4420  Longview-Marshall, TX.........................    0.8611    0.9027
  Gregg, TX                                                             
  Harrison, TX                                                          
  Upshur, TX                                                            
4480  *Los Angeles-Long Beach, CA...................    1.2290    1.1517
  Los Angeles, CA                                                       
4520  Louisville, KY-IN.............................    0.9498    0.9653
  Clark, IN                                                             
  Floyd, IN                                                             
  Harrison, IN                                                          
  Scott, IN                                                             
  Bullitt, KY                                                           
  Jefferson, KY                                                         
  Oldham, KY                                                            
4600  Lubbock, TX...................................    0.8345    0.8835
  Lubbock, TX                                                           
4640  Lynchburg, VA.................................    0.8199    0.8729
  Amherst, VA                                                           
  Bedford, VA                                                           
  Bedford City, VA                                                      
  Campbell, VA                                                          
  Lynchburg City, VA                                                    
4680  Macon, GA.....................................    0.9069    0.9353
  Bibb, GA                                                              
  Houston, GA                                                           
  Jones, GA                                                             
  Peach, GA                                                             
  Twiggs, GA                                                            
4720  Madison, WI...................................    1.0062    1.0042
  Dane, WI                                                              
4800  Mansfield, OH.................................    0.8645    0.9051
  Crawford, OH                                                          
  Richland, OH                                                          
4840  Mayaguez, PR..................................    0.4486    0.5776
  Anasco, PR                                                            
  Cabo Rojo, PR                                                         
  Hormigueros, PR                                                       
  Mayaguez, PR                                                          
  Sabana Grande, PR                                                     
  San German, PR                                                        
4880  McAllen-Edinburg-Mission, TX..................    0.8034    0.8608
  Hidalgo, TX                                                           
4890  Medford-Ashland, OR...........................    1.0361    1.0246
  Jackson, OR                                                           
4900  Melbourne-Titusville-Palm Bay, FL.............    0.8825    0.9180
  Brevard, Fl                                                           
4920  *Memphis, TN-AR-MS............................    0.8595    0.9015
  Crittenden, AR                                                        
  DeSoto, MS                                                            
  Fayette, TN                                                           
  Shelby, TN                                                            
  Tipton, TN                                                            
4940  Merced, CA....................................    1.0913    1.0617
  Merced, CA                                                            
5000  *Miami, FL....................................    0.9301    0.9516
  Dade, FL                                                              
5015  *Middlesex-Somerset-Hunterdon, NJ.............    1.0883    1.0597
  Hunterdon, NJ                                                         
  Middlesex, NJ                                                         
  Somerset, NJ                                                          
5080  *Milwaukee-Waukesha, WI.......................    0.9826    0.9881
  Milwaukee, WI                                                         
  Ozaukee, WI                                                           
  Washington, WI                                                        
  Waukesha, WI                                                          
5120  *Minneapolis-St. Paul, MN-WI..................    1.0739    1.0500
  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....................................    0.8458    0.8916
  Baldwin, AL                                                           
  Mobile, AL                                                            
5170  Modesto, CA...................................    1.0384    1.0261
  Stanislaus, CA                                                        
5190  *Monmouth-Ocean, NJ...........................    1.0912    1.0616

[[Page 29976]]

                                                                        
  Monmouth, NJ                                                          
  Ocean, NJ                                                             
5200  Monroe, LA....................................    0.8420    0.8889
  Ouachita, LA                                                          
5240  Montgomery, AL................................    0.7818    0.8449
  Autauga, AL                                                           
  Elmore, AL                                                            
  Montgomery, AL                                                        
5280  Muncie, IN....................................    0.9156    0.9414
  Delaware, IN                                                          
5330  Myrtle Beach, SC..............................    0.7978    0.8567
  Horry, SC                                                             
5345  Naples, FL....................................    1.0116    1.0079
  Collier, FL                                                           
5360  *Nashville, TN................................    0.9189    0.9437
  Cheatham, TN                                                          
  Davidson, TN                                                          
  Dickson, TN                                                           
  Robertson, TN                                                         
  Rutherford TN                                                         
  Sumner, TN                                                            
  Williamson, TN                                                        
  Wilson, TN                                                            
5380  *Nassau-Suffolk, NY...........................    1.3276    1.2142
  Nassau, NY                                                            
  Suffolk, NY                                                           
5483  *New Haven-Bridgeport-Stamford-Waterbury-                         
 Danbury, CT........................................    1.2629    1.1733
  Fairfield, CT                                                         
  New Haven, CT                                                         
5523  New London-Norwich, CT........................    1.2266    1.1501
  New London, CT                                                        
5560  *New Orleans, LA..............................    0.9566    0.9701
  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.................................    1.4352    1.2807
  Bronx, NY                                                             
  Kings, NY                                                             
  New York, NY                                                          
  Putnam, NY                                                            
  Queens, NY                                                            
  Richmond, NY                                                          
  Rockland, NY                                                          
  Westchester, NY                                                       
5640  *Newark, NJ...................................    1.1101    1.0741
  Essex, NJ                                                             
  Morris, NJ                                                            
  Sussex, NJ                                                            
  Union, NJ                                                             
  Warren, NJ                                                            
5660  Newburgh, NY-PA...............................    1.1291    1.0867
  Orange, NY                                                            
  Pike, PA                                                              
5720  *Norfolk-Virginia Beach-Newport News, VA-NC...    0.8314    0.8812
  Currituck, NC                                                         
  Chesapeake City, VA                                                   
  Gloucester, VA                                                        
  Hampton City, VA                                                      
  Isle of Wight, VA                                                     
  James City, VA                                                        
  Mathews, VA                                                           
  Newport News City, VA                                                 
  Norfolk City, VA                                                      
  Poquoson City, VA                                                     
  Portsmouth City, VA                                                   
  Suffolk City, VA                                                      
  Virginia Beach City, VA                                               
  Williamsburg City, VA                                                 
  York, VA                                                              
5775  *Oakland, CA..................................    1.5239    1.3344
  Alameda, CA                                                           
  Contra Costa, CA                                                      
5790  Ocala, FL.....................................    0.9039    0.9332
  Marion, FL                                                            
5800  Odessa-Midland, TX............................    0.8666    0.9066
  Ector, TX                                                             
  Midland, TX                                                           
5880  *Oklahoma City, OK............................    0.8487    0.8937
  Canadian, OK                                                          
  Cleveland, OK                                                         
  Logan, OK                                                             
  McClain, OK                                                           
  Oklahoma, OK                                                          
  Pottawatomie, OK                                                      
5910  Olympia, WA...................................    1.0866    1.0585
  Thurston, WA                                                          
5920  Omaha, NE-IA..................................    0.9406    0.9589
  Pottawattamie, IA                                                     
  Cass, NE                                                              
  Douglas, NE                                                           
  Sarpy, NE                                                             
  Washington, NE                                                        
5945  *Orange County, CA............................    1.1408    1.0944
  Orange, CA                                                            
5960  *Orlando, FL..................................    0.9328    0.9535
  Lake, FL                                                              
  Orange, FL                                                            
  Osceola, FL                                                           
  Seminole, FL                                                          
5990  Owensboro, KY.................................    0.7486    0.8201
  Daviess, KY                                                           
6015  Panama City, FL...............................    0.8343    0.8833
  Bay, FL                                                               
6020  Parkersburg-Marietta, WV-OH...................    0.8052    0.8621
  Washington, OH                                                        
  Wood, WV                                                              
6080  Pensacola, FL.................................    0.8199    0.8729
  Escambia, FL                                                          
  Santa Rosa, FL                                                        
6120  Peoria-Pekin, IL..............................    0.8555    0.8986
  Peoria, IL                                                            
  Tazewell, IL                                                          
  Woodford, IL                                                          
6160  *Philadelphia, PA-NJ..........................    1.1380    1.0926
  Burlington, NJ                                                        
  Camden, NJ                                                            
  Gloucester, NJ                                                        
  Salem, NJ                                                             
  Bucks, PA                                                             
  Chester, PA                                                           
  Delaware, PA                                                          
  Montgomery, PA                                                        
  Philadelphia, PA                                                      
6200  *Phoenix-Mesa, AZ.............................    0.9451    0.9621
  Maricopa, AZ                                                          
  Pinal, AZ                                                             
6240  Pine Bluff, AR................................    0.7832    0.8459
  Jefferson, AR                                                         
6280  *Pittsburgh, PA...............................    0.9733    0.9816
  Allegheny, PA                                                         
  Beaver, PA                                                            
  Butler, PA                                                            
  Fayette, PA                                                           
  Washington, PA                                                        
  Westmoreland, PA                                                      
6323  Pittsfield, MA................................    1.0623    1.0423
  Berkshire, MA                                                         
6340  Pocatello, ID.................................    0.9543    0.9685
  Bannock, ID                                                           
6360  Ponce, PR.....................................    0.4560    0.5841
  Guayanilla, PR                                                        
  Juana Diaz, PR                                                        
  Penuelas, PR                                                          
  Ponce, PR                                                             
  Villalba, PR                                                          
  Yauco, PR                                                             
6403  Portland, ME..................................    0.9634    0.9748
  Cumberland, ME                                                        
  Sagadahoc, ME                                                         
  York, ME                                                              
6440  *Portland-Vancouver, OR-WA....................    1.1352    1.0907
  Clackamas, OR                                                         
  Columbia, OR                                                          
  Multnomah, OR                                                         
  Washington, OR                                                        
  Yamhill, OR                                                           
  Clark, WA                                                             
6483  *Providence-Warwick-Pawtucket, RI.............    1.1062    1.0716
  Bristol, RI                                                           
  Kent, RI                                                              
  Newport, RI                                                           
  Providence, RI                                                        
  Washington, RI                                                        
6520  Provo-Orem, UT................................    1.0080    1.0055
  Utah, UT                                                              
6560  Pueblo, CO....................................    0.8166    0.8705
  Pueblo, CO                                                            
6580  Punta Gorda, FL...............................    0.8587    0.9009
  Charlotte, FL                                                         
6600  Racine, WI....................................    0.8941    0.9262
  Racine, WI                                                            
6640  Raleigh-Durham-Chapel Hill, NC................    0.9825    0.9880
  Chatham, NC                                                           

[[Page 29977]]

                                                                        
  Durham, NC                                                            
  Franklin, NC                                                          
  Johnston, NC                                                          
  Orange, NC                                                            
  Wake, NC                                                              
6660  Rapid City, SD................................    0.8351    0.8839
  Pennington, SD                                                        
6680  Reading, PA...................................    0.9523    0.9671
  Berks, PA                                                             
6690  Redding, CA...................................    1.1781    1.1188
  Shasta, CA                                                            
6720  Reno, NV......................................    1.0776    1.0525
  Washoe, NV                                                            
6740  Richland-Kennewick-Pasco, WA..................    0.9925    0.9949
  Benton, WA                                                            
  Franklin, WA                                                          
6760  Richmond-Petersburg, VA.......................    0.9175    0.9427
  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.................    1.1166    1.0785
  Riverside, CA                                                         
  San Bernardino, CA                                                    
6800  Roanoke, VA...................................    0.8362    0.8847
  Botetourt, VA                                                         
  Roanoke, VA                                                           
  Roanoke City, VA                                                      
  Salem City, VA                                                        
6820  Rochester, MN.................................    1.0509    1.0346
  Olmsted, MN                                                           
6840  *Rochester, NY................................    0.9498    0.9653
  Genesee, NY                                                           
  Livingston, NY                                                        
  Monroe, NY                                                            
  Ontario, NY                                                           
  Orleans, NY                                                           
  Wayne, NY                                                             
6880  Rockford, IL..................................    0.9087    0.9365
  Boone, IL                                                             
  Ogle, IL                                                              
  Winnebago, IL                                                         
6895  Rocky Mount, NC...............................    0.9038    0.9331
  Edgecombe, NC                                                         
  Nash, NC                                                              
6920  *Sacramento, CA...............................    1.2225    1.1475
  El Dorado, CA                                                         
  Placer, CA                                                            
  Sacramento, CA                                                        
6960  Saginaw-Bay City-Midland, MI..................    0.9571    0.9704
  Bay, MI                                                               
  Midland, MI                                                           
  Saginaw, MI                                                           
6980  St. Cloud, MN.................................    0.9551    0.9690
  Benton, MN                                                            
  Stearns, MN                                                           
7000  St. Joseph, MO................................    0.8372    0.8854
  Andrew, MO                                                            
  Buchanan, MO                                                          
7040  *St. Louis, MO-IL.............................    0.9145    0.9406
  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.....................................    0.9942    0.9960
  Marion, OR                                                            
  Polk, OR                                                              
7120  Salinas, CA...................................    1.4523    1.2911
  Monterey, CA                                                          
7160  *Salt Lake City-Ogden, UT.....................    0.9869    0.9910
  Davis, UT                                                             
  Salt Lake, UT                                                         
  Weber, UT                                                             
7200  San Angelo, TX................................    0.7504    0.8215
  Tom Green, TX                                                         
7240  *San Antonio, TX..............................    0.8225    0.8748
  Bexar, TX                                                             
  Comal, TX                                                             
  Guadalupe, TX                                                         
  Wilson, TX                                                            
7320  *San Diego, CA................................    1.2266    1.1501
  San Diego, CA                                                         
7360  *San Francisco, CA............................    1.4120    1.2665
  Marin, CA                                                             
  San Francisco, CA                                                     
  San Mateo, CA                                                         
7400  *San Jose, CA.................................    1.4245    1.2742
  Santa Clara, CA                                                       
7440  *San Juan-Bayamon, PR.........................    0.4704    0.5966
  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....    1.1379    1.0925
  San Luis Obispo, CA                                                   
7480  Santa Barbara-Santa Maria-Lompoc, CA..........    1.0696    1.0472
  Santa Barbara, CA                                                     
7485  Santa Cruz-Watsonville, CA....................    1.4199    1.2714
  Santa Cruz, CA                                                        
7490  Santa Fe, NM..................................    1.0081    1.0055
  Los Alamos, NM                                                        
  Santa Fe, NM                                                          
7500  Santa Rosa, CA................................    1.2609    1.1721
  Sonoma, CA                                                            
7510  Sarasota-Bradenton, FL........................    0.9764    0.9838
  Manatee, FL                                                           
  Sarasota, FL                                                          
7520  Savannah, GA..................................    0.8678    0.9075
  Bryan, GA                                                             
  Chatham, GA                                                           
  Effingham, GA                                                         
7560  Scranton-Wilkes-Barre-Hazleton, PA............    0.8546    0.8980
  Columbia, PA                                                          
  Lackawanna, PA                                                        
  Luzerne, PA                                                           
  Wyoming, PA                                                           
7600  *Seattle-Bellevue-Everett, WA.................    1.1383    1.0928
  Island, WA                                                            
  King, WA                                                              
  Snohomish, WA                                                         
7610  Sharon, PA....................................    0.8790    0.9155
  Mercer, PA                                                            
7620  Sheboygan, WI.................................    0.7868    0.8486
  Sheboygan, WI                                                         
7640  Sherman-Denison, TX...........................    0.8528    0.8967
  Grayson, TX                                                           
7680  Shreveport-Bossier City, LA...................    0.9396    0.9582
  Bossier, LA                                                           
  Caddo, LA                                                             
  Webster, LA                                                           
7720  Sioux City, IA-NE.............................    0.8026    0.8602
  Woodbury, IA                                                          
  Dakota, NE                                                            
7760  Sioux Falls, SD...............................    0.8718    0.9103
  Lincoln, SD                                                           

[[Page 29978]]

                                                                        
  Minnehaha, SD                                                         
7800  South Bend, IN................................    0.9887    0.9922
  St. Joseph, IN                                                        
7840  Spokane, WA...................................    1.0491    1.0334
  Spokane, WA                                                           
7880  Springfield, IL...............................    0.8719    0.9104
  Menard, IL                                                            
  Sangamon, IL                                                          
7920  Springfield, MO...............................    0.7969    0.8560
  Christian, MO                                                         
  Greene, MO                                                            
  Webster, MO                                                           
8003  Springfield, MA...............................    1.0661    1.0448
  Hampden, MA                                                           
  Hampshire, MA                                                         
8050  State College, PA.............................    0.9642    0.9753
  Centre, PA                                                            
8080  Steubenville-Weirton, OH-WV...................    0.8652    0.9056
  Jefferson, OH                                                         
  Brooke, WV                                                            
  Hancock, WV                                                           
8120  Stockton-Lodi, CA.............................    1.1527    1.1022
  San Joaquin, CA                                                       
8140  Sumter, SC....................................    0.7848    0.8471
  Sumter, SC                                                            
8160  Syracuse, NY..................................    0.9464    0.9630
  Cayuga, NY                                                            
  Madison, NY                                                           
  Onondaga, NY                                                          
  Oswego, NY                                                            
8200  Tacoma, WA....................................    1.1024    1.0690
  Pierce, WA                                                            
8240  Tallahassee, FL...............................    0.8338    0.8830
  Gadsden, FL                                                           
  Leon, FL                                                              
8280  *Tampa-St. Petersburg-Clearwater, FL..........    0.9191    0.9439
  Hernando, FL                                                          
  Hillsborough, FL                                                      
  Pasco, FL                                                             
  Pinellas, FL                                                          
8320  Terre Haute, IN...............................    0.8620    0.9033
  Clay, IN                                                              
  Vermillion, IN                                                        
  Vigo, IN                                                              
8360  Texarkana, AR-Texarkana, TX...................    0.9594    0.9720
  Miller, AR                                                            
  Bowie, TX                                                             
8400  Toledo, OH....................................    1.0147    1.0100
  Fulton, OH                                                            
  Lucas, OH                                                             
  Wood, OH                                                              
8440  Topeka, KS....................................    0.9365    0.9561
  Shawnee, KS                                                           
8480  Trenton, NJ...................................    1.0375    1.0255
  Mercer, NJ                                                            
8520  Tucson, AZ....................................    0.9187    0.9436
  Pima, AZ                                                              
8560  Tulsa, OK.....................................    0.8080    0.8642
  Creek, OK                                                             
  Osage, OK                                                             
  Rogers, OK                                                            
  Tulsa, OK                                                             
  Wagoner, OK                                                           
8600  Tuscaloosa, AL................................    0.8134    0.8681
  Tuscaloosa, AL                                                        
8640  Tyler, TX.....................................    0.9516    0.9666
  Smith, TX                                                             
8680  Utica-Rome, NY................................    0.8362    0.8847
  Herkimer, NY                                                          
  Oneida, NY                                                            
8720  Vallejo-Fairfield-Napa, CA....................    1.3442    1.2245
  Napa, CA                                                              
  Solano, CA                                                            
8735  Ventura, CA...................................    1.0551    1.0374
  Ventura, CA                                                           
8750  Victoria, TX..................................    0.8517    0.8959
  Victoria, TX                                                          
8760  Vineland-Millville-Bridgeton, NJ..............    1.0118    1.0081
  Cumberland, NJ                                                        
8780  Visalia-Tulare-Porterville, CA................    0.9931    0.9953
  Tulare, CA                                                            
8800  Waco, TX......................................    0.7701    0.8362
  McLennan, TX                                                          
8840  *Washington, DC-MD-VA-WV......................    1.0786    1.0532
  District of Columbia, DC                                              
  Calvert, MD                                                           
  Charles, MD                                                           
  Frederick, MD                                                         
  Montgomery, MD                                                        
  Prince Georges, MD                                                    
  Alexandria City, VA                                                   
  Arlington, VA                                                         
  Clarke, VA                                                            
  Culpeper, VA                                                          
  Fairfax, VA                                                           
  Fairfax City, VA                                                      
  Falls Church City, VA                                                 
  Fauquier, VA                                                          
  Fredericksburg City, VA                                               
  King George, VA                                                       
  Loudoun, VA                                                           
  Manassas City, VA                                                     
  Manassas Park City, VA                                                
  Prince William, VA                                                    
  Spotsylvania, VA                                                      
  Stafford, VA                                                          
  Warren, VA                                                            
  Berkeley, WV                                                          
  Jefferson, WV                                                         
8920  Waterloo-Cedar Falls, IA......................    0.8649    0.9054
  Black Hawk, IA                                                        
8940  Wausau, WI....................................    1.0553    1.0375
  Marathon, WI                                                          
8960  West Palm Beach-Boca Raton, FL................    1.0331    1.0226
  Palm Beach, FL                                                        
9000  Wheeling, OH-WV...............................    0.7712    0.8370
  Belmont, OH                                                           
  Marshall, WV                                                          
  Ohio, WV                                                              
9040  Wichita, KS...................................    0.9369    0.9563
  Butler, KS                                                            
  Harvey, KS                                                            
  Sedgwick, KS                                                          
9080  Wichita Falls, TX.............................    0.7645    0.8320
  Archer, TX                                                            
  Wichita, TX                                                           
9140  Williamsport, PA..............................    0.8554    0.8986
  Lycoming, PA                                                          
9160  Wilmington-Newark, DE-MD......................    1.1549    1.1036
  New Castle, DE                                                        
  Cecil, MD                                                             
9200  Wilmington, NC................................    0.9329    0.9535
  New Hanover, NC                                                       
  Brunswick, NC                                                         
9260  Yakima, WA....................................    1.0109    1.0075
  Yakima, WA                                                            
9270  Yolo, CA......................................    1.1439    1.0964
  Yolo, CA                                                              
9280  York, PA......................................    0.9422    0.9600
  York, PA                                                              
9320  Youngstown-Warren, OH.........................    0.9944    0.9962
  Columbiana, OH                                                        
  Mahoning, OH                                                          
  Trumbull, OH                                                          
9340  Yuba City, CA.................................    1.0479    1.0326
  Sutter, CA                                                            
  Yuba, CA                                                              
9360  Yuma, AZ......................................    0.9739    0.9821
  Yuma, AZ                                                              
------------------------------------------------------------------------
* Large Urban Area                                                      


Table 4B.--Wage Index and Capital Geographic Adjustment Factor (GAF) for
                               Rural Areas                              
------------------------------------------------------------------------
                                                        Wage            
                    Nonurban area                       index      GAF  
------------------------------------------------------------------------
Alabama.............................................    0.7257    0.8029
Alaska..............................................    1.2319    1.1535
Arizona.............................................    0.7995    0.8579
Arkansas............................................    0.7010    0.7841
California..........................................    1.0005    1.0003
Colorado............................................    0.8068    0.8633
Connecticut.........................................    1.2626    1.1731
Delaware............................................    0.8932    0.9256
Florida.............................................    0.8846    0.9195
Georgia.............................................    0.7747    0.8396
Hawaii..............................................    1.0236    1.0161
Idaho...............................................    0.8209    0.8736
Illinois............................................    0.7651    0.8325
Indiana.............................................    0.8176    0.8712
Iowa................................................    0.7387    0.8127
Kansas..............................................    0.7207    0.7991
Kentucky............................................    0.7784    0.8424
Louisiana...........................................    0.7400    0.8137
Maine...............................................    0.8474    0.8928
Maryland............................................    0.8623    0.9035
Massachusetts.......................................    1.0726    1.0492
Michigan............................................    0.8939    0.9261
Minnesota...........................................    0.8202    0.8731

[[Page 29979]]

                                                                        
Mississippi.........................................    0.6919    0.7771
Missouri............................................    0.7221    0.8001
Montana.............................................    0.8142    0.8687
Nebraska............................................    0.7358    0.8105
Nevada..............................................    0.8922    0.9249
New Hampshire.......................................    0.9730    0.9814
New Jersey \1\......................................  ........  ........
New Mexico..........................................    0.7893    0.8504
New York............................................    0.8375    0.8856
North Carolina......................................    0.7938    0.8537
North Dakota........................................    0.7347    0.8097
Ohio................................................    0.8438    0.8902
Oklahoma............................................    0.7065    0.7883
Oregon..............................................    0.9988    0.9992
Pennsylvania........................................    0.8439    0.8903
Puerto Rico.........................................    0.3999    0.5338
Rhode Island \1\....................................  ........  ........
South Carolina......................................    0.7909    0.8516
South Dakota........................................    0.6982    0.7819
Tennessee...........................................    0.7357    0.8104
Texas...............................................    0.7322    0.8078
Utah................................................    0.8932    0.9256
Vermont.............................................    0.9320    0.9529
Virginia............................................    0.7763    0.8408
Washington..........................................    1.0223    1.0152
West Virginia.......................................    0.7964    0.8556
Wisconsin...........................................    0.8477    0.8930
Wyoming.............................................    0.8250   0.8766 
------------------------------------------------------------------------
\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            
                     Urban area                         index      GAF  
------------------------------------------------------------------------
Abilene, TX.........................................    0.8294    0.8798
Albuquerque, NM.....................................    0.9336    0.9540
Alexandria, LA......................................    0.8275    0.8784
Amarillo, TX........................................    0.9503    0.9657
Anchorage, AK.......................................    1.3015    1.1978
Asheville, NC.......................................    0.9078    0.9359
Athens, GA..........................................    0.9093    0.9370
Atlanta, GA.........................................    0.9812    0.9871
Austin-San Marcos, TX...............................    0.8690    0.9083
Bangor, ME..........................................    0.9485    0.9644
Barnstable-Yarmouth, MA.............................    1.3837    1.2491
Baton Rouge, LA.....................................    0.8416    0.8886
Benton Harbor, MI...................................    0.8640    0.9047
Benton Harbor, MI (Rural Michigan Hosp.)............    0.8939    0.9261
Bergen-Passaic, NJ..................................    1.1573    1.1052
Billings, MT........................................    0.9147    0.9408
Birmingham, AL......................................    0.8933    0.9256
Bismarck, ND........................................    0.7874    0.8490
Boise City, ID......................................    0.8893    0.9228
Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH....    1.1430    1.0958
Caguas, PR..........................................    0.4551    0.5833
Casper, WY..........................................    0.9019    0.9317
Champaign-Urbana, IL................................    0.8740    0.9119
Charlotte-Gastonia-Rock Hill, NC-SC.................    0.9758    0.9834
Charlottesville, VA.................................    0.8897    0.9231
Chattanooga, TN-GA..................................    0.8664    0.9065
Chicago, IL.........................................    1.0829    1.0561
Cincinnati, OH-KY-IN................................    0.9565    0.9700
Cleveland-Lorain-Elyria, OH.........................    0.9811    0.9870
Columbia, MO........................................    0.8685    0.9080
Columbus, OH........................................    0.9800    0.9863
Dallas, TX..........................................    0.9624    0.9741
Davenport-Moline-Rock Island, IA-IL.................    0.8411    0.8883
Denver, CO..........................................    1.0299    1.0204
Des Moines, IA......................................    0.8718    0.9103
Detroit, MI.........................................    1.0844    1.0571
Duluth-Superior, MN-WI..............................    0.9786    0.9853
Dutchess County, NY.................................    1.0174    1.0119
Eugene-Springfield, OR..............................    1.1700    1.1135
Fargo-Moorhead, ND-MN...............................    0.8730    0.9112
Fayetteville, NC....................................    0.8468    0.8924
Flint, MI...........................................    1.1191    1.0801
Florence, AL........................................    0.7722    0.8378
Florence, SC........................................    0.8243    0.8761
Ft. Lauderdale, FL..................................    1.0802    1.0543
Fort Pierce-Port St. Lucie, FL......................    0.9782    0.9850
Fort Walton Beach, FL...............................    0.8555    0.8986
Fort Worth-Arlington, TX............................    0.9691    0.9787
Gadsden, AL.........................................    0.8821    0.9177
Gainesville, FL.....................................    0.9603    0.9726
Gary, IN............................................    0.9121    0.9389
Grand Forks, ND-MN..................................    0.8853    0.9200
Grand Junction, CO..................................    0.8557    0.8988
Great Falls, MT.....................................    0.9321    0.9530
Greeley, CO.........................................    0.9798    0.9861
Green Bay, WI.......................................    0.9592    0.9719
Greensboro-Winston-Salem-High Point, NC.............    0.9357    0.9555
Harrisburg-Lebanon-Carlisle, PA.....................    1.0044    1.0030
Honolulu, HI........................................    1.1826    1.1217
Houma, LA...........................................    0.7859    0.8479
Houston, TX.........................................    0.9633    0.9747
Huntington-Ashland, WV-KY-OH........................    0.9159    0.9416
Huntsville, AL......................................    0.8491    0.8940
Indianapolis, IN....................................    0.9851    0.9898
Iowa City, IA.......................................    0.9192    0.9439
Jackson, MS.........................................    0.7799    0.8435
Johnson City-Kingsport-Bristol, TN-VA...............    0.9120    0.9389
Jonesboro, AR.......................................    0.7449    0.8174
Joplin, MO..........................................    0.7519    0.8226
Kalamazoo-Battle Creek, MI..........................    1.0676    1.0458
Kansas City, KS-MO..................................    0.9571    0.9704
Knoxville, TN.......................................    0.8837    0.9188
Lafayette, LA.......................................    0.8226    0.8748
Lafayette, IN.......................................    0.9181    0.9432
Lansing-East Lansing, MI............................    1.0093    1.0064
Las Cruces, NM......................................    0.8664    0.9065
Las Vegas, NV-AZ....................................    1.0601    1.0408
Lexington, KY.......................................    0.8422    0.8890
Lima, OH............................................    0.9192    0.9439
Lincoln, NE.........................................    0.8935    0.9258
Little Rock-North Little Rock, AR...................    0.8496    0.8944
Longview-Marshall, TX...............................    0.8508    0.8953
Los Angeles-Long Beach, CA..........................    1.2290    1.1517
Louisville, KY-IN...................................    0.9498    0.9653
Macon, GA...........................................    0.9069    0.9353
Madison, WI.........................................    1.0062    1.0042
Mansfield, OH.......................................    0.8645    0.9051
Medford-Ashland, OR.................................    1.0361    1.0246
Memphis, TN-AR-MS...................................    0.8595    0.9015
Milwaukee-Waukesha, WI..............................    0.9826    0.9881
Minneapolis-St. Paul, MN-WI.........................    1.0739    1.0500
Monroe, LA..........................................    0.8420    0.8889
Montgomery, AL......................................    0.7818    0.8449
Nashville, TN.......................................    0.9189    0.9437
New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT.    1.2629    1.1733
New London-Norwich, CT..............................    1.2266    1.1501
New Orleans, LA.....................................    0.9566    0.9701
New York, NY........................................    1.4352    1.2807
Newark, NJ..........................................    1.1101    1.0741
Newburgh, NY-PA.....................................    1.1468    1.0983
Oakland, CA.........................................    1.5239    1.3344
Odessa-Midland, TX..................................    0.8522    0.8963
Oklahoma City, OK...................................    0.8487    0.8937
Omaha, NE-IA........................................    0.9406    0.9589
Orange County, CA...................................    1.1408    1.0944
Peoria-Pekin, IL....................................    0.8555    0.8986
Philadelphia, PA-NJ.................................    1.1380    1.0926
Pittsburgh, PA......................................    0.9591    0.9718
Pocatello, ID.......................................    0.8987    0.9295
Portland, ME........................................    0.9634    0.9748
Portland-Vancouver, OR-WA...........................    1.1352    1.0907
Provo-Orem, UT......................................    1.0080    1.0055
Raleigh-Durham-Chapel Hill, NC......................    0.9825    0.9880
Rapid City, SD......................................    0.8351    0.8839
Rochester, MN.......................................    1.0509    1.0346
Rockford, IL........................................    0.9087    0.9365
Sacramento, CA......................................    1.2225    1.1475
Saginaw-Bay City-Midland, MI........................    0.9571    0.9704
St. Cloud, MN.......................................    0.9551    0.9690
St. Louis, MO-IL....................................    0.9145    0.9406
Salinas, CA.........................................    1.4309    1.2781
Salt Lake City-Ogden, UT............................    0.9869    0.9910
San Diego, CA.......................................    1.2266    1.1501
San Francisco, CA...................................    1.4120    1.2665
Santa Fe, NM........................................    0.9818    0.9875
Santa Rosa, CA......................................    1.2447    1.1617
Seattle-Bellevue-Everett, WA........................    1.1383    1.0928
Sherman-Denison, TX.................................    0.8345    0.8835
Sioux City, IA-NE...................................    0.8026    0.8602
Sioux Falls, SD.....................................    0.8613    0.9028
South Bend, IN......................................    0.9887    0.9922

[[Page 29980]]

                                                                        
Spokane, WA.........................................    1.0316    1.0215
Springfield, IL.....................................    0.8617    0.9031
Springfield, MO.....................................    0.7969    0.8560
Stockton-Lodi, CA...................................    1.1527    1.1022
Syracuse, NY........................................    0.9464    0.9630
Tampa-St. Petersburg-Clearwater, FL.................    0.9191    0.9439
Texarkana, AR-Texarkana, TX.........................    0.9482    0.9642
Topeka, KS..........................................    0.9240    0.9473
Tucson, AZ..........................................    0.9187    0.9436
Tulsa, OK...........................................    0.8080    0.8642
Tyler, TX...........................................    0.9379    0.9570
Vallejo-Fairfield-Napa, CA..........................    1.3442    1.2245
Washington, DC-MD-VA-WV.............................    1.0786    1.0532
Waterloo-Cedar Falls, IA............................    0.8649    0.9054
Wausau, WI..........................................    0.9853    0.9899
Wichita, KS.........................................    0.9130    0.9396
Wichita Falls, TX...................................    0.7645    0.8320
Rural Florida.......................................    0.8846    0.9195
Rural Louisiana.....................................    0.7400    0.8137
Rural Minnesota.....................................    0.8202    0.8731
Rural Missouri......................................    0.7221    0.8001
Rural New Hampshire.................................    0.9730    0.9814
Rural New Mexico....................................    0.7893    0.8504
Rural North Carolina................................    0.7938    0.8537
Rural Oregon........................................    0.9988    0.9992
Rural Washington....................................    1.0223    1.0152
Rural West Virginia.................................    0.7964    0.8556
Rural Wyoming.......................................    0.8250    0.8766
------------------------------------------------------------------------


             Table 4D.--Average Hourly Wage for Urban Areas             
------------------------------------------------------------------------
                                                                Average 
                          Urban area                             hourly 
                                                                  wage  
------------------------------------------------------------------------
Abilene, TX..................................................    16.6537
Aguadilla, PR................................................     8.4161
Akron, OH....................................................    19.6368
Albany, GA...................................................    15.9028
Albany-Schenectady-Troy, NY..................................    17.0385
Albuquerque, NM..............................................    18.7069
Alexandria, LA...............................................    16.4017
Allentown-Bethlehem-Easton, PA...............................    20.2671
Altoona, PA..................................................    18.3612
Amarillo, TX.................................................    18.9399
Anchorage, AK................................................    25.8065
Ann Arbor, MI................................................    23.6829
Anniston, AL.................................................    16.6112
Appleton-Oshkosh-Neenah, WI..................................    18.0782
Arecibo, PR..................................................     8.4753
Asheville, NC................................................    18.2293
Athens, GA...................................................    18.2596
Atlanta, GA..................................................    19.7032
Atlantic-Cape May, NJ........................................    22.4152
Augusta-Aiken, GA-SC.........................................    18.7566
Austin-San Marcos, TX........................................    17.4495
Bakersfield, CA..............................................    20.1222
Baltimore, MD................................................    19.4693
Bangor, ME...................................................    19.0467
Barnstable-Yarmouth, MA......................................    28.7181
Baton Rouge, LA..............................................    16.9004
Beaumont-Port Arthur, TX.....................................    17.2215
Bellingham, WA...............................................    22.5492
Benton Harbor, MI............................................    17.3503
Bergen-Passaic, NJ...........................................    24.3291
Billings, MT.................................................    19.5350
Biloxi-Gulfport-Pascagoula, MS...............................    16.9110
Binghamton, NY...............................................    18.2489
Birmingham, AL...............................................    17.9378
Bismarck, ND.................................................    15.4640
Bloomington,IN...............................................    18.3421
Bloomington-Normal, IL.......................................    17.6360
Boise City, ID...............................................    17.7955
Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH.............    22.9698
Boulder-Longmont, CO.........................................    20.1260
Brazoria, TX.................................................    18.7704
Bremerton, WA................................................    22.1033
Brownsville-Harlingen-San Benito, TX.........................    17.4677
Bryan-College Station, TX....................................    14.1367
Buffalo-Niagara Falls, NY....................................    18.6068
Burlington, VT...............................................    20.2766
Caguas, PR...................................................     9.0320
Canton-Massillon, OH.........................................    18.0078
Casper, WY...................................................    18.1110
Cedar Rapids, IA.............................................    17.1383
Champaign-Urbana, IL.........................................    17.5502
Charleston-North Charleston, SC..............................    17.5483
Charleston, WV...............................................    18.3703
Charlotte-Gastonia-Rock Hill, NC-SC..........................    19.5947
Charlottesville, VA..........................................    18.2038
Chattanooga, TN-GA...........................................    17.3976
Cheyenne, WY.................................................    15.1808
Chicago, IL..................................................    21.7444
Chico-Paradise, CA...........................................    20.8709
Cincinnati, OH-KY-IN.........................................    19.0516
Clarksville-Hopkinsville, TN-KY..............................    15.7778
Cleveland-Lorain-Elyria, OH..................................    19.7007
Colorado Springs, CO.........................................    18.7205
Columbia, MO.................................................    17.8452
Columbia, SC.................................................    18.5185
Columbus, GA-AL..............................................    16.6542
Columbus, OH.................................................    19.6781
Corpus Christi, TX...........................................    17.9745
Cumberland, MD-WV............................................    17.7280
Dallas, TX...................................................    19.3876
Danville, VA.................................................    16.3692
Davenport-Moline-Rock Island, IA-IL..........................    16.8903
Dayton-Springfield, OH.......................................    19.3553
Daytona Beach, FL............................................    16.7797
Decatur, AL..................................................    16.6503
Decatur, IL..................................................    15.9047
Denver, CO...................................................    20.6808
Des Moines, IA...............................................    17.5070
Detroit, MI..................................................    21.7434
Dothan, AL...................................................    16.2160
Dover, DE....................................................    18.5175
Dubuque, IA..................................................    16.2530
Duluth-Superior, MN-WI.......................................    19.6500
Dutchess County, NY..........................................    21.3729
Eau Claire, WI...............................................    17.6122
El Paso, TX..................................................    19.5169
Elkhart-Goshen, IN...........................................    18.2474
Elmira, NY...................................................    16.5714
Enid, OK.....................................................    16.0002
Erie, PA.....................................................    17.8087
Eugene-Springfield, OR.......................................    23.0592
Evansville, Henderson, IN-KY.................................    17.3648
Fargo-Moorhead, ND-MN........................................    17.7585
Fayetteville, NC.............................................    17.5510
Fayetteville-Springdale-Rogers, AR...........................    14.9924
Flagstaff, AZ-UT.............................................    18.3168
Flint, MI....................................................    22.4728
Florence, AL.................................................    15.1732
Florence, SC.................................................    16.5268
Fort Collins-Loveland, CO....................................    20.5933
Fort Lauderdale, FL..........................................    20.8970
Fort Myers-Cape Coral, FL....................................    16.8350
Fort Pierce-Port St. Lucie, FL...............................    19.6424
Fort Smith, AR-OK............................................    15.6127
Fort Walton Beach, FL........................................    17.1797
Fort Wayne, IN...............................................    17.8865
Fort Worth-Arlington, TX.....................................    19.3702
Fresno, CA...................................................    21.2867
Gadsden, AL..................................................    17.7134
Gainesville, FL..............................................    19.2822
Galveston-Texas City, TX.....................................    21.2286
Gary, IN.....................................................    19.3581
Glens Falls, NY..............................................    16.7853
Goldsboro, NC................................................    16.9659
Grand Forks, ND-MN...........................................    17.5737
Grand Junction, CO...........................................    15.6876
Grand Rapids-Muskegon-Holland, MI............................    20.3894
Great Falls, MT..............................................    17.9668
Greeley, CO..................................................    20.2891
Green Bay, WI................................................    18.2802
Greensboro-Winston-Salem-High Point, NC......................    18.7901
Greenville, NC...............................................    18.2150
Greenville-Spartanburg-Anderson, SC..........................    18.2047
Hagerstown, MD...............................................    19.4546
Hamilton-Middletown, OH......................................    17.7961
Harrisburg-Lebanon-Carlisle, PA..............................    20.3990
Hartford, CT.................................................    25.2442
Hattiesburg, MS..............................................    14.4517
Hickory-Morganton-Lenoir, NC.................................    17.4555
Honolulu, HI.................................................    23.7434
Houma, LA....................................................    15.7820
Houston, TX..................................................    19.3444
Huntington-Ashland, WV-KY-OH.................................    18.3921
Huntsville, AL...............................................    17.0504
Indianapolis, IN.............................................    19.7810
Iowa City, IA................................................    18.8914
Jackson, MI..................................................    18.1893
Jackson, MS..................................................    15.6018
Jackson, TN..................................................    17.1259
Jacksonville, FL.............................................    18.0438
Jacksonville, NC.............................................    14.0121
Jamestown, NY................................................    15.1621
Janesville-Beloit, WI........................................    17.7327
Jersey City, NJ..............................................    22.9317
Johnson City-Kingsport-Bristol, TN-VA........................    18.3136
Johnstown, PA................................................    16.8349
Jonesboro, AR................................................    14.9575
Joplin, MO...................................................    15.0332
Kalamazoo-Battlecreek, MI....................................    21.4383
Kankakee, IL.................................................    17.3802
Kansas City, KS-MO...........................................    19.2182
Kenosha, WI..................................................    18.4799
Killeen-Temple, TX...........................................    20.6010
Knoxville, TN................................................    17.7457

[[Page 29981]]

                                                                        
Kokomo, IN...................................................    16.9123
La Crosse, WI-MN.............................................    17.5812
Lafayette, LA................................................    16.4732
Lafayette, IN................................................    18.4349
Lake Charles, LA.............................................    15.6250
Lakeland-Winter Haven, FL....................................    17.6957
Lancaster, PA................................................    19.0606
Lansing-East Lansing, MI.....................................    20.2670
Laredo, TX...................................................    14.7188
Las Cruces, NM...............................................    17.3739
Las Vegas, NV-AZ.............................................    21.2874
Lawrence, KS.................................................    17.2986
Lawton, OK...................................................    18.1767
Lewiston-Auburn, ME..........................................    19.1630
Lexington, KY................................................    16.8603
Lima, OH.....................................................    18.4571
Lincoln, NE..................................................    18.2595
Little Rock-North Little Rock, AR............................    17.0606
Longview-Marshall, TX........................................    17.2912
Los Angeles-Long Beach, CA...................................    24.6067
Louisville, KY-IN............................................    19.0725
Lubbock, TX..................................................    16.7563
Lynchburg, VA................................................    16.4640
Macon, GA....................................................    18.2107
Madison, WI..................................................    20.2048
Mansfield, OH................................................    17.3603
Mayaguez, PR.................................................     9.0075
McAllen-Edinburg-Mission, TX.................................    16.1323
Medford-Ashland, OR..........................................    20.8059
Melbourne-Titusville-Palm Bay, FL............................    17.7216
Memphis, TN-AR-MS............................................    17.2589
Merced, CA...................................................    21.9146
Miami, FL....................................................    19.8627
Middlesex-Somerset-Hunterdon, NJ.............................    22.0067
Milwaukee-Waukesha, WI.......................................    19.7306
Minneapolis-St. Paul, MN-WI..................................    21.5643
Mobile, AL...................................................    16.9845
Modesto, CA..................................................    21.6914
Monmouth-Ocean, NJ...........................................    21.9116
Monroe, LA...................................................    16.9075
Montgomery, AL...............................................    15.4155
Muncie, IN...................................................    18.3854
Myrtle Beach, SC.............................................    16.0211
Naples, FL...................................................    20.3132
Nashville, TN................................................    18.4518
Nassau-Suffolk, NY...........................................    27.7072
New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT..........    25.3561
New London-Norwich, CT.......................................    24.1396
New Orleans, LA..............................................    19.2096
New York, NY.................................................    28.8193
Newark, NJ...................................................    24.0494
Newburgh, NY-PA..............................................    22.6737
Norfolk-Virginia Beach-Newport News, VA-NC...................    16.6956
Oakland, CA..................................................    30.4360
Ocala, FL....................................................    18.1497
Odessa-Midland, TX...........................................    17.4016
Oklahoma City, OK............................................    17.0417
Olympia, WA..................................................    21.8203
Omaha, NE-IA.................................................    18.8876
Orange County, CA............................................    23.0599
Orlando, FL..................................................    18.7302
Owensboro, KY................................................    15.0313
Panama City, FL..............................................    16.7539
Parkersburg-Marietta, WV-OH..................................    16.1677
Pensacola, FL................................................    16.4635
Peoria-Pekin, IL.............................................    17.1794
Philadelphia, PA-NJ..........................................    22.8513
Phoenix-Mesa, AZ.............................................    18.9787
Pine Bluff, AR...............................................    15.7267
Pittsburgh, PA...............................................    19.5446
Pittsfield, MA...............................................    21.3310
Pocatello, ID................................................    19.1619
Ponce, PR....................................................     9.1572
Portland, ME.................................................    19.3456
Portland-Vancouver, OR-WA....................................    22.7959
Providence-Warwick, RI.......................................    22.2138
Provo-Orem, UT...............................................    20.2420
Pueblo, CO...................................................    16.3970
Punta Gorda, FL..............................................    17.2423
Racine, WI...................................................    17.9536
Raleigh-Durham-Chapel Hill, NC...............................    19.7297
Rapid City, SD...............................................    16.7698
Reading, PA..................................................    19.1233
Redding, CA..................................................    23.6558
Reno, NV.....................................................    21.6378
Richland-Kennewick-Pasco, WA.................................    19.9294
Richmond-Petersburg, VA......................................    18.4237
Riverside-San Bernardino, CA.................................    22.7449
Roanoke, VA..................................................    16.7913
Rochester, MN................................................    21.1030
Rochester, NY................................................    19.0730
Rockford, IL.................................................    18.2476
Rocky Mount, NC..............................................    18.1482
Sacramento, CA...............................................    24.5491
Saginaw-Bay City-Midland, MI.................................    19.2180
St. Cloud, MN................................................    19.1778
St. Joseph, MO...............................................    16.8108
St. Louis, MO-IL.............................................    18.3627
Salem, OR....................................................    19.9649
Salinas, CA..................................................    29.1634
Salt Lake City-Ogden, UT.....................................    19.8077
San Angelo, TX...............................................    15.0684
San Antonio, TX..............................................    16.5159
San Diego, CA................................................    24.5670
San Francisco, CA............................................    28.5345
San Jose, CA.................................................    28.6049
San Juan-Bayamon, PR.........................................     9.4463
San Luis Obispo-Atascadero-Paso Robles, CA...................    22.8504
Santa Barbara-Santa Maria-Lompoc, CA.........................    21.4774
Santa Cruz-Watsonville, CA...................................    28.5128
Santa Fe, NM.................................................    20.2428
Santa Rosa, CA...............................................    26.2920
Sarasota-Bradenton, FL.......................................    19.6072
Savannah, GA.................................................    17.4249
Scranton-Wilkes Barre-Hazleton, PA...........................    17.1601
Seattle-Bellevue-Everett, WA.................................    22.7858
Sharon, PA...................................................    17.6500
Sheboygan, WI................................................    15.7984
Sherman-Denison, TX..........................................    17.1241
Shreveport-Bossier City, LA..................................    18.8682
Sioux City, IA-NE............................................    16.1162
Sioux Falls, SD..............................................    17.5067
South Bend, IN...............................................    19.8290
Spokane, WA..................................................    21.0664
Springfield, IL..............................................    17.5080
Springfield, MO..............................................    15.8980
Springfield, MA..............................................    21.4074
State College, PA............................................    19.3613
Steubenville-Weirton, OH-WV..................................    17.3728
Stockton-Lodi, CA............................................    23.1020
Sumter, SC...................................................    15.7585
Syracuse, NY.................................................    18.9634
Tacoma, WA...................................................    22.1357
Tallahassee, FL..............................................    16.7434
Tampa-St. Petersburg-Clearwater, FL..........................    18.2677
Terre Haute, IN..............................................    17.3093
Texarkana, AR-Texarkana, TX..................................    19.2649
Toledo, OH...................................................    20.8792
Topeka, KS...................................................    18.8050
Trenton, NJ..................................................    20.8336
Tucson, AZ...................................................    18.4477
Tulsa, OK....................................................    16.2252
Tuscaloosa, AL...............................................    16.3331
Tyler, TX....................................................    19.1086
Utica-Rome, NY...............................................    16.7919
Vallejo-Fairfield-Napa, CA...................................    27.4125
Ventura, CA..................................................    21.9959
Victoria, TX.................................................    17.1016
Vineland-Millville-Bridgeton, NJ.............................    20.3170
Visalia-Tulare-Porterville, CA...............................    19.9417
Waco, TX.....................................................    15.4645
Washington, DC-MD-VA-WV......................................    21.6582
Waterloo-Cedar Falls, IA.....................................    17.3631
Wausau, WI...................................................    21.1907
West Palm Beach-Boca Raton, FL...............................    20.8691
Wheeling, OH-WV..............................................    15.4868
Wichita, KS..................................................    18.8137
Wichita Falls, TX............................................    15.3505
Williamsport, PA.............................................    17.1768
Wilmington-Newark, DE-MD.....................................    23.1911
Wilmington, NC...............................................    18.7325
Yakima, WA...................................................    20.2994
Yolo, CA.....................................................    22.9704
York, PA.....................................................    18.9189
Youngstown-Warren, OH........................................    19.9688
Yuba City, CA................................................    21.0423
Yuma, AZ.....................................................    19.5572
------------------------------------------------------------------------


             Table 4E.--Average Hourly Wage For Rural Areas             
------------------------------------------------------------------------
                                                                Average 
                        Nonurban area                            hourly 
                                                                  wage  
------------------------------------------------------------------------
Alabama......................................................    14.5723
Alaska.......................................................    24.7367
Arizona......................................................    16.0545
Arkansas.....................................................    14.0756
California...................................................    20.0902
Colorado.....................................................    16.2015
Connecticut..................................................    25.3532
Delaware.....................................................    17.9354
Florida......................................................    17.7628
Georgia......................................................    15.5563
Hawaii.......................................................    20.5550
Idaho........................................................    16.4839
Illinois.....................................................    15.3631
Indiana......................................................    16.4180
Iowa.........................................................    14.8337
Kansas.......................................................    14.4720
Kentucky.....................................................    15.6298
Louisiana....................................................    14.8596
Maine........................................................    17.0166
Maryland.....................................................    17.3152
Massachusetts................................................    21.5382
Michigan.....................................................    17.9507
Minnesota....................................................    16.4669
Mississippi..................................................    13.8932

[[Page 29982]]

                                                                        
Missouri.....................................................    14.4980
Montana......................................................    16.3497
Nebraska.....................................................    14.7745
Nevada.......................................................    17.9159
New Hampshire................................................    19.5250
New Jersey \1\...............................................  .........
New Mexico...................................................    15.8297
New York.....................................................    16.8172
North Carolina...............................................    15.9365
North Dakota.................................................    14.7534
Ohio.........................................................    16.9442
Oklahoma.....................................................    14.1874
Oregon.......................................................    20.0517
Pennsylvania.................................................    16.9465
Puerto Rico..................................................     8.0298
Rhode Island \1\.............................................  .........
South Carolina...............................................    15.8812
South Dakota.................................................    14.0203
Tennessee....................................................    14.7740
Texas........................................................    14.7038
Utah.........................................................    17.9362
Vermont......................................................    18.7155
Virginia.....................................................    15.5887
Washington...................................................    20.5277
West Virginia................................................    15.9342
Wisconsin....................................................    17.0214
Wyoming......................................................   16.5656 
------------------------------------------------------------------------
\1\ All counties within the State are classified as urban.              


                Table 4F.--Puerto Rico Wage Index and Capital Geographic Adjustment Factor (GAF)                
----------------------------------------------------------------------------------------------------------------
                                                                                        Wage index--            
                                                                                          reclass.      GAF--   
                            Area                               Wage index      GAF       hospitals     reclass. 
                                                                                                      hospitals 
----------------------------------------------------------------------------------------------------------------
Aguadilla, PR...............................................       0.9152       0.9411  ...........  ...........
Arecibo, PR.................................................       0.9217       0.9457  ...........  ...........
Caguas, PR..................................................       0.9937       0.9957       0.9937       0.9957
Mayaguez, PR................................................       0.9795       0.9859  ...........  ...........
Ponce, PR...................................................       0.9958       0.9971  ...........  ...........
San Juan-Bayamon, PR........................................       1.0273       1.0186  ...........  ...........
Rural Puerto Rico...........................................       0.8732       0.9113  ...........  ...........
----------------------------------------------------------------------------------------------------------------


  Table 5.--List of Diagnosis Related Groups (DRGs), Relative Weighting Factors, Geometric and Arithmetic Mean  
                                                     Length                                                     
----------------------------------------------------------------------------------------------------------------
                                                                               Relative    Geometric  Arithmetic
                                                                                weights    mean LOS    mean LOS 
----------------------------------------------------------------------------------------------------------------
1...............       01  SURG                  CRANIOTOMY AGE >17 EXCEPT        3.0381         6.9        10.0
                                                  FOR TRAUMA.                                                   
2...............       01  SURG                  CRANIOTOMY FOR TRAUMA AGE        3.0527         7.9        10.6
                                                  >17.                                                          
3...............       01  SURG                  *CRANIOTOMY AGE 0-17.......      1.9470        12.7        12.7
4...............       01  SURG                  SPINAL PROCEDURES..........      2.3738         5.5         8.5
5...............       01  SURG                  EXTRACRANIAL VASCULAR            1.5019         2.9         3.9
                                                  PROCEDURES.                                                   
6...............       01  SURG                  CARPAL TUNNEL RELEASE......       .7573         2.2         3.3
7...............       01  SURG                  PERIPH & CRANIAL NERVE &         2.4812         7.6        11.6
                                                  OTHER NERV SYST PROC W CC.                                    
8...............       01  SURG                  PERIPH & CRANIAL NERVE &         1.1314         2.5         3.6
                                                  OTHER NERV SYST PROC W/O                                      
                                                  CC.                                                           
9...............       01  MED                   SPINAL DISORDERS & INJURIES      1.2570         5.1         7.2
10..............       01  MED                   NERVOUS SYSTEM NEOPLASMS W       1.2176         5.3         7.4
                                                  CC.                                                           
11..............       01  MED                   NERVOUS SYSTEM NEOPLASMS W/       .7857         3.2         4.3
                                                  O CC.                                                         
12..............       01  MED                   DEGENERATIVE NERVOUS SYSTEM       .9357         5.0         6.8
                                                  DISORDERS.                                                    
13..............       01  MED                   MULTIPLE SCLEROSIS &              .7809         4.7         5.8
                                                  CEREBELLAR ATAXIA.                                            
14..............       01  MED                   SPECIFIC CEREBROVASCULAR         1.1904         5.1         6.8
                                                  DISORDERS EXCEPT TIA.                                         
15..............       01  MED                   TRANSIENT ISCHEMIC ATTACK &       .7249         3.2         4.1
                                                  PRECEREBRAL OCCLUSIONS.                                       
16..............       01  MED                   NONSPECIFIC CEREBROVASCULAR      1.0452         4.6         6.1
                                                  DISORDERS W CC.                                               
17..............       01  MED                   NONSPECIFIC CEREBROVASCULAR       .6176         2.9         3.7
                                                  DISORDERS W/O CC.                                             
18..............       01  MED                   CRANIAL & PERIPHERAL NERVE        .9400         4.5         5.9
                                                  DISORDERS W CC.                                               
19..............       01  MED                   CRANIAL & PERIPHERAL NERVE        .6290         3.2         4.1
                                                  DISORDERS W/O CC.                                             
20..............       01  MED                   NERVOUS SYSTEM INFECTION         2.5777         8.0        10.8
                                                  EXCEPT VIRAL MENINGITIS.                                      
21..............       01  MED                   VIRAL MENINGITIS...........      1.4784         5.4         7.1
22..............       01  MED                   HYPERTENSIVE ENCEPHALOPATHY       .8687         3.7         4.8
23..............       01  MED                   NONTRAUMATIC STUPOR & COMA.       .7820         3.3         4.6
24..............       01  MED                   SEIZURE & HEADACHE AGE >17        .9588         3.9         5.4
                                                  W CC.                                                         
25..............       01  MED                   SEIZURE & HEADACHE AGE >17        .5809         2.8         3.6
                                                  W/O CC.                                                       
26..............       01  MED                   SEIZURE & HEADACHE AGE 0-17       .9598         3.7         5.0
27..............       01  MED                   TRAUMATIC STUPOR & COMA,         1.2609         3.4         5.5
                                                  COMA >1 HR.                                                   
28..............       01  MED                   TRAUMATIC STUPOR & COMA,         1.1684         4.4         6.4
                                                  COMA <1 HR AGE >17 W CC.                                      
29..............       01  MED                   TRAUMATIC STUPOR & COMA,          .6364         2.8         3.8
                                                  COMA <1 HR AGE >17 W/O CC.                                    
30..............       01  MED                   *TRAUMATIC STUPOR & COMA,         .3292         2.0         2.0
                                                  COMA <1 HR AGE 0-17.                                          
31..............       01  MED                   CONCUSSION AGE >17 W CC....       .8364         3.5         4.8
32..............       01  MED                   CONCUSSION AGE >17 W/O CC..       .5087         2.2         3.1
33..............       01  MED                   *CONCUSSION AGE 0-17.......       .2069         1.6         1.6
34..............       01  MED                   OTHER DISORDERS OF NERVOUS       1.0365         4.2         5.8
                                                  SYSTEM W CC.                                                  
35..............       01  MED                   OTHER DISORDERS OF NERVOUS        .5930         3.0         3.9
                                                  SYSTEM W/O CC.                                                
36..............       02  SURG                  RETINAL PROCEDURES.........       .6246         1.3         1.5

[[Page 29983]]

                                                                                                                
37..............       02  SURG                  ORBITAL PROCEDURES.........       .9697         2.6         3.9
38..............       02  SURG                  PRIMARY IRIS PROCEDURES....       .4780         1.9         2.7
39..............       02  SURG                  LENS PROCEDURES WITH OR           .5414         1.5         2.0
                                                  WITHOUT VITRECTOMY.                                           
40..............       02  SURG                  EXTRAOCULAR PROCEDURES            .7386         2.2         3.3
                                                  EXCEPT ORBIT AGE >17.                                         
41..............       02  SURG                  *EXTRAOCULAR PROCEDURES           .3351         1.6         1.6
                                                  EXCEPT ORBIT AGE 0-17.                                        
42..............       02  SURG                  INTRAOCULAR PROCEDURES            .5659         1.5         2.0
                                                  EXCEPT RETINA, IRIS & LENS.                                   
43..............       02  MED                   HYPHEMA....................       .4123         2.9         4.0
44..............       02  MED                   ACUTE MAJOR EYE INFECTIONS.       .6026         4.3         5.3
45..............       02  MED                   NEUROLOGICAL EYE DISORDERS.       .6709         2.9         3.6
46..............       02  MED                   OTHER DISORDERS OF THE EYE        .7231         3.7         4.9
                                                  AGE >17 W CC.                                                 
47..............       02  MED                   OTHER DISORDERS OF THE EYE        .4635         2.7         3.6
                                                  AGE >17 W/O CC.                                               
48..............       02  MED                   *OTHER DISORDERS OF THE EYE       .2953         2.9         2.9
                                                  AGE 0-17.                                                     
49..............       03  SURG                  MAJOR HEAD & NECK                1.7911         3.8         5.3
                                                  PROCEDURES.                                                   
50..............       03  SURG                  SIALOADENECTOMY............       .8117         1.7         2.1
51..............       03  SURG                  SALIVARY GLAND PROCEDURES         .8380         2.0         2.9
                                                  EXCEPT SIALOADENECTOMY.                                       
52..............       03  SURG                  CLEFT LIP & PALATE REPAIR..      1.2445         2.2         3.2
53..............       03  SURG                  SINUS & MASTOID PROCEDURES       1.0663         2.3         3.6
                                                  AGE >17.                                                      
54..............       03  SURG                  *SINUS & MASTOID PROCEDURES       .4786         3.2         3.2
                                                  AGE 0-17.                                                     
55..............       03  SURG                  MISCELLANEOUS EAR, NOSE,          .8318         2.0         2.9
                                                  MOUTH & THROAT PROCEDURES.                                    
56..............       03  SURG                  RHINOPLASTY................       .8845         2.1         2.8
57..............       03  SURG                  T&A PROC, EXCEPT                 1.0234         2.8         4.0
                                                  TONSILLECTOMY &/OR                                            
                                                  ADENOIDECTOMY ONLY, AGE                                       
                                                  >17.                                                          
58..............       03  SURG                  *T&A PROC, EXCEPT                 .2718         1.5         1.5
                                                  TONSILLECTOMY &/OR                                            
                                                  ADENOIDECTOMY ONLY, AGE 0-                                    
                                                  17.                                                           
59..............       03  SURG                  TONSILLECTOMY &/OR                .8026         2.2         3.1
                                                  ADENOIDECTOMY ONLY, AGE                                       
                                                  >17.                                                          
60..............       03  SURG                  *TONSILLECTOMY &/OR               .2070         1.5         1.5
                                                  ADENOIDECTOMY ONLY, AGE 0-                                    
                                                  17.                                                           
61..............       03  SURG                  MYRINGOTOMY W TUBE               1.1426         2.8         4.6
                                                  INSERTION AGE >17.                                            
62..............       03  SURG                  *MYRINGOTOMY W TUBE               .2931         1.3         1.3
                                                  INSERTION AGE 0-17.                                           
63..............       03  SURG                  OTHER EAR, NOSE, MOUTH &         1.2390         3.1         4.6
                                                  THROAT O.R. PROCEDURES.                                       
64..............       03  MED                   EAR, NOSE, MOUTH & THROAT        1.1531         4.4         6.7
                                                  MALIGNANCY.                                                   
65..............       03  MED                   DYSEQUILIBRIUM.............       .5174         2.5         3.2
66..............       03  MED                   EPISTAXIS..................       .5588         2.8         3.5
67..............       03  MED                   EPIGLOTTITIS...............       .7881         3.1         3.8
68..............       03  MED                   OTITIS MEDIA & URI AGE >17        .6842         3.5         4.3
                                                  W CC.                                                         
69..............       03  MED                   OTITIS MEDIA & URI AGE >17        .5170         2.9         3.5
                                                  W/O CC.                                                       
70..............       03  MED                   OTITIS MEDIA & URI AGE 0-17       .3837         2.7         3.3
71..............       03  MED                   LARYNGOTRACHEITIS..........       .6844         3.0         3.9
72..............       03  MED                   NASAL TRAUMA & DEFORMITY...       .6277         2.7         3.5
73..............       03  MED                   OTHER EAR, NOSE, MOUTH &          .7661         3.4         4.7
                                                  THROAT DIAGNOSES AGE >17.                                     
74..............       03  MED                   *OTHER EAR, NOSE, MOUTH &         .3330         2.1         2.1
                                                  THROAT DIAGNOSES AGE 0-17.                                    
75..............       04  SURG                  MAJOR CHEST PROCEDURES.....      3.1862         8.3        10.5
76..............       04  SURG                  OTHER RESP SYSTEM O.R.           2.6396         8.7        11.7
                                                  PROCEDURES W CC.                                              
77..............       04  SURG                  OTHER RESP SYSTEM O.R.           1.1098         3.6         5.1
                                                  PROCEDURES W/O CC.                                            
78..............       04  MED                   PULMONARY EMBOLISM.........      1.4278         6.6         7.7
79..............       04  MED                   RESPIRATORY INFECTIONS &         1.6310         6.8         8.7
                                                  INFLAMMATIONS AGE >17 W CC.                                   
80..............       04  MED                   RESPIRATORY INFECTIONS &          .9138         4.9         6.0
                                                  INFLAMMATIONS AGE >17 W/O                                     
                                                  CC.                                                           
81..............       04  MED                   *RESPIRATORY INFECTIONS &        1.5079         6.1         6.1
                                                  INFLAMMATIONS AGE 0-17.                                       
82..............       04  MED                   RESPIRATORY NEOPLASMS......      1.3326         5.4         7.3
83..............       04  MED                   MAJOR CHEST TRAUMA W CC....       .9660         4.6         5.9
84..............       04  MED                   MAJOR CHEST TRAUMA W/O CC..       .5235         2.8         3.5
85..............       04  MED                   PLEURAL EFFUSION W CC......      1.2226         5.3         6.9
86..............       04  MED                   PLEURAL EFFUSION W/O CC....       .6697         3.1         4.1
87..............       04  MED                   PULMONARY EDEMA &                1.3668         4.9         6.5
                                                  RESPIRATORY FAILURE.                                          
88..............       04  MED                   CHRONIC OBSTRUCTIVE               .9746         4.6         5.7
                                                  PULMONARY DISEASE.                                            
89..............       04  MED                   SIMPLE PNEUMONIA & PLEURISY      1.1033         5.4         6.6
                                                  AGE >17 W CC.                                                 
90..............       04  MED                   SIMPLE PNEUMONIA & PLEURISY       .6793         4.0         4.7
                                                  AGE >17 W/O CC.                                               
91..............       04  MED                   SIMPLE PNEUMONIA & PLEURISY       .7951         3.7         4.4
                                                  AGE 0-17.                                                     
92..............       04  MED                   INTERSTITIAL LUNG DISEASE W       .1929         5.3         6.6
                                                  CC.                                                           
93..............       04  MED                   INTERSTITIAL LUNG DISEASE W/      .7367         3.6         4.6
                                                  O CC.                                                         
94..............       04  MED                   PNEUMOTHORAX W CC..........      1.1833         5.1         6.7
95..............       04  MED                   PNEUMOTHORAX W/O CC........       .5950         3.2         4.0
96..............       04  MED                   BRONCHITIS & ASTHMA AGE >17       .8093         4.2         5.1
                                                  W CC.                                                         
97..............       04  MED                   BRONCHITIS & ASTHMA AGE >17       .5990         3.3         4.0
                                                  W/O CC.                                                       
98..............       04  MED                   BRONCHITIS & ASTHMA AGE 0-        .6334         2.2         3.8
                                                  17.                                                           
99..............       04  MED                   RESPIRATORY SIGNS &               .6716         2.5         3.2
                                                  SYMPTOMS W CC.                                                
100.............       04  MED                   RESPIRATORY SIGNS &               .5105         1.8         2.2
                                                  SYMPTOMS W/O CC.                                              
101.............       04  MED                   OTHER RESPIRATORY SYSTEM          .8495         3.5         4.7
                                                  DIAGNOSES W CC.                                               
102.............       04  MED                   OTHER RESPIRATORY SYSTEM          .5298         2.3         2.9
                                                  DIAGNOSES W/O CC.                                             
103.............       05  SURG                  HEART TRANSPLANT...........     16.1872        31.7        47.3
104.............       05  SURG                  CARDIAC VALVE PROCEDURES W       7.3312        10.8        13.4
                                                  CARDIAC CATH.                                                 

[[Page 29984]]

                                                                                                                
105.............       05  SURG                  CARDIAC VALVE PROCEDURES W/      5.6831         8.4        10.2
                                                  O CARDIAC CATH.                                               
106.............       05  SURG                  CORONARY BYPASS W CARDIAC        5.5811         9.8        11.1
                                                  CATH.                                                         
107.............       05  SURG                  CORONARY BYPASS W/O CARDIAC      4.0780         7.3         8.3
                                                  CATH.                                                         
108.............       05  SURG                  OTHER CARDIOTHORACIC             6.1040         9.5        12.1
                                                  PROCEDURES.                                                   
109.............  .......  ....................  NO LONGER VALID............       .0000          .0          .0
110.............       05  SURG                  MAJOR CARDIOVASCULAR             4.1852         7.7        10.2
                                                  PROCEDURES W CC.                                              
111.............       05  SURG                  MAJOR CARDIOVASCULAR             2.2254         5.4         6.2
                                                  PROCEDURES W/O CC.                                            
112.............       05  SURG                  PERCUTANEOUS CARDIOVASCULAR      1.9997         3.1         4.2
                                                  PROCEDURES.                                                   
113.............       05  SURG                  AMPUTATION FOR CIRC SYSTEM       2.6574         9.7        13.1
                                                  DISORDERS EXCEPT UPPER                                        
                                                  LIMB & TOE.                                                   
114.............       05  SURG                  UPPER LIMB & TOE AMPUTATION      1.5397         6.4         8.8
                                                  FOR CIRC SYSTEM DISORDERS.                                    
115.............       05  SURG                  PERM PACE IMPLNT W AMI,HRT       3.5473         6.7         9.2
                                                  FAIL OR SHOCK OR AICD LEAD                                    
                                                  OR GEN PROC.                                                  
116.............       05  SURG                  OTH PERM CARDIAC PACEMAKER       2.5183         3.5         4.7
                                                  IMPLANT OR PTCA W CORONARY                                    
                                                  ART STENT.                                                    
117.............       05  SURG                  CARDIAC PACEMAKER REVISION       1.1922         2.7         4.0
                                                  EXCEPT DEVICE REPLACEMENT.                                    
118.............       05  SURG                  CARDIAC PACEMAKER DEVICE         1.5923         2.0         3.0
                                                  REPLACEMENT.                                                  
119.............       05  SURG                  VEIN LIGATION & STRIPPING..      1.2041         3.1         5.1
120.............       05  SURG                  OTHER CIRCULATORY SYSTEM         1.9153         5.0         8.5
                                                  O.R. PROCEDURES.                                              
121.............       05  MED                   CIRCULATORY DISORDERS W AMI      1.6563         6.0         7.3
                                                  & MAJOR COMP DISCH ALIVE.                                     
122.............       05  MED                   CIRCULATORY DISORDERS W AMI      1.1474         3.9         4.7
                                                  W/O MAJOR COMP DISCH ALIVE.                                   
123.............       05  MED                   CIRCULATORY DISORDERS W          1.4704         2.7         4.5
                                                  AMI, EXPIRED.                                                 
124.............       05  MED                   CIRCULATORY DISORDERS            1.3575         3.6         4.6
                                                  EXCEPT AMI, W CARD CATH &                                     
                                                  COMPLEX DIAG.                                                 
125.............       05  MED                   CIRCULATORY DISORDERS             .9739         2.3         2.9
                                                  EXCEPT AMI, W CARD CATH W/                                    
                                                  O COMPLEX DIAG.                                               
126.............       05  MED                   ACUTE & SUBACUTE                 2.4892        10.0        13.1
                                                  ENDOCARDITIS.                                                 
127.............       05  MED                   HEART FAILURE & SHOCK......      1.0219         4.5         5.8
128.............       05  MED                   DEEP VEIN THROMBOPHLEBITIS.       .7832         5.6         6.4
129.............       05  MED                   CARDIAC ARREST, UNEXPLAINED      1.1434         1.9         3.2
130.............       05  MED                   PERIPHERAL VASCULAR               .9409         5.1         6.3
                                                  DISORDERS W CC.                                               
131.............       05  MED                   PERIPHERAL VASCULAR               .6042         4.1         4.9
                                                  DISORDERS W/O CC.                                             
132.............       05  MED                   ATHEROSCLEROSIS W CC.......       .6763         2.7         3.3
133.............       05  MED                   ATHEROSCLEROSIS W/O CC.....       .5391         2.2         2.7
134.............       05  MED                   HYPERTENSION...............       .5785         2.8         3.6
135.............       05  MED                   CARDIAC CONGENITAL &              .8331         3.4         4.5
                                                  VALVULAR DISORDERS AGE >17                                    
                                                  W CC.                                                         
136.............       05  MED                   CARDIAC CONGENITAL &              .5732         2.4         3.1
                                                  VALVULAR DISORDERS AGE >17                                    
                                                  W/O CC.                                                       
137.............       05  MED                   *CARDIAC CONGENITAL &             .8125         3.3         3.3
                                                  VALVULAR DISORDERS AGE 0-                                     
                                                  17.                                                           
138.............       05  MED                   CARDIAC ARRHYTHMIA &              .7960         3.2         4.2
                                                  CONDUCTION DISORDERS W CC.                                    
139.............       05  MED                   CARDIAC ARRHYTHMIA &              .4979         2.2         2.7
                                                  CONDUCTION DISORDERS W/O                                      
                                                  CC.                                                           
140.............       05  MED                   ANGINA PECTORIS............       .6036         2.6         3.2
141.............       05  MED                   SYNCOPE & COLLAPSE W CC....       .6998         3.1         4.1
142.............       05  MED                   SYNCOPE & COLLAPSE W/O CC..       .5220         2.3         2.9
143.............       05  MED                   CHEST PAIN.................       .5193         1.9         2.4
144.............       05  MED                   OTHER CIRCULATORY SYSTEM         1.0902         3.9         5.4
                                                  DIAGNOSES W CC.                                               
145.............       05  MED                   OTHER CIRCULATORY SYSTEM          .6397         2.3         3.0
                                                  DIAGNOSES W/O CC.                                             
146.............       06  SURG                  RECTAL RESECTION W CC......      2.7395         9.3        10.5
147.............       06  SURG                  RECTAL RESECTION W/O CC....      1.5895         6.3         6.9
148.............       06  SURG                  MAJOR SMALL & LARGE BOWEL        3.3879        10.6        12.6
                                                  PROCEDURES W CC.                                              
149.............       06  SURG                  MAJOR SMALL & LARGE BOWEL        1.5505         6.5         7.1
                                                  PROCEDURES W/O CC.                                            
150.............       06  SURG                  PERITONEAL ADHESIOLYSIS W        2.7137         9.1        11.1
                                                  CC.                                                           
151.............       06  SURG                  PERITONEAL ADHESIOLYSIS W/O      1.2634         4.9         6.1
                                                  CC.                                                           
152.............       06  SURG                  MINOR SMALL & LARGE BOWEL        1.9120         7.2         8.5
                                                  PROCEDURES W CC.                                              
153.............       06  SURG                  MINOR SMALL & LARGE BOWEL        1.1591         5.2         5.8
                                                  PROCEDURES W/O CC.                                            
154.............       06  SURG                  STOMACH, ESOPHAGEAL &            4.1799        10.8        14.1
                                                  DUODENAL PROCEDURES AGE                                       
                                                  >17 W CC.                                                     
155.............       06  SURG                  STOMACH, ESOPHAGEAL &            1.3360         3.9         5.0
                                                  DUODENAL PROCEDURES AGE                                       
                                                  >17 W/O CC.                                                   
156.............       06  SURG                  *STOMACH, ESOPHAGEAL &            .8368         6.0         6.0
                                                  DUODENAL PROCEDURES AGE 0-                                    
                                                  17.                                                           
157.............       06  SURG                  ANAL & STOMAL PROCEDURES W       1.1844         4.0         5.6
                                                  CC.                                                           
158.............       06  SURG                  ANAL & STOMAL PROCEDURES W/       .6286         2.2         2.8
                                                  O CC.                                                         
159.............       06  SURG                  HERNIA PROCEDURES EXCEPT         1.2556         3.8         5.1
                                                  INGUINAL & FEMORAL AGE >17                                    
                                                  W CC.                                                         
160.............       06  SURG                  HERNIA PROCEDURES EXCEPT          .7189         2.3         2.8
                                                  INGUINAL & FEMORAL AGE >17                                    
                                                  W/O CC.                                                       
161.............       06  SURG                  INGUINAL & FEMORAL HERNIA        1.0571         3.0         4.2
                                                  PROCEDURES AGE >17 W CC.                                      
162.............       06  SURG                  INGUINAL & FEMORAL HERNIA         .5897         1.7         2.1
                                                  PROCEDURES AGE >17 W/O CC.                                    
163.............       06  SURG                  HERNIA PROCEDURES AGE 0-17.       .8538         3.1         4.7
164.............       06  SURG                  APPENDECTOMY W COMPLICATED       2.3460         7.5         8.7
                                                  PRINCIPAL DIAG W CC.                                          
165.............       06  SURG                  APPENDECTOMY W COMPLICATED       1.2284         4.7         5.4
                                                  PRINCIPAL DIAG W/O CC.                                        

[[Page 29985]]

                                                                                                                
166.............       06  SURG                  APPENDECTOMY W/O                 1.4655         4.3         5.4
                                                  COMPLICATED PRINCIPAL DIAG                                    
                                                  W CC.                                                         
167.............       06  SURG                  APPENDECTOMY W/O                  .8352         2.5         3.0
                                                  COMPLICATED PRINCIPAL DIAG                                    
                                                  W/O CC.                                                       
168.............       03  SURG                  MOUTH PROCEDURES W CC......      1.1152         3.2         4.7
169.............       03  SURG                  MOUTH PROCEDURES W/O CC....       .6870         2.0         2.5
170.............       06  SURG                  OTHER DIGESTIVE SYSTEM O.R.      2.7585         8.1        11.8
                                                  PROCEDURES W CC.                                              
171.............       06  SURG                  OTHER DIGESTIVE SYSTEM O.R.      1.1221         3.7         5.1
                                                  PROCEDURES W/O CC.                                            
172.............       06  MED                   DIGESTIVE MALIGNANCY W CC..      1.2870         5.3         7.4
173.............       06  MED                   DIGESTIVE MALIGNANCY W/O CC       .6749         2.8         3.9
174.............       06  MED                   G.I. HEMORRHAGE W CC.......       .9939         4.1         5.2
175.............       06  MED                   G.I. HEMORRHAGE W/O CC.....       .5383         2.7         3.2
176.............       06  MED                   COMPLICATED PEPTIC ULCER...      1.1050         4.5         5.8
177.............       06  MED                   UNCOMPLICATED PEPTIC ULCER        .8584         3.8         4.7
                                                  W CC.                                                         
178.............       06  MED                   UNCOMPLICATED PEPTIC ULCER        .6255         2.8         3.3
                                                  W/O CC.                                                       
179.............       06  MED                   INFLAMMATORY BOWEL DISEASE.      1.1142         5.2         6.7
180.............       06  MED                   G.I. OBSTRUCTION W CC......       .9167         4.4         5.7
181.............       06  MED                   G.I. OBSTRUCTION W/O CC....       .5208         3.1         3.7
182.............       06  MED                   ESOPHAGITIS, GASTROENT &          .7684         3.5         4.6
                                                  MISC DIGEST DISORDERS AGE                                     
                                                  >17 W CC.                                                     
183.............       06  MED                   ESOPHAGITIS, GASTROENT &          .5513         2.6         3.2
                                                  MISC DIGEST DISORDERS AGE                                     
                                                  >17 W/O CC.                                                   
184.............       06  MED                   ESOPHAGITIS, GASTROENT &          .5679         2.7         3.7
                                                  MISC DIGEST DISORDERS AGE                                     
                                                  0-17.                                                         
185.............       03  MED                   DENTAL & ORAL DIS EXCEPT          .8431         3.5         4.8
                                                  EXTRACTIONS &                                                 
                                                  RESTORATIONS, AGE >17.                                        
186.............       03  MED                   *DENTAL & ORAL DIS EXCEPT         .3190         2.9         2.9
                                                  EXTRACTIONS &                                                 
                                                  RESTORATIONS, AGE 0-17.                                       
187.............       03  MED                   DENTAL EXTRACTIONS &              .7018         3.0         3.9
                                                  RESTORATIONS.                                                 
188.............       06  MED                   OTHER DIGESTIVE SYSTEM           1.0732         4.3         5.8
                                                  DIAGNOSES AGE >17 W CC.                                       
189.............       06  MED                   OTHER DIGESTIVE SYSTEM            .5484         2.5         3.4
                                                  DIAGNOSES AGE >17 W/O CC.                                     
190.............       06  MED                   OTHER DIGESTIVE SYSTEM            .8567         3.2         4.9
                                                  DIAGNOSES AGE 0-17.                                           
191.............       07  SURG                  PANCREAS, LIVER & SHUNT          4.3141        11.1        14.9
                                                  PROCEDURES W CC.                                              
192.............       07  SURG                  PANCREAS, LIVER & SHUNT          1.6937         5.6         7.1
                                                  PROCEDURES W/O CC.                                            
193.............       07  SURG                  BILIARY TRACT PROC EXCEPT        3.2686        10.6        12.9
                                                  ONLY CHOLECYST W OR W/O                                       
                                                  C.D.E. W CC.                                                  
194.............       07  SURG                  BILIARY TRACT PROC EXCEPT        1.6529         5.9         7.4
                                                  ONLY CHOLECYST W OR W/O                                       
                                                  C.D.E. W/O CC.                                                
195.............       07  SURG                  CHOLECYSTECTOMY W C.D.E. W       2.7190         8.2         9.8
                                                  CC.                                                           
196.............       07  SURG                  CHOLECYSTECTOMY W C.D.E. W/      1.6123         5.5         6.3
                                                  O CC.                                                         
197.............       07  SURG                  CHOLECYSTECTOMY EXCEPT BY        2.3145         7.2         8.7
                                                  LAPAROSCOPE W/O C.D.E. W                                      
                                                  CC.                                                           
198.............       07  SURG                  CHOLECYSTECTOMY EXCEPT BY        1.1753         4.1         4.7
                                                  LAPAROSCOPE W/O C.D.E. W/O                                    
                                                  CC.                                                           
199.............       07  SURG                  HEPATOBILIARY DIAGNOSTIC         2.3537         7.9        10.7
                                                  PROCEDURE FOR MALIGNANCY.                                     
200.............       07  SURG                  HEPATOBILIARY DIAGNOSTIC         3.0792         7.6        11.4
                                                  PROCEDURE FOR NON-                                            
                                                  MALIGNANCY.                                                   
201.............       07  SURG                  OTHER HEPATOBILIARY OR           3.3934        11.0        15.0
                                                  PANCREAS O.R. PROCEDURES.                                     
202.............       07  MED                   CIRRHOSIS & ALCOHOLIC            1.3281         5.3         7.1
                                                  HEPATITIS.                                                    
203.............       07  MED                   MALIGNANCY OF HEPATOBILIARY      1.2603         5.2         7.2
                                                  SYSTEM OR PANCREAS.                                           
204.............       07  MED                   DISORDERS OF PANCREAS            1.2126         4.9         6.4
                                                  EXCEPT MALIGNANCY.                                            
205.............       07  MED                   DISORDERS OF LIVER EXCEPT        1.2165         5.0         6.8
                                                  MALIG, CIRR, ALC HEPA W CC.                                   
206.............       07  MED                   DISORDERS OF LIVER EXCEPT         .6588         3.2         4.2
                                                  MALIG, CIRR, ALC HEPA W/O                                     
                                                  CC.                                                           
207.............       07  MED                   DISORDERS OF THE BILIARY         1.0526         4.1         5.4
                                                  TRACT W CC.                                                   
208.............       07  MED                   DISORDERS OF THE BILIARY          .6065         2.4         3.0
                                                  TRACT W/O CC.                                                 
209.............       08  SURG                  MAJOR JOINT & LIMB               2.2348         5.3         5.9
                                                  REATTACHMENT PROCEDURES OF                                    
                                                  LOWER EXTREMITY.                                              
210.............       08  SURG                  HIP & FEMUR PROCEDURES           1.8260         6.5         7.6
                                                  EXCEPT MAJOR JOINT AGE >17                                    
                                                  W CC.                                                         
211.............       08  SURG                  HIP & FEMUR PROCEDURES           1.2523         5.0         5.6
                                                  EXCEPT MAJOR JOINT AGE >17                                    
                                                  W/O CC.                                                       
212.............       08  SURG                  *HIP & FEMUR PROCEDURES          1.1668        11.1        11.1
                                                  EXCEPT MAJOR JOINT AGE 0-                                     
                                                  17.                                                           
213.............       08  SURG                  AMPUTATION FOR                   1.6483         6.3         8.7
                                                  MUSCULOSKELETAL SYSTEM &                                      
                                                  CONN TISSUE DISORDERS.                                        
214.............       08  SURG                  NO LONGER VALID............       .0000          .0          .0
215.............       08  SURG                  NO LONGER VALID............       .0000          .0          .0
216.............       08  SURG                  BIOPSIES OF MUSCULOSKELETAL      2.0988         7.4        10.3
                                                  SYSTEM & CONNECTIVE TISSUE.                                   
217.............       08  SURG                  WND DEBRID & SKN GRFT            2.7938         9.2        13.7
                                                  EXCEPT HAND, FOR                                              
                                                  MUSCSKELET & CONN TISS DIS.                                   
218.............       08  SURG                  LOWER EXTREM & HUMER PROC        1.4542         4.4         5.6
                                                  EXCEPT HIP, FOOT, FEMUR                                       
                                                  AGE >17 W CC.                                                 
219.............       08  SURG                  LOWER EXTREM & HUMER PROC         .9619         2.9         3.4
                                                  EXCEPT HIP, FOOT, FEMUR                                       
                                                  AGE >17 W/O CC.                                               

[[Page 29986]]

                                                                                                                
220.............       08  SURG                  *LOWER EXTREM & HUMER PROC        .5796         5.3         5.3
                                                  EXCEPT HIP, FOOT, FEMUR                                       
                                                  AGE 0-17.                                                     
221.............       08  SURG                  NO LONGER VALID............       .0000          .0          .0
222.............       08  SURG                  NO LONGER VALID............       .0000          .0          .0
223.............       08  SURG                  MAJOR SHOULDER/ELBOW PROC,        .9015         2.1         2.7
                                                  OR OTHER UPPER EXTREMITY                                      
                                                  PROC W CC.                                                    
224.............       08  SURG                  SHOULDER, ELBOW OR FOREARM        .7474         1.8         2.1
                                                  PROC, EXC MAJOR JOINT                                         
                                                  PROC, W/O CC.                                                 
225.............       08  SURG                  FOOT PROCEDURES............      1.0149         3.1         4.6
226.............       08  SURG                  SOFT TISSUE PROCEDURES W CC      1.4061         4.1         6.3
227.............       08  SURG                  SOFT TISSUE PROCEDURES W/O        .7715         2.2         2.9
                                                  CC.                                                           
228.............       08  SURG                  MAJOR THUMB OR JOINT PROC,        .9539         2.3         3.5
                                                  OR OTH HAND OR WRIST PROC                                     
                                                  W CC.                                                         
229.............       08  SURG                  HAND OR WRIST PROC, EXCEPT        .6695         1.8         2.4
                                                  MAJOR JOINT PROC, W/O CC.                                     
230.............       08  SURG                  LOCAL EXCISION & REMOVAL OF      1.1279         3.3         5.0
                                                  INT FIX DEVICES OF HIP &                                      
                                                  FEMUR.                                                        
231.............       08  SURG                  LOCAL EXCISION & REMOVAL OF      1.2689         3.1         4.8
                                                  INT FIX DEVICES EXCEPT HIP                                    
                                                  & FEMUR.                                                      
232.............       08  SURG                  ARTHROSCOPY................      1.0599         2.5         4.2
233.............       08  SURG                  OTHER MUSCULOSKELET SYS &        2.0155         5.7         8.3
                                                  CONN TISS O.R. PROC  W CC.                                    
234.............       08  SURG                  OTHER MUSCULOSKELET SYS &        1.1072         2.9         3.9
                                                  CONN TISS O.R. PROC  W/O                                      
                                                  CC.                                                           
235.............       08  MED                   FRACTURES OF FEMUR.........       .7709         4.2         5.9
236.............       08  MED                   FRACTURES OF HIP & PELVIS..       .7341         4.3         5.7
237.............       08  MED                   SPRAINS, STRAINS, &               .5909         3.2         4.2
                                                  DISLOCATIONS OF HIP,                                          
                                                  PELVIS & THIGH.                                               
238.............       08  MED                   OSTEOMYELITIS..............      1.3362         7.0         9.4
239.............       08  MED                   PATHOLOGICAL FRACTURES &          .9851         5.3         7.0
                                                  MUSCULOSKELETAL & CONN                                        
                                                  TISS MALIGNANCY.                                              
240.............       08  MED                   CONNECTIVE TISSUE DISORDERS      1.2071         5.1         7.0
                                                  W CC.                                                         
241.............       08  MED                   CONNECTIVE TISSUE DISORDERS       .5873         3.3         4.2
                                                  W/O CC.                                                       
242.............       08  MED                   SEPTIC ARTHRITIS...........      1.0548         5.5         7.2
243.............       08  MED                   MEDICAL BACK PROBLEMS......       .7157         4.0         5.1
244.............       08  MED                   BONE DISEASES & SPECIFIC          .7167         4.0         5.4
                                                  ARTHROPATHIES W CC.                                           
245.............       08  MED                   BONE DISEASES & SPECIFIC          .5014         3.0         4.0
                                                  ARTHROPATHIES W/O CC.                                         
246.............       08  MED                   NON-SPECIFIC ARTHROPATHIES.       .5737         3.4         4.3
247.............       08  MED                   SIGNS & SYMPTOMS OF               .5575         2.8         3.7
                                                  MUSCULOSKELETAL SYSTEM &                                      
                                                  CONN TISSUE.                                                  
248.............       08  MED                   TENDONITIS, MYOSITIS &            .7414         3.7         5.0
                                                  BURSITIS.                                                     
249.............       08  MED                   AFTERCARE, MUSCULOSKELETAL        .6524         2.7         3.9
                                                  SYSTEM & CONNECTIVE TISSUE.                                   
250.............       08  MED                   FX, SPRN, STRN & DISL OF          .6984         3.4         4.7
                                                  FOREARM, HAND, FOOT AGE                                       
                                                  >17 W CC.                                                     
251.............       08  MED                   FX, SPRN, STRN & DISL OF          .4527         2.3         3.0
                                                  FOREARM, HAND, FOOT AGE                                       
                                                  >17 W/O CC.                                                   
252.............       08  MED                   *FX, SPRN, STRN & DISL OF         .2518         1.8         1.8
                                                  FOREARM, HAND, FOOT AGE 0-                                    
                                                  17.                                                           
253.............       08  MED                   FX, SPRN, STRN & DISL OF          .7245         3.9         5.3
                                                  UPARM, LOWLEG EX FOOT AGE                                     
                                                  >17 W CC.                                                     
254.............       08  MED                   FX, SPRN, STRN & DISL OF          .4343         2.8         3.5
                                                  UPARM, LOWLEG EX FOOT AGE                                     
                                                  >17 W/O CC.                                                   
255.............       08  MED                   *FX, SPRN, STRN & DISL OF         .2932         2.9         2.9
                                                  UPARM, LOWLEG EX FOOT AGE                                     
                                                  0-17.                                                         
256.............       08  MED                   OTHER MUSCULOSKELETAL             .7779         3.9         5.7
                                                  SYSTEM & CONNECTIVE TISSUE                                    
                                                  DIAGNOSES.                                                    
257.............       09  SURG                  TOTAL MASTECTOMY FOR              .9273         2.6         3.2
                                                  MALIGNANCY W CC.                                              
258.............       09  SURG                  TOTAL MASTECTOMY FOR              .7158         2.0         2.3
                                                  MALIGNANCY W/O CC.                                            
259.............       09  SURG                  SUBTOTAL MASTECTOMY FOR           .8870         2.1         3.2
                                                  MALIGNANCY W CC.                                              
260.............       09  SURG                  SUBTOTAL MASTECTOMY FOR           .6083         1.4         1.7
                                                  MALIGNANCY W/O CC.                                            
261.............       09  SURG                  BREAST PROC FOR NON-              .8980         1.8         2.2
                                                  MALIGNANCY EXCEPT BIOPSY &                                    
                                                  LOCAL EXCISION.                                               
262.............       09  SURG                  BREAST BIOPSY & LOCAL             .7883         2.6         4.0
                                                  EXCISION FOR NON-                                             
                                                  MALIGNANCY.                                                   
263.............       09  SURG                  SKIN GRAFT &/OR DEBRID FOR       2.0240         8.9        12.5
                                                  SKN ULCER OR CELLULITIS W                                     
                                                  CC.                                                           
264.............       09  SURG                  SKIN GRAFT &/OR DEBRID FOR       1.0809         5.4         7.3
                                                  SKN ULCER OR CELLULITIS W/                                    
                                                  O CC.                                                         
265.............       09  SURG                  SKIN GRAFT &/OR DEBRID           1.4947         4.6         7.1
                                                  EXCEPT FOR SKIN ULCER OR                                      
                                                  CELLULITIS W CC.                                              
266.............       09  SURG                  SKIN GRAFT &/OR DEBRID            .7880         2.6         3.6
                                                  EXCEPT FOR SKIN ULCER OR                                      
                                                  CELLULITIS W/O CC.                                            
267.............       09  SURG                  PERIANAL & PILONIDAL              .8551         2.7         4.2
                                                  PROCEDURES.                                                   
268.............       09  SURG                  SKIN, SUBCUTANEOUS TISSUE &      1.0173         2.4         3.6
                                                  BREAST PLASTIC PROCEDURES.                                    
269.............       09  SURG                  OTHER SKIN, SUBCUT TISS &        1.5805         5.9         8.5
                                                  BREAST PROC W CC.                                             
270.............       09  SURG                  OTHER SKIN, SUBCUT TISS &         .7083         2.2         3.2
                                                  BREAST PROC W/O CC.                                           
271.............       09  MED                   SKIN ULCERS................      1.0344         6.0         7.7

[[Page 29987]]

                                                                                                                
272.............       09  MED                   MAJOR SKIN DISORDERS W CC..       .9940         5.1         6.7
273.............       09  MED                   MAJOR SKIN DISORDERS W/O CC       .6713         4.0         5.4
274.............       09  MED                   MALIGNANT BREAST DISORDERS       1.1158         4.9         7.2
                                                  W CC.                                                         
275.............       09  MED                   MALIGNANT BREAST DISORDERS        .5823         2.4         3.8
                                                  W/O CC.                                                       
276.............       09  MED                   NON-MALIGANT BREAST               .6170         3.8         4.7
                                                  DISORDERS.                                                    
277.............       09  MED                   CELLULITIS AGE >17 W CC....       .8374         5.1         6.2
278.............       09  MED                   CELLULITIS AGE >17 W/O CC..       .5629         4.0         4.8
279.............       09  MED                   *CELLULITIS AGE 0-17.......       .7304         4.2         4.2
280.............       09  MED                   TRAUMA TO THE SKIN, SUBCUT        .6748         3.5         4.7
                                                  TISS & BREAST AGE >17 W CC.                                   
281.............       09  MED                   TRAUMA TO THE SKIN, SUBCUT        .4539         2.5         3.4
                                                  TISS & BREAST AGE >17 W/O                                     
                                                  CC.                                                           
282.............       09  MED                   *TRAUMA TO THE SKIN, SUBCUT       .2549         2.2         2.2
                                                  TISS & BREAST AGE 0-17.                                       
283.............       09  MED                   MINOR SKIN DISORDERS W CC..       .6927         3.8         5.0
284.............       09  MED                   MINOR SKIN DISORDERS W/O CC       .4355         2.7         3.5
285.............       10  SURG                  AMPUTAT OF LOWER LIMB FOR        2.1559         8.8        12.1
                                                  ENDOCRINE, NUTRIT, &                                          
                                                  METABOL DISORDERS.                                            
286.............       10  SURG                  ADRENAL & PITUITARY              2.2472         5.7         7.2
                                                  PROCEDURES.                                                   
287.............       10  SURG                  SKIN GRAFTS & WOUND DEBRID       1.8821         8.6        12.1
                                                  FOR ENDOC, NUTRIT & METAB                                     
                                                  DISORDERS.                                                    
288.............       10  SURG                  O.R. PROCEDURES FOR OBESITY      1.9792         4.8         5.9
289.............       10  SURG                  PARATHYROID PROCEDURES.....       .9793         2.4         3.5
290.............       10  SURG                  THYROID PROCEDURES.........       .8990         2.0         2.6
291.............       10  SURG                  THYROGLOSSAL PROCEDURES....       .7362         1.7         2.2
292.............       10  SURG                  OTHER ENDOCRINE, NUTRIT &        2.5540         7.6        11.2
                                                  METAB O.R. PROC W CC.                                         
293.............       10  SURG                  OTHER ENDOCRINE, NUTRIT &        1.2228         4.0         5.9
                                                  METAB O.R. PROC W/O CC.                                       
294.............       10  MED                   DIABETES AGE >35...........       .7562         4.0         5.3
295.............       10  MED                   DIABETES AGE 0-35..........       .7347         3.2         4.1
296.............       10  MED                   NUTRITIONAL & MISC                .8655         4.3         5.8
                                                  METABOLIC DISORDERS AGE                                       
                                                  >17 W CC.                                                     
297.............       10  MED                   NUTRITIONAL & MISC                .5200         3.0         3.9
                                                  METABOLIC DISORDERS AGE                                       
                                                  >17 W/O CC.                                                   
298.............       10  MED                   NUTRITIONAL & MISC                .4116         2.0         2.5
                                                  METABOLIC DISORDERS AGE 0-                                    
                                                  17.                                                           
299.............       10  MED                   INBORN ERRORS OF METABOLISM       .8645         3.9         5.5
300.............       10  MED                   ENDOCRINE DISORDERS W CC...      1.0787         5.1         6.6
301.............       10  MED                   ENDOCRINE DISORDERS W/O CC.       .5928         3.1         4.4
302.............       11  SURG                  KIDNEY TRANSPLANT..........      3.7056         9.2        11.0
303.............       11  SURG                  KIDNEY, URETER & MAJOR           2.6067         7.8         9.5
                                                  BLADDER PROCEDURES FOR                                        
                                                  NEOPLASM.                                                     
304.............       11  SURG                  KIDNEY, URETER & MAJOR           2.3912         6.9         9.6
                                                  BLADDER PROC FOR NON-NEOPL                                    
                                                  W CC.                                                         
305.............       11  SURG                  KIDNEY, URETER & MAJOR           1.1690         3.4         4.3
                                                  BLADDER PROC FOR NON-NEOPL                                    
                                                  W/O CC.                                                       
306.............       11  SURG                  PROSTATECTOMY W CC.........      1.2212         4.0         5.8
307.............       11  SURG                  PROSTATECTOMY W/O CC.......       .6495         2.1         2.5
308.............       11  SURG                  MINOR BLADDER PROCEDURES W       1.5142         4.3         6.4
                                                  CC.                                                           
309.............       11  SURG                  MINOR BLADDER PROCEDURES W/       .8733         2.1         2.6
                                                  O CC.                                                         
310.............       11  SURG                  TRANSURETHRAL PROCEDURES W       1.0253         3.0         4.3
                                                  CC.                                                           
311.............       11  SURG                  TRANSURETHRAL PROCEDURES W/       .5867         1.7         2.1
                                                  O CC.                                                         
312.............       11  SURG                  URETHRAL PROCEDURES, AGE          .9770         3.1         4.7
                                                  >17 W CC.                                                     
313.............       11  SURG                  URETHRAL PROCEDURES, AGE          .5799         1.8         2.3
                                                  >17 W/O CC.                                                   
314.............       11  SURG                  *URETHRAL PROCEDURES, AGE 0-      .4912         2.3         2.3
                                                  17.                                                           
315.............       11  SURG                  OTHER KIDNEY & URINARY           2.0639         4.9         8.6
                                                  TRACT O.R. PROCEDURES.                                        
316.............       11  MED                   RENAL FAILURE..............      1.3100         5.1         7.1
317.............       11  MED                   ADMIT FOR RENAL DIALYSIS...       .5551         2.0         2.9
318.............       11  MED                   KIDNEY & URINARY TRACT           1.1589         4.7         6.7
                                                  NEOPLASMS W CC.                                               
319.............       11  MED                   KIDNEY & URINARY TRACT            .5851         2.0         2.8
                                                  NEOPLASMS W/O CC.                                             
320.............       11  MED                   KIDNEY & URINARY TRACT            .8796         4.7         5.9
                                                  INFECTIONS AGE >17 W CC.                                      
321.............       11  MED                   KIDNEY & URINARY TRACT            .5864         3.6         4.3
                                                  INFECTIONS AGE >17 W/O CC.                                    
322.............       11  MED                   KIDNEY & URINARY TRACT            .5236         3.3         4.1
                                                  INFECTIONS AGE 0-17.                                          
323.............       11  MED                   URINARY STONES W CC, &/OR         .7559         2.5         3.4
                                                  ESW LITHOTRIPSY.                                              
324.............       11  MED                   URINARY STONES W/O CC......       .4306         1.7         2.0
325.............       11  MED                   KIDNEY & URINARY TRACT            .6224         3.1         4.2
                                                  SIGNS & SYMPTOMS AGE >17 W                                    
                                                  CC.                                                           
326.............       11  MED                   KIDNEY & URINARY TRACT            .4206         2.3         2.9
                                                  SIGNS & SYMPTOMS AGE >17 W/                                   
                                                  O CC.                                                         
327.............       11  MED                   KIDNEY & URINARY TRACT            .3394         2.3         3.5
                                                  SIGNS & SYMPTOMS AGE 0-17.                                    
328.............       11  MED                   URETHRAL STRICTURE AGE >17        .6891         2.9         3.9
                                                  W CC.                                                         
329.............       11  MED                   URETHRAL STRICTURE AGE >17        .5050         1.9         2.3
                                                  W/O CC.                                                       
330.............       11  MED                   *URETHRAL STRICTURE AGE 0-        .3164         1.6         1.6
                                                  17.                                                           
331.............       11  MED                   OTHER KIDNEY & URINARY            .9985         4.4         5.9
                                                  TRACT DIAGNOSES AGE >17 W                                     
                                                  CC.                                                           
332.............       11  MED                   OTHER KIDNEY & URINARY            .5845         2.6         3.5
                                                  TRACT DIAGNOSES AGE >17 W/                                    
                                                  O CC.                                                         
333.............       11  MED                   OTHER KIDNEY & URINARY            .8999         4.0         5.7
                                                  TRACT DIAGNOSES AGE 0-17.                                     
334.............       12  SURG                  MAJOR MALE PELVIC                1.6387         4.8         5.4
                                                  PROCEDURES W CC.                                              
335.............       12  SURG                  MAJOR MALE PELVIC                1.2197         3.7         4.1
                                                  PROCEDURES W/O CC.                                            
336.............       12  SURG                  TRANSURETHRAL PROSTATECTOMY       .8893         2.9         3.8
                                                  W CC.                                                         

[[Page 29988]]

                                                                                                                
337.............       12  SURG                  TRANSURETHRAL PROSTATECTOMY       .6159         2.1         2.4
                                                  W/O CC.                                                       
338.............       12  SURG                  TESTES PROCEDURES, FOR           1.0997         3.3         5.1
                                                  MALIGNANCY.                                                   
339.............       12  SURG                  TESTES PROCEDURES, NON-          1.0073         3.1         4.6
                                                  MALIGNANCY AGE >17.                                           
340.............       12  SURG                  *TESTES PROCEDURES, NON-          .2813         2.4         2.4
                                                  MALIGNANCY AGE 0-17.                                          
341.............       12  SURG                  PENIS PROCEDURES...........      1.1129         2.2         3.1
342.............       12  SURG                  CIRCUMCISION AGE >17.......       .8680         3.0         4.2
343.............       12  SURG                  *CIRCUMCISION AGE 0-17.....       .1528         1.7         1.7
344.............       12  SURG                  OTHER MALE REPRODUCTIVE          1.0265         2.1         3.1
                                                  SYSTEM O.R. PROCEDURES FOR                                    
                                                  MALIGNANCY.                                                   
345.............       12  SURG                  OTHER MALE REPRODUCTIVE           .8547         2.7         3.8
                                                  SYSTEM O.R. PROC EXCEPT                                       
                                                  FOR MALIGNANCY.                                               
346.............       12  MED                   MALIGNANCY, MALE                  .9554         4.5         6.3
                                                  REPRODUCTIVE SYSTEM, W CC.                                    
347.............       12  MED                   MALIGNANCY, MALE                  .4682         2.2         3.0
                                                  REPRODUCTIVE SYSTEM, W/O                                      
                                                  CC.                                                           
348.............       12  MED                   BENIGN PROSTATIC                  .6954         3.3         4.5
                                                  HYPERTROPHY W CC.                                             
349.............       12  MED                   BENIGN PROSTATIC                  .4196         2.1         2.7
                                                  HYPERTROPHY W/O CC.                                           
350.............       12  MED                   INFLAMMATION OF THE MALE          .6801         3.8         4.6
                                                  REPRODUCTIVE SYSTEM.                                          
351.............       12  MED                   *STERILIZATION, MALE.......       .2345         1.3         1.3
352.............       12  MED                   OTHER MALE REPRODUCTIVE           .6210         2.8         3.9
                                                  SYSTEM DIAGNOSES.                                             
353.............       13  SURG                  PELVIC EVISCERATION,             2.1041         6.4         8.3
                                                  RADICAL HYSTERECTOMY &                                        
                                                  RADICAL VULVECTOMY.                                           
354.............       13  SURG                  UTERINE, ADNEXA PROC FOR         1.4944         5.0         6.0
                                                  NON-OVARIAN/ADNEXAL MALIG                                     
                                                  W CC.                                                         
355.............       13  SURG                  UTERINE, ADNEXA PROC FOR          .9167         3.4         3.6
                                                  NON-OVARIAN/ADNEXAL MALIG                                     
                                                  W/O CC.                                                       
356.............       13  SURG                  FEMALE REPRODUCTIVE SYSTEM        .7715         2.5         2.8
                                                  RECONSTRUCTIVE PROCEDURES.                                    
357.............       13  SURG                  UTERINE & ADNEXA PROC FOR        2.4197         7.6         9.3
                                                  OVARIAN OR ADNEXAL                                            
                                                  MALIGNANCY.                                                   
358.............       13  SURG                  UTERINE & ADNEXA PROC FOR        1.2028         3.8         4.5
                                                  NON-MALIGNANCY W CC.                                          
359.............       13  SURG                  UTERINE & ADNEXA PROC FOR         .8469         2.9         3.1
                                                  NON-MALIGNANCY W/O CC.                                        
360.............       13  SURG                  VAGINA, CERVIX & VULVA            .8713         2.7         3.3
                                                  PROCEDURES.                                                   
361.............       13  SURG                  LAPAROSCOPY & INCISIONAL         1.1804         2.6         3.7
                                                  TUBAL INTERRUPTION.                                           
362.............       13  SURG                  *ENDOSCOPIC TUBAL                 .2998         1.4         1.4
                                                  INTERRUPTION.                                                 
363.............       13  SURG                  D&C, CONIZATION & RADIO-          .7470         2.6         3.5
                                                  IMPLANT, FOR MALIGNANCY.                                      
364.............       13  SURG                  D&C, CONIZATION EXCEPT FOR        .7020         2.5         3.5
                                                  MALIGNANCY.                                                   
365.............       13  SURG                  OTHER FEMALE REPRODUCTIVE        1.7123         4.7         7.2
                                                  SYSTEM O.R. PROCEDURES.                                       
366.............       13  MED                   MALIGNANCY, FEMALE               1.1898         4.9         7.1
                                                  REPRODUCTIVE SYSTEM W CC.                                     
367.............       13  MED                   MALIGNANCY, FEMALE                .5347         2.1         2.9
                                                  REPRODUCTIVE SYSTEM W/O CC.                                   
368.............       13  MED                   INFECTIONS, FEMALE                .9733         5.0         6.3
                                                  REPRODUCTIVE SYSTEM.                                          
369.............       13  MED                   MENSTRUAL & OTHER FEMALE          .5386         2.5         3.4
                                                  REPRODUCTIVE SYSTEM                                           
                                                  DISORDERS.                                                    
370.............       14  SURG                  CESAREAN SECTION W CC......      1.0660         4.3         5.6
371.............       14  SURG                  CESAREAN SECTION W/O CC....       .7057         3.3         3.6
372.............       14  MED                   VAGINAL DELIVERY W                .5552         2.4         3.1
                                                  COMPLICATING DIAGNOSES.                                       
373.............       14  MED                   VAGINAL DELIVERY W/O              .3954         1.7         2.0
                                                  COMPLICATING DIAGNOSES.                                       
374.............       14  SURG                  VAGINAL DELIVERY W                .7814         2.3         2.9
                                                  STERILIZATION &/OR D&C.                                       
375.............       14  SURG                  *VAGINAL DELIVERY W O.R.          .6804         4.4         4.4
                                                  PROC EXCEPT STERIL &/OR                                       
                                                  D&C.                                                          
376.............       14  MED                   POSTPARTUM & POST ABORTION        .4882         2.4         3.3
                                                  DIAGNOSES W/O O.R.                                            
                                                  PROCEDURE.                                                    
377.............       14  SURG                  POSTPARTUM & POST ABORTION       1.0654         2.6         4.1
                                                  DIAGNOSES W O.R. PROCEDURE.                                   
378.............       14  MED                   ECTOPIC PREGNANCY..........       .8186         2.3         2.7
379.............       14  MED                   THREATENED ABORTION........       .4021         2.1         3.0
380.............       14  MED                   ABORTION W/O D&C...........       .3424         1.5         1.8
381.............       14  SURG                  ABORTION W D&C, ASPIRATION        .4595         1.6         2.2
                                                  CURETTAGE OR HYSTEROTOMY.                                     
382.............       14  MED                   FALSE LABOR................       .2107         1.2         1.3
383.............       14  MED                   OTHER ANTEPARTUM DIAGNOSES        .4596         2.8         3.8
                                                  W MEDICAL COMPLICATIONS.                                      
384.............       14  MED                   OTHER ANTEPARTUM DIAGNOSES        .3659         2.0         2.9
                                                  W/O MEDICAL COMPLICATIONS.                                    
385.............       15  ....................  *NEONATES, DIED OR               1.3655         1.8         1.8
                                                  TRANSFERRED TO ANOTHER                                        
                                                  ACUTE CARE FACILITY.                                          
386.............       15  ....................  *EXTREME IMMATURITY OR           4.5029        17.9        17.9
                                                  RESPIRATORY DISTRESS                                          
                                                  SYNDROME, NEONATE.                                            
387.............       15  ....................  *PREMATURITY W MAJOR             3.0754        13.3        13.3
                                                  PROBLEMS.                                                     
388.............       15  ....................  *PREMATURITY W/O MAJOR           1.8556         8.6         8.6
                                                  PROBLEMS.                                                     
389.............       15  ....................  FULL TERM NEONATE W MAJOR        1.4625         5.1         6.3
                                                  PROBLEMS.                                                     
390.............       15  ....................  *NEONATE W OTHER                 1.3048         3.4         3.4
                                                  SIGNIFICANT PROBLEMS.                                         
391.............       15  ....................  * NORMAL NEWBORN...........       .1514         3.1         3.1
392.............       16  SURG                  SPLENECTOMY AGE >17........      3.1584         8.1        10.6
393.............       16  SURG                  *SPLENECTOMY AGE 0-17......      1.3376         9.1         9.1

[[Page 29989]]

                                                                                                                
394.............       16  SURG                  OTHER O.R. PROCEDURES OF         1.6297         4.5         7.4
                                                  THE BLOOD AND BLOOD                                           
                                                  FORMING ORGANS.                                               
395.............       16  MED                   RED BLOOD CELL DISORDERS          .8191         3.6         5.0
                                                  AGE >17.                                                      
396.............       16  MED                   RED BLOOD CELL DISORDERS          .6302         2.7         4.1
                                                  AGE 0-17.                                                     
397.............       16  MED                   COAGULATION DISORDERS......      1.2694         4.2         5.8
398.............       16  MED                   RETICULOENDOTHELIAL &            1.2233         4.9         6.3
                                                  IMMUNITY DISORDERS W CC.                                      
399.............       16  MED                   RETICULOENDOTHELIAL &             .6859         3.2         4.0
                                                  IMMUNITY DISORDERS W/O CC.                                    
400.............       17  SURG                  LYMPHOMA & LEUKEMIA W MAJOR      2.6206         6.3         9.7
                                                  O.R. PROCEDURE.                                               
401.............       17  SURG                  LYMPHOMA & NON-ACUTE             2.5614         8.1        11.7
                                                  LEUKEMIA W OTHER O.R. PROC                                    
                                                  W CC.                                                         
402.............       17  SURG                  LYMPHOMA & NON-ACUTE             1.0130         2.9         4.2
                                                  LEUKEMIA W OTHER O.R. PROC                                    
                                                  W/O CC.                                                       
403.............       17  MED                   LYMPHOMA & NON-ACUTE             1.6930         6.0         8.6
                                                  LEUKEMIA W CC.                                                
404.............       17  MED                   LYMPHOMA & NON-ACUTE              .7928         3.3         4.6
                                                  LEUKEMIA W/O CC.                                              
405.............       17  ....................  *ACUTE LEUKEMIA W/O MAJOR        1.8964         4.9         4.9
                                                  O.R. PROCEDURE AGE 0-17.                                      
406.............       17  SURG                  MYELOPROLIF DISORD OR            2.5952         7.2        10.0
                                                  POORLY DIFF NEOPL W MAJ                                       
                                                  O.R. PROC W CC.                                               
407.............       17  SURG                  MYELOPROLIF DISORD OR            1.1430         3.5         4.4
                                                  POORLY DIFF NEOPL W MAJ                                       
                                                  O.R. PROC W/O CC.                                             
408.............       17  SURG                  MYELOPROLIF DISORD OR            1.7314         4.8         7.7
                                                  POORLY DIFF NEOPL W OTHER                                     
                                                  O.R. PROC.                                                    
409.............       17  MED                   RADIOTHERAPY...............       .9545         4.3         5.9
410.............       17  MED                   CHEMOTHERAPY W/O ACUTE            .7957         2.6         3.4
                                                  LEUKEMIA AS SECONDARY                                         
                                                  DIAGNOSIS.                                                    
411.............       17  MED                   HISTORY OF MALIGNANCY W/O         .4403         1.8         2.3
                                                  ENDOSCOPY.                                                    
412.............       17  MED                   HISTORY OF MALIGNANCY W           .5176         2.4         3.4
                                                  ENDOSCOPY.                                                    
413.............       17  MED                   OTHER MYELOPROLIF DIS OR         1.3771         5.7         8.0
                                                  POORLY DIFF NEOPL DIAG W                                      
                                                  CC.                                                           
414.............       17  MED                   OTHER MYELOPROLIF DIS OR          .7072         3.2         4.6
                                                  POORLY DIFF NEOPL DIAG W/O                                    
                                                  CC.                                                           
415.............       18  SURG                  O.R. PROCEDURE FOR               3.5212        10.9        14.9
                                                  INFECTIOUS & PARASITIC                                        
                                                  DISEASES.                                                     
416.............       18  MED                   SEPTICEMIA AGE >17.........      1.4832         5.8         7.7
417.............       18  MED                   SEPTICEMIA AGE 0-17........       .7530         3.3         4.4
418.............       18  MED                   POSTOPERATIVE & POST-             .9666         5.0         6.3
                                                  TRAUMATIC INFECTIONS.                                         
419.............       18  MED                   FEVER OF UNKNOWN ORIGIN AGE       .8810         4.1         5.3
                                                  >17 W CC.                                                     
420.............       18  MED                   FEVER OF UNKNOWN ORIGIN AGE       .6040         3.2         4.0
                                                  >17 W/O CC.                                                   
421.............       18  MED                   VIRAL ILLNESS AGE >17......       .7063         3.3         4.2
422.............       18  MED                   VIRAL ILLNESS & FEVER OF          .5308         2.7         3.9
                                                  UNKNOWN ORIGIN AGE 0-17.                                      
423.............       18  MED                   OTHER INFECTIOUS &               1.5656         5.8         7.9
                                                  PARASITIC DISEASES                                            
                                                  DIAGNOSES.                                                    
424.............       19  SURG                  O.R. PROCEDURE W PRINCIPAL       2.4655         9.9        16.9
                                                  DIAGNOSES OF MENTAL                                           
                                                  ILLNESS.                                                      
425.............       19  MED                   ACUTE ADJUST REACT &              .6861         3.2         4.4
                                                  DISTURBANCES OF                                               
                                                  PSYCHOSOCIAL DYSFUNCTION.                                     
426.............       19  MED                   DEPRESSIVE NEUROSES........       .5648         3.7         5.2
427.............       19  MED                   NEUROSES EXCEPT DEPRESSIVE.       .5805         3.6         5.3
428.............       19  MED                   DISORDERS OF PERSONALITY &        .6946         4.9         7.6
                                                  IMPULSE CONTROL.                                              
429.............       19  MED                   ORGANIC DISTURBANCES &            .8713         5.4         7.9
                                                  MENTAL RETARDATION.                                           
430.............       19  MED                   PSYCHOSES..................       .8101         6.5         9.1
431.............       19  MED                   CHILDHOOD MENTAL DISORDERS.       .8425         5.5         8.9
432.............       19  MED                   OTHER MENTAL DISORDER             .7654         3.7         5.8
                                                  DIAGNOSES.                                                    
433.............       20  ....................  ALCOHOL/DRUG ABUSE OR             .3037         2.4         3.3
                                                  DEPENDENCE, LEFT AMA.                                         
434.............       20  ....................  ALC/DRUG ABUSE OR DEPEND,         .6852         4.0         5.3
                                                  DETOX OR OTH SYMPT TREAT W                                    
                                                  CC.                                                           
435.............       20  ....................  ALC/DRUG ABUSE OR DEPEND,         .3987         3.6         4.5
                                                  DETOX OR OTH SYMPT TREAT W/                                   
                                                  O CC.                                                         
436.............       20  ....................  ALC/DRUG DEPENDENCE W             .8107        11.5        14.0
                                                  REHABILITATION THERAPY.                                       
437.............       20  ....................  ALC/DRUG DEPENDENCE,              .7364         8.3         9.9
                                                  COMBINED REHAB & DETOX                                        
                                                  THERAPY.                                                      
438.............  .......  ....................  NO LONGER VALID............       .0000          .0          .0
439.............       21  SURG                  SKIN GRAFTS FOR INJURIES...      1.6308         5.4         8.5
440.............       21  SURG                  WOUND DEBRIDEMENTS FOR           1.8261         6.0         9.5
                                                  INJURIES.                                                     
441.............       21  SURG                  HAND PROCEDURES FOR               .9319         2.2         3.5
                                                  INJURIES.                                                     
442.............       21  SURG                  OTHER O.R. PROCEDURES FOR        2.1794         5.4         8.3
                                                  INJURIES W CC.                                                
443.............       21  SURG                  OTHER O.R. PROCEDURES FOR         .9109         2.5         3.4
                                                  INJURIES W/O CC.                                              
444.............       21  MED                   TRAUMATIC INJURY AGE >17 W        .6988         3.7         4.8
                                                  CC.                                                           
445.............       21  MED                   TRAUMATIC INJURY AGE >17 W/       .4849         2.6         3.7
                                                  O CC.                                                         
446.............       21  MED                   *TRAUMATIC INJURY AGE 0-17.       .2940         2.4         2.4
447.............       21  MED                   ALLERGIC REACTIONS AGE >17.       .4932         2.0         2.6
448.............       21  MED                   ALLERGIC REACTIONS AGE 0-17       .0952         1.0         1.0
449.............       21  MED                   POISONING & TOXIC EFFECTS         .7859         2.8         4.0
                                                  OF DRUGS AGE >17 W CC.                                        
450.............       21  MED                   POISONING & TOXIC EFFECTS         .4416         1.7         2.3
                                                  OF DRUGS AGE >17 W/O CC.                                      
451.............       21  MED                   *POISONING & TOXIC EFFECTS        .2611         2.1         2.1
                                                  OF DRUGS AGE 0-17.                                            
452.............       21  MED                   COMPLICATIONS OF TREATMENT        .9475         3.7         5.2
                                                  W CC.                                                         
453.............       21  MED                   COMPLICATIONS OF TREATMENT        .4946         2.3         3.1
                                                  W/O CC.                                                       
454.............       21  MED                   OTHER INJURY, POISONING &         .9026         3.3         5.2
                                                  TOXIC EFFECT DIAG W CC.                                       

[[Page 29990]]

                                                                                                                
455.............       21  MED                   OTHER INJURY, POISONING &         .4431         2.0         2.8
                                                  TOXIC EFFECT DIAG W/O CC.                                     
456.............       22  ....................  BURNS, TRANSFERRED TO            1.7408         3.7         7.3
                                                  ANOTHER ACUTE CARE                                            
                                                  FACILITY.                                                     
457.............       22  MED                   EXTENSIVE BURNS W/O O.R.         1.5647         2.5         4.9
                                                  PROCEDURE.                                                    
458.............       22  SURG                  NON-EXTENSIVE BURNS W SKIN       3.5516        11.1        16.0
                                                  GRAFT.                                                        
459.............       22  SURG                  NON-EXTENSIVE BURNS W WOUND      1.5555         6.5         9.3
                                                  DEBRIDEMENT OR OTHER O.R.                                     
                                                  PROC.                                                         
460.............       22  MED                   NON-EXTENSIVE BURNS W/O           .9464         4.4         6.3
                                                  O.R. PROCEDURE.                                               
461.............       23  SURG                  O.R. PROC W DIAGNOSES OF         1.0082         2.5         4.6
                                                  OTHER CONTACT W HEALTH                                        
                                                  SERVICES.                                                     
462.............       23  MED                   REHABILITATION.............      1.3997        10.5        13.1
463.............       23  MED                   SIGNS & SYMPTOMS W CC......       .6904         3.6         4.8
464.............       23  MED                   SIGNS & SYMPTOMS W/O CC....       .4855         2.7         3.4
465.............       23  MED                   AFTERCARE W HISTORY OF            .5882         2.2         3.8
                                                  MALIGNANCY AS SECONDARY                                       
                                                  DIAGNOSIS.                                                    
466.............       23  MED                   AFTERCARE W/O HISTORY OF          .6265         2.6         4.7
                                                  MALIGNANCY AS SECONDARY                                       
                                                  DIAGNOSIS.                                                    
467.............       23  MED                   OTHER FACTORS INFLUENCING         .4641         2.3         4.2
                                                  HEALTH STATUS.                                                
468.............  .......  ....................  EXTENSIVE O.R. PROCEDURE         3.6128         9.9        14.1
                                                  UNRELATED TO PRINCIPAL                                        
                                                  DIAGNOSIS.                                                    
469.............  .......  ....................  **PRINCIPAL DIAGNOSIS             .0000          .0          .0
                                                  INVALID AS DISCHARGE                                          
                                                  DIAGNOSIS.                                                    
470.............  .......  ....................  **UNGROUPABLE..............       .0000          .0          .0
471.............       08  SURG                  BILATERAL OR MULTIPLE MAJOR      3.4694         5.8         6.7
                                                  JOINT PROCS OF LOWER                                          
                                                  EXTREMITY.                                                    
472.............       22  SURG                  EXTENSIVE BURNS W O.R.          10.2511        11.7        23.9
                                                  PROCEDURE.                                                    
473.............       17  ....................  ACUTE LEUKEMIA W/O MAJOR         3.4633         7.9        13.6
                                                  O.R. PROCEDURE AGE >17.                                       
474.............  .......  ....................  NO LONGER VALID............        0000          .0          .0
475.............       04  MED                   RESPIRATORY SYSTEM               3.7349         8.2        11.6
                                                  DIAGNOSIS WITH VENTILATOR                                     
                                                  SUPPORT.                                                      
476.............  .......  SURG                  PROSTATIC O.R. PROCEDURE         2.2284         9.5        12.6
                                                  UNRELATED TO PRINCIPAL                                        
                                                  DIAGNOSIS.                                                    
477.............  .......  SURG                  NON-EXTENSIVE O.R.               1.7434         5.5         8.6
                                                  PROCEDURE UNRELATED TO                                        
                                                  PRINCIPAL DIAGNOSIS.                                          
478.............       05  SURG                  OTHER VASCULAR PROCEDURES W      2.3179         5.2         7.7
                                                  CC.                                                           
479.............       05  SURG                  OTHER VASCULAR PROCEDURES W/     1.4148         3.2         4.2
                                                  O CC.                                                         
480.............  .......  SURG                  LIVER TRANSPLANT...........     10.6265        18.7        24.2
481.............  .......  SURG                  BONE MARROW TRANSPLANT.....     11.1194        26.3        29.9
482.............  .......  SURG                  TRACHEOSTOMY FOR FACE,           3.5738        10.5        13.5
                                                  MOUTH & NECK DIAGNOSES.                                       
483.............  .......  SURG                  TRACHEOSTOMY EXCEPT FOR         15.9340        33.7        43.3
                                                  FACE, MOUTH & NECK                                            
                                                  DIAGNOSES.                                                    
484.............       24  SURG                  CRANIOTOMY FOR MULTIPLE          5.7304        10.6        15.3
                                                  SIGNIFICANT TRAUMA.                                           
485.............       24  SURG                  LIMB REATTACHMENT, HIP AND       3.0798         8.2        10.4
                                                  FEMUR PROC FOR MULTIPLE                                       
                                                  SIGNIFICANT TR.                                               
486.............       24  SURG                  OTHER O.R. PROCEDURES FOR        4.8508         8.8        13.4
                                                  MULTIPLE SIGNIFICANT                                          
                                                  TRAUMA.                                                       
487.............       24  MED                   OTHER MULTIPLE SIGNIFICANT       2.0089         5.9         8.3
                                                  TRAUMA.                                                       
488.............       25  SURG                  HIV W EXTENSIVE O.R.             4.4739        12.0        17.8
                                                  PROCEDURE.                                                    
489.............       25  MED                   HIV W MAJOR RELATED              1.7916         6.7         9.8
                                                  CONDITION.                                                    
490.............       25  MED                   HIV W OR W/O OTHER RELATED        .9930         4.2         6.0
                                                  CONDITION.                                                    
491.............       08  SURG                  MAJOR JOINT & LIMB               1.6585         3.3         3.9
                                                  REATTACHMENT PROCEDURES OF                                    
                                                  UPPER EXTREMITY.                                              
492.............       17  MED                   CHEMOTHERAPY W ACUTE             4.6072        11.8        17.9
                                                  LEUKEMIA AS SECONDARY                                         
                                                  DIAGNOSIS.                                                    
493.............       07  SURG                  LAPAROSCOPIC                     1.7593         4.1         5.7
                                                  CHOLECYSTECTOMY W/O C.D.E.                                    
                                                  W CC.                                                         
494.............       07  SURG                  LAPAROSCOPIC                      .9434         1.8         2.4
                                                  CHOLECYSTECTOMY W/O C.D.E.                                    
                                                  W/O CC.                                                       
495.............  .......  SURG                  LUNG TRANSPLANT............      9.0199        14.4        17.4
496.............       08  SURG                  COMBINED ANTERIOR/POSTERIOR      5.4752         9.2        11.5
                                                  SPINAL FUSION.                                                
497.............       08  SURG                  SPINAL FUSION W CC.........      2.7641         5.3         6.8
498.............       08  SURG                  SPINAL FUSION W/O CC.......      1.6140         3.1         3.7
499.............       08  SURG                  BACK & NECK PROCS EXCEPT         1.4825         4.1         5.3
                                                  SPINAL FUSION W CC.                                           
500.............       08  SURG                  BACK & NECK PROCS EXCEPT          .9704         2.6         3.1
                                                  SPINAL FUSION W/O CC.                                         
501.............       08  SURG                  KNEE PROC W PRINCIPAL            2.3780         8.1        10.4
                                                  DIAGNOSIS OF INFECTION W                                      
                                                  CC.                                                           
502.............       08  SURG                  KNEE PROC W PRINCIPAL            1.4616         4.1         5.3
                                                  DIAGNOSIS OF INFECTION W/O                                    
                                                  CC.                                                           
503.............       08  SURG                  KNEE PROCEDURES W/O               .9891         2.7         3.4
                                                  PRINCIPAL DIAGNOSIS OF                                        
                                                  INFECTION.                                                    
----------------------------------------------------------------------------------------------------------------
*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.        


[[Page 29991]]


                                         Table 6A.--New Diagnosis Codes                                         
----------------------------------------------------------------------------------------------------------------
  Diagnosis                                                                                                     
    code              Description                 CC              MDC                       DRG                 
----------------------------------------------------------------------------------------------------------------
007.4.......  Other protozoal intestinal  N                            6  182, 183, 184                         
               diseases,                                                                                        
               cryptosporidiosis.                                                                               
031.2.......  Disease due to              N                           18  423                                   
               disseminated                                           25  489 1                                 
               mycobacterium avium-                                                                             
               intracellulare complex                                                                           
               (DMAC).                                                                                          
038.10......  Staphylococcal septicemia,  Y                           15  387, 389 2                            
               unspecified.                                           18  416, 417                              
                                                                      25  4891                                  
038.11......  Staphylococcus aureus       Y                           15  387, 389 2                            
               septicemia.                                            18  416, 417                              
                                                                      25  4891                                  
038.19......  Other staphylococcal        Y                           15  387, 389 2                            
               septicemia.                                            18  416,417                               
                                                                      25  4891                                  
275.40......  Unspecified disorder of     N                           10  296, 297, 298                         
               calcium metabolism.                                                                              
275.41......  Hypocalcemia..............  N                           10  296, 297, 298                         
275.42......  Hypercalcemia.............  N                           10  296, 297, 298                         
275.49......  Other disorder of calcium   N                           10  296, 297, 298                         
               metabolism.                                                                                      
438.0.......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               cognitive deficits.                                                                              
438.10......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               speech and language                                                                              
               deficits, unspecified..                                                                          
438.11......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               speech and language                                                                              
               deficits, aphasia.                                                                               
438.12......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               speech and language                                                                              
               deficits, dysphasia.                                                                             
438.19......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               other speech and language                                                                        
               deficits.                                                                                        
438.20......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               hemiplegia affecting                                                                             
               unspecified side.                                                                                
438.21......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               hemiplegia affecting                                                                             
               dominant side.                                                                                   
438.22......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               hemiplegia affecting                                                                             
               nondominant side.                                                                                
438.30......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               monoplegia of upper limb                                                                         
               affecting unspecified                                                                            
               side.                                                                                            
438.31......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               monoplegia of upper limb                                                                         
               affecting dominant side.                                                                         
438.32......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               monoplegia of upper limb                                                                         
               affecting nondominant                                                                            
               side.                                                                                            
438.40......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               monoplegia of lower limb                                                                         
               affecting unspecified                                                                            
               side.                                                                                            
438.41......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               monoplegia of lower limb                                                                         
               affecting dominant side.                                                                         
438.42......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               monoplegia of lower limb                                                                         
               affecting nondominant                                                                            
               side.                                                                                            
438.50......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               other paralytic syndrome                                                                         
               affecting unspecified                                                                            
               side.                                                                                            
438.51......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               other paralytic syndrome                                                                         
               affecting dominant side.                                                                         
438.52......  Late effect of              N                            1  12                                    
               cerebrovascular disease,                                                                         
               other paralytic syndrome                                                                         
               affecting nondominant                                                                            
               side.                                                                                            
438.81......  Other late effect of        N                            1  12                                    
               cerebrovascular disease,                                                                         
               apraxia.                                                                                         
438.82......  Other late effect of        N                            1  12                                    
               cerebrovascular disease,                                                                         
               dysphagia.                                                                                       
438.89......  Other late effects of       N                            1  12                                    
               cerebrovascular disease.                                                                         
438.9.......  Unspecified late effects    N                            1  12                                    
               of cerebrovascular                                                                               
               disease.                                                                                         
458.8.......  Other specified             N                            5  144, 145                              
               hypotension.                                               1213                                  
474.00......  Chronic tonsillitis.......  N                          pre  482                                   
                                                                       3  68, 69, 70                            
474.01......  Chronic adenoiditis.......  N                          pre  482                                   
                                                                       3  68, 69, 70                            
474.02......  Chronic tonsillitis and     N                          pre  482                                   
               adenoiditis.                                            3  68, 69, 70                            
482.84......  Legionnaires' disease.....  Y                            4  79, 80, 81                            
518.6.......  Allergic bronchopulmonary   Y                            4  92, 93                                
               aspergillosis.                                                                                   
655.70......  Decreased fetal movements   N                           14  469                                   
               unspecified as to episode                                                                        
               of care or not applicable.                                                                       
655.71......  Decreased fetal movements   N                           14  370, 371, 372, 373, 374, 375          
               delivered, with or                                                                               
               without mention of                                                                               
               antepartum condition.                                                                            
655.73......  Decreased fetal movements   N                           14  383, 384                              
               antepartum condition or                                                                          
               complication.                                                                                    
686.00......  Other local infection of    N                            9  277, 278, 279                         
               skin and subcutaneous                                                                            
               tissue, pyoderma,                                                                                
               unspecified.                                                                                     

[[Page 29992]]

                                                                                                                
686.01......  Other local infection of    N                            9  277, 278, 279                         
               skin and subcutaneous                                                                            
               tissue, pyoderma                                                                                 
               gangrenosum.                                                                                     
686.09......  Other local infection of    N                            9  277, 278, 279                         
               skin and subcutaneous                                                                            
               tissue, other pyoderma.                                                                          
756.70......  Congenital anomaly of       N                            6  188, 189, 190                         
               abdominal wall,                                                                                  
               unspecified.                                                                                     
756.71......  Congenital anomaly of       N                            6  188, 189, 190                         
               abdominal wall, prune                                                                            
               belly syndrome.                                                                                  
756.79......  Other congenital anomalies  N                            6  188, 189, 190                         
               of abdominal wall.                                                                               
780.31......  Febrile convulsions.......  Y                            1  24, 25, 26                            
                                                                      15  387, 389 2                            
780.39......  Other convulsions.........  Y                            1  24, 25, 26                            
                                                                      15  387, 389 2                            
790.94......  Other nonspecific findings  N                           23  463, 464                              
               on examination of blood,                                                                         
               euthyroid sick syndrome.                                                                         
796.5.......  Abnormal findings on        N                           14  383, 384                              
               antenatal screening.                                                                             
959.01......  Head injury, unspecified..  N                          pre  482                                   
                                                                      21  444, 445, 446                         
                                                                      24  significant trauma list               
959.09......  Injury of face and neck...  N                          pre  482                                   
                                                                      21  444, 445, 446                         
                                                                      24  significant trauma list               
V02.60......  Viral hepatitis carrier,    N                            7  205, 206                              
               unspecified.                                                                                     
V02.61......  Hepatitis B carrier.......  N                            7  205, 206                              
V02.62......  Hepatitis C carrier.......  N                            7  205, 206                              
V02.69......  Other viral hepatitis       N                            7  205, 206                              
               carrier.                                                                                         
V12.40......  Personal history of         N                           23  467                                   
               unspecified disorder of                                                                          
               nervous system and sense                                                                         
               organs.                                                                                          
V12.41......  Personal history of benign  N                           23  467                                   
               neoplasm of the brain.                                                                           
V12.49......  Personal history of other   N                           23  467                                   
               disorder of nervous                                                                              
               system and sense organs.                                                                         
V16.40......  Family history of           N                           23  467                                   
               malignant neoplasm of                                                                            
               genital organ,                                                                                   
               unspecified.                                                                                     
V16.41......  Family history of           N                           23  467                                   
               malignant neoplasm of                                                                            
               ovary.                                                                                           
V16.42......  Family history of           N                           23  467                                   
               malignant neoplasm of                                                                            
               prostate.                                                                                        
V16.43......  Family history of           N                           23  467                                   
               malignant neoplasm of                                                                            
               testis.                                                                                          
V16.49......  Family history of other     N                           23  467                                   
               malignant neoplasm.                                                                              
V28.6.......  Antenatal screening for     N                           23  467                                   
               streptococcus B.                                                                                 
V42.81......  Organ or tissue replaced    Y                           16  398, 399                              
               by transplant, bone                                                                              
               marrow.                                                                                          
V42.82......  Organ or tissue replaced    Y                           16  398, 399                              
               by transplant, peripheral                                                                        
               stem cells.                                                                                      
V42.83......  Organ or tissue replaced    Y                            7  467                                   
               by transplant, pancreas.                                                                         
V42.89......  Other organ or tissue       Y                           23  467                                   
               replaced by transplant.                                                                          
V45.61......  Cataract extraction status  N                           23  467                                   
V45.69......  Other states following      N                           23  467                                   
               surgery of eye and adnexa.                                                                       
V45.71......  Acquired absence of breast  N                           23  467                                   
V45.72......  Acquired absence of         N                           23  467                                   
               intestine (large (small).                                                                        
V45.73......  Acquired absence of kidney  N                           23  467                                   
V53.01......  Fitting and adjustment of   N                           23  467                                   
               cerebral ventricular                                                                             
               (communicating) shunt.                                                                           
V53.02......  Fitting and adjustment of   N                           23  467                                   
               neuropacemaker (brain)                                                                           
               (peripheral nerve)(Spinal                                                                        
               cord).                                                                                           
V53.09......  Fitting and adjustment of   N                           23  467                                   
               other devices related to                                                                         
               nervous system and                                                                               
               special senses.                                                                                  
V64.4.......  Laparoscopic surgical       N                           23  467                                   
               procedure converted to                                                                           
               open procedure.                                                                                  
V76.10......  Screening for malignant     N                           23  467                                   
               neoplasm, breast                                                                                 
               screening, unspecified.                                                                          
V76.11......  Screening mammogram for     N                           23  467                                   
               high-risk patient,                                                                               
               malignant neoplasm of                                                                            
               breast.                                                                                          
V76.12......  Other screening mammogram   N                           23  467                                   
               for malignant neoplasm of                                                                        
               breast.                                                                                          
V76.19......  Other screening breast      N                           23  467                                   
               examination for malignant                                                                        
               neoplasm.                                                                                        
----------------------------------------------------------------------------------------------------------------
\1\ HIV major related condition in this DRG.                                                                    
\2\ Classified as a ``major problem'' in these DRGs.                                                            
\3\ Classified as a ``major complication'' in this DRG.                                                         


                                         Table 6B.--New Procedure Codes                                         
----------------------------------------------------------------------------------------------------------------
  Procedure                                                                                                     
    code              Description                 OR              MDC                       DRG                 
----------------------------------------------------------------------------------------------------------------
37.35.......  Partial ventriculectomy...  Y                            5  108                                   
41.05.......  Allogeneic hematopoietic    Y                          pre  481                                   
               stem cell transplant.                                                                            
41.06.......  Cord blood stem cell        Y                          pre  481                                   
               transplant.                                                                                      
----------------------------------------------------------------------------------------------------------------


[[Page 29993]]


                                       Table 6C.--Invalid Diagnosis Codes                                       
----------------------------------------------------------------------------------------------------------------
  Diagnosis                                                                                                     
    code              Description                 CC              MDC                       DRG                 
----------------------------------------------------------------------------------------------------------------
038.1.......  Staphylococcal septicemia.  Y                           15  387, 389 1                            
                                                                      18  416, 417                              
                                                                      25  489 2                                 
275.4.......  Disorders of calcium        N                           10  296, 297, 298                         
               metabolism.                                                                                      
438.........  Late effects of             N                            1  12                                    
               cerebrovascular disease.                                                                         
474.0.......  Chronic tonsillitis and     N                          pre  482                                   
               adenoiditis.                                            3  68, 69, 70                            
686.0.......  Other local infections of   N                            9  277, 278, 279                         
               skin and subcutaneous                                                                            
               tissue, pyoderma.                                                                                
756.7.......  Other congenital anomalies  N                            6  188, 189, 190                         
               of abdominal wall.                                                                               
780.3.......  Convulsions...............  Y                            1  24, 25, 26                            
                                                                      15  387, 389 1                            
959.0.......  Injury, other and           N                          pre  482                                   
               unspecified of head,                                   21  444, 445, 446                         
               face, and neck.                                        24  significant trauma list               
V02.6.......  Carrier or suspected        N                            7  205, 206                              
               carrier of viral                                                                                 
               hepatitis.                                                                                       
V12.4.......  Personal history of         N                           23  467                                   
               disorders of nervous                                                                             
               system and sense organs.                                                                         
V16.4.......  Family history of           N                           23  467                                   
               malignant neoplasm of                                                                            
               genital organs.                                                                                  
V42.8.......  Unspecified organ or        Y                            7  205, 206                              
               tissue replaced by                                                                               
               transplant.                                                                                      
V45.6.......  Other postsurgical state    N                           23  467                                   
               following surgery of eye                                                                         
               and adnexa.                                                                                      
V53.0.......  Fitting and adjustment of   N                           23  467                                   
               devices related to                                                                               
               nervous system and                                                                               
               special senses.                                                                                  
V76.1.......  Special screening for       N                           23  467                                   
               malignant neoplasm of the                                                                        
               breast.                                                                                          
----------------------------------------------------------------------------------------------------------------
\1\ Classified as a ``major problem'' in these DRGs.                                                            
\2\ HIV major related condition in this DRG.                                                                    


                                    Table 6D.--Revised Diagnosis Code Titles                                    
----------------------------------------------------------------------------------------------------------------
  Diagnosis                                                                                                     
    code              Description                 CC              MDC                       DRG                 
----------------------------------------------------------------------------------------------------------------
041.04......  Streptococcus infection in  N                           18  423                                   
               conditions classified                                                                            
               elsewhere and of                                                                                 
               unspecified site, Group D                                                                        
               [Enterococcus].                                                                                  
474.0.......  Chronic tonsillitis and     N                            3  68, 69, 70                            
               adenoiditis.                                                                                     
959.0.......  Injury, other and           N                          pre  482                                   
               unspecified of head,                                   21  444, 445, 446                         
               face, and neck.                                        24  significant trauma list               
----------------------------------------------------------------------------------------------------------------


[[Page 29994]]


             Table 6E.--Additions to the CC Exclusions List             
                            Page 1 of 5 Pages                           
   CCs that are added to the list are in Table 6E--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.
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
*0031       48284     48284    48284    01176    01354    01643    01771
  03810   *01140    *01186   *01795     01180    01355    01644    01772
  03811     48284     48284    48284    01181    01356    01645    01773
  03819   *01141    *01190   *01796     01182    01360    01646    01774
*0074       48284     48284    48284    01183    01361    01650    01775
  00841   *01142    *01191   *0202      01184    01362    01651    01776
  00842     48284     48284    03810    01185    01363    01652    01780
  00843   *01143    *01192     03811    01186    01364    01653    01781
  00844     48284     48284    03819    01190    01365    01654    01782
  00845   *01144    *01193   *0212      01191    01366    01655    01783
  00846     48284     48284    48284    01192    01380    01656    01784
  00847   *01145    *01194   *0310      01193    01381    01660    01785
  00849     48284     48284    48284    01194    01382    01661    01786
*01100    *01146    *01195   *0312      01195    01383    01662    01790
  48284     48284     48284    01100    01196    01384    01663    01791
*01101    *01150    *01196     01101    01200    01385    01664    01792
  48284     48284     48284    01102    01201    01386    01665    01793
*01102    *01151    *01200     01103    01202    01390    01666    01794
  48284     48284     48284    01104    01203    01391    01670    01795
*01103    *01152    *01201     01105    01204    01392    01671    01796
  48284     48284     48284    01106    01205    01393    01672    01800
*01104    *01153    *01202     01110    01206    01394    01673    01801
  48284     48284     48284    01111    01210    01395    01674    01802
*01105    *01154    *01203     01112    01211    01396    01675    01803
  48284     48284     48284    01113    01212    01400    01676    01804
*01106    *01155    *01204     01114    01213    01401    01690    01805
  48284     48284     48284    01115    01214    01402    01691    01806
*01110    *01156    *01205     01116    01215    01403    01692    01880
  48284     48284     48284    01120    01216    01404    01693    01881
*01111    *01160    *01206     01121    01300    01405    01694    01882
  48284     48284     48284    01122    01301    01406    01695    01883
*01112    *01161    *01210     01123    01302    01480    01696    01884
  48284     48284     48284    01124    01303    01482    01720    01885
*01113    *01162    *01211     01125    01304    01483    01721    01886
  48284     48284     48284    01126    01305    01484    01722    01890
*01114    *01163    *01212     01130    01306    01485    01723    01891
  48284     48284     48284    01131    01310    01486    01724    01892
*01115    *01164    *01213     01132    01311    01600    01725    01893
  48284     48284     48284    01133    01312    01601    01726    01894
*01116    *01165    *01214     01134    01313    01602    01730    01895
  48284     48284     48284    01135    01314    01603    01731    01896
*01120    *01166    *01215     01136    01315    01604    01732    0310 
  48284     48284     48284    01140    01316    01605    01733  *0362  
*01121    *01170    *01216     01141    01320    01606    01734    03810
  48284     48284     48284    01142    01321    01610    01735    03811
*01122    *01171    *01280     01143    01322    01611    01736    03819
  48284     48284     48284    01144    01323    01612    01740  *0380  
*01123    *01172    *01281     01145    01324    01613    01741    03810
  48284     48284     48284    01146    01325    01614    01742    03811
*01124    *01173    *01282     01150    01326    01615    01743    03819
  48284     48284     48284    01151    01330    01616    01744  *03810 
*01125    *01174    *01283     01152    01331    01620    01745    0362 
  48284     48284     48284    01153    01332    01621    01746    0380 
*01126    *01175    *01284     01154    01333    01622    01750    03810
  48284     48284     48284    01155    01334    01623    01751    03811
*01130    *01176    *01285     01156    01335    01624    01752    03819
  48284     48284     48284    01160    01336    01625    01753    0382 
*01131    *01180    *01286     01161    01340    01626    01754    0383 
  48284     48284     48284    01162    01341    01630    01755    03840
*01132    *01181    *01790     01163    01342    01631    01756    03841
  48284     48284     48284    01164    01343    01632    01760    03842
*01133    *01182    *01791     01165    01344    01633    01761    03843
  48284     48284     48284    01170    01345    01634    01762    03844
*01134    *01183    *01792     01171    01346    01635    01763    03849
  48284     48284     48284    01172    01350    01636    01764    0388 
*01135    *01184    *01793     01173    01351    01640    01765    0389 
  48284     48284     48284    01174    01352    01641    01766    0545 
*01136    *01185    *01794     01175    01353    01642    01770  *03811 
------------------------------------------------------------------------


[[Page 29995]]


                            Page 2 of 5 Pages                           
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
  0362    *0391       03819  *34550     48284    01196  *4838      48284
  0380      48284   *04182     78031  *48283     01200    48284  *5078  
  03810   *04089      03810    78039    48284    01201  *4841      48284
  03811     03810     03811  *34551   *48284     01202    48284  *5080  
  03819     03811     03819    78031    01100    01203  *4843      48284
  0382      03819   *04183     78039    01101    01204    48284  *5081  
  0383    *04100      03810  *34560     01102    01205  *4845      48284
  03840     03810     03811    78031    01103    01206    48284  *5088  
  03841     03811     03819    78039    01104    01210  *4846      48284
  03842     03819   *04184   *34561     01105    01211    48284  *5089  
  03843   *04101      03810    78031    01106    01212  *4847      48284
  03844     03810     03811    78039    01110    01213    48284  *5171  
  03849     03811     03819  *34570     01111    01214  *4848      48284
  0388      03819   *04185     78031    01112    01215    48284  *5178  
  0389    *04102      03810    78039    01113    01216  *485       48284
  0545      03810     03811  *34571     01114    0310     48284  *5186  
*03819      03811     03819    78031    01115    11505  *486       5186 
  0362      03819   *04186     78039    01116    11515    48284  *51889 
  0380    *04103      03810  *34580     01120    1304   *4870      48284
  03810     03810     03811    78031    01121    1363     48284  *5198  
  03811     03811     03819    78039    01122    481    *4871      48284
  03819     03819   *04189   *34581     01123    4820     48284    5186 
  0382    *04104      03810    78031    01124    4821   *494     *5199  
  0383      03810     03811    78039    01125    4822     48284    48284
  03840     03811     03819  *34590     01126    48230  *4950      5186 
  03841     03819   *0419      78031    01130    48231    48284  *5990  
  03842   *04105      03810    78039    01131    48232  *4951      99664
  03843     03810     03811  *34591     01132    48239    48284  *65570 
  03844     03811     03819    78031    01133    4824   *4952      66500
  03849     03819   *0545      78039    01134    48281    48284    66501
  0388    *04109      03810  *3488      01135    48282  *4953      66503
  0389      03810     03811    78031    01136    48283    48284    66510
  0545      03811     03819    78039    01140    48284  *4954      66511
*0382       03819   *11505   *3489      01141    48289    48284  *65571 
  03810   *04110      48284    78031    01142    4829   *4955      66500
  03811     03810   *11515     78039    01143    4830     48284    66501
  03819     03811     48284  *34989     01144    4831   *4956      66503
*0383       03819   *11595     78031    01145    4838     48284    66510
  03810   *04111      48284    78039    01146    4841   *4957      66511
  03811     03810   *1221    *3499      01150    4843     48284  *65573 
  03819     03811     48284    78031    01151    4845   *4958      66500
*03840      03819   *1304      78039    01152    4846     48284    66501
  03810   *04119      48284  *4800      01153    4847   *4959      66503
  03811     03810   *1363      48284    01154    4848     48284    66510
  03819     03811     48284  *4801      01155    485    *496       66511
*03841      03819   *1398      48284    01156    486      48284  *68600 
  03810   *0412       03810  *4802      01160    4870   *500       6800 
  03811     03810     03811    48284    01161    4950     48284    6801 
  03819     03811     03819  *4808      01162    4951   *501       6802 
*03842      03819   *34500     48284    01163    4952     48284    6803 
  03810   *0413       78031  *4809      01164    4953   *502       6804 
  03811     03810     78039    48284    01165    4954     48284    6805 
  03819     03811   *34501   *481       01166    4955   *503       6806 
*03843      03819     78031    48284    01170    4956     48284    6807 
  03810   *0414       78039  *4820      01171    4957   *504       6808 
  03811     03810   *34510     48284    01172    4958     48284    6809 
  03819     03811     78031  *4821      01173    4959   *505       6820 
*03844      03819     78039    48284    01174    5060     48284    6821 
  03810   *0415     *34511   *4822      01175    5061   *5060      6822 
  03811     03810     78031    48284    01176    5070     48284    6823 
  03819     03811     78039  *48230     01180    5071   *5061      6825 
*03849      03819   *3452      48284    01181    5078     48284    6826 
  03810   *0416       78031  *48231     01182    5080   *5062      6827 
  03811     03810     78039    48284    01183    5081     48284    6828 
  03819     03811   *3453    *48232     01184    5171   *5063      6829 
*0388       03819     78031    48284    01185  *48289     48284    684  
  03810   *0417       78039  *48239     01186    48284  *5064    *68601 
  03811     03810   *34540     48284    01190  *4829      48284    6800 
  03819     03811     78031  *4824      01191    48284  *5069      6801 
*0389       03819     78039    48284    01192  *4830      48284    6802 
  03810   *04181    *34541   *48281     01193    48284  *5070      6803 
  03811     03810     78031    48284    01194  *4831      48284    6804 
  03819     03811     78039  *48282     01195    48284  *5071      6805 
------------------------------------------------------------------------


[[Page 29996]]


                            Page 3 of 5 Pages                           
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
  6806      80019     80110    80220    80359    80450    85132    85223
  6807      80020     80111    80221    80360    80451    85133    85224
  6808      80021     80112    80222    80361    80452    85134    85225
  6809      80022     80113    80223    80362    80453    85135    85226
  6820      80023     80114    80224    80363    80454    85136    85229
  6821      80024     80115    80225    80364    80455    85139    85230
  6822      80025     80116    80226    80365    80456    85140    85231
  6823      80026     80119    80227    80366    80459    85141    85232
  6825      80029     80120    80228    80369    80460    85142    85233
  6826      80030     80121    80229    80370    80461    85143    85234
  6827      80031     80122    80230    80371    80462    85144    85235
  6828      80032     80123    80231    80372    80463    85145    85236
  6829      80033     80124    80232    80373    80464    85146    85239
  684       80034     80125    80233    80374    80465    85149    85240
*68609      80035     80126    80234    80375    80466    85150    85241
  6800      80036     80129    80235    80376    80469    85151    85242
  6801      80039     80130    80236    80379    80470    85152    85243
  6802      80040     80131    80237    80380    80471    85153    85244
  6803      80041     80132    80238    80381    80472    85154    85245
  6804      80042     80133    80239    80382    80473    85155    85246
  6805      80043     80134    8024     80383    80474    85156    85249
  6806      80044     80135    8025     80384    80475    85159    85250
  6807      80045     80136    8026     80385    80476    85160    85251
  6808      80046     80139    8027     80386    80479    85161    85252
  6809      80049     80140    8028     80389    80480    85162    85253
  6820      80050     80141    8029     80390    80481    85163    85254
  6821      80051     80142    80300    80391    80482    85164    85255
  6822      80052     80143    80301    80392    80483    85165    85256
  6823      80053     80144    80302    80393    80484    85166    85259
  6825      80054     80145    80303    80394    80485    85169    85300
  6826      80055     80146    80304    80395    80486    85170    85301
  6827      80056     80149    80305    80396    80489    85171    85302
  6828      80059     80150    80306    80399    80490    85172    85303
  6829      80060     80151    80309    80400    80491    85173    85304
  684       80061     80152    80310    80401    80492    85174    85305
*74861      80062     80153    80311    80402    80493    85175    85306
  48284     80063     80154    80312    80403    80494    85176    85309
*7790       80064     80155    80313    80404    80495    85179    85310
  78031     80065     80156    80314    80405    80496    85180    85311
  78039     80066     80159    80315    80406    80499    85181    85312
*7791       80069     80160    80316    80409    8500     85182    85313
  78031     80070     80161    80319    80410    8501     85183    85314
  78039     80071     80162    80320    80411    8502     85184    85315
*78031      80072     80163    80321    80412    8503     85185    85316
  78031     80073     80164    80322    80413    8504     85186    85319
  78039     80074     80165    80323    80414    8505     85189    85400
*78039      80075     80166    80324    80415    8509     85190    85401
  78031     80076     80169    80325    80416    85100    85191    85402
  78039     80079     80170    80326    80419    85101    85192    85403
*7809       80080     80171    80329    80420    85102    85193    85404
  78031     80081     80172    80330    80421    85103    85194    85405
  78039     80082     80173    80331    80422    85104    85195    85406
*79094      80083     80174    80332    80423    85105    85196    85409
  7907      80084     80175    80333    80424    85106    85199    85410
*7998       80085     80176    80334    80425    85109    85200    85411
  78031     80086     80179    80335    80426    85110    85201    85412
  78039     80089     80180    80336    80429    85111    85202    85413
*95901      80090     80181    80339    80430    85112    85203    85414
  80000     80091     80182    80340    80431    85113    85204    85415
  80001     80092     80183    80341    80432    85114    85205    85416
  80002     80093     80184    80342    80433    85115    85206    85419
  80003     80094     80185    80343    80434    85116    85209    9251 
  80004     80095     80186    80344    80435    85119    85210    9252 
  80005     80096     80189    80345    80436    85120    85211  *95909 
  80006     80099     80190    80346    80439    85121    85212    80000
  80009     80100     80191    80349    80440    85122    85213    80001
  80010     80101     80192    80350    80441    85123    85214    80002
  80011     80102     80193    80351    80442    85124    85215    80003
  80012     80103     80194    80352    80443    85125    85216    80004
  80013     80104     80195    80353    80444    85126    85219    80005
  80014     80105     80196    80354    80445    85129    85220    80006
  80015     80106     80199    80355    80446    85130    85221    80009
  80016     80109     8021     80356    80449    85131    85222    80010
------------------------------------------------------------------------


[[Page 29997]]


                            Page 4 of 5 Pages                           
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
  80011     80102     80193    80351    80442    85124    85215    V4282
  80012     80103     80194    80352    80443    85125    85216    V4283
  80013     80104     80195    80353    80444    85126    85219    V4289
  80014     80105     80196    80354    80445    85129    85220  *99685 
  80015     80106     80199    80355    80446    85130    85221    V4281
  80016     80109     8021     80356    80449    85131    85222  *99686 
  80019     80110     80220    80359    80450    85132    85223    V4283
  80020     80111     80221    80360    80451    85133    85224  *99689 
  80021     80112     80222    80361    80452    85134    85225    V4289
  80022     80113     80223    80362    80453    85135    85226  *V090  
  80023     80114     80224    80363    80454    85136    85229    03810
  80024     80115     80225    80364    80455    85139    85230    03811
  80025     80116     80226    80365    80456    85140    85231    03819
  80026     80119     80227    80366    80459    85141    85232  *V091  
  80029     80120     80228    80369    80460    85142    85233    03810
  80030     80121     80229    80370    80461    85143    85234    03811
  80031     80122     80230    80371    80462    85144    85235    03819
  80032     80123     80231    80372    80463    85145    85236  *V092  
  80033     80124     80232    80373    80464    85146    85239    03810
  80034     80125     80233    80374    80465    85149    85240    03811
  80035     80126     80234    80375    80466    85150    85241    03819
  80036     80129     80235    80376    80469    85151    85242  *V093  
  80039     80130     80236    80379    80470    85152    85243    03810
  80040     80131     80237    80380    80471    85153    85244    03811
  80041     80132     80238    80381    80472    85154    85245    03819
  80042     80133     80239    80382    80473    85155    85246  *V094  
  80043     80134     8024     80383    80474    85156    85249    03810
  80044     80135     8025     80384    80475    85159    85250    03811
  80045     80136     8026     80385    80476    85160    85251    03819
  80046     80139     8027     80386    80479    85161    85252  *V0950 
  80049     80140     8028     80389    80480    85162    85253    03810
  80050     80141     8029     80390    80481    85163    85254    03811
  80051     80142     80300    80391    80482    85164    85255    03819
  80052     80143     80301    80392    80483    85165    85256  *V0951 
  80053     80144     80302    80393    80484    85166    85259    03810
  80054     80145     80303    80394    80485    85169    85300    03811
  80055     80146     80304    80395    80486    85170    85301    03819
  80056     80149     80305    80396    80489    85171    85302  *V096  
  80059     80150     80306    80399    80490    85172    85303    03810
  80060     80151     80309    80400    80491    85173    85304    03811
  80061     80152     80310    80401    80492    85174    85305    03819
  80062     80153     80311    80402    80493    85175    85306  *V0970 
  80063     80154     80312    80403    80494    85176    85309    03810
  80064     80155     80313    80404    80495    85179    85310    03811
  80065     80156     80314    80405    80496    85180    85311    03819
  80066     80159     80315    80406    80499    85181    85312  *V0971 
  80069     80160     80316    80409    8500     85182    85313    03810
  80070     80161     80319    80410    8501     85183    85314    03811
  80071     80162     80320    80411    8502     85184    85315    03819
  80072     80163     80321    80412    8503     85185    85316  *V0980 
  80073     80164     80322    80413    8504     85186    85319    03810
  80074     80165     80323    80414    8505     85189    85400    03811
  80075     80166     80324    80415    8509     85190    85401    03819
  80076     80169     80325    80416    85100    85191    85402  *V0981 
  80079     80170     80326    80419    85101    85192    85403    03810
  80080     80171     80329    80420    85102    85193    85404    03811
  80081     80172     80330    80421    85103    85194    85405    03819
  80082     80173     80331    80422    85104    85195    85406  *V0990 
  80083     80174     80332    80423    85105    85196    85409    03810
  80084     80175     80333    80424    85106    85199    85410    03811
  80085     80176     80334    80425    85109    85200    85411    03819
  80086     80179     80335    80426    85110    85201    85412  *V0991 
  80089     80180     80336    80429    85111    85202    85413    03810
  80090     80181     80339    80430    85112    85203    85414    03811
  80091     80182     80340    80431    85113    85204    85415    03819
  80092     80183     80341    80432    85114    85205    85416  *V4283 
  80093     80184     80342    80433    85115    85206    85419    V4283
  80094     80185     80343    80434    85116    85209    9251   *V4289 
  80095     80186     80344    80435    85119    85210    9252     V420 
  80096     80189     80345    80436    85120    85211  *99664     V421 
  80099     80190     80346    80439    85121    85212    5990     V422 
  80100     80191     80349    80440    85122    85213  *99680     V426 
  80101     80192     80350    80441    85123    85214    V4281    V427 
------------------------------------------------------------------------


[[Page 29998]]


                            Page 5 of 5 Pages                           
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
  V4289                                                                 
*V429                                                                   
  V4281                                                                 
  V4282                                                                 
  V4283                                                                 
  V4289                                                                 
------------------------------------------------------------------------


[[Page 29999]]


             Table 6F.--Deletions to the CC Exclusions List             
                            Page 1 of 2 Pages                           
 CCs that are deleted from the list are in Table 6G--Deletions to the CC
    Exclusions List. Each of the principal diagnoses is shown with an   
asterisk, and the revisions to the CC Exclusions List are provided in an
 indented column immediately following the affected principal diagnosis.
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
*0031       0381      7803     80039    80123    80226    80360    80444
  0381    *0414     *34989     80040    80124    80227    80361    80445
*0202       0381      7803     80041    80125    80228    80362    80446
  0381    *0415     *3499      80042    80126    80229    80363    80449
*0362       0381      7803     80043    80129    80230    80364    80450
  0381    *0416     *6860      80044    80130    80231    80365    80451
*0380       0381      6800     80045    80131    80232    80366    80452
  0381    *0417       6801     80046    80132    80233    80369    80453
*0381       0381      6802     80049    80133    80234    80370    80454
  0362    *04181      6803     80050    80134    80235    80371    80455
  0380      0381      6804     80051    80135    80236    80372    80456
  0381    *04182      6805     80052    80136    80237    80373    80459
  0382      0381      6806     80053    80139    80238    80374    80460
  0383    *04183      6807     80054    80140    80239    80375    80461
  03840     0381      6808     80055    80141    8024     80376    80462
  03841   *04184      6809     80056    80142    8025     80379    80463
  03842     0381      6820     80059    80143    8026     80380    80464
  03843   *04185      6821     80060    80144    8027     80381    80465
  03844     0381      6822     80061    80145    8028     80382    80466
  03849   *04186      6823     80062    80146    8029     80383    80469
  0388      0381      6825     80063    80149    80300    80384    80470
  0389    *04189      6826     80064    80150    80301    80385    80471
  0545      0381      6827     80065    80151    80302    80386    80472
*0382     *0419       6828     80066    80152    80303    80389    80473
  0381      0381      6829     80069    80153    80304    80390    80474
*0383     *0545       684      80070    80154    80305    80391    80475
  0381      0381    *7790      80071    80155    80306    80392    80476
*03840    *1398       7803     80072    80156    80309    80393    80479
  0381      0381    *7791      80073    80159    80310    80394    80480
*03841    *34500      7803     80074    80160    80311    80395    80481
  0381      7803    *7803      80075    80161    80312    80396    80482
*03842    *34501      7803     80076    80162    80313    80399    80483
  0381      7803    *7809      80079    80163    80314    80400    80484
*03843    *34510      7803     80080    80164    80315    80401    80485
  0381      7803    *7998      80081    80165    80316    80402    80486
*03844    *34511      7803     80082    80166    80319    80403    80489
  0381      7803    *9590      80083    80169    80320    80404    80490
*03849    *3452       80000    80084    80170    80321    80405    80491
  0381      7803      80001    80085    80171    80322    80406    80492
*0388     *3453       80002    80086    80172    80323    80409    80493
  0381      7803      80003    80089    80173    80324    80410    80494
*0389     *34540      80004    80090    80174    80325    80411    80495
  0381      7803      80005    80091    80175    80326    80412    80496
*04089    *34541      80006    80092    80176    80329    80413    80499
  0381      7803      80009    80093    80179    80330    80414    8500 
*04100    *34550      80010    80094    80180    80331    80415    8501 
  0381      7803      80011    80095    80181    80332    80416    8502 
*04101    *34551      80012    80096    80182    80333    80419    8503 
  0381      7803      80013    80099    80183    80334    80420    8504 
*04102    *34560      80014    80100    80184    80335    80421    8505 
  0381      7803      80015    80101    80185    80336    80422    8509 
*04103    *34561      80016    80102    80186    80339    80423    85100
  0381      7803      80019    80103    80189    80340    80424    85101
*04104    *34570      80020    80104    80190    80341    80425    85102
  0381      7803      80021    80105    80191    80342    80426    85103
*04105    *34571      80022    80106    80192    80343    80429    85104
  0381      7803      80023    80109    80193    80344    80430    85105
*04109    *34580      80024    80110    80194    80345    80431    85106
  0381      7803      80025    80111    80195    80346    80432    85109
*04110    *34581      80026    80112    80196    80349    80433    85110
  0381      7803      80029    80113    80199    80350    80434    85111
*04111    *34590      80030    80114    8021     80351    80435    85112
  0381      7803      80031    80115    80220    80352    80436    85113
*04119    *34591      80032    80116    80221    80353    80439    85114
  0381      7803      80033    80119    80222    80354    80440    85115
*0412     *3488       80034    80120    80223    80355    80441    85116
  0381      7803      80035    80121    80224    80356    80442    85119
*0413     *3489       80036    80122    80225    80359    80443    85120
------------------------------------------------------------------------


[[Page 30000]]


                            Page 2 of 2 Pages                           
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
  85121   85212       V428                                              
  85122   85213     *99686                                              
  85123   85214       V428                                              
  85124   85215     *99689                                              
  85125   85216       V428                                              
  85126   85219     *V090                                               
  85129   85220     0381                                                
  85130   85221     *V091                                               
  85131   85222     0381                                                
  85132   85223     *V092                                               
  85133   85224     0381                                                
  85134   85225     *V093                                               
  85135   85226     0381                                                
  85136   85229     *V094                                               
  85139   85230     0381                                                
  85140   85231     *V0950                                              
  85141   85232     0381                                                
  85142   85233     *V0951                                              
  85143   85234     0381                                                
  85144   85235     *V096                                               
  85145   85236     0381                                                
  85146   85239     *V0970                                              
  85149   85240     0381                                                
  85150   85241     *V0971                                              
  85151   85242     0381                                                
  85152   85243     *V0980                                              
  85153   85244     0381                                                
  85154   85245     *V0981                                              
  85155   85246     0381                                                
  85156   85249     *V0990                                              
  85159   85250     0381                                                
  85160   85251     *V0991                                              
  85161   85252     0381                                                
  85162   85253     *V428                                               
  85163   85254     V420                                                
  85164   85255     V421                                                
  85165   85256     V422                                                
  85166   85259     V426                                                
  85169   85300     V427                                                
  85170   85301     V428                                                
  85171   85302     *V429                                               
  85172   85303     V428                                                
  85173   85304                                                         
  85174   85305                                                         
  85175   85306                                                         
  85176   85309                                                         
  85179   85310                                                         
  85180   85311                                                         
  85181   85312                                                         
  85182   85313                                                         
  85183   85314                                                         
  85184   85315                                                         
  85185   85316                                                         
  85186   85319                                                         
  85189   85400                                                         
  85190   85401                                                         
  85191   85402                                                         
  85192   85403                                                         
  85193   85404                                                         
  85194   85405                                                         
  85195   85406                                                         
  85196   85409                                                         
  85199   85410                                                         
  85200   85411                                                         
  85201   85412                                                         
  85202   85413                                                         
  85203   85414                                                         
  85204   85415                                                         
  85205   85416                                                         
  85206   85419                                                         
  85209   9251                                                          
  85210   9252                                                          
  85211   *99680                                                        
------------------------------------------------------------------------


[[Page 30001]]


                                   Table 7A.--Medicare Prospective Payment System; Selected Percentile Lengths of Stay                                  
                                                        [FY96 MEDPAR Update 12/96 Grouper V14.0]                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Number        Arithmetic         10th            25th            50th            75th            90th     
                   DRG                      discharges       mean LOS       percentile      percentile      percentile      percentile      percentile  
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................           36587         10.0378               2               4               7              13              21
2.......................................            6771         10.5860               3               5               8              13              21
3.......................................               1          1.0000               1               1               1               1               1
4.......................................            6231          8.4710               2               3               6              10              18
5.......................................          102519          3.9306               1               2               3               4               8
6.......................................             417          3.2590               1               1               2               4               7
7.......................................           11911         11.6376               3               5               8              13              22
8.......................................            2088          3.8410               1               1               3               5               8
9.......................................            1712          7.0596               1               3               5               9              14
10......................................           20092          7.2703               2               3               5               9              15
11......................................            2933          4.2636               1               2               3               6               9
12......................................           25964          6.8386               2               3               5               8              13
13......................................            6323          5.7745               2               3               5               7              10
14......................................          374831          6.7444               2               3               5               8              13
15......................................          145009          4.0646               1               2               3               5               7
16......................................           13995          6.0974               2               3               5               7              11
17......................................            3084          3.7036               1               2               3               5               7
18......................................           24039          5.7935               2               3               4               7              11
19......................................            6542          4.0880               1               2               3               5               8
20......................................            8163          9.4084               2               4               7              12              19
21......................................            1177          7.0935               2               3               5               9              14
22......................................            2887          4.7645               2               2               4               6               9
23......................................            6025          4.5610               1               2               3               6               9
24......................................           57698          5.3362               1               2               4               6              10
25......................................           22091          3.6103               1               2               3               4               7
26......................................              40          5.2500               1               2               4               7              11
27......................................            3743          5.5060               1               1               3               7              13
28......................................           12494          6.3374               1               3               4               8              13
29......................................            3906          3.7384               1               2               3               5               7
30......................................               1          4.0000               4               4               4               4               4
31......................................            3008          4.7822               1               2               3               6               9
32......................................            1389          3.0756               1               1               2               3               6
34......................................           18440          5.8049               1               3               4               7              11
35......................................            3698          3.9227               1               2               3               5               7
36......................................            6706          1.5406               1               1               1               2               2
37......................................            1756          3.9169               1               1               3               4               8
38......................................             195          2.7077               1               1               2               3               5
39......................................            2545          2.0000               1               1               1               2               4
40......................................            2629          3.4059               1               1               2               4               7
42......................................            5378          1.9781               1               1               1               2               4
43......................................             110          4.0182               1               2               3               5               7
44......................................            1461          5.2005               2               3               4               6               9
45......................................            2340          3.5949               1               2               3               5               7
46......................................            2995          4.8417               1               2               4               6               9
47......................................            1173          3.9599               1               1               3               4               7
49......................................            2364          5.2563               1               2               4               6              10
50......................................            3268          2.1068               1               1               2               2               3
51......................................             348          2.8908               1               1               2               3               6
52......................................              89          2.9213               1               1               2               4               7
53......................................            3071          3.5988               1               1               2               4               8
54......................................               2          5.0000               1               1               9               9               9
55......................................            1876          2.9302               1               1               2               3               6
56......................................             729          2.8299               1               1               2               3               6
57......................................             652          3.9525               1               2               2               5               8
58......................................               1          2.0000               2               2               2               2               2
59......................................             103          3.1262               1               1               2               4               6
60......................................               3          1.0000               1               1               1               1               1
61......................................             241          4.5726               1               1               3               5              11
63......................................            3732          4.6072               1               2               3               5               9
64......................................            3341          6.6417               1               2               5               8              14
65......................................           29312          3.1709               1               2               3               4               6
66......................................            6560          3.4703               1               2               3               4               6
67......................................             492          3.8049               1               2               3               5               7
68......................................           10175          4.3277               2               2               4               5               8
69......................................            2943          3.4709               1               2               3               4               6
70......................................              40          3.3000               1               2               3               4               5
71......................................             128          3.9297               1               2               3               5               7
72......................................             705          3.4610               1               2               3               4               7
73......................................            6206          4.6695               1               2               4               6               9
74......................................               4          3.2500               1               1               2               3               7

[[Page 30002]]

                                                                                                                                                        
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78......................................           30978          7.6317               3               5               7               9              13
79......................................          237994          8.6320               3               4               7              11              16
80......................................            8120          6.0765               2               3               5               7              11
81......................................              20         10.7000               1               6               8              11              15
82......................................           70673          7.3185               2               3               6               9              14
83......................................            7304          5.8976               2               3               5               7              11
84......................................            1473          3.4725               1               2               3               4               6
85......................................           20682          6.8707               2               3               5               9              13
86......................................            1372          4.0532               1               2               3               5               8
87......................................           67342          6.4329               1               3               5               8              12
88......................................          359001          5.6528               2               3               5               7              10
89......................................          428753          6.5589               3               4               5               8              12
90......................................           36813          4.6811               2               3               4               6               8
91......................................              73          5.2466               2               3               4               7               9
92......................................           13516          6.6268               2               3               5               8              12
93......................................            1162          4.6145               1               2               4               6               8
94......................................           13665          6.6447               2               3               5               8              13
95......................................            1418          3.9810               1               2               3               5               7
96......................................           58911          5.0549               2               3               4               6               9
97......................................           23971          4.0015               1               2               3               5               7
98......................................              28          2.8214               1               1               2               3               6
99......................................           26524          3.1691               1               1               2               4               6
100.....................................           10188          2.2330               1               1               2               3               4
101.....................................           20391          4.7223               1               2               4               6               9
102.....................................            4493          2.8952               1               1               2               4               5
103.....................................             517         47.0406               9              15              32              71             104
104.....................................           26171         13.3430               5               8              11              16              24
105.....................................           22843         10.1949               5               6               8              12              18
106.....................................          106957         11.0507               6               7               9              13              18
107.....................................           68189          8.3054               5               6               7               9              13
108.....................................            7462         12.0893               4               7              10              15              23
110.....................................           63215         10.0803               3               6               8              12              19
111.....................................            5557          6.1074               2               4               6               7               9
112.....................................          218111          4.2393               1               2               3               6               8
113.....................................           47795         13.1200               4               6               9              16              26
114.....................................            9030          8.8270               2               4               7              11              17
115.....................................           11560         10.2985               4               6               8              13              18
116.....................................           86830          5.0237               1               2               4               6              10
117.....................................            3723          4.0285               1               1               3               5               9
118.....................................            6649          3.0284               1               1               2               4               7
119.....................................            1684          5.1081               1               1               3               7              11
120.....................................           39395          8.4464               1               2               5              11              19
121.....................................          165994          6.9292               2               4               6               9              12
122.....................................           90608          4.6367               1               2               4               6               8
123.....................................           45927          4.4682               1               1               2               6              11
124.....................................          152443          4.5925               1               2               4               6               9
125.....................................           60680          2.9371               1               1               2               4               6
126.....................................            5118         12.8009               4               6              10              16              26
127.....................................          705250          5.7994               2               3               5               7              11
128.....................................           18457          6.3457               3               4               6               7              10
129.....................................            4439          3.1683               1               1               1               3               7
130.....................................           99388          6.2962               2               4               5               8              11
131.....................................           25429          4.8527               1               3               5               6               8
132.....................................          164147          3.3158               1               2               3               4               6
133.....................................            6113          2.8050               1               1               2               3               5
134.....................................           29364          3.6008               1               2               3               4               7
135.....................................            8043          4.4405               1               2               3               5               8
136.....................................            1143          3.0604               1               1               2               4               6
137.....................................               5          6.6000               2               2               4               8              16
138.....................................          207475          4.1925               1               2               3               5               8
139.....................................           65356          2.7468               1               1               2               3               5
140.....................................          134319          3.1700               1               2               3               4               6
141.....................................           78035          4.0805               1               2               3               5               7
142.....................................           35460          2.9406               1               1               2               4               5
143.....................................          137083          2.3957               1               1               2               3               4
144.....................................           75930          5.3732               1               2               4               7              11
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[[Page 30003]]

                                                                                                                                                        
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149.....................................           14218          7.1334               4               5               7               8              10
150.....................................           24389         11.1129               4               7               9              14              20
151.....................................            4232          6.1189               2               3               6               8              11
152.....................................            4675          8.4877               4               5               7              10              14
153.....................................            1644          5.7968               3               4               6               7               9
154.....................................           34909         14.0372               4               7              11              17              27
155.....................................            4509          5.0100               2               2               4               7               9
156.....................................               2         18.0000               5               5              31              31              31
157.....................................            9420          5.6036               1               2               4               7              11
158.....................................            4328          2.7872               1               1               2               4               6
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160.....................................            9493          2.7740               1               1               2               4               5
161.....................................           14884          4.2139               1               2               3               5               9
162.....................................            7335          2.0923               1               1               1               3               4
163.....................................              11          4.4545               1               1               2               6              10
164.....................................            5335          8.7134               4               5               7              10              15
165.....................................            1586          5.4061               2               3               5               7               8
166.....................................            3342          5.4333               2               3               4               7              10
167.....................................            2247          2.9653               1               2               3               4               5
168.....................................            1853          4.7210               1               2               3               6               9
169.....................................             925          2.5459               1               1               2               3               5
170.....................................           12921         11.7454               2               5               9              15              23
171.....................................            1051          5.1246               1               2               4               6              10
172.....................................           32806          7.3996               2               3               5               9              15
173.....................................            2065          3.9467               1               2               3               5               8
174.....................................          238661          5.1466               2               3               4               6               9
175.....................................           21406          3.2356               1               2               3               4               6
176.....................................           17834          5.7615               2               3               4               7              11
177.....................................           11741          4.7286               2               3               4               6               8
178.....................................            3764          3.3547               1               2               3               4               6
179.....................................           12072          6.7301               2               3               5               8              13
180.....................................           88723          5.6566               2               3               4               7              11
181.....................................           21229          3.7030               1               2               3               5               7
182.....................................          237563          4.5654               1               2               4               6               8
183.....................................           69548          3.1791               1               2               3               4               6
184.....................................              86          3.7093               1               2               3               4               7
185.....................................            4055          4.8222               1               2               4               6              10
186.....................................               2          3.0000               2               2               4               4               4
187.....................................             869          3.9298               1               2               3               5               7
188.....................................           70414          5.7816               1               3               4               7              11
189.....................................            7871          3.3750               1               1               3               4               7
190.....................................              94          4.8830               1               2               3               6              11
191.....................................           11024         14.8159               4               7              11              18              29
192.....................................             775          7.1419               2               4               6               9              13
193.....................................            8299         12.8943               5               7              11              16              23
194.....................................             660          7.4379               2               4               6               9              13
195.....................................            8718          9.8580               4               6               8              12              17
196.....................................             624          6.3462               3               4               6               8              10
197.....................................           27165          8.6986               3               5               7              10              15
198.....................................            7036          4.7172               2               3               4               6               8
199.....................................            2147         10.6954               3               5               8              14              22
200.....................................            1533         11.3503               2               4               8              14              23
201.....................................            1536         14.8932               4               7              11              18              29
202.....................................           28316          7.0896               2               3               5               9              14
203.....................................           29341          7.1571               2               3               6               9              14
204.....................................           52859          6.3341               2               3               5               8              12
205.....................................           22935          6.7787               2               3               5               8              14
206.....................................            1652          4.2240               1               2               3               5               8
207.....................................           36747          5.2866               1               2               4               7              10
208.....................................            9886          3.0404               1               1               2               4               6
209.....................................          356581          5.8918               3               4               5               7               9
210.....................................          142712          7.6249               4               5               6               9              13
211.....................................           26185          5.6079               3               4               5               7               9
212.....................................              40          6.2250               3               4               5               7               9
213.....................................            7121          8.7182               2               4               7              11              17
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[[Page 30004]]

                                                                                                                                                        
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220.....................................               4          4.7500               1               1               4               4              10
221.....................................            5113          7.1731               2               3               5               9              14
222.....................................            3453          3.8199               1               2               3               5               7
223.....................................           19460          2.7002               1               1               2               3               5
224.....................................            8049          2.1070               1               1               2               3               4
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226.....................................            5513          6.2507               1               2               4               7              13
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230.....................................            2473          4.9713               1               2               3               6              10
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234.....................................            2165          3.8859               1               2               3               5               8
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236.....................................           39637          5.5891               2               3               4               7              10
237.....................................            1654          4.2019               1               2               3               5               8
238.....................................            7601          9.3428               3               4               7              11              17
239.....................................           60377          6.9698               2               3               5               8              13
240.....................................           13251          6.9282               2               3               5               8              14
241.....................................            2990          4.2331               1               2               3               5               8
242.....................................            2825          7.1487               2               3               5               9              14
243.....................................           80090          5.1221               2               3               4               6               9
244.....................................           12427          5.3968               1               3               4               6              10
245.....................................            4382          4.0895               1               2               3               5               7
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247.....................................           11432          3.6810               1               2               3               5               7
248.....................................            7374          4.9761               1               2               4               6               9
249.....................................           10329          3.9287               1               1               3               5               8
250.....................................            3558          4.6501               1               2               3               5               9
251.....................................            2107          3.0019               1               1               2               4               5
253.....................................           18921          5.2431               1               3               4               6              10
254.....................................            9245          3.5230               1               2               3               4               6
255.....................................               1          6.0000               6               6               6               6               6
256.....................................            4394          5.6445               1               2               4               7              11
257.....................................           22632          3.2017               1               2               3               4               6
258.....................................           16954          2.2782               1               1               2               3               4
259.....................................            3995          3.1975               1               1               2               3               7
260.....................................            4550          1.6642               1               1               1               2               3
261.....................................            2213          2.2350               1               1               2               3               4
262.....................................             659          4.0030               1               1               3               5               8
263.....................................           29107         12.4970               3               5               9              15              24
264.....................................            3357          7.2848               2               3               6               9              14
265.....................................            4141          7.0995               1               2               5               8              14
266.....................................            2553          3.5719               1               1               2               5               7
267.....................................             223          4.1839               1               1               2               5               9
268.....................................            1177          3.7961               1               1               2               4               7
269.....................................           10062          8.5178               2               3               6              11              17
270.....................................            3072          3.2080               1               1               2               4               7
271.....................................           22910          7.7195               3               4               6               9              14
272.....................................            5988          6.6757               2               3               5               8              13
273.....................................            1387          5.3677               1               2               4               6              11
274.....................................            2619          7.1229               1               3               5               9              15
275.....................................             240          3.8042               1               1               2               5               8
276.....................................             939          4.7444               1               3               4               6               8
277.....................................           80070          6.2309               2               3               5               7              11
278.....................................           24752          4.8306               2               3               4               6               8
279.....................................               7          4.4286               2               2               4               6               6
280.....................................           13778          4.7052               1               2               3               6               9
281.....................................            5819          3.3805               1               1               3               4               6
282.....................................               5         12.0000               1               1               3              14              41
283.....................................            5280          5.0146               1               2               4               6              10
284.....................................            1748          3.5463               1               2               3               5               7
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[[Page 30005]]

                                                                                                                                                        
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290.....................................            8792          2.5875               1               1               2               3               4
291.....................................              94          2.1596               1               1               2               3               4
292.....................................            5173         11.2101               2               4               8              14              22
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295.....................................            3650          4.1052               1               2               3               5               8
296.....................................          231553          5.7556               2               3               4               7              11
297.....................................           31811          3.8626               1               2               3               5               7
298.....................................             112          3.1786               1               1               2               4               7
299.....................................            1130          5.4823               1               2               4               7              11
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301.....................................            1968          4.3664               1               2               3               5               8
302.....................................            7967         10.9728               5               6               8              13              19
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307.....................................            2480          2.5375               1               1               2               3               4
308.....................................            9697          6.4016               1               2               4               8              13
309.....................................            3353          2.5577               1               1               2               3               5
310.....................................           27418          4.3367               1               2               3               5               9
311.....................................            8484          2.0532               1               1               2               2               4
312.....................................            1866          4.6833               1               2               3               6              10
313.....................................             659          2.2656               1               1               2               3               4
315.....................................           28342          8.5520               1               2               5              11              19
316.....................................           84578          6.9970               2               3               5               9              14
317.....................................             841          2.9441               1               1               2               3               6
318.....................................            6158          6.6325               1               3               5               8              13
319.....................................             422          2.8815               1               1               2               4               6
320.....................................          175874          5.8692               2               3               5               7              10
321.....................................           23491          4.2793               2               3               4               5               7
322.....................................              97          4.3196               2               2               3               5               8
323.....................................           17371          3.3739               1               1               2               4               7
324.....................................            7972          2.0066               1               1               2               2               4
325.....................................            6977          4.2005               1               2               3               5               8
326.....................................            2097          2.8994               1               1               2               4               5
327.....................................              15          3.1333               1               1               2               3              12
328.....................................             671          3.9091               1               2               3               5               8
329.....................................             107          2.4393               1               1               2               3               5
331.....................................           43921          5.8404               2               3               4               7              11
332.....................................            4398          3.5489               1               1               3               5               7
333.....................................             338          5.5621               1               2               4               7              11
334.....................................           19279          5.4196               3               4               5               6               8
335.....................................            9751          4.0561               2               3               4               5               6
336.....................................           59003          3.7602               1               2               3               4               7
337.....................................           34115          2.4160               1               2               2               3               4
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340.....................................               1          1.0000               1               1               1               1               1
341.....................................            5932          3.1123               1               1               2               3               6
342.....................................             192          4.1927               1               2               3               6               8
344.....................................            3517          3.1137               1               1               2               3               6
345.....................................            1357          3.7900               1               1               3               5               8
346.....................................            5156          6.2853               1               3               5               8              12
347.....................................             372          2.9624               1               1               2               4               6
348.....................................            3204          4.4860               1               2               3               5               8
349.....................................             741          2.6815               1               1               2               3               5
350.....................................            6300          4.6057               2               3               4               6               8
351.....................................               2          2.5000               2               2               3               3               3
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353.....................................            2701          8.3425               3               4               6               9              16
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356.....................................           29723          2.8078               1               2               3               3               4
357.....................................            6569          9.3230               4               5               7              11              17
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[[Page 30006]]

                                                                                                                                                        
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363.....................................            3892          3.4740               1               2               2               3               7
364.....................................            1856          3.4984               1               1               2               4               7
365.....................................            2435          7.1647               1               2               4               9              16
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367.....................................             541          2.9704               1               1               2               4               6
368.....................................            2377          6.2680               2               3               5               8              12
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370.....................................            1170          5.5453               2               3               4               5               9
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372.....................................             876          3.1199               1               2               2               3               5
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375.....................................               7          8.4286               1               2               5               9              15
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377.....................................              49          4.1224               1               1               2               4               9
378.....................................             187          2.6578               1               2               2               3               4
379.....................................             358          2.9609               1               1               2               3               5
380.....................................              96          1.8333               1               1               1               2               4
381.....................................             178          2.2022               1               1               1               2               4
382.....................................              47          1.3404               1               1               1               1               2
383.....................................            1583          3.8111               1               2               3               5               8
384.....................................             132          2.9318               1               1               2               3               6
385.....................................               5          4.6000               1               1               2               4              15
389.....................................              24          7.1667               3               3               5              10              13
390.....................................              13          5.3077               2               3               4               7               7
392.....................................            2532         10.5517               4               5               8              13              21
393.....................................               2         11.0000               7               7              15              15              15
394.....................................            1791          7.4199               1               2               5               8              16
395.....................................           67638          4.9800               1               2               4               6              10
396.....................................              19          4.2632               1               1               3               7               7
397.....................................           16823          5.7741               1               2               4               7              11
398.....................................           18282          6.2511               2               3               5               8              11
399.....................................            1299          4.0154               1               2               3               5               8
400.....................................            7810          9.7049               2               3               7              12              21
401.....................................            6739         11.6630               2               5               9              15              24
402.....................................            1499          4.2368               1               1               3               6               9
403.....................................           38891          8.5771               2               3               6              11              18
404.....................................            3799          4.6594               1               2               4               6               9
406.....................................            3452         10.0200               3               4               7              13              21
407.....................................             699          4.4120               1               2               4               6               8
408.....................................            2840          7.6835               1               2               5               9              18
409.....................................            5557          5.9152               2               3               4               6              12
410.....................................           74223          3.3541               1               2               3               4               5
411.....................................              33          2.3030               1               1               1               3               6
412.....................................              30          3.3667               1               1               2               5               7
413.....................................            8747          8.0088               2               3               6              10              16
414.....................................             727          4.5571               1               2               3               6              10
415.....................................           44505         14.8769               4               7              11              18              29
416.....................................          218588          7.6808               2               4               6               9              14
417.....................................              54          4.6111               1               2               4               6               9
418.....................................           20458          6.3064               2               3               5               8              12
419.....................................           14820          5.2356               2               3               4               6              10
420.....................................            2622          3.9714               1               2               3               5               7
421.....................................           10711          4.2451               1               2               3               5               8
422.....................................              84          3.9167               1               2               3               5               6
423.....................................           10805          7.9172               2               3               6               9              16
424.....................................            1925         16.6618               2               6              10              19              31
425.....................................           15459          4.3906               1               2               3               5               8
426.....................................            4692          5.2163               1               2               4               6              11
427.....................................            1679          5.2478               1               2               4               6              11
428.....................................             923          7.6111               1               3               5               9              16
429.....................................           42295          7.8371               2               3               5               9              15
430.....................................           55585          9.0191               2               4               7              11              18
431.....................................             218          8.9037               2               3               5               9              17
432.....................................             404          5.8292               1               2               3               7              12
433.....................................            8177          3.2849               1               1               2               4               7
434.....................................           22419          5.2813               2               3               4               6              10

[[Page 30007]]

                                                                                                                                                        
435.....................................           16398          4.5144               1               2               4               5               8
436.....................................            3530         13.7382               4               8              13              20              26
437.....................................           15594          9.9086               4               6               9              13              18
439.....................................            1041          8.4476               1               3               6              10              18
440.....................................            4797          9.4951               2               3               6              11              20
441.....................................             604          3.4619               1               1               2               4               7
442.....................................           15541          8.2678               1               3               6              10              17
443.....................................            2981          3.3603               1               1               2               4               7
444.....................................            3303          4.7802               1               2               4               6               9
445.....................................            1229          3.7079               1               1               3               4               6
447.....................................            4148          2.6437               1               1               2               3               5
448.....................................              29          1.0000               1               1               1               1               1
449.....................................           28622          4.0140               1               1               3               5               8
450.....................................            6263          2.2531               1               1               1               3               4
451.....................................               4          3.0000               1               1               1               2               8
452.....................................           21359          5.1382               1               2               4               6              10
453.....................................            3599          3.0889               1               1               2               4               6
454.....................................            3919          5.1832               1               2               3               6              10
455.....................................             884          2.7805               1               1               2               3               6
456.....................................             214          7.3178               1               1               3               8              16
457.....................................             111          4.8649               1               1               2               6              14
458.....................................            1652         15.9994               3               6              12              21              33
459.....................................             567          9.3210               2               4               7              12              19
460.....................................            2285          6.3422               1               3               5               8              13
461.....................................            3199          4.5552               1               1               2               5              11
462.....................................            9980         12.9722               4               6              11              17              24
463.....................................           13387          4.7746               1               2               4               6               9
464.....................................            3180          3.4299               1               2               3               4               7
465.....................................             215          3.7767               1               1               2               4               7
466.....................................            1750          4.7080               1               1               2               5              10
467.....................................            1582          4.2061               1               1               2               4               8
468.....................................           62754         13.9856               3               6              11              18              28
471.....................................           11592          6.7331               3               4               5               8              11
472.....................................             198         23.9192               1               5              18              34              56
473.....................................            8660         13.2808               2               4               7              19              34
475.....................................          100258         11.4467               2               5               9              15              22
476.....................................            6588         12.6252               3               7              11              16              23
477.....................................           29950          8.0288               1               2               6              10              16
478.....................................          126594          7.6907               1               3               6              10              16
479.....................................           17890          4.1892               1               2               3               5               8
480.....................................             513         27.1598               9              12              19              34              58
481.....................................             150         33.5333              19              23              30              41              54
482.....................................            6981         13.4369               5               7              10              15              24
483.....................................           39458         42.8906              14              22              34              52              78
484.....................................             382         15.3822               3               7              11              20              30
485.....................................            3406         10.4055               4               5               8              12              20
486.....................................            2358         13.1768               1               5              10              17              27
487.....................................            4134          8.1265               2               3               6              10              16
488.....................................            1737         16.4531               4               7              12              20              32
489.....................................           18692          9.5287               2               4               7              12              20
490.....................................            5357          6.0062               1               2               4               7              12
491.....................................           10675          3.9154               2               2               3               4               7
492.....................................            2207         17.8691               4               5              14              28              37
493.....................................           56437          5.6673               1               2               4               7              11
494.....................................           24927          2.3773               1               1               2               3               5
495.....................................             117         17.1197               8              11              15              21              30
                                         ----------------                                                                                               
                                                11086740                                                                                                
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                   Table 7B.--Medicare Prospective Payment System; Selected Percentile Lengths of Stay                                  
                                                        [FY96 MEDPAR Update 12/96 Grouper V15.0]                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Number        Arithmetic         10th            25th            50th            75th            90th     
                   DRG                      discharges       mean LOS       percentile      percentile      percentile      percentile      percentile  
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................           36587         10.0378               2               4               7              13              21
2.......................................            6771         10.5860               3               5               8              13              21
3.......................................               1          1.0000               1               1               1               1               1
4.......................................            6231          8.4710               2               3               6              10              18

[[Page 30008]]

                                                                                                                                                        
5.......................................          102519          3.9306               1               2               3               4               8
6.......................................             417          3.2590               1               1               2               4               7
7.......................................           12033         11.5494               2               5               8              13              21
8.......................................            2346          3.5904               1               1               2               5               8
9.......................................            1716          7.0752               1               3               5               9              14
10......................................           20105          7.2766               2               3               5               9              15
11......................................            2931          4.2610               1               2               3               6               9
12......................................           25980          6.8468               2               3               5               8              13
13......................................            6321          5.7765               2               3               5               7              10
14......................................          374962          6.7449               2               3               5               8              13
15......................................          145044          4.0652               1               2               3               5               7
16......................................           14000          6.0985               2               3               5               7              11
17......................................            3087          3.7036               1               2               3               5               7
18......................................           25611          5.8649               2               3               4               7              11
19......................................            7093          4.1081               1               2               3               5               8
20......................................            6049         10.5016               2               5               8              14              21
21......................................            1178          7.0976               2               3               5               9              14
22......................................            2888          4.7666               2               2               4               6               9
23......................................            6027          4.5603               1               2               3               6               9
24......................................           57786          5.3375               1               2               4               6              10
25......................................           22109          3.6065               1               2               3               4               7
26......................................              45          4.9111               1               2               4               6              11
27......................................            3806          5.5008               1               1               3               7              13
28......................................           12739          6.3365               1               3               4               8              13
29......................................            4009          3.7381               1               2               3               5               7
31......................................            3088          4.8374               1               2               3               6               9
32......................................            1441          3.0743               1               1               2               3               6
34......................................           18454          5.8051               1               3               4               7              11
35......................................            3693          3.9163               1               2               3               5               7
36......................................            6707          1.5408               1               1               1               2               2
37......................................            1756          3.9169               1               1               3               4               8
38......................................             196          2.7041               1               1               2               3               5
39......................................            2546          2.0000               1               1               1               2               4
40......................................            2520          3.3218               1               1               2               4               7
42......................................            5401          1.9867               1               1               1               2               4
43......................................             111          3.9910               1               2               3               5               7
44......................................            1463          5.2160               2               3               4               7               9
45......................................            2342          3.5956               1               2               3               5               7
46......................................            3043          4.8478               1               2               4               6               9
47......................................            1198          3.9307               1               1               3               4               7
49......................................            2364          5.2563               1               2               4               6              10
50......................................            3268          2.1068               1               1               2               2               3
51......................................             348          2.8908               1               1               2               3               6
52......................................             107          3.1589               1               1               2               3               7
53......................................            3140          3.6080               1               1               2               4               8
54......................................               2          5.0000               1               1               9               9               9
55......................................            1876          2.9302               1               1               2               3               6
56......................................             729          2.8299               1               1               2               3               6
57......................................             620          3.9935               1               2               2               5               8
58......................................               1          2.0000               2               2               2               2               2
59......................................             103          3.1262               1               1               2               4               6
60......................................               3          1.0000               1               1               1               1               1
61......................................             241          4.5726               1               1               3               5              11
63......................................            3732          4.6072               1               2               3               5               9
64......................................            3341          6.6417               1               2               5               8              14
65......................................           29330          3.1723               1               2               3               4               6
66......................................            6560          3.4703               1               2               3               4               6
67......................................             492          3.8049               1               2               3               5               7
68......................................           10182          4.3274               2               2               4               5               8
69......................................            2937          3.4705               1               2               3               4               6
70......................................              40          3.3000               1               2               3               4               5
71......................................             128          3.9297               1               2               3               5               7
72......................................             734          3.4728               1               2               3               4               7
73......................................            6210          4.6697               1               2               4               6               9
74......................................               4          3.2500               1               1               2               3               7
75......................................           40911         10.5412               4               5               8              13              20
76......................................           41032         11.7128               3               6               9              14              22
77......................................            2178          5.0987               1               2               4               7              10
78......................................           30980          7.6317               3               5               7               9              13
79......................................          238095          8.6329               3               4               7              11              16

[[Page 30009]]

                                                                                                                                                        
80......................................            8060          6.0504               2               3               5               7              11
81......................................               6          6.8333               3               5               6               7               7
82......................................           70681          7.3182               2               3               6               9              14
83......................................            7334          5.8951               2               3               5               7              11
84......................................            1480          3.4696               1               2               3               4               6
85......................................           20681          6.8720               2               3               5               9              13
86......................................            1375          4.0429               1               2               3               5               8
87......................................           67349          6.4330               1               3               5               8              12
88......................................          359037          5.6532               2               3               5               7              10
89......................................          428964          6.5605               3               4               5               8              12
90......................................           36711          4.6673               2               3               4               6               8
91......................................              40          4.3750               2               3               4               5               9
92......................................           13520          6.6271               2               3               5               8              12
93......................................            1160          4.6147               1               2               4               6               8
94......................................           13679          6.6439               2               3               5               8              13
95......................................            1419          3.9831               1               2               3               5               7
96......................................           58934          5.0552               2               3               4               6               9
97......................................           23955          3.9986               1               2               3               5               7
98......................................              22          3.8182               1               1               2               4              10
99......................................           26526          3.1692               1               1               2               4               6
100.....................................           10188          2.2330               1               1               2               3               4
101.....................................           20410          4.7228               1               2               4               6               9
102.....................................            4491          2.8940               1               1               2               4               5
103.....................................             511         47.3190               9              15              32              71             104
104.....................................           26161         13.3467               5               8              11              16              24
105.....................................           22856         10.1918               5               6               8              12              18
106.....................................          106944         11.0508               6               7               9              13              18
107.....................................           68187          8.3051               5               6               7               9              13
108.....................................            7497         12.1122               4               7              10              15              23
110.....................................           63208         10.0765               3               6               8              12              19
111.....................................            5547          6.1031               2               4               6               7               9
112.....................................          142252          4.2152               1               2               3               6               8
113.....................................           47795         13.1200               4               6               9              16              26
114.....................................            9030          8.8270               2               4               7              11              17
115.....................................           13707          9.2228               2               4               8              12              18
116.....................................          160542          4.6957               1               2               4               6               9
117.....................................            3723          4.0285               1               1               3               5               9
118.....................................            6649          3.0284               1               1               2               4               7
119.....................................            1684          5.1081               1               1               3               7              11
120.....................................           39395          8.4464               1               2               5              11              19
121.....................................          170653          6.9325               2               4               6               9              12
122.....................................           85992          4.5068               1               2               4               6               8
123.....................................           45937          4.4685               1               1               2               6              11
124.....................................          152452          4.5929               1               2               4               6               9
125.....................................           60687          2.9374               1               1               2               4               6
126.....................................            5118         12.8009               4               6              10              16              26
127.....................................          705314          5.7996               2               3               5               7              11
128.....................................           18459          6.3467               3               4               6               7              10
129.....................................            4441          3.1678               1               1               1               3               7
130.....................................           99436          6.2969               2               4               5               8              11
131.....................................           25388          4.8483               1               3               5               6               8
132.....................................          164155          3.3160               1               2               3               4               6
133.....................................            6111          2.8053               1               1               2               3               5
134.....................................           29371          3.6005               1               2               3               4               7
135.....................................            8055          4.4431               1               2               3               5               8
136.....................................            1146          3.0689               1               1               2               4               6
137.....................................               3          9.0000               3               3               8              16              16
138.....................................          207593          4.1945               1               2               3               5               8
139.....................................           65375          2.7460               1               1               2               3               5
140.....................................          134325          3.1700               1               2               3               4               6
141.....................................           78304          4.0837               1               2               3               5               7
142.....................................           35576          2.9415               1               1               2               4               5
143.....................................          137087          2.3957               1               1               2               3               4
144.....................................           75955          5.3738               1               2               4               7              11
145.....................................            6306          2.9802               1               1               2               4               6
146.....................................            9812         10.5317               6               7               9              12              17
147.....................................            1663          6.9056               4               5               7               8              10
148.....................................          148695         12.6142               6               7              10              15              22
149.....................................           14197          7.1277               4               5               7               8              10
150.....................................           24394         11.1136               4               7               9              14              20

[[Page 30010]]

                                                                                                                                                        
151.....................................            4227          6.1091               2               3               6               8              11
152.....................................            4685          8.4886               4               5               7              10              14
153.....................................            1634          5.7778               3               4               6               7               9
154.....................................           34916         14.0359               4               7              11              17              27
155.....................................            4502          5.0060               2               2               4               7               9
156.....................................               2         18.0000               5               5              31              31              31
157.....................................            9423          5.6030               1               2               4               7              11
158.....................................            4325          2.7866               1               1               2               4               6
159.....................................           18159          5.0739               1               2               4               6              10
160.....................................            9496          2.7724               1               1               2               4               5
161.....................................           14885          4.2146               1               2               3               5               9
162.....................................            7335          2.0907               1               1               1               3               4
163.....................................              10          4.7000               1               1               2               8              10
164.....................................            5342          8.7142               4               5               7              10              15
165.....................................            1579          5.3889               2               3               5               7               8
166.....................................            3344          5.4342               2               3               4               7              10
167.....................................            2245          2.9617               1               2               3               4               5
168.....................................            1816          4.7015               1               2               3               6               9
169.....................................             907          2.5480               1               1               2               3               5
170.....................................           12921         11.7454               2               5               9              15              23
171.....................................            1051          5.1246               1               2               4               6              10
172.....................................           32809          7.3996               2               3               5               9              15
173.....................................            2065          3.9467               1               2               3               5               8
174.....................................          238825          5.1461               2               3               4               6               9
175.....................................           21268          3.2303               1               2               3               4               6
176.....................................           17835          5.7613               2               3               4               7              11
177.....................................           11794          4.7272               2               3               4               6               8
178.....................................            3711          3.3393               1               2               3               4               6
179.....................................           12071          6.7278               2               3               5               8              13
180.....................................           88763          5.6576               2               3               4               7              11
181.....................................           21194          3.6978               1               2               3               5               7
182.....................................          237775          4.5664               1               2               4               6               8
183.....................................           69353          3.1731               1               2               3               4               6
184.....................................              84          3.6548               1               2               3               4               7
185.....................................            4091          4.8238               1               2               4               6              10
186.....................................               2          3.0000               2               2               4               4               4
187.....................................             869          3.9298               1               2               3               5               7
188.....................................           70432          5.7809               1               3               4               7              11
189.....................................            7853          3.3748               1               1               3               4               7
190.....................................              93          4.9247               1               2               3               5              12
191.....................................           11046         14.8284               4               7              11              18              29
192.....................................             775          7.1381               2               4               6               9              13
193.....................................            8318         12.9221               5               7              11              16              23
194.....................................             657          7.4247               2               4               6               9              13
195.....................................            8720          9.8580               4               6               8              12              17
196.....................................             622          6.3344               3               4               6               8              10
197.....................................           27180          8.7010               3               5               7              10              15
198.....................................            7031          4.7165               2               3               4               6               8
199.....................................            2148         10.6909               3               5               8              14              22
200.....................................            1535         11.3759               2               4               8              14              23
201.....................................            1540         14.9247               4               7              11              18              29
202.....................................           28333          7.0992               2               3               5               9              14
203.....................................           29347          7.1592               2               3               6               9              14
204.....................................           52863          6.3342               2               3               5               8              12
205.....................................           22950          6.7923               2               3               5               8              14
206.....................................            1650          4.2218               1               2               3               5               8
207.....................................           36763          5.2874               1               2               4               7              10
208.....................................            9874          3.0353               1               1               2               4               6
209.....................................          356581          5.8918               3               4               5               7               9
210.....................................          142751          7.6248               4               5               6               9              13
211.....................................           26179          5.6064               3               4               5               7               9
212.....................................               9          5.5556               2               3               3               5               6
213.....................................            7121          8.7182               2               4               7              11              17
216.....................................            6357         10.2902               2               4               8              13              21
217.....................................           20641         13.7099               3               5               9              17              29
218.....................................           24494          5.6207               2               3               4               7              10
219.....................................           18726          3.4427               1               2               3               4               6
220.....................................               5          4.2000               1               1               4               4              10
223.....................................           19460          2.7002               1               1               2               3               5
224.....................................            8049          2.1070               1               1               2               3               4

[[Page 30011]]

                                                                                                                                                        
225.....................................            5842          4.6251               1               2               3               6              10
226.....................................            5512          6.2509               1               2               4               7              13
227.....................................            4323          2.8543               1               1               2               3               5
228.....................................            2967          3.4553               1               1               2               4               7
229.....................................            1216          2.3528               1               1               2               3               4
230.....................................            2473          4.9713               1               2               3               6              10
231.....................................           10931          4.7553               1               2               3               6              10
232.....................................             553          4.2405               1               1               2               5              10
233.....................................            4689          8.2457               2               3               6              10              16
234.....................................            2164          3.8812               1               2               3               5               8
235.....................................            5523          5.8175               1               3               4               6              11
236.....................................           39703          5.5917               2               3               4               7              10
237.....................................            1658          4.1978               1               2               3               5               8
238.....................................            7601          9.3428               3               4               7              11              17
239.....................................           60382          6.9698               2               3               5               8              13
240.....................................           13253          6.9292               2               3               5               8              14
241.....................................            2987          4.2266               1               2               3               5               8
242.....................................            2825          7.1487               2               3               5               9              14
243.....................................           80144          5.1231               2               3               4               6               9
244.....................................           12434          5.3963               1               3               4               6              10
245.....................................            4379          4.0877               1               2               3               5               7
246.....................................            1267          4.2447               1               2               3               5               8
247.....................................           11435          3.6810               1               2               3               5               7
248.....................................            7377          4.9753               1               2               4               6               9
249.....................................           10332          3.9334               1               1               3               5               8
250.....................................            3605          4.6624               1               2               3               5               9
251.....................................            2135          3.0070               1               1               2               4               5
253.....................................           19016          5.2421               1               3               4               6              10
254.....................................            9279          3.5245               1               2               3               4               6
256.....................................            4420          5.6344               1               2               4               7              11
257.....................................           22633          3.2019               1               2               3               4               6
258.....................................           16953          2.2778               1               1               2               3               4
259.....................................            3995          3.1975               1               1               2               3               7
260.....................................            4550          1.6642               1               1               1               2               3
261.....................................            2214          2.2344               1               1               2               3               4
262.....................................             659          4.0030               1               1               3               5               8
263.....................................           29116         12.4972               3               5               9              15              24
264.....................................            3348          7.2694               2               3               6               9              14
265.....................................            4140          7.1005               1               2               5               8              14
266.....................................            2554          3.5717               1               1               2               5               7
267.....................................             223          4.1839               1               1               2               5               9
268.....................................             936          3.5716               1               1               2               4               7
269.....................................           10077          8.5158               2               3               6              11              17
270.....................................            3072          3.1953               1               1               2               4               7
271.....................................           22910          7.7195               3               4               6               9              14
272.....................................            5990          6.6751               2               3               5               8              13
273.....................................            1385          5.3682               1               2               4               6              11
274.....................................            2618          7.1176               1               3               5               9              15
275.....................................             240          3.8042               1               1               2               5               8
276.....................................             939          4.7444               1               3               4               6               8
277.....................................           80128          6.2324               2               3               5               7              11
278.....................................           24698          4.8226               2               3               4               6               8
279.....................................               4          4.5000               2               2               2               6               8
280.....................................           13930          4.7090               1               2               3               6               9
281.....................................            5886          3.3819               1               1               3               4               6
282.....................................               1          1.0000               1               1               1               1               1
283.....................................            5284          5.0157               1               2               4               6              10
284.....................................            1745          3.5415               1               2               3               5               7
285.....................................            5591         12.0757               3               5               9              15              23
286.....................................            2071          7.2038               3               4               5               8              13
287.....................................            6659         12.2050               3               5               8              14              24
288.....................................            1201          5.8485               3               4               5               6               9
289.....................................            5476          3.4830               1               1               2               3               7
290.....................................            8792          2.5875               1               1               2               3               4
291.....................................              94          2.1596               1               1               2               3               4
292.....................................            5173         11.2101               2               4               8              14              22
293.....................................             271          5.8782               1               2               4               7              12
294.....................................           83789          5.2505               2               3               4               6              10
295.....................................            3687          4.0966               1               2               3               5               8
296.....................................          231836          5.7562               2               3               4               7              11

[[Page 30012]]

                                                                                                                                                        
297.....................................           31640          3.8523               1               2               3               5               7
298.....................................              95          2.5263               1               1               2               3               5
299.....................................            1130          5.4823               1               2               4               7              11
300.....................................           15620          6.6238               2               3               5               8              13
301.....................................            1968          4.3664               1               2               3               5               8
302.....................................            7967         10.9728               5               6               8              13              19
303.....................................           19228          9.4496               4               5               8              11              17
304.....................................           13039          9.5748               2               4               7              11              19
305.....................................            2442          4.3276               1               2               4               5               8
306.....................................           11607          5.7509               1               2               4               7              12
307.....................................            2482          2.5363               1               1               2               3               4
308.....................................            9610          6.4318               1               2               4               8              13
309.....................................            3296          2.5713               1               1               2               3               5
310.....................................           27425          4.3364               1               2               3               5               9
311.....................................            8487          2.0526               1               1               2               2               4
312.....................................            1870          4.6904               1               2               3               6              10
313.....................................             664          2.2651               1               1               2               3               4
315.....................................           28343          8.5525               1               2               5              11              19
316.....................................           84582          6.9972               2               3               5               9              14
317.....................................             841          2.9441               1               1               2               3               6
318.....................................            6162          6.6386               1               3               5               8              13
319.....................................             421          2.8005               1               1               2               4               6
320.....................................          175993          5.8700               2               3               5               7              10
321.....................................           23410          4.2695               2               3               4               5               7
322.....................................              88          4.1023               2               2               3               4               7
323.....................................           17373          3.3754               1               1               2               4               7
324.....................................            7970          2.0041               1               1               2               2               4
325.....................................            7001          4.1964               1               2               3               5               8
326.....................................            2116          2.8767               1               1               2               3               5
327.....................................              15          3.4667               1               1               2               3              12
328.....................................             674          3.9139               1               2               3               5               8
329.....................................             106          2.3491               1               1               2               3               5
331.....................................           43957          5.8366               2               3               4               7              11
332.....................................            4414          3.5353               1               1               3               5               7
333.....................................             352          5.6733               1               2               4               7              12
334.....................................           19282          5.4196               3               4               5               6               8
335.....................................            9747          4.0557               2               3               4               5               6
336.....................................           59009          3.7607               1               2               3               4               7
337.....................................           34107          2.4150               1               2               2               3               4
338.....................................            3724          5.0709               1               2               3               6              11
339.....................................            2118          4.5892               1               2               3               6              10
340.....................................               2          1.5000               1               1               2               2               2
341.....................................            5932          3.1123               1               1               2               3               6
342.....................................             192          4.1927               1               2               3               6               8
344.....................................            3517          3.1137               1               1               2               3               6
345.....................................            1357          3.7900               1               1               3               5               8
346.....................................            5156          6.2853               1               3               5               8              12
347.....................................             372          2.9624               1               1               2               4               6
348.....................................            3204          4.4978               1               2               3               5               8
349.....................................             741          2.6815               1               1               2               3               5
350.....................................            6300          4.6057               2               3               4               6               8
351.....................................               2          2.5000               2               2               3               3               3
352.....................................             541          3.9279               1               1               3               5               8
353.....................................            2701          8.3425               3               4               6               9              16
354.....................................            9927          5.9853               3               3               5               7              10
355.....................................            5565          3.6270               2               3               3               4               5
356.....................................           29685          2.8084               1               2               3               3               4
357.....................................            6569          9.3230               4               5               7              11              17
358.....................................           28653          4.4708               2               3               4               5               7
359.....................................           28097          3.0930               2               2               3               4               4
360.....................................           18115          3.2832               1               2               3               4               5
361.....................................             671          3.6692               1               1               2               4               8
362.....................................               1          1.0000               1               1               1               1               1
363.....................................            3892          3.4740               1               2               2               3               7
364.....................................            1856          3.4984               1               1               2               4               7
365.....................................            2435          7.1647               1               2               4               9              16
366.....................................            4452          7.0106               1               3               5               9              15
367.....................................             538          2.9387               1               1               2               4               6
368.....................................            2377          6.2680               2               3               5               8              12
369.....................................            2399          3.4239               1               1               2               4               7

[[Page 30013]]

                                                                                                                                                        
370.....................................            1171          5.5448               2               3               4               5               9
371.....................................            1053          3.5897               2               3               3               4               5
372.....................................             876          3.1199               1               2               2               3               5
373.....................................            3973          2.0194               1               1               2               2               3
374.....................................             152          2.9474               1               2               2               3               4
375.....................................               7          8.4286               1               2               5               9              15
376.....................................             214          3.2710               1               1               2               4               7
377.....................................              49          4.1224               1               1               2               4               9
378.....................................             187          2.6578               1               2               2               3               4
379.....................................             358          2.9609               1               1               2               3               5
380.....................................              96          1.8333               1               1               1               2               4
381.....................................             178          2.2022               1               1               1               2               4
382.....................................              47          1.3404               1               1               1               1               2
383.....................................            1583          3.8111               1               2               3               5               8
384.....................................             132          2.9318               1               1               2               3               6
385.....................................               3          6.6667               1               1               4              15              15
389.....................................              16          6.2500               3               3               5               7              12
390.....................................               8          5.1250               2               2               3               5               7
392.....................................            2532         10.5517               4               5               8              13              21
393.....................................               2         11.0000               7               7              15              15              15
394.....................................            1791          7.4199               1               2               5               8              16
395.....................................           67648          4.9800               1               2               4               6              10
396.....................................              17          4.1176               1               1               2               7               7
397.....................................           16824          5.7741               1               2               4               7              11
398.....................................           18292          6.2478               2               3               5               8              11
399.....................................            1293          4.0162               1               2               3               5               8
400.....................................            7808          9.6883               2               3               7              12              21
401.....................................            6732         11.6693               2               5               9              15              24
402.....................................            1499          4.2368               1               1               3               6               9
403.....................................           38817          8.5440               2               3               6              11              17
404.....................................            3788          4.6378               1               2               4               6               9
406.....................................            3452         10.0200               3               4               7              13              21
407.....................................             699          4.4120               1               2               4               6               8
408.....................................            2838          7.6688               1               2               5               9              18
409.....................................            5558          5.9171               2               3               4               6              12
410.....................................           74218          3.3531               1               2               3               4               5
411.....................................              33          2.3030               1               1               1               3               6
412.....................................              30          3.3667               1               1               2               5               7
413.....................................            8746          8.0082               2               3               6              10              16
414.....................................             727          4.5571               1               2               3               6              10
415.....................................           44472         14.8801               4               7              11              18              29
416.....................................          218625          7.6812               2               4               6               9              14
417.....................................              41          4.3171               1               2               4               6               8
418.....................................           20458          6.3064               2               3               5               8              12
419.....................................           14836          5.2358               2               3               4               6              10
420.....................................            2606          3.9643               1               2               3               5               7
421.....................................           10712          4.2451               1               2               3               5               8
422.....................................              84          3.8690               1               2               3               5               5
423.....................................           10806          7.9174               2               3               6               9              16
424.....................................            1855         16.8313               2               6              10              19              31
425.....................................           15463          4.3916               1               2               3               5               8
426.....................................            4693          5.2169               1               2               4               6              11
427.....................................            1680          5.2494               1               2               4               6              11
428.....................................             923          7.6111               1               3               5               9              16
429.....................................           42341          7.8410               2               3               5               9              15
430.....................................           55603          9.0212               2               4               7              11              18
431.....................................             218          8.9037               2               3               5               9              17
432.....................................             404          5.8292               1               2               3               7              12
433.....................................            8182          3.2840               1               1               2               4               7
434.....................................           22447          5.2816               2               3               4               6              10
435.....................................           16417          4.5130               1               2               4               5               8
436.....................................            3531         13.7366               4               8              13              20              26
437.....................................           15598          9.9085               4               6               9              13              18
439.....................................            1041          8.4476               1               3               6              10              18
440.....................................            4797          9.4951               2               3               6              11              20
441.....................................             604          3.4619               1               1               2               4               7
442.....................................           15505          8.2772               1               3               6              10              17
443.....................................            2968          3.3632               1               1               2               4               7
444.....................................            3308          4.7830               1               2               4               6               9
445.....................................            1229          3.6998               1               1               3               4               6

[[Page 30014]]

                                                                                                                                                        
447.....................................            4148          2.6437               1               1               2               3               5
448.....................................              29          1.0000               1               1               1               1               1
449.....................................           28641          4.0147               1               1               3               5               8
450.....................................            6265          2.2530               1               1               1               3               4
451.....................................               4          3.0000               1               1               1               2               8
452.....................................           21368          5.1393               1               2               4               6              10
453.....................................            3597          3.0770               1               1               2               4               6
454.....................................            3925          5.1827               1               2               3               6              10
455.....................................             892          2.7668               1               1               2               3               6
456.....................................             214          7.3178               1               1               3               8              16
457.....................................             111          4.8649               1               1               2               6              14
458.....................................            1652         15.9994               3               6              12              21              33
459.....................................             567          9.3210               2               4               7              12              19
460.....................................            2286          6.3408               1               3               5               8              13
461.....................................            3190          4.5564               1               1               2               5              11
462.....................................            9980         12.9722               4               6              11              17              24
463.....................................           13395          4.7779               1               2               4               6               9
464.....................................            3180          3.4145               1               2               3               4               7
465.....................................             215          3.7767               1               1               2               4               7
466.....................................            1751          4.7059               1               1               2               5              10
467.....................................            1583          4.2053               1               1               2               4               8
468.....................................           60012         14.0970               3               6              11              18              28
471.....................................           11592          6.7331               3               4               5               8              11
472.....................................             198         23.9192               1               5              18              34              56
473.....................................            8660         13.2826               2               4               7              19              34
475.....................................          100273         11.4470               2               5               9              15              22
476.....................................            6604         12.6364               3               7              11              16              23
477.....................................           29677          8.6003               1               3               6              11              18
478.....................................          126591          7.6914               1               3               6              10              16
479.....................................           17894          4.1872               1               2               3               5               8
480.....................................             388         24.2294               8              12              17              29              49
481.....................................             250         29.8760              17              21              26              36              50
482.....................................            6981         13.4369               5               7              10              15              24
483.....................................           39492         42.9069              14              22              34              52              78
484.....................................             382         15.3822               3               7              11              20              30
485.....................................            3406         10.4055               4               5               8              12              20
486.....................................            2298         13.2820               1               6              10              17              27
487.....................................            4186          8.1388               2               3               6              10              16
488.....................................             906         17.7770               4               7              13              22              37
489.....................................           19468          9.7616               2               4               7              12              20
490.....................................            5412          6.0458               1               2               4               7              12
491.....................................           10675          3.9154               2               2               3               4               7
492.....................................            2207         17.8691               4               5              14              28              37
493.....................................           56448          5.6678               1               2               4               7              11
494.....................................           24916          2.3746               1               1               2               3               5
495.....................................              87         17.3333               7              10              15              22              31
496.....................................             683         11.5344               4               6               9              13              22
497.....................................           19813          6.8081               2               4               5               8              12
498.....................................           10451          3.7528               1               2               3               5               7
499.....................................           37493          5.3005               2               3               4               6              10
500.....................................           34661          3.1298               1               2               3               4               6
501.....................................            2000         10.4195               4               5               8              12              19
502.....................................            3520          5.3301               2               3               4               6              10
503.....................................            3046          3.3700               1               2               3               4               6
                                         ----------------                                                                                               
                                                11086638                                                                                                
--------------------------------------------------------------------------------------------------------------------------------------------------------


 Table 8A.--Statewide Average Operating Cost-to-Charge Ratios for Urban 
             and Rural Hospitals (Case Weighted) April 1997             
------------------------------------------------------------------------
                         State                           Urban    Rural 
------------------------------------------------------------------------
ALABAMA...............................................    0.400    0.449
ALASKA................................................    0.517    0.778
ARIZONA...............................................    0.397    0.559
ARKANSAS..............................................    0.541    0.491
CALIFORNIA............................................    0.388    0.500
COLORADO..............................................    0.486    0.609
CONNECTICUT...........................................    0.551    0.555
DELAWARE..............................................    0.505    0.489

[[Page 30015]]

                                                                        
DISTRICT OF COLUMBIA..................................    0.521  .......
FLORIDA...............................................    0.397    0.397
GEORGIA...............................................    0.508    0.510
HAWAII................................................    0.458    0.528
IDAHO.................................................    0.557    0.618
ILLINOIS..............................................    0.474    0.585
INDIANA...............................................    0.559    0.596
IOWA..................................................    0.529    0.665
KANSAS................................................    0.447    0.652
KENTUCKY..............................................    0.503    0.529
LOUISIANA.............................................    0.469    0.531
MAINE.................................................    0.619    0.576
MARYLAND..............................................    0.764    0.815
MASSACHUSETTS.........................................    0.557    0.597
MICHIGAN..............................................    0.485    0.585
MINNESOTA.............................................    0.566    0.629
MISSISSIPPI...........................................    0.524    0.522
MISSOURI..............................................    0.445    0.531
MONTANA...............................................    0.485    0.602
NEBRASKA..............................................    0.495    0.660
NEVADA................................................    0.339    0.516
NEW HAMPSHIRE.........................................    0.574    0.598
NEW JERSEY............................................    0.458  .......
NEW MEXICO............................................    0.466    0.537
NEW YORK..............................................    0.569    0.654
NORTH CAROLINA........................................    0.534    0.475
NORTH DAKOTA..........................................    0.650    0.673
OHIO..................................................    0.551    0.593
OKLAHOMA..............................................    0.477    0.552
OREGON................................................    0.585    0.638
PENNSYLVANIA..........................................    0.410    0.540
PUERTO RICO...........................................    0.477    0.521
RHODE ISLAND..........................................    0.577  .......
SOUTH CAROLINA........................................    0.474    0.496
SOUTH DAKOTA..........................................    0.542    0.639
TENNESSEE.............................................    0.532    0.557
TEXAS.................................................    0.445    0.557
UTAH..................................................    0.596    0.639
VERMONT...............................................    0.610    0.566
VIRGINIA..............................................    0.494    0.510
WASHINGTON............................................    0.663    0.666
WEST VIRGINIA.........................................    0.599    0.545
WISCONSIN.............................................    0.597    0.648
WYOMING...............................................    0.514    0.751
------------------------------------------------------------------------


    Table 8B.--Statewide Average Capital Cost-to-Charge Ratios (Case    
                          Weighted) April 1997                          
------------------------------------------------------------------------
                             State                                Ratio 
------------------------------------------------------------------------
ALABAMA........................................................    0.054
ALASKA.........................................................    0.073
ARIZONA........................................................    0.047
ARKANSAS.......................................................    0.055
CALIFORNIA.....................................................    0.040
COLORADO.......................................................    0.055
CONNECTICUT....................................................    0.039
DELAWARE.......................................................    0.056
DISTRICT OF COLUMBIA...........................................    0.040
FLORIDA........................................................    0.047
GEORGIA........................................................    0.048
HAWAII.........................................................    0.046
IDAHO..........................................................    0.055
ILLINOIS.......................................................    0.044
INDIANA........................................................    0.059
IOWA...........................................................    0.055
KANSAS.........................................................    0.057
KENTUCKY.......................................................    0.054
LOUISIANA......................................................    0.068
MAINE..........................................................    0.045
MARYLAND.......................................................    0.013
MASSACHUSETTS..................................................    0.063
MICHIGAN.......................................................    0.048
MINNESOTA......................................................    0.057
MISSISSIPPI....................................................    0.055
MISSOURI.......................................................    0.051
MONTANA........................................................    0.058
NEBRASKA.......................................................    0.057
NEVADA.........................................................    0.033
NEW HAMPSHIRE..................................................    0.067
NEW JERSEY.....................................................    0.045
NEW MEXICO.....................................................    0.053
NEW YORK.......................................................    0.054
NORTH CAROLINA.................................................    0.049
NORTH DAKOTA...................................................    0.074
OHIO...........................................................    0.055
OKLAHOMA.......................................................    0.056
OREGON.........................................................    0.054
PENNSYLVANIA...................................................    0.042
PUERTO RICO....................................................    0.090
RHODE ISLAND...................................................    0.038
SOUTH CAROLINA.................................................    0.055
SOUTH DAKOTA...................................................    0.061
TENNESSEE......................................................    0.056
TEXAS..........................................................    0.053
UTAH...........................................................    0.058
VERMONT........................................................    0.053
VIRGINIA.......................................................    0.058
WASHINGTON.....................................................    0.067
WEST VIRGINIA..................................................    0.055
WISCONSIN......................................................    0.048
WYOMING........................................................    0.065
------------------------------------------------------------------------

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 we certify that a proposed rule would not have 
a significant economic impact on a substantial number of small 
entities. For purposes of the RFA, we consider all hospitals to be 
small entities.
    Also, section 1102(b) of the Social Security Act requires us to 
prepare a regulatory impact analysis for any proposed rule that may 
have a significant impact on the operations of a substantial number 
of small rural hospitals. Such an analysis must conform to the 
provisions of section 603 of the RFA. With the exception of 
hospitals located in certain New England counties, for purposes of 
section 1102(b) of the Act, we define a small rural hospital as a 
hospital with fewer than 100 beds that is located outside of a 
Metropolitan Statistical Area (MSA) or New England County 
Metropolitan Area (NECMA). Section 601(g) of the Social Security 
Amendments of 1983 (Pub. L. 98-21) designated hospitals in certain 
New England counties as belonging to the adjacent NECMA. Thus, for 
purposes of the prospective payment system, we classify these 
hospitals as urban hospitals.
    It is clear that the changes being proposed in this document 
would affect both a substantial number of small rural hospitals as 
well as other classes of hospitals, and the effects on some may be 
significant. Therefore, the discussion below, in combination with 
the rest of this proposed rule, constitutes a combined regulatory 
impact analysis and regulatory flexibility analysis.
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

II. Objectives

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

III. Limitations of Our Analysis

    As has been the case in previously published regulatory impact 
analyses, the following quantitative analysis presents the projected 
effects of our proposed policy changes, as well as statutory changes 
effective for FY 1998, 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. As we have done in previous proposed rules, we are 
soliciting comments and information about the anticipated effects of 
these changes on hospitals and our methodology for estimating them.

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

    The prospective payment systems for hospital inpatient operating 
and capital-related costs encompass nearly all general, short-term, 
acute care hospitals that participate in the Medicare program. There 
were 45 Indian Health Service hospitals in our database, 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, as of April 1997, we have 
included 5,087

[[Page 30016]]

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, 
children's, and cancer hospitals. The impacts of our proposed policy 
changes on these hospitals are discussed below.

V. Impact on Excluded Hospitals and Units

    As of April 1997, there were 1,118 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 2,346 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) of the Act, the update 
factor applicable to the rate-of-increase limit for excluded 
hospitals and units for FY 1998 would be 2.8 percent (the excluded 
hospital market basket).
    The impact on excluded hospitals and units of the proposed 
update in the rate-of-increase limit depends on the cumulative cost 
increases experienced by each excluded hospital or 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 limits, the major effect will be the amount 
of excess costs that would not be reimbursed.
    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 its rate-of-increase limit plus 50 
percent of reasonable costs in excess of the limit, not to exceed 
110 percent of its limit. In addition, under the various provisions 
set forth in Sec. 413.40, excluded hospitals and units can obtain 
payment adjustments for 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.
    We are proposing to extend certain exclusion criteria that 
currently apply only to long-term care hospitals to all other 
categories of excluded facilities. These criteria define a minimum 
level of independence and separate control that a facility must have 
in order to be excluded as a ``hospital within a hospital.'' We 
expect that this provision will result in a very small decrease in 
aggregate payment levels (other things being equal) by, for example, 
preventing new hospital units from inappropriately qualifying for 
the exemption from the-rate-of-increase ceiling that is available 
only to new hospitals. To our knowledge, there are fewer than 50 
facilities that would be affected by this proposal. We welcome 
comments on this aspect of the impact analysis.

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

A. Basis and Methodology of Estimates

    In this proposed rule, we are announcing policy changes and 
payment rate updates for the prospective payment systems for 
operating and capital-related costs. We have prepared separate 
analyses of the proposed changes to each system. This section deals 
with changes to the operating prospective payment system.
    The data used in developing the quantitative analyses presented 
below are taken from the FY 1996 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 proposed 
policy changes. Second, due to the interdependent nature of the 
prospective payment system, it is very difficult to precisely 
quantify the impact associated with each proposed change. Third, we 
draw upon various sources for the data used to categorize hospitals 
in the tables. In some cases, particularly the number of beds, there 
is a fair degree of variation in the data from different sources. We 
have attempted to construct these variables with the best available 
source overall. For individual hospitals, however, some 
miscategorizations are possible.
    Using cases in the FY 1996 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. Estimated payment 
impacts of proposed FY 1998 changes to the capital prospective 
payment system are discussed below in section VII of this Appendix.
    The proposed changes discussed separately below are the 
following:
     The effects of the annual reclassification of diagnoses 
and procedures and the recalibration of the DRG relative weights 
required by section 1886(d)(4)(C) of the Act.
     The effects of changes in hospitals' wage index values 
reflecting the wage index update (FY 1994 data).
     The effects of implementing the Puerto Rico-specific 
wage index to be applied to the Puerto Rico standardized amounts.
     The effects of completing the phase-out of 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 effects of geographic reclassifications by the 
MGCRB that will be effective in FY 1998.
     The total change in payments based on FY 1998 policies 
relative to payments based on FY 1997 policies.
    To illustrate the impacts of the FY 1998 proposed changes, our 
analysis begins with a FY 1998 baseline simulation model using: the 
FY 1997 GROUPER (version 14.0); the FY 1997 wage index; national 
wage index values applied to the Puerto Rico standardized amounts; 
FY 1997 outlier policy (75 percent phase-out of day outlier 
payments); and no MGCRB reclassifications. Outlier payments are set 
at 5.1 percent of total DRG payments.
    Each proposed and statutory policy change is then added 
incrementally to this baseline model, finally arriving at an FY 1998 
model incorporating all of the changes. This allows us to isolate 
the effects of each change.
    Our final comparison illustrates the percent change in payments 
per case from FY 1997 to FY 1998. Three factors have significant 
impacts here. First is the update to the standardized amounts. In 
accordance with section 1886(d)(3)(A)(iv) of the Act, we are 
proposing to update the large urban and the other areas average 
standardized amounts for FY 1998 using the most recently forecasted 
hospital market basket increase for FY 1998 of 2.8 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 equal to 
the market basket increase of 2.8 percent.
    A second significant factor impacting changes in hospitals' 
payments per case from FY 1997 to FY 1998 is a change in MGCRB 
reclassification status from one year to the next. That is, 
hospitals reclassified in FY 1997 that are no longer reclassified in 
FY 1998 may have a negative payment impact going from FY 1997 to FY 
1998; conversely, hospitals not reclassified in FY 1997 that are 
reclassified in FY 1998 may have a positive impact. In some cases 
these impacts can be quite substantial, so 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 actual 
outlier payments during FY 1997 will be 4.9 percent of actual total 
DRG payments. When the FY 1997 final rule was published, we 
projected FY 1997 outlier payments would be 5.1 percent of total DRG 
payments, and the standardized amounts were reduced correspondingly. 
The effects of the slightly lower than expected outlier payments 
during FY 1997 (as discussed in the Addendum to this proposed rule) 
are reflected in the analyses below

[[Page 30017]]

comparing our current estimates of FY 1997 payments per case to 
estimated FY 1998 payments per case.
    Table I demonstrates the results of our analysis. The table 
categorizes hospitals by various geographic and special payment 
consideration groups to illustrate the varying impacts on different 
types of hospitals. The top row of the table shows the overall 
impact on the 5,087 hospitals included in the analysis. This is 42 
fewer hospitals than were included in the impact analysis in the FY 
1997 final rule (61 FR 46305). Data for 82 hospitals that were 
included in last year's analysis were not available for analysis 
this year; however, data were available this year for 40 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 2,857 
hospitals located in urban areas (MSAs or NECMAs) included in our 
analysis. Among these, there are 1,580 hospitals located in large 
urban areas (populations over 1 million), and 1,277 hospitals in 
other urban areas (populations of 1 million or fewer). In addition, 
there are 2,230 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 1998 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 2,949, 
1,733, 1,216, and 2,138, respectively.
    The next three groupings examine the impacts of the proposed 
changes on hospitals grouped by whether or not they have residency 
programs (teaching hospitals that receive an IME adjustment), 
receive DSH payments, or some combination of these two adjustments. 
There are 3,996 nonteaching hospitals in our analysis, 849 teaching 
hospitals with fewer than 100 residents, and 242 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 proposed 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. The RRCs (95), SCH/EACHs (651), and 
SCH/EACH and RRCs (41) shown here were not reclassified for purposes 
of the standardized amount. There are four SCHs that will be 
reclassified for the standardized amount in FY 1998 that, therefore, 
are not included in these rows. There are eight EACHs included in 
our analysis and five EACH/RRCs.
    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 1995 
Medicare cost report files, if available (otherwise FY 1994 data are 
used). Data needed to determine ownership status or Medicare 
utilization percentages were unavailable for 138 hospitals. For the 
most part, these are either new hospitals or hospitals filing manual 
cost reports that are not yet entered into the database.
    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 both FY 
1997 and FY 1998, or for either of those 2 years, by urban/rural 
status. The next rows illustrate the overall number of FY 1998 
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 1998 Operating Prospective Payment System                                 
                                                         [Percent changes in payments per case]                                                         
                                                                                                                                                        
                                                                                              Puerto Rico-                                              
                                 Number of          DRG          New wage    Combined wage &    specific   Day outlier         MGCRB          All FY 98 
                                 hospitals     recalibration     data \3\     recalibration    wage index    phaseout     reclassification   changes \8\
                                    \1\             \2\                            \4\            \5\          \6\              \7\                     
                                        (0)             (1)            (2)             (3)            (4)          (5)              (6)              (7)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                (By Geographic Location)                                                                
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL HOSPITALS................         5,087             0.1            0.1             0.0            0.0          0.0              0.0              3.0
    URBAN HOSPITALS..........         2,857             0.1            0.1             0.0            0.0         -0.1             -0.4              3.0
        LARGE URBAN..........         1,580             0.1            0.1             0.0            0.0         -0.2             -0.4              3.0
        OTHER URBAN..........         1,277             0.1            0.1             0.1            0.0          0.1             -0.3              3.1
    RURAL HOSPITALS..........         2,230            -0.2            0.4             0.0            0.0          0.2              2.1              3.2
BED SIZE (URBAN):                                                                                                                                       
    0-99 BEDS................           720            -0.2           -0.1            -0.4            0.1          0.2             -0.4              2.9
    100-199 BEDS.............           948            -0.1            0.0            -0.3            0.1          0.1             -0.4              3.0
    200-299 BEDS.............           568             0.1            0.1             0.0            0.0          0.1             -0.4              3.1
    300-499 BEDS.............           460             0.2            0.1             0.1            0.0         -0.1             -0.4              2.9
    500 OR MORE BEDS.........           161             0.3            0.2             0.4            0.0         -0.3             -0.2              3.1
BED SIZE (RURAL):                                                                                                                                       
    0-49 BEDS................         1,173            -0.4            0.4            -0.2            0.0          0.1              0.1              3.1
    50-99 BEDS...............           654            -0.3            0.4            -0.1            0.0          0.2              1.2              3.2
    100-149 BEDS.............           237            -0.2            0.5             0.1            0.0          0.2              2.9              3.1
    150-199 BEDS.............            90            -0.1            0.4             0.2            0.0          0.2              2.7              3.5
    200 OR MORE BEDS.........            76             0.0            0.3             0.2            0.0          0.2              4.0              2.9
URBAN BY CENSUS DIVISION:                                                                                                                               
    NEW ENGLAND..............           159             0.1           -0.4            -0.5            0.0          0.0             -0.3              2.4
    MIDDLE ATLANTIC..........           431             0.1            0.7             0.6            0.0         -1.0             -0.4              2.7
    SOUTH ATLANTIC...........           419             0.2           -0.4            -0.4            0.0          0.1             -0.4              2.7
    EAST NORTH CENTRAL.......           474             0.1            0.3             0.3            0.0          0.2             -0.3              3.4

[[Page 30018]]

                                                                                                                                                        
    EAST SOUTH CENTRAL.......           164             0.2            0.8             0.8            0.0          0.2             -0.3              4.1
    WEST NORTH CENTRAL.......           191             0.2            0.1             0.1            0.0          0.2             -0.4              3.5
    WEST SOUTH CENTRAL.......           367             0.2           -0.4            -0.4            0.0          0.2             -0.4              2.8
    MOUNTAIN.................           129             0.3           -0.5            -0.4            0.0          0.2             -0.3              3.0
    PACIFIC..................           475             0.1           -0.2            -0.3            0.0          0.2             -0.3              2.9
    PUERTO RICO..............            48             0.0            0.5             0.3            5.9         -0.3             -0.3              9.4
RURAL BY CENSUS DIVISION:                                                                                                                               
    NEW ENGLAND..............            53            -0.2            0.7             0.3            0.0          0.2              2.0              3.5
    MIDDLE ATLANTIC..........            85            -0.2           -0.3            -0.7            0.0          0.0              1.1              2.7
    SOUTH ATLANTIC...........           298            -0.2            0.4             0.1            0.0          0.2              2.3              2.7
    EAST NORTH CENTRAL.......           302            -0.1            0.6             0.3            0.0          0.2              1.2              2.9
    EAST SOUTH CENTRAL.......           275            -0.2            0.6             0.3            0.0          0.2              2.5              3.6
    WEST NORTH CENTRAL.......           512            -0.3            0.3            -0.1            0.0          0.2              2.4              3.3
    WEST SOUTH CENTRAL.......           347            -0.2            0.1            -0.3            0.0          0.2              3.2              3.2
    MOUNTAIN.................           212            -0.2            0.0            -0.4            0.0          0.1              1.6              3.5
    PACIFIC..................           141            -0.2            1.1             0.8            0.0          0.1              2.1              3.7
    PUERTO RICO..............             5            -0.4           -1.4            -2.0            7.2          0.0              3.9              8.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 (By Payment Categories)                                                                
--------------------------------------------------------------------------------------------------------------------------------------------------------
URBAN HOSPITALS..............         2,949             0.1            0.1             0.1            0.0         -0.1             -0.3              3.0
    LARGE URBAN..............         1,733             0.1            0.2             0.1            0.0         -0.2             -0.3              3.0
    OTHER URBAN..............         1,216             0.1            0.0            -0.1            0.0          0.1             -0.4              3.1
    RURAL HOSPITALS..........         2,138            -0.2            0.3             0.0            0.0          0.2              1.9              3.1
TEACHING STATUS:                                                                                                                                        
    NON-TEACHING.............         3,996             0.0            0.1            -0.1            0.0          0.2              0.2              3.1
    FEWER THAN 100 RESIDENTS.           849             0.1            0.1             0.1            0.0          0.0             -0.4              3.1
    100 OR MORE RESIDENTS....           242             0.2            0.3             0.3            0.0         -0.6             -0.1              2.9
DISPROPORTIONATE SHARE                                                                                                                                  
 HOSPITALS (DSH):                                                                                                                                       
    NON-DSH..................         3,186             0.0            0.1             0.0            0.0          0.2              0.2              3.2
    URBAN DSH:                                                                                                                                          
        100 BEDS OR MORE.....         1,403             0.1            0.1             0.1            0.0         -0.2             -0.3              2.9
        FEWER THAN 100 BEDS..            91            -0.3            0.0            -0.5            0.0          0.2             -0.2              2.9
    RURAL DSH:                                                                                                                                          
        SOLE COMMUNITY (SCH).           153            -0.3            0.2            -0.3            0.0          0.0              0.1              2.9
        REFERRAL CENTERS                                                                                                                                
         (RRC)...............            35            -0.1            0.5             0.3            0.0          0.1              3.6              3.4
    OTHER RURAL DSH:                                                                                                                                    
        100 BEDS OR MORE.....            79            -0.1            0.6             0.3            0.0          0.3              2.5              2.8
        FEWER THAN 100 BEDS..           140            -0.4            0.6             0.1            0.0          0.1              0.8              3.8
    URBAN TEACHING AND DSH:                                                                                                                             
        BOTH TEACHING AND DSH           703             0.2            0.2             0.2            0.0         -0.3             -0.4              2.9
        TEACHING AND NO DSH..           333             0.2            0.2             0.3            0.0          0.1             -0.2              3.3
        NO TEACHING AND DSH..           791             0.0            0.0            -0.2            0.0          0.1             -0.2              3.0

[[Page 30019]]

                                                                                                                                                        
        NO TEACHING AND NO                                                                                                                              
         DSH.................         1,122             0.0            0.0            -0.2            0.1          0.2             -0.3              3.1
    RURAL HOSPITAL TYPES:                                                                                                                               
        NONSPECIAL STATUS                                                                                                                               
         HOSPITALS...........         1,351            -0.2            0.4             0.0            0.0          0.2              1.6              3.0
        RRC..................            95             0.0            0.5             0.3            0.0          0.2              5.1              3.8
        SCH/EACH.............           651            -0.3            0.1            -0.3            0.0          0.1              0.4              2.8
        SCH/EACH AND RRC.....            41            -0.1            0.2            -0.1            0.0          0.0              1.3              2.7
TYPE OF OWNERSHIP:                                                                                                                                      
    VOLUNTARY................         2,915             0.1            0.1             0.1            0.0         -0.1             -0.1              3.0
    PROPRIETARY..............           688             0.0           -0.2            -0.3            0.1          0.2              0.1              2.8
    GOVERNMENT...............         1,346             0.0            0.3             0.1            0.0          0.0              0.2              3.3
    UNKNOWN..................           138             0.1            0.0            -0.1            0.3         -1.6             -0.2              2.1
MEDICARE UTILIZATION AS A                                                                                                                               
 PERCENT OF INPATIENT DAYS:                                                                                                                             
    0-25.....................           266             0.0           -0.4            -0.5            0.0         -0.2             -0.2              2.5
    25-50....................         1,300             0.2            0.0             0.1            0.0         -0.1             -0.2              3.0
    50-65....................         1,985             0.1            0.3             0.2            0.0          0.0              0.1              3.2
    OVER 65..................         1,397            -0.1            0.1            -0.1            0.0          0.1              0.0              2.9
    UNKNOWN..................           138             0.1            0.0            -0.1            0.3         -1.6             -0.2              2.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             Hospitals Reclassified by the Medicare Geographic Review Board                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
RECLASSIFICATION STATUS                                                                                                                                 
 DURING FY 97 AND FY 98:                                                                                                                                
    RECLASSIFIED DURING BOTH                                                                                                                            
     FY 97 AND FY 98.........           340             0.0            1.1             0.9            0.0          0.2              5.5              3.3
        URBAN................           102             0.1            1.4             1.4            0.0          0.1              2.9              3.6
        RURAL................           238             0.0            0.6             0.4            0.0          0.3              8.5              3.1
    RECLASSIFIED DURING FY 98                                                                                                                           
     ONLY:...................            92             0.2            0.6             0.7            0.1          0.1              3.6              9.0
        URBAN................            15             0.5            0.9             1.2            0.2          0.1              1.0              7.4
        RURAL................            77            -0.2            0.3             0.0            0.0          0.2              7.1             11.0
    RECLASSIFIED DURING FY 97                                                                                                                           
     ONLY....................           203             0.0            0.3             0.2            0.0          0.0             -0.8             -0.3
        URBAN................            88             0.1            0.3             0.2            0.0         -0.1             -1.1              0.1
        RURAL................           115            -0.2            0.3             0.0            0.0          0.2             -0.1             -1.0
FY 98 RECLASSIFICATIONS:                                                                                                                                
    ALL RECLASSIFIED                                                                                                                                    
     HOSPITALS...............           433             0.1            1.0             0.9            0.0          0.2              5.2              4.2
        STANDARD AMOUNT ONLY.            96             0.0            1.8             1.7            0.1          0.1             -0.2              3.3
        WAGE INDEX ONLY......           284             0.1            0.4             0.3            0.0          0.2              7.8              4.5
        BOTH.................            53             0.0            1.8             1.7            0.0          0.2              3.7              4.6
        NONRECLASSIFIED......         4,627             0.1            0.1             0.0            0.0         -0.1             -0.5              2.9
    ALL URBAN RECLASSIFIED...           117             0.2            1.3             1.3            0.0          0.1              2.5              4.2
        STANDARD AMOUNT ONLY.            45             0.1            1.8             1.7            0.1          0.0             -0.9              3.3
        WAGE INDEX ONLY......            33             0.3            0.5             0.7            0.0          0.0              6.4              5.1
        BOTH.................            39             0.1            1.8             1.7            0.0          0.2              1.8              4.2
        NONRECLASSIFIED......         2,740             0.1            0.0             0.0            0.0         -0.1             -0.5              3.0

[[Page 30020]]

                                                                                                                                                        
    ALL RURAL RECLASSIFIED...           316            -0.1            0.6             0.4            0.0          0.2              8.3              4.3
        STANDARD AMOUNT ONLY.            51            -0.2            1.9             1.6            0.0          0.4              2.5              3.2
        WAGE INDEX ONLY......           251            -0.1            0.4             0.1            0.0          0.2              8.6              4.2
        BOTH.................            14            -0.1            1.8             1.6            0.0          0.5             14.7              6.5
        NONRECLASSIFIED......         1,887            -0.2            0.3            -0.1            0.0          0.1             -0.3              2.7
    OTHER RECLASSIFIED:                                                                                                                                 
        HOSPITALS (SECTION...                                                                                                                           
        1886(d)(8)(B)).......            27            -0.2            0.2            -0.1            0.0          0.2              0.8              3.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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 1996, and hospital cost report data are from reporting periods beginning in FY 1994 and FY 1995.           
\2\ This column displays the payment impacts of the recalibration of the DRG weights, based on FY 1996 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 1994 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 1998 budget neutrality factor of 0.998400.                              
\5\ This column illustrates the payment impacts of the Puerto Rico-specific wage index, applied to the Puerto Rico standardized amounts.                
\6\ This column illustrates the payment impacts of completing the phase-out of day outlier payments, and increasing cost outlier payments, in accordance
  with section 1886(d)(5) of the Act.                                                                                                                   
\7\ Shown here are the combined effects of geographic reclassification by the Medicare Geographic Classification Review Board (MGCRB). The effects shown
  here demonstrate the FY 1998 payment impacts of going from no reclassifications to the reclassifications scheduled to be in effect for FY 1998.       
  Reclassification for prior years has no bearing on the payment impacts shown here.                                                                    
\8\ This column shows changes in payments from FY 1997 to FY 1998. It incorporates all of the changes displayed in columns 3 through 6 (the changes     
  displayed in columns 1 and 2 are included in column 3). It also displays the impacts of the updates to the FY 1998 standardized amounts and the       
  hospital-specific rates, changes in hospitals' reclassification status in FY 1998 compared to FY 1997, and the difference in outlier payments from FY 
  1997 to FY 1998. The sum of columns 3 through 6 plus these effects may be different from the percentage changes shown here due to rounding and        
  interactive effects.                                                                                                                                  

B. Impact of the Proposed 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 proposed rule. Section 1886(d)(4)(C)(i) of 
the Act requires us each year to make appropriate classification 
changes and to recalibrate the DRG weights in order to reflect 
changes in treatment patterns, technology, and any other factors 
that may change the relative use of hospital resources.
    We compared aggregate payments using the FY 1997 DRG relative 
weights (GROUPER version 14) to aggregate payments using the 
proposed FY 1998 DRG relative weights (GROUPER version 15). Overall, 
payments increase by 0.1 percent due to the DRG changes, although 
this is prior to applying the budget neutrality factor for DRG and 
wage index changes (see column 3). Consistent with the minor changes 
we are proposing for the FY 1998 GROUPER, the redistributional 
impacts of DRG reclassifications and recalibration across hospital 
groups are very small (a 0.1 percent increase for large and other 
urban hospitals; a 0.2 percent decrease among rural hospitals). 
Within hospital categories, the net effects for urban hospitals are 
small positive changes for larger hospitals (200 or more beds), and 
slightly negative changes for urban hospitals with fewer than 200 
beds. Among rural hospitals, the smallest rural hospitals (fewer 
than 50 beds) experience a decrease of 0.4 percent. For other rural 
bed size categories, slight negative impacts prevail. Only the 
largest rural hospitals (200 or more beds) avoid any negative impact 
from the changes.
    The breakdowns by urban census division show that the increase 
among urban hospitals is spread across all census categories, with 
the largest increase (0.3 percent) for hospitals in the Mountain 
census division. For rural hospitals, the largest decrease is 0.4 
percent for the five rural hospitals in Puerto Rico. The next 
largest decrease is 0.3 percent in the West North Central census 
division. This pattern of negative impacts upon small and rural 
hospitals is also apparent when examining the effects of DRG changes 
on hospitals according to special payment categories, with the 
largest decrease (0.4 percent) among rural DSH hospitals with fewer 
than 100 beds.
    Overall, we attribute the changes associated with DRG 
recalibration 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, lower relative 
weights associated with those cases would disproportionately affect 
these hospitals. In general, small hospitals that serve a 
disproportionate share of low-income patients fit this definition. 
In contrast, larger hospitals in both urban and rural areas, which 
tend to treat the latter group of DRGs, would experience small 
payment increases. Teaching hospitals, which also treat the more 
complicated cases, experience similar effects. We note, however, 
that both the positive and negative impacts are relatively minor.

C. 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 proposed 
wage index for FY

[[Page 30021]]

1998 is based on data submitted for hospital cost reporting periods 
beginning on or after October 1, 1993 and before October 1, 1994. 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 
1997 wage index based on FY 1993 wage data before geographic 
reclassifications to a model using the FY 1998 prereclassification 
wage index based on FY 1994 wage data.
    The results indicate that the new wage data have a 0.1 percent 
increase overall impact on hospital payments (prior to applying the 
budget neutrality factor, see column 3). Rural hospitals generally 
appear to benefit from the update. Payments increase for rural 
hospitals by 0.4 percent. These increases are attributable to 
relatively large increases in the wage index values for the rural 
areas of particular States (although all but one changed by less 
than 5 percent). Urban hospitals as a group are not significantly 
affected by the updated wage data (0.1 percent increases), although 
some particular categories of urban hospitals exhibit sizeable 
changes.
    Some of the largest changes are found among both urban and rural 
hospitals grouped by census division. In almost all cases, payments 
change by less than 1 percent. Our review of the wage data indicates 
that these changes were attributable to improved reporting, as well 
as relative changes in labor costs.
    Among the urban census division categories, the East South 
Central and the Middle Atlantic census divisions experience the 
largest increases (0.8 and 0.7 percent, respectively). In the East 
South Central, the increase stems largely from wage index increases 
of 6.0 percent in the Mobile, Alabama labor market area, and an 
increase of 5.2 percent in the Memphis, Tennessee labor market area. 
In the Middle Atlantic division, New York City's wage index rises by 
almost 1.4 percent, and Philadelphia's wage index increases by 1.3 
percent. The largest decrease among urban hospitals occurs in the 
Mountain census division with a decline of 0.5 percent. This 
decrease is primarily due to a 3.7 percent decrease in the wage 
index for Phoenix, Arizona.
    Among the rural hospitals, all census divisions experience 
increases except for the Middle Atlantic (and Puerto Rico, discussed 
separately below) census division, which experiences a slight 
decrease of 0.3 percent. The largest increase (1.1 percent) occurs 
in the Pacific census division. Here, Oregon's rural wage index 
rises by 3.3 percent, and Washington's rural index increases by 2.9 
percent. The second largest increase (0.7 percent) occurs in the New 
England census division. In this census division, the Vermont index 
increases by 4.5 percent, and the Maine index increases by 1.9 
percent.
    In Puerto Rico, payments increase by 0.5 percent for the urban 
hospitals and decrease by 1.4 percent for the five rural hospitals. 
Although column 4 shows the isolated effects of introducing the 
Puerto Rico-specific wage index, it is also included in the payment 
simulations here showing the impacts of the new wage data. Of the 
six urban areas in Puerto Rico, two experience increases in their 
national and Puerto Rico-specific wage index values, including the 
San Juan-Bayamon area (4.4 percent national, and 2.0 percent Puerto 
Rico-specific), which contains the majority of the urban Puerto Rico 
hospitals (29 of 48), and the Mayaguez area (6.4 percent national, 
and 4.0 Puerto Rico-specific).
    The following chart compares the shifts in wage index values for 
labor market areas for FY 1998 with those from FY 1997. The majority 
of labor market areas (336) experience less than a 5 percent change. 
A total of 31 labor market areas experience a change between 5 and 
10 percent; 14 of those experience increases. Still fewer labor 
markets experience a change of more than 10 percent; one experiences 
an increase, and two experience decreases. We reviewed the data for 
any area that experienced a wage index change of 5 percent or more 
to determine the reason for the fluctuation.

------------------------------------------------------------------------
                                                       Number of labor  
                                                        market areas    
    Percentage change in area wage index values    ---------------------
                                                     FY 1997    FY 1998 
------------------------------------------------------------------------
Increase more than 10 percent.....................          1          1
Increase between 5 and 10 percent (inclusive).....         10         14
Increase or decrease less than 5 percent                                
 (inclusive)......................................        334        336
Decrease between 5 and 10 percent.................          9         17
Decrease more than 10 percent.....................          3          2
------------------------------------------------------------------------

    Under the proposed FY 1998 wage index, 94.2 percent of urban 
hospitals and 99.9 percent of rural hospitals would experience a 
change in their wage index of less than 5 percent. Among urban 
hospitals, 153 would experience a change of between 5 and 10 percent 
(66 increasing and 87 decreasing), while only 3 rural hospitals fall 
into this category, all decreasing. Ten urban hospitals and no rural 
hospitals would experience a change of more than 10 percent. The 
following chart shows the projected impact for urban and rural 
hospitals.

------------------------------------------------------------------------
                                                     Number of hospitals
    Percentage change in area wage index values    ---------------------
                                                      Urban      Rural  
------------------------------------------------------------------------
Increase more than 10 percent.....................          4          0
Increase between 5 and 10 percent (inclusive).....         66          0
Increase or decrease less than 5 percent..........       2663       2217
Decrease between 5 and 10 percent (inclusive).....         87          3
Decrease more than 10 percent.....................          6          0
------------------------------------------------------------------------

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 
to be budget neutral. As pointed out in the Addendum to this 
proposed rule, we compared aggregate payments using the FY 1997 DRG 
relative weights and wage index to aggregate payments using the FY 
1998 DRG relative weights and wage index. Based on this comparison, 
we computed a wage and recalibration budget neutrality factor of 
0.998400. 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. There may, of 
course, be some variation of plus or minus 0.1 percent due to 
rounding. In calculating the total changes shown in column 7, 
readers should begin with this column and add across, excluding the 
impacts shown in columns 1 and 2.

E. Puerto Rico-Specific Wage Index (Column 4)

    As described in section III. of the preamble to this proposed 
rule, we are proposing to adopt a Puerto Rico-specific wage index 
for FY 1998. These wage index values would be applied to the Puerto 
Rico standardized amounts. Column 4 shows the effect of implementing 
this proposed change results in no payment impact for the All 
Hospitals row. In Puerto Rico, payments increase by 5.9 percent 
among urban hospitals, and 7.2 percent among rural hospitals. As 
shown in Table 4F of the Addendum, the Puerto Rico-specific wage 
index values are considerably higher than Puerto Rico's national 
wage indexes (shown in Table 4A of the Addendum). This results in 
the increases shown in this column.
    As indicated above, this change is shown in isolation here for 
ease in reading Table I. To actually calculate the national DRG and 
wage index budget neutrality factors, the Puerto Rico-specific wage 
index was included. As described in the Addendum, we also computed a 
DRG reclassification and recalibration budget neutrality adjustment 
for the Puerto Rico standardized amounts equal to 0.999224.

F. Outlier Changes (Column 5)

    Currently, 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). 
Beginning with FY 1995, section 1886(d)(5)(A) of the Act requires 
the Secretary to phase-out payments for day outliers. Under the

[[Page 30022]]

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. 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. This reduction in 
day outlier payments will be offset by an increase in cost outlier 
payments.
    As discussed in the Addendum, for FY 1998, we are proposing that 
a case would receive cost outlier payments if its costs exceed the 
DRG amount plus $7,600. We are also proposing to maintain 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 Middle Atlantic census division (1.0 percent decline); 
urban hospitals with 500 or more beds (0.3 percent decline); 
teaching hospitals with 100 or more residents (0.6 percent decline); 
and hospitals for which data were unavailable to calculate Medicare 
utilization rates (1.5 percent decline). This last category contains 
a number of New York City public hospitals that file manual cost 
reports. Because the changes to the 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.

G. Impact of MGCRB Reclassifications (Column 6)

    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 6 reflect 
the per case payment impact of moving from this baseline to a 
simulation incorporating the MGCRB decisions for FY 1998. As noted 
below, these decisions affect hospitals' standardized amount and 
wage index area assignments. In addition, rural hospitals 
reclassified for purposes of the standardized amount qualify to be 
treated as urban for purposes of the 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 approve a hospital's 
reclassification request for the purpose of using the other area's 
standardized amount, wage index value, or both. Effective FY 1997, 
rural hospitals can no longer be reclassified to an other urban area 
for purposes of the standardized amount under section 1886(d)(10) of 
the Act.
    The proposed FY 1998 wage index values incorporate all of the 
MGCRB's reclassification decisions for FY 1998. The wage index 
values also reflect any decisions made by the HCFA Administrator 
through the appeals and review process for MGCRB decisions as of 
March 29, 1997. Additional changes that result from the 
Administrator's review of MGCRB decisions or a request by a hospital 
to withdraw its application will be reflected in the final rule for 
FY 1998.
    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 0.995127 to ensure that the effects of 
reclassification are budget neutral. (See section II.A.4 of the 
Addendum to this proposed rule.)
    As a group, rural hospitals benefit from geographic 
reclassification. Their payments rise 2.1 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 2 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 urban hospitals stemming from the budget neutrality offset to 0.3 
percent. Among urban hospital groups generally (that is, bed size, 
census division, and special payment status), payments generally 
fall between 0.3 and 0.4 percent. Urban hospitals with 500 or more 
beds have the lowest decline, only 0.2 percent, owing to the 
reclassification of 9 hospitals within this category.
    A positive impact is evident among all rural hospital groups. 
The smallest effect among the rural census divisions is 1.1 percent 
for the Middle Atlantic division. The largest impacts are in rural 
Puerto Rico and the West South Central, with increases of 3.9 
percent and 3.2 percent, respectively.
    Among rural hospitals designated as RRCs, 45 hospitals are 
reclassified for purposes of the wage index only, leading to the 5.1 
percent increase in payments among RRCs overall. This positive 
impact on RRCs is also reflected in the category of rural hospitals 
with 200 or more beds, which has a 4.0 percent increase in payments.
    Rural hospitals reclassified for FY 1997 and FY 1998 experience 
an 8.5 percent increase in payments. 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 1998 only experience a 7.1 percent increase in 
payments, while rural hospitals reclassified for FY 1997 only 
experience a 0.1 decrease in payments. Urban hospitals reclassified 
for FY 1997 but not FY 1998 experience a 1.1 percent decline in 
payments overall. This appears to be due to the combined impacts of 
the budget neutrality adjustment, and a number of Bergen-Passaic, 
New Jersey hospitals in this category that experience a 4.5 percent 
drop in their wage index after reclassification. Urban hospitals 
reclassified for FY 1998 but not for FY 1997 experience a 1.0 
percent increase in payments.
    The FY 1998 Reclassification rows of Table I show the changes in 
payments per case for all FY 1998 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 a 14.7 percent increase in payments. In addition, rural 
hospitals reclassified just 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 
5.2 percent for FY 1998.
    Among the 27 rural hospitals deemed to be urban under section 
1886(d)(8)(B) of the Act, payments increase 0.8 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 annual like the MGCRB 
reclassifications), they are eligible for MGCRB reclassification. 
For FY 1998, one hospital in this category reclassified to a large 
urban area.
    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 about 0.5 percent, which 
corresponds closely with the geographic reclassification budget 
neutrality factor. Rural nonreclassified hospitals decrease slightly 
less, experiencing a 0.3 percent decrease. This occurs because the 
wage index values in some rural areas increase after reclassified 
hospitals are excluded from the calculation of those indexes.
    The number of reclassifications for purposes of the standardized 
amount, or for both the standardized amount and the wage index, has 
declined from 210 in FY 1997 to 149 in FY 1998. The number of wage 
index only reclassifications increased slightly from 274 in FY 1997 
to 284 in FY 1998.
    The foregoing analysis was based on MGCRB and HCFA Administrator 
decisions made by March 29 of this year. As previously noted, there 
may be changes to some MGCRB decisions through the appeals, review, 
and applicant withdrawal process. The outcome of these cases will be 
reflected in the analysis presented in the final rule.

H. All Changes (Column 7)

    Column 7 compares our estimate of payments per case, 
incorporating all changes reflected in this proposed rule for FY 
1998 (including statutory changes), to our estimate of payments per 
case in FY 1997. It includes the effects of the 2.8 percent update 
to the standardized amounts and the hospital-specific rates for SCHs 
and EACHs, and reflects the 0.2 percentage point difference between 
the projected outlier payments in FY 1998 (5.1 percent of total DRG 
payments) and the current estimate of the percentage of actual 
outlier payments in FY 1997 (4.9 percent), as described in the 
introduction to this Appendix and the Addendum.
    We also note that column 7 includes the impacts of FY 1998 MGCRB 
reclassifications compared to the payment impacts of FY 1997 
reclassifications. Column 6, however, shows

[[Page 30023]]

the impact of going from no MGCRB reclassifications to the FY 1998 
reclassifications. Therefore, when comparing FY 1998 payments to FY 
1997, the percent changes due to FY 1998 reclassifications shown in 
column 6 need to be offset by the effects of reclassification on 
hospitals' FY 1997 payments (column 4 of Table 1, September 1, 1996 
final rule; 61 FR 46306). For example, the impact of MGCRB 
reclassifications on rural hospitals' FY 1997 payments was 
approximately a 2.3 percent increase, offsetting the 2.1 percent 
increase in column 6. Therefore, the net change in FY 1998 payments 
due to reclassification for rural hospitals is actually closer to a 
decrease of 0.2 percent relative to FY 1997. However, last year's 
analysis contained a somewhat different set of hospitals, so this 
might affect the numbers slightly.
    There might also be interactive effects among the various 
factors comprising the payment system that we are not able to 
isolate. For these reasons, the values in column 7 may not equal the 
sum of the changes in columns 3 through 6, plus the other impacts 
that we are able to identify.
    The overall payment increase from FY 1998 to FY 1997 for all 
hospitals is a 3.0 percent increase. This reflects the 0.0 percent 
net change in total payments due to the proposed changes for FY 1998 
shown in columns 3 through 6, the 2.8 percent update for FY 1998, 
and the 0.2 percent higher outlier payments in FY 1998 compared to 
FY 1997, as discussed above.
    Hospitals in urban areas experience a 3.0 percent rise in 
payments per case over FY 1997. Similar to all hospitals nationally, 
this is primarily due to the factors discussed above: the 2.8 
percent update and a 0.2 percent higher level of outlier payments 
estimated for FY 1998. Urban hospitals lose 0.1 percent due to the 
phase-out of the day outlier policy. Their 0.4 negative impact in FY 
1998 due to reclassification is offset by a similar impact from FY 
1997 reclassifications. Hospitals in large and other urban areas 
experience 3.0 percent and 3.1 percent increases, respectively.
    Hospitals in rural areas experience a 3.2 percent increase. This 
larger increase for rural hospitals appears to be primarily 
attributable to RRCs experiencing a 3.8 percent increase in payments 
overall for FY 1998. The 45 RRCs that were reclassified for the wage 
index experience a 4.7 percent overall increase in payments from FY 
1997 to FY 1998. Although a small number, they tend to be large 
hospitals and therefore have a disproportionate impact in the rural 
category. In fact, these 45 hospitals represented 7 percent of all 
rural discharges during FY 1996 (2 percent of all rural hospitals).
    Puerto Rico stands out as having large payment increases for FY 
1998, with urban Puerto Rico hospitals' payments increasing by 9.4 
percent, and rural Puerto Rico hospitals' payments increasing by 8.6 
percent. As noted earlier, this is largely due to the proposed 
implementation of the Puerto Rico-specific wage index during FY 
1998.
    Among other census divisions, urban East South Central displays 
the largest increase, 4.1 percent. This is related to the 0.8 
percent increase due to the new wage data. Similarly, rural Pacific 
and rural East South Central display above average increases, 3.6 
and 3.5 percent respectively. The smallest increase, on the other 
hand, occurs in urban New England, with a 2.4 percent payment 
increase. This also appears to be due to the updated wage data (the 
Boston wage index value declines by 1.5 percent).
    The only hospital groups with negative payment impacts from FY 
1997 to FY 1998 are hospitals that were reclassified for FY 1997 and 
are not reclassified for FY 1998. Overall, these hospitals lose 0.3 
percent. The urban hospitals in this category actually experience 
slight payment increases over FY 1997 (0.1 percent), while the rural 
hospitals lose 1.0 percent. On the other hand, hospitals 
reclassified for FY 1998 that were not reclassified for FY 1997 
would experience the greatest payment increases: 11.0 percent for 77 
rural hospitals in this category and 7.4 percent for 15 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 7. This impact is 
illustrated most clearly when one examines the rows categorizing 
hospitals by their reclassification status for FY 1998. All 
nonreclassified hospitals have an average payment increase of 2.9 
percent. The average payment increase for all reclassified hospitals 
is 4.2 percent.
    Among SCH/EACHs, the payment increase is 2.8 percent. The 
primary reason for this below average increase is that there is 
minimal impact upon these hospitals from the higher estimated FY 
1998 outlier payments. Because this hospital group receives their 
hospital-specific rate if the hospitals exceed the applicable 
Federal amount (including outliers), and the hospital-specific rate 
is not adjusted for outliers, there is less of an impact due to 
changes in outlier payment levels.

             Table II.--Impact Analysis of Changes for FY 1998 Operating Prospective Payment System             
                                               [Payments per case]                                              
                                                                                                                
                                                                            Average FY   Average FY             
                                                               Number of       1997         1998                
                                                               hospitals   payment per  payment per  All changes
                                                                  \1\          case         case                
                                                                      (1)          (2)          (3)          (4)
----------------------------------------------------------------------------------------------------------------
                                            (By Geographic Location)                                            
----------------------------------------------------------------------------------------------------------------
ALL HOSPITALS..............................................         5,087        6,759        6,965          3.0
    URBAN HOSPITALS........................................         2,857        7,332        7,554          3.0
        LARGE URBAN........................................         1,580        7,884        8,117          3.0
        OTHER URBAN........................................         1,277        6,624        6,831          3.1
    RURAL HOSPITALS........................................         2,230        4,454        4,594          3.2
BED SIZE (URBAN):                                                                                               
    0-99 BEDS..............................................           720        4,916        5,059          2.9
    100-199 BEDS...........................................           948        6,170        6,354          3.0
    200-299 BEDS...........................................           568        6,878        7,092          3.1
    300-499 BEDS...........................................           460        7,827        8,055          2.9
    500 OR MORE BEDS.......................................           161        9,573        9,873          3.1
BED SIZE (RURAL):                                                                                               
    0-49 BEDS..............................................         1,173        3,650        3,763          3.1
    50-99 BEDS.............................................           654        4,169        4,302          3.2
    100-149 BEDS...........................................           237        4,623        4,768          3.1
    150-199 BEDS...........................................            90        4,803        4,972          3.5
    200 OR MORE BEDS.......................................            76        5,576        5,740          2.9
URBAN BY CENSUS DIVISION:                                                                                       
    NEW ENGLAND............................................           159        7,851        8,039          2.4
    MIDDLE ATLANTIC........................................           431        8,113        8,335          2.7
    SOUTH ATLANTIC.........................................           419        7,002        7,190          2.7

[[Page 30024]]

                                                                                                                
    EAST NORTH CENTRAL.....................................           474        7,037        7,279          3.4
    EAST SOUTH CENTRAL.....................................           164        6,537        6,807          4.1
    WEST NORTH CENTRAL.....................................           191        6,945        7,186          3.5
    WEST SOUTH CENTRAL.....................................           367        6,815        7,009          2.8
    MOUNTAIN...............................................           129        7,101        7,315          3.0
    PACIFIC................................................           475        8,406        8,648          2.9
    PUERTO RICO............................................            48        2,692        2,946          9.4
RURAL BY CENSUS DIVISION:                                                                                       
    NEW ENGLAND............................................            53        5,270        5,456          3.5
    MIDDLE ATLANTIC........................................            85        4,745        4,871          2.7
    SOUTH ATLANTIC.........................................           298        4,636        4,761          2.7
    EAST NORTH CENTRAL.....................................           302        4,501        4,634          2.9
    EAST SOUTH CENTRAL.....................................           275        4,125        4,274          3.6
    WEST NORTH CENTRAL.....................................           512        4,148        4,284          3.3
    WEST SOUTH CENTRAL.....................................           347        4,004        4,133          3.2
    MOUNTAIN...............................................           212        4,779        4,947          3.5
    PACIFIC................................................           141        5,578        5,783          3.7
    PUERTO RICO............................................             5        2,074        2,253          8.6
----------------------------------------------------------------------------------------------------------------
                                             (By Payment Categories)                                            
----------------------------------------------------------------------------------------------------------------
URBAN HOSPITALS............................................         2,949        7,294        7,515          3.0
    LARGE URBAN............................................         1,733        7,738        7,970          3.0
    OTHER URBAN............................................         1,216        6,634        6,839          3.1
RURAL HOSPITALS............................................         2,138        4,433        4,570          3.1
TEACHING STATUS:                                                                                                
    NON-TEACHING...........................................         3,996        5,492        5,662          3.1
    FEWER THAN 100 RESIDENTS...............................           849        7,201        7,425          3.1
    100 OR MORE RESIDENTS..................................           242       11,006       11,321          2.9
DISPROPORTIONATE SHARE HOSPITALS (DSH):                                                                         
    NON-DSH................................................         3,186        5,806        5,991          3.2
    URBAN DSH:                                                                                                  
        100 BEDS OR MORE...................................         1,403        7,970        8,203          2.9
        FEWER THAN 100 BEDS................................            91        5,110        5,260          2.9
    RURAL DSH:                                                                                                  
        SOLE COMMUNITY (SCH)...............................           153        4,386        4,513          2.9
        REFERRAL CENTERS (RRC).............................            35        5,391        5,576          3.4
    OTHER RURAL DSH:                                                                                            
        100 BEDS OR MORE...................................            79        4,311        4,431          2.8
        FEWER THAN 100 BEDS................................           140        3,592        3,730          3.8
                                                                      (1)          (2)          (3)          (4)
----------------------------------------------------------------------------------------------------------------
    URBAN TEACHING AND DSH:                                                                                     
        BOTH TEACHING AND DSH..............................           703        8,953        9,210          2.9
        TEACHING AND NO DSH................................           333        7,395        7,641          3.3
        NO TEACHING AND DSH................................           791        6,393        6,587          3.0
        NO TEACHING AND NO DSH.............................         1,122        5,675        5,853          3.1
    RURAL HOSPITAL TYPES:                                                                                       
        NONSPECIAL STATUS HOSPITALS........................         1,351        4,001        4,121          3.0
        RRC................................................            95        5,382        5,586          3.8
        SCH/EACH...........................................           651        4,555        4,683          2.8
        SCH/EACH and RRC...................................            41        5,463        5,609          2.7
TYPE OF OWNERSHIP:                                                                                              
    VOLUNTARY..............................................         2,915        6,932        7,143          3.0
    PROPRIETARY............................................           688        6,143        6,315          2.8
    GOVERNMENT.............................................         1,346        6,283        6,490          3.3
    UNKNOWN................................................           138        7,582        7,743          2.1
MEDICARE UTILIZATION AS A PERCENT OF INPATIENT DAYS:                                                            
    0--25..................................................           266        8,849        9,066          2.5
    25--50.................................................         1,300        8,227        8,475          3.0
    50--65.................................................         1,985        6,183        6,382          3.2
    OVER 65................................................         1,397        5,251        5,402          2.9
    UNKNOWN................................................           138        7,582        7,743          2.1
----------------------------------------------------------------------------------------------------------------

[[Page 30025]]

                                                                                                                
                         Hospitals Reclassified by the Medicare Geographic Review Board                         
----------------------------------------------------------------------------------------------------------------
RECLASSIFICATION STATUS DURING FY 97 AND FY 98:                                                                 
    RECLASSIFIED DURING BOTH FY 97 AND FY 98...............           340        6,123        6,328          3.3
        URBAN..............................................           102        7,231        7,490          3.6
        RURAL..............................................           238        5,248        5,410          3.1
    RECLASSIFIED DURING FY 98 ONLY.........................            92        5,843        6,372          9.0
        URBAN..............................................            15        7,940        8,526          7.4
        RURAL..............................................            77        4,384        4,872         11.1
    RECLASSIFIED DURING FY 97 ONLY:                                                                             
        URBAN..............................................           203        6,063        6,045         -0.3
        RURAL..............................................            88        7,054        7,062          0.1
    FY 98 RECLASSIFICATIONS................................           115        4,738        4,685         -1.1
        ALL RECLASSIFIED HOSPITALS.........................           433        6,077        6,334          4.2
            STANDARD AMOUNT ONLY...........................            96        5,927        6,120          3.3
            WAGE INDEX ONLY................................           284        6,085        6,360          4.5
            BOTH...........................................            53        6,251        6,539          4.6
            NONRECLASSIFIED................................         4,627        6,836        7,037          2.9
        ALL URBAN RECLASSIFIED.............................           117        7,340        7,650          4.2
            STANDARD AMOUNT ONLY...........................            45        6,449        6,659          3.3
            WAGE INDEX ONLY................................            33        9,513        9,996          5.1
            BOTH...........................................            39        6,457        6,731          4.2
            NONRECLASSIFIED................................         2,740        7,332        7,549          3.0
        ALL RURAL RECLASSIFIED.............................           316        5,100        5,317          4.3
            STANDARD AMOUNT ONLY...........................            51        4,505        4,651          3.2
            WAGE INDEX ONLY................................           251        5,163        5,381          4.2
            BOTH...........................................            14        5,337        5,683          6.5
            NONRECLASSIFIED................................         1,887        4,216        4,329          2.7
        OTHER RECLASSIFIED:                                                                                     
            HOSPITALS (SECTION 1886(d)(8)(B))..............            27        4,740        4,902         3.4 
----------------------------------------------------------------------------------------------------------------
\1\ These payment amounts per case do not reflect any estimates of annual case-mix increase.                    

    Table II presents the projected impact of the proposed changes 
for FY 1998 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 1998 with the average estimated per case 
payments for FY 1997, 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 II equal 
the percentage changes in average payments from column 7 of Table I.

VII. Impact of Proposed 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 fourth year of the capital 
prospective payment system (cost reports beginning in FY 1995) 
available through the December 1996 update of the Health Care 
Provider 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 this information affects our impact analysis in the 
following ways:
     Major investment in hospital capital assets (for 
example in building and major fixed equipment) occurs at irregular 
intervals. As a result, there can be significant variation in the 
growth rates of Medicare capital-related costs per case among 
hospitals. We do not have the necessary hospital-specific budget 
data to project the hospital capital growth rate for 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 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 1998 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 1998 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 1998. In 
addition, we have integrated sufficient hospital-specific 
information into our actuarial model to project the impact of the

[[Page 30026]]

proposed FY 1998 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 
1998 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 1998 payment 
policies.

B. Projected Impact Based on the Proposed FY 1998 Actuarial Model

1. Assumptions

    In this impact analysis, we model dynamically the impact of the 
capital prospective payment system from FY 1997 to FY 1998 using a 
capital cost model. The FY 1998 model, described in Appendix B of 
this proposed 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 1995 received 
through the December 1996 update of HCRIS, interim payment data for 
hospitals already receiving capital prospective payments through 
PRICER, and data reported by the intermediaries that include the 
hospital-specific rate determinations that have been made through 
January 1, 1997 in the provider-specific file. We used these data to 
determine the proposed FY 1998 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 1993, 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 1993. All Federal 
rate payment parameters are assigned to the applicable hospital.
    Recently available cost report data indicate that old capital 
costs are declining faster than we previously projected. 
Consequently, for FY 1998 we are projecting faster declines in old 
capital. To make up for the larger declines in old capital, we are 
projecting faster growth in new capital. The combination of these 
two factors will make the 100-percent Federal rate higher than the 
hold-harmless rate for some hold-harmless hospitals. Therefore, we 
are now projecting that more hospitals will move to the 100-percent 
Federal rate than previously projected.
    For purposes of this impact analysis, the FY 1998 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 discharge       
-------------------------------------------------------------------------
                                                              Percentage
                         Fiscal year                           increase 
------------------------------------------------------------------------
1996........................................................        3.84
1997........................................................        4.46
1998........................................................        4.50
------------------------------------------------------------------------

     The Medicare case-mix index will increase by 1.0 
percent in FY 1997 and FY 1998.
     The Federal capital rate and hospital-specific rate 
were 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 
proposed FY 1998 update for inflation is 1.10 percent (see section 
III of the Addendum).

2. Results

    We have used the actuarial model to estimate the change in 
payment for capital-related costs from FY 1997 to FY 1998. 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 1998      FY 1998  
                                                               Percent of    FY 1998     percent of   percent of
                      Type of hospital                         hospitals    percent of    capital      capital  
                                                                            discharges     costs       payments 
----------------------------------------------------------------------------------------------------------------
Low Cost Hospital...........................................           66           62           58           59
High Cost Hospital..........................................           34           38           42           41
----------------------------------------------------------------------------------------------------------------

    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 FY 1997 to FY 
1998 using the above described actuarial model. With the proposed 
Federal rate, we estimate aggregate Medicare capital payments will 
increase by 7.19 percent in FY 1998.

                                      Table III.--Impact of Proposed Changes for FY 1998 on Payments per Discharge                                      
                                                            [FY 1997 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........................................      3,330       6,844,215    $469.21      63.86    $134.59      $2.72      $56.19    $662.70
    Fully Prospective.....................................      3,068       6,162,124     439.28      60.00     149.48  .........       60.85     649.61
    100% Federal Rate.....................................        251         658,508     756.30     100.00  .........  .........       13.60     769.90
    Hold Harmless.........................................         11          23,583     274.74      33.13  .........     789.18       27.68   1,091.61
High Cost Hospitals.......................................      1,684       4,194,629     745.99      98.04  .........      20.38       24.58     790.95

[[Page 30027]]

                                                                                                                                                        
    100% Federal Rate.....................................      1,590       4,037,189     760.08     100.00  .........  .........       24.02     784.10
    Hold Harmless.........................................         94         157,441     384.62      49.19  .........     542.92       39.14     966.68
        Total Hospitals...................................      5,014      11,038,844     574.38      77.13      83.44       9.43       44.18     711.44
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                                                                                                        
                                                            [FY 1998 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.............................      3,330       7,007,946    $541.97      72.94    $101.16      $1.65      $63.03    $707.81       6.81
    Fully Prospective..........................      3,068       6,309,538     518.20      70.00     112.35  .........       67.55     698.11       7.47
    100% Federal Rate..........................        254         685,995     763.67     100.00  .........  .........       21.61     785.29       2.00
    Hold Harmless..............................          8          12,413     371.31      36.27  .........     931.58       56.43   1,359.32      24.52
High Cost Hospitals............................      1,684       4,294,976     767.03      99.15  .........       9.38       28.59     804.99       1.77
    100% Federal Rate..........................      1,618       4,201,847     775.10     100.00  .........  .........       28.26     803.36       2.46
    Hold Harmless..............................         66          93,129     402.78      57.09  .........     432.39       43.27     878.44      -9.13
        Total Hospitals........................      5,014      11,302,922     627.49      83.15      62.72       4.59       49.94     744.74       4.68
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We project that low capital cost hospitals paid under the fully 
prospective payment methodology will experience an average increase 
in payments per case of 6.81 percent, and high capital cost 
hospitals will experience an average increase of 1.77 percent.
    For hospitals paid under the fully prospective payment 
methodology, the Federal rate payment percentage will increase from 
60 percent to 70 percent and the hospital-specific rate payment 
percentage will decrease from 40 to 30 percent in FY 1998. 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 high cost hospitals receiving a hold-harmless 
payment for old capital will increase from 49.19 percent to 57.09 
percent. We estimate the percentage of hold-harmless hospitals paid 
based on 100 percent of the Federal rate will increase from 94.6 
percent to 96.2 percent.
    We expect that the average hospital-specific rate payment per 
discharge will decrease from $83.44 in FY 1997 to $62.72 in FY 1998. 
This is partly due to the decrease in the hospital-specific rate 
payment percentage from 40 percent in FY 1997 to 30 percent in FY 
1998.
    We are proposing no changes in our exceptions policies for FY 
1998. As a result, the minimum payment levels would be:
     90 percent for sole community hospitals;
     80 percent for urban hospitals with 100 or more beds 
and a disproportionate share patient percentage of 20.2 percent or 
more; or,
     70 percent for all other hospitals.
    We estimate that exceptions payments will increase from 6.21 
percent of total capital payments in FY 1997 to 6.71 percent of 
payments in FY 1998. 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 1998 Exceptions Payments                 
------------------------------------------------------------------------
                                                              Percent of
                 Type of hospital                    No. of   exceptions
                                                   hospitals   payments 
------------------------------------------------------------------------
Low Capital Cost.................................        332          78
High Capital Cost................................        183          22
                                                  ----------------------
    Total........................................        515         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.

  Table IV.--Distribution by Method of Payment (Hold-Harmless/Fully Prospective) of Hospitals Receiving Capital 
                                                    Payments                                                    
----------------------------------------------------------------------------------------------------------------
                                                                        (2)  Hold-harmless                      
                                                                 -------------------------------- (3) Percentage
                                                 (1)  Total No.     Percentage      Percentage       paid full  
                                                  of  hospitals     paid hold-       paid full      Prospective 
                                                                   harmless  (A)   federal  (B)        rate     
----------------------------------------------------------------------------------------------------------------
By Geographic Location:                                                                                         
    All hospitals.............................             5,014             1.5            37.3            61.2
    Large urban areas (populations over 1                                                                       
     million).................................             1,543             1.7            45.4            52.9
    Other urban areas (populations of 1                                                                         
     million or fewer)........................             1,254             1.6            45.7            52.7
    Rural areas...............................             2,217             1.3            27.0            71.8
    Urban hospitals...........................             2,797             1.6            45.5            52.8
        0-99 beds.............................               671             2.4            39.5            58.1
        100-199 beds..........................               938             2.3            52.1            45.5
        200-299 beds..........................               567             0.9            46.9            52.2
        300-499 beds..........................               460             0.4            40.9            58.7
        500 or more beds......................               161             0.6            41.0            58.4
    Rural hospitals...........................             2,217             1.3            27.0            71.8
        0-49 beds.............................             1,162             1.2            18.9            79.9

[[Page 30028]]

                                                                                                                
        50-99 beds............................               652             1.8            32.2            66.0
        100-149 beds..........................               237             0.8            42.2            57.0
        150-199 beds..........................                90             0.0            32.2            67.8
        200 or more beds......................                76             0.0            51.3            48.7
By Region                                                                                                       
    Urban by Region...........................             2,797             1.6            45.5            52.8
        New England...........................               158             0.0            27.8            72.2
        Middle Atlantic.......................               426             1.4            38.0            60.6
        South Atlantic........................               413             1.9            57.4            40.7
        East North Central....................               471             0.6            36.7            62.6
        East South Central....................               160             0.6            58.8            40.6
        West North Central....................               188             1.6            41.0            57.4
        West South Central....................               344             3.5            64.8            31.7
        Mountain..............................               123             3.3            52.0            44.7
        Pacific...............................               466             1.9            39.9            58.2
        Puerto Rico...........................                48             0.0            29.2            70.8
    Rural by Region...........................             2,217             1.3            27.0            71.8
        New England...........................                53             0.0            22.6            77.4
        Middle Atlantic.......................                84             2.4            28.6            69.0
        South Atlantic........................               294             1.0            34.4            64.6
        East North Central....................               301             0.0            23.3            76.7
        East South Central....................               273             0.4            37.0            62.6
        West North Central....................               511             1.0            19.8            79.3
        West South Central....................               345             1.4            29.9            68.7
        Mountain..............................               211             5.2            21.8            73.0
        Pacific...............................               140             0.7            27.9            71.4
Large urban areas (populations over 1 million)             1,695             1.7            45.0            53.3
Other urban areas (populations of 1 million or                                                                  
 fewer).......................................             1,193             1.5            45.3            53.2
Rural areas...................................             2,126             1.3            26.8            71.9
Teaching Status:                                                                                                
    Non-teaching..............................             3,925             1.5            37.2            61.3
    Fewer than 100 Residents..................               848             1.5            39.4            59.1
    100 or more Residents.....................               241             0.8            32.8            66.4
Disproportionate share hospitals (DSH):                                                                         
    Non-DSH...................................             3,128             1.6            33.7            64.7
    Urban DSH:                                                                                                  
        100 or more beds......................             1,397             1.1            47.7            51.2
        Less than 100 beds....................                85             2.4            31.8            65.9
    Rural DSH:                                                                                                  
        Sole Community (SCH/EACH).............               153             3.9            22.2            73.9
        Referral Center (RRC/EACH)............                35             0.0            51.4            48.6
    Other Rural:                                                                                                
        100 or more beds......................                79             0.0            48.1            51.9
        Less than 100 beds....................               137             0.0            26.3            73.7
Urban teaching and DSH:                                                                                         
    Both teaching and DSH.....................               702             1.0            38.7            60.3
    Teaching and no DSH.......................               332             2.4            35.8            61.7
    No teaching and DSH.......................               780             1.4            54.0            44.6
    No teaching and no DSH....................             1,074             1.9            45.7            52.4
Rural Hospital Types:                                                                                           
    Non special status hospitals..............             1,340             0.4            25.9            73.7
    RRC/EACH..................................                95             0.0            43.2            56.8
    SCH/EACH..................................               650             3.5            25.2            71.2
    SCH, RRC and EACH.........................                41             0.0            41.5            58.5
Type of Ownership:                                                                                              
    Voluntary.................................                                                                  
        Voluntary.............................             2,997             1.2            36.9            61.9
        Proprietary...........................               673             3.4            65.7            30.9
        Government............................             1,344             1.0            24.1            74.9
Medicare Utilization as a Percent of Inpatient                                                                  
 Days:                                                                                                          
    0-25......................................               254             3.1            33.9            63.0
    25-50.....................................             1,293             1.9            44.4            53.7
    50-65.....................................             1,980             1.2            37.9            61.0
    Over 65...................................             1,391             1.2            30.2            68.6
----------------------------------------------------------------------------------------------------------------


[[Page 30029]]

    As we explain in Appendix B, we were not able to determine a 
hospital-specific rate for 73 of the 5,087 hospitals in our 
database. Consequently, the payment methodology distribution is 
based on 5,014 hospitals. These 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 37.3 percent in FY 1998.
    Table IV indicates that 61.2 percent of hospitals will be 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 (71.8 percent and 74.9 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 30.9 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 1998 actuarial model to estimate the potential 
impact of our proposed changes for FY 1998 on total capital payments 
per case, using a universe of 5,014 hospitals. The individual 
hospital payment parameters are taken from the best available data, 
including: the January 1, 1997 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 1997 and FY 1998 (columns 2 and 3). Column 4 shows the total 
percentage change in payments from FY 1997 to FY 1998. 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 0.11 
percent decrease in the Federal rate, a 1.0 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 MGCRB. 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 60 percent to 70 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, (2) region, and (3) payment classification.
    The simulation results show that, on average, capital payments 
per case can be expected to increase 4.7 percent in FY 1998. The 
results show that the effect of the Federal rate changes alone is to 
increase payments by 1.1 percent. In addition to the increase 
attributable to the Federal rate changes, a 3.6 percent increase is 
attributable to the effects of all other changes.
    Our comparison by geographic location shows that capital 
payments per case to urban and rural hospitals experience similar 
rates of increase (4.7 percent and 4.4 percent, respectively). 
Payments per case for urban hospitals will increase at about the 
same rate as payments per case for rural hospitals (1.2 percent and 
0.9 percent, respectively) from the Federal rate changes alone. 
Urban hospitals will gain the same as rural hospitals (3.5 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, partly due to the increased share 
of payments that is based on the Federal rate (from 60 to 70 
percent). Changes by region vary from a low of 0.7 percent increase 
(Mountain urban region) to a high of 10.3 percent increase (rural 
hospitals of the Mountain region).
    By type of ownership, government hospitals are projected to have 
the largest rate of increase (5.3 percent, 1.1 percent due to 
Federal rate changes and 4.2 percent from the effects of all other 
changes). Payments to voluntary hospitals will increase 4.9 percent 
(a 1.1 percent increase due to Federal rate changes and a 3.8 
percent increase from the effects of all other changes) and payments 
to proprietary hospitals will increase 2.3 percent (a 1.2 percent 
increase due to Federal rate changes and a 1.1 percent increase from 
the effects of all other changes).
    Section 1886(d)(10) of the Act established the 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 1998 compared to the effects of reclassification for FY 1997, we 
show the average payment percentage increase for hospitals 
reclassified in each fiscal year and in total. For FY 1998 
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 1998 as a whole are projected to 
experience a 5.3 percent increase in payments (a 2.0 percent 
increase attributable to Federal rate changes and a 3.3 percent 
increase attributable to the effects of all other changes). Payments 
to nonreclassified hospitals will increase slightly less (4.8 
percent) than reclassified hospitals (5.3 percent) overall. Payments 
to nonreclassified hospitals will increase slightly less than 
reclassified hospitals from the Federal rate changes (1.2 percent 
compared to 2.0 percent), but they will gain about the same from the 
effects of all other changes (3.6 percent compared to 3.3 percent).

                                 Table V.--Comparison of Total Payments Per Case                                
                                 [FY 1997 Payments Compared To FY 1998 Payments]                                
----------------------------------------------------------------------------------------------------------------
                                                              Average FY   Average FY                  Portion  
                                                 Number of       1997         1998                  attributable
                                                 hospitals    payments/    payments/   All changes   to Federal 
                                                                 case         case                   rate change
----------------------------------------------------------------------------------------------------------------
By Geographic Location:                                                                                         
    All hospitals.............................        5,014          711          745          4.7           1.1
    Large urban areas (populations over 1                                                                       
     million).................................        1,543          798          835          4.6           1.1
    Other urban areas (populations of 1                                                                         
     million or fewer)........................        1,254          682          716          5.0           1.2
    Rural areas...............................        2,217          567          592          4.4           0.9
    Urban hospitals...........................        2,797          747          782          4.7           1.2
        0-99 beds.............................          671          611          640          4.7           0.9

[[Page 30030]]

                                                                                                                
        100-199 beds..........................          938          675          701          3.7           1.1
        200-299 beds..........................          567          723          753          4.2           1.2
        300-499 beds..........................          460          754          795          5.4           1.1
        500 or more beds......................          161          914          963          5.5           1.4
    Rural hospitals...........................        2,217          567          592          4.4           0.9
        0-49 beds.............................        1,162          412          447          8.6           0.8
        50-99 beds............................          652          438          461          5.2           1.2
        100-149 beds..........................          237          547          566          3.5           1.1
        150-199 beds..........................           90          494          518          5.0           1.5
        200 or more beds......................           76        1,116        1,140          2.2           0.5
By Region:                                                                                                      
    Urban by Region...........................        2,797          747          782          4.7           1.2
        New England...........................          158          734          772          5.1           0.6
        Middle Atlantic.......................          426          821          861          4.8           0.9
        South Atlantic........................          413          726          757          4.3           1.0
        East North Central....................          471          690          725          5.1           1.3
        East South Central....................          160          671          714          6.4           2.4
        West North Central....................          188          774          824          6.4           1.4
        West South Central....................          344          736          759          3.1           1.4
        Mountain..............................          123          827          832          0.7           0.9
        Pacific...............................          466          812          856          5.4           1.1
        Puerto Rico...........................           48          298          309          3.7           1.2
    Rural by Region...........................        2,217          567          592          4.4           0.9
        New England...........................           53          541          575          6.3           1.8
        Middle Atlantic.......................           84          481          494          2.9           0.6
        South Atlantic........................          294          897          919          2.6           0.3
        East North Central....................          301          462          491          6.1           1.0
        East South Central....................          273          427          449          5.0           1.7
        West North Central....................          511          536          556          3.8           1.1
        West South Central....................          345          454          474          4.3           1.2
        Mountain..............................          211          554          611         10.3           1.7
        Pacific...............................          140          535          574          7.4           1.4
By Payment Classification:                                                                                      
    All hospitals.............................        5,014          711          745          4.7           1.1
    Large urban areas (populations over 1                                                                       
     million).................................        1,695          786          822          4.6           1.1
    Other urban areas (populations of 1                                                                         
     million or fewer)........................        1,193          682          716          5.0           1.2
    Rural areas...............................        2,126          568          593          4.3           0.9
    Teaching Status:                                                                                            
        Non-teaching..........................        3,925          624          649          4.0           1.1
        Fewer than 100 Residents..............          848          756          796          5.3           1.1
        100 or more Residents.................          241          969        1,021          5.4           1.1
        Urban DSH:                                                                                              
            100 or more beds..................        1,397          773          811          4.9           1.1
            Less than 100 beds................           85          579          626          8.2           1.2
        Rural DSH:                                                                                              
            Sole Community (SCH/EACH).........          153          421          448          6.3           0.7
            Referral Center (RRC/EACH)........           35        1,932        1,964          1.7           0.4
        Other Rural:                                                                                            
            100 or more beds..................           79          462          474          2.6           1.1
            Less than 100 beds................          137          446          470          5.5           1.5
Urban teaching and DSH:                                                                                         
    Both teaching and DSH.....................          702          838          882          5.2           1.1
    Teaching and no DSH.......................          332          792          837          5.7           1.2
    No teaching and DSH.......................          780          669          697          4.2           1.2
    No teaching and no DSH....................        1,074          644          667          3.5           1.2
Rural Hospital Types:                                                                                           
    Non special status hospitals..............        1,340          431          451          4.6           0.9
    RRC/EACH..................................           95          664          693          4.5           1.2
    SCH/EACH..................................          650          465          499          7.4           1.1
    SCH, RRC and EACH.........................           41        1,868        1,888          1.1           0.4
Hospitals Reclassified by the Medicare                                                                          
 Geographic Classification Review Board:                                                                        
    Reclassification Status During FY97 and                                                                     
     FY98:                                                                                                      
        Reclassified During Both FY97 and FY98          340          673          704          4.5           1.2
        Reclassified During FY98 Only.........           92          581          639         10.0           6.7
        Reclassified During FY97 Only.........          172          618          622          0.6          -2.0
    FY98 Reclassifications:                                                                                     
        All Reclassified Hospitals............          432          658          693          5.3           2.0

[[Page 30031]]

                                                                                                                
        All Nonreclassified Hospitals.........        4,510          719          753          4.8           1.2
        All Urban Reclassified Hospitals......          117          726          764          5.2           1.8
        Urban Nonreclassified Hospitals.......        2,680          748          783          4.7           1.1
        All Reclassified Rural Hospitals......          315          605          638          5.5           2.1
        Rural Nonreclassified Hospitals.......        1,875          555          577          4.0           0.5
    Other Reclassified Hospitals (Section                                                                       
     1886(D)(8)(B))...........................           27          512          531          3.8           1.6
Type of Ownership:                                                                                              
    Voluntary.................................        2,997          715          751          4.9           1.1
    Proprietary...............................          673          685          701          2.3           1.2
    Government................................        1,344          712          749          5.3           1.1
Medicare Utilization as a percent of Inpatient                                                                  
 Days:                                                                                                          
    0-25......................................          254          768          832          8.4           0.5
    25-50.....................................        1,293          808          841          4.0           1.2
    50-65.....................................        1,980          690          724          5.0           1.1
    Over 65...................................        1,391          593          617          4.2           1.0
----------------------------------------------------------------------------------------------------------------

Appendix B: Technical Appendix on the New Capital Cost 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 expired 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. To determine these factors, we must continue to project 
capital costs and payments.
    We have used the capital acquisition model since the start of 
prospective payments for capital costs. We now have 4 years of cost 
reports under the capital prospective payment system. Consequently, 
we have developed a new capital cost model to replace the capital 
acquisition model. This new model makes use of the data from these 
cost reports.
    The following cost reports are used in the capital cost model 
for this proposed rule: the December 31, 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), PPS-XI (cost 
reporting periods beginning in FY 1994), and PPS-XII (cost reporting 
periods beginning in FY 1995). In addition to model payments, we use 
the January 1, 1997 update of the provider-specific file, and the 
March 1994 update of the intermediary audit file.
    Since hospitals under alternative payment system waivers (that 
is, hospitals in Maryland) are currently excluded from the capital 
prospective payment system, we excluded these hospitals from our 
model.
    We developed FY 1992, FY 1993, FY 1994, FY 1995, FY 1996, and FY 
1997 hospital-specific rates using the provider-specific file and 
the intermediary audit file. (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 ensured that increases in the hospital-
specific rates were at least as large as the published updates 
(increases) for the hospital-specific rates each year. We were able 
to match hospitals to the files as shown in the following table:

------------------------------------------------------------------------
                                                              Number of 
                           Source                             hospitals 
------------------------------------------------------------------------
Provider-Specific File Only................................          115
Provider-Specific and Audit File...........................        4,972
                                                            ------------
    Total..................................................        5,087
------------------------------------------------------------------------

    Ninety-six of the 5,087 hospitals had unusable or missing data 
or had no cost reports available. We determined from the cost 
reports that 23 of the 96 hospitals were paid under the hold-
harmless methodology. Since the hospital-specific amount is not used 
to determine payments for these hospitals, we were able to include 
these 23 hospitals in the analysis. Seventy-three hospitals could 
not be used in the analysis because of insufficient information. 
They account for less than 0.3 percent of admissions so any effect 
should be minimal. Therefore, we used data from cost reports from 
5,014 hospitals for the analysis.
    We analyzed changes in capital-related costs (depreciation, 
interest, rent, leases, insurance, and taxes) reported in the cost 
reports. We found a wide variance among hospitals in the growth of 
these costs. For hospitals with more than 100 beds, the distribution 
and mean of these cost increases were different for large (greater 
than 20 percent) changes in bed-size. We also analyzed 
changes in the growth in old capital and new capital for cost 
reports that provided this information. For old capital, we limited 
the analysis only for decreases in old capital. We did this since 
the opportunity for most hospitals to treat ``obligated'' capital 
put into service as old capital has expired. Old capital costs 
should, therefore, decrease as assets become fully depreciated, and 
interest costs decrease as the loan is amortized.
    The new capital cost model separates the hospitals into three 
mutually exclusive groups. Hold-harmless hospitals with data on old 
capital were placed in the first group. Of the remaining hospitals, 
those hospitals with fewer than 100 beds comprise the second group. 
The third group consists of all hospitals that did not fit into 
either of the first two groups. Each of these groups displayed 
unique patterns of growth in capital costs. We found that the gamma 
distribution is useful in explaining and describing the patterns of 
increase in capital costs. A gamma distribution is a statistical 
distribution that can be used to describe patterns of growth rates, 
with greatest proportion of rates being at the low end. We use the 
gamma distribution to estimate individual hospital rates of 
increase.
    (1) For hold-harmless hospitals, old capital cost changes were 
fitted to a truncated gamma distribution, that is, a gamma 
distribution covering only the distribution of cost decreases. New 
capital costs changes were fitted to the entire gamma distribution 
allowing for both decreases and increases.
    (2) For hospitals with fewer than 100 beds (small), total 
capital cost changes were fitted to the gamma distribution allowing 
for both decreases and increases.
    (3) Other (large) hospitals were further separated into three 
groups:
     Bed-size decreases over 20 percent (decrease)
     Bed-size increases over 20 percent (increase)
     Other (no-change).
    Capital cost changes for large hospitals were fitted to gamma 
distributions for each bed-size change group, allowing for both 
decreases and increases in capital costs. We analyzed the 
probability distribution of increases and decreases in bed-size for 
large hospitals. We found the probability somewhat dependent on the 
prior year

[[Page 30032]]

change in bed-size and factored this dependence into the analysis. 
Probabilities of bed-size change were determined. Separate sets of 
probability factors were calculated to reflect the dependence on 
prior year change in bed-size (increase, decrease, and no change).
    The gamma distributions were fitted to changes in aggregate 
capital costs for the entire hospital. We checked the relationship 
between aggregate costs and Medicare per discharge costs. For large 
hospitals, there was a small variance, but the variance was larger 
for small hospitals. Since costs are used only for the hold-harmless 
methodology and to determine exceptions, we decided to use the gamma 
distributions fitted to aggregate cost increases for estimating 
distributions of cost per discharge increases.
    Capital costs per discharge calculated from the cost reports 
were increased by random numbers drawn from the gamma distribution 
to project costs in future years. Old and new capital were projected 
separately for hold-harmless hospitals. Aggregate capital per 
discharge costs were projected for all other hospitals. Because the 
distribution of increases in capital costs varies with changes in 
bed-size for large hospitals, we first projected changes in bed-size 
for large hospitals before drawing random numbers from the gamma 
distribution. Bed-size changes were drawn from the uniform 
distribution with the probabilities dependent on the previous year 
bed-size change. The gamma distribution has a shape parameter and a 
scaling parameter. (We used different parameters for each hospital 
group, and for old and new capital.) The average national capital 
cost per discharge generated by this model is the combined average 
of many randomly generated increases. This average must equal the 
projected average national capital cost per discharge, which we 
projected separately (outside this model). We adjusted the shape 
parameter of the gamma distributions so that the modeled average 
capital cost per discharge matches our projected capital cost per 
discharge. The shape parameter for old capital was not adjusted 
since we are modeling the aging of ``existing'' assets. This model 
provides a distribution of capital costs among hospitals that are 
consistent with our aggregate capital projections.
    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 as determined from the provider-specific file and 
the cost reports. 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 1996 MedPAR file using the FY 1998 DRG relative weights 
published in section V. of the Addendum of this proposed rule. The 
case-mix index is increased each year after FY 1996 based on 
analysis of past experiences in case-mix increases. Based on 
analysis of recent case-mix increases, we estimate that case-mix 
will increase 1.4 percent in FY 1997 and 1.0 percent in FY 1998. 
(Since we are using FY 1996 cases for our analysis, the FY 1996 
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 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 1997, the budget neutrality adjustment factor 
was 1.00123. To determine the factor for FY 1998, we first 
determined the portion of the Federal rate that would be paid for 
each hospital in FY 1998 based on its applicable payment 
methodology. Using our model, we then compared estimated aggregate 
Federal rate payments based on the FY 1997 DRG relative weights and 
the FY 1997 geographic adjustment factor to estimated aggregate 
Federal rate payments based on the FY 1998 relative weights and the 
FY 1998 geographic adjustment factor. In making the comparison, we 
held the FY 1998 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 1.00013 for FY 1998 should be applied to 
the previous cumulative FY 1997 adjustment of 1.00123, yielding a 
cumulative adjustment of 1.00136 through FY 1998. The following 
table summarizes the adjustment factors for each fiscal year:

Budget Neutrality Adjustment for DRG Reclassifications and Recalibration
                  and the Geographic Adjustment Factor                  
------------------------------------------------------------------------
                                            Incremental     Cumulative  
               Fiscal year                  adjustment      adjustment  
------------------------------------------------------------------------
1992....................................              --         1.00000
1993....................................         0.99800         0.99800
1994....................................         1.00531         1.00330
1995....................................         0.99980         1.00310
1996....................................         0.99940         1.00250
1997....................................         0.99873         1.00123
1998....................................         1.00013         1.00136
------------------------------------------------------------------------

    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 payments.
    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, and FY 1997, the proposed FY 1998 factor, 
and the estimated factors that would be applicable through FY 2002. 
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 budget neutrality 
adjustment factor will remain at 1.0014 for FY 1998 and later 
because we do not have sufficient information to estimate the change 
that will occur in the factor for years after FY 1998.
    The projections are as follows:

[[Page 30033]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Exceptions        Budget          DRG/GAF         Outlier                      Federal rate 
               Fiscal year                 Update factor     reduction      neutrality      adjustment      adjustment     Federal rate   (after outlier
                                                              factor          factor         factor\1\        factor        adjustment      reduction)  
--------------------------------------------------------------------------------------------------------------------------------------------------------
1992....................................             N/A          0.9813          0.9602  ..............           .9497  ..............          415.59
1993....................................            6.07           .9756           .9162           .9980           .9496  ..............          417.29
1994....................................            3.04           .9485           .8947          1.0053           .9454        \2\.9260          378.34
1995....................................            3.44           .9734           .8432           .9998           .9414  ..............          376.83
1996....................................            1.20           .9849             N/A           .9994           .9536        \3\.9972          461.96
1997....................................            0.70           .9358             N/A           .9987           .9481  ..............          438.92
1998....................................            1.10           .9276             N/A          1.0001           .9449  ..............          438.43
1999....................................            1.30           .9286             N/A       \4\1.0000        \4\.9449  ..............          444.61
2000....................................            1.30           .9173             N/A          1.0000           .9449  ..............          444.91
2001....................................            1.30           .9070             N/A          1.0000           .9449  ..............          445.63
2002....................................            1.40       \5\1.0000             N/A          1.0000           .9449  ..............         498.20 
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Note: The incremental change over the previous year.                                                                                                
\2\ Note: OBRA 1993 adjustment.                                                                                                                         
\3\ Note: Adjustment for change in the transfer policy.                                                                                                 
\4\ Note: Future adjustments are, for purposes of this projection, assumed to remain at the same level.                                                 
\5\ 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: Revised Hospital Market Basket Data Sources

A. Introduction: Market Basket Relative Weights and Choice of Price 
Proxy Variables for the Operating Hospital Input Price Indexes

    In the August 30, 1996 final rule (61 FR 46323), we discussed in 
detail the current 1992-based hospital market baskets, and noted 
that we would revise the hospital market baskets when new cost data 
for 1992 became available. This appendix describes the technical 
features of the revisions to the 1992-based indexes that we are 
proposing in this rule in section IV of the preamble. For both the 
prospective payment and excluded hospital market baskets, the 
differences between the proposed revised market basket and the 
current market basket are noted.
    We present this description of the hospital operating market 
baskets in three steps:
     A synopsis of the differences between the current 1992-
based market baskets and the proposed revisions to those market 
baskets.
     A description of the methodology used to develop the 
cost category weights in the proposed revised market baskets, making 
note of the differences from the methodology used to develop the 
1992-based current market baskets.
     A description of the data sources used to measure price 
change for each component of the proposed revised market baskets, 
making note of the differences from the price proxies used in the 
1992-based current hospital market baskets.

B. Synopsis of Differences

    Two major differences exist between the 1992-based current 
hospital market baskets and the proposed hospital market baskets. 
The first major change is that the proposed revised hospital market 
baskets are based on additional hospital expenditure data--data not 
available until after the publication of the August 30, 1996 final 
rule. The 1992-based current market baskets were derived from 
hospital cost reports for cost reporting periods beginning on or 
after October 1, 1991 and before October 1, 1992, augmented by 
information from the latest available (1987) Input-Output Table for 
the hospital industry, produced by the Bureau of Economic Analysis, 
U.S. Department of Commerce. In addition to the data sources cited 
above, the proposed revised hospital market baskets use data from 
the 1992 Asset and Expenditure Survey, produced by the U.S. 
Department of Commerce, Economic and Statistics Administration, 
Bureau of the Census. These are more recent data made available 
after the publication of the FY 1997 final rule.
    The second major difference is that some cost categories have 
been combined with other cost categories to better reflect the new 
data sources. Specifically, the Transportation Services category has 
been combined with All Other Non-labor Intensive Services; Business 
Services and Computer and Data Processing Services with All Other 
Labor Intensive Services; and part of Fuel Oil, Coal, etc. was 
combined with Natural Gas into Fuels, Nonhighway. The remainder of 
the Fuel Oil, Coal, etc. was combined with Miscellaneous Products. 
These category mergers reflect the Bureau of the Census categories 
in the Asset and Expenditure Survey and its information on services.

C. Methodology for Developing the Proposed Revised Cost Category 
Weights

    Cost category weights for the proposed revised market baskets 
were developed in three stages. First, base weights for the six main 
categories (wages and salaries, employee benefits, pharmaceuticals, 
nonmedical professional fees, professional liability insurance, and 
all other expenses) were obtained from the 1992-based hospital 
market baskets. As the base year is not changing, these weights, 
developed last year from HCRIS data and the American Hospital 
Association (AHA) Annual Survey information, will not change. The 
weight for All Other Expenses was divided into subcategories using 
cost shares from the 1992 Asset and Expenditure Survey for 
Hospitals, U.S. Department of Commerce, Economics and Statistics 
Administration, Bureau of the Census. These subcategories were 
further divided 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 (BEA), aged to 1992 using 
price changes.
    A description of the source of the six main category weights is 
found in the August 30, 1996 final rule (61 FR 46323). The weight 
for the Utilities category, as well as those for the Electricity, 
Fuels Nonhighway, and Water and Sewerage Maintenance cost 
categories, was derived from the 1992 Asset and Expenditure Survey. 
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 telephone services, 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 
1992 Asset and Expenditure Survey, augmented by data from the 1987 
Input-Output Table produced by BEA for the hospital industry, aged 
forward to 1992 using price changes, and then standardized to be 
consistent with data from the Asset and Expenditure Survey.

D. Price Proxies Used to Measure Cost Category Growth

    Descriptions of the price proxies used to measure cost category 
price growth in the current hospital market baskets are found in the 
August 30, 1996 final rule (61 FR 46324). The price proxies used for 
the proposed revised hospital market baskets are the same as those 
for the current market baskets. Four cost categories in the current 
hospital market baskets have been combined with other cost 
categories to better reflect new data sources.
    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).

Appendix D

May 27, 1997
The Honorable Albert Gore, Jr.
President of the Senate

[[Page 30034]]

Washington, D.C. 20510

    Dear Mr. President: Section 1886(e)(3)(B) of the Social Security 
Act (the Act) requires me to report to Congress the initial estimate 
of the applicable percentage increase in inpatient hospital payment 
rates for fiscal year (FY) 1998 that I will recommend for hospitals 
subject to the Medicare prospective payment system (PPS) and for 
hospitals and units excluded from PPS. This submission constitutes 
the required report.
    Current law mandates an update for all PPS hospitals equal to 
the market basket rate of increase. Based on the recent changes in 
delivery of hospital inpatient care, with an increasing reliance on 
hospital outpatient and postacute care services and a corresponding 
decrease in use of hospital inpatient services, we recommend an 
update for hospitals in both large urban and other areas of zero 
percent.
    Sole community hospitals (SCHs) are the sole source of care in 
their area and are afforded special payment protection to maintain 
access to services for Medicare beneficiaries. SCHs are paid the 
higher of a hospital-specific rate or the Federal PPS rate. Current 
law mandates that the FY 1998 update to hospital-specific rates for 
SCHs equal the market basket rate of increase. We recommend an 
update to hospital-specific rates equal to our recommended increase 
for all PPS hospitals, zero percent.
    Hospitals and distinct part hospital units excluded from PPS are 
paid based on their reasonable costs subject to a limit under the 
Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982. Current 
law mandates an update for all hospitals and distinct part units 
excluded from PPS equal to the rate of increase in the excluded 
hospital market basket. Consistent with our recommendation for PPS 
hospitals, we recommend an increase in the TEFRA limit of zero 
percent.
    A final recommendation on the appropriate percentage increases 
for FY 1998 will be made nearer the beginning of the new Federal 
fiscal year based on the most current data available at that time. 
The final recommendation will incorporate our analysis of the latest 
estimates of all relevant factors, including recommendations by 
ProPAC.
    Section 1886(d)(4)(C)(iv) of the Act also requires that I 
include in my report recommendations with respect to adjustments to 
the diagnosis-related group (DRG) weighting factors. At this time I 
do not anticipate recommending any adjustment to the DRG weighting 
factors for FY 1998.
    I am pleased to provide this recommendation to you. I am also 
sending a copy of this letter to the Speaker of the House of 
Representatives.
          Sincerely,

Donna E. Shalala
May 27, 1997
The Honorable Newt Gingrich
Speaker of the House of Representatives
Washington, D.C. 20515
    Dear Mr. Speaker: Section 1886(e)(3)(B) of the Social Security 
Act (the Act) requires me to report to Congress the initial estimate 
of the applicable percentage increase in inpatient hospital payment 
rates for fiscal year (FY) 1998 that I will recommend for hospitals 
subject to the Medicare prospective payment system (PPS) and for 
hospitals and units excluded from PPS. This submission constitutes 
the required report.
    Current law mandates an update for all PPS hospitals equal to 
the market basket rate of increase. Based on the recent changes in 
delivery of hospital inpatient care, with an increasing reliance on 
hospital outpatient and postacute care services and a corresponding 
decrease in use of hospital inpatient services, we recommend an 
update for hospitals in both large urban and other areas of zero 
percent.
    Sole community hospitals (SCHs) are the sole source of care in 
their area and are afforded special payment protection to maintain 
access to services for Medicare beneficiaries. SCHs are paid the 
higher of a hospital-specific rate or the Federal PPS rate. Current 
law mandates that the FY 1998 update to hospital-specific rates for 
SCHs equal the market basket rate of increase. We recommend an 
update to hospital-specific rates equal to our recommended increase 
for all PPS hospitals, zero percent.
    Hospitals and distinct part hospital units excluded from PPS are 
paid based on their reasonable costs subject to a limit under the 
Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982. Current 
law mandates an update for all hospitals and distinct part units 
excluded from PPS equal to the rate of increase in the excluded 
hospital market basket. Consistent with our recommendation for PPS 
hospitals, we recommend an increase in the TEFRA limit of zero 
percent.
    A final recommendation on the appropriate percentage increases 
for FY 1998 will be made nearer the beginning of the new Federal 
fiscal year based on the most current data available at that time. 
The final recommendation will incorporate our analysis of the latest 
estimates of all relevant factors, including recommendations by 
ProPAC.
    Section 1886(d)(4)(C)(iv) of the Act also requires that I 
include in my report recommendations with respect to adjustments to 
the diagnosis-related group (DRG) weighting factors. At this time I 
do not anticipate recommending any adjustment to the DRG weighting 
factors for FY 1998.
    I am pleased to provide this recommendation to you. I am also 
sending a copy of this letter to the President of the Senate.
          Sincerely,

Donna E. Shalala

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

I. Background

    Several provisions of the Act address the setting of update 
factors for inpatient services furnished in FY 1998 by hospitals 
subject to the prospective payment system and those excluded from 
the prospective payment system. Section 1886(b)(3)(B)(i)(XIII) of 
the Act sets the FY 1998 percentage increase in the operating cost 
standardized amounts equal to the rate of increase in the hospital 
market basket for prospective payment hospitals in all areas. 
Section 1886(b)(3)(B)(iv) of the Act sets the FY 1998 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. Section 1886(b)(3)(B)(ii) of the Act sets the 
FY 1998 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.
    In accordance with section 1886(d)(3)(A) of the Act, we are 
proposing to update the standardized amounts, the hospital-specific 
rates, and the rate-of-increase limits for hospitals excluded from 
the prospective payment system as provided in section 1886(b)(3)(B) 
of the Act. Based on the first quarter 1997 forecast of the FY 1998 
revised market basket increase of 2.8 percent for hospitals subject 
to the prospective payment system, the proposed updates in the 
standardized amounts are 2.8 percent for hospitals in both large 
urban and other areas. The proposed update in the hospital-specific 
rate applicable to sole community hospitals is 2.8 percent (that is, 
the market basket rate of increase). The proposed update for 
hospitals excluded from the prospective payment system is the 
percentage increase in the excluded hospital market basket 
(currently estimated at 2.8 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, 1997 an update factor that takes into account 
changes in the market basket rate of increase index, hospital 
productivity, technological and scientific advances, the quality of 
health care provided in hospitals, and long-term cost effectiveness 
in the provision of inpatient hospital services.
    In its March 1, 1997 report, ProPAC recommended update factors 
to the standardized amounts equal to zero percentage points for 
hospitals in both large urban and other areas (Recommendation 2). 
ProPAC did not make a separate recommendation for the hospital-
specific rates applicable to sole community hospitals. The 
components of ProPAC's update factor recommendations are described 
in detail in the ProPAC report, which is published as Appendix F to 
this document. We discuss ProPAC's recommendations concerning the 
update factors and our responses to these recommendations below.
    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 are required to publish the update 
factors recommended under section 1886(e)(4) of the Act. 
Accordingly, this appendix provides the recommendations of 
appropriate update factors, the analysis underlying our 
recommendations, and our responses to the

[[Page 30035]]

ProPAC recommendations concerning the update factors.

II. Secretary's Recommendations

    Under section 1886(e)(4) of the Act, we are recommending that an 
appropriate update factor for the standardized amounts is zero 
percentage points for hospitals located in large urban and other 
areas. We are also recommending an update of zero percentage points 
to the hospital-specific rate for sole community hospitals. We 
believe these recommended update factors 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.
    We recommend that hospitals excluded from the prospective 
payment system receive a zero update. This update is consistent with 
the updates provided to the prospective payment hospitals. We 
believe this update would ensure that Medicare acts as a prudent 
purchaser and would provide incentives to hospitals for increased 
efficiency, thereby contributing to the solvency of the Medicare 
Part A Trust Fund.
    As required by section 1886(e)(4) of the Act, we have taken into 
consideration the recommendations of ProPAC in setting these 
recommended update factors. Our responses to the ProPAC 
recommendations concerning the update factors are discussed below.

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

    For FY 1998, ProPAC's update framework would support an update 
between -0.6 percent and 1.4 percent. ProPAC notes the significant 
changes occurring in health care delivery, including the drop in 
hospital lengths of stay for Medicare beneficiaries since 1990 and 
the increase in beneficiaries' use of hospital outpatient services 
and postacute care. Because payment rates reflect care that is no 
longer furnished as part of the hospital stay, ProPAC recommends 
that hospitals in large urban and other areas receive an update of 
zero percent. However, it emphasizes that, because of uncertainty 
about the future and the extent of changes in productivity and 
service delivery, its recommendation applies for only one year.
    Response: We agree with ProPAC's recommendation that the update 
for FY 1998 for prospective payment system hospitals located in 
large urban and other areas be equal to zero percentage point. Our 
recommendation is supported by the following analyses that measure 
changes in hospital productivity, scientific and technological 
advances, practice pattern changes, and changes in case mix:
     Productivity: Service level productivity is defined as 
the ratio of total service output to full-time equivalent employees 
(FTEs). While we recognize that productivity is a function of many 
variables (for example, labor, nonlabor material, and capital 
inputs), we use a labor productivity measure since this update 
framework applies to operating payment. To recognize that we are 
apportioning the short run output changes to the labor input and not 
considering the nonlabor inputs, we weight our productivity measure 
for operating costs by the share of direct labor services in the 
market basket rate of increase to determine the expected effect on 
cost per case.
    Our recommendation for the service productivity component is 
based on historical trends in productivity and total output for both 
the hospital industry and the general economy, and projected levels 
of future hospital service output. ProPAC has also estimated 
cumulative service productivity growth to be 4.9 percent from 1985-
1989, or 1.2 percent annually. At the same time, ProPAC estimates 
total output growth at 3.4 percent annually, implying a ratio of 
service productivity growth to output growth of 0.35. Our Medicare 
Provider Analysis and Review (MedPAR) file analysis indicates total 
Medicare service output (charges per admission, adjusted for CPI 
change) decreased 1.6 percent from 1987-1996, or an approximate 
average annual decrease of 0.2 percent. Since it is not possible at 
this time to develop a productivity measure specific to Medicare 
patients, we examined productivity (output per hour) and output 
(gross domestic product) for the economy. Depending on the exact 
time period, annual changes in productivity range from 0.3 to 0.35 
percent of the change in output (that is, a 1.0 percent increase in 
output would be correlated with a 0.3 to 0.35 percent change in 
output per hour).
    Under our framework, the recommended update is based in part on 
expected productivity--that is, projected service output during the 
year multiplied by the historical ratio of service productivity to 
total service output, multiplied by the share of labor in total 
operating inputs, as calculated in the hospital market basket rate 
of increase. This method estimates an expected labor productivity 
improvement in the same proportion to expected total service growth 
that has occurred in the past and assumes that, at a minimum, growth 
in FTEs changes proportionally to the growth in total service 
output. Thus, the recommendation allows for unit productivity to be 
smaller than the historical averages in years that output growth is 
relatively low and higher in years that output growth is larger than 
the historical trend. Based on the above estimates from both the 
hospital industry and the economy, we have chosen to employ the 
range of ratios of productivity change to output change of 0.30 to 
0.35.
    The expected change in total hospital service output is the 
product of projected growth in total admissions (adjusted for 
outpatient usage), projected real case-mix growth, and expected 
quality enhancing intensity growth, net of expected decline in 
intensity due to reduction of cost ineffective practice. Case-mix 
growth and intensity numbers for Medicare are used as proxies for 
those of the total hospital, since case-mix increases (used in the 
intensity measure as well) are unavailable for non-Medicare 
patients. Thus, expected output growth is simply the sum of the 
expected change in intensity (0.0 percent), projected admissions 
change (2.4 percent for FY 1998), and projected real case-mix growth 
(0.8 percent), or 3.2 percent. The share of direct labor services in 
the market basket rate of increase (consisting of wages, salaries, 
and employee benefits) is 61.4 percent. Multiplying the expected 
change in total hospital service output (3.2 percent) by the ratio 
of historical service productivity change to total service growth of 
0.30 to 0.35 and by the direct labor share percentage (0.614) 
provides our productivity standard of 0.6 to 0.7 percent.
    ProPAC also believes hospitals should be given an incentive for 
additional productivity improvement. ProPAC measures productivity as 
the ratio of hospital admissions (adjusted for case mix and 
outpatient services) per FTE employee (adjusted for changes in skill 
mix). ProPAC includes in its productivity measurement the effect of 
changes in practice patterns. We treat practice pattern changes as a 
portion of our intensity adjustment, described below. In the past, 
ProPAC has expected hospitals to achieve productivity gains ranging 
from 0.5 percent to 2.0 percent per year. This year, recognizing 
changes in lengths of stay and sites of service, ProPAC believes a 
productivity adjustment in the range of -3.0 to -1.0 percentage 
points is required in fiscal year 1998. The adjustment is intended 
to share productivity equally between hospitals and Medicare.
     Intensity: We base our intensity standard on the 
combined effect of three separate factors: changes in the use of 
quality enhancing services, changes in the use of services due to 
shifts in within-DRG severity, and changes in the use of services 
due to reductions of cost-ineffective practices. For FY 1998, we 
recommend an adjustment of 0.0 percent. The basis of this 
recommendation is discussed below.
    We have no empirical evidence that accurately gauges the level 
of quality-enhancing technology changes. Typically, a specific new 
technology increases cost in some uses and decreases cost in other 
uses. Concurrently, health status is improved in some situations 
while in other situations it may be unaffected or even worsened 
using the same technology. It is difficult to separate out the 
relative significance of each of the cost increasing effects for 
individual technologies and new technologies.
    The quality enhancing technology component is intended to 
recognize the use of services that increase cost but whose value in 
terms of enhanced health-status is commensurate with these costs. 
Such services may result from technological change, or in some 
cases, increased use of existing technologies. The latter recognizes 
that as cost and medical effectiveness studies become available, 
some increased use of existing, as well as new, services may be 
warranted.
    The component for reduction of cost-ineffective practice 
recognizes that some improvements in practice patterns could be made 
so that the intensity of services provided is more consistent with 
the efficient use of limited resources. That is, improvements could 
be made so that the number of services provided during an inpatient 
stay, and their complexity, produce an improvement in health status 
that is consistent with the cost of care. This component of our 
update recommendation is

[[Page 30036]]

intended to encourage both hospitals and physicians to more 
carefully consider the cost-effectiveness of medical care. This 
component of the framework also accounts for real within-DRG change, 
since that should be directly reflected in the CMI-adjusted growth 
in real charges per case.
    Following methods developed by HCFA's Office of the Actuary for 
deriving hospital output estimates from total hospital charges, we 
have developed Medicare-specific intensity measures based on a 5-
year average using FY 1992-1996 MedPAR billing data. Case-mix 
constant intensity is calculated as the change in total Medicare 
charges per discharge adjusted for changes in the average charge per 
unit of service as measured by the Medical CPI hospital component 
and changes in real case mix. Thus, in order to measure changes in 
intensity, one must measure changes in real case mix.
    In determining case-mix constant intensity, we found that 
observed case-mix increase was 1.8 percent in FY 1992, 0.9 percent 
in FY 1993, 0.8 percent in FY 1994, 1.7 percent in FY 1995, and 1.6 
percent in FY 1996. For FY 1992, FY 1995, and FY 1996, 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 1994. Based on this analysis, we believe that all of the observed 
case-mix increase for FY 1993 and FY 1994 is real.
    Given estimates of real case-mix increase of 1.0 percent for FY 
1992, 0.9 percent for FY 1993, 0.8 percent for FY 1994, 1.0 percent 
for FY 1995, and 1.0 percent for FY 1996, we estimate that case-mix 
constant intensity declined by an average 1.4 percent during FY 1992 
through FY 1996, for a cumulative decrease of 7.0 percent. If we 
assume that real case-mix increase was 1.4 percent for FY 1992, 0.9 
percent for FY 1993, 0.8 percent for FY 1994, 1.4 percent for FY 
1995, and 1.4 percent for FY 1996, we estimate that case-mix 
constant intensity declined by an average 1.6 percent during FY 1992 
through FY 1996, for a cumulative decrease of 7.5 percent. Since we 
estimate that intensity has declined during that period, we are 
recommending a 0.0 percent intensity adjustment for FY 1998.
     Quality Enhancing New Science and Technology: For FY 
1998, ProPAC has computed the adjustment for scientific and 
technological advances to be a future-oriented policy target 
intended to provide additional funds for hospitals to adopt quality-
enhancing, cost increasing health care innovations. In the past, 
ProPAC has included an adjustment ranging from 0.3 to 1.0 percentage 
points. ProPAC believes that the cost-competitive environment now 
faced by hospitals may dampen the adoption of new technologies as 
they closely evaluate their relative costs and benefits. Therefore, 
ProPAC recommends an adjustment of 0.4 percentage points for the 
increase in operating costs due to scientific and technological 
advances.
     Change in Case Mix: Our analysis takes into account 
projected changes in case mix, adjusted for changes attributable to 
improved coding practices. For our FY 1998 update recommendation, we 
are projecting a 1.0 percent increase in the case-mix index. We 
define real case-mix increase as actual changes in the mix (and 
resource requirements) of Medicare patients as opposed to changes in 
coding behavior that result in assignment of cases to higher-
weighted DRGs but do not reflect greater resource requirements. For 
FY 1998, we believe that real case-mix increase is equal to our 
projected change in case mix less 0.2 percent. We estimate that 
changes in coding behavior account for an increase of 0.2 percentage 
points in our projected case-mix change. Our net adjustment to case-
mix change for FY 1998 is 0.2 percentage points.
    The 0.0 percent figure used in the ProPAC framework represents 
ProPAC's projection for observed case-mix change. ProPAC's net 
adjustment for case mix is 0.0 percentage points.
     Effect of FY 1996 DRG Reclassification and 
Recalibration: We estimate that DRG reclassification and 
recalibration for FY 1996 resulted in a 0.0 percent increase in the 
case-mix index when compared with the case-mix index that would have 
resulted if we had not made the reclassification and recalibration 
changes to the GROUPER. ProPAC does not make an adjustment for DRG 
reclassification and recalibration in its update recommendation.
     Correction for Market Basket Forecast Error: The 
estimated market basket percentage increase used to update the FY 
1996 payment rates was 3.5 percent. Our most recent data indicate 
the actual FY 1996 increase was 2.7 percent, primarily reflecting 
that the actual increase in wages, benefits, and chemical prices was 
lower than projected. The resulting forecast error in the FY 1996 
market basket rate of increase is 0.8 percentage points. Under our 
update framework, we make a forecast error correction if our 
estimate is off by 0.25 percentage points or more. Therefore, we are 
recommending an adjustment of -0.8 percentage points to reflect this 
overestimation of the FY 1996 market basket rate of increase. The 
following is a summary of the update ranges supported by our 
analyses compared to ProPAC's framework.

                             Table 1.--Comparison of FY 1998 Update Recommendations                             
----------------------------------------------------------------------------------------------------------------
                                                                         HHS                     ProPAC         
----------------------------------------------------------------------------------------------------------------
Market Basket...............................................                        MB                        MB
Difference between HCFA & ProPAC Market Baskets.............  ........................                       0.0
                                                             ---------------------------------------------------
      Subtotal..............................................                        MB                        MB
                                                             ===================================================
Policy Adjustments Factors:                                                                                     
    Productivity............................................              -0.6 to -0.7              -3.0 to -1.0
    Intensity...............................................                       0.0  ........................
        Science & Technology................................  ........................                       0.4
        Practice Patterns...................................  ........................                       (1)
        Real Within DRG Change..............................  ........................                       (2)
                                                             ---------------------------------------------------
          Subtotal..........................................              -0.6 to -0.7              -2.6 to -0.6
                                                             ===================================================
Case-Mix Adjustment Factors:                                                                                    
    Projected Case-Mix Change...............................                      -1.0  ........................
    Real Across DRG Change..................................                       0.8  ........................
    Real Within DRG Change..................................                       (3)                       0.0
                                                             ---------------------------------------------------
      Subtotal..............................................                      -0.2                       0.0
                                                             ===================================================
Effect of 1996 Reclassification & Recalibration.............                       0.0  ........................
Forecast Error Correction...................................                      -0.8                      -0.8

[[Page 30037]]

                                                                                                                
Total Recommended Update....................................        MB -1.7 to MB -1.6       MB -3.4 to MB -1.4 
----------------------------------------------------------------------------------------------------------------
(1) Included in ProPAC's Productivity Measure.                                                                  
(2) Included in ProPAC's Case-Mix Adjustment.                                                                   
(3) Included in HHS' Intensity Factor.                                                                          

    While the above analysis would support a recommendation that the 
update be no less than market basket minus 1.6 percentage points, we 
are recommending an update of zero percentage points. We believe 
that this update factor appropriately adjusts for changes occurring 
in health care delivery including the relative decrease in use of 
hospital inpatient services and the corresponding increase in use of 
hospital outpatient and postacute care services. We agree with 
ProPAC that a zero update for FY 1998 would not disadvantage the 
hospital industry nor harm Medicare beneficiaries. We also recommend 
that the hospital-specific rates applicable to sole community 
hospitals be increased by the same update, zero percentage points.

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

    ProPAC recommends an update factor equal to a 2.0 percent 
average increase in TEFRA target amounts for excluded hospitals and 
units (Recommendation 13). This reflects a reduction of 0.8 
percentage points from HCFA's market basket increase forecast of 2.8 
percent. The reduction consists of an adjustment of -0.7 percentage 
points to account for the forecast error in the FY 1996 market 
basket rate of increase, an adjustment of -0.1 percentage points for 
the difference between the forecasts for HCFA's and ProPAC's market 
baskets, and no allowance for new technology.
    Response: We recommend that hospitals excluded from the 
prospective payment system also receive a zero update. This update 
is consistent with the updates provided to the prospective payment 
hospitals. We believe this update would ensure that Medicare acts as 
a prudent purchaser and would provide incentives to hospitals for 
increased efficiency, thereby contributing to the solvency of the 
Medicare Part A Trust Fund.

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[FR Doc. 97-14248 Filed 5-30-97; 8:45 am]
BILLING CODE 4120-03-C