[Federal Register Volume 63, Number 154 (Tuesday, August 11, 1998)]
[Notices]
[Pages 42912-42938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20878]



[[Page 42911]]

_______________________________________________________________________

Part II





Department of Health and Human Services





_______________________________________________________________________



Health Care Financing Administration



_______________________________________________________________________



Medicare Program; Schedules of Per-Visit and Per-Beneficiary 
Limitations on Home Health Agency Costs for Cost Reporting Periods 
Beginning On or After October 1, 1998; Notice

  Federal Register / Vol. 63, No. 154 / Tuesday, August 11, 1998 / 
Notices  

[[Page 42912]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration
[HCFA-1035-NC]


Medicare Program; Schedules of Per-Visit and Per-Beneficiary 
Limitations on Home Health Agency Costs for Cost Reporting Periods 
Beginning On or After October 1, 1998

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

ACTION: Notice with comment period.

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

SUMMARY: This notice with comment period sets forth revised schedules 
of limitations on home health agency costs that may be paid under the 
Medicare program for cost reporting periods beginning on or after 
October 1, 1998. These limitations replace the limitations that were 
set forth in our January 2, 1998 notice with comment period (63 FR 89) 
and our March 31, 1998 final rule with comment period (63 FR 15718).

DATES: Effective Date: These schedules of limitations are effective for 
cost reporting periods beginning on or after October 1, 1998.
    Comment Date: Written comments will be considered if we receive 
them at the appropriate address, as provided below, no later than 5 p. 
m. on October 13, 1998.

ADDRESSES: Mail written comments (one original and three copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: HCFA-1035-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, 200 Independence Avenue, SW., 
Washington, DC 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.
    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code HCFA-1035NC. 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 5:00 p.m. 
(Phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Michael Bussacca, (410) 786-4602.

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I. Background

    Section 1861(v)(1)(A) of the Social Security Act (the Act) 
authorizes the Secretary to establish limitations on allowable costs 
incurred by a provider of services that may be paid under the Medicare 
program, based on estimates of the costs necessary for the efficient 
delivery of needed health services. Under this authority, we have 
maintained limitations on home health agency (HHA) costs since 1979. 
Additional statutory provisions specifically governing the limitations 
applicable to HHAs are contained at section 1861(v)(1)(L) of the Act.
    Section 1861(v)(1)(L)(i)(IV) of the Act specifies that the per-
visit limits shall not exceed 105 percent of the median of the labor-
related and nonlabor per-visit costs for freestanding HHAs. The 
reasonable costs used in the per-visit calculations will be updated by 
the home health market basket excluding any change in the home health 
market basket with respect to cost reporting periods that began on or 
after July 1, 1994 and before July 1, 1996.
    Section 1861(v)(1)(L)(v)(I) of the Act requires the per-beneficiary 
annual limitation be a blend of: (1), an agency-specific per-
beneficiary limitation based on 75 percent of 98 percent of the 
reasonable costs (including nonroutine medical supplies) for the 
agency's 12-month cost reporting period ending during Federal fiscal 
year (FY) 1994, and (2), a census region division per-beneficiary 
limitation based on 25 percent of 98 percent of the regional average of 
such costs for the agency's census division for cost reporting periods 
ending during FY 1994, standardized by the hospital wage index. The 
reasonable costs used in the per-beneficiary limitation calculations in 
1 and 2 above will be updated by the home health market basket 
excluding any changes in the home health market basket with respect to 
cost reporting periods that began on or after July 1, 1994 and before 
July 1, 1996. This per-beneficiary limitation based on the blend of the 
agency-specific and census region division per-beneficiary limitations 
will then be multiplied by the agency's unduplicated census count of 
beneficiaries (entitled to benefits under Medicare) to calculate the 
HHA's aggregate per-beneficiary limitation for the cost reporting 
period subject to the limitation.
    For new providers and providers without a 12-month cost reporting 
period ending in fiscal 1994, the per-beneficiary limitation will be a 
national per-beneficiary limitation which will be equal to the median 
of these limitations applied to other HHAs as determined under section 
1861(v)(1)(L)(v) of the Act.
    Payments by Medicare under this system of payment limitations must 
be the lower of an HHA's actual reasonable allowable costs, per-visit 
limitations in the aggregate, or a per-beneficiary limitation in the 
aggregate.
    This notice with comment period sets forth cost limitations for 
cost reporting periods beginning on or after October 1, 1998. As 
required by section 1861(v)(1)(L)(iii) of the Act, we are

[[Page 42913]]

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 home health service is rendered. For purposes of this notice, the 
HHA wage index is based on the most recent published final hospital 
wage index, that is, the preclassified hospital wage index effective 
for hospital discharges on or after October 1, 1997, which uses FY 1994 
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 Board (MGCRB) under section 
1886(d)(10) of the Act, or decisions by the Secretary.

II. Analysis of and Responses to Public Comments to the January 2, 
1998 Per-Visit Limitation Notice

    We received 24 items of timely correspondence on the January 2, 
1998 notice with comment period. A large percentage of the commenters 
also expressed concern over various aspects of the BBA `97 including 
the per-beneficiary limitations and the surety bond requirement which 
are not pertinent to the January 2, 1998 notice. Nonetheless, we will 
address the comments regarding the per-beneficiary limitations under 
section IV. of this notice. The issues not related to the limitations 
will be taken into account under separate notices specific to those 
issues. The comments pertaining to the per-visit limitations and our 
responses are discussed below.
    Comment: The hospital wage indices do not include wages and wage-
related data for home health services. The most appropriate measure 
would be a home health agency specific wage index by geographic area.
    Response: The use of the hospital wage indices is required by 
statute. Section 1861(v)(1)(L)(iii) of the Act specifically states, in 
part, ``the Secretary shall establish limits under this subparagraph 
for cost reporting periods beginning on or after such date by utilizing 
the area wage index applicable under section 1886 (d)(3)(E) and 
determined using the survey of the most recent available wages and 
wage-related costs of hospitals located in the geographic area in which 
the home health service is furnished * * * '' Furthermore, in 1989 we 
published a schedule of per-visit limitations using a home health 
agency-specific wage index in the Federal Register (54 FR 27742). Even 
though we placed a limit of 20 percent on the amount that HHAs cost 
limitation may increase or decrease when compared to the prior year's 
cost limitation which applied the hospital wage indices, the HHA 
industry questioned the validity of the data used in developing the 
HHA-specific wage indices. A change in legislation was pursued to 
prohibit the use of a HHA-specific wage index. In 1991 we had to 
republish the 1989 per-visit limitations in the Federal Register at 56 
FR 12934 using the hospital wage indices as required by section 6222 of 
the Budget Reconciliation Act of 1989, Pub. L. 99-239. From that time 
forward we have been required to use the hospital wage indices in 
developing the per-visit limitations.
    Comment: Agencies may be forced into more stringent evaluations of 
what patients are suitable for home care, rejecting those whose needs 
are going to make them candidates for lengthy and expensive visits. 
Overall quality of care to patients will fall as field staff are placed 
under greater pressure to perform more visits in a given time at a 
lower cost.
    Response: We recognize that there will be valid circumstances not 
anticipated by the per-visit limitation methodology that will cause an 
agency to incur cost in excess of that allowed by the per-visit 
limitation. We provide for those unique situations through the 
exceptions process as ``atypical'' home health services at 42 CFR 
413.30(f)(1). It is desirable for all agencies to monitor continually 
the cost of providing each discipline and to take steps to control the 
cost of any discipline as soon as there are indications that costs are 
increasing. We believe that a per-visit limitation of 105 percent of 
the median will give all agencies an added incentive to improve their 
management controls with immediate and ongoing benefit to the Medicare 
program and its beneficiaries through a reduction in cost and a 
moderation in the future rate of increase in costs.
    Comment: There are additional costs which the home health industry 
must bear in order to meet new HCFA requirements such as implementation 
of the home health patient Outcome and Assessment Information Set 
(OASIS). There should be an add-on to the per-visit limitations in 
recognition of the costs associated with implementing OASIS 
requirements.
    Response: We recognize that when agencies are required to implement 
OASIS, the agencies will incur training costs that they would not have 
otherwise incurred for this activity. These costs are almost 
exclusively associated with training staff in the disciplines (skilled 
nursing, physical, speech pathology, and occupational therapy) that 
will be performing OASIS assessments at the start of care and on a 
continuing basis. Accordingly, we have calculated for these disciplines 
an adjustment factor to be applied to the labor portion of the per-
visit limitations applicable to these disciplines. This adjustment is 
intended as an offset to foregone patient care time that will be 
required for the necessary OASIS training and for gaining experience in 
performing assessments during the year of implementation. This offset 
is applied as an adjustment factor to be applied to the labor portion 
of the affected disciplines. See section III.G. for a discussion of the 
methodology used to calculate the adjustment factor.
    Comment: The rise in utilization of home health has been due, in 
part, to the implementation of the hospital prospective payment system 
by hospitals which now discharge the patient quicker and sicker knowing 
that the patient can be treated adequately at home and the realization 
by physicians that home health care is useful, desirable, and 
economical alternative to institutionalization.
    Response: There are several reasons why home health utilization has 
grown. Although it has been said that the hospital prospective payment 
system has resulted in patients being discharged sicker and quicker, 
and transferred to the home health setting, this is not the case 
overall. A study published in The New England Journal of Medicine in 
August 1996 found, ``less than a quarter of home health visits (22 
percent) were preceded by a hospital stay within 30 days. Nearly half 
the visits (43 percent.) were unassociated with an inpatient stay in 
the previous six months.'' Also, the hospital prospective payment 
system has been in existence since October 1983. Any impact on the 
costs of services of providing home health care should have already 
been reflected in our data base which is approximately ten years after 
the implementation of the hospital prospective payment system.
    Comment: The per-visit limitations should not be published and 
applied on a retroactive basis.
    Response: The statute is quite explicit in establishing both the 
effective date of the per-beneficiary limitation, as well as the date 
by which the per-visit limitations were to be published. As much 
information as possible was disseminated to the home health trade 
organizations regarding the impact of the limitations without 
jeopardizing our rulemaking process. We were aware that

[[Page 42914]]

these home health trade organizations had been forwarding this 
information to their home health care members as quickly as possible so 
that agencies could estimate the effect of the per-visit on their 
financial operations. To the extent possible we made as much 
information available to the home health industry as we could for 
preparation to the revised per-visit limitations.
    Comment: The update factors proposed by HCFA appear to be 
understated by approximately 4.5 percent.
    Response: The update factors displayed in the notice which are 
applied to the data used in developing the per-visit limitations are 
reduced update factors as mandated by the statute. Section 
1861(v)(1)(L)(iv) of the Act specifically prohibits the Secretary from 
taking into account any changes in the home health market basket with 
respect to cost reporting periods which began on or after July 1, 1994 
and before July 1, 1996. Therefore, the update factors displayed in the 
notice do not include the changes for this period of time.
    Comment: A seventh discipline should be established to set out 
chronic illness (such as insulin dependent diabetic and wound care) 
skilled nursing services from other skilled nursing visits. This would 
assist the definition of patient acuity and would create significant 
savings to the Medicare program by developing a lower level of skilled 
nursing visit category that would account for reduced time and effort 
associated with chronic illness.
    Response: The home health benefit as set forth in 1861(m) of the 
Act sets forth the disciplines covered for home health services and 
does not provide for a seventh discipline along the lines suggested by 
the commenter.
    Comment: The total impact on home health agencies of the reduction 
in per-visit cost limitations has been understated due to HCFA's 
separate analysis of the per-visit and the per-beneficiary limitations.
    Response: The impact analysis on the revised per-visit limitation 
notice is correct in that the analysis can only address the limitations 
addressed in that notice. At the time the notice was published, the 
per-beneficiary limitations were not calculated and the impact of both 
the per-visit and the per-beneficiary limitations was unknown. We did, 
however, address the dual impact of the revised per-visit limitations 
and the new per-beneficiary limitations in the final rule with comment 
for the per-beneficiary limitation which was published on March 31, 
1998. This impact is addressed in the Federal Register published on 
March 31, 1998 at 63 FR 15736.
    Comment: After the adjustment of the labor and nonlabor portions 
from 112 percent of the mean to 105 percent of the median, the amount 
that would be paid under the labor portion is significantly smaller 
than what the 1982 wage-index would indicate. Therefore, in order to 
remain budget neutral, it would appear that a significantly larger 
budget neutrality factor should be applied to raise the labor-related 
portion back up to be in line with the 1982 wage-index base.
    Response: Budget neutrality with respect to the wage index requires 
that aggregate Medicare payments to home health agencies be equal to 
the payments that would have been made had the 1982 wage index been 
used. Because the level of the per-visit limitations was adjusted 
downward from the previous per-visit limitations that were in effect, a 
different distribution of HHAs are under the revised per-visit 
limitations. These are the HHAs that largely affect the budget 
neutrality adjustment factor. These HHAs would have been only slightly 
better off using the 1982 wage index. Therefore, the adjustment factor 
reflects the slight increase in payments to obtain budget neutrality.
    Comment: HCFA has stated that fiscal year 1994 is the most current 
information available for computation of the home health per-visit 
limitations. Excluding the results of cost reports finalized after 
October 10, 1995 from the data base seriously skews the cost per-visit 
limitation calculations with older cost and per-visit data, 
artificially lowering the median.
    Response: Unlike the per-beneficiary limitations which require the 
use of Federal FY 1994 as the base period for establishing the 
limitations, neither the statute nor the Medicare regulations dictate 
the data base to be used in establishing the per-visit limitations. 
Moreover, we update the data base by rates of increase in the home 
health market basket from the end of the FYs of the cost report data 
used in the data base to the FY end to which the per-visit limitations 
apply. In keeping with past practices, we updated the data base used 
for the July 1997 notice in establishing the per-visit limitations. We 
believe the per-visit limitations reflect the per-visit costs reported 
by HHAs and these per-visit limitations have been updated appropriately 
in accordance with the statute.
    Comment: The home health market-basket index does not measure 
specific costs.
    Response: The home health market-basket is a measurement of costs 
and inflation overall and is not a measurement of increase in agency-
specific costs.

III. Update of Per-Visit Limitations

    The methodology used to develop the schedule of per-visit 
limitations in this notice is the same as that used in setting the 
limitations effective October 1, 1997. We are using the latest settled 
cost report data from freestanding HHAs to develop the per-visit cost 
limitations. We have updated the per-visit cost limitations to reflect 
the expected cost increases between the cost reporting periods in the 
data base and September 30, 1999 excluding any changes in the home 
health market basket with respect to cost reporting periods which began 
on or after July 1, 1994 and before July 1, 1996.

A. Data Used

    To develop the schedule of per-visit limitations effective for cost 
reporting periods beginning on or after October 1, 1998, we extracted 
actual cost per-visit data from the most recent settled Medicare cost 
reports for periods beginning on or after January 1, 1994 and settled 
by May 1998. The majority of the cost reports were from Federal fiscal 
year 1996. 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 data base and September 30, 
1999, excluding any changes in the home health market basket with 
respect to cost reporting periods which began on or after July 1, 1994 
and before July 1, 1996. Therefore, we excluded this time period when 
we adjusted the database for the market basket increases.

B. Wage Index

    A wage index is used to adjust the labor-related portion of the 
per-visit limitation to reflect differing wage levels among areas. In 
establishing the per-visit limitation, we used the FY 1998 hospital 
wage index, which is based on 1994 hospital wage data.
    Each HHA's labor market area is determined based on the definitions 
of Metropolitan Statistical Areas (MSAs) issued by the Office of 
Management and Budget (OMB). Section 1861(v)(1)(L)(iii) of the Act 
requires us to use the most recently published hospital wage index 
(that is, the FY 1998 hospital wage index, which was published in the 
Federal Register on August 29, 1997 (62

[[Page 42915]]

FR 46070)) without regard to whether such hospitals have been 
reclassified to a new geographic area, to establish the HHA cost 
limitations. Therefore, the schedule of per-visit limitations 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 limitations 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 (Public Law 98-11). 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 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 
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 Medicare hospital wage index to the HHA per-visit 
limitations. These exceptions result in the same New England County 
Metropolitan Area definitions for hospitals, skilled nursing 
facilities, 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, these four counties are urban under 
either definition, New England County Metropolitan Area or MSA.
    Section 1861(v)(1)(L)(iii) requires the use of the area wage index 
applicable under section 1886(d)(3)(E) of the Act and determined using 
the survey of the most recently published wages and wage-related costs 
of hospitals located in the geographic area in which the home health 
service is furnished without regard to whether such hospitals have been 
reclassified to a new geographic area pursuant to section 1886(d)(8)(B) 
of the Act. The wage-index, as applied to the labor portion of the per-
visit limitation, must be based on the geographic location in which the 
home health service is actually furnished rather than the physical 
location of the HHA itself.

C. 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 requirements 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 1.03 to 
the labor-related portion of the per-visit limitations effective for 
cost reporting periods beginning on or after October 1, 1998. 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 29, 1997.
    To determine the adjustment factor, we analyzed both the data 
obtained from the freestanding agencies used to determine the per-visit 
limitations and the settled cost report data covering the same time 
period for the provider-based agencies. For each agency in this data 
base, 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 data 
base we are currently using, these unmatchable MSAs represented 1.3 
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.B. of this notice regarding the adjustment of per-visit 
limitations by the wage index and the budget neutrality factor.)

D. 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 
cost (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 cost 
by the wage index applicable to the HHA's location to arrive at an 
adjusted labor cost.

E. 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 median cost and standard 
deviation for each group. We then eliminated all ``outlier'' costs 
which were all per-visit costs less than 10 dollars and per-visit costs 
more than 800 dollars, retaining only those per-visit costs within two 
standard deviations of the median in each service.

F. Basic Service Limitation

    We calculate a basic service limitation to 105 percent of the 
median labor and nonlabor portions of the per-visit costs of 
freestanding HHAs for each type of service. (See Table 3a in section 
VIII.)

G. Offset Adjustment for the Implementation of the Home Health Outcome 
Assessment Information (OASIS)

    When HHAs are required to use an assessment tool, such as OASIS, 
for ongoing collection of quality of care data, they will incur costs 
associated with this requirement. Any costs associated with a new type 
of reporting system are not reflected in the database used to calculate 
the per-visit limitations. We have, therefore, decided to provide an 
offset adjustment factor to be applied to the labor-related component 
of the per-visit limitations for skilled nursing, physical therapy, 
speech pathology, and occupational therapy which should be the only 
disciplines affected by this new requirement.
    Since any new assessment performance tool will replace or be 
integrated into an agency's existing assessment activities, we believe 
that there will be no permanent ongoing incremental costs associated 
with these types of assessment systems. This has been shown through 
data derived from the ongoing Medicare Quality and Improvement 
Demonstration using OASIS as an assessment tool. This demonstration 
shows that the OASIS assessment requires either the same amount of time 
or less time than the

[[Page 42916]]

patient assessment methods currently in use.
    Absent other types of data, we are using the information from this 
demonstration to derive an offset adjustment for any new assessment 
tool that may be imposed on the HHAs effective during the per-visit 
limitations effective for cost reporting periods beginning on or after 
October 1, 1998. Data from the OASIS demonstration show that OASIS 
implementation burden consists of foregone staff time that would 
otherwise be devoted to patient care activities. There are three types 
of costs associated with staff time for a typical 18-person staff. The 
first would be training time for an agency coordinator who conducts 
training or supervision of the clinical staff. This individual would 
probably need to spend four hours reading the assessment tool training 
manual and eight hours attending an assessment tool training session. 
Training would also be necessary for staff who will be performing the 
assessment process. The affected disciplines are skilled nursing, 
physical therapy, speech pathology, and occupational therapy. Each 
member of these disciplines would probably require four to six hours of 
training. Since agencies currently conduct inservices for clinical 
staff, usually on a monthly basis, the training for a new assessment 
tool would replace at least one of these sessions. The incremental 
training costs would be approximately half of the total costs, or two 
to three hours per trained staff member.
    The second type of costs would be increases in assessment time 
during initial implementation. Experience from the demonstration 
indicates that total visit time increases by approximately 15 minutes 
during the first six to seven visits when newly trained staff have 
begun to perform OASIS assessments. After this initial period of 
becoming familiar with and acquiring experience with the new assessment 
tool, there is no net increase in visit duration.
    The third type of costs would be the costs associated with the 
staff time to revise assessment forms and integrate OASIS elements. For 
a typical 18-person professional staff this is estimated to require 
sixteen hours of staff time: twelve hours of professional staff time 
(skill nursing, physical therapy, etc. * * *) and 4 hours of clerical 
time.
    The adjustment factor is calculated in terms of per-FTE foregone 
staff time spent on these training and form revision activities as 
follows: (a) One hour for the agency coordinator--based on twelve hours 
total training time allocated over an 18-person professional staff, (b) 
three hours per staff for training, (c) two hours for increased 
assessment time during the initial implementation--based on fifteen 
minutes additional time for each of the first eight visits (rounded up 
from 7) during which the assessments are performed, and (d) one hour of 
supervisory time--based on sixteen hours of time spent revising 
assessment forms allocated over an 18-person professional staff. These 
four items total seven hours of time per-FTE during the year of OASIS 
implementation. Using a normal work year of 2000 hours (50 weeks times 
40 hours) less the seven hours for additional training time for a new 
assessment program, the offset adjustment for foregone patient care 
would be .35 percent (2000 hours divided by 1993 hours less one equals 
.003513). This offset factor will be applied to the labor portion of 
the skilled nursing, physical therapy, speech pathology and 
occupational therapy per-visit limitations for both urban and nonurban 
areas. This factor will only be applied to the labor portion of these 
per-visit limitations for cost reporting periods beginning on or after 
October 1, 1998 if HHAs are required to implement OASIS.
    In addition to training and forms revision, agencies will incur 
printing costs for the revised assessment forms. Data from the OASIS 
demonstration show that for the typical HHA, i.e., one that has 486 
admissions per year and an 18-person professional staff, printing the 
new assessment forms will cost $280. Cost report data for 1994 and 1995 
show that an HHA with 486, plus or minus 50, admissions, provides a 
total of thirty thousand visits of all types annually to patients. 
Allocating the $280 over 30 thousand visit yields an incremental cost 
of .93 cents per visit, which for estimation purposes is rounded up to 
one cent per visit for all disciplines.
    The total offset adjustment is applied by first multiplying the 
labor portion of the per-visit limitation for skill nursing, physical 
therapy, speech pathology, and occupational therapy by the factor of 
1.003513 for training and forms revision (the labor-portion is also 
adjusted by the appropriate wage index and budget neutrality factor), 
second, the non-labor portion is added to the adjusted labor-portion, 
and third, one cent is added for printing costs. The OASIS adjustment 
is only done after the implementation of OASIS is effective.
    Because we believe that there will be no ongoing incremental costs 
to perform assessments under a new protocol, this adjustment offset 
will only apply to the labor component of the specified per-visit 
limitations in the first year of implementation of a new assessment 
tool.
    While we have based this adjustment on the best data we have 
available to us, we are concerned that we may not have captured all 
relevant costs, particularly ongoing and automation costs. In part, 
this is because our data is based on agencies whose costs in this 
regard may not have been fully representative of agency costs 
generally. Therefore, we are asking for specific comments, including 
documented data, which would inform future decision making on this 
issue.

IV. Analysis of and Responses to Public Comments to the March 31, 
1998 Per-Beneficiary Final Rule

    We received 125 comments with respect to the March 31, 1998 Federal 
Register final rule with comment addressing the implementation of the 
per-beneficiary limitations. A number of comments were on the statutory 
requirements for which we do not have discretionary authority to change 
or not implement. These included comments such as: do not apply the 
per-beneficiary limitations for cost reporting periods beginning on or 
after October 1, 1997, delay implementation of the per-beneficiary 
limitations to October 1, 1998, repeal the statutory provisions 
requiring the application of the per-beneficiary limitations, and the 
use of fiscal year 1994 as a base year for establishing the per-
beneficiary limitations is inadequate and should not be used in 
establishing the per-beneficiary limitations. These comments cannot be 
adopted without legislative amendments to the Act pertaining to the 
per-beneficiary limitations. The remaining comments are given below.
    Comment: Agencies that have a per-beneficiary limitation lower than 
the national per-beneficiary limitation should be allowed to have the 
higher national per-beneficiary limitation apply.
    Response: The statute is very specific with respect to how the per-
beneficiary limitations are to be calculated for agencies that have a 
12-month cost reporting period ending in Federal fiscal year 1994 
(``clause v'' agencies) and new agencies (``clause vi'' agencies). Once 
the agency is classified as either a ``clause v'' or ``clause vi'' 
provider, the per-beneficiary limitation is established by statute. We 
have no discretion to apply a most beneficial test.
    Comment: The requirement to prorate the unduplicated census count 
of Medicare beneficiaries when a beneficiary is serviced by more than 
one HHA for cost reporting periods beginning on or after October 1, 
1997

[[Page 42917]]

should also apply in determining the unduplicated census count of 
Medicare beneficiaries for the base year, i.e., cost reporting periods 
ending during Federal FY 1994.
    Response: The statute does not provide for this. Section 
1861(v)(1)(L)(vi)(II) of the Act, as added by section 4602(c) of the 
BBA '97, states, ``For beneficiaries who use services furnished by more 
than one home health agency, the per-beneficiary limitation shall be 
prorated among the agencies.'' This provision is specific for services 
furnished by HHAs for cost reporting periods beginning on or after 
October 1, 1997. It applies to the application of the per-beneficiary 
limitation and not the calculation of the per-beneficiary limitation.
    Comment: Many agencies were required to operate under a new system 
of reimbursement for a full six months before being told precisely what 
the system was. HCFA should provide some form of leniency for those 
agencies which have large overpayments due to the delay in publishing 
the new limitations.
    Response: We recognize that providers with cost reporting periods 
that began prior to the publication of the per-beneficiary limitations 
may have experienced some uncertainty in budgeting their costs. 
Nonetheless, the BBA '97 is quite explicit in establishing both the 
effective date of these provisions and the date by which these 
limitations needed to be established. We made as much information as 
possible available to the home health industry prior to the publication 
of the limitations. We tried to make a smooth transition into the 
interim payment system (IPS) for HHAs by providing such information 
through major home health trade organizations. The IPS was highly 
publicized through home health trade news articles such that the effect 
of the IPS should have been anticipated by the home health industry. 
While there were certain technical issues which could only be addressed 
through the publication of the limitations, agencies could, to a large 
degree, estimate the effect of the new limitations on the financial 
operations. In fact, a trade organization developed computer software 
packages for estimating the impact of the IPS. Even though the 
limitations were not available prior to publication, we believe the 
home health industry had sufficient advanced knowledge to properly 
react to an estimated impact of the limitations on their operations. If 
an agency had suspected that overpayments might result from the interim 
payments received prior to the publication of the limitations, a 
prudent agency would set the estimated overpayment aside as a potential 
liability. This way, the agency would not put itself in a financial 
hardship to pay back any overpayments resulting from the newly 
published limitations.
    Comment: The 1994 base period is not reflective of the sicker 
patients being released from the hospitals due to the hospital 
prospective payment system.
    Response: As stated in the comments addressing the per-visit 
limitations, although it has been said that the hospital prospective 
payment system has resulted in patients being discharged quicker and 
sicker and transferred to a home health setting, this is not the case 
overall. A study published in The New England Journal of Medicine in 
August 1996 found , ``less than a quarter of home health visits (22 
percent) were preceded by a hospital stay within 30 days. Nearly half 
the visits (43 percent) were unassociated with an inpatient stay in the 
previous six months.'' Also, the hospital prospective payment system 
has been in existence since October 1983. Any impact on the costs of 
services of providing home health care should have already been 
reflected in our data base which is approximately ten years after the 
implementation of the hospital prospective payment system.
    Comment: The IPS per-beneficiary limitation puts a cap on the 
expenses a beneficiary can receive in one year.
    Response: We cannot stress enough that the per-beneficiary 
limitation is not a cap on an individual beneficiary's amount of 
services or the costs of services. The per-beneficiary limitation is an 
aggregate limitation on each agency's total costs. Agencies now have a 
global budget that increases with the number of beneficiaries served 
and promotes efficiency in planning and delivering total services to 
all patients throughout the entire home health episodes. Applying the 
per-beneficiary limitation in the aggregate, not just to an individual 
patient, allows HHAs to balance the costs of caring for one patient 
against the cost of caring for other patients. HHAs have the 
flexibility to provide the appropriate amount of care (duration of 
visits, number of visits, and skill level of care given) for all 
patients within the aggregate per-beneficiary limitation.
    Comment: Do not apply the freeze to inflation for the 1994-1996 
period. This freeze should only apply to the per-visit limitations.
    Response: The statute applies the freeze to both the per-visit and 
the per-beneficiary limitations. Section 1861(v)(1)(L)(iv) of the Act 
states, ``In establishing limits under this subparagraph for cost 
reporting periods beginning after September 30,1997, the Secretary 
shall not take into account any changes in the home health market 
basket, as determined by the Secretary, with respect to cost reporting 
periods which began on or after July 1, 1994, and before July 1, 
1996.'' The amendment in section 4601 of the B.B.A. '97 to amend 
section 1861(v)(1)(L) of the Act encompasses all limits established 
under section 1861(v)(1)(L) of the Act, including the per-beneficiary 
limitations. Therefore, the application of the freeze in the market 
basket increases to both the per-visit limitations and the per-
beneficary limitations is in accordance with the statutory language.
    Comment: The requirement to apply the wage-index based on the 
location of the service furnished rather than the location of the HHA 
should only apply to the per-visit limitations.
    Response: Again the statute requires the wage index based upon the 
location of the service furnished be applied to both the per-visit and 
the per-beneficiary limitations. Section 1861(v)(1)(L) of the Act, 
states in part, `` * * * the Secretary shall establish limits under 
this subparagraph for cost reporting periods beginning on or after such 
date by utilizing the area wage index applicable under section 
1886(d)(3)(E) and determined using the survey of the most recent 
available wages and wage-related costs of hospitals located in the 
geographic area in which the home health service is furnished * * * '' 
This language encompasses all the limitations noted under section 
1861(v)(1)(L) of the Act, which includes both the per-visit and the 
per-beneficiary limitations.
    Comment: HCFA should utilize the median amount for each census 
region for new providers. This will be the best reflection of both 
wages and utilization for agencies in a given area.
    Response: Section 1861(v)(1)(L)(vi) of the Act as added by section 
4602(c) of the B.B.A. '97, states, ``For new providers and those 
providers without a 12-month cost reporting period ending in fiscal 
year 1994, the per beneficiary limitation shall be equal to the median 
of these limits (or the Secretary's best estimates thereof) applied to 
other home health agencies as determined by the Secretary.'' The 
statute clearly contemplates the use of a single, and therefore 
national, median as the basis for the new provider limitation. The 
statute requires the per-beneficiary limitation to be ``the median'' of 
all the per-beneficiary limitations applied to the other HHAs, i.e., 
the per-beneficiary

[[Page 42918]]

limitations of the old providers. The statutory language refers to a 
single median and not several medians, which would be the case if the 
statute required a regional system suggested by commenters. Moreover, 
in direct contrast to the language governing the per-beneficiary 
limitation for old providers, section 1861(v)(1)(L)(vi) does not 
contain any reference to a calculation based upon the home health 
agency's census division.
    Comment: The base year for the surviving provider number should be 
utilized in computing the per-beneficiary limitation. Because the 
agency still carries assets and liabilities of the agency it purchased, 
the base year and resulting per-beneficiary limitation should be 
considered an asset or a liability, as applicable.
    Response: The per-beneficiary limitation is neither an asset nor a 
liability for an HHA. The per-beneficiary limitation is a limit on the 
amount of payments made by Medicare. The limitations are not intended 
to be used as bargaining tools for selling or buying agencies.
    Comment: Extend authorizations for exceptions to the new interim 
payment system per-beneficiary limitations as well as the per-visit 
limitations.
    Response: As we stated in the March 31, 1998 Federal Register, we 
do not believe that Congress intended the general rules at 42 CFR 
413.30 to apply to the establishment of the per-beneficiary 
limitations. The statute does not provide any such exceptions or 
exemptions to the per-beneficiary limitations.
    Comment: On page 15725 of the Federal Register the example 
references index levels for the period of July 1998 through December 
1998 from Table 6 for calculating the market basket increase. Table 6 
in the March 31, 1998 Federal Register stops at November 1997.
    Response: We apologize for the inadvertent omission of the index 
levels for the months of December 1997 through September 1999. Table 6 
at 63 FR 103 published on January 2, 1998 contains the same index 
levels that are appropriate in calculating the applicable market basket 
increase and the index levels for the months of December 1997 through 
September 1999 can be obtained from that table.
    Comment: Under section 112 of the Provider Reimbursement Manual, 
Part I, State health department home health agencies with subunits or 
branches are permitted to file a combined cost report under the 7800 
series of provider numbers. (1) How will those subunits and branches 
that have separate provider numbers and separately bill that previously 
filed a combined cost report be treated if some decide to no longer 
file with the combined cost report? (2) How will the remaining agencies 
that wish to file a combined report be treated? As clause ``v'' or 
clause ``vi'', and will there be any adjustment to costs for the 
agency-specific portion? (3) If combined State department home health 
agencies that file a combined cost report has subunits, and a 
beneficiary moves from one subunit to another, is that beneficiary 
counted as one beneficiary in each of the subunits, or is it prorated?
    Response: (1) State health departments with subunits are allowed to 
file a combined Medicare cost report because of the administrative and 
financial burden in filing separate Medicare cost reports for all the 
agencies within the department. The State health departments were 
allowed to obtain subunit provider numbers for the purposes of tracking 
revenue and claims processing. Also, it is our understanding that the 
State health departments did have the capability to segregate the costs 
for each individual agency within the department. If State health 
departments decide to start submitting individual Medicare cost reports 
for the agencies within their department, they will not be allowed to 
pick and choose individual agencies for which they would like to report 
separately. The State agency health would have to rescind the 7800 
series number and submit separate cost reports for all the agencies.
    (2) Since the State health department filed a single cost report 
for all the agencies under a 7800 number series, and the individual 
subunits did not file a separate Medicare cost report for which an 
agency-specific per-beneficiary limitation can be calculated, if the 
units start filing separate Medicare cost reports under their own 
numbers, they will be considered clause ``vi'' type providers. 
Therefore, they will be subject to the national per-beneficiary 
limitation.
    (3) State health departments that file a single cost report under 
the 7800 number for all its units will count a single beneficiary in 
its unduplicated census count for the cost reporting period regardless 
of the number of units that service that beneficiary. However, if the 
subunits report separately and the beneficiary is serviced by more than 
one subunit, the beneficiary must be prorated among the subunits 
servicing the beneficiary.
    Comment: How do you determine prorating between agencies when you 
have one agency that was working hard and saw a patient on a limited 
basis versus the other agency who maximized visits to reach the ceiling 
of the beneficiary limitation and then discharged the patient?
    Response: We cannot emphasize enough that the per-beneficiary 
limitation is not a limitation on the amount of services a beneficiary 
may receive or a limitation on the costs of an individual beneficiary. 
The per-beneficiary limitation is applied to the total unduplicated 
census count of the agency and compared to the lesser of the agency's 
actual costs or per-visit limitation in the aggregate plus nonroutine 
medical supplies. If an agency discharges a beneficiary with the 
assumption that the beneficiary has exhausted its per-beneficiary 
limitation and that beneficiary receives services from another agency, 
each agency will have less than one beneficiary in its unduplicated 
census count. For example, if agency ``A'' treats a Medicare 
beneficiary and after 60 visits, discharges the patient and 
subsequently the patient receives 40 visits from agency ``B'', agency 
``A'' will count the beneficiary as .60 in its unduplicated census 
count and agency ``B'' will count the beneficiary as .40 in its 
unduplicated census count. Under a system based on medians and 
averages, such as the per-beneficiary limitations, it should be 
expected that some patients' costs and amount of services will be under 
the average and some patients' costs and amounts of services will be 
above the average.
    Comment: The blend of an agency-specific component and a regional 
census division component rewards agencies that had high costs in 
Federal FY 1994 and penalizes agencies that had low costs in Federal FY 
1994.
    Response: By basing the per-beneficiary limitation on the HHA's own 
cost experience, the per-beneficiary limitation should reflect the mix 
of patients that the agency has been caring for in the past. This mix 
of patients should not change drastically as compared to the mix of 
patients for whom the HHA is currently providing care. While variation 
does exist between agencies, it is a reflection of their actual cost 
experience. All agencies were subject to the lower of their actual 
costs or the aggregate per-visit limitation in FY 1994. It is the lower 
of these amounts that is incorporated into the calculation of the per-
beneficiary limitations. If two agencies existing in the same area with 
1994 base periods did not have a competitive advantage over each other 
in 1994, it does not follow that one would have a competitive advantage 
due to the application of a per-beneficiary

[[Page 42919]]

limitation. As stated before, the average per-beneficiary cost is a 
reflection of the mix of patients that the HHA serviced in the base 
period.
    Comment: Home health agencies that have reclassified branches to 
subunits should be allowed to use the parent agency's FY 1994 cost 
report as the base for establishing the per-beneficiary limitation for 
the new subunit.
    Response: Branches within home health agencies are not providers as 
recognized under Medicare principles of reimbursement. Branches within 
home health agencies are part of and under the administrative control 
of the parent home health agency. The branch itself does not have its 
own administrative function or control. They are not independently 
certified by Medicare as a provider nor are they required to file a 
Medicare cost report. Because branches are not providers of service but 
an intricate part of a provider, they will be considered new providers 
if they become certified by Medicare as an independent provider of home 
health services subsequent to Federal FY 1994.
    Comment: HCFA should allow agencies which filed more than one cost 
report during Federal FY 1994 to combine the cost reporting periods 
when they equal or exceed a 12-month cost reporting period for 
establishing the agency-specific per-beneficiary limitation.
    Response: We do not agree. Medicare has always applied the 
terminology of a 12-month cost reporting period as being twelve 
consecutive months as reported in the Medicare cost report.
    Comment: The impact analysis seems almost entirely focused on total 
Medicare expenditures. It gives short shrift to the problems that will 
be experienced by patients, HHAs, and other payers such as Medicaid. In 
order to maintain costs below the per-beneficiary limitation, HHAs will 
need to reduce the average number of visits provided to Medicare 
beneficiaries below the levels patients received in 1997. The size of 
this reduction was not estimated or its impact on Medicare 
beneficiaries.
    Response: The impact analysis did not discuss the impact on 
beneficiaries because this payment system does not limit the amount of 
services a beneficiary may receive from an agency. It is designed to 
provide more efficient delivery of services. No beneficiary should be 
denied services as a result of this payment system. These beneficiaries 
continue to be eligible for Medicare home health benefits without a 
specific day limit.
    Comment: The use of a two-thirds offset in estimating the impact of 
the aggregate per-beneficiary limitation on HHAs was not explained 
adequately. What analysis was performed to justify such an offset?
    Response: An impact analysis requires that we estimate the impact 
of a change in policy. While there are questions about whether such an 
impact analysis is needed for a notice that announces rates for a 
statutorily mandated policy for which there is virtually no discretion, 
if we are to estimate the impact of the home health policy, we need to 
consider not just changes in Medicare payments that would be involved, 
but also the incentives created by the new policy and how providers are 
likely to react to the change in policy.
    Home health is the highest cost Medicare service category which has 
no cost-sharing. As a result, there is no direct financial consequences 
to beneficiaries for use of home health services. Combined with the 
fact that home health services are non-invasive and the patient does 
not have to leave home to receive them, there are not the same kinds of 
constraints on their use as with other medical services.
    We believe that it is prudent to assume that because of the 
incentives created by the B.B.A. '97 policy and the demonstrated 
ability of the industry to respond, that there would be a response. 
This does not necessarily mean that agencies will go out of business or 
substitute care of Medicare beneficiaries from other payers or sources 
of funds. It does mean that there would be changes in behavior to 
recoup some of the financial effects that would otherwise occur with 
the policy, such as an increase in users serving particularly low 
users, or reducing the intensity of care in marginal cases, or reducing 
services that should not be covered by Medicare. For the purposes of 
this impact analysis, it is our judgement that a 50 percent offset for 
the per-visit limitations and a 66 percent offset for the per-
beneficiary limitations is reasonable. To the extent that actual 
expenditures differ from projections, after adjusting for other factors 
affecting expenditure growth, we will review the offsets used for 
future impact analysis.
    Comment: Using HCFA's own analysis it is clear that agencies will 
either have to go out of business or subsidize care of Medicare 
beneficiaries from other payers or sources of funds. Layoffs of staff 
and closures of HHAs will have a direct impact on access to care that 
HCFA did not address.
    Response: We did not address the impact on access to care due to 
agency closures because we were not expecting this to be a necessary 
reaction to the limitations as stated in the above response. We are 
currently receiving many new applications from agencies wanting to 
become Medicare certified. If there are any closures as a result of 
this payment system, it is expected other new agencies or agency 
expansions will offset these closures.
    Comment: HCFA mentions that 15 percent of the Medicare savings are 
attributable to payments to managed care plans in FY 1998 and 20 
percent in FY 1999. It is unclear what this means. Are home health 
services to managed care enrollees included in projected expenditures? 
Does HCFA expect managed care organizations to reduce home health 
services even though it is far below fee-for-service utilization?
    Response: The impact notice mentions that some of the savings from 
this system are attributable to payments to managed care plans. 
Payments to Medicare managed care plans are based on fee-for-service 
Medicare benefits. If we expect to pay less to home health agencies on 
a fee-for-service basis, then the managed care rates will decrease. 
Managed care payments, in total, are included as part of our cost 
projections. Since payments to managed care plans are based on fee-for-
service use, there is no need to project managed care payments by type. 
Since the B.B.A. '97 is directed toward changes in fee-for-service, 
managed care plans are not expected to reduce home health services as a 
result of this notice.
    Comment: The impact section did not address the impact on per-visit 
costs of reducing the average number of visits provided per patient. It 
would seem logical that agencies' per-visit costs would increase as the 
average reimbursed cost per patient decreases. This impact on per-visit 
costs will drive agency per-visit costs higher which will result in a 
greater proportion of agencies exceeding the per-visit cost limitations 
than HCFA anticipates in its analysis.
    Response: We believe that this system was implemented, in part, 
because the number of visits per beneficiary had been increasing at 
double-digit growth rate until 1996. However, the cost per-visit was 
not increasing at a similar level. The impact of these limitations was 
not expected to reduce the cost per-visit significantly.
    Comment: The impact analysis is incomplete for two reasons. First, 
the Regulatory Flexibility Act is insufficient since it does not 
consider alternative interpretations of the HHA Interim Payment System 
provision. Second, section 202 of the Unfunded Mandates Reform Act 
requires its own assessment of costs and benefits.

[[Page 42920]]

    Response: The HHA Interim Payment System provision, generally 
section 4602 of the Balanced Budget Act of 1997, is narrowly 
constructed such that it does not provide for exceptions or 
consideration of options that reduce the burden on small entities. We 
did not prepare a separate assessment of costs and benefits for 
purposes of Section 202 of the Unfunded Mandates Reform Act because we 
believe that this regulation did not meet the threshold requirement of 
an annual expenditure by State, local, or tribal governments, in the 
aggregate, or by private sector, of $100 million (adjusted annually for 
inflation).
    Comment: HCFA describes 1,158 new providers on the database as 
those with December 1994 or December 1995 FY ends. These agencies may 
not be representative of all new agencies and thus the database may be 
limited in its use as a measure of the impact on new agencies.
    Response: In order to meet the statutory dates for establishing the 
limitation, we had a very limited time in which to collect data, but 
obtained the most recent data available to assess the impact on new 
agencies. Because of how new providers are defined, we are limited by 
our resources in identifying all types of new providers. We believe 
that the data base was sufficient to conduct a valid impact analysis.
    Comment: We see no justification for the additional two percent 
reduction to the per-beneficiary limitation for new agencies when 
determining a specific agency's per-beneficiary limitation as shown on 
page 15726 of the notice.
    Response: The national per-beneficiary calculations at 63 FR 15726 
should not be multiplied by 98 percent. The two percent reduction to 
the per-beneficiary limitations has already been taken into account in 
the calculations of the national per-beneficiary limitation. The 
examples of the national per-beneficiary calculations at 63 FR 15726 
should be $3,279.26 for the Dallas MSA and $2,679.89 for rural Texas. 
We apologize for any inconveniences this may have caused.
    Comment: The example of two merged agencies at 63 FR 15721 does not 
explain the new November 1, 1997 beginning cost reporting period. The 
date does not match either the agencies' previous cost reporting 
periods or the merger date.
    Response: The date in the example of the two merged agencies should 
state that the weighted per-beneficiary limitation applies to the cost 
reporting period which began December 1, 1997.
    Comment: The counties listed for MSA region 8840--Washington, DC in 
the March 31, 1998 Federal Register includes Charles County but those 
in the January 2, 1998 Federal Register do not. Is Charles County, 
Maryland in the Washington, DC region for the wage index for both the 
per-beneficiary limitations and the per-visit limitations?
    Response: Both Federal Registers at 63 FR 102 and 63 FR 15733 show 
Charles, MD as part of the Washington, DC MSA.
    Comment: Step 2 of the example at 63 FR 15725 depicts a divisor of 
seven instead of six. Shouldn't the divisor be six?
    Response: Yes, the divisor at step 2 of the example at 63 FR 15725 
should be six.
    Comment: HCFA should have made the database available when the 
notice was published and should do so for all future cost limit or 
payment rate notices. The database should be available for the full 
comment period.
    Response: We made every attempt to make the data available shortly 
after the notice was published. Due to the limited time available after 
finalizing the limits, we were unable to post the data to the Internet 
until one month after the notice was published. We believe this allowed 
sufficient time for analysis.
    Comment: HCFA should make provider numbers and other requested data 
available immediately.
    Response: We believe it is not necessary to identify individual 
providers in order to calculate the per-beneficiary limitations and 
therefore did not include this information in our data base on the 
public use file.
    Comment: HCFA should provide a detailed explanation of how the 
database was constructed. The discussion should include the method for 
choosing agencies to include/exclude, the editing and verification 
process, and an explanation of how denied claims were matched to 
claims-based unduplicated census counts.
    Response: We believe the calculations were explained fully in the 
notice. Because the statute is very explicit about how the per-
beneficiary limitations are determined, we believe the explanations 
provided in the notice are adequate.
    Comment: All outlying areas, such as Guam, Puerto Rico, and the 
Virgin Islands, should be combined into one category for purposes of 
calculating the census division components.
    Response: The statute did not refer specifically to Guam, Puerto 
Rico, or the Virgin Islands in establishing per-beneficiary 
limitations. These areas do not fall within any of the existing census 
region divisions which are required by statute in establishing the 
regional per-beneficiary limitations. In order to avoid advantaging or 
disadvantaging any of the census division regions, we treated these 
areas as separate areas in establishing the regional per-beneficiary 
limitations. Puerto Rico and the Virgin Islands were combined as one 
area and Guam as a separate area. We note that the wage indices for the 
Virgin Islands and Guam were inadvertently omitted from the notice. The 
wage index for the Virgin Islands is .4588 and the wage index for Guam 
is .6516.
    Comment: The standardization of the census division average per-
beneficiary costs by the appropriate wage indices should only be 
applied to the labor-related component of the per-beneficiary rates.
    Response: The standardization of the per-beneficiary limitations 
was applied to the labor-related component of the average costs per 
beneficiary. This adjustment methodology is explained on page 15723 of 
the notice with respect to how the adjusted unduplicated census counts 
of Medicare beneficiaries are used in the calculation of the per-
beneficiary limitations. We applied the labor-related component 
percentage before calculating the wage-index weighted unduplicated 
beneficiary counts.
    Comment: Unless HCFA can provide a reasonable explanation for 
including nonroutine supplies in the costs that were standardized by 
the wage index, the cost of nonroutine supplies should have been 
excluded from the standardization of these costs.
    Response: When doing the standardization of the per-beneficiary 
limitations, we do not separate out each individual component of costs 
to determine the labor and nonlabor components. The labor-related and 
nonlabor percentages are determined with respect to all costs incurred 
by an HHA, and are applied to total costs accordingly.
    Comment: HCFA should explain the reasons for not computing urban 
and rural costs separately and weighting by patient rather than agency.
    Response: The statute does not provide for establishing urban and 
rural per-beneficiary limitations. Since the wage-index is applied 
based on the location of the services rendered to the beneficiaries, 
the standardization was done through a weighting of the beneficiaries 
rather than the location of the HHA.
    Comment: HCFA should ensure that HHAs are reimbursed for additional 
costs associated with new regulatory requirements, such as OASIS costs.
    Response: The statute requires the per-beneficiary limitations to 
be based

[[Page 42921]]

upon the costs incurred during a particular base year, the Federal FY 
1994, and does not contemplate adjustments due to costs incurred 
subsequent to the base year.
    Comment: We received numerous comments concerning the definition of 
new providers under the IPS. In particular, there are concerns over the 
application of national per-beneficiary limitations when there are 
mergers and consolidations of unlike agencies, i.e. provider-based and 
freestanding or agencies without a FY ending during Federal year 1994 
with agencies with a FY ending during Federal FY 1994. Various 
scenarios were written in with respect to whether HCFA would find if 
such scenarios constituted a merger or consolidation which took place 
since Federal FY 1994. It was recommended that HCFA limit new provider 
status to those agencies without a 12-month cost reporting ending 
during Federal FY 1994 and providers that did not exist at the time of 
passage of the B.B.A. '97.
    Response: We do not believe the policies set forth in the Federal 
Register were unreasonable with respect to new provider status under 
the interim payment system. The policies are not intended to redefine 
or impose new policies regarding HCFA's long standing policies 
regarding mergers and consolidations. With respect to provider-based 
agencies or freestanding agencies, we have always made a distinction 
between the two types of providers. In May 1998 we issued a Program 
Memorandum (Transmittal No. A-98-15) which clarified our policies 
regarding provider-based and freestanding designation. In that 
memorandum we state that the main purpose of provider or facility-based 
designation is to accommodate the appropriate accounting and allocation 
of costs where there is more than one type of provider activity taking 
place within the same facility/organization. This cost allocation and 
cost reimbursement more often than not results in Medicare program 
payments that exceed what would have been paid for if the same services 
were rendered by a free-standing entity.
    Even though we believe our policies as stated in the March 31, 1998 
Federal Register with respect to what is a ``clause vi'' agency are 
reasonable, we have reevaluated our position based on comments and are 
revising our interpretation as to what constitutes a new provider by 
adding an alternative reading. In determining whether an agency is a 
new or old provider, we will consider whether the agency's provider 
number existed with a 12-month cost reporting period ending during 
Federal FY 1994. In such a case, that agency can be considered an old 
provider/clause v provider regardless of any changes that took place in 
subsequent years. However, those agencies that did not have a 12-month 
cost reporting period ending during Federal FY 1994 and those agencies 
that were certified under Medicare with provider numbers that did not 
exist with a 12-month cost reporting period ending during Federal FY 
1994 will continue to be considered new providers/clause vi providers. 
For greater detail on new providers, see section V.C. ``New 
Providers.''

V. Update of the Per-Beneficiary Limitations

    The methodologies and data used to develop the schedule of per-
beneficiary limitations set forth in this notice are the same as that 
used in setting the per-beneficiary limitations that were effective for 
cost reporting periods beginning on or after October 1, 1997. We have 
updated the per-beneficiary limitations to reflect the expected cost 
increases occurring between the cost reporting periods ended during 
Federal FY 1994 and September 30, 1999, excluding any changes in the 
home health market basket with respect to cost reporting periods which 
began on or after July 1, 1994 and before July 1, 1996. Therefore, we 
excluded this time period when we adjusted the database for the market 
basket increases.

A. Data Used

    The cost report data used to develop the schedule of per-
beneficiary limitations set forth in this notice are for cost reporting 
periods ending in Federal FY 1994, as required by section 1861(v)(1)(L) 
of the Act. We have updated the per-beneficiary limitations to reflect 
the expected cost increases occurring between the cost reporting 
periods for the data contained in the database and September 30, 1999 
(excluding, as required by statute, any changes in the home health 
market basket for cost reporting periods beginning on or after July 1, 
1994 and before July 1, 1996).
    The interim payment system sets limitations according to two 
different methodologies. For agencies with cost reporting periods 
ending during Federal FY 1994, the limitation is based on 75 percent of 
98 percent of the agencies' own reasonable costs and 25 percent of 98 
percent of the average census region division costs. At the end of the 
agency's cost reporting period subject to the per-beneficiary 
limitations, the labor component of the census region division per-
beneficiary limitation is adjusted by a wage index based on where the 
home health services are rendered.
    For new providers and providers without a cost reporting period 
ending during Federal FY 1994, the per-beneficiary limitation is based 
on the standardized national median of the blended agency-specific and 
census region division per-beneficiary limitations described above. 
This is done by simply arraying the agencies' per-beneficiary 
limitations and selecting the median case. This national per-
beneficiary limitation is then standardized for the effect of the wage 
index. The wage index is applied to the labor component of the national 
per-beneficiary limitation at the end of the cost reporting period 
beginning on or after October 1, 1998, and is based on where the home 
health services are rendered.

B. Wage Index

    A wage index is used to adjust the labor-related portion of the 
standardized regional average per-beneficiary limitation and the 
national per-beneficiary limitation to reflect differing wage levels 
among areas. In establishing the regional average per-beneficiary 
limitation and national per-beneficiary limitation, we used the FY 1998 
hospital wage index, which is based on 1994 hospital wage data.
    Each HHA's labor market area is determined based on the definitions 
of Metropolitan Statistical Areas (MSAs) issued by the Office of 
Management and Budget (OMB). Section 1861(v)(1)(L)(iii) of the Act 
requires us to use the current hospital wage index (that is, the FY 
1998 hospital wage index, which was published in the Federal Register 
on August 29, 1997 (62 FR 46070)) without regard to whether such 
hospitals have been reclassified to a new geographic area, to establish 
the HHA cost limitations. Therefore, the schedules of standardized 
regional average per-beneficiary limitations and the national per-
beneficiary limitation reflects the MSA definitions that are currently 
in effect under the hospital prospective payment system.
    As we did for the per-visit limitations, 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 
limitations 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 (Public Law 98-11). Section 601(g) 
of Public Law 98-21 requires that any

[[Page 42922]]

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 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 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 Medicare hospital wage index to the HHA standardized 
regional average per-beneficiary limitations and the national per-
beneficiary limitation. These exceptions result in the same New England 
County Metropolitan Area definitions for hospitals, skilled nursing 
facilities, 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, these four counties are urban under 
either definition, New England County Metropolitan Area or MSA.
    Section 1861(v)(1)(L)(iii) requires the use of the area wage index 
applicable under section 1886(d)(3)(E) of the Act and determined using 
the survey of the most recent available wages and wage-related costs of 
hospitals located in the geographic area in which the home health 
service is furnished without regard to whether such hospitals have been 
reclassified to a new geographic area pursuant to section 1886(d)(8)(B) 
of the Act. The wage-index, as applied to the labor portion of the 
regional per-beneficiary limitation and the labor portion of the 
national per-beneficiary limitation, must be based on the geographic 
location in which the home health service is actually furnished.

C. New Providers

    Section III. C. at 63 FR 15721 through 15722 provides the policy 
with respect to the determination of whether an agency is a new agency 
or an old agency for applying the per-beneficiary limitations. 
Considering the number of comments and inquiries we have received 
concerning the policies set forth in this section, particularly with 
respect to what a ``clause vi'' provider is under the IPS, we have 
reevaluated our position on this issue and are modifying some of the 
policies.
    In considering this policy we recognize there are many changes an 
HHA may undergo including changes due to mergers, consolidations, and 
changes in ownership. Regardless of what constitutes the change there 
will be a surviving entity resulting from the change and the status of 
the surviving entity will dictate how the agency will be treated under 
the per-beneficiary limitations. We believe that providers fall within 
the following groupings: (a) An HHA with an existing provider number 
with a provider agreement with HCFA, (b) an HHA accepts assignment of 
the provider agreement and provider number which had a FY 1994 base 
year through a change in ownership after the FY 1994 base year, or, (c) 
an HHA has gone through the certification process since the FY 1994 
base period as a new provider and has a new provider number assigned 
after the applicable FY 1994 base year. Under (a) or (b), if the 
provider number existed as an HHA with a 12-month cost reporting period 
ending during Federal FY 1994, that 12-month cost reporting period will 
be the cost reporting period for calculating the agency-specific 
component of the per-beneficiary limitation and considered an old 
provider with an agency-specific per-beneficiary limitation. Under (c), 
the agency will be a new provider and subject to the national per-
beneficiary limitation.
    We are permitting providers that would be determined to be new 
providers under the policies set forth in the March 31, 1998 final 
notice, to elect to be considered an old provider under the policies 
set forth above. Furthermore, providers that were determined to be new 
providers under the March 31, 1998 policies may likewise choose to 
continue to be considered new providers. These choices must be made and 
conveyed to the agency's fiscal intermediary by October 1, 1998. We 
note these designations of provider status is solely for purposes of 
determining the per-beneficiary limitation. However, those providers 
that elect to continue to be new providers pursuant to the March 31, 
1998 final notice are subject to that continued new provider status for 
so long as there are no changes after their October 1, 1998 election 
that would affect their elected new provider option.
    Our policy addressing HHA branches that become subunits set forth 
at 63 FR 15722 is not affected by the change addressed above.

VI. Market Basket

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

 Table 1.--1993-Based Cost Categories, Basket Weights, and Price Proxies
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
Compensation including allocated          77.668  ......................
 Contract Services' Labor.                                              
    Wages and Salaries including          64.226  HHA Occupational Wage 
     allocated Contract Services'                  Index.               
     Labor.                                                             
    Employee benefits, including          13.442  HHA Occupational      
     allocated Contract Services'                  Benefits Index.      
     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.      
    Paper & Printing...............        0.529  CPI-U Household Paper,
                                                   Paper Products &     
                                                   Stationary Supplies. 
    Postage........................        0.724  CPI-U Postage.        
    Other Administrative & General,        7.591  CPI-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.          
    Movable Capital................        0.880  PPI Machinery &       
                                                   Equipment.           
Other Expenses, including allocated        5.322  CPI-U All Items Less  
 Contract Services' Non-Labor.                     Food & Energy.       
                                    -------------                       
      Total........................      100.000  ......................
------------------------------------------------------------------------


[[Page 42923]]

VII. Update of Data Base

    The data used to develop the cost per-visit limitations, the census 
region per-beneficiary limitations and the national per-beneficiary 
limitation were adjusted using the latest available market basket 
factors to reflect expected cost increases occurring between the cost 
reporting periods contained in our database and September 30, 1999, 
excluding any changes in the home health market basket with respect to 
cost reporting periods which began on or after July 1, 1994 and before 
July 1, 1996. The following inflation factors were used in calculating 
the per-visit, the census region per-beneficiary limitations, and 
national per-beneficiary limitations:

                      Table 2.--Factors for Inflating Database Dollars to September 30,1999                     
                                       [Inflation Adjustment Factors \1\]                                       
----------------------------------------------------------------------------------------------------------------
                     FY end                          1993         1994         1995         1996         1997   
----------------------------------------------------------------------------------------------------------------
October 31.....................................      1.11846      1.08387      1.08361      1.08169      1.05773
November 30....................................      1.11568      1.08773      1.08361      1.08073      1.05507
December 31....................................      1.11291      1.08650      1.08361      1.07955      1.05241
January 31.....................................  ...........      1.11015      1.08553      1.08361      1.07816
February 28....................................  ...........      1.10741      1.08483      1.08361      1.07656
March 31.......................................  ...........      1.10475      1.08428      1.08361      1.07477
April 30.......................................  ...........      1.10215      1.08387      1.08361      1.07279
May 31.........................................  ...........      1.09963      1.08361      1.08361      1.07064
June 30........................................  ...........      1.09709      1.08361      1.08361      1.06820
July 31........................................  ...........      1.09480      1.08361      1.08342      1.06566
August 31......................................  ...........      1.09276      1.08361      1.08304      1.06303
September 30...................................  ...........      1.09090      1.08361      1.08246     1.06039 
----------------------------------------------------------------------------------------------------------------
\1\ Source: The Home Health Agency Price Index, produced by HCFA. The forecasts are from Standard and Poor's DRI
  1st QTR 1998; @USSIM/TREND25YR0298@CISSIM/Control981 forecast exercise which has historical data through      
  1998:1.                                                                                                       

    Multiplying nominal dollars for a given FY end by their respective 
inflation adjustment factor will express those dollars in the dollar 
levels for the FY ending September 30, 1998.
    The procedure followed to develop these tables, based on 
requirements from BBA '97, was to hold the June 1994 level for input 
price index constant through June 1996. From July 1996 forward, we 
trended the revised index forward using the percentage gain each month 
from the HCFA Home Health Agency Input Price Index.
    Thus, the monthly trend of the revised index is the same as that of 
the HCFA market basket for the period from July 1996 forward.

A. Short Period Adjustment Factors for Cost Reporting Periods 
Consisting of Fewer Than 12 Months

    HHAs with cost reporting periods beginning on or after October 1, 
1998 may have cost reporting periods that are less than 12 months in 
length. This may happen, for example, when a new provider enters the 
Medicare program after its selected FY has already begun, or when a 
provider experiences a change of ownership before the end of the cost 
reporting period. The data used in calculating the limitations were 
updated to September 30, 1999. Therefore, the cost limitations 
published in this notice are for a 12-month cost reporting period 
beginning October 1, 1998 and ending September 30, 1999. For 12-month 
cost reporting periods beginning after October 1, 1998 and before 
October 1, 1999, cost reporting period 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 limitations to agencies with cost 
reporting periods of fewer than 12 months, we are publishing an example 
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 of the cost reporting 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.
    Example:
    1. After approval by its intermediary, an HHA that had a 1994 base 
year changed its FY end from June 30 to December 31. Therefore, the HHA 
had a short cost reporting period beginning on July 1, 1999 and ending 
on December 31, 1999. The cost reporting period ending during Federal 
FY 1994 would have been the cost reporting period ending on June 30, 
1994. The limitations 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 
1999 through December 1999: 6.82716.
    Step 2--Divide the results from Step 1 by the number of months in 
short period:

6.827166=1.13787.

    Step 3--From Table 6, sum the index levels for the months in the 
common period of October 1998 through September 1999: 13.45836.
    Step 4--Divide the results in Step 3 by the number of months in the 
common period:

13.4583612=1.12153.
    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 per-visit 
and per-beneficiary limitations:

1.137871.12153=1.0145693.
    Step 6--Apply the results from Step 5 to the published limitations.
    For example:
    a. Urban skilled nursing per-visit labor portion

$88.44 x 1.0145693=$89.73.
    b. Urban skilled nursing per-visit nonlabor portion

$19.73 x .0145693=$20.02.


[[Page 42924]]


    c. West South Central Census region division labor portion per-
beneficiary limitation

$4,588.26 x 1.0145693=$4,655.11.
    d. West South Central Census region division nonlabor portion per-
beneficiary limitation

$1,319.27 x 1.0145693=$1,338.49.

    Step 7. Also apply the results from Step 5 to the calculated 
agency-specific per-beneficiary amount which has been updated to 
September 30, 1999 using Table 2.

B. Adjustment Factor for Reporting Year Beginning After October 1, 1998 
and Before October 1, 1999

    If an HHA has a 12-month cost reporting period beginning on or 
after November 1, 1998, the per-visit limitation and the adjusted 
census region division per-beneficiary limitation and the agency-
specific per-beneficiary limitation or the adjusted national per-
beneficiary limitations are 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 per-beneficiary limitations 
become effective.
    In adjusting the agency-specific per-beneficiary limitation for the 
market basket increases since the end of the cost reporting period 
ending during Federal year 1994, the intermediary will increase the 
agency-specific per-beneficiary limitation to September 30, 1999. That 
way when the limitations need to be further adjusted for the cost 
reporting period, all elements of the limitation calculations can be 
adjusted by the same factor. For example, if an HHA providing services 
in the Dallas MSA only and has a cost reporting period beginning 
January 1, 1999, its occupational therapy per-visit limitation and its 
per-beneficiary limitation would be further adjusted as follows:

        Computation of Revised Per-Visit for Occupational Therapy       
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
Adjusted per-visit limitation...........................      $123.05 \1\
Adjustment from Table 5.................................         1.00720
Revised per-visit limitation............................      $123.94   
------------------------------------------------------------------------
\1\ Adjusted by appropriate wage index applicable to the Dallas MSA and 
  the budget neutrality adjustment factor of 1.03.                      


  Computation of Revised Per-beneficiary Limitations for an HHA With a  
                            1994 Base Period                            
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
Agency-specific component inflated through December 31,                 
 1999:                                                                  
    $5400.00  x  .98  x  .75............................    $3,969.00   
West south central division component adjusted by the                   
 Dallas MSA wage index:                                                 
    $5,771.26  x  .98  x  .25...........................     1,413.96   
Blended per-beneficiary limitation for Dallas-MSA.......    $5,382.96   
Adjustment factor from Table 5..........................         1.00720
Adjusted blended per-beneficiary limitation for Dallas                  
 MSA....................................................    $5,521.72   
------------------------------------------------------------------------


 Computation of Revised Per-beneficiary Limitation for a New Provider in
                             the Dallas MSA                             
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
National per-beneficiary limitation for Dallas MSA......    $3,376.61 \1\
Adjustment factor from Table 5..........................         1.00720
Adjusted national per-beneficiary limitation............    $3,400.92   
------------------------------------------------------------------------
\1\ Published limitation reflects 98 percent factor.                    

VIII. Schedules of Per-visit and Per-beneficiary Limitations

    The schedules of limitations set forth below apply to cost 
reporting periods beginning on or after October 1, 1998. The 
intermediaries will compute the adjusted limitations using the wage 
index(s) published in Tables 4a and 4b of section X. for each MSA and/
or non MSA for which the HHA provides services to Medicare 
beneficiaries. The intermediary will notify each HHA it services of its 
applicable limitations for the area(s) where the HHA furnishes HHA 
services to Medicare beneficiaries. Each HHA's aggregate limitations 
cannot be determined prospectively, but depends on each HHA's Medicare 
utilization (visits and unduplicated census count) by location of the 
HHA services furnished for the cost reporting periods subject to this 
document.
    Section 1861(v)(1)(L)(vi)(II) of the Act, requires the per-
beneficiary limitations to be prorated among HHAs for Medicare 
beneficiaries who use services furnished by more than one HHA. The per-
beneficiary limitation will be prorated based on a ratio of the number 
of visits furnished to the individual beneficiary by the HHA during its 
cost reporting period to the total number of visits furnished by all 
HHAs to that individual beneficiary during the same period.
    The proration of the per-beneficiary limitation will be done based 
on the fraction of services the beneficiary received from the HHA. For 
example, if an HHA furnished 100 visits to an individual beneficiary 
during its cost reporting period ending September 30, 1999, and that 
same individual received a total of 400 visits during that same period, 
the HHA would count the beneficiary as a .25 unduplicated census count 
of Medicare patient for the cost reporting period ending September 30, 
1999.
    The HHA costs that are subject to the per-visit limitations include 
the cost of medical supplies routinely furnished in conjunction with 
patient care. Durable medical equipment orthotic, prosthetic, 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 the per-visit schedule of limitations. (See Chapter IV of the 
Home Health Agency Manual (HCFA Pub. II).) The HHA costs that are 
subject to the per-beneficiary limitations include the costs of medical 
supplies routinely furnished and nonroutine medical supplies furnished 
in conjunction with patient care. Durable medical equipment directly 
identifiable as services to an individual

[[Page 42925]]

patient are excluded from the per-beneficiary limitations and are paid 
without regard to this schedule of per-beneficiary limitations.
    The intermediary will determine the aggregate limitations for each 
HHA according to the location where the services are furnished by the 
HHA. Medicare payment is based on the lower of the HHA's total 
allowable Medicare costs plus the allowable Medicare costs of 
nonroutine medical supplies, the aggregate per-visit limitation plus 
the allowable Medicare costs of nonroutine medical supplies, or the 
aggregate per-beneficiary limitation. An example of how the aggregate 
limitations are computed for an HHA providing HHA service to Medicare 
beneficiaries in both Dallas, Texas and rural Texas are as follows:
    Example: HHA X, an HHA located in Dallas, TX, has 11,500 skilled 
nursing visits, 4,300 physical therapy visits, 8,900 home health aide 
visits and an unduplicated census count of 400 Medicare beneficiaries 
in the Dallas MSA and 5,000 skilled nursing visits, 2,300 physical 
therapy visits, 4,300 home health aide visits and an unduplicated 
census count of 200 Medicare beneficiaries in rural Texas during its 
12-month cost reporting period ending September 30, 1999. The 
unadjusted agency-specific per-beneficiary amount for the base period 
(cost reporting period ending September 30, 1994) is $4,825.00. The 
aggregate limitations are calculated as follows:

                              Determining the Aggregate Per-Beneficiary Limitation                              
----------------------------------------------------------------------------------------------------------------
                                                                                       Unduplicated             
                                                                                       census count   Total per 
              MSA/Non-MSA area                      Per beneficiary limitation         of Medicare   beneficiary
                                                                                      beneficiaries   limitation
----------------------------------------------------------------------------------------------------------------
Dallas, TX..................................  (4,825.00  x  1.09090  x  .98  x  .75)           400     2,113,080
                                               plus ((4,588.36  x  .9703) plus                                  
                                               1,319.21))  x  .98  x  .25.                                      
Rural, TX...................................  (4,825.00  x  1.09090  x  .98  x  .75)           200     1,004,852
                                               plus ((4,588.36  x  .7404) plus                                  
                                               1,319.21))  x  .98  x  .25.                                      
Aggregate Limitation........................  ......................................  .............    3,117,932
----------------------------------------------------------------------------------------------------------------


             Determining the Aggregate Per-Visit Limitation             
------------------------------------------------------------------------
                                    Number of    Per-visit              
        Area/type of visit            visits     limit \1\   Total limit
------------------------------------------------------------------------
Dallas-MSA:......................                                       
    Skilled nursing..............       11,550       108.12    1,248,786
    Physical therapy.............        4,300       121.08      520,644
    Home health aide.............        8,900        45.14      401,746
Rural Texas:                                                            
    Skilled nursing..............        5,000        77.37      386,850
    Physical therapy.............        2,300        88.95      204.585
    Home health aide.............        4,300        43.06      185,158
Aggregate limitation.............  ...........  ...........    2,947,769
------------------------------------------------------------------------
\1\ The per-visit has been adjusted by the appropriate wage-index and   
  the budget neutrality adjustment factor of 1.03.                      

    For the cost reporting period ending September 30, 1999, the HHA 
incurred $2,850,000 in Medicare costs for the discipline services and 
$325,000 for the costs of Medicare nonroutine medical supplies. 
Medicare reimbursement for this HHA would be $3,117,932, which is the 
lesser of the actual costs of $2,850,000 plus the costs of nonroutine 
medical supplies of $325,000 ($3,175,000) or the aggregate per-visit 
limitation of $2,947,769 plus the costs of nonroutine medical supplies 
of $325,000 ($3,272,769) or the aggregate per-beneficiary limitation of 
$3,117,932.
    Before the limitations are applied during settlement of the cost 
report, the HHA's actual costs are reduced by the amount of individual 
items of costs (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 of comparable HHAs 
(see 42 CFR 413.9).

                    Table 3A.--Per-Visit Limitations                    
------------------------------------------------------------------------
                                    Per-visit      Labor       Nonlabor 
          Type of Visit             limitation    portion    portion \1\
------------------------------------------------------------------------
MSA(NECMA) location:                                                    
    Skilled nursing care.........       108.17        $88.4       $19.73
    Physical therapy.............      $121.14        98.82        22.32
    Speech therapy...............       126.52       103.01        23.51
    Occupational therapy.........       123.10        99.81        23.29
    Medical social services......       167.78       136.78        31.00
    Home health aide.............        45.16        36.88         8.28
NonMSA location:                                                        
    Skilled nursing care.........        94.97        74.13        20.84
    Physical therapy.............       107.26        83.56        23.70
    Speech therapy...............       107.97        83.99        23.98
    Occupational therapy.........       108.15        84.05        24.10

[[Page 42926]]

                                                                        
    Medical social services......       130.69       101.38        29.31
    Home health aides............        43.84        34.21         9.63
------------------------------------------------------------------------
\1\ Nonlabor portion of per-visit limitations 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.....................................................        1.150
Hawaii:                                                                 
    County of Hawaii.......................................        1.225
    County of Hawaii.......................................        1.150
    County of Kauai........................................        1.200
    County of Maui.........................................       1.2225
    County of Kalawao......................................        1.225
Puerto Rico................................................        1.100
Virgin Islands.............................................        1.125
------------------------------------------------------------------------


   Table 3b.--Standardized Per-Beneficiary Limitation by Census Region  
                        Division, Labor/Nonlabor                        
------------------------------------------------------------------------
                                                   Labor       Nonlabor 
            Census region division               component    component 
------------------------------------------------------------------------
New England (CT, ME, MA, NH, RI, VT)..........    $2,749.52      $790.58
Middle Atlantic (NJ, NY, PA)..................     2,037.88       585.96
South Atlantic (DE, DC, FL, GA, MD, NC, SC,                             
 VA, WV)......................................     3,073.90       883.84
East North Central (IL, IN, MI, OH, WI).......     2,492.70       716.73
East South Central (AL, KY, MS, TN)...........     4,726.25     1,358.95
West North Central (IA, KS, MN, MO, NE, ND,                             
 SD)..........................................     2,394.14       688.39
West South Central (AR, LA, OK, TX)...........     4,588.26     1,319.27
Mountain (AZ, CO, ID, MT, NV, NM, UT, WY).....     3,023.85       869.45
Pacific (AK, CA, HI, OR, WA)..................     2,342.45       673.53
------------------------------------------------------------------------


 Table 3c.--Standardized Per-Beneficiary Limitation for New Agencies and
  Agencies Without a 12-Month Cost Report Ending During Federal FY 1994 
------------------------------------------------------------------------
                                                  Labor       Nonlabor  
                                                component     component 
------------------------------------------------------------------------
National....................................    $2,684.47       $771.87 
------------------------------------------------------------------------


 Table 3d.--Standardized Per-Beneficiary Limitations for Puerto Rico and
                                  Guam                                  
------------------------------------------------------------------------
                                                   Labor       Nonlabor 
                                                 component    component 
------------------------------------------------------------------------
Puerto Rico...................................    $1,996.22      $573.97
Guam..........................................     1,929.22       554.71
------------------------------------------------------------------------

IX. Wage Indexes

                  Table 4a.--Wage Index for Urban Areas                 
------------------------------------------------------------------------
                                                                  Wage  
    Urban area (Constituent counties or county equivalents)       index 
------------------------------------------------------------------------
0040  Abilene, TX.............................................    0.8287
  Taylor, TX                                                            
0060  Aguadilla, PR...........................................    0.4188
  Aguada, PR                                                            
  Aguadilla, PR                                                         
  Moca, PR                                                              
0080  Akron, OH...............................................    0.9772
  Portage, OH                                                           
  Summit, OH                                                            
0120  Albany, GA..............................................    0.7914
  Dougherty, GA                                                         
  Lee, GA                                                               
0160  Albany-Schenectady-Troy, NY.............................    0.8480
  Albany, NY                                                            
  Montgomery, NY                                                        
  Rensselaer, NY                                                        
  Saratoga, NY                                                          
  Schenectady, NY                                                       
  Schoharie, NY                                                         
0200  Albuquerque, NM.........................................    0.9309
  Bernalillo, NM                                                        
  Sandoval, NM                                                          
  Valencia, NM                                                          
0220  Alexandria, LA..........................................    0.8162

[[Page 42927]]

                                                                        
  Rapides, LA                                                           
0240  Allentown-Bethlehem-Easton, PA..........................    1.0086
  Carbon, PA                                                            
  Lehigh, PA                                                            
  Northampton, PA                                                       
0280  Altoona, PA.............................................    0.9137
  Blair, PA                                                             
0320  Amarillo, TX............................................    0.9425
  Potter, TX                                                            
  Randall, TX                                                           
0380  Anchorage, AK...........................................    1.2842
  Anchorage, AK                                                         
0440  Ann Arbor, MI...........................................    1.1785
  Lenawee, MI                                                           
  Livingston, MI                                                        
  Washtenaw, MI                                                         
0450  Anniston, AL............................................    0.8266
  Calhoun, AL                                                           
0460  Appleton-Oshkosh-Neenah, WI.............................    0.8996
  Calumet, WI                                                           
  Outagamie, WI                                                         
  Winnebago, WI                                                         
0470  Arecibo, PR.............................................    0.4218
  Arecibo, PR                                                           
  Camuy, PR                                                             
  Hatillo, PR                                                           
0480  Asheville, NC...........................................    0.9072
  Buncombe, NC                                                          
  Madison, NC                                                           
0500  Athens, GA..............................................    0.9087
  Clarke, GA                                                            
  Madison, GA                                                           
  Oconee, GA                                                            
0520  Atlanta, GA.............................................    0.9823
  Barrow, GA                                                            
  Bartow, GA                                                            
  Carroll, GA                                                           
  Cherokee, GA                                                          
  Clayton, GA                                                           
  Cobb, GA                                                              
  Coweta, GA                                                            
  DeKalb, GA                                                            
  Douglas, GA                                                           
  Fayette, GA                                                           
  Forsyth, GA                                                           
  Fulton, GA                                                            
  Gwinnett, GA                                                          
  Henry, GA                                                             
  Newton, GA                                                            
  Paulding, GA                                                          
  Pickens, GA                                                           
  Rockdale, GA                                                          
  Spalding, GA                                                          
  Walton, GA                                                            
0560  Atlantic City-Cape May, NJ..............................    1.1155
  Atlantic City, NJ                                                     
  Cape May, NJ                                                          
0600  Augusta-Aiken, GA-SC....................................    0.9333
  Columbia, GA                                                          
  McDuffie, GA                                                          
  Richmond, GA                                                          
  Aiken, SC                                                             
  Edgefield, SC                                                         
0640  Austin-San Marcos, TX...................................    0.9133
  Bastrop, TX                                                           
  Caldwell, TX                                                          
  Hays, TX                                                              
  Travis, TX                                                            
  Williamson, TX                                                        
0680  Bakersfield, CA.........................................    1.0014
  Kern, CA                                                              
0720  Baltimore, MD...........................................    0.9689
  Anne Arundel, MD                                                      
  Baltimore, MD                                                         
  Baltimore City, MD                                                    
  Carroll, MD                                                           
  Harford, MD                                                           
  Howard, MD                                                            
  Queen Anne, MD                                                        
0733  Bangor, ME..............................................    0.9478
  Penobscot, ME                                                         
0743  Barnstable-Yarmouth, MA.................................    1.4291
  Barnstable, MA                                                        
0760  Baton Rouge, LA.........................................    0.8382
  Ascension, LA                                                         
  East Baton Rouge, LA                                                  
  Livingston, LA                                                        
  West Baton Rouge, LA                                                  
0840  Beaumont-Port Arthur, TX................................    0.8593
  Hardin, TX                                                            
  Jefferson, TX                                                         
  Orange, TX                                                            
0860  Bellingham, WA..........................................    1.1221
  Whatcom, WA                                                           
0870  Benton Harbor, MI.......................................    0.8634
  Berrien, MI                                                           
0875  Bergen-Passaic, NJ......................................    1.2156
  Bergen, NJ                                                            
  Passaic, NJ                                                           
0880  Billings, MT............................................    0.9783
  Yellowstone, MT                                                       
0920  Biloxi-Gulfport-Pascagoula, MS..........................    0.8415
  Hancock, MS                                                           
  Harrison, MS                                                          
  Jackson, MS                                                           
0960  Binghamton, NY..........................................    0.8914
  Broome, NY                                                            
  Tioga, NY                                                             
1000  Birmingham, AL..........................................    0.9005
  Blount, AL                                                            
  Jefferson, AL                                                         
  St. Clair, AL                                                         
  Shelby, AL                                                            
1010  Bismarck, ND............................................    0.7695
  Burleigh, ND                                                          
  Morton, ND                                                            
1020  Bloomington, IN.........................................    0.9128
  Monroe, IN                                                            
1040  Bloomington-Normal, IL..................................    0.8733
  McLean, IL                                                            
1080  Boise City, ID..........................................    0.8856
  Ada, ID                                                               
  Canyon, ID                                                            
1123  Boston-Worcester Lawrence-Lowell-Brockton, MA-NH........    1.1506
  Bristol, MA                                                           
  Essex, MA                                                             
  Middlesex, MA                                                         
  Norfolk, MA                                                           
  Plymouth, MA                                                          
  Suffolk, MA                                                           
  Worcester, MA                                                         
  Hillsborough, NH                                                      
  Merrimack, NH                                                         
  Rockingham, NH                                                        
  Strafford, NH                                                         
1125  Boulder-Longmont, CO....................................    1.0015
  Boulder, CO                                                           
1145  Brazoria, TX............................................    0.9341
  Brazoria, TX                                                          
1150  Bremerton, WA...........................................    1.0999
  Kitsap, WA                                                            
1240  Brownsville-Harlingen-San Benito, TX....................    0.8740
  Cameron, TX                                                           
1260  Bryan-College Station, TX...............................    0.8571
  Brazos, TX                                                            
1280  Buffalo-Niagara Falls, NY...............................    0.9272
  Erie, NY                                                              
  Niagara, NY                                                           
1303  Burlington, VT..........................................    1.0142
  Chittenden, VT                                                        
  Franklin, VT                                                          
  Grand Isle, VT                                                        
1310  Caguas, PR..............................................    0.4459
  Caguas, PR                                                            
  Cayey, PR                                                             
  Cidra, PR                                                             
  Gurabo, PR                                                            
  San Lorenzo, PR                                                       
1320  Canton-Massillon, OH....................................    0.8961
  Carroll, OH                                                           
  Stark, OH                                                             
1350  Casper, WY..............................................    0.9013
  Natrona, WY                                                           
1360  Cedar Rapids, IA........................................    0.8529
  Linn, IA                                                              
1400  Champaign-Urbana, IL....................................    0.8824
  Champaign, IL                                                         
1440  Charleston-North Charleston, SC.........................    0.8807
  Berkeley, SC                                                          
  Charleston, SC                                                        
  Dorchester, SC                                                        
1450  Charleston, WV..........................................    0.9142
  Kanawha, WV                                                           
  Putnam, WV                                                            
1520  Charlotte-Gastonia-Rock Hill, NC-SC.....................    0.9710
  Cabarrus, NC                                                          
  Gaston, NC                                                            
  Lincoln, NC                                                           
  Mecklenburg, NC                                                       
  Rowan, NC                                                             
  Union, NC                                                             
  York, SC                                                              
1540  Charlottesville, VA.....................................    0.9051
  Albemarle, VA                                                         
  Charlottesville City, VA                                              
  Fluvanna, VA                                                          
  Greene, VA                                                            
1560  Chattanooga, TN-GA......................................    0.8658
  Catoosa, GA                                                           
  Dade, GA                                                              
  Walker, GA                                                            
  Hamilton, TN                                                          
  Marion, TN                                                            
1580  Cheyenne, WY............................................    0.7555
  Laramie, WY                                                           
1600  Chicago, IL.............................................    1.0860
  Cook, IL                                                              
  DeKalb, IL                                                            
  DuPage, IL                                                            
  Grundy, IL                                                            

[[Page 42928]]

                                                                        
  Kane, IL                                                              
  Kendall, IL                                                           
  Lake, IL                                                              
  McHenry, IL                                                           
  Will, IL                                                              
1620  Chico-Paradise, CA......................................    1.0429
  Butte, CA                                                             
1640  Cincinnati, OH-KY-IN....................................    0.9474
  Dearborn, IN                                                          
  Ohio, IN                                                              
  Boone, KY                                                             
  Campbell, KY                                                          
  Gallatin, KY                                                          
  Grant, KY                                                             
  Kenton, KY                                                            
  Pendleton, KY                                                         
  Brown, OH                                                             
  Clermont, OH                                                          
  Hamilton, OH                                                          
  Warren, OH                                                            
1660  Clarksville-Hopkinsville, TN-KY.........................    0.7852
  Christian, KY                                                         
  Montgomery, TN                                                        
1680  Cleveland-Lorain-Elyria, OH.............................    0.9804
  Ashtabula, OH                                                         
  Cuyahoga, OH                                                          
  Geauga, OH                                                            
  Lake, OH                                                              
  Lorain, OH                                                            
  Medina, OH                                                            
1720  Colorado Springs, CO....................................    0.9316
  El Paso, CO                                                           
1740  Columbia, MO............................................    0.9001
  Boone, MO                                                             
1760  Columbia, SC............................................    0.9192
  Lexington, SC                                                         
  Richland, SC                                                          
1800  Columbus, GA-AL.........................................    0.8288
  Russell, AL                                                           
  Chattanoochee, GA                                                     
  Harris, GA                                                            
  Muscogee, GA                                                          
1840  Columbus, OH............................................    0.9793
  Delaware, OH                                                          
  Fairfield, OH                                                         
  Franklin, OH                                                          
  Licking, OH                                                           
  Madison, OH                                                           
  Pickaway, OH                                                          
1880  Corpus Christi, TX......................................    0.8945
  Nueces, TX                                                            
  San Patricio, TX                                                      
1900  Cumberland, MD-WV.......................................    0.8822
  Allegany, MD                                                          
  Mineral, WV                                                           
1920  Dallas, TX..............................................    0.9703
  Collin, TX                                                            
  Dallas, TX                                                            
  Denton, TX                                                            
  Ellis, TX                                                             
  Henderson, TX                                                         
  Hunt, TX                                                              
  Kaufman, TX                                                           
  Rockwall, TX                                                          
1950  Danville, VA............................................    0.8146
  Danville City, VA                                                     
  Pittsylvania, VA                                                      
1960  Davenport-Rock Island-Moline, IA-IL.....................    0.8405
  Scott, IA                                                             
  Henry, IL                                                             
  Rock Island, IL                                                       
2000  Dayton-Springfield, OH..................................    0.9584
  Clark, OH                                                             
  Greene, OH                                                            
  Miami, OH                                                             
  Montgomery, OH                                                        
2020  Daytona Beach, FL.......................................    0.8375
  Flagler, FL                                                           
  Volusia, FL                                                           
2030  Decatur, AL.............................................    0.8286
  Lawrence, AL                                                          
  Morgan, AL                                                            
2040  Decatur, IL.............................................    0.7915
  Macon, IL                                                             
2080  Denver, CO..............................................    1.0386
  Adams, CO                                                             
  Arapahoe, CO                                                          
  Denver, CO                                                            
  Douglas, CO                                                           
  Jefferson, CO                                                         
2120  Des Moines, IA..........................................    0.8837
  Dallas, IA                                                            
  Polk, IA                                                              
  Warren, IA                                                            
2160  Detroit, MI.............................................    1.0825
  Lapeer, MI                                                            
  Macomb, MI                                                            
  Monroe, MI                                                            
  Oakland, MI                                                           
  St. Clair, MI                                                         
  Wayne, MI                                                             
2180  Dothan, AL..............................................    0.8070
  Dale, AL                                                              
  Houston, AL                                                           
2190  Dover, DE...............................................    0.9303
  Kent, DE                                                              
2200  Dubuque, IA.............................................    0.8088
  Dubuque, IA                                                           
2240  Duluth-Superior, MN-WI..................................    0.9779
  St. Louis, MN                                                         
  Douglas, WI                                                           
2281  Dutchess County, NY.....................................    1.0632
  Dutchess, NY                                                          
2290  Eau Claire, WI..........................................    0.8764
  Chippewa, WI                                                          
  Eau Claire, WI                                                        
2320  El Paso, TX.............................................    1.0123
  El Paso, TX                                                           
2330  Elkhart-Goshen, IN......................................    0.9081
  Elkhart, IN                                                           
2335  Elmira, NY..............................................    0.8247
  Chemung, NY                                                           
2340  Enid, OK................................................    0.7962
  Garfield, OK                                                          
2360  Erie, PA................................................    0.8862
  Erie, PA                                                              
2400  Eugene-Springfield, OR..................................    1.1435
  Lane, OR                                                              
2440  Evansville-Henderson, IN-KY.............................    0.8641
  Posey, IN                                                             
  Vanderburgh, IN                                                       
  Warrick, IN                                                           
  Henderson, KY                                                         
2520  Fargo-Moorhead, ND-MN...................................    0.8837
  Clay, MN                                                              
  Cass, ND                                                              
2560  Fayetteville, NC........................................    0.8734
  Cumberland, NC                                                        
2580  Fayetteville-Springdale-Rogers, AR......................    0.7461
  Benton, AR                                                            
  Washington, AR                                                        
2620  Flagstaff, AZ-UT........................................    0.9115
  Coconino, AZ                                                          
  Kane, UT                                                              
2640  Flint, MI...............................................    1.1171
  Genesee, MI                                                           
2650  Florence, AL............................................    0.7551
  Colbert, AL                                                           
  Lauderdale, AL                                                        
2655  Florence, SC............................................    0.8711
  Florence, SC                                                          
2670  Fort Collins-Loveland, CO...............................    1.0248
  Larimer, CO                                                           
2680  Ft. Lauderdale, FL......................................    1.0448
  Broward, FL                                                           
2700  Fort Myers-Cape Coral, FL...............................    0.8788
  Lee, FL                                                               
2710  Fort Pierce-Port St. Lucie, FL..........................    1.0257
  Martin, FL                                                            
  St. Lucie, FL                                                         
2720  Fort Smith, AR-OK.......................................    0.7769
  Crawford, AR                                                          
  Sebastian, AR                                                         
  Sequoyah, OK                                                          
2750  Fort Walton Beach, FL...................................    0.8765
  Okaloosa, FL                                                          
2760  Fort Wayne, IN..........................................    0.8901
  Adams, IN                                                             
  Allen, IN                                                             
  DeKalb, IN                                                            
  Huntington, IN                                                        
  Wells, IN                                                             
  Whitley, IN                                                           
2800  Forth Worth-Arlington, TX...............................    0.9979
  Hood, TX                                                              
  Johnson, TX                                                           
  Parker, TX                                                            
  Tarrant, TX                                                           
2840  Fresno, CA..............................................    1.0607
  Fresno, CA                                                            
  Madera, CA                                                            
2880  Gadsden, AL.............................................    0.8815
  Etowah, AL                                                            
2900  Gainesville, FL.........................................    0.9616
  Alachua, FL                                                           
2920  Galveston-Texas City, TX................................    1.0564
  Galveston, TX                                                         
2960  Gary, IN................................................    0.9633
  Lake, IN                                                              
  Porter, IN                                                            
2975  Glens Falls, NY.........................................    0.8386
  Warren, NY                                                            
  Washington, NY                                                        
2980  Goldsboro, NC...........................................    0.8443
  Wayne, NC                                                             
2985  Grand Forks, ND-MN......................................    0.8745
  Polk, MN                                                              
  Grand Forks, ND                                                       
2995  Grand Junction, CO......................................    0.9090
  Mesa, CO                                                              
3000  Grand Rapids-Muskegon-Holland, MI.......................    1.0147
  Allegan, MI                                                           

[[Page 42929]]

                                                                        
  Kent, MI                                                              
  Muskegon, MI                                                          
  Ottawa, MI                                                            
3040  Great Falls, MT.........................................    0.8803
  Cascade, MT                                                           
3060  Greeley, CO.............................................    1.0097
  Weld, CO                                                              
3080  Green Bay, WI...........................................    0.9097
  Brown, WI                                                             
3120  Greensboro-Winston-Salem-High Point, NC.................    0.9351
  Alamance, NC                                                          
  Davidson, NC                                                          
  Davie, NC                                                             
  Forsyth, NC                                                           
  Guilford, NC                                                          
  Randolph, NC                                                          
  Stokes, NC                                                            
  Yadkin, NC                                                            
3150  Greenville, NC..........................................    0.9064
  Pitt, NC                                                              
3160  Greenville-Spartanburg-Anderson, SC.....................    0.9059
  Anderson, SC                                                          
  Cherokee, SC                                                          
  Greenville, SC                                                        
  Pickens, SC                                                           
  Spartanburg, SC                                                       
3180  Hagerstown, MD..........................................    0.9681
  Washington, MD                                                        
3200  Hamilton-Middletown, OH.................................    0.8767
  Butler, OH                                                            
3240  Harrisburg-Lebanon-Carlisle, PA.........................    1.0187
  Cumberland, PA                                                        
  Dauphin, PA                                                           
  Lebanon, PA                                                           
  Perry, PA                                                             
3283  Hartford, CT............................................    1.2562
  Hartford, CT                                                          
  Litchfield, CT                                                        
  Middlesex, CT                                                         
  Tolland, CT                                                           
3285  Hattiesburg, MS.........................................    0.7192
  Forrest, MS                                                           
  Lamar, MS                                                             
3290  Hickory-Morganton-Lenoir, NC............................    0.8686
  Alexander, NC                                                         
  Burke, NC                                                             
  Caldwell, NC                                                          
  Catawba, NC                                                           
3320  Honolulu, HI............................................    1.1816
  Honolulu, HI                                                          
3350  Houma, LA...............................................    0.7854
  Lafourche, LA                                                         
  Terrebonne, LA                                                        
3360  Houston, TX.............................................    0.9855
  Chambers, TX                                                          
  Fort Bend, TX                                                         
  Harris, TX                                                            
  Liberty, TX                                                           
  Montgomery, TX                                                        
  Waller, TX                                                            
3400  Huntington-Ashland, WV-KY-OH............................    0.9160
  Boyd, KY                                                              
  Carter, KY                                                            
  Greenup, KY                                                           
  Lawrence, OH                                                          
  Cabell, WV                                                            
  Wayne, WV                                                             
3440  Huntsville, AL..........................................    0.8485
  Limestone, AL                                                         
  Madison, AL                                                           
3480  Indianapolis, IN........................................    0.9848
  Boone, IN                                                             
  Hamilton, IN                                                          
  Hancock, IN                                                           
  Hendricks, IN                                                         
  Johnson, IN                                                           
  Madison, IN                                                           
  Marion, IN                                                            
  Morgan, IN                                                            
  Shelby, IN                                                            
3500  Iowa City, IA...........................................    0.9413
  Johnson, IA                                                           
3520  Jackson, MI.............................................    0.9052
  Jackson, MI                                                           
3560  Jackson, MS.............................................    0.7760
  Hinds, MS                                                             
  Madison, MS                                                           
  Rankin, MS                                                            
3580  Jackson, TN.............................................    0.8522
  Madison, TN                                                           
  Chester, TN                                                           
3600  Jacksonville, FL........................................    0.8969
  Clay, FL                                                              
  Duval, FL                                                             
  Nassau, FL                                                            
  St. Johns, FL                                                         
3605  Jacksonville, NC........................................    0.6973
  Onslow, NC                                                            
3610  Jamestown, NY...........................................    0.7552
  Chautaqua, NY                                                         
3620  Janesville-Beloit, WI...................................    0.8824
  Rock, WI                                                              
3640  Jersey City, NJ.........................................    1.1412
  Hudson, NJ                                                            
3660  Johnson City-Kingsport-Bristol, TN-VA...................    0.9114
  Carter, TN                                                            
  Hawkins, TN                                                           
  Sullivan, TN                                                          
  Unicoi, TN                                                            
  Washington, TN                                                        
  Bristol City, VA                                                      
  Scott, VA                                                             
  Washington, VA                                                        
3680  Johnstown, PA...........................................    0.8378
  Cambria, PA                                                           
  Somerset, PA                                                          
3700  Jonesboro, AR...........................................    0.7443
  Craighead, AR                                                         
3710  Joplin, MO..............................................    0.7510
  Jasper, MO                                                            
  Newton, MO                                                            
3720  Kalamazoo-Battlecreek, MI...............................    1.0668
  Calhoun, MI                                                           
  Kalamazoo, MI                                                         
  Van Buren, MI                                                         
3740  Kankakee, IL............................................    0.8653
  Kankakee, IL                                                          
3760  Kansas City, KS-MO......................................    0.9564
  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.............................................    0.9196
  Kenosha, WI                                                           
3810  Killeen-Temple, TX......................................    1.0252
  Bell, TX                                                              
  Coryell, TX                                                           
3840  Knoxville, TN...........................................    0.8831
  Anderson, TN                                                          
  Blount, TN                                                            
  Knox, TN                                                              
  Loudon, TN                                                            
  Sevier, TN                                                            
  Union, TN                                                             
3850  Kokomo, IN..............................................    0.8416
  Howard, IN                                                            
  Tipton, IN                                                            
3870  La Crosse, WI-MN........................................    0.8749
  Houston, MN                                                           
  La Crosse, WI                                                         
3880  Lafayette, LA...........................................    0.8206
  Acadia, LA                                                            
  Lafayette, LA                                                         
  St. Landry, LA                                                        
  St. Martin, LA                                                        
3920  Lafayette, IN...........................................    0.9174
  Clinton, IN                                                           
  Tippecanoe, IN                                                        
3960  Lake Charles, LA........................................    0.7776
  Calcasieu, LA                                                         
3980  Lakeland-Winter Haven, FL...............................    0.8806
  Polk, FL                                                              
4000  Lancaster, PA...........................................    0.9481
  Lancaster, PA                                                         
4040  Lansing-East Lansing, MI................................    1.0088
  Clinton, MI                                                           
  Eaton, MI                                                             
  Ingham, MI                                                            
4080  Laredo, TX..............................................    0.7325
  Webb, TX                                                              
4100  Las Cruces, NM..........................................    0.8646
  Dona Ana, NM                                                          
4120  Las Vegas, NV-AZ........................................    1.0592
  Mohave, AZ                                                            
  Clark, NV                                                             
  Nye, NV                                                               
4150  Lawrence, KS............................................    0.8608
  Douglas, KS                                                           
4200  Lawton, OK..............................................    0.9045
  Comanche, OK                                                          
4243  Lewiston-Auburn, ME.....................................    0.9536
  Androscoggin, ME                                                      
4280  Lexington, KY...........................................    0.8390
  Bourbon, KY                                                           
  Clark, KY                                                             
  Fayette, KY                                                           
  Jessamine, KY                                                         
  Madison, KY                                                           
  Scott, KY                                                             
  Woodford, KY                                                          
4320  Lima, OH................................................    0.9185
  Allen, OH                                                             
  Auglaize, OH                                                          
4360  Lincoln, NE.............................................    0.9231

[[Page 42930]]

                                                                        
  Lancaster, NE                                                         
4400  Little Rock-North Little Rock, AR.......................    0.8490
  Faulkner, AR                                                          
  Lonoke, AR                                                            
  Pulaski, AR                                                           
  Saline, AR                                                            
4420  Longview-Marshall, TX...................................    0.8613
  Gregg, TX                                                             
  Harrison, TX                                                          
  Upshur, TX                                                            
4480  Los Angeles-Long Beach, CA..............................    1.2232
  Los Angeles, CA                                                       
4520  Louisville, KY-IN.......................................    0.9507
  Clark, IN                                                             
  Floyd, IN                                                             
  Harrison, IN                                                          
  Scott, IN                                                             
  Bullitt, KY                                                           
  Jefferson, KY                                                         
  Oldham, KY                                                            
4600  Lubbock, TX.............................................    0.8400
  Lubbock, TX                                                           
4640  Lynchburg, VA...........................................    0.8228
  Amherst, VA                                                           
  Bedford, VA                                                           
  Bedford City, VA                                                      
  Campbell, VA                                                          
  Lynchburg City, VA                                                    
4680  Macon, GA...............................................    0.9227
  Bibb, GA                                                              
  Houston, GA                                                           
  Jones, GA                                                             
  Peach, GA                                                             
  Twiggs, GA                                                            
4720  Madison, WI.............................................    1.0055
  Dane, WI                                                              
4800  Mansfield, OH...........................................    0.8639
  Crawford, OH                                                          
  Richland, OH                                                          
4840  Mayaguez, PR............................................    0.4475
  Anasco, PR                                                            
  Cabo Rojo, PR                                                         
  Hormigueros, PR                                                       
  Mayaguez, PR                                                          
  Sabana Grande, PR                                                     
  San German, PR                                                        
4880  McAllen-Edinburg-Mission, TX............................    0.8371
  Hidalgo, TX                                                           
4890 Medford-Ashland, OR......................................    1.0354
  Jackson, OR                                                           
4900  Melbourne-Titusville-Palm Bay, FL.......................    0.8819
  Brevard, Fl                                                           
4920  Memphis, TN-AR-MS.......................................    0.8589
  Crittenden, AR                                                        
  DeSoto, MS                                                            
  Fayette, TN                                                           
  Shelby, TN                                                            
  Tipton, TN                                                            
4940  Merced, CA..............................................    1.0947
  Merced, CA                                                            
5000  Miami, FL...............................................    0.9859
  Dade, FL                                                              
5015  Middlesex-Somerset-Hunterdon, NJ........................    1.1059
  Hunterdon, NJ                                                         
  Middlesex, NJ                                                         
  Somerset, NJ                                                          
5080  Milwaukee-Waukesha, WI..................................    0.9819
  Milwaukee, WI                                                         
  Ozaukee, WI                                                           
  Washington, WI                                                        
  Waukesha, WI                                                          
5120  Minneapolis-St. Paul, MN-WI.............................    1.0733
  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..............................................    0.8455
  Baldwin, AL                                                           
  Mobile, AL                                                            
5170  Modesto, CA.............................................    1.0794
  Stanislaus, CA                                                        
5190  Monmouth-Ocean, NJ......................................    1.0934
  Monmouth, NJ                                                          
  Ocean, NJ                                                             
5200  Monroe, LA..............................................    0.8414
  Ouachita, LA                                                          
5240  Montgomery, AL..........................................    0.7671
  Autauga, AL                                                           
  Elmore, AL                                                            
  Montgomery, AL                                                        
5280  Muncie, IN..............................................    0.9173
  Delaware, IN                                                          
5330  Myrtle Beach, SC........................................    0.8072
  Horry, SC                                                             
5345  Naples, FL..............................................    1.0109
  Collier, FL                                                           
5360  Nashville, TN...........................................    0.9182
  Cheatham, TN                                                          
  Davidson, TN                                                          
  Dickson, TN                                                           
  Robertson, TN                                                         
  Rutherford TN                                                         
  Sumner, TN                                                            
  Williamson, TN                                                        
  Wilson, TN                                                            
5380  Nassau-Suffolk, NY......................................    1.3807
  Nassau, NY                                                            
  Suffolk, NY                                                           
5483  New Haven-Bridgeport-Stamford-Danbury-Waterbury, CT.....    1.2618
  Fairfield, CT                                                         
  New Haven, CT                                                         
5523  New London-Norwich, CT..................................    1.2013
  New London, CT                                                        
5560  New Orleans, LA.........................................    0.9566
  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............................................    1.4449
  Bronx, NY                                                             
  Kings, NY                                                             
  New York, NY                                                          
  Putnam, NY                                                            
  Queens, NY                                                            
  Richmond, NY                                                          
  Rockland, NY                                                          
  Westchester, NY                                                       
5640  Newark, NJ..............................................    1.1980
  Essex, NJ                                                             
  Morris, NJ                                                            
  Sussex, NJ                                                            
  Union, NJ                                                             
  Warren, NJ                                                            
5660  Newburgh, NY-PA.........................................    1.1283
  Orange, NY                                                            
  Pike, PA                                                              
5720  Norfolk-Virginia Beach-Newport News, VA-NC..............    0.8316
  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.............................................    1.5068
  Alameda, CA                                                           
  Contra Costa, CA                                                      
 5790  Ocala, FL..............................................    0.9032
  Marion, FL                                                            
5800  Odessa-Midland, TX......................................    0.8660
  Ector, TX                                                             
  Midland, TX                                                           
5880  Oklahoma City, OK.......................................    0.8481
  Canadian, OK                                                          
  Cleveland, OK                                                         
  Logan, OK                                                             
  McClain, OK                                                           
  Oklahoma, OK                                                          
  Pottawatomie, OK                                                      
5910  Olympia, WA.............................................    1.0901
  Thurston, WA                                                          
5920  Omaha, NE-IA............................................    0.9421
  Pottawattamie, IA                                                     
  Cass, NE                                                              
  Douglas, NE                                                           
  Sarpy, NE                                                             
  Washington, NE                                                        
5945  Orange County, CA.......................................    1.1605
  Orange, CA                                                            
5960  Orlando, FL.............................................    0.9397
  Lake, FL                                                              
  Orange, FL                                                            
  Osceola, FL                                                           
  Seminole, FL                                                          
5990  Owensboro, KY...........................................    0.7480
  Daviess, KY                                                           
6015  Panama City, FL.........................................    0.8337

[[Page 42931]]

                                                                        
  Bay, FL                                                               
6020  Parkersburg-Marietta, WV-OH.............................    0.8046
  Washington, OH                                                        
  Wood, WV                                                              
6080  Pensacola, FL...........................................    0.8193
  Escambia, FL                                                          
  Santa Rosa, FL                                                        
6120  Peoria-Pekin, IL........................................    0.8571
  Peoria, IL                                                            
  Tazewell, IL                                                          
  Woodford, IL                                                          
6160  Philadelphia, PA-NJ.....................................    1.1398
  Burlington, NJ                                                        
  Camden, NJ                                                            
  Gloucester, NJ                                                        
  Salem, NJ                                                             
  Bucks, PA                                                             
  Chester, PA                                                           
  Delaware, PA                                                          
  Montgomery, PA                                                        
  Philadelphia, PA                                                      
6200  Phoenix-Mesa, AZ........................................    0.9606
  Maricopa, AZ                                                          
  Pinal, AZ                                                             
6240  Pine Bluff, AR..........................................    0.7826
  Jefferson, AR                                                         
6280  Pittsburgh, PA..........................................    0.9725
  Allegheny, PA                                                         
  Beaver, PA                                                            
  Butler, PA                                                            
  Fayette, PA                                                           
  Washington, PA                                                        
  Westmoreland, PA                                                      
 6323  Pittsfield, MA.........................................    1.0960
  Berkshire, MA                                                         
6340  Pocatello, ID...........................................    0.9586
  Bannock ID                                                            
6360  Ponce, PR...............................................    0.4589
  Guayanilla, PR                                                        
  Juana Diaz, PR                                                        
  Penuelas, PR                                                          
  Ponce, PR                                                             
  Villalba, PR                                                          
  Yauco, PR                                                             
6403  Portland, ME............................................    0.9627
  Cumberland, ME                                                        
  Sagadahoc, ME                                                         
  York, ME                                                              
6440  Portland-Vancouver, OR-WA...............................    1.1344
  Clackamas, OR                                                         
  Columbia, OR                                                          
  Multnomah, OR                                                         
  Washington, OR                                                        
  Yamhill, OR                                                           
  Clark, WA                                                             
6483  Providence-Warwick-Pawtucket, RI........................    1.1049
  Bristol, RI                                                           
  Kent, RI                                                              
  Newport, RI                                                           
  Providence, RI                                                        
  Washington, RI                                                        
  Statewide, RI                                                         
6520  Provo-Orem, UT..........................................    1.0073
  Utah, UT                                                              
6560  Pueblo, CO..............................................    0.8450
  Pueblo, CO                                                            
6580  Punta Gorda, FL.........................................    0.8725
  Charlotte, FL                                                         
6600  Racine, WI..............................................    0.8934
  Racine, WI                                                            
6640  Raleigh-Durham-Chapel Hill, NC..........................    0.9818
  Chatham, NC                                                           
  Durham, NC                                                            
  Franklin, NC                                                          
  Johnston, NC                                                          
  Orange, NC                                                            
  Wake, NC                                                              
6660  Rapid City, SD..........................................    0.8345
  Pennington, SD                                                        
6680  Reading, PA.............................................    0.9516
  Berks, PA                                                             
6690  Redding, CA.............................................    1.1790
  Shasta, CA                                                            
6720  Reno, NV................................................    1.0768
  Washoe, NV                                                            
6740  Richland-Kennewick-Pasco, WA............................    0.9918
  Benton, WA                                                            
  Franklin, WA                                                          
6760  Richmond-Petersburg, VA.................................    0.9152
  Charles City County, VA                                               
  Chesterfield, VA                                                      
  Colonial Heights City, VA                                             
  Dinwiddie, VA                                                         
  Goochland, VA                                                         
  Hanover, VA                                                           
  Henrico, VA                                                           
  Hopewell City, VA                                                     
  New Kent, VA                                                          
  Petersburg City, VA                                                   
  Powhatan, VA                                                          
  Prince George, VA                                                     
  Richmond City, VA                                                     
6780  Riverside-San Bernardino, CA............................    1.1307
  Riverside, CA                                                         
  San Bernardino, CA                                                    
6800  Roanoke, VA.............................................    0.8402
  Botetourt, VA                                                         
  Roanoke, VA                                                           
  Roanoke City, VA                                                      
  Salem City, VA                                                        
6820  Rochester, MN...........................................    1.0502
  Olmsted, MN                                                           
6840  Rochester, NY...........................................    0.9524
  Genesee, NY                                                           
  Livingston, NY                                                        
  Monroe, NY                                                            
  Ontario, NY                                                           
  Orleans, NY                                                           
  Wayne, NY                                                             
6880  Rockford, IL............................................    0.9081
  Boone, IL                                                             
  Ogle, IL                                                              
  Winnebago, IL                                                         
6895  Rocky Mount, NC.........................................    0.9029
  Edgecombe, NC                                                         
  Nash, NC                                                              
6920  Sacramento, CA..........................................    1.2202
  El Dorado, CA                                                         
  Placer, CA                                                            
  Sacramento, CA                                                        
6960  Saginaw-Bay City-Midland, MI............................    0.9564
  Bay, MI                                                               
  Midland, MI                                                           
  Saginaw, MI                                                           
6980  St. Cloud, MN...........................................    0.9544
  Benton, MN                                                            
  Stearns, MN                                                           
7000  St. Joseph, MO..........................................    0.8366
  Andrews, MO                                                           
  Buchanan, MO                                                          
7040  St. Louis, MO-IL........................................    0.9130
  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...............................................    0.9935
  Marion, OR                                                            
  Polk, OR                                                              
7120  Salinas, CA.............................................    1.4513
  Monterey, CA                                                          
7160  Salt Lake City-Ogden, UT................................    0.9857
  Davis, UT                                                             
  Salt Lake, UT                                                         
  Weber, UT                                                             
7200  San Angelo, TX..........................................    0.7780
  Tom Green, TX                                                         
7240  San Antonio, TX.........................................    0.8499
  Bexar, TX                                                             
  Comal, TX                                                             
  Guadalupe, TX                                                         
  Wilson, TX                                                            
7320  San Diego, CA...........................................    1.2193
  San Diego, CA                                                         
7360  San Francisco, CA.......................................    1.4180
  Marin, CA                                                             
  San Francisco, CA                                                     
  San Mateo, CA                                                         
7400  San Jose, CA............................................    1.4332
  Santa Clara, CA                                                       
7440  San Juan-Bayamon, PR....................................    0.4625
  Aguas Buenas, PR                                                      
  Barceloneta, PR                                                       
  Bayamon, PR                                                           
  Canovanas, PR                                                         
  Carolina, PR                                                          
  Catano, PR                                                            
  Ceiba, PR                                                             
  Comerio, PR                                                           
  Corozal, PR                                                           
  Dorado, PR                                                            
  Fajardo, PR                                                           
  Florida, PR                                                           
  Guaynabo, PR                                                          
  Humacao, PR                                                           
  Juncos, PR                                                            
  Los Piedras, PR                                                       
  Loiza, PR                                                             
  Luguillo, PR                                                          
  Manati, PR                                                            
  Morovis, PR                                                           
  Naguabo, PR                                                           
  Naranjito, PR                                                         

[[Page 42932]]

                                                                        
  Rio Grande, PR                                                        
  San Juan, PR                                                          
  Toa Alta, PR                                                          
  Toa Baja, PR                                                          
  Trujillo Alto, PR                                                     
  Vega Alta, PR                                                         
  Vega Baja, PR                                                         
  Yabucoa, PR                                                           
7460  San Luis Obispo-Atascadero-Paso Robles, CA..............    1.1374
  San Luis Obispo, CA                                                   
7480  Santa Barbara-Santa Maria-Lompoc, CA....................    1.0688
  Santa Barbara, CA                                                     
7485  Santa Cruz-Watsonville, CA..............................    1.4187
  Santa Cruz, CA                                                        
7490  Santa Fe, NM............................................    1.0332
  Los Alamos, NM                                                        
  Santa Fe, NM                                                          
7500  Santa Rosa, CA..........................................    1.2815
  Sonoma, CA                                                            
7510  Sarasota-Bradenton, FL..................................    0.9757
  Manatee, FL                                                           
  Sarasota, FL                                                          
7520  Savannah, GA............................................    0.8638
  Bryan, GA                                                             
  Chatham, GA                                                           
  Effingham, GA                                                         
7560  Scranton--Wilkes-Barre--Hazleton, PA....................    0.8539
  Columbia, PA                                                          
  Lackawanna, PA                                                        
  Luzerne, PA                                                           
  Wyoming, PA                                                           
7600  Seattle-Bellevue-Everett, WA............................    1.1339
  Island, WA                                                            
  King, WA                                                              
  Snohomish, WA                                                         
7610  Sharon, PA..............................................    0.8783
  Mercer, PA                                                            
7620  Sheboygan, WI...........................................    0.7862
  Sheboygan, WI                                                         
7640  Sherman-Denison, TX.....................................    0.8499
  Grayson, TX                                                           
7680  Shreveport-Bossier City, LA.............................    0.9381
  Bossier, LA                                                           
  Caddo, LA                                                             
  Webster, LA                                                           
7720  Sioux City, IA-NE.......................................    0.8031
  Woodbury, IA                                                          
  Dakota, NE                                                            
17760  Sioux Falls, SD........................................    0.8712
  Lincoln, SD                                                           
  Minnehaha, SD                                                         
7800  South Bend, IN..........................................    0.9868
  St. Joseph, IN                                                        
7840  Spokane, WA.............................................    1.0486
  Spokane, WA                                                           
7880  Springfield, IL.........................................    0.8713
  Menard, IL                                                            
  Sangamon, IL                                                          
7920  Springfield, MO.........................................    0.7989
  Christian, MO                                                         
  Greene, MO                                                            
  Webster, MO                                                           
8003  Springfield, MA.........................................    1.0740
  Hampden, MA                                                           
  Hampshire, MA                                                         
8050  State College, PA.......................................    0.9635
  Centre, PA                                                            
8080  Steubenville-Weirton, OH-WV.............................    0.8645
  Jefferson, OH                                                         
  Brooke, WV                                                            
  Hancock, WV                                                           
8120  Stockton-Lodi, CA.......................................    1.1496
  San Joaquin, CA                                                       
8140  Sumter, SC..............................................    0.7842
  Sumter, SC                                                            
8160  Syracuse, NY............................................    0.9464
  Cayuga, NY                                                            
  Madison, NY                                                           
  Onondaga, NY                                                          
  Oswego, NY                                                            
8200  Tacoma, WA..............................................    1.1016
  Pierce, WA                                                            
8240  Tallahassee, FL.........................................    0.8832
  Gadsden, FL                                                           
  Leon, FL                                                              
8280  Tampa-St. Petersburg-Clearwater, FL.....................    0.9103
  Hernando, FL                                                          
  Hillsborough, FL                                                      
  Pasco, FL                                                             
  Pinellas, FL                                                          
8320  Terre Haute, IN.........................................    0.8614
  Clay, IN                                                              
  Vermillion, IN                                                        
  Vigo, IN                                                              
8360  Texarkana, AR-Texarkana, TX.............................    0.8664
  Miller, AR                                                            
  Bowie, TX                                                             
8400  Toledo, OH..............................................    1.0390
  Fulton, OH                                                            
  Lucas, OH                                                             
  Wood, OH                                                              
8440  Topeka, KS..............................................    0.9438
  Shawnee, KS                                                           
8480  Trenton, NJ.............................................    1.0380
  Mercer, NJ                                                            
8520  Tucson, AZ..............................................    0.9180
  Pima, AZ                                                              
8560  Tulsa, OK...............................................    0.8074
  Creek, OK                                                             
  Osage, OK                                                             
  Rogers, OK                                                            
  Tulsa, OK                                                             
  Wagoner, OK                                                           
8600  Tuscaloosa, AL..........................................    0.8187
  Tuscaloosa, AL                                                        
8640  Tyler, TX...............................................    0.9567
  Smith, TX                                                             
8680  Utica-Rome, NY..........................................    0.8398
  Herkimer, NY                                                          
  Oneida, NY                                                            
8720  Vallejo-Fairfield-Napa, CA..............................    1.3754
  Napa, CA                                                              
  Solano, CA                                                            
8735  Ventura, CA.............................................    1.0946
  Ventura, CA                                                           
8750  Victoria, TX............................................    0.8474
  Victoria, TX                                                          
8760  Vineland-Millville-Bridgeton, NJ........................    1.0110
  Cumberland, NJ                                                        
8780  Visalia-Tulare-Porterville, CA..........................    0.9924
  Tulare, CA                                                            
8800  Waco, TX................................................    0.7696
  McLennan, TX                                                          
8840  Washington, DC-MD-VA-WV.................................    1.0911
  District of Columbia, DC                                              
  Calvert, MD                                                           
  Charles, MD                                                           
  Frederick, MD                                                         
  Montgomery, MD                                                        
  Prince Georges, MD                                                    
  Alexandria City, VA                                                   
  Arlington, VA                                                         
  Clarke, VA                                                            
  Culpepper, VA                                                         
  Fairfax, VA                                                           
  Fairfax City, VA                                                      
  Falls Church City, VA                                                 
  Fauquier, VA                                                          
  Fredericksburg City, VA                                               
  King George, VA                                                       
  Loudoun, VA                                                           
  Manassas City, VA                                                     
  Manassas Park City, VA                                                
  Prince William, VA                                                    
  Spotsylvania, VA                                                      
  Stafford, VA                                                          
  Warren, VA                                                            
  Berkeley, WV                                                          
  Jefferson, WV                                                         
8920  Waterloo-Cedar Falls, IA................................    0.8640
  Black Hawk, IA                                                        
8940  Wausau, WI..............................................    1.0545
  Marathon, WI                                                          
8960  West Palm Beach-Boca Raton, FL..........................    1.0372
  Palm Beach, FL                                                        
9000  Wheeling, OH-WV.........................................    0.7707
  Belmont, OH                                                           
  Marshall, WV                                                          
  Ohio, WV                                                              
9040  Wichita, KS.............................................    0.9403
  Butler, KS                                                            
  Harvey, KS                                                            
  Sedgwick, KS                                                          
9080  Wichita Falls, TX.......................................    0.7646
  Archer, TX                                                            
  Wichita, TX                                                           
9140  Williamsport, PA........................................    0.8548
  Lycoming, PA                                                          
9160  Wilmington-Newark, DE-MD................................    1.1538
  New Castle, DE                                                        
  Cecil, MD                                                             
9200  Wilmington, NC..........................................    0.9322
  New Hanover, NC                                                       
  Brunswick, NC                                                         
9260  Yakima, WA..............................................    1.0102
  Yakima, WA                                                            
9270  Yolo, CA................................................    1.1431
  Yolo, CA                                                              
9280  York, PA................................................    0.9415
  York, PA                                                              
9320  Youngstown-Warren, OH...................................    0.9937
  Columbiana, OH                                                        
  Mahoning, OH                                                          
  Trumbull, OH                                                          
9340  Yuba City, CA...........................................    1.0324

[[Page 42933]]

                                                                        
  Sutter, CA                                                            
  Yuba, CA                                                              
9360  Yuma, AZ................................................    0.9732
  Yuma, AZ                                                              
------------------------------------------------------------------------


                  Table 4b.--Wage Index for Rural Areas                 
------------------------------------------------------------------------
                                                                  Wage  
                        Nonurban area                            index  
------------------------------------------------------------------------
Alabama......................................................     0.7260
Alaska.......................................................     1.2302
Arizona......................................................     0.7989
Arkansas.....................................................     0.6995
California...................................................     0.9977
Colorado.....................................................     0.8129
Connecticut..................................................     1.2617
Delaware.....................................................     0.8925
Florida......................................................     0.8838
Georgia......................................................     0.7761
Hawaii.......................................................     1.0229
Idaho........................................................     0.8221
Illinois.....................................................     0.7644
Indiana......................................................     0.8161
Iowa.........................................................     0.7391
Kansas.......................................................     0.7203
Kentucky.....................................................     0.7772
Louisiana....................................................     0.7383
Maine........................................................     0.8468
Maryland.....................................................     0.8617
Massachusetts................................................     1.0718
Michigan.....................................................     0.8923
Minnesota....................................................     0.8179
Mississippi..................................................     0.6911
Missouri.....................................................     0.7205
Montana......................................................     0.8302
Nebraska.....................................................     0.7401
Nevada.......................................................     0.8914
New Hampshire................................................     0.9717
New Jersey \1\...............................................  .........
New Mexico...................................................     0.8070
New York.....................................................     0.8401
North Carolina...............................................     0.7937
North Dakota.................................................     0.7360
Ohio.........................................................     0.8434
Oklahoma.....................................................     0.7072
Oregon.......................................................     0.9975
Pennsylvania.................................................     0.8421
Puerto Rico..................................................     0.3939
Rhode Island \1\.............................................  .........
South Carolina...............................................     0.7921
South Dakota.................................................     0.6983
Tennessee....................................................     0.7353
Texas........................................................     0.7404
Utah.........................................................     0.8926
Vermont......................................................     0.9314
Virginia.....................................................     0.7782
Washington...................................................     1.0221
West Virginia................................................     0.7938
Wisconsin....................................................     0.8471
Wyoming......................................................     0.8247
Guam.........................................................     0.6516
Virgin Islands...............................................     0.4588
------------------------------------------------------------------------
\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
------------------------------------------------------------------------
November 1, 1998............................................     1.00239
December 1, 1998............................................     1.00478
January 1, 1999.............................................     1.00720
February 1, 1999............................................     1.00964
March 1, 1999...............................................     1.01210
April 1, 1999...............................................     1.01456
May 1, 1999.................................................     1.01702
June 1, 1999................................................     1.01948
July 1, 1999................................................     1.02197
August 1, 1999..............................................     1.02448
September 1, 1999...........................................    1.02701 
------------------------------------------------------------------------
\1\ Based on compounded projected market basket inflation rates.        
Source: The Home Health Agency Input Price Index, produced by HCFA for  
  the period between 1983:1 and 2008:4. The forecasts are from Standard 
  and Poor's DRI 3rd QTR 1997: @USSIM/TREND25YR0897@CISSIM/Control973   
  forecast exercise which has historical data through 1997:2.           


 Table 6.--Monthly Index Levels for Calculating Inflation Factors To Be 
                      Applied to Home Health Agency                     
------------------------------------------------------------------------
                                                                 Index  
              Per-beneficiary limitations month                  level  
------------------------------------------------------------------------
October 1992.................................................     .98566
November 1992................................................     .98800
December 1992................................................     .99099
January 1993.................................................     .99399
February 1993................................................     .99700
March 1993...................................................     .99933
April 1993...................................................    1.00166
May 1993.....................................................    1.00400
June 1993....................................................    1.00666
July 1993....................................................    1.00933
August 1993..................................................    1.01200
September 1993...............................................    1.01400
October 1993.................................................    1.01600
November 1993................................................    1.01800
December 1993................................................    1.02099
January 1994.................................................    1.02399
February 1994................................................    1.02700
March 1994...................................................    1.02866
April 1994...................................................    1.03033
May 1994.....................................................    1.03200
June 1994....................................................    1.03499
July 1994....................................................    1.03499
August 1994..................................................    1.03499
September 1994...............................................    1.03499
October 1994.................................................    1.03499
November 1994................................................    1.03499
December 1994................................................    1.03499
January 1995.................................................    1.03499
February 1995................................................    1.03499
March 1995...................................................    1.03499
April 1995...................................................    1.03499
May 1995.....................................................    1.03499
June 1995....................................................    1.03499
July 1995....................................................    1.03499
August 1995..................................................    1.03499
September 1995...............................................    1.03499
October 1995.................................................    1.03499
November 1995................................................    1.03499
December 1995................................................    1.03499
January 1996.................................................    1.03499
February 1996................................................    1.03499
March 1996...................................................    1.03499
April 1996...................................................    1.03499
May 1996.....................................................    1.03499
June 1996....................................................    1.03499
July 1996....................................................    1.03720
August 1996..................................................    1.03941
September 1996...............................................    1.04162
October 1996.................................................    1.04383
November 1996................................................    1.04604
December 1996................................................    1.04856
January 1997.................................................    1.05108
February 1997................................................    1.05361
March 1997...................................................    1.05582
April 1997...................................................    1.05803
May 1997.....................................................    1.06024
June 1997....................................................    1.06370
July 1997....................................................    1.06717
August 1997..................................................    1.07065
September 1997...............................................    1.07317
October 1997.................................................    1.07569
November 1997................................................    1.07822
December 1997................................................    1.08074
January 1998.................................................    1.08327
February 1998................................................    1.08580
March 1998...................................................    1.08769
April 1998...................................................    1.08958
May 1998.....................................................    1.09148
June 1998....................................................    1.09494
July 1998....................................................    1.09841
August 1998..................................................    1.10189
September 1998...............................................    1.10441
October 1998.................................................    1.10693
November 1998................................................    1.10946
December 1998................................................    1.11230
January 1999.................................................    1.11514
February 1999................................................    1.11798
March 1999...................................................    1.12019
April 1999...................................................    1.12240
May 1999.....................................................    1.12461
June 1999....................................................    1.12776
July 1999....................................................    1.13091
August 1999..................................................    1.13408
September 1999...............................................    1.13660
October 1999.................................................    1.13912
November 1999................................................    1.14165
December 1999................................................    1.14480
January 2000.................................................    1.14795
February 2000................................................    1.15112
March 2000...................................................    1.15332
April 2000...................................................    1.15553
May 2000.....................................................    1.15774
June 2000....................................................    1.16120
July 2000....................................................    1.16467
August 2000..................................................    1.16816
September 2000...............................................    1.17099
October 2000.................................................    1.17383
------------------------------------------------------------------------

X. Regulatory Impact Statement

A. Introduction

    HCFA has examined the impacts of this notice with comment as 
required by Executive Order 12866, the Regulatory Flexibility Act (RFA) 
(Pub. L. 96-354), and the Unfunded Mandates Reform Act

[[Page 42934]]

of 1995 (Pub. L. 104-4). Executive Order 12866 directs agencies to 
assess all costs and benefits of available regulatory alternatives and, 
when regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects; distributive impacts; and equity). 
The RFA requires agencies to analyze options for regulatory relief for 
small businesses. For purposes of the RFA, States and individuals are 
not considered small entities. However, most providers, physicians, and 
health care suppliers are small entities, either by nonprofit status or 
by having revenues of $5 million or less annually. Approximately 25 
percent of HHAs are identified as Visiting Nurse Associations, combined 
in government and voluntary, and official health agency, and therefore, 
are considered small entities. We anticipate this notice, in total, 
will have a significant impact on a substantial number of small 
entities based on the estimates shown below. We have examined the 
options for lessening the burden on small entities, however, the 
statute does not allow for any exceptions to these limitations based on 
size of entity. Therefore, there are no options to lessen the 
regulatory burden that are consistent with the statute.
    Section 202 of the Unfunded Mandates Reform Act requires agencies 
to prepare an assessment of anticipated costs and benefits before 
proposing any rule that may result in an annual expenditure by State, 
local, or tribal governments, in the aggregate, or by private sector, 
of $100 million (adjusted annually for inflation). We believe that 
there are no costs associated with this notice with comment that apply 
to these governmental and private sectors. Therefore, the law does not 
apply.
1. Effect of This Notice
    This notice is a part of the HHA IPS. As a result of rebasing the 
per-visit limitations, we estimate that there will be a cost to the 
Medicare program of approximately $70 million in Federal FY 1999. We 
estimate that the effect of the offset adjustment for the 
implementation of OASIS data collection, as discussed in section III.G. 
will result in negligible costs to the Medicare program. We note that 
this estimate differs from that published in the Paperwork Reduction 
Act section of the March 10, 1997 proposed rule on OASIS collection 
requirements (62 FR 11035). This is due to several factors. Unlike the 
OASIS proposed rule which calculated impacts based on total HHA costs 
on an agency basis, the offset adjustment factor in this notice is 
necessarily calculated on a per-visit, Medicare basis. Moreover, we 
have based these estimates on actual data collected from the home 
health PPS demonstration rather than using the general estimates of the 
proposed OASIS rule. We believe using actual data which was not 
available at the time the OASIS proposed rule was written produces a 
more accurate estimate of cost impact.
    We should also note, however, that the adjustment only incorporates 
the incremental costs of data collection and not any incremental costs, 
if any, which may be incurred for OASIS reporting because no reliable 
cost data were available at this time. We are specifically requesting 
comments on these costs. Also, we cannot determine the number of 
providers affected by our revised new provider policy and therefore 
cannot determine what the financial impact, if any, will be.
    2. Effect on March 31, 1998 Final Rule With Comment Period
    As stated in the March 31, 1998 final rule with comment period (63 
FR 15718) for Federal FY 1999, we estimate that the imposition of the 
per-beneficiary limitations will result in savings of $2.14 billion. 
However, the changes imposed through this notice to the per-visit 
limitations will result in savings of $670 million instead of $740 
million as stated in the March 31, 1998 final rule with comment period 
(63 FR 15718). This is the result of rebasing the per-visit 
limitations. The total savings from both limitations for Federal FY 
1999 will be $2.81 billion rather than $2.88 billion as stated in the 
March 31, 1998 rule.
    This notice with comment is not a major rule as defined in Title 5, 
United States Code, section 804(2) and is not an economically 
significant rule under Executive Order 12866. However, we are preparing 
a regulatory impact statement because this notice with comment is an 
integral part of the HHA IPS.
    It is clear that the changes being made in this document will 
affect both a substantial number of small HHAs as well as other classes 
of HHAs, and the effects on some may be significant. Therefore, the 
discussion below, in combination with the rest of this notice with 
comment, constitutes a combined regulatory impact analysis and 
regulatory flexibility analysis.

B. Explanation of Per-Visit Limitations

    Section 1861(v)(1)(L)(i) of the Act specifies that the per-visit 
limitations not exceed 105 percent of the median of the labor-related 
and nonlabor per-visit costs for freestanding HHAs. The reasonable 
costs used in the per-visit calculations will be updated by the home 
health market basket excluding any change in the home health market 
basket with respect to cost reporting periods that began on or after 
July 1, 1994 and before July 1, 1996.
    The methodology used to develop the schedule of per-visit 
limitations in this notice with comment is the same as that used in 
setting the limitations effective October 1, 1997. We are using the 
latest settled cost report data (as described in Section III. Update of 
Per-Visit Limitations) from freestanding HHAs to develop the per-visit 
limitations.

C. Explanation of Per-Beneficiary Limitations

    Section 1861(v)(1)(L) requires the per-beneficiary limitation be a 
blend of: (1) an agency-specific per-beneficiary limitation based on 75 
percent of 98 percent of the reasonable costs (including nonroutine 
medical supplies) for the agency's 12-month cost reporting period 
ending during FFY 1994, and (2) a census region division per-
beneficiary limitation based on 25 percent of 98 percent of the 
regional average of such costs for the agency's census division for 
cost reporting periods ending during FFY 1994, standardized by the 
hospital wage index. The reasonable costs used in the per-beneficiary 
limitation calculations in one and two above will be updated by the 
home health market basket excluding any changes in the home health 
market basket with respect to cost reporting periods that began on or 
after July 1, 1994 and before July 1, 1996. This per-beneficiary 
limitation based on the blend of the agency-specific and census region 
division per-beneficiary limitations will then by multiplied by the 
agency's unduplicated census count of beneficiaries (entitled to 
benefits under Medicare) to calculate the HHA's per-beneficiary 
limitation for the cost reporting period subject to the limitation.
    For new providers and providers without a 12-month cost reporting 
period ending in FFY 1994, the per-beneficiary limitation will be a 
national per-beneficiary limitation which will be equal to the median 
of these limitations applied to other HHAs as determined under section 
1861(v)(1)(L)(v) of the Act.
    The methodologies and data used to develop the schedule of per-
beneficiary limitations set forth in this notice are the same as that 
used in setting the per-beneficiary limitations that were effective for 
cost reporting periods beginning on or after October 1, 1997. We have 
updated the per-beneficiary

[[Page 42935]]

limitations to reflect the expected cost increases occurring between 
the cost reporting periods ended during FFY 1994 and September 30, 
1999, excluding any changes in the home health market basket with 
respect to cost reporting periods which began on or after July 1, 1994 
and before July 1, 1996. Therefore, we excluded this time period when 
we adjusted the database for the market basket increases.
    Payments by Medicare under this system of payment limitations must 
be the lower of an HHA's actual reasonable allowable costs, per-visit 
limitations in the aggregate, or a per-beneficiary limitation in the 
aggregate.

D. Effect on Home Health Agencies

    This notice with comment period sets forth revised schedules of 
limitations on home health agency costs that may be paid under the 
Medicare program for cost reporting periods beginning on or after 
October 1, 1998. These limitations replace the limitations that were 
set forth in our January 2, 1998 notice with comment period, per-visit 
limitations, (63 FR 89) and our March 31, 1998 final rule with comment 
period, per-beneficiary limitations, (63 FR 15718).
    The following quantitative analysis presents the projected effects 
of the statutory changes effective for FFY 1999. This notice with 
comment period is necessary to implement the provisions of section 
1861(v)(1)(L) of the Act, as amended by B.B.A. `97.
    The settled cost report data that we are using have been adjusted 
by the most recent market basket factors, excluding market basket 
increases for cost reporting periods beginning on or after July 1, 1994 
and before July 1, 1996, to reflect the expected cost increases 
occurring between the cost reporting periods for the data contained in 
the database and September 30, 1999.
    We are unable to identify the effects of the changes to the cost 
limits on individual HHAs. However, Table 7 below illustrates the 
proportion of HHAs that are likely to be affected by the limits. This 
table is a model of our estimate of the revision in the schedule of the 
per-visit and per-beneficiary limitations. The total number of HHAs in 
this table, 6,414, is based on HHA cost reports with a FFY ending in 
1994 and for new providers whose cost reports end on either December 
31, 1994 or December 31, 1995. For both old and new providers, the 
length of the cost report is 12 months.
    This table takes into account the behaviors that we believe HHAs 
will engage in order to reduce the adverse effects of section 4602 of 
B.B.A. `97 on their allowable costs. We believe these behavioral 
offsets might include an increase in the number of low cost 
beneficiaries served, a general decrease in the number of visits 
provided, and earlier discharge of patients who are not eligible for 
Medicare home health benefits because they no longer need skilled 
services but have only chronic, custodial care needs. We believe that, 
on average, these behavioral offsets will result in a 65 percent 
reduction in the effects these limits might otherwise have on an 
individual HHA for the per-beneficiary limitations and a 50 percent 
reduction for the per-visit limitations.
    Column one of this table divides HHAs by a number of 
characteristics including their ownership, whether they are old or new 
agencies, whether they are located in an urban or rural area, and the 
census region they are located in. Column two shows the number of 
agencies that fall within each characteristic or group of 
characteristics, for example, there are 1,197 rural freestanding HHAs 
in our database. Column three shows the percent of HHAs within a group 
that are projected to exceed the per-visit limitation and therefore, 
not be affected by the per-beneficiary limitation, before the 
behavioral offsets are taken into account. Column four shows the 
average percent of costs over the per-visit limitation for an agency in 
that cell, including behavioral offsets. Column five shows the percent 
of HHAs within a group that are projected to exceed the per-beneficiary 
limitation and therefore, not be affected by the per-visit limitation, 
before the behavioral offsets are taken into account. Column six shows 
the average percent of costs over the per-beneficiary limitation for an 
agency in that category, including behavioral offsets. It is important 
to note that in determining the expected percentage of an agency's 
costs exceeding the cost limitations, column four (percent of costs 
exceeding visit limits) and column six (percent of costs exceeding 
beneficiary limits) are not to be added together. Either the per-visit 
limitation or the per-beneficiary limitation is exceeded, but not both.

                                 Impact of the IPS HHA Limits, Effective 10/1/98                                
----------------------------------------------------------------------------------------------------------------
                                                               Percent of   Percent of   Percent of   Percent of
                                                                agencies      costs       agencies      costs   
                                                  Number of    exceeding    exceeding    exceeding    exceeding 
                                                   agencies      visit        visit     beneficiary  beneficiary
                                                                 limits       limits       limits       limits  
----------------------------------------------------------------------------------------------------------------
BY: GEOGRAPHIC AREA:                                                                                            
    ALL AGENCIES...............................         6414         29.8          4.1         60.2          9.8
        FREESTANDING...........................         4308         23.9          3.9         67.5         11.2
        HOSPITAL BASED.........................         2106         42.1          4.5         45.4          6.5
        OLD AGENCIES...........................         5256         25.7          2.2         62.7          9.4
            FREESTANDING.......................         3245         15.8          1.0         73.4         11.0
            HOSPITAL BASED.....................         2011         41.7          4.5         45.4          6.4
        NEW AGENCIES...........................         1158         48.6         19.5         49.3         12.6
            FREESTANDING.......................         1063         48.5         20.4         49.6         12.8
            HOSPITAL BASED.....................           95         49.5          5.3         46.3          9.2
    ALL URBAN..................................         4137         29.1          4.1         63.7         10.0
        FREESTANDING...........................         3111         23.6          3.8         69.3         11.3
        HOSPITAL BASED.........................         1026         46.0          5.0         46.5          6.6
        OLD AGENCIES...........................         3272         24.4          2.2         67.1          9.7
            FREESTANDING.......................         2292         15.2          1.0         75.9         11.1
            HOSPITAL BASED.....................          980         45.8          4.9         46.4          6.6
        NEW AGENCIES...........................          865         47.2         19.0         50.9             
    12.3.......................................                                                                 
            FREESTANDING.......................          819         47.0         19.7         51.0         12.5
            HOSPITAL BASED.....................           46         50.0          6.1         47.8          8.8
    ALL RURAL..................................         2277         31.1          3.9         54.0          9.1

[[Page 42936]]

                                                                                                                
        FREESTANDING...........................         1197         24.6          4.3         62.7         11.0
        HOSPITAL BASED.........................         1080         38.3          3.3         44.4          6.1
        OLD AGENCIES...........................         1984         27.9          1.9         55.4          8.5
            FREESTANDING.......................          953         17.2          0.9         67.4         10.5
            HOSPITAL BASED.....................         1031         37.8          3.3         44.3          6.0
        NEW AGENCIES...........................          293         52.9         21.1         44.7         13.8
            FREESTANDING.......................          244         53.7         22.7         44.7         14.1
            HOSPITAL BASED.....................           49         49.0          3.6         44.9         10.1
BY: REGION:                                                                                                     
    OLD AGENCIES...............................         5256         25.7          2.2         62.7          9.4
        NEW ENGLAND............................          291          5.5          0.3         83.8         12.8
        MIDDLE ATLANTIC........................          443         19.4          1.8         72.2          9.0
        SOUTH ATLANTIC.........................          739         24.1          1.7         65.4          9.9
        EAST NORTH CENTRAL.....................          866         21.6          1.6         68.6         10.3
        EAST SOUTH CENTRAL.....................          431         23.0          1.6         58.9          9.2
        WEST NORTH CENTRAL.....................          728         26.6          2.4         58.2          9.7
        WEST SOUTH CENTRAL.....................          936         30.1          3.1         56.3          8.6
        MOUNTAIN...............................          354         37.0          3.4         50.0          7.4
        PACIFIC................................          428         39.3          4.9         56.8          7.3
    NEW AGENCIES...............................         1158         48.6         19.5         49.3         12.6
        NEW ENGLAND............................           44          4.5          0.0         93.2         17.0
        MIDDLE ATLANTIC........................           51         49.0         21.9         47.1          5.1
        SOUTH ATLANTIC.........................           44         56.8         25.5         43.2          7.3
        EAST NORTH CENTRAL.....................          151         74.2         36.1         25.2          4.4
        EAST SOUTH CENTRAL.....................           25         44.0         18.7         56.0         14.7
        WEST NORTH CENTRAL.....................          117         65.8         17.9         29.1          9.9
        WEST SOUTH CENTRAL.....................          484         39.3         16.4         59.9         16.5
        MOUNTAIN...............................          103         45.6         22.0         49.5          8.8
        PACIFIC................................          138         52.9         19.8         43.5         10.1
----------------------------------------------------------------------------------------------------------------

E.1. Percent of Costs Exceeding Per Visit Limitations (Column Four)

    Results from this column indicate that, for an HHA that reaches the 
per-visit limitation first, the average percent of costs exceeding the 
per-visit limitation for an HHA in the ``all agencies'' category is 4.1 
percent after the behavioral offset. This should not be surprising 
since the intent of section 4602 of the BBA is to control the soaring 
expenditures of the Medicare home health benefit which have been driven 
largely by increased utilization. All discussion of the analysis of the 
per-visit limitation is based on the fact that HHAs in these categories 
reached the per-visit limitation and therefore are not affected by the 
per-beneficiary limitation.
    For the old agencies category, (HHAs that filed a 12-month cost 
report that ended during FFY 1994), the average percent of costs 
exceeding the per-visit limitation is 2.2 percent. For the new agencies 
category, (such as HHAs that did not have a 12-month cost reporting 
period ended in FFY 1994 or that entered the Medicare program after FFY 
1994), the average percent of costs exceeding the per-visit limitation 
is 19.5 percent. Old agencies will not be affected as much by the per-
visit limitation the new agencies, on average, because the new agencies 
have, in general, reported higher per-visit costs.
    For the urban areas HHA category, the average percent of costs 
exceeding the per-visit limitation is 4.1 percent, while the rural 
areas HHA category is 3.9 percent. For the old agency census division 
categories the average percent of costs exceeding the per-visit 
limitation ranges from a low of 0.3 percent in the New England census 
region to a high of 4.9 percent in the Pacific census region. The other 
census regions fall between 1.6 percent and 3.4 percent.
    For the new agency census region categories the average percent of 
costs exceeding the per-visit limitation ranges from a low of 0.0 
percent in the New England census region to a high of 36.1 percent in 
the East North Central census region. The other census regions fall 
between 16.4 percent and 25.5 percent.

E.2. Percent of Costs Exceeding Per-Beneficiary Limitation (Column Six)

    Results from this column indicate that, for an HHA that reaches the 
per-beneficiary limitation first, the average percent of costs 
exceeding the per-beneficiary limitation for an HHA in the ``all 
agencies'' category is 9.8 percent after the behavioral offset. All 
discussion of the analysis of the per-beneficiary limitation is based 
on the fact that HHAs in these categories reached the per-beneficiary 
limitation and therefore are not affected by the per-visit limitation.
    For the old agencies category, (HHAs that filed a 12-month cost 
report that ended during FFY 1994), the average percent of costs 
exceeding the per-beneficiary limitation is 9.4 percent. For the new 
agencies category, (including HHAs that did not have a 12-month cost 
reporting period ended in Federal FY 1994 or that entered the Medicare 
program after Federal FY 1994), the average percent of costs exceeding 
the per-visit limitation is 12.6 percent. Old agencies will not be 
affected as much by the per-beneficiary limitations as the new 
agencies, on average, because the new agenices have, in general, 
reported higher costs related to higher levels of utilization. 
Moreover, the statutory provision for old providers which bases 75 
percent of the limitation on their own cost experience would implicitly 
result in less of an impact than experienced by the new providers whose 
limitations are based on a national median. Also, we believe the

[[Page 42937]]

differing impacts of these limits is an inherent result of beginning to 
draw unexplained variation among providers closer to national norms 
which existed prior to the rapid increase in home health expenditures 
of the post '93-'94 period.
    For the urban areas HHA category, the average percent of costs 
exceeding the per-visit limitation is 10.0 percent, while the rural 
areas HHA category is 9.1 percent. For the old agency census division 
categories the average percent of costs exceeding the per-beneficiary 
limitation ranges from a low of 7.3 percent in the Pacific census 
region to a high of 12.8 percent in the New England census region. The 
other census regions fall between 7.4 percent and 10.3 percent. The 
differences between census regions reflect the pattern of highly 
disparate costs that have been reported historically between geographic 
areas which cannot be explained by differences in patient 
characteristics but appear more related to patterns of HHA practices.
    For the new agency census region categories the average percent of 
costs exceeding the per-beneficiary limitation ranges from a low of 4.4 
percent in the East North Central census region to a high of 17.0 
percent in the New England census region. The other census regions fall 
between 5.1 percent and 16.5 percent. In general, newer agencies in 
census regions that have exceptionally high cost histories are more 
impacted due to their being limited to the national median.
    Although there is considerable variation in these limitations, we 
believe this is a reflection of the wide variation in payments that 
have been recognized under the present cost reimbursement system. 
Moreover, we believe the differing impacts of these limitations is an 
inherent result of beginning to draw unexplained variation among 
providers closer to which existed prior to the rapid increase in home 
health expenditures of the post '93-'94 period.
    Because this rule limits payments to HHAs to the lesser of actual 
cost, the per-visit limitations, or the per-beneficiary limitation, we 
have estimated the combined impact of these limitations.
    We estimate that in FFY 1999 and 2000, 30 percent of the HHAs will 
be limited by the per-visit limitation while 60 percent will be limited 
to the per-beneficiary limitation. It is important to note again that 
an HHA is affected either by the per-visit limitation or the per-
beneficiary. They will not be affected by both.
    Medicare payments to managed care plans are based on fee-for-
service Medicare benefits. Although we do not know what home health 
services are supplied for these payments, we know how much we pay the 
plans as a result of fee-for-service home health payments. Thus, 
managed care payments are figured in as part of our cost/savings 
estimates. Managed care plans are not expected to reduce home health 
services as a result of this notice. For Federal FY 1999, we estimate 
that 20 percent of the Medicare cost will be for payments to managed 
care plans, our estimate for Federal FY 2000 is 26 percent.
    We believe that the effect of this notice on State Medicaid 
programs overall will be small. However, because of the flexibility and 
variation in State Medicaid policies and service delivery systems as 
well as differences in provider behavior in reaction to these limits, 
it is impossible to predict which States will be affected or the 
magnitude of the impact.
    Under the Paperwork Reduction Act of 1995, agencies are required to 
provide a 60-day notice in the Federal Register and solicit public 
comments before a collection of information requirement is submitted to 
the Office of Management and Budget for review and approval. This 
document does not impose information collection and recordkeeping 
requirements. Consequently, it need not be reviewed by the Office of 
Management and Budget under the authority of the Paperwork Reduction 
Act of 1995.

XI. Other Required Information

A. Waiver of Proposed Notice

    In adopting notices such as this, we ordinarily publish a proposed 
notice in the Federal Register to provide a period for public comment 
before the provisions of the notice take effect. However, we may waive 
this procedure if for good cause we find that prior notice and comment 
are impracticable, unnecessary or contrary to public interest. 5 U.S.C 
553(b)(B).
    Section 1861(v)(1)(L) 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). In accordance with the statute, we have used the same 
methodology to develop the schedules of limits that were used in 
setting the limits effective for cost reporting periods beginning on or 
after October 1, 1997. These 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 September 30, 1999, excluding any changes 
in the home health market basket with respect to cost reporting periods 
which began on or after July 1, 1994 and before July 1, 1996. In 
addition, as required under section 1861(v)(1)(L) of the Act, we have 
used the most recently published hospital wage index.
    Therefore, for good cause we find that it was unnecessary to 
undertake notice and comment procedures. Generally, the methodology 
used to develop these schedules of limits is dictated by statute and 
does not require the exercise of discretion. These methodologies have 
also been previously published for public comment. It was also 
necessary to inform HHAs of their new cost limitations in a timely 
manner such that HHAs could benefit from the most recently published 
wage index and updated market basket adjustment factor.
    We also find that it was impracticable to provide notice and 
comment procedures before publishing this notice. The per-beneficiary 
limitations were published on March 31, 1998 with a 60-day comment 
period. To fully respond to the comments and establish the limitation 
by August 1, 1998, it was impracticable to publish a proposed notice. 
Accordingly, for good cause, we waive prior notice and comment 
procedures. However, we are providing a 60-day comment period for 
public comment, as indicated at the beginning of this notice.

B. 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 document.

    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)


[[Page 42938]]


    Dated: July 28, 1998.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.

    Dated: July 30, 1998.
Donna E. Shalala,
Secretary.
[FR Doc. 98-20878 Filed 7-31-98; 3:03 pm]
BILLING CODE 4120-01-P