[Federal Register Volume 62, Number 211 (Friday, October 31, 1997)]
[Notices]
[Pages 59261-59266]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29028]



  Federal Register / Vol. 62, No. 211 / Friday, October 31, 1997 / 
Notices  

[[Page 59261]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration
[BPD-893-FN]
RIN 0938-AI16


Medicare Program; Physician Fee Schedule Conversion Factor for 
Calendar Year 1998 and Sustainable Growth Rate for Fiscal Year 1998

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

ACTION: Final notice.

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

SUMMARY: This final notice announces the calendar year 1998 Medicare 
physician fee schedule conversion factor and the fiscal year 1998 
sustainable growth rate for expenditures for physicians' services under 
the Medicare Supplementary Medical Insurance (Part B) program as 
required by sections 1848(d) and (f), respectively, of the Social 
Security Act. The 1998 Medicare physician fee schedule conversion 
factor is $36.6873. The sustainable growth rate for fiscal year 1998 is 
1.5 percent.

EFFECTIVE DATE: The provisions in this final notice pertaining to the 
Medicare sustainable growth rate of increase are effective October 1, 
1997, and the provisions pertaining to the Medicare physician fee 
schedule conversion factor are effective January 1, 1998, as provided 
by the Medicare statute.

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FOR FURTHER INFORMATION CONTACT: Ordering information: See ADDRESSES 
section.
    Content information: Don Thompson, (410) 786-4586.

SUPPLEMENTARY INFORMATION:

I. Background and Summary of Legislation

    The following discussion contains references to the conversion 
factor and relative value units as components of the Medicare physician 
fee schedule. The 1998 physician fee schedule final rule, published 
elsewhere in this Federal Register issue, explains how these factors 
are used in determining payments under the fee schedule.

A. Calendar Year 1998 Physician Fee Schedule Conversion Factor

    There are currently three conversion factors used in the physician 
fee schedule: one for primary care services, one for surgical services, 
and one for all other services. However, section 1848(d)(1)(C) of the 
Social Security Act (the Act), as amended by section 4501 of the 
Balanced Budget Act of 1997 (BBA 1997) (Pub. L. 105-33), enacted on 
August 5, 1997, states that the 1998 physician fee schedule conversion 
factor for all services ``shall be the conversion factor for primary 
care services for 1997, increased by the Secretary's estimate of the 
weighted average of the three separate updates that would otherwise 
occur were it not for the enactment of . . . the Balanced Budget Act of 
1997.''
    The conversion factor is also affected by section 
1848(c)(2)(B)(ii)(II) of the Act, which requires that any changes to 
the relative value units of the Medicare physician fee schedule not 
cause expenditures to increase or decrease by more than $20 million 
from the amount of expenditures that would have been made if such 
adjustments had not been made. We implement this requirement through a 
uniform budget neutrality adjustment to the conversion factor.

B. Fiscal Year 1998 Medicare Sustainable Growth Rate

    Section 1848(f) of the Act, as amended by section 4503 of the BBA 
1997, replaces the volume performance standard with a sustainable 
growth rate standard. It specifies the formula for establishing yearly 
sustainable growth rate expenditure targets for physicians' services 
under Medicare. The use of sustainable growth rate targets is intended 
to control the actual growth in Medicare expenditures for physicians' 
services.
    The sustainable growth rate targets are not limits on expenditures. 
Payments for services are not withheld if the sustainable growth rate 
target is exceeded. Rather, the appropriate fee schedule update, as 
specified in section 1848(d)(3)(A) of the Act, is adjusted to reflect 
the success or failure in meeting the sustainable growth rate target.
    The amended section 1848(f)(2) of the Act now states that ``the 
sustainable growth rate for all physicians' services for a fiscal year 
(beginning with fiscal year 1998) shall be equal to the product of--
    (A) 1.0 plus the Secretary's estimate of the weighted-average 
percentage increase (divided by 100) in the fees for all physicians' 
services in the fiscal year involved,
    (B) 1.0 plus the Secretary's estimate of the percentage change 
(divided by 100) in the average number of individuals enrolled under 
this part (other than Medicare+Choice plan enrollees) from the previous 
fiscal year to the fiscal year involved,
    (C) 1.0 plus the Secretary's estimate of the projected percentage 
growth in real gross domestic product per capita (divided by 100) from 
the previous fiscal year to the year involved, and
    (D) 1.0 plus the Secretary's estimate of the percentage change 
(divided by 100) in expenditures for all physicians' services in the 
fiscal year (compared with the previous fiscal year) that will result 
from changes in law or regulations determined without taking into 
account estimated changes in

[[Page 59262]]

expenditures resulting from the update adjustment factor determined 
under subsection (d)(3)(B), minus 1 and multiplied by 100.

C. Physicians' Services

    Because the scope of physicians' services covered by the 
sustainable growth rate is identical to the scope of services that was 
covered by the Medicare volume performance standards, we are using the 
same definition of physicians' services for the sustainable growth rate 
as we did for the Medicare volume performance standard. The November 
22, 1996 final notice (61 FR 59717) announcing the fiscal year 1997 
volume performance standard rates of increase contains a detailed 
description of this scope of services.

II. Provisions of This Final Notice

A. Calendar Year 1998 Physician Fee Schedule Conversion Factor

    Under the requirements of the amended section 1848(d)(1)(C) of the 
Act, the 1998 physician fee schedule conversion factor is $36.6873. We 
determined this conversion factor as follows:

1997 Primary care conversion factor...........................   35.7671
Weighted average update if BBA 1997 not enacted...............     1.034
Budget neutrality adjustment*.................................     0.992
1998 Physician fee schedule conversion factor.................  36.6873 
                                                                        
* This adjustment results from section 1848(c)(2)(B)(ii) of the Act and 
  is described in the 1998 physician fee schedule final rule, published 
  elsewhere in this Federal Register issue.                             

    Under the requirements of section 1848(d)(1)(D) of the Act, as 
amended by section 4504 of the BBA 1997, the 1998 anesthesia conversion 
factor is equal to 46 percent of the 1998 physician fee schedule 
conversion factor. This calculation yields a 1998 anesthesia conversion 
factor of $16.8762.
    The specific calculations to determine the conversion factor for 
physicians' services for calendar year 1998 are explained in section 
III. A. of this notice.
    The following table shows the combined effect on calendar year 1998 
payments (relative to calendar year 1997) of the move to a single 
conversion factor and the changes to the 1998 Medicare physician fee 
schedule relative value units (described in the 1998 physician fee 
schedule final rule published elsewhere in this Federal Register 
issue).

         Table 1.--1998 Percent Change in Payments by Specialty*        
------------------------------------------------------------------------
                                    Change due                          
                                    to single    Change due    Combined 
            Specialty               conversion  to relative     change  
                                      factor    value units             
------------------------------------------------------------------------
M.D./D.O. Physicians:                                                   
Radiation Oncology...............          9.2         -0.7          8.4
    Psychiatry...................          9.0         -0.7          8.2
    Radiology....................          9.0         -0.7          8.2
    Pathology....................          9.3         -1.1          8.1
    Hematology/Oncology..........          7.1          0.8          8.0
    Neurology....................          7.9          0.0          7.9
    Pulmonary....................          8.1         -0.4          7.7
    Rheumatology.................          5.7          1.4          7.2
    Gastroenterology.............          8.5         -1.3          7.1
    Internal Medicine............          6.4          0.6          7.0
    Family Practice..............          5.0          1.3          6.4
    Cardiology...................          7.9         -1.4          6.4
    Other Physician..............          6.4         -0.2          6.2
    General Practice.............          4.7          1.2          6.0
    Nephrology...................          6.0         -1.2          4.7
    Clinics......................          4.5         -0.1          4.4
    Emergency Medicine...........          3.8         -0.6          3.2
    Anesthesiology...............          1.2          0.9          2.1
    Obstetrics/Gynecology........         -2.3          3.0          0.6
    Otolaryngology...............         -0.1          0.6          0.5
    General Surgery..............         -4.0          1.8         -2.3
    Vascular Surgery.............         -4.0          1.5         -2.6
    Urology......................         -3.3          0.4         -2.9
    Orthopedic Surgery...........         -4.8          0.8         -4.0
    Dermatology..................         -4.8          0.2         -4.6
    Plastic Surgery..............         -6.9          1.7         -5.3
    Ophthalmology................         -3.3         -2.6         -5.8
    Neurosurgery.................         -5.7         -0.2         -5.9
    Thoracic Surgery.............         -7.0         -0.2         -7.2
    Cardiac Surgery..............         -8.1         -0.7         -8.8
Others:                                                                 
    Chiropractic.................          9.3         -0.8          8.4
    Suppliers....................          9.3         -1.0          8.2
    Optometry....................          5.7          0.1          5.8
    Nonphysician practitioners...          5.1         -0.6          4.5
    Podiatry.....................         -5.2          0.8        -4.4 
------------------------------------------------------------------------
* Table reflects changes from 1997 payments due to the relative value   
  units and single conversion factor, excluding the 0.3 percent volume  
  and intensity increase associated with the single conversion factor   
  and the 0.1 percent volume and intensity increase associated with the 
  relative value unit changes.                                          


[[Page 59263]]

B. Physician Sustainable Growth Rate for Fiscal Year 1998

    Under the requirements in sections 1848(f)(2)(A) and (B) of the 
Act, as amended by section 4503 of the BBA 1997, we have determined 
that the sustainable growth rate of increase for physicians' services 
for fiscal year 1998 is 1.5 percent.
    This determination is based on the following statutory factors:

------------------------------------------------------------------------
                                                                Percent 
                      Statutory factors                          change 
------------------------------------------------------------------------
Fees.........................................................        2.3
Enrollment...................................................       -2.4
Increase in Gross Domestic Product...........................        1.1
Legislation..................................................        0.6
                                                              ----------
Total........................................................        1.5
------------------------------------------------------------------------

    The specific calculations to determine the sustainable growth rate 
for physicians' services for fiscal year 1998 are explained in section 
III. B. of this notice.

III. Detail on Calculation of the Calendar Year 1998 Physician Fee 
Schedule Conversion Factor and the Fiscal Year 1998 Sustainable Growth 
Rate

A. Physician Fee Schedule Conversion Factor

1. The Weighted Average Update
    The weighted average update if the BBA 1997 had not been enacted is 
3.4 percent. This was determined based on the Medicare Economic Index 
(MEI) and the Medicare volume performance standard (MVPS) adjustments 
as follows:

------------------------------------------------------------------------
                                                                Update  
             Service                 1998 MEI       MVPS      (prior to 
                                                 adjustment   BBA 1997) 
------------------------------------------------------------------------
                                                                        
(2)[In Percent]                                                         
                                  --------------------------------------
Primary Care.....................          2.2          5.3          7.5
Surgical.........................          2.2          0.3          2.5
All other........................          2.2         -0.3          1.9
Weighted average.................  ...........  ...........          3.4
------------------------------------------------------------------------

    The MEI and the MVPS adjustments are described below.
2. The Percentage Change in the Medicare Economic Index
    The MEI measures the weighted-average annual price change for 
various inputs needed to produce physicians' services. The MEI is a 
fixed-weight input price index, with an adjustment for the change in 
economy-wide labor productivity. This index, which has 1989 base 
weights, is comprised of two broad categories: (1) Physician's own 
time, and (2) physician's practice expense.
    The physician's own time component represents the net income 
portion of business receipts and primarily reflects the input of the 
physician's own time into the production of physicians' services in 
physicians' offices. This category consists of two subcomponents: wages 
and salaries, and fringe benefits. These components are adjusted by the 
10-year moving average percent change in output per man-hour for the 
nonfarm business sector to eliminate double counting for productivity 
growth in physicians' offices and the general economy.
    The physician's practice expense category represents the rate of 
price growth in nonphysician inputs to the production of services in 
physicians' offices. This category consists of wages and salaries and 
fringe benefits for nonphysician staff and other nonlabor inputs. Like 
physician's own time, the nonphysician staff categories are adjusted 
for productivity using the 10-year moving average percent change in 
output per man-hour for the nonfarm business sector. The physician's 
practice expense component also includes the following categories of 
nonlabor inputs: office expense, medical materials and supplies, 
professional liability insurance, medical equipment, professional car, 
and other expense. The table below presents a listing of the MEI cost 
categories with associated weights and percent changes for price 
proxies for the 1998 update. The calendar year 1998 MEI is 2.2 percent.

  Increase in the Medicare Economic Index Update for Calendar Year 1998 
                                   \1\                                  
------------------------------------------------------------------------
                                                               CY 1998  
                                                    1989       percent  
                                                weights \2\    changes  
------------------------------------------------------------------------
Medicare Economic Index Total.................        100.0          2.2
    1. Physician's Own Time\3\ \4\............         54.2          2.5
        a. Wages and Salaries: Average hourly                           
         earnings private nonfarm, net of                               
         productivity.........................         45.3          2.8
        b. Fringe Benefits: Employment Cost                             
         Index, benefits, private nonfarm, net                          
         of productivity......................          8.8          1.2
    2. Physician's Practice Expense \3\.......         45.8          1.9
        a. Nonphysician Employee Compensation.         16.3          2.4
            1. Wages and Salaries: Employment                           
             Cost Index, wages and salaries,                            
             weighted by occupation, net of                             
             productivity.....................         13.8          2.6
            2. Fringe Benefits: Employment                              
             Cost Index, fringe benefits,                               
             white collar, net of productivity          2.5          1.4
        b. Office Expense: Consumer Price                               
         Index for Urban Consumers (CPI-U),                             
         housing..............................         10.3          2.9
        c. Medical Materials and Supplies:                              
         Producer Price Index (PPI), ethical                            
         drugs/PPI, surgical appliances and                             
         supplies/CPI-U, medical equipment and                          
         supplies (equally weighted)..........          5.2          1.6
        d. Professional Liability Insurance:                            
         HCFA professional liability insurance                          
         survey\5\............................          4.8         -1.8
        e. Medical Equipment: PPI, medical                              
         instruments and equipment............          2.3         -0.4
        f. Other Professional Expense.........          6.9          2.5
            1. Professional Car: CPI-U,                                 
             private transportation...........          1.4          2.3
            2. Other: CPI-U, all items less                             
             food and energy..................          5.5          2.6

[[Page 59264]]

                                                                        
Addendum:                                                               
    Productivity: 10-year moving average of                             
     output per man-hour, nonfarm business                              
     sector...................................          N/A          0.8
    Physician's Own Time, not productivity                              
     adjusted.................................         54.2          3.3
        Wages and salaries, not productivity                            
         adjusted.............................         45.3          3.6
        Fringe benefits, not productivity                               
         adjusted.............................          8.8          2.0
    Nonphysician Employee Compensation, not                             
     productivity adjusted....................         16.3          3.2
        Wages and salaries, not productivity                            
         adjusted.............................         13.8          3.4
        Fringe benefits, not productivity                               
         adjusted.............................          2.5         2.2 
------------------------------------------------------------------------
\1\ The rates of change are for the 12-month period ending June 30,     
  1997, which is the period used for computing the calendar year 1998   
  update. The price proxy values are based upon the latest available    
  Bureau of Labor Statistics data as of September 1997.                 
\2\ The weights shown for the MEI components are the 1989 base-year     
  weights, which may not sum to subtotals or totals because of rounding.
  The MEI is a fixed-weight, Laspeyres-type input price index whose     
  category weights indicate the distribution of expenditures among the  
  inputs to physicians' services for calendar year 1989. To determine   
  the MEI level for a given year, the price proxy level for each        
  component is multiplied by its 1989 weight. The sum of these products 
  (weights multiplied by the price index levels) over all cost          
  categories yields the composite MEI level for a given year. The annual
  percent change in the MEI levels is an estimate of price change over  
  time for a fixed market basket of inputs to physicians' services.     
\3\ The Physician's Own Time and Nonphysician Employee Compensation     
  category price measures include an adjustment for productivity. The   
  price measure for each category is divided by the 10-year moving      
  average of output per man-hour in the nonfarm business sector. For    
  example, the wages and salaries component of Physician's Own Time is  
  calculated by dividing the rate of growth in average hourly earnings  
  by the 10-year moving average rate of growth of output per man-hour   
  for the nonfarm business sector. Dividing one plus the decimal form of
  the percent change in the average hourly earnings (1+.036=1.036 by one
  plus the decimal form of the percent change in the 10-year moving     
  average of labor productivity (1+.008=1.008) equals one plus the      
  change in average hourly earnings net of the change in output per     
  manhour (1.036/1.008=1.028). All Physician's Own Time and Nonphysician
  Employee Compensation categories are adjusted in this way. Due to a   
  higher level of precision the computer calculated quotient may differ 
  from the quotient calculated from rounded individual percent changes. 
\4\ The average hourly earnings proxy, the Employment Cost Index        
  proxies, as well as the CPI-U, housing and CPI-U, private             
  transportation are published in the Current Labor Statistics Section  
  of the Bureau of Labor Statistics' Monthly Labor Review. The remaining
  CPIs and PPIs in the revised index can be obtained from the Bureau of 
  Labor Statistics' CPI Detailed Report or Producer Price Indexes.      
\5\ Derived from a HCFA survey of several major insurers (the latest    
  available historical percent change data are for calendar year 1997). 
  This is consistent with prior computations of the professional        
  liability insurance component of the MEI.                             
n/a Productivity is factored into the MEI compensation categories as an 
  adjustment to the price variables; therefore, no explicit weight      
  exists for productivity in the MEI.                                   

3. Medicare Volume Performance Standard Performance Adjustment

    Prior to the enactment of the BBA 1997, the update methodology set 
forth in section 1848(d)(3)(B)(i) of the Act would have increased the 
primary care services update by 5.3 percentage points, increased the 
surgical services update by 0.3 percentage points, and decreased the 
update for all other services by 0.3 percentage points. These 
adjustments reflect the percentage increase in expenditures between 
fiscal year 1995 and fiscal year 1996 relative to the volume 
performance standard rates of increase for fiscal year 1996. The volume 
performance standard rates of increase were targets for the growth in 
Medicare expenditures for physicians' services that have subsequently 
been replaced by the sustainable growth rates. The success or failure 
in meeting the volume performance standard targets was taken into 
account in determining the Medicare physician fee schedule update. The 
update methodology prior to the enactment of the BBA 1997 is described 
in detail in the November 22, 1996 final notice announcing the 
physician fee schedule update for 1997 (61 FR 59717).
    The MVPS adjustments were derived as follows:

                                                                        
------------------------------------------------------------------------
                                    FY 1996       FY 1996        MVPS   
             Service                  MVPS      increase in   adjustment
                                     target    expenditures  difference)
------------------------------------------------------------------------
                                                                        
(2)[In Percent]                                                         
                                 ---------------------------------------
Primary Care....................          9.3           4.0          5.3
Surgical........................         -0.5          -0.8          0.3
All other.......................          0.6           0.9         -0.3
------------------------------------------------------------------------

B. Fiscal Year 1998 Sustainable Growth Rate

    Below we explain how we determined the increases for each of the 
four factors used in determining the sustainable growth rate for fiscal 
year 1998.
Factor 1--Percentage Increase in Fees for Physicians' Services (Before 
Applying Legislative Adjustments) for Fiscal Year 1998
    This factor was calculated as a weighted average of the calendar 
year 1997 and 1998 fee increases that apply during fiscal year 1998. 
Adjustments to the fee increases, such as the move to a single 
conversion factor, are accounted for in Factor 4 (the increase in 
expenditures resulting from changes in law or regulations).
    Most of the fees for physicians' services (as defined in section I. 
C. of this notice) are updated by the MEI. However, laboratory 
services, which

[[Page 59265]]

represent about 13 percent of the Medicare allowed charges for 
physicians' services, are updated by the Consumer Price Index for Urban 
Consumers (CPI-U). The following table, therefore, shows both the MEI 
and CPI-U updates that were used in determining the percentage increase 
in physicians' fees for fiscal year 1998.

Medicare Economic Index and Consumer Price Index for Urban Consumers for
                      Calendar Years 1997 and 1998                      
------------------------------------------------------------------------
                                                          1997     1998 
------------------------------------------------------------------------
MEI...................................................      2.0      2.2
CPI-U.................................................      2.7      3.0
------------------------------------------------------------------------

    After taking into account all the elements described above, we 
estimate that the weighted-average increase in fees for physicians' 
services in fiscal year 1998 before applying any legislative 
adjustments will be 2.3 percent for all physicians' services.
Factor 2--The Percentage Change in the Average Number of Part B 
Enrollees from Fiscal Year 1997 to Fiscal Year 1998
    Due to the rapid growth in Medicare+Choice plan enrollees (whose 
Medicare-covered medical care is outside the scope of the sustainable 
growth rate), we estimate that the average number of Medicare Part B 
enrollees excluding those in Medicare+Choice plans will decline by 2.4 
percent. This was derived as follows:

----------------------------------------------------------------------------------------------------------------
                                                                         Average Medicare Part B enrollment (in 
                                                                                       millions)                
                                                                      ------------------------------------------
                                                                                                     Overall    
                                                                         Overall      Medicare      excluding   
                                                                                      +Choice*   Medicare+Choice
----------------------------------------------------------------------------------------------------------------
FY 1997..............................................................       36.384        4.461         31.923  
FY 1998..............................................................       36.775        5.627         31.148  
    Percent change...................................................  ...........  ...........          -2.4%  
----------------------------------------------------------------------------------------------------------------
* Because the Medicare+Choice program does not begin until 1998, the 1997 Medicare+Choice enrollment was proxied
  by the risk health maintenance organization enrollment.                                                       

    Differences between projected and actual enrollment will be 
adjusted for in subsequent years.
Factor 3--Estimated Real Gross Domestic Product Per Capita Growth in 
Fiscal Year 1998
    In calculating the sustainable growth rate, section 1848(f)(2)(C) 
of the Act, as amended by section 4503 of the BBA 1997, requires the 
Secretary to project real gross domestic product per capita growth for 
the coming fiscal year. We estimate that this growth will be 1.1 
percent in fiscal year 1998.
    Differences between projected and actual real gross domestic 
product per capita growth will be adjusted for in subsequent years.
Factor 4--Percentage Increase in Expenditures for Physicians' Services 
Resulting from Changes in Law or Regulations in Fiscal Year 1998 
Compared with Fiscal Year 1997
    Legislative changes contained in the BBA 1997 will impact 
expenditures for physicians' services in fiscal year 1998. Although the 
move to a single conversion factor for the Medicare physician fee 
schedule will cause the payments for surgical services to decline, it 
will increase the payments for nonsurgical services sufficiently to 
cause an overall increase in expenditures for fiscal year 1998 relative 
to fiscal year 1997. The Medicare coverage changes for screening 
mammography, colorectal cancer screening, screening PAP smears, and 
screening pelvic exams will cause increases in Medicare expenditures. 
The changes in payments for nurse practitioners, clinical nurse 
specialists, and physician assistants will also increase expenditures. 
Medicare to be secondary payer and the provisions relating to payments 
for laboratory services will cause reductions in Medicare expenditures.
    In response to the fee changes associated with implementation of 
the 1998 physician fee schedule, we anticipate that the volume and 
intensity of physician services provided to Medicare beneficiaries will 
increase by 0.1 percent. In order to prevent an increase in 
expenditures as a result of this volume and intensity response, an 
offsetting 0.1 percent reduction is made to the conversion factor. 
Because we incorporate both the volume and intensity response and the 
offsetting conversion factor reduction into the sustainable growth rate 
target, if the volume and intensity response does not occur, the 
sustainable growth rate system returns the offsetting reduction to the 
conversion factor in form of higher future updates to the Medicare 
physician fee schedule.
    After taking into account all the BBA 1997 provisions, the increase 
in expenditures for physician services due to changes in law or 
regulations is estimated to be 0.6 percent.

IV. Inapplicability of a Notice and Comment Procedure and of a 30-Day 
Delay in Effective Date

    We find good cause to waive notice and comment procedure for this 
final notice. It is an interpretive rule because section 1848 of the 
Social Security Act, as amended by sections 4501 and 4503 of the BBA 
1997, sets out in detail the factors and procedures necessary to 
calculate the conversion factor for calendar year 1998 and the 
sustainable growth rate of increase for fiscal year 1998. As required 
by the statute, section I. A. of this notice discusses the replacement 
of the three conversion factors that are currently used under the 
physician fee schedule with a single conversion factor, and the method 
used to determine the conversion factor for calendar year 1998. Section 
I. B. of this notice discusses the replacement of the volume 
performance standard with the sustainable growth rate of increase, and 
the formula for establishing the fiscal year 1998 sustainable growth 
rate target for physicians' services under Medicare. Therefore, it 
would be impracticable and unnecessary to submit this notice to the 
public for a notice and comment procedure.
    We usually provide a delay of 30 days in the effective date for 
final Federal Register documents. In this case, however, the 
sustainable growth rates of increase are required by law to be 
published by November 1, 1997 and are effective on October 1, 1997. 
Thus, the

[[Page 59266]]

Congress has clearly indicated its intent that the rates of increase be 
implemented without the usual 30-day delay in the effective date and 
has foreclosed any discretion by us in this matter. Therefore, the 
requirement for a 30-day delay in the effective date does not apply to 
this notice. With regard to the physician fee schedule conversion 
factor, the effective date will be January 1, 1998, which exceeds the 
30-day requirement for the publication of this notice.

V. Regulatory Impact Statement

    We generally prepare a regulatory flexibility analysis that is 
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612) unless the Secretary certifies that a notice will not have 
a significant economic impact on a substantial number of small 
entities. For purposes of the RFA, States and individuals are not 
entities, but we consider all physicians to be small entities.
    We are not preparing a regulatory flexibility analysis since we 
have determined, and the Secretary certifies, that this notice will not 
have a significant economic impact on a substantial number of small 
entities.
    Also, 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. 
This 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 are not preparing a rural impact analysis since we have 
determined, and the Secretary certifies, that this notice will not have 
a significant 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.

(Sections 1848(d) and (f) of the Social Security Act) (42 U.S.C. 
1395w-4(d) and (f))

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

    Dated: October 27, 1997.
Nancy-Ann Min DeParle,
Deputy Administrator, Health Care Financing Administration.

    Dated: October 28, 1997.
Donna E. Shalala,
Secretary.
[FR Doc. 97-29028 Filed 10-30-97; 8:45 am]
BILLING CODE 4120-01-P