[Federal Register Volume 62, Number 190 (Wednesday, October 1, 1997)]
[Notices]
[Pages 51551-51552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25986]



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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration
[BPD-896-PN]
RIN 0938-AL14


Medicare Program; Adjustments to Cost Limits for Skilled Nursing 
Facility Inpatient Routine Service Costs

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

ACTION: Proposed notice.

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SUMMARY: This notice proposes to eliminate an adjustment that we make 
to the Medicare cost limits for skilled nursing facility (SNF) routine 
services if the final rate of change in the market basket index for a 
calendar year that we use to set the limits differs from the estimated 
rate of change in the index by at least 0.3 percentage points. 
Elsewhere in this issue of the Federal Register is a separate final 
notice with comment period that explains the methodology we use to 
develop the cost limits and sets forth the cost limits applicable to 
cost reporting periods occurring on or after October 1, 1997.

COMMENT PERIOD: Written comments will be considered if we receive them 
at the appropriate address, as provided below, no later than 5:00 p.m. 
on December 1, 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-896-PN, P.O. Box 7517, 
Baltimore, MD 21244-0517.
    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, 200 Independence Avenue, SW, Washington, DC 
20201, or Room C5-09-26, 7500 Security Boulevard, Baltimore, MD 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-896-PN. 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).
    Copies: To order copies of the Federal Register containing this 
document, send your request to: New Orders, Superintendent of 
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date 
of the issue requested and enclose a check or money order payable to 
the Superintendent of Documents, or enclose your Visa or Master Card 
number and expiration date. Credit card orders can also be placed by 
calling the order desk at (202) 512-1800 or by faxing to (202) 512-
2250. The cost for each copy is $8.00. As an alternative, you can view 
and photocopy the Federal Register document at most libraries 
designated as Federal Depository Libraries and at many other public and 
academic libraries throughout the country that receive the Federal 
Register.

FOR FURTHER INFORMATION CONTACT: Robert Kuhl, (410) 786-4597.

SUPPLEMENTARY INFORMATION:

I. Background

    Sections 1861(v)(1)(A) and 1888 of the Act authorize the Secretary 
to set limits on allowable costs incurred by a provider of services for 
which payment may be made under Medicare. These limits are based on 
estimates of the costs necessary for the efficient delivery of needed 
health services. Section 1888(a) of the Act directs the Secretary to 
set limits on per diem inpatient routine service costs for hospital-
based and freestanding SNFs by urban or rural area. Implementing 
regulations appear at 42 CFR 413.30.
    Elsewhere is this issue of the Federal Register, we are issuing a 
final notice with comment period that announces, for cost reporting 
periods beginning in FY 1998 (1) an updated schedule of limits on SNF 
routine service costs for which payment may be made under the Medicare 
program; and (2) an updated schedule of prospectively determined 
payment rates for low Medicare volume SNFs that have elected to receive 
prospective payments for routine service costs, as required under 
section 1888(a) of the Act. The cost limits have been updated to 
reflect changes to the wage data, the Metropolitan Statistical Area 
(MSA) designations, and inflation data since the limits were last 
issued.
    The cost limits set forth in the separate notice are based on the 
FY 1997 cost limits, trended to cost reporting periods beginning in FY 
1998, using the most recent projections of the rates of inflation or 
increase in the costs included in the SNF market basket index. The 
market basket index is used to adjust the SNF cost data to reflect cost 
increases occurring between the cost reporting periods represented in 
the data collection and the midpoints of the cost reporting periods to 
which the cost limits and rates apply. The market basket index is 
comprised of the most commonly used categories of SNF routine service 
expenses. The categories are based primarily on those used by the 
National Center for Health Statistics in its National Nursing Home 
Surveys.
    The categories of expenses are weighted according to the estimated 
proportion of SNF routine service costs attributable to each category. 
A detailed description of the market basket index is described in the 
October 7, 1992 Federal Register notice for cost limits (57 FR 46177).

II. Provisions of the Proposed Notice

    In developing the market basket index, we obtain historical and 
projected (estimated) rates of change in the price of goods and 
services in each category. For cost limit purposes only, estimated 
rates of change may be revised, retroactively, based on actual (final) 
rates of change.
    As described in all previous schedules of cost limits, if the final 
rate of change in the market basket index for a calendar year differs 
from the estimated rate of change by at least 0.3 percentage points, we 
adjust the limits. We are proposing to eliminate this provision to 
adjust the limits based on the following justification:
    In the past, our determination to make this adjustment was made 6 
months after the end of last calendar year where an estimate of change 
was used. Since 1984, we have made several adjustments to the cost 
limits because our estimates differed from the actual rates of change 
by at least 0.3 percentage points. In some cases, the retroactive 
adjustment was made to cost reports that had been settled for Medicare 
reimbursement purposes for more than 2 years. We believe that the 
original intent behind setting cost limits was to help providers 
determine their cost limits prior to the beginning of the affected cost 
reporting period. In addition, for the most part, these adjustments 
have not been significant in relation to the financial insecurity 
placed on providers and the administrative burden placed on the 
Medicare fiscal intermediaries to

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implement the adjustments. We believe that this retroactive adjustment 
has not served a useful purpose based on past experience. Accordingly, 
we believe it is administratively feasible to propose the elimination 
of this provision. If, based on our analysis of public comments we 
receive, we finalize the elimination of the adjustment, the effect of 
that elimination will be made on a prospective basis.

III. Impact Statement

    For proposed notices such as this, we generally prepare a 
regulatory flexibility analysis that is consistent with the Regulatory 
Flexibility Act (RFA) (5 U.S.C. 601 through 612) unless we certify that 
a proposed notice would not have a significant economic impact on a 
substantial number of small entities. For purposes of the RFA, all SNFs 
are considered to be small entities. Individuals and States are not 
included in the definition of a small entity.
    We have determined, and we certify, that a regulatory flexibility 
analysis under the RFA is not required. As stated earlier in this 
notice, we believe it is administratively feasible to propose 
elimination of the adjustment provision to the cost limits. For the 
most part, these adjustments have not been significant in relation to 
the financial insecurity placed on providers and the administrative 
burden placed on the Medicare fiscal intermediaries to implement the 
adjustments. In addition, based on past experience, the retroactive 
adjustments have not served a useful purpose.
    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis if a notice such as this 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 604 of the 
RFA. For purposes of section 1102(b) of the Act, we define a small 
rural hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 50 beds.
    We have not prepared a rural impact statement since we have 
determined that this proposed notice would not have a significant 
economic impact on the operations of a substantial number of small 
rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

IV. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comment, we are not 
able to acknowledge or respond to them individually. We will consider 
all comments we receive by the date and time specified in the DATES 
section of this notice, and, if we proceed with a subsequent document, 
we will respond to the comments in that document.

    Authority: (Secs. 1102, 1814(b), 1861(v)(1), 1866(a), 1871, and 
1888 of the Social Security Act (42 U.S.C. 1302, 1395f(b), 
1395x(v)(1), 1395cc(a), 1395hh, and 1395yy); section 13503 of Pub. 
L. 103-66 (42 U.S.C. 1395x(v)(1)(B) and 1395yy (note)) and 42 CFR 
413.1, 413.24, 413.300 through 413.321).

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

    Dated: September 25, 1997.
Nancy-Ann Min DeParle,
Deputy Administrator, Health Care Financing Administration.

    Dated: September 25, 1997.
Donna E. Shalala,
Secretary.
[FR Doc. 97-25986 Filed 9-30-97; 8:45 am]
BILLING CODE 4120-01-P