[Federal Register Volume 62, Number 126 (Tuesday, July 1, 1997)]
[Notices]
[Pages 35608-35634]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17235]



[[Page 35607]]

_______________________________________________________________________

Part V





Department of Health and Human Services





_______________________________________________________________________



Health Care Financing Administration



_______________________________________________________________________



Medicare Program; Schedule of Limits on Home Health Agency Costs Per 
Visit for Cost Reporting Periods Beginning on or After July 1, 1997; 
Notice

  Federal Register / Vol. 62, No. 126 / Tuesday, July 1, 1997 / 
Notices  

[[Page 35608]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration
[BPD-889-NC]
RIN 0938-AH88


Medicare Program; Schedule of Limits on Home Health Agency Costs 
Per Visit for Cost Reporting Periods Beginning on or After July 1, 1997

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

ACTION: Notice with comment Period.

-----------------------------------------------------------------------

SUMMARY: This notice sets forth a revised schedule of limits on home 
health agency costs that may be paid under the Medicare program for 
cost reporting periods beginning on or after July 1, 1997. These limits 
replace the per visit limits that were set forth in our July 1, 1996 
notice with comment period (61 FR 34344). This notice also responds to 
comments on the July 1, 1996 notice.

DATES: Effective Date: The schedule of limits is effective for cost 
reporting periods beginning on or after July 1, 1997.
    Comment Period: Written comments will be considered if we receive 
them at the appropriate address, as provided below, no later than 5 
p.m. on September 2, 1997.

ADDRESSES: Mail written comments (one original and three copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: BPD-889-NC, P.O. Box 7517, 
Baltimore, Maryland 21207-0517.
    If you prefer, you may deliver your written comments (one original 
and three copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 00 Independence Avenue, SW, 
Washington, D.C. 20201, or
Room C5-09-26, Central Building 7500 Security Boulevard Baltimore, 
Maryland 21244-1850.

    Comments may also be submitted electronically to the following e-
mail address: [email protected]. E-mail comments must include the 
full name and address of the sender and must be submitted to the 
referenced address in order to be considered. All comments must be 
incorporated in the e-mail message because we may not be able to access 
attachments. Electronically submitted comments will be available for 
public inspection at the Independence Avenue address below.
    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code BPD-889-NC. Comments received timely will be available for 
public inspection as they are received, generally beginning 
approximately 3 weeks after publication of a document, in Room 309-G of 
the Department's offices at 200 Independence Avenue, SW, Washington, 
DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m. 
(Phone: (202) 690-7890).
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FOR FURTHER INFORMATION CONTACT: Michael Bussacca, (410) 786-4602.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 1861(v)(1)(A) of the Social Security Act (the Act) 
authorizes the Secretary to establish limits on allowable costs 
incurred by a provider of services that may be paid under the Medicare 
program, based on estimates of the costs necessary in the efficient 
delivery of needed health services. Under this authority, we have 
maintained limits on home health agency (HHA) per-visit costs since 
1979. The limits may be applied to direct or indirect overall costs or 
to the costs incurred for specific items or services furnished by the 
provider. Implementing regulations are located at 42 CFR 413.30. 
Additional statutory provisions specifically governing the limits 
applicable to HHAs are contained at section 1861(v)(1)(L) of the Act. 
Section 1861(v)(1)(L)(i) of the Act specifies that the cost limits are 
not to exceed 112 percent of the mean of the labor-related and nonlabor 
per-visit costs for freestanding HHAs. Section 1861(v)(1)(L)(iii) of 
the Act requires that the Secretary establish HHA cost limits on an 
annual basis for cost reporting periods beginning on or after July 1 of 
each year (except for cost reporting periods beginning on or after July 
1, 1994, and before July 1, 1996). In establishing these limits, the 
Act directs the Secretary to use the applicable hospital wage index, as 
discussed below.
    On July 1, 1996, we published in the Federal Register (61 FR 34344) 
a notice with comment period that set forth a revised schedule of 
limits on HHA costs that may be paid under the Medicare program for 
cost reporting periods beginning on or after July 1, 1996. These limits 
replaced the per-visit limits that were set forth in our February 14, 
1995 notice with comment period (60 FR 8389). The July 1, 1996 limits 
were computed using the actual cost-per-visit data from cost reporting 
periods ending on or after June 30, 1991, and settled by October 1, 
1995, and were adjusted by later estimates in the ``market basket'' 
index to reflect changes in the prices of goods and services furnished 
by HHAs.
    This notice with comment period sets forth revised cost limits for 
cost reporting periods beginning on or after July 1, 1997. As required 
by section 1861(v)(1)(L)(iii) of the Act, we are using the area wage 
index applicable under section 1886(d)(3)(E) of the Act determined 
using the survey of the most recent available wages and wage-related 
costs of hospitals located in the geographic area in which the HHA is 
located. For purposes of this notice, the HHA wage index is based on 
the most recent hospital wage index, that is, the hospital wage index 
effective for hospital discharges on or after October 1, 1996, which 
uses Federal fiscal year (FY) 1993 wage data. As the statute also 
specifies, in applying the hospital wage index to HHAs, no adjustments 
are to be made to account for hospital reclassifications under section 
1886(d)(8)(B) of the Act, decisions of the Medicare Geographic 
Classification Review Board (MGCRB) under section

[[Page 35609]]

1886(d)(10) of the Act, or decisions by the Secretary.

II. Analysis of and Response to Public Comments

    We received 28 items of timely correspondence on the July 1, 1996 
notice with comment period. A summary of these comments and our 
responses are discussed below.
    Comment: One commenter suggested that an HHA based in a hospital 
that has been redesignated by the MGCRB should be allowed to use the 
same wage index as that used by the parent hospital.
    Response: Section 1861(v)(1)(L)(iii) of the Social Security Act 
requires us to use the wage index used for hospitals under the 
inpatient hospital prospective payment system (PPS) using the survey of 
the most recent available wages and wage-related costs of hospitals 
located in the geographic area in which the HHA is located, determined 
without regard to whether the hospitals have been reclassified to a new 
geographic area. Given this explicit statutory requirement, the wage 
index value for an area cannot reflect any redesignations by the MGCRB.
    Comment: A number of commenters raised concerns regarding the 
budget neutrality factor of 0.91, included in the July 1, 1996 notice 
and its effect on the July 1, 1996 schedule of limits. They indicated 
that the decrease in the budget neutrality factor, from 1.067, for the 
limits effective July 1, 1993, to 0.91 for the cost limits effective 
July 1, 1996, failed to account for industry growth and growing labor 
costs. Commenters also expressed concern that this decrease would 
create a reduction in cost limits that could threaten the quality of 
services HHAs can affordably provide, especially in rural areas.
    Response: Subsequent to the publication of the July 1, 1996 
schedule of limits, we identified several errors in the data that were 
used to calculate the budget neutrality factor of 0.91 in the July 1, 
1996 notice. In order to ensure the accuracy of the factor, we 
conducted an exhaustive review of all the data used in the calculation 
of the 1996 limits. Based on corrected data, we have revised the budget 
neutrality factor to be 1.078. Our fiscal intermediaries have been 
directed, in Program Memorandum A-96-11, November 1996, to use this 
revised factor in limits calculations for all cost reporting periods 
beginning on or after July 1, 1996. Since the previous factor, in the 
limits effective July 1, 1993, had a value of 1.067, the revised budget 
neutrality factor of 1.078 had no substantial effect on the July 1, 
1996 schedule of limits applied to any agency.
    Comment: One commenter suggested that the limits take into account 
the special circumstances of rural home health agencies.
    Response: The July 1, 1996 limits were based on the latest 
available settled cost reports. In calculating the limits, we 
determined the average cost per visit for urban and rural agencies 
separately. Therefore, the limits applied to rural HHAs are based on 
the actual operating and cost experience of rural agencies, and are 
reflective of the circumstances unique to an agency operating in a 
rural area.
    Comment: One commenter recommended that the wage index used in the 
July 1, 1996 schedule of limits be that used in the hospital 
prospective payment system that was effective on October 1, 1996.
    Response: Section 1861(v)(1)(L)(iii) of the Act requires us to use 
the area wage index applicable under section 1886(d)(3)(E) of the Act 
determined using the survey of the most recent available wages and 
wage-related costs of hospitals located in the geographic area in which 
the HHA is located. Accordingly, in our July 1, 1996 notice, the HHA 
wage index was based on the most recent hospital wage index at that 
time, which was the index effective for hospital discharges on or after 
October 1, 1995.
    Comment: One commenter suggested that we include in our Federal 
Register notices and the public use data file more details and 
information on the methodology and data used in calculating the limits.
    Response: In each of the Federal Register notices we have published 
since 1979, we have striven to provide all of the information necessary 
for the public to understand the reason and basis for our policies. At 
the same time, we try to avoid dense and highly technical discussions 
that would be of interest to few readers and that might be found to be 
confusing or perceived as obfuscatory. We are always open to 
suggestions on the adequacy of the information provided in the notices. 
In response to the commenter, in this 1997 notice, we are providing 
additional information on the assumptions used in computing the budget 
neutrality adjustment. We will attempt to include more technical 
details in future notices. We are also amenable to including additional 
data items in the public use data file, and will expand this file as 
requested.
    Comment: Commenters wanted assurance that the effect of an increase 
in the minimum wage had been considered when the forecast of the HHA 
market basket was made for the July 1, 1996 schedule of limits.
    Response: Public Law 104-188 signed on August 20, 1996, raised the 
minimum wage of $4.25 per hour by $0.50 per hour in October 1996 to 
$4.75 per hour, and an additional $0.40 per hour in September 1997 to 
$5.15 per hour. The HHA input price index is a national, not a 
regional, measure of price changes in a ``market basket'' reflecting 
the inputs used by HHAs in providing covered home health services. The 
forecast used for the HHA market basket in the July 1, 1996 notice did 
reflect anticipated increases in the minimum wage, although the timing 
and magnitude of the changes were different than those of the actual 
legislated increases, enacted after the July 1, 1996 notice. There are 
two areas where minimum wage increases can impact on the HHA market 
basket. Each of these areas is discussed in detail below.
    One area where an increase in the minimum wage can have an impact 
on the HHA input price index is the annual percent increase of that 
index. The impact of a minimum wage increase is reflected in the HHA 
input price index as a ``one-time'' increase in the growth rate that is 
distributed over time in a lagged manner. The increase is distributed 
over time because of the two-step increase in the minimum wage, the use 
of four-quarter moving-average percent changes, and the delayed 
response by some firms to increased wages of employees that are 
currently slightly above the new minimum. The minimum wage increase is 
reflected in: (1) The price proxies for compensation of workers in the 
HHA input price index, which are the five Employment Cost Indexes (ECI) 
for each of the occupational categories; and (2) the noncompensation 
price proxies as secondary impacts where labor is used in an earlier 
stage of processing.
    DRI/McGraw-Hill, under contract with HCFA to forecast the HHA 
index, includes increases in the minimum wage in its macroeconomic 
forecast assumptions. The increase in the minimum wage is incorporated 
in the DRI models used to establish the economy-wide profile, as well 
as the profile for individual occupations and sectors, for wages, 
salaries, benefits, and noncompensation price inflation used in the HHA 
input price index. While the inclusion of the minimum wage increases 
directly affects the wage price proxy (five ECIs for the occupational 
groupings) in the HHA input price index, it also indirectly affects the 
growth of other nonlabor cost input

[[Page 35610]]

proxies in a lesser manner through a stages-of-processing methodology.
    The first quarter 1996 DRI/McGraw-Hill forecast was used to 
determine the HHA input price increases in the July 1, 1996 notice. In 
its first quarter 1996 forecast, DRI anticipated minimum wage increases 
in 1997 and 1998, and included its expectations in the model at that 
time. When DRI made its first quarter 1996 forecast in March 1996, it 
expected minimum wage increases of $0.45 per hour in April 1997 and an 
additional $0.10 per hour in April 1998. These expectations contributed 
to an increase in the HHA input price index growth rate between the 
second quarter of 1997 and the second quarter of 1999. (The growth rate 
is affected for nine quarters, in part because HCFA uses a four-quarter 
moving-average percent change for price increases, meaning that an 
increase in the minimum wage in the second quarter of 1998 will show up 
in the calculation of the four-quarter moving-average percent change 
for the second quarter of 1999.)
    As mentioned above, the actual, legislated minimum wage increases 
are $0.50 per hour in October 1996 and an additional $0.40 per hour in 
September 1997. Because the July 1, 1996 notice was published before we 
knew the exact amount of the minimum wage increase, the first quarter 
1996 DRI forecast, the latest data available for use in that notice, 
did not reflect the actual, legislated minimum wage increase. Beginning 
with the second quarter 1996 DRI forecast, however, the legislated 
minimum wage increase is reflected in all DRI forecasts. The HHA input 
price index growth rate, based on the actual minimum wage increase, 
will be impacted between the fourth quarter of 1996 and the fourth 
quarter of 1998, instead of the period between the second quarter of 
1997 and the second quarter of 1999 as anticipated in the first quarter 
1996 DRI forecast. The forecasted impact will also be larger than was 
anticipated in the first quarter 1996 forecast because the minimum wage 
will increase $0.35 per hour more than was expected in early 1996.
    To analyze the impact of the cumulative $0.90 per hour minimum wage 
increase on the HHA input price index growth rate, we examined the 
underlying wage distribution of the ECI occupational categories used in 
the HHA compensation price proxies. We estimated the impact on those 
workers in those occupational categories earning below or up to the 
September 1997 national minimum wage of $5.15 an hour. An analysis of 
the March 1995 Current Population Survey showed that roughly 10 percent 
of workers in those occupational categories earned below $5.15. Those 
workers earning just above this new minimum are also expected to be 
affected by a modest ripple effect. DRI estimates the new minimum wage 
will increase the growth rate in the HHA input price index by 0.25 
percentage points between the fourth quarter of 1996 and the fourth 
quarter of 1998.
    We compared the first quarter 1996 DRI forecast used in the July 1, 
1996 notice to the fourth quarter 1996 DRI forecast for the forecasted 
FY 1996, FY 1997, and FY 1998 percent increases. The first quarter 1996 
forecast was made based on DRI assumptions of how much and when the 
minimum wage would increase, while the fourth quarter 1996 DRI forecast 
was made after the August 1996 passage date of the minimum wage 
legislation. Since the first of the two-step minimum wage increase did 
not take place until October 1996, the FY 1996 percent increase in the 
HHA market basket was not impacted by the increase in the minimum wage. 
Our analysis showed that even though the full effect of the minimum 
wage was not included in the July 1, 1996 notice, other negative 
factors such as lower than expected benefits price increases and lower 
than expected administrative and general expense price increases more 
than offset the effect of the minimum wage increases. The FY 1997 
increase is now being forecast by DRI to be lower than originally 
expected in the first quarter of 1996 by 0.2 percentage points (3.1 
percent vs 2.9 percent). The FY 1998 increase, however, is now being 
forecast to increase roughly 0.1 percentage points faster than was 
expected in the first quarter of 1996 (3.3 percent vs 3.2 percent). The 
cumulative growth in the HHA market basket for FY 1997 and FY 1998 is 
0.1 percentage points lower than was forecast in the July 1, 1996 
notice.
    The other area where a change in the minimum wage can impact the 
HHA input price index is the cost category weights, although any impact 
on percentage changes would be insignificant. Because the 1993 base 
year for the HHA market basket is earlier than the October 1996 minimum 
wage increase, this change is not represented in the cost category 
weights. However, when HCFA updates the base year for the HHA index in 
a future year, the minimum wage increase will be reflected in the wages 
and salaries cost category weight.
    Comment: Several commenters requested that we evaluate labor-
related share by provider or individual geographic area, not by 
industry averages.
    Response: The national industry share of labor-related costs is 
used for adjusting area variations in compensation costs for the major 
provider types, including PPS hospitals, skilled nursing facilities 
(SNFs), and HHAs. The national average reflects a standard mix of 
labor-related inputs relative to nonlabor inputs. Inefficient mixes of 
inputs are not rewarded with higher payments. If the labor-related 
share was somehow estimated at the individual provider level, it could 
encourage individual providers to game the system to maximize payments. 
Additionally, the required data to calculate or estimate labor-related 
costs of the individual provider or in geographic areas are typically 
not available. However, more data are available at the national level.
    Comment: One commenter questioned why the HHA Input Price Index has 
failed to address concerns that the home health industry has previously 
submitted to HCFA , such as costs that change as a result of 
modifications in hospital discharge practices or advancements in home 
health technology.
    Response: HCFA, by design, uses fixed weight or Laspeyres-type 
indices to measure pure price increases for HHA services. A Laspeyres 
index is used to measure the cost of a given market basket at different 
points in time. The HHA Input Price Index answers the question of how 
much more or less it would cost, at a later time, to purchase the same 
mix of goods and services per HHA visit that was purchased in the base 
period. Changes in costs as a result of modifications in hospital 
discharge practices or advancements in home health technology are 
appropriately handled in other ways in the HHA update framework. For 
example, if discharge patterns change so that more high-skilled 
physical therapist and registered nurse visits are needed relative to 
HHA aide visits, this automatically is reflected in higher cost per 
visit. Higher costs per visit within each of the various visit types 
are reflected in the HHA Medicare cost report data and thus in payment 
limit updates. If the effect of changing technology and changing 
discharge practices is a change in the mix of goods and services, then 
this is automatically taken into account when the weights are rebased. 
When this occurs, the most recently available cost structure of the 
industry, reflecting changes in technology, changed mix of goods and 
services, etc., is reflected in the weights developed for the market 
basket. Therefore, the cost limits methodology, which includes the 
Input Price Index,

[[Page 35611]]

accounts for the changes in costs that were of concern to the 
commenters.
    Comment: One commenter questioned why HCFA uses data from outside 
the home health care industry as a proxy for changes in home health 
employees' compensation. In addition, one commenter pointed out that 
HHAs also compete with employers in nonhealth industries, such as 
retail and service industries.
    Response: The HHA market basket wage and benefits labor categories 
include: (1) Skilled nurses, therapists, and other professional and 
technical workers; (2) managerial and supervisory workers; (3) clerical 
workers; and (4) service workers. HHAs compete for these occupational 
labor categories with employers both inside and outside the HHA care 
sector. In the case of compensation for nurses and certain other health 
care technicians and professionals, the hospital labor market may be 
predominant. However, hospitals and HHAs also compete with other 
industries to obtain certain skilled professional and technical staff 
(for example, accountants and computer programmers). For professional 
and technical workers (skilled nurses, therapists, and other 
professional and technical workers), we believe that a price proxy that 
reflects a blend of compensation variables internal and external to the 
health sector is appropriate. The blend used is price proxies that are 
equally weighted between ECI for civilian hospital workers and ECI for 
economy-wide professional and technical workers. The PPS hospital 
market basket has used this same blend of internal and external price 
proxies for professional and technical workers since the 1980's.
    Since HHAs compete primarily with employers outside the health care 
sector for the other three occupational categories (managerial and 
supervisory, clerical, and service workers), we use economy-wide 
employment cost indices as price proxies for these three occupational 
groups. The health care sector is included in economy-wide employment 
cost indices. According to the Bureau of Labor Statistics Current 
Employment Statistics Survey (establishment data), in March 1995 the 
health care sector accounted for over 9 percent of employment in the 
total nonfarm economy.
    We ran a simulation using the compensation weights in the 1993-
based HHA Input Price Index to show the cumulative difference between 
using the blend in the HHA Input Price Index of 50 percent ECI for 
hospital workers, and 50 percent ECI for professional and technical 
workers and using only the ECI for hospital workers (the internal 
health sector component of the blend) over 10 years (fourth quarter of 
1986 through the fourth quarter of 1996). The cumulative difference was 
only 0.7 percentage points over 10 years. This amounts to an average 
difference of less than 0.1 percentage point per year, indicating that 
the blend, while technically more accurate, results in a rate of 
increase that is almost identical to that measured by the nonblended 
ECI.
    Comment: One commenter questioned why data for hospital-based HHAs 
were not included in the derivation of weights for the revised and 
rebased market basket.
    Response: Data for hospital-based HHAs were not used in the revised 
and rebased HHA Input Price Index because Medicare cost reports for 
hospital-based HHAs contain costs that, due to the stepdown of overhead 
cost from the hospital, are not part of an efficient HHA cost 
structure. In addition, the data for hospital-based HHAs were not as 
detailed as the data for freestanding HHAs. We believe that an input 
price index based on the cost structure of freestanding HHAs more 
accurately represents the cost structure of the home health industry 
than would a market basket based on the cost structure of both 
freestanding and hospital-based HHAs. This same approach is used for 
SNFs.

III. Updating the Wage Index on a Budget-Neutral Basis

    Section 4207(d)(2) of the Omnibus Budget Reconciliation Act of 1990 
(OBRA `90) (Public Law 101-508) requires that, in updating the wage 
index, aggregate payments to HHAs will remain the same as they would 
have been if the wage index had not been updated. Therefore, overall 
payments to HHAs are not affected by changes in the wage index values.
    To comply with the requirement of section 4207(d)(2) of OBRA `90 
that updating the wage index be budget neutral, we determined that it 
is necessary to apply a budget neutrality adjustment factor of 1.078 to 
the labor-related portion of the July 1, 1997 cost limits. This 
adjustment ensures that aggregate payments to HHAs are not affected by 
the change to a wage index based on the hospital wage index published 
on August 30, 1996 (61 FR 46166). The adjustment factor of 1.078 is the 
same as the factor derived from the November 1996 calculations. When we 
updated the data for the wage index, we did not find changes 
significant enough to have an effect on the budget neutrality 
adjustment factor.
    To determine this factor, we analyzed both the data obtained from 
the freestanding agencies used to determine the cost limits and the 
settled cost report data covering the same time period for the 
hospital-based agencies. For each agency in this database, we replaced 
their current wage index with the one corresponding to the 1982 
hospital wage index. Some Metropolitan Statistical Areas (MSAs) that 
currently exist did not exist at the time this index was created and 
therefore have no matching 1982 wage index. In the database we are 
currently using, these unmatchable MSAs represented 2 percent of the 
total visits. Since this percentage was small, we deleted these 
agencies from the analysis. We then determined what Medicare program 
payments would be using the 1982 wage index. Next, we determined 
payments using the new wage index and adjusted the labor portion of the 
payment by the factor necessary to match program payments if the 1982 
wage index was used. (See the example in section VIII.A of this notice 
regarding the adjustment of cost limits by the wage index and the 
budget neutrality factor.)

IV. Update of Limits

    The methodology used to develop the schedule of limits set forth in 
this notice is the same as that used in setting the limits that were 
effective July 1, 1996. We have updated the cost limits to reflect the 
expected cost increases occurring between the cost reporting periods 
for the data contained in the database and June 30, 1998.

A. Data Used

    To develop the schedule of limits that is effective July 1, 1997, 
we extracted actual cost per-visit data from settled Medicare cost 
reports for periods ending on or after June 30, 1991, and settled by 
October 1, 1995. The majority of the cost reports were from FY 1993. We 
then adjusted the data using the latest available market basket indexes 
to reflect expected cost increases occurring between the cost reporting 
periods contained in our database and June 30, 1998.
    Previous to the July 1, 1996 notice, HCFA used the market basket 
index to adjust the cost report data to the midpoint (December 31) of 
the first cost reporting period to which the limits applied (July 1). 
The present limits adjust the data to the end of the first cost 
reporting period to which the limits apply (June 30, 1998), a change 
that will enable fiscal intermediaries to calculate the applicable 
adjustment factors for HHAs with a cost reporting period of fewer than 
12 months. Previously, the

[[Page 35612]]

intermediaries had to contact HCFA's central office for this 
adjustment.

B. Wage Index

    The wage index is used to adjust the labor-related portion of the 
limits to reflect differing wage levels among areas. In setting this 
schedule of limits, we used the FY 1997 hospital wage index, which is 
based on 1993 hospital wage data.
    Each HHA's labor market area is determined based on the definitions 
of MSAs issued by the Office of Management and Budget (OMB). Section 
1861(v)(1)(L) of the Act requires us to use the current hospital wage 
index (that is, the FY 1997 hospital wage index, which was published in 
the Federal Register on August 30, 1996 (61 FR 46256)) to establish the 
HHA cost limits. Therefore, this schedule of limits reflects the MSA 
definitions that are currently in effect under the hospital prospective 
payment system.
    We are continuing to incorporate exceptions to the MSA 
classification system for certain New England counties that were 
identified in the July 1, 1992 notice (57 FR 29410). These exceptions 
have been recognized in setting hospital cost limits for cost reporting 
periods beginning on and after July 1, 1979 (45 FR 41218), and were 
authorized under section 601(g) of the Social Security Amendments of 
1983 (Pubic Law 98-21). Section 601(g) of Public Law 98-21 requires 
that any hospital in New England that was classified as being in an 
urban area under the classification system in effect in 1979 will be 
considered urban for the purposes of the hospital prospective payment 
system. This provision is intended to ensure equitable treatment under 
the hospital prospective payment system. Under this authority, the 
following counties have been deemed to be urban areas for purposes of 
payment under the inpatient hospital prospective payment system:
     Litchfield County, CT in the Hartford, CT MSA.
     York County, ME and Sagadahoc County, ME in the Portland, 
ME MSA.
     Merrimack County, NH in the Boston-Brockton-Nashua, MA-NH 
MSA.
     Newport County, RI in the Providence Fall-Warwick, RI MSA.
    We are continuing to grant these urban exceptions for the purpose 
of applying the HCFA hospital wage index to the HHA cost limits. These 
exceptions result in the same New England County Metropolitan Area 
(NECMA) definitions for hospitals, SNFs, and HHAs. In New England, MSAs 
are defined on town boundaries rather than on county lines but exclude 
parts of the four counties cited above that would be considered urban 
under the MSA definition. Under this notice, those four counties are 
urban under either definition, NECMA or MSA.

V. Provisions of the HHA Schedule of Limits

    The schedule of limits set forth below was calculated using 112 
percent of the mean per-visit costs of freestanding HHAs and is 
adjusted by the latest estimates in the market basket index.
    The schedule of limits effective for cost reporting periods 
beginning on or after July 1, 1997, is based on the actual cost per-
visit data from settled Medicare cost reports for periods ending on or 
after June 30, 1991, and settled by October 1, 1995, updated by the 
market basket rate of increase and provides for the following:
     A classification system based on whether an HHA is located 
within an MSA, a NECMA, or a non-MSA area. (See Tables 4a and 4b in 
section X. of this notice for the listing of MSAs, NECMAs, and rural 
areas.)
     The use of a single schedule of limits for hospital-based 
and freestanding agencies. This single limit is based on the cost 
experience of freestanding agencies.
     The use of a market basket index, which was developed from 
the price of goods and services purchased by HHAs to account for the 
impact of changing wage and price levels on HHA costs.
     The use of the current hospital wage index. The wage index 
is used to adjust the labor-related portion of the limits. The employee 
wage portion of the market basket index, including a proportionate 
share of contract services (64.226 percent), and the employee benefits 
portion (13.442 percent) are used to determine the labor component 
(77.668 percent) of all HHA per-visit costs used to set the limits.
     Separate treatment of the labor and nonlabor components of 
per-visit costs. The separate components of costs are calculated by 
obtaining actual HHA cost data for each agency for cost periods ending 
on or after June 30, 1991 and settled before October 1, 1995, and 
increasing those data by the actual and projected increases in the HHA 
market basket index. We then separate each HHA's per-visit costs into 
labor and nonlabor portions, and divide the labor portion by the wage 
index value for the agency's location to control for the effect of 
geographic variations in prevailing wage levels. Separate means are 
computed for the labor and nonlabor components of per-visit costs. For 
each comparison group, the resulting amounts are shown in Table 3 of 
section IX. of this notice.
     The application of a cost-of-living adjustment to the 
nonlabor portion of the limit for HHAs located in Alaska, Hawaii, 
Puerto Rico, and the U.S. Virgin Islands.
     Limits that are determined for the per-visit cost of each 
type of home health service: skilled nursing care, physical therapy, 
speech pathology, occupational therapy, medical social services, and 
home health aide.
     Application of the limits in the aggregate after an HHA's 
actual costs are adjusted. An HHA's actual costs are adjusted for 
individual items of cost that are found to be excessive under Medicare 
principles of provider payment and for costs that are not included in 
the limitation amount. The limits are applied in the aggregate to the 
cost remaining after these adjustments are made. Payment is limited to 
the lower of the actual costs or the cost limits.

VI. Market Basket

    The 1993-Based cost categories and weights are listed in Table 1 
below.

                        Table 1.--1993-Based Cost Categories, Weights, and Price Proxies                        
----------------------------------------------------------------------------------------------------------------
                                        1993-Based                                                              
            Cost category              market basket                          Price proxy                       
                                          weight                                                                
----------------------------------------------------------------------------------------------------------------
Compensation, including allocated             77.668  ..........................................................
 Contract Services' Labor.                                                                                      
    Wages and Salaries, including             64.226  HHA Occupational Wage Index.                              
     allocated Contract Services,                                                                               
     Labor.                                                                                                     
    Employee benefits, including              13.442  HHA Occupational Benefits Index.                          
     allocated Contract Services'                                                                               
     Labor.                                                                                                     
    Operations & Maintenance........           0.832  CPI-U Fuel & Other Utilities.                             
Administrative & General, including            9.569  ..........................................................
 allocated Contract Services' Non-                                                                              
 Labor.                                                                                                         
    Telephone.......................           0.725  CPI-U  Telephone.                                         

[[Page 35613]]

                                                                                                                
    Paper & Printing................           0.529  CPI-U  Household Paper, Paper Products & Stationery       
                                                       Supplies.                                                
    Postage.........................           0.724  CPI-U  Postage.                                           
    Other Administrative & General,            7.591  CPI-U  Services.                                          
     including allocated Contract                                                                               
     Services Non-Labor.                                                                                        
Transportation......................           3.405  CPI-U  Private Transportation.                            
    Capital-Related.................           3.204  ..........................................................
    Insurance.......................           0.560  CPI-U  Household Insurance.                               
    Fixed Capital...................           1.764  CPI-U Owner's Equivalent Rent.                            
    Movable Capital.................           0.880  PPI Machinery & Equipment.                                
    Other Expenses, including                  5.322  CPI-U  All Items Less Food & Energy.                      
     allocated Contract Services'                                                                               
     Non-Labor.                                                                                                 
                                     ----------------                                                           
      Total.........................         100.000                                                            
----------------------------------------------------------------------------------------------------------------

VII. Methodology for Determining Cost-Per-Visit Limits

A. Data

    For this notice, the cost-per-visit limit values were determined by 
extracting settled actual cost-per-visit data from Medicare cost 
reports for cost reporting periods ending on or after June 30, 1991, 
and settled before October 1, 1995. We then adjusted the data using the 
latest available market basket factors to reflect expected cost 
increases occurring between the cost reporting periods contained in our 
database and June 30, 1998. The following adjustment factors were used 
to compute the per-visit costs:

    Table 2.--Factors for Inflating Database Dollars to June 30, 1998   
------------------------------------------------------------------------
                    Inflation adjustment factors \1\                    
-------------------------------------------------------------------------
         Fiscal year end               1992         1993         1994   
------------------------------------------------------------------------
January 31.......................  ...........      1.17097      1.13480
February 28......................  ...........      1.16778      1.13203
March 31.........................  ...........      1.16457      1.12934
April 30.........................  ...........      1.16135      1.12672
May 31...........................  ...........      1.15816      1.12413
June 30..........................      1.19400      1.15505      1.12152
July 31..........................      1.19056      1.15202      1.11889
August 31........................      1.18719      1.14906      1.11625
September 30.....................      1.18387      1.14614      1.11359
October 31.......................      1.18061      1.14327      1.11091
November 30......................      1.17738      1.14043      1.10824
December 31......................      1.17417      1.13761      1.10562
------------------------------------------------------------------------

B. Cost Reporting Periods Consisting of Fewer Than 12 Months

    HHAs may have cost reporting periods that are fewer than 12 months 
in duration. This may happen, for example, when a new provider enters 
the Medicare program after its selected fiscal year has already begun, 
or when a provider experiences a change of ownership before the end of 
the cost reporting period. As explained in section IV. of this 
preamble, the data used in calculating the cost limits were updated to 
June 30, 1998. Therefore, the cost limits published in this notice are 
for a 12-month cost reporting period beginning July 1, 1997 and ending 
June 30, 1998. For 12-month cost reporting periods beginning after July 
1, 1997 and before July 1, 1998, cost reporting year adjustment factors 
are provided in Table 5. However, when a cost reporting period consists 
of fewer than 12 months, adjustments must be made to the data that have 
been developed for use with 12-month cost reporting periods. To promote 
the efficient dissemination of cost limits to providers with cost 
reporting periods of fewer than 12 months, we are publishing the 
following examples and tables to enable intermediaries to calculate the 
applicable adjustment factors.
    Cost reporting periods of fewer than 12 months may not necessarily 
begin on the first of the month or end on the last day of the month. In 
order to simplify the process in calculating ``short period'' 
adjustment factors, if the short cost reporting period begins before 
the sixteenth of the month, we will consider the period to have begun 
on the first of that month. If the start period begins on or after the 
sixteenth of the month, it will be considered to have begun at the 
beginning of the next month. Also, if the short period ends before the 
sixteenth of the month, we will consider the period to have ended at 
the end of the preceding month; if the short period ends on or after 
the sixteenth of the month, it will be considered to have ended at the 
end of that month.
    Examples:
    1. After approval by its intermediary, an HHA changes its fiscal 
year end from June 30 to December 31. Therefore, the HHA had a short 
cost reporting period beginning on July 1, 1997 and ending on December 
31, 1997. The cost limits that apply to this short period must be 
adjusted as follows:
    Step 1--From Table 6, sum the index levels for the months of July 
1997 through December 1997: 6.81963.
    Step 2--Divide the results from Step 1 by the number of months in 
the short period.

6.819636=1.136605


[[Page 35614]]


    Step 3--From Table 6, sum the index levels for the months in the 
common period of July 1997 through June 1998.

13.75528

    Step 4--Divide the results from Step 3 by the number of months in 
the common period.

13.7552812=1.146273

    Step 5--Divide the results from Step 2 by the results from Step 4. 
This is the adjustment factor to be applied to the published limits

1.1366051.146273=.991566

    Step 6--Apply the results from Step 5 to the published cost limits.
    a. Urban Skilled Nursing Labor Portion.

$79.01 x .991566=$78.34

    b. Urban Skilled Nursing Nonlabor Portion.

$22.28 x .991566=$22.09

    2. A HHA with a fiscal year end of November 30, 1997 changes 
ownership on September 21, 1998. The HHA is required to file a 
terminated cost report for the period of December 1, 1997 to September 
21, 1998. The cost limits that apply to this short period must be 
adjusted as follows:
    Step 1--From Table 6, sum the index level for the month of December 
1997 through September 1998.

11.58995

    Step 2--Divide the results from Step 1 by the number of months in 
the short period.

11.5899510=158995

    Step 3--From Table 6, sum the index levels for the months in the 
common period of July 1997, through June 1998.

13.75528

    Step 4--Divide the results from Step 3 by the number of months from 
the common period.

13.7552812=1.146273

    Step 5--Divide the results from Step 2 by the results from Step 4.

1.1589951.146273=1.011099

    Step 6--Apply the results from Step 5 to the published cost limits.
    a. Urban Skilled Nursing Labor Portion.

$79.01 x 1.01199=$79.89

    b. Urban Skilled Nursing Non-Labor Portion.

$22.28 x 1.011099=$22.53

C. Standardization for Wage Levels

    After adjustment by the market basket index, we divided each HHA's 
per-visit costs into labor and nonlabor portions. The labor portion of 
costs (77.668 percent as determined by the market basket) represents 
the employee wage and benefit factor plus the contract services factor 
from the market basket. We then divided the labor portion of per-visit 
costs by the wage index applicable to the HHA's location to arrive at 
an adjusted labor cost.

D. Adjustment for ``Outliers''

    We transformed all per-visit cost data into their natural 
logarithms and grouped them by type of service and MSA, NECMA, or non-
MSA location, in order to determine the mean cost and standard 
deviation for each group. We then eliminated all ``outlier'' costs, 
retaining only those per-visit costs within two standard deviations of 
the mean in each service.

E. Basic Service Limit

    We calculate a basic service limit equal to 112 percent of the mean 
labor and nonlabor portions of the per-visit costs of freestanding HHAs 
for each type of service. (See Table 3 in section IX.)

VIII. Computing the Adjusted Limit

A. Adjustment of Cost Limits by Wage Index

    To arrive at the adjusted limit, which is to be applied to each 
service furnished by an HHA, the HHA's intermediary first determines 
the adjusted labor-related component by multiplying the labor-related 
component of the limit by the appropriate wage index and by multiplying 
the adjusted labor-related component by the special labor adjustment 
for budget neutrality. (See example below and Tables 4a and 4b in 
section X. of this notice.) The sum of the nonlabor component plus the 
labor-related component is the adjusted limit applicable to an HHA.

    Example--Calculation of Adjusted Occupational Therapy Limit for a   
                     Freestanding HHA In Dallas, TX                     
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
Labor component (Table 3)..................................     $85.97  
Wage index value (Table 4a)................................       0.9729
Labor portion..............................................      83.64  
Special labor adjustment for budget neutrality.............       1.078 
Adjusted labor portion.....................................      90.16  
Nonlabor component (Table 3)...............................      24.55  
Adjusted occupational therapy limit........................     114.71  
------------------------------------------------------------------------

B. Adjustment for Reporting Year

    If an HHA has a 12-month cost reporting period beginning on or 
after August 1, 1997, the adjusted per-visit limit for each service is 
again revised by an adjustment factor from Table 5 that corresponds to 
the month and year in which the cost reporting period begins. Each 
factor represents the compounded rate of monthly increase derived from 
the projected annual increase in the market basket index, and is used 
to account for inflation in costs that will occur after the date on 
which the limits become effective.
    For example, if the HHA in the example above had a cost reporting 
period beginning January 1, 1998, its per-visit therapy limit would be 
further adjusted as follows:

          Computation of Revised Limit for Occupational Therapy         
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
Adjusted per-visit limit..................................    $114.71   
Adjustment factor from Table 5............................       1.01588
Revised per-visit limit...................................     116.53   
------------------------------------------------------------------------

    In this example, the revised adjusted per-visit limit for 
occupational therapy applicable to this HHA for the cost reporting 
period beginning January 1, 1998, is $116.53 per visit.
    If an HHA uses a cost reporting period that is not 12 months in 
duration, a special calculation of the adjustment factor must be made. 
This results from the fact that projections are computed to June 30, 
1998. This calculation is done using the methodology described in 
section VII.B.

IX. Schedule of Limits

    The schedule of limits set forth below applies to cost reporting 
periods beginning on or after July 1, 1997. The intermediaries will 
compute the adjusted limits using the wage index published in Tables 4a 
and 4b of section X. and will notify each HHA they service of its 
applicable cost per-visit limit for each type of service. Each HHA's 
aggregate limit cannot be determined prospectively, but depends on each 
HHA's Medicare visits for each type of service for the cost reporting 
periods subject to this notice.
    The HHA costs that are subject to the limits include the cost of 
medical supplies routinely furnished in conjunction with patient care. 
Durable medical equipment, orthotics, prosthetics, and other medical 
supplies directly identifiable as services to an individual patient are 
excluded from the per-visit costs and are paid without regard to this 
schedule of limits. (See Chapter IV of the Home Health Agency Manual 
(HCFA Pub. 11).)
    The intermediary will determine the limit for each HHA by 
multiplying the number of Medicare visits for each type of service 
furnished by the HHA, by the respective per-visit cost limit. The sum 
of these amounts is compared to the HHA's total allowable cost.

[[Page 35615]]

    Example: HHA X, a freestanding agency located in Richmond, VA, 
furnished 5,000 covered skilled nursing visits, 2,000 physical therapy 
visits, and 4,000 home health aide visits to Medicare beneficiaries 
during its 12-month cost reporting period beginning July 1, 1997. The 
aggregate cost limit for the HHA is calculated as follows:

                                      Determining the Aggregate Cost Limit                                      
----------------------------------------------------------------------------------------------------------------
                                                                             Adjusted                           
                 Type of visit                      Visits      Nonlabor      labor       Adjusted    Aggregate 
                                                                portion      portion     limit \1\      limit   
----------------------------------------------------------------------------------------------------------------
Skilled nursing................................        5,000       $22.28       $72.64      $100.59     $502,950
Physical therapy...............................        2,000        24.30        79.54       110.04      220,080
Home health aide...............................        4,000        10.88        35.25        48.88      195,520
                                                ----------------------------------------------------------------
      Total Visits.............................       11,000  ...........  ...........  ...........  ...........
Aggregate cost limit...........................  ...........  ...........  ...........  ...........    918,5501 
----------------------------------------------------------------------------------------------------------------
\1\ Includes special labor adjustment of 1.078 for budget neutrality.                                           

    Before the limits are applied during settlement of the cost report, 
the HHA's actual costs are reduced by the amount of individual items of 
cost (for example, administrative compensation and contract services) 
that are found to be excessive under the Medicare principles of 
provider payment. That is, the intermediary reviews the various 
reported costs, taking into account all the Medicare payment 
principles; for example, the cost guidelines for physical therapy 
furnished under arrangements (see 42 CFR 413.106) and the limitation on 
costs that are substantially out of line with those comparable home 
health agencies (see 42 CFR 413.9).

           Table 3.--Per Visit Limits for Home Health Agencies          
------------------------------------------------------------------------
                                                   Labor       Nonlabor 
          Type of visit               Limit       portion    portion \1\
------------------------------------------------------------------------
MSA (NECMA) location:                                                   
    Skilled nursing care.........      $101.20       $79.01       $22.28
    Physical therapy.............       110.81        86.51        24.30
    Speech pathology.............       111.60        86.96        24.64
    Occupational therapy.........       110.52        85.97        24.55
    Medical social services......       146.39       114.01        32.38
    Home health aide.............        49.22        38.34        10.88
Non-MSA location:                                                       
    Skilled nursing care.........       113.07        92.35        20.72
    Physical therapy.............       123.38       100.66        22.72
    Speech pathology.............       134.19       109.22        24.97
    Occupational therapy.........       133.22       108.26        24.96
    Medical social services......       189.57       154.33        35.24
    Home health aide.............        49.03        40.03         9.00
------------------------------------------------------------------------
\1\ Nonlabor portion of limits for HHAs located in Alaska, Hawaii,      
  Puerto Rico, and the Virgin Islands are increased by multiplying them 
  by the following cost-of-living adjustment factors:                   


------------------------------------------------------------------------
                                                              Adjustment
                          Location                              factor  
------------------------------------------------------------------------
Alaska.....................................................        1.250
Hawaii:                                                                 
    County of Honolulu.....................................        1.225
    County of Hawaii.......................................        1.150
    County of Kauai........................................        1.200
    County of Maui.........................................        1.225
    County of Kalawao......................................        1.225
Puerto Rico................................................        1.100
Virgin Islands.............................................        l.125
------------------------------------------------------------------------

X. Wage Indexes

                  Table 4a.--Wage Index for Urban Areas                 
------------------------------------------------------------------------
                                 Urban area (Constituent                
                                    counties or county      Wage index  
                                       equivalents)                     
------------------------------------------------------------------------
0040...........................  Abilene, TX............          0.8048
                                   Taylor, TX                           
0060...........................  Aguadilla, PR..........          0.4237
                                   Aguada, PR                           
                                   Aguadilla, PR                        
                                   Moca, PR                             

[[Page 35616]]

                                                                        
0080...........................  Akron, OH..............          0.9853
                                   Portage, OH                          
                                   Summit, OH                           
0120...........................  Albany, GA.............          0.8597
                                   Dougherty, GA                        
                                   Lee, GA                              
0160...........................  Albany-Schenectady-              0.8624
                                  Troy, NY.                             
                                   Albany, NY                           
                                   Montgomery, NY                       
                                   Rensselaer, NY                       
                                   Saratoga, NY                         
                                   Schenectady, NY                      
                                   Schoharie, NY                        
0200...........................  Albuquerque, NM........          0.9344
                                   Bernalillo, NM                       
                                   Sandoval, NM                         
                                   Valencia, NM                         
0220...........................  Alexandria, LA.........          0.8119
                                   Rapides, LA                          
0240...........................  Allentown-Bethlehem-             0.9992
                                  Easton, PA.                           
                                   Carbon, PA                           
                                   Lehigh, PA                           
                                   Northampton, PA                      
0280...........................  Altoona, PA............          0.9510
                                   Blair, PA                            
0320...........................  Amarillo, TX...........          0.8730
                                   Potter, TX                           
                                   Randall, TX                          
0380...........................  Anchorage, AK..........          1.3224
                                   Anchorage, AK                        
0440...........................  Ann Arbor, MI..........          1.1662
                                   Lenawee, MI                          
                                   Livingston, MI                       
                                   Washtenaw, MI                        
0450...........................  Anniston, AL...........          0.8023
                                   Calhoun, AL                          
0460...........................  Appleton-Oshkosh-                0.8890
                                  Neenah, WI.                           
                                   Calumet, WI                          
                                   Outagamie, WI                        
                                   Winnebago, WI                        
0470...........................  Arecibo, PR............          0.4397
                                   Arecibo, PR                          
                                   Camuy, PR                            
                                   Hatillo, PR                          
0480...........................  Asheville, NC..........          0.9334
                                   Buncombe, NC                         
                                   Madison, NC                          
0500...........................  Athens, GA.............          0.9408
                                   Clarke, GA                           
                                   Madison, GA                          
                                   Oconee, GA                           
0520...........................  *Atlanta, GA...........          1.0033
                                   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                           

[[Page 35617]]

                                                                        
0560...........................  Atlantic City--Cape              1.1077
                                  May, NJ.                              
                                   Atlantic City, NJ                    
                                   Cape May, NJ                         
0600...........................  Augusta-Aiken, GA-SC...          0.8836
                                   Columbia, GA                         
                                   McDuffie, GA                         
                                   Richmond, GA                         
                                   Aiken, SC                            
                                   Edgefield, SC                        
0640...........................  Austin-San Marcos, TX..          0.9254
                                   Bastrop, TX                          
                                   Caldwell, TX                         
                                   Hays, TX                             
                                   Travis, TX                           
                                   Williamson, TX                       
0680...........................  Bakersfield, CA........          1.0189
                                   Kern, CA                             
0720...........................  *Baltimore, MD.........          0.9798
                                   Anne Arundel, MD                     
                                   Baltimore, MD                        
                                   Baltimore City, MD                   
                                   Carroll, MD                          
                                   Harford, MD                          
                                   Howard, MD                           
                                   Queen Annes, MD                      
0733...........................  Bangor, ME.............          0.9391
                                   Penobscot, ME                        
0743...........................  Barnstable-Yarmouth, MA          1.3651
                                   Barnstable, MA                       
0760...........................  Baton Rouge, LA........          0.8433
                                   Ascension, LA                        
                                   East Baton Rouge, LA                 
                                   Livingston, LA                       
                                   West Baton Rouge, LA                 
0840...........................  Beaumont-Port Arthur,            0.8576
                                  TX.                                   
                                   Hardin, TX                           
                                   Jefferson, TX                        
                                   Orange, TX                           
0860...........................  Bellingham, WA.........          1.1317
                                   Whatcom, WA                          
0870...........................  Benton Harbor, MI......          0.8506
                                   Berrien, MI                          
0875...........................  *Bergen-Passaic, NJ....          1.1785
                                   Bergen, NJ                           
                                   Passaic, NJ                          
0880...........................  Billings, MT...........          0.9086
                                   Yellowstone, MT                      
0920...........................  Biloxi-Gulfport-                 0.8554
                                  Pascagoula, MS.                       
                                   Hancock, MS                          
                                   Harrison, MS                         
                                   Jackson, MS                          
0960...........................  Binghamton, NY.........          0.8822
                                   Broome, NY                           
                                   Tioga, NY                            
1000...........................  Birmingham, AL.........          0.9036
                                   Blount, AL                           
                                   Jefferson, AL                        
                                   St. Clair, AL                        
                                   Shelby, AL                           
1010...........................  Bismarck, ND...........          0.7923
                                   Burleigh, ND                         
                                   Morton, ND                           
1020...........................  Bloomington, IN........          0.8652
                                   Monroe, IN                           
1040...........................  Bloomington-Normal, IL.          0.8990
                                   McLean, IL                           
1080...........................  Boise City, ID.........          0.9383
                                   Ada, ID                              
                                   Canyon, ID                           
1123...........................  *Boston-Worcester                1.1613
                                  Lawrence-Lowell-                      
                                  Brockton, MA-NH.                      
                                   Bristol, MA                          
                                   Essex, MA                            

[[Page 35618]]

                                                                        
                                   Middlesex, MA                        
                                   Norfolk, MA                          
                                   Plymouth, MA                         
                                   Suffolk, MA                          
                                   Worcester, MA                        
                                   Hillsborough, NH                     
                                   Merrimack, NH                        
                                   Rockingham, NH                       
                                   Strafford, NH                        
1125...........................  Boulder-Longmont, CO...          0.9522
                                   Boulder, CO                          
1145...........................  Brazoria, TX...........          0.9201
                                   Brazoria, TX                         
1150...........................  Bremerton, WA..........          1.0901
                                   Kitsap, WA                           
1240...........................  Brownsville-Harlingen-           0.8542
                                  San Benito, TX.                       
                                   Cameron, TX                          
1260...........................  Bryan-College Station,           0.8851
                                  TX.                                   
                                   Brazos, TX                           
1280...........................  *Buffalo-Niagara Falls,          0.9107
                                  NY.                                   
                                   Erie, NY                             
                                   Niagara, NY                          
1303...........................  Burlington, VT.........          1.0068
                                   Chittenden, VT                       
                                   Franklin, VT                         
                                   Grand Isle, VT                       
1310...........................  Caguas, PR.............          0.4573
                                   Caguas, PR                           
                                   Cayey, PR                            
                                   Cidra, PR                            
                                   Gurabo, PR                           
                                   San Lorenzo, PR                      
1320...........................  Canton-Massillon, OH...          0.8648
                                   Carroll, OH                          
                                   Stark, OH                            
1350...........................  Casper, WY.............          0.8821
                                   Natrona, WY                          
1360...........................  Cedar Rapids, IA.......          0.8458
                                   Linn, IA                             
1400...........................  Champaign-Urbana, IL...          0.9391
                                   Champaign, IL                        
1440...........................  Charleston-North                 0.8963
                                  Charleston, SC.                       
                                   Berkeley, SC                         
                                   Charleston, SC                       
                                   Dorchester, SC                       
1480...........................  Charleston, WV.........          0.9526
                                   Kanawha, WV                          
                                   Putnam, WV                           
1520...........................  *Charlotte-Gastonia-             0.9620
                                  Rock Hill, NC-SC.                     
                                   Cabarrus, NC                         
                                   Gaston, NC                           
                                   Lincoln, NC                          
                                   Mecklenburg, NC                      
                                   Rowan, NC                            
                                   Union, NC                            
                                   York, SC                             
1540...........................  Charlottesville, VA....          0.9155
                                   Albemarle, VA                        
                                   Charlottesville City,                
                                  VA                                    
                                   Fluvanna, VA                         
                                   Greene, VA                           
1560...........................  Chattanooga, TN-GA.....          0.8847
                                   Catoosa, GA                          
                                   Dade, GA                             
                                   Walker, GA                           
                                   Hamilton, TN                         
                                   Marion, TN                           
1580...........................  Cheyenne, WY...........          0.7678
                                   Laramie, WY                          
1600...........................  *Chicago, IL...........          1.0760
                                   Cook, IL                             
                                   DeKalb, IL                           

[[Page 35619]]

                                                                        
                                   DuPage, IL Grundy, IL                
                                   Kane, IL                             
                                   Kendall, IL                          
                                   Lake, IL                             
                                   McHenry, IL                          
                                   Will, IL                             
1620...........................  Chico-Paradise, CA.....          1.0417
                                   Butte, CA                            
1640...........................  *Cincinnati, OH-KY-IN..          0.9570
                                   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-                     0.7716
                                  Hopkinsville, TN-KY.                  
                                   Christian, KY                        
                                   Montgomery, TN                       
1680...........................  *Cleveland-Lorain-               0.9886
                                  Elyria, OH.                           
                                   Ashtabula, OH                        
                                   Cuyahoga, OH                         
                                   Geauga, OH                           
                                   Lake, OH                             
                                   Lorain, OH                           
                                   Medina, OH                           
1720...........................  Colorado Springs, CO...          0.9341
                                   El Paso, CO                          
1740...........................  Columbia, MO...........          0.8899
                                   Boone, MO                            
1760...........................  Columbia, SC...........          0.9160
                                   Lexington, SC                        
                                   Richland, SC                         
1800...........................  Columbus, GA-AL........          0.7779
                                   Russell, AL                          
                                   Chattanoochee, GA                    
                                   Harris, GA                           
                                   Muscogee, GA                         
1840...........................  *Columbus, OH..........          0.9681
                                   Delaware, OH                         
                                   Fairfield, OH                        
                                   Franklin, OH                         
                                   Licking, OH                          
                                   Madison, OH                          
                                   Pickaway, OH                         
1880...........................  Corpus Christi, TX.....          0.8881
                                   Nueces, TX                           
                                   San Patricio, TX                     
1900...........................  Cumberland, MD-WV......          0.8671
                                   Allegany, MD                         
                                   Mineral, WV                          
1920...........................  *Dallas, TX............          0.9729
                                   Collin, TX                           
                                   Dallas, TX                           
                                   Denton, TX                           
                                   Ellis, TX                            
                                   Henderson, TX                        
                                   Hunt, TX                             
                                   Kaufman, TX                          
                                   Rockwall, TX                         
1950...........................  Danville, VA...........          0.8497
                                   Danville City, VA                    
                                   Pittsylvania, VA                     
1960...........................  Davenport-Rock Island-           0.8388
                                  Moline, IA-IL.                        
                                   Scott, IA                            
                                   Henry, IL                            
                                   Rock Island, IL                      

[[Page 35620]]

                                                                        
2000...........................  Dayton-Springfield, OH.          0.9559
                                   Clark, OH                            
                                   Greene, OH                           
                                   Miami, OH                            
                                   Montgomery, OH                       
2020...........................  Daytona Beach, FL......          0.8871
                                   Flagler, FL                          
                                   Volusia, FL                          
2030...........................  Decatur, AL............          0.8384
                                   Lawrence, AL                         
                                   Morgan, AL                           
2040...........................  Decatur, IL............          0.7848
                                   Macon, IL                            
2080...........................  *Denver, CO............          1.0166
                                   Adams, CO                            
                                   Arapahoe, CO                         
                                   Denver, CO                           
                                   Douglas, CO                          
                                   Jefferson, CO                        
2120...........................  Des Moines, IA.........          0.8815
                                   Dallas, IA                           
                                   Polk, IA                             
                                   Warren, IA                           
2160...........................  *Detroit, MI...........          1.0724
                                   Lapeer, MI                           
                                   Macomb, MI                           
                                   Monroe, MI                           
                                   Oakland, MI                          
                                   St. Clair, MI                        
                                   Wayne, MI                            
2180...........................  Dothan, AL.............          0.7740
                                   Dale, AL                             
                                   Houston, AL                          
2190...........................  Dover, DE..............          0.8997
                                   Kent, DE                             
2200...........................  Dubuque, IA............          0.8112
                                   Dubuque, IA                          
2240...........................  Duluth-Superior, MN-WI.          0.9416
                                   St. Louis, MN                        
                                   Douglas, WI                          
2281...........................  Dutchess County, NY....          1.0589
                                   Dutchess, NY                         
2290...........................  Eau Claire, WI.........          0.8678
                                   Chippewa, WI                         
                                   Eau Claire, WI                       
2320...........................  El Paso, TX............          0.9464
                                   El Paso, TX                          
2330...........................  Elkhart-Goshen, IN.....          0.8801
                                   Elkhart, IN                          
2335...........................  Elmira, NY.............          0.8417
                                   Chemung, NY                          
2340...........................  Enid, OK...............          0.7862
                                   Garfield, OK                         
2360...........................  Erie, PA...............          0.9159
                                   Erie, PA                             
2400...........................  Eugene-Springfield, OR.          1.1271
                                   Lane, OR                             
2440...........................  Evansville-Henderson,            0.8983
                                  IN-KY.                                
                                   Posey, IN                            
                                   Vanderburgh, IN                      
                                   Warrick, IN                          
                                   Henderson, KY                        
2520...........................  Fargo-Moorhead, ND-MN..          0.9045
                                   Clay, MN                             
                                   Cass, ND                             
2560...........................  Fayetteville, NC.......          0.9007
                                   Cumberland, NC                       
2580...........................  Fayetteville-Springdale-         0.7220
                                  Rogers, AR.                           
                                   Benton, AR                           
                                   Washington, AR                       
2620...........................  Flagstaff, AZ-UT.......          0.9019
                                   Coconino, AZ                         

[[Page 35621]]

                                                                        
                                   Kane, UT                             
2640...........................  Flint, MI..............          1.1248
                                   Genesee, MI                          
2650...........................  Florence, AL...........          0.7938
                                   Colbert, AL                          
                                   Lauderdale, AL                       
2655...........................  Florence, SC...........          0.8594
                                   Florence, SC                         
2670...........................  Fort Collins-Loveland,           1.0562
                                  CO.                                   
                                   Larimer, CO                          
2680...........................  *Ft. Lauderdale, FL....          1.0548
                                   Broward, FL                          
2700...........................  Fort Myers-Cape Coral,           0.9032
                                  FL.                                   
                                   Lee, FL                              
2710...........................  Fort Pierce-Port St.             1.0169
                                  Lucie, FL.                            
                                   Martin, FL                           
                                   St. Lucie, FL                        
2720...........................  Fort Smith, AR-OK......          0.7864
                                   Crawford, AR                         
                                   Sebastian, AR                        
                                   Sequoyah, OK                         
2750...........................  Fort Walton Beach, FL..          0.9192
                                   Okaloosa, FL                         
2760...........................  Fort Wayne, IN.........          0.8800
                                   Adams, IN                            
                                   Allen, IN                            
                                   DeKalb, IN                           
                                   Huntington, IN                       
                                   Wells, IN                            
                                   Whitley, IN                          
2800...........................  *Forth Worth-Arlington,          1.0153
                                  TX.                                   
                                   Hood, TX                             
                                   Johnson, TX                          
                                   Parker, TX                           
                                   Tarrant, TX                          
2840...........................  Fresno, CA.............          1.1183
                                   Fresno, CA                           
                                   Madera, CA                           
2880...........................  Gadsden, AL............          0.8881
                                   Etowah, AL                           
2900...........................  Gainesville, FL........          0.9434
                                   Alachua, FL                          
2920...........................  Galveston-Texas City,            1.0997
                                  TX.                                   
                                   Galveston, TX                        
2960...........................  Gary, IN...............          0.9641
                                   Lake, IN                             
                                   Porter, IN                           
2975...........................  Glens Falls, NY........          0.8562
                                   Warren, NY                           
                                   Washington, NY                       
2980...........................  Goldsboro, NC..........          0.8393
                                   Wayne, NC                            
2985...........................  Grand Forks, ND-MN.....          0.9011
                                   Polk, MN                             
                                   Grand Forks, ND                      
2995...........................  Grand Junction, CO.....          0.8336
                                   Mesa, CO                             
3000...........................  Grand Rapids-Muskegon-           1.0119
                                  Holland, MI.                          
                                   Allegan, MI                          
                                   Kent, MI                             
                                   Muskegon, MI                         
                                   Ottawa, MI                           
3040...........................  Great Falls, MT........          0.8681
                                   Cascade, MT                          
3060...........................  Greeley, CO............          0.9690
                                   Weld, CO                             
3080...........................  Green Bay, WI..........          0.9038
                                   Brown, WI                            
3120...........................  *Greensboro-Winston-             0.9332
                                  Salem-High Point, NC.                 
                                   Alamance, NC                         
                                   Davidson, NC                         
                                   Davie, NC                            

[[Page 35622]]

                                                                        
                                   Forsyth, NC                          
                                   Guilford, NC                         
                                   Randolph, NC                         
                                   Stokes, NC                           
                                   Yadkin, NC                           
3150...........................  Greenville, NC.........          0.9078
                                   Pitt, NC                             
3160...........................  Greenville-Spartanburg-          0.8927
                                  Anderson, SC.                         
                                   Anderson, SC                         
                                   Cherokee, SC                         
                                   Greenville, SC                       
                                   Pickens, SC                          
                                   Spartanburg, SC                      
3180...........................  Hagerstown, MD.........          0.9175
                                   Washington, MD                       
3200...........................  Hamilton-Middletown, OH          0.9490
                                   Butler, OH                           
3240...........................  Harrisburg-Lebanon-              1.0158
                                  Carlisle, PA.                         
                                   Cumberland, PA                       
                                   Dauphin, PA                          
                                   Lebanon, PA                          
                                   Perry, PA                            
3283...........................  *Hartford, CT..........          1.2367
                                   Hartford, CT                         
                                   Litchfield, CT                       
                                   Middlesex, CT                        
                                   Tolland, CT                          
3285...........................  Hattiesburg, MS........          0.7252
                                   Forrest, MS                          
                                   Lamar, MS                            
3290...........................  Hickory-Morganton-               0.8626
                                  Lenoir, NC.                           
                                   Alexander, NC                        
                                   Burke, NC                            
                                   Caldwell, NC                         
                                   Catawba, NC                          
3320...........................  Honolulu, HI...........          1.1461
                                   Honolulu, HI                         
3350...........................  Houma, LA..............          0.7853
                                   Lafourche, LA                        
                                   Terrebonne, LA                       
3360...........................  *Houston, TX...........          1.0000
                                   Chambers, TX                         
                                   Fort Bend, TX                        
                                   Harris, TX                           
                                   Liberty, TX                          
                                   Montgomery, TX                       
                                   Waller, TX                           
3400...........................  Huntington-Ashland, WV-          0.9174
                                  KY-OH.                                
                                   Boyd, KY                             
                                   Carter, KY                           
                                   Greenup, KY                          
                                   Lawrence, OH                         
                                   Cabell, WV                           
                                   Wayne, WV                            
3440...........................  Huntsville, AL.........          0.8206
                                   Limestone, AL                        
                                   Madison, AL                          
3480...........................  *Indianapolis, IN......          0.9903
                                   Boone, IN                            
                                   Hamilton, IN                         
                                   Hancock, IN                          
                                   Hendricks, IN                        
                                   Johnson, IN                          
                                   Madison, IN                          
                                   Marion, IN                           
                                   Morgan, IN                           
                                   Shelby, IN                           
3500...........................  Iowa City, IA..........          0.9361
                                   Johnson, IA                          
3520...........................  Jackson, MI............          0.9045
                                   Jackson, MI                          
3560...........................  Jackson, MS............          0.7884

[[Page 35623]]

                                                                        
                                   Hinds, MS                            
                                   Madison, MS                          
                                   Rankin, MS                           
3580...........................  Jackson, TN............          0.8288
                                   Madison, TN                          
                                   Chester, TN                          
3600...........................  Jacksonville, FL.......          0.9086
                                   Clay, FL                             
                                   Duval, FL                            
                                   Nassau, FL                           
                                   St. Johns, FL                        
3605...........................  Jacksonville, NC.......          0.7055
                                   Onslow, NC                           
3610...........................  Jamestown, NY..........          0.7670
                                   Chautaqua, NY                        
3620...........................  Janesville-Beloit, WI..          0.8645
                                   Rock, WI                             
3640...........................  Jersey City, NJ........          1.1382
                                   Hudson, NJ                           
3660...........................  Johnson City-Kingsport-          0.8884
                                  Bristol, TN-VA.                       
                                   Carter, TN                           
                                   Hawkins, TN                          
                                   Sullivan, TN                         
                                   Unicoi, TN                           
                                   Washington, TN                       
                                   Bristol City, VA                     
                                   Scott, VA                            
                                   Washington, VA                       
3680...........................  Johnstown, PA..........          0.8398
                                   Cambria, PA                          
                                   Somerset, PA                         
3700...........................  Jonesboro, AR..........          0.7220
                                   Craighead, AR                        
3710...........................  Joplin, MO.............          0.7638
                                   Jasper, MO                           
                                   Newton, MO                           
3720...........................  Kalamazoo-Battlecreek,           1.0542
                                  MI.                                   
                                   Calhoun, MI                          
                                   Kalamazoo, MI                        
                                   Van Buren, MI                        
3740...........................  Kankakee, IL...........          0.9115
                                   Kankakee, IL                         
3760...........................  *Kansas City, KS-MO....          0.9478
                                   Johnson, KS                          
                                   Leavenworth, KS                      
                                   Miami, KS                            
                                   Wyandotte, KS                        
                                   Cass, MO                             
                                   Clay, MO                             
                                   Clinton, MO                          
                                   Jackson, MO                          
                                   Lafayette, MO                        
                                   Platte, MO                           
                                   Ray, MO                              
3800...........................  Kenosha, WI............          0.9145
                                   Kenosha, WI                          
3810...........................  Killeen-Temple, TX.....          1.0392
                                   Bell, TX                             
                                   Coryell, TX                          
3840...........................  Knoxville, TN..........          0.8502
                                   Anderson, TN                         
                                   Blount, TN                           
                                   Knox, TN                             
                                   Loudon, TN                           
                                   Sevier, TN                           
                                   Union, TN                            
3850...........................  Kokomo, IN.............          0.8590
                                   Howard, IN                           
                                   Tipton, IN                           
3870...........................  La Crosse, WI-MN.......          0.8618
                                   Houston, MN                          
                                   La Crosse, WI                        

[[Page 35624]]

                                                                        
3880...........................  Lafayette, LA..........          0.8163
                                   Acadia, LA                           
                                   Lafayette, LA                        
                                   St. Landry, LA                       
                                   St. Martin, LA                       
3920...........................  Lafayette, IN..........          0.8781
                                   Clinton, IN                          
                                   Tippecanoe, IN                       
3960...........................  Lake Charles, LA.......          0.8034
                                   Calcasieu, LA                        
3980...........................  Lakeland-Winter Haven,           0.8774
                                  FL.                                   
                                   Polk, FL                             
4000...........................  Lancaster, PA..........          0.9583
                                   Lancaster, PA                        
4040...........................  Lansing-East Lansing,            1.0010
                                  MI.                                   
                                   Clinton, MI                          
                                   Eaton, MI                            
                                   Ingham, MI                           
4080...........................  Laredo, TX.............          0.7073
                                   Webb, TX                             
4100...........................  Las Cruces, NM.........          0.8497
                                   Dona Ana, NM                         
4120...........................  *Las Vegas, NV-AZ......          1.0870
                                   Mohave, AZ                           
                                   Clark, NV                            
                                   Nye, NV                              
4150...........................  Lawrence, KS...........          0.8597
                                   Douglas, KS                          
4200...........................  Lawton, OK.............          0.8365
                                   Comanche, OK                         
4243...........................  Lewiston-Auburn, ME....          0.9410
                                   Androscoggin, ME                     
4280...........................  Lexington, KY..........          0.8293
                                   Bourbon, KY                          
                                   Clark, KY                            
                                   Fayette, KY                          
                                   Jessamine, KY                        
                                   Madison, KY                          
                                   Scott, KY                            
                                   Woodford, KY                         
4320...........................  Lima, OH...............          0.8732
                                   Allen, OH                            
                                   Auglaize, OH                         
4360...........................  Lincoln, NE............          0.9161
                                   Lancaster, NE                        
4400...........................  Little Rock-North                0.8597
                                  Little Rock, AR.                      
                                   Faulkner, AR                         
                                   Lonoke, AR                           
                                   Pulaski, AR                          
                                   Saline, AR                           
4420...........................  Longview-Marshall, TX..          0.8645
                                   Gregg, TX                            
                                   Harrison, TX                         
                                   Upshur, TX                           
4480*..........................  Los Angeles-Long Beach,          1.2343
                                  CA.                                   
                                   Los Angeles, CA                      
4520...........................  Louisville, KY-IN......          0.9447
                                   Clark, IN                            
                                   Floyd, IN                            
                                   Harrison, IN                         
                                   Scott, IN                            
                                   Bullitt, KY                          
                                   Jefferson, KY                        
                                   Oldham, KY                           
4600...........................  Lubbock, TX............          0.8510
                                   Lubbock, TX                          
4640...........................  Lynchburg, VA..........          0.8052
                                   Amherst, VA                          
                                   Bedford, VA                          
                                   Bedford City, VA                     
                                   Campbell, VA                         
                                   Lynchburg City, VA                   

[[Page 35625]]

                                                                        
4680...........................  Macon, GA..............          0.8824
                                   Bibb, GA                             
                                   Houston, GA                          
                                   Jones, GA                            
                                   Peach, GA                            
                                   Twiggs, GA                           
4720...........................  Madison, WI............          1.0021
                                   Dane, WI                             
4800...........................  Mansfield, OH..........          0.8524
                                   Crawford, OH                         
                                   Richland, OH                         
4840...........................  Mayaguez, PR...........          0.4215
                                   Anasco, PR                           
                                   Cabo Rojo, PR                        
                                   Hormigueros, PR                      
                                   Mayaguez, PR                         
                                   Sabana Grande, PR                    
                                   San German, PR                       
4880...........................  McAllen-Edinburg-                0.8485
                                  Mission, TX.                          
                                   Hidalgo, TX                          
4890...........................  Medford-Ashland, OR....          1.0068
                                   Jackson, OR                          
4900...........................  Melbourne-Titusville-            0.9068
                                  Palm Bay, FL.                         
                                   Brevard, Fl                          
4920...........................  *Memphis, TN-AR-MS.....          0.8166
                                   Crittenden, AR                       
                                   DeSoto, MS                           
                                   Fayette, TN                          
                                   Shelby, TN                           
                                   Tipton, TN                           
4940...........................  Merced, CA.............          1.0660
                                   Merced, CA                           
5000...........................  *Miami, FL.............          0.9938
                                   Dade, FL                             
5015...........................  *Middlesex-Somerset-             1.0883
                                  Hunterdon, NJ.                        
                                   Hunterdon, NJ                        
                                   Middlesex, NJ                        
                                   Somerset, NJ                         
5080...........................  *Milwaukee-Waukesha, WI          0.9645
                                   Milwaukee, WI                        
                                   Ozaukee, WI                          
                                   Washington, WI                       
                                   Waukesha, WI                         
5120...........................  *Minneapolis-St. Paul,           1.0777
                                  MN-WI.                                
                                   Anoka, MN                            
                                   Carver, MN                           
                                   Chisago, MN                          
                                   Dakota, MN                           
                                   Hennepin, MN                         
                                   Isanti, MN                           
                                   Ramsey, MN                           
                                   Scott, MN                            
                                   Sherburne, MN                        
                                   Washington, MN                       
                                   Wright, MN                           
                                   Pierce, WI                           
                                   St. Croix, WI                        
5160...........................  Mobile, AL.............          0.7981
                                   Baldwin, AL                          
                                   Mobile, AL                           
5170...........................  Modesto, CA............          1.0600
                                   Stanislaus, CA                       
5190...........................  *Monmouth-Ocean, NJ....          1.0833
                                   Monmouth, NJ                         
                                   Ocean, NJ                            
5200...........................  Monroe, LA.............          0.8211
                                   Ouachita, LA                         
5240...........................  Montgomery, AL.........          0.7876
                                   Autauga, AL                          
                                   Elmore, AL                           
                                   Montgomery, AL                       
5280...........................  Muncie, IN.............          0.9714

[[Page 35626]]

                                                                        
                                   Delaware, IN                         
5330...........................  Myrtle Beach, SC.......          0.7790
                                   Horry, SC                            
5345...........................  Naples, FL.............          1.0199
                                   Collier, FL                          
5360...........................  *Nashville, TN.........          0.9081
                                   Cheatham, TN                         
                                   Davidson, TN                         
                                   Dickson, TN                          
                                   Robertson, TN                        
                                   Rutherford TN                        
                                   Sumner, TN                           
                                   Williamson, TN                       
                                   Wilson, TN                           
5380...........................  *Nassau-Suffolk, NY....          1.3547
                                   Nassau, NY                           
                                   Suffolk, NY                          
5483...........................  *New Haven-Bridgeport-           1.2704
                                  Stamford-Danbury-                     
                                  Waterbury, CT.                        
                                   Fairfield, CT                        
                                   New Haven, CT                        
5523...........................  New London-Norwich, CT.          1.2262
                                   New London, CT                       
5560...........................  * New Orleans, LA......          0.9294
                                   Jefferson, LA                        
                                   Orleans, LA                          
                                   Plaquemines, LA                      
                                   St. Bernard, LA                      
                                   St. Charles, LA                      
                                   St. James, LA                        
                                   St. John Baptist, LA                 
                                   St. Tammany, LA                      
5600...........................  * New York, NY.........          1.4154
                                   Bronx, NY                            
                                   Kings, NY                            
                                   New York, NY                         
                                   Putnam, NY                           
                                   Queens, NY                           
                                   Richmond, NY                         
                                   Rockland, NY                         
                                   Westchester, NY                      
5640...........................  * Newark, NJ...........          1.1762
                                   Essex, NJ                            
                                   Morris, NJ                           
                                   Sussex, NJ                           
                                   Union, NJ                            
                                   Warren, NJ                           
5660...........................  Newburgh, NY-PA........          1.0803
                                   Orange, NY                           
                                   Pike, PA                             
5720...........................  * Norfolk-Virginia               0.8348
                                  Beach-Newport News, VA-               
                                  NC.                                   
                                   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..........          1.4991
                                   Alameda, CA                          
                                   Contra Costa, CA                     
5790...........................  Ocala, FL..............          0.9105
                                   Marion, FL                           
5800...........................  Odessa-Midland, TX.....          0.8482
                                   Ector, TX                            

[[Page 35627]]

                                                                        
                                   Midland, TX                          
5880...........................  * Oklahoma City, OK....          0.8371
                                   Canadian, OK                         
                                   Cleveland, OK                        
                                   Logan, OK                            
                                   McClain, OK                          
                                   Oklahoma, OK                         
                                   Pottawatomie, OK                     
5910...........................  Olympia, WA............          1.0689
                                   Thurston, WA                         
5920...........................  Omaha, NE-IA...........          0.9480
                                   Pottawattamie, IA                    
                                   Cass, NE                             
                                   Douglas, NE                          
                                   Sarpy, NE                            
                                   Washington, NE                       
5945...........................  * Orange County, CA....          1.1966
                                   Orange, CA                           
5960...........................  * Orlando, FL..........          0.9470
                                   Lake, FL                             
                                   Orange, FL                           
                                   Osceola, FL                          
                                   Seminole, FL                         
5990...........................  Owensboro, KY..........          0.7575
                                   Daviess, KY                          
6015...........................  Panama City, FL........          0.8061
                                   Bay, FL                              
6020...........................  Parkersburg-Marietta,            0.7877
                                  WV-OH.                                
                                   Washington, OH                       
                                   Wood, WV                             
6080...........................  Pensacola, FL..........          0.8202
                                   Escambia, FL                         
                                   Santa Rosa, FL                       
6120...........................  Peoria-Pekin, IL.......          0.8905
                                   Peoria, IL                           
                                   Tazewell, IL                         
                                   Woodford, IL                         
6160...........................  * Philadelphia, PA-NJ..          1.1237
                                   Burlington, NJ                       
                                   Camden, NJ                           
                                   Gloucester, NJ                       
                                   Salem, NJ                            
                                   Bucks, PA                            
                                   Chester, PA                          
                                   Delaware, PA                         
                                   Montgomery, PA                       
                                   Philadelphia, PA                     
6200...........................  * Phoenix-Mesa, AZ.....          0.9810
                                   Maricopa, AZ                         
                                   Pinal, AZ                            
6240...........................  Pine Bluff, AR.........          0.7886
                                   Jefferson, AR                        
6280...........................  *Pittsburgh, PA........          0.9701
                                   Allegheny, PA                        
                                   Beaver, PA                           
                                   Butler, PA                           
                                   Fayette, PA                          
                                   Washington, PA                       
                                   Westmoreland, PA                     
6323...........................  Pittsfield, MA.........          1.0552
                                   Berkshire, MA                        
6340...........................  Pocatelo, ID...........          0.8784
                                   Bannock ID                           
6360...........................  Ponce, PR..............          0.4685
                                   Guayanilla, PR                       
                                   Juana Diaz, PR                       
                                   Penuelas, PR                         
                                   Ponce, PR                            
                                   Villalba, PR                         
                                   Yauco, PR                            
6403...........................  Portland, ME...........          0.9619
                                   Cumberland, ME                       

[[Page 35628]]

                                                                        
                                   Sagadahoc, ME                        
                                   York, ME                             
6440...........................  *Portland-Vancouver, OR-         1.1235
                                  WA.                                   
                                   Clackamas, OR                        
                                   Columbia, OR                         
                                   Multnomah, OR                        
                                   Washington, OR                       
                                   Yamhill, OR                          
                                   Clark, WA                            
6483...........................  Providence-Warwick-              1.1092
                                  Pawtucket, RI.                        
                                   Bristol, RI                          
                                   Kent, RI                             
                                   Newport, RI                          
                                   Providence, RI                       
                                   Washington, RI                       
                                   Statewide, RI                        
6520...........................  Provo-Orem, UT.........         1.01116
                                   Utah, UT                             
6560...........................  Pueblo, CO.............          0.8284
                                   Pueblo, CO                           
6580...........................  Punta Gorda, FL........          0.8999
                                   Charlotte, FL                        
6600...........................  Racine, WI.............          0.8835
                                   Racine, WI                           
6640...........................  Raleigh-Durham-Chapel            0.9728
                                  Hill, NC.                             
                                   Chatham, NC                          
                                   Durham, NC                           
                                   Franklin, NC                         
                                   Johnston, NC                         
                                   Orange, NC                           
                                   Wake, NC                             
6660...........................  Rapid City, SD.........          0.8455
                                   Pennington, SD                       
6680...........................  Reading, PA............          0.9445
                                   Berks, PA                            
6690...........................  Redding, CA............          1.1605
                                   Shasta, CA                           
6720...........................  Reno, NV...............          1.1018
                                   Washoe, NV                           
6740...........................  Richland-Kennewick-              0.9970
                                  Pasco, WA.                            
                                   Benton, WA                           
                                   Franklin, WA                         
6760...........................  Richmond-Petersburg, VA          0.9194
                                   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                   1.1379
                                  Bernardino, CA.                       
                                   Riverside, CA                        
                                   San Bernardino, CA                   
6800...........................  Roanoke, VA............          0.8702
                                   Botetourt, VA                        
                                   Roanoke, VA                          
                                   Roanoke City, VA                     
                                   Salem City, VA                       
6820...........................  Rochester, MN..........          1.0428
                                   Olmsted, MN                          
6840...........................  *Rochester, NY.........          0.9649
                                   Genesee, NY                          
                                   Livingston, NY                       
                                   Monroe, NY                           
                                   Ontario, NY                          
                                   Orleans, NY                          

[[Page 35629]]

                                                                        
                                   Wayne, NY                            
6880...........................  Rockford, IL...........          0.8994
                                   Boone, IL                            
                                   Ogle, IL                             
                                   Winnebago, IL                        
6895...........................  Rocky Mount, NC........          0.8955
                                   Edgecombe, NC                        
                                   Nash, NC                             
6920...........................  *Sacramento, CA........          1.2351
                                   El Dorado, CA                        
                                   Placer, CA                           
                                   Sacramento, CA                       
6960...........................  Saginaw-Bay City-                0.9612
                                  Midland, MI.                          
                                   Bay, MI                              
                                   Midland, MI                          
                                   Saginaw, MI                          
6980...........................  St. Cloud, MN..........          0.9457
                                   Benton, MN                           
                                   Stearns, MN                          
7000...........................  St. Joseph, MO.........          0.8551
                                   Andrews, MO                          
                                   Buchanan, MO                         
7040...........................  *St. Louis, MO-IL......          0.9022
                                   Clinton, IL                          
                                   Jersey, IL                           
                                   Madison, IL                          
                                   Monroe, IL                           
                                   St. Clair, IL                        
                                   Franklin, MO                         
                                   Jefferson, MO                        
                                   Lincoln, MO                          
                                   St. Charles, MO                      
                                   St. Louis, MO                        
                                   St. Louis City, MO                   
                                   Warren, MO                           
7080...........................  Salem, OR..............          0.9728
                                   Marion, OR                           
                                   Polk, OR                             
7120...........................  Salinas, CA............          1.3803
                                   Monterey, CA                         
7160...........................  *Salt Lake City-Ogden,           0.9677
                                  UT.                                   
                                   Davis, UT                            
                                   Salt Lake, UT                        
                                   Weber, UT                            
7200...........................  San Angelo, TX.........          0.7577
                                   Tom Green, TX                        
7240...........................  *San Antonio, TX.......          0.8390
                                   Bexar, TX                            
                                   Comal, TX                            
                                   Guadalupe, TX                        
                                   Wilson, TX                           
7320...........................  *San Diego, CA.........          1.2134
                                   San Diego, CA                        
7360...........................  *San Francisco, CA.....          1.4260
                                   Marin, CA                            
                                   San Francisco, CA                    
                                   San Mateo, CA                        
7400...........................  *San Jose, CA..........          1.4519
                                   Santa Clara, CA                      
7440...........................  *San Juan-Bayamon, PR..          0.4506
                                   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                          

[[Page 35630]]

                                                                        
                                   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-                 1.1561
                                  Atascadero-Paso                       
                                  Robles, CA.                           
                                   San Luis Obispo, CA                  
7480...........................  Santa Barbara-Santa              1.1242
                                  Maria-Lompoc, CA.                     
                                   Santa Barbara, CA                    
7485...........................  Santa Cruz-Watsonville,          1.3520
                                  CA.                                   
                                   Santa Cruz, CA                       
7490...........................  Santa Fe, NM...........          1.0823
                                   Los Alamos, NM                       
                                   Santa Fe, NM                         
7500...........................  Santa Rosa, CA.........          1.2526
                                   Sonoma, CA                           
7510...........................  Sarasota-Bradenton, FL.          0.9789
                                   Manatee, FL                          
                                   Sarasota, FL                         
7520...........................  Savannah, GA...........          0.9649
                                   Bryan, GA                            
                                   Chatham, GA                          
                                   Effingham, GA                        
7560...........................  Scranton-Wilkes-Barre-           0.8752
                                  Hazleton, PA.                         
                                   Columbia, PA                         
                                   Lackawanna, PA                       
                                   Luzerne, PA                          
                                   Wyoming, PA                          
7600...........................  *Seattle-Bellevue-               1.1384
                                  Everett, WA.                          
                                   Island, WA                           
                                   King, WA                             
                                   Snohomish, WA                        
7610...........................  Sharon, PA.............          0.8885
                                   Mercer, PA                           
7620...........................  Sheboygan, WI..........          0.7764
                                   Sheboygan, WI                        
7640...........................  Sherman-Denison, TX....          0.8614
                                   Grayson, TX                          
7680...........................  Shreveport-Bossier               0.9359
                                  City, LA.                             
                                   Bossier, LA                          
                                   Caddo, LA                            
                                   Webster, LA                          
7720...........................  Sioux City, IA-NE......          0.8313
                                   Woodbury, IA                         
                                   Dakota, NE                           
7760...........................  Sioux Falls, SD........          0.8620
                                   Lincoln, SD                          
                                   Minnehaha, SD                        
7800...........................  South Bend, IN.........          0.9934
                                   St. Joseph, IN                       
7840...........................  Spokane, WA............          1.0524
                                   Spokane, WA                          
7880...........................  Springfield, IL........          0.8671
                                   Menard, IL                           
                                   Sangamon, IL                         
7920...........................  Springfield, MO........          0.7823
                                   Christian, MO                        
                                   Greene, MO                           
                                   Webster, MO                          

[[Page 35631]]

                                                                        
8003...........................  Springfield, MA........          1.0586
                                   Hampden, MA                          
                                   Hampshire, MA                        
8050...........................  State College, PA......          0.9538
                                   Centre, PA                           
8080...........................  Steubenville-Weirton,            0.8266
                                  OH-WV.                                
                                   Jefferson, OH                        
                                   Brooke, WV                           
                                   Hancock, WV                          
8120...........................  Stockton-Lodi, CA......          1.1330
                                   San Joaquin, CA                      
8140...........................  Sumter, SC.............          0.7699
                                   Sumter, SC                           
8160...........................  Syracuse, NY...........          0.9395
                                   Cayuga, NY                           
                                   Madison, NY                          
                                   Onondaga, NY                         
                                   Oswego, NY                           
8200...........................  Tacoma, WA.............          1.0860
                                   Pierce, WA                           
8240...........................  Tallahassee, FL........          0.8313
                                   Gadsden, FL                          
                                   Leon, FL                             
8280...........................  * Tampa-St. Petersburg-          0.9250
                                  Clearwater, FL.                       
                                   Hernando, FL                         
                                   Hillsborough, FL                     
                                   Pasco, FL                            
                                   Pinellas, FL                         
8320...........................  Terre Haute, IN........          0.8591
                                   Clay, IN                             
                                   Vermillion, IN                       
                                   Vigo, IN                             
8360...........................  Texarkana, AR-                   0.8503
                                  Texarkana, TX.                        
                                   Miller, AR                           
                                   Bowie, TX                            
8400...........................  Toledo, OH.............          1.0361
                                   Fulton, OH                           
                                   Lucas, OH                            
                                   Wood, OH                             
8440...........................  Topeka, KS.............          1.0086
                                   Shawnee, KS                          
8480...........................  Trenton, NJ............          1.0549
                                   Mercer, NJ                           
8520...........................  Tucson, AZ.............          0.9068
                                   Pima, AZ                             
8560...........................  Tulsa, OK..............          0.8095
                                   Creek, OK                            
                                   Osage, OK                            
                                   Rogers, OK                           
                                   Tulsa, OK                            
                                   Wagoner, OK                          
8600...........................  Tuscaloosa, AL.........          0.7784
                                   Tuscaloosa, AL                       
8640...........................  Tyler, TX..............          0.9996
                                   Smith, TX                            
8680...........................  Utica-Rome, NY.........          0.8413
                                   Herkimer, NY                         
                                   Oneida, NY                           
8720...........................  Vallejo-Fairfield-Napa,          1.3947
                                  CA.                                   
                                   Napa, CA                             
                                   Solano, CA                           
8735...........................  Ventura, CA............          1.1454
                                   Ventura, CA                          
8750...........................  Victoria, TX...........          0.8393
                                   Victoria, TX                         
8760...........................  Vineland-Millville-              0.9993
                                  Bridgeton, NJ.                        
                                   Cumberland, NJ                       
8780...........................  Visalia-Tulare-                  1.0151
                                  Porterville, CA.                      
                                   Tulare, CA                           
8800...........................  Waco, TX...............          0.7772
                                   McLennan, TX                         
8840...........................  *Washington, DC-MD-VA-           1.0823
                                  WV.                                   

[[Page 35632]]

                                                                        
                                   District of Columbia,                
                                  DC                                    
                                   Calvert, MD                          
                                   Charles, MD                          
                                   Frederick, MD                        
                                   Montgomery, MD                       
                                   Prince Georges, MD                   
                                   Alexandria City, VA                  
                                   Arlington, VA                        
                                   Clarke, VA                           
                                   Culpepper, VA                        
                                   Fairfax, VA                          
                                   Fairfax City, VA                     
                                   Falls Church City, VA                
                                   Fauquier, VA                         
                                   Fredericksburg City,                 
                                  VA                                    
                                   King George, VA                      
                                   Loudoun, VA                          
                                   Manassas City, VA                    
                                   Manassas Park City,                  
                                  VA                                    
                                   Prince William, VA                   
                                   Spotsylvania, VA                     
                                   Stafford, VA                         
                                   Warren, VA                           
                                   Berkeley, WV                         
                                   Jefferson, WV                        
8920...........................  Waterloo-Cedar Falls,            0.8705
                                  IA.                                   
                                   Black Hawk, IA                       
8940...........................  Wausau, WI.............          1.0323
                                   Marathon, WI                         
8960...........................  West Palm Beach-Boca             1.0202
                                  Raton, FL.                            
                                   Palm Beach, FL                       
9000...........................  Wheeling, OH-WV........          0.7563
                                   Belmont, OH                          
                                   Marshall, WV                         
                                   Ohio, WV                             
9040...........................  Wichita, KS............          0.9369
                                   Butler, KS                           
                                   Harvey, KS                           
                                   Sedgwick, KS                         
9080...........................  Wichita Falls, TX......          0.8041
                                   Archer, TX                           
                                   Wichita, TX                          
9140...........................  Williamsport, PA.......          0.8467
                                   Lycoming, PA                         
9160...........................  Wilmington-Newark, DE-           1.1315
                                  MD.                                   
                                   New Castle, DE                       
                                   Cecil, MD                            
9200...........................  Wilmington, NC.........          0.9046
                                   New Hanover, NC                      
                                   Brunswick, NC                        
9260...........................  Yakima, WA.............          1.0026
                                   Yakima, WA                           
9270...........................  Yolo, CA...............          1.1444
                                   Yolo, CA                             
9280...........................  York, PA...............          0.9104
                                   York, PA                             
9320...........................  Youngstown-Warren, OH..          0.9742
                                   Columbiana, OH                       
                                   Mahoning, OH                         
                                   Trumbull, OH                         
9340...........................  Yuba City, CA..........          1.0414
                                   Sutter, CA                           
                                   Yuba, CA                             
9360...........................  Yuma, AZ...............          0.9497
                                   Yuma, AZ                             
------------------------------------------------------------------------
* Large Urban Area.                                                     


[[Page 35633]]


                  Table 4b.--Wage Index for Rural Areas                 
------------------------------------------------------------------------
                       Nonurban area                          Wage index
------------------------------------------------------------------------
Alabama....................................................       0.7122
Alaska.....................................................       1.2444
Arizona....................................................       0.7928
Arkansas...................................................       0.6954
California.................................................       1.0002
Colorado...................................................       0.8092
Connecticut................................................       1.2759
Delaware...................................................       0.9447
Florida....................................................       0.8668
Georgia....................................................       0.7653
Hawaii.....................................................       1.0245
Idaho......................................................       0.8277
Illinois...................................................       0.7553
Indiana....................................................       0.8124
Iowa.......................................................       0.7373
Kansas.....................................................       0.7107
Kentucky...................................................       0.7753
Louisiana..................................................       0.7232
Maine......................................................       0.8317
Maryland...................................................       0.8427
Massachusetts..............................................       1.0070
Michigan...................................................       0.8830
Minnesota..................................................       0.8144
Mississippi................................................       0.6793
Missouri...................................................       0.7261
Montana....................................................       0.8128
Nebraska...................................................       0.7214
Nevada.....................................................       0.8775
New Hampshire..............................................       0.9745
New Jersey \1\.............................................             
New Mexico.................................................       0.8000
New York...................................................       0.8558
North Carolina.............................................       0.7950
North Dakota...............................................       0.7358
Ohio.......................................................       0.8332
Oklahoma...................................................       0.6942
Oregon.....................................................       0.9664
Pennsylvania...............................................       0.8453
Puerto Rico................................................       0.4026
Rhode Island \1\...........................................             
South Carolina.............................................       0.7668
South Dakota...............................................       0.7063
Tennessee..................................................       0.7341
Texas......................................................       0.7462
Utah.......................................................       0.8848
Vermont....................................................       0.8921
Virginia...................................................       0.7713
Washington.................................................       0.9933
West Virginia..............................................       0.7904
Wisconsin..................................................       0.8430
Wyoming....................................................      0.8177 
------------------------------------------------------------------------
\1\ All counties within the State are classified urban.                 


           Table 5.--Cost Reporting Year Adjustment Factor \1\          
------------------------------------------------------------------------
                                                                 The    
          If the HHA cost reporting period begins             adjustment
                                                              factor is 
------------------------------------------------------------------------
August 1, 1997.............................................      1.00251
September 1, 1997..........................................      1.00509
October 1, 1997............................................      1.00771
November 1, 1997...........................................      1.01038
December 1, 1997...........................................      1.01311
January 1, 1998............................................      1.01588
February 1,1998............................................      1.01871
March 1, 1998..............................................      1.02154
April 1, 1998..............................................      1.02435
May 1, 1998................................................      1.02714
June 1, 1998...............................................     1.02993 
------------------------------------------------------------------------
\1\ Based on compounded projected market basket inflation rates.        

    These adjustment factors are subject to change based on later 
estimates of cost increases.
    If, for any reason, we do not publish a new schedule of limits to 
be effective on July 1, 1998 or do not announce other changes in the 
current schedule by that date, the current limits will continue in 
effect. Intermediaries will be notified of the adjustment factors to be 
applied until a new schedule of limits or other provision is issued.

 Table 6.--Monthly Index Levels for Calculating Inflation Factors to Be 
                Applied to Home Health Agency Cost Limits               
------------------------------------------------------------------------
                           Month                             Index level
------------------------------------------------------------------------
July 1997..................................................      1.12866
August 1997................................................      1.13200
September 1997.............................................      1.13499
October 1997...............................................      1.13799
November 1997..............................................      1.14100
December 1997..............................................      1.14499
January 1998...............................................      1.14899
February 1998..............................................      1.15300
March 1998.................................................      1.15500
April 1998.................................................      1.15700
May 1998...................................................      1.15900
June 1998..................................................      1.16266
July 1998..................................................      1.16632
August 1998................................................      1.17000
September 1998.............................................      1.17299
October 1998...............................................      1.17599
November 1998..............................................      1.17900
December 1998..............................................      1.18266
January 1999...............................................      1.18632
February 1999..............................................      1.19000
March 1999.................................................      1.19233
April 1999.................................................      1.19466
May 1999...................................................     1.19700 
------------------------------------------------------------------------
Source: DRI/McGraw-Hill HCC, 1st QTR 1996; @USSIM/TREND 25YR0296 @CISSIM/
  CONTROL961.                                                           

XI. Regulatory Impact Statement

    For notices such as this, we generally prepare an initial 
regulatory flexibility analysis that is consistent with the Regulatory 
Flexibility Act (RFA) (5 U.S.C. 601 through 612) unless we certify that 
the notice will not have a significant economic impact on a substantial 
number of small entities. For purposes of the RFA, all HHAs are treated 
as small entities.
    As discussed below, this notice has an impact of less than $5 
million on aggregate Medicare expenditures and we have no evidence that 
the economic impact on most HHAs will be significant. Moreover, this 
notice is necessary to implement the provisions of section 
1861(v)(1)(L) of the Act; thus no alternatives to the provisions set 
forth in this notice are available. However, because this notice may 
have some effect on a large number of providers, we are providing a 
voluntary regulatory flexibility analysis.
    This notice with comment period sets forth a revised schedule of 
HHA cost limits for cost reporting periods beginning on or after July 
1, 1997. The methodology used to develop the schedule of limits set 
forth in this notice is the same as that used in setting the limits 
effective July 1, l996. In accordance with section 1861(v)(1)(L)(I) of 
the Act, we are continuing to set the limits not to exceed 112 percent 
of the mean of the labor-related and nonlabor per-visit costs for 
freestanding HHAs. As required by section 1861(v)(1)(L)(iii) of the 
Act, we are using the most recent hospital wage index to calculate the 
HHA cost limits, that is, the hospital wage index effective for 
discharges on or after October 1, 1996, which is based on 1993 wage 
survey data. The wage index is used to adjust the labor-related portion 
of the limits to reflect differing wage levels among areas. As 
discussed in section II. of this notice, we are applying a budget 
neutrality adjustment factor of 1.078 to the labor-related portion of 
the limits to ensure that aggregate payments to HHAs are not affected 
by the updating of the wage index. Based on the database used to 
calculate the cost limits, there is no significant discernable 
redistribution of expenditures between types of agencies (freestanding 
or hospital-based) or regions as a result of this notice.
    We are using settled cost report data from Medicare cost reports 
for cost reporting periods ending on or after June 30, 1991, and 
settled before October 1, 1995, to develop the HHA cost-per visit limit 
values for each type of home health service: skilled nursing care, 
physical therapy, speech pathology, occupational therapy, medical 
social services, and home health aide. The majority of the cost reports 
were from FY 1993. The data have been adjusted by the most recent 
market basket factors to reflect the expected cost increases occurring 
between the cost reporting periods for the data contained in the 
database and June 30, 1998. The intermediary determines the aggregate 
cost limit for each HHA by multiplying the number of Medicare visits 
for each type of service furnished by the HHA by the respective

[[Page 35634]]

per-visit cost limit. Each HHA's aggregate limit cannot be determined 
prospectively, but depends on each HHA's Medicare visits for each type 
of service and actual costs for the cost reporting period subject to 
this notice.
    The methodology used to calculate these new limits is the same as 
the 1996 cost limit methodology. The projected aggregate Medicare 
expenditures under the new limits are approximately equal to the 
projected aggregate expenditures under the old limits in effect for 
cost reporting periods beginning on or after July 1, 1996, updated by 
the market basket increases since those limits took effect. In the 
absence of this notice, these market basket increases will still take 
effect under current law. Therefore, this notice is expected to change 
Medicare expenditures by less than $5 million.
    The cost limits for HHAs are statutorily driven and the impact of 
the market basket increases has already been reflected in the current 
law baseline of the President's FY 1998 budget.
    We are unable to identify the effects of changes to the cost limits 
on individual HHAs. In general, we believe that most HHAs will 
experience small revenue increases under the new limits; the degree of 
that increase will vary depending on the proportion of an HHA's 
revenues that come from Medicare, the distribution of services provided 
by the HHA, and the HHA's ability to operate within the cost limits. As 
stated earlier, there is no significant discernable redistribution 
effect between freestanding and hospital-based home health agencies in 
the aggregate.
    Table 7 below illustrates the proportion of HHAs that are likely to 
be affected by the limits. The results are based on both the data used 
to determine the limits and all available settled hospital-based cost 
reports for the same time period:

                Table 7.--HHAs Exceeding the Cost Limits                
------------------------------------------------------------------------
                                                              Percentage
                                     HHAs in        HHAs       of HHAs  
                                     database    exceeding    exceeding 
                                                 the limits   the limits
------------------------------------------------------------------------
Total HHAs.......................         4986         1569           31
Freestanding.....................         3202          698           22
Hospital-based...................         1784          871           49
------------------------------------------------------------------------

    Section 1102(b) of the Act requires the Secretary to prepare a 
regulatory impact analysis if a notice 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. 
For purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital located outside a Metropolitan Statistical Area 
with fewer than 50 beds.
    We are not preparing a rural impact statement because we have 
determined, and certify, that this notice will not have a significant 
impact on a substantial number of rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

XII. Other Required Information

A. Waiver of Proposed Notice

    In adopting notices such as this, we ordinarily publish a proposed 
notice in the Federal Register with a 60-day period for public comment 
as required under section 1871(b)(1) of the Act. However, we may waive 
this procedure if we find good cause that prior notice and comment are 
impracticable, unnecessary or contrary to public interest.
    Section 1861(v)(1)(L)(iii) of the Act requires that the Secretary 
establish revised HHA cost limits for cost reporting periods beginning 
on or after July 1, 1991 and annually thereafter (except for cost 
reporting periods beginning on or after July 1, 1994 and before July 1, 
1996). As discussed in section III above, in accordance with the 
statute, we have used the same methodology to develop the schedule of 
limits that was used in setting the limits effective for cost reporting 
periods beginning on or after July 1, 1996. The cost limits have been 
updated by the appropriate market basket adjustment factor to reflect 
the cost increases occurring between the cost reporting periods for the 
data contained in the database and June 30, 1998. In addition, as 
required under section 1861(v)(1)(L)(iii) of the Act, we have updated 
the wage index using the most recent hospital wage index.
    If HHAs are to receive timely the benefits of these new cost limits 
based on the updated wage index and market basket adjustment factors, 
it is necessary that these limits be published in time to take effect 
for cost reporting periods beginning on or after July 1, 1997. Because 
the methodology used to develop this schedule of limits is for the most 
part dictated by the statute and has been previously published for 
public comment, we believe that in this instance it would be 
impracticable, unnecessary and contrary to the public interest to 
publish a proposed notice. Therefore, we find good cause to waive 
publication of a proposed notice. However, we are providing a 60-day 
period for public comment, as indicated at the beginning of this 
notice.

C. Public Comments

    Because of the large number of items of correspondence we normally 
receive on a notice with comment period, we are not able to acknowledge 
or respond to them individually. However, we will consider all comments 
concerning the provisions of this notice that we receive by the date 
and time specified in the Dates section of this notice, and we will 
respond to those comments in a subsequent notice.

    Authority: Section 1861(v)(1)(L) of the Social Security Act (42 
U.S.C. 1395x(v)(1)(L)); section 4207(d) of Pub. L. 101-508 (42 
U.S.C. 1395x (note)).

(Catalog of Federal Domestic Assistance Program No. 93.773 
Medicare--Hospital Insurance)

    Dated: April 9, 1997.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.

    Dated: April 30, 1997.
Donna E. Shalala,
Secretary.
[FR Doc. 97-17235 Filed 6-30-97; 8:45 am]
BILLING CODE 4120-01-P