[Federal Register Volume 64, Number 193 (Wednesday, October 6, 1999)]
[Proposed Rules]
[Pages 54263-54268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25788]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 447

[HCFA-2004-P]
RIN 0938-AI70


Medicaid Program; Flexibility in Payment Methods for Services of 
Hospitals, Nursing Facilities, and Intermediate Care Facilities for the 
Mentally Retarded

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

ACTION: Proposed rule.

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SUMMARY: This rule proposes to amend the Medicaid regulations that deal 
with payment for the services of hospitals and long-term care 
facilities. It proposes to remove all references to regulations based 
on the Boren Amendment and to add more flexible rules for States 
changing rates or payment methodologies for hospitals and long-term 
care facilities. These revisions will conform the regulations to the 
Social Security Act, as revised by section 4711 of the Balanced Budget 
Act of 1997.

DATES: Comments will be considered if we receive them at the 
appropriate address, as provided below, no later than 5 p.m. on 
December 6, 1999.

ADDRESSES: Department of Health and Human Services, Attention: HCFA-
2004-P, P.O. Box 7517, Baltimore, MD 21207-5187
    If you prefer, you may deliver an original and 3 copies of your 
written comments to one of the following addresses:
Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC, or

Room C5-09-26, 7500 Security Boulevard, Baltimore, Maryland.

    Because of staffing and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting please refer to 
file code HCFA-2004-P. Comments received timely will be available for 
inspection as they are received, generally beginning approximately 
three weeks after publication of a document, in Room 309-G of the 
Department's offices at 200 Independence Avenue, SW., Washington D.C., 
on Monday through Friday of each week from 8:30 a.m. to 5 p.m. 
(telephone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Marge Lee, (410) 786-4361.

SUPPLEMENTARY INFORMATION: Copies: To order copies of the Federal 
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I. Background

A. The Boren Amendment

    The Social Security Act (the Act) was amended by section 962 of 
Public Law

[[Page 54264]]

96-499 (OBRA '80) and section 2173 of Public Law 97-35 (OBRA '81), 
known collectively as the Boren amendment, that became effective on 
October 1, 1980 and October 1, 1981, respectively. ``Boren'' required 
the State agencies to pay hospitals, nursing facilities (NF), and 
intermediate care facilities for the mentally retarded (ICF/MR), with 
rates that were ``* * * reasonable and adequate to meet the costs which 
must be incurred by efficiently and economically operated facilities in 
order to provide care and services in conformity with applicable State 
and Federal laws, regulations, and quality and safety standards * * 
*''. State agencies were required to find, and make assurances 
satisfactory to the Secretary, that their rates met those requirements 
and that individuals eligible for medical assistance had reasonable 
access to inpatient services of adequate quality.
    The Balanced Budget Act of 1997 (BBA) repealed the Boren amendment 
effective October 1, 1997. The Boren amendment still applies to 
payments for items and services furnished before October 1, 1997; 
however, we recognize that the intent in repealing the Boren amendment 
was to reduce our role in the rate-setting process for inpatient 
hospital and long-term care facility payments and to increase State 
flexibility in this area. In light of the less restrictive requirements 
now in place, we are committed to working with State agencies to 
expedite the resolution of outstanding Boren issues in existing pending 
amendments.

B. Effects of the Balanced Budget Act of 1997

    The BBA, which became effective on October 1, 1997, repealed 
sections 1902(a)(13)(A), (13)(B), and (13)(C) of the Act. Many of the 
Federal requirements related to the State plan amendment process for 
institutional payment have been eliminated, with the intent of allowing 
greater State flexibility in setting payment rates. State agencies no 
longer need to make an annual finding that their payment rates are 
reasonable and adequate to meet the costs that must be incurred by 
efficiently and economically operated providers. In addition, for State 
plan amendments involving institutional payment with proposed effective 
dates of October 1, 1997 and beyond, State agencies are not required to 
submit assurances and related rate information to us.
    Although these requirements were based on the Boren amendment and 
therefore were eliminated with the Boren amendment repeal, we want to 
clarify that certain requirements remain unchanged. All of the 
regulations in 42 CFR 447.252, 447.257, 447.271, and 447.280 continue 
to apply to payment rates for inpatient hospital and long-term care 
services. Other requirements that continue, but are changed due to the 
new public process requirements, are discussed in the ``Provisions of 
this Proposed Rule'' section below.
    The Omnibus Budget Reconciliation Act of 1987 (OBRA '87) 
comprehensively revised the statutory authority that applies to nursing 
homes participating in Medicaid. This revision, often referred to as 
Nursing Home Reform, responded to general concern about the quality of 
nursing home care paid for by the Medicaid and Medicare programs, as 
well as findings and recommendations of a 1986 Institute of Medicine 
report. The repeal of the Boren amendment eliminated the requirement 
that States provide an assurance that, effective October 1, 1990, their 
rates ``take into account the costs of complying with subsections (b) 
[other than paragraph (3)(F) thereof], (c) and (d) of section 1919 of 
the Act and provide, in the case of a nursing facility with a waiver 
under section 1919(b)(4)(C)(ii) of the Act for an appropriate reduction 
to take into account the lower costs (if any) of the facility for 
nursing care.'' However, State agencies are still required to comply 
with all of the subsections of section 1919 of the Act. The repeal of 
the Boren amendment has not relieved States of the responsibility of 
promoting quality of care for their beneficiaries served in nursing 
homes.
    We are concerned about the quality of care in nursing homes and 
ICFs/MR and continue to seek ways to ensure high quality of care in 
these settings. Towards that end, we are soliciting comments from 
consumers and their representatives, providers, and States on including 
a discussion of how quality of care will be maintained as part of the 
State agency's justification of the new payment rates.
    We want to clarify our position on the public notice requirements 
in Sec. 447.205. We have reviewed our past position and have concluded 
that while these requirements still have continuing validity with 
respect to non-institutional providers, they have diminished relevance 
to Medicaid institutional payment rates. The public notice requirements 
in Sec. 447.205 were applied to Boren amendment payment rates because 
section 1902(a)(13) of the Act did not speak to the process by which 
State agencies were to adopt payment rates. Since this provision of the 
statute was silent on this process, we viewed the public notice 
requirements as being applicable to this part of the State agency's 
program. However, with the repeal of the Boren amendment, we now have 
in section 4711 of the BBA a provision that specifies the process that 
State agencies are to employ in establishing rates for inpatient 
hospitals and long-term care facilities. Therefore, with respect to 
inpatient hospital and long-term care facility payments, the public 
notice requirements in Sec. 447.205 have been superseded. Accordingly, 
we propose to make a change to the text at Sec. 447.205(a) to clarify 
that the requirements in that section no longer apply to institutional 
payments.
    Because we are now clarifying that Sec. 447.205 has applicability 
only to non-institutional services, we want to be certain that the 
public realizes that the exceptions that previously would have enabled 
States to be excused from providing public notice would no longer 
apply. Thus, the provisions, at paragraph (b), that would excuse a 
State from compliance with the otherwise applicable public notice 
requirements when changes are needed to conform payment rates to 
Medicare methods or levels of reimbursement, or when changes are 
required by a court order, would have force only with respect to non-
institutional services. Because section 4711 requires that States 
engage in a public process that entails the publication of proposed and 
final rates, methodologies, and justifications whenever a State wishes 
to make payment rate changes, it does not seem to account for the kinds 
of exceptions set out in the current rule nor any other type of 
exceptions. Accordingly, we are making clear in the rule that the 
exceptions to public notice set out in Sec. 447.205(b) only would apply 
to non-institutional payment rates.
    We want to clarify the circumstances in which a change in payment 
rates for inpatient hospital and long-term care facility services would 
not be subject to the public process requirements set forth in section 
4711 of the BBA. If a State agency has a methodology in its State plan 
that allows for rates to change solely due to the application of an 
objective indicator such as the CPI, then those rates, that is, the 
periodic update, the underlying methodologies, and justifications do 
not need to be published. If, however, rates change for any other 
reason, including any change in the payment methods and standards, then 
those rates, methodologies, and justifications need to be published in 
accordance with the State's public process.

[[Page 54265]]

    It is our intent to provide substantial flexibility to State 
agencies in development of a public process that fulfils the 
requirements and purposes of section 4711 of the BBA. The least 
burdensome approach to having State agencies assure us that they have 
in place an acceptable public process is for State agencies to submit a 
preprint page that becomes a part of the State plan and indicates that 
the State agency has in place, and uses, a public process which meets 
the requirements of section 4711 of the BBA. Alternatively, State 
agencies may indicate elsewhere in the State plan that they have in 
place, and use, a public process that meets the requirements of section 
4711 of the BBA. This information will only need to be submitted to us 
once, and once approved, will become part of the State plan. During 
implementation of this provision, we weighed carefully the balance 
between maximizing State flexibility and maintaining appropriate 
oversight of Federal Medicaid expenditures. The repeal of the Boren 
based regulatory provisions through this rule, significantly reduces 
the burden on State agencies seeking Federal financial participation 
for institutional services. Previously, each time a State agency chose 
to amend its methods and standards for institutional payments, the 
State agency had to include in its amendment, a five page check list 
indicating its compliance with over a dozen regulatory provisions, as 
well as provide information on the rate in effect as a result of the 
amendment. With this regulation, we propose to require State agencies 
to submit one page each for their inpatient hospital and long term care 
sections of their State plan. These pages do not contain specific rate 
information, but rather provide formal assurance to us that the State 
agency is in compliance with section 4711. Furthermore, the proposed 
options available to the State agencies in complying with he public 
process requirements of section 4711 provide State agencies with 
additional flexibility. State agencies may choose to implement one of 
three suggested public processes, or create a similar public process 
that conforms with section 4711.

II. Provisions of This Proposed Rule

    The purpose of this proposed rule is to clarify in the Code of 
Federal Regulations the increased State flexibility in setting payment 
rates for inpatient hospital and long-term care services required 
through section 4711 of the BBA.
    We propose to amend Sec. 447.250 by removing the requirement that 
States ``* * * pay for inpatient hospital and long-term care services 
through rates that the State finds, and makes assurances satisfactory 
to the Secretary, are reasonable and adequate to meet the costs which 
must be incurred by efficiently and economically operated facilities in 
order to provide care and services in conformity with applicable State 
and Federal laws and regulations, and quality and safety standards.'' 
We also propose to add to that same section, language that would 
require the State agency to develop and use a public process to 
determine rates and publish proposed and final rates, the underlying 
methodologies, and justification for the rates, and also to give 
interested parties a reasonable opportunity for review and comment on 
the proposed rates, methodologies, and justifications.
    The State agency will comply with this provision if it elects to 
use an administrative process similar to the Federal Administrative 
Procedures Act, that satisfies the requirements for a public process in 
developing and inviting comment. This will allow State agencies the 
flexibility to follow current State public procedures. If a State's 
public process is not currently being applied to rate setting, or does 
not currently include a comment period, then the State agency would 
need to modify the process for purposes of meeting the requirements in 
this section.
    Alternatively, State agencies may elect to use a public process 
other than their regular administrative procedures. Examples of what we 
consider to be an acceptable public process include the following:

 Hold one or more public hearings, at which the proposed rates, 
methodologies, and justifications are described and made available to 
the public, and time is provided during which comments can be received. 
Hold one or more additional public hearings, at which the final rates, 
methodologies, and justifications are described and made available to 
the public.
 Use a commission or similar process, where meetings are open 
to members of the public, in the development of proposed and final 
rates, methodologies, and justifications.
 Include notice of the intent to submit a State plan amendment 
in newspapers of general circulation, and provide a mechanism for 
members of the public to receive a copy of the proposed and final 
rates, methodologies, and justifications underlying the amendment, and 
an opportunity, which shall not be less than 30 days prior to the 
proposed effective date, to comment on the proposed rates, 
methodologies, and justifications.
 Include any other similar process for public input that would 
afford an interested party a reasonable opportunity to learn about the 
proposed and final rates, methodologies, and justifications, and to 
comment on the proposed rates, methodologies, and justifications.

    State agencies will be required to indicate in the State plan that 
they have in place a public process that meets the requirements of 
section 1902(a)(13)(A) of the Act. This information need only be 
submitted once, and States may use the preprint page that we provide, 
which makes this statement, or include the language from the preprint 
page in their State plan at an appropriate location. In the case of 
hospitals, these rates must take into account the situation of 
hospitals that serve a disproportionate number of low income patients 
with special needs.
    While the intent in repealing the Boren amendment was to permit 
States maximum flexibility in the rates they establish for 
institutional services, section 4711 of the BBA is intended to assure 
that the processes established by the State agency for setting those 
rates will be conducted in a public manner, with meaningful 
opportunities for public input. Therefore, we are adding to 
Sec. 447.251, for purposes of this subpart, a definition of the word 
``published.'' We interpret the word ``published'' to mean ``at least, 
produced and made available in hard copy and, if possible, 
electronically, such that any interested party may readily obtain a 
copy of the proposed and final rates, the underlying methodologies, and 
justifications.'' We feel that a definition which provides specific 
guidance on what we consider acceptable forms of publication of rates, 
the methodologies underlying the rates, and the justifications is 
fairer and more workable than the course we initially recommended after 
the enactment of the BBA. We recognize that this definition of 
``published'' differs from the guidance we sent to State agencies in 
our letter of December 10, 1997 regarding the repeal of the Boren 
amendment. In that letter, we indicated that ``published'' means ``made 
public'', without requiring State agencies to issue an actual written 
publication to meet the new public process requirements. However, we 
specifically want to solicit public comment on this proposed change in 
the definition of ``published''.

[[Page 54266]]

    We are removing Secs. 447.253 and 447.255 from the text. The 
requirements contained in these sections are no longer applicable to 
the setting of institutional rates.
    We are adding a new Sec. 447.254 to address the new public process 
that the State agencies must have in place to satisfy the requirements 
of the BBA. In Sec. 447.254(a) we describe the steps in the public 
process, indicating that proposed rates, methodologies underlying the 
establishment of such rates and the justifications for the rates must 
be published prior to the proposed effective date, giving a reasonable 
opportunity for review and comment. State agencies may elect to apply 
the notice periods specified in their State general administrative 
procedures acts. The final rates and the associated methodologies and 
justifications must also be published, but may be published following 
the effective date.
    In Sec. 447.254(b) we explain that State agencies must indicate to 
us that they have in place a public process that meets the requirements 
of Sec. 447.254(a). This language is to be submitted to us only one 
time for approval. Once approved, the language will become a part of 
the State plan.
    In Sec. 447.256, we have removed the reference to repealed 
Sec. 447.253 and replaced it with a reference to the new Sec. 447.254.
    In Sec. 447.272, we have removed the reference to repealed 
Sec. 447.253(B)(1)(ii)(A) and replaced it with a reference to section 
1902(a)(13)(A)(iv) of the Act.

III. Response to Comments

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

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:

 The need for the information collection and its usefulness in 
carrying out the proper functions of our agency.
 The accuracy of our estimate of the information collection 
burden.
 The quality, utility, and clarity of the information to be 
collected.
 Recommendations to minimize the information collection burden 
on the affected public, including automated collection techniques.

    Therefore, we are soliciting public comment on each information 
collection requirement discussed below.

Section 447. 252 State Plan Requirements

    Section 447. 252(b) states that the State plan must specify 
comprehensively the methods and standards used by the State agency to 
set payment rates in a manner consistent with Sec. 430.10. This section 
requires State agencies to maintain in their State plan a current 
description of their payment methods and standards for institutional 
services. State agencies generally amend their State plans between one 
and five times during the fiscal year through State plan amendments 
submitted to us for review and approval.

Section 447.254 Public Process Requirements

    Section 447.254(b) requires that the State agency report to us that 
it has in place a public process for determination of payment rates 
under the plan for hospital services and long-term care facility 
services.
    This information is submitted by State agencies on a one-time basis 
for the hospital payment section of the Medicaid State plan and a one-
time basis for the long-term care payment section of the Medicaid State 
plan. It requires the submission of a single sentence in each instance. 
State agencies have the option of signing a preprinted statement or 
they may copy the statement into their plan and initialize the page 
with the statement. Once approved, this statement will become part of 
the State plan. Our best estimate is that it will take \1/4\ hour or 
less for a State agency to submit each statement. At two per State (one 
each for the hospital payment and long-term care payment sections of 
the Medicaid State plan), that would result in \1/2\ hour for each of 
54 States, or approximately 27 hours total.
    We have submitted a copy of this proposed rule to OMB for its 
review of the information collection requirement described above. This 
requirement is not effective until it has been approved by OMB.
    If you comment on this information collection, please mail copies 
directly to the following:
Health Care Financing Administration, Office of Information Services, 
Security and Standards Group, Division of HCFA Enterprise Standards 
Room N2-14-26, 7500 Security Boulevard, Baltimore, MD 21244-1850. 
Attention:: Julie Brown, HCFA-2004-P, and

Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office building, Washington, DC 20503 
Attn: Allison Eydt, HCFA Desk Officer.

V. Regulatory Impact Statement

    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 and the Regulatory Flexibility Act (RFA) (Public 
Law 96-354). 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 of small businesses. 
For purposes of the RFA, small entities include small businesses, non-
profit organizations, and government agencies. Most hospitals and most 
other providers and suppliers are small entities, either by non-profit 
status or by having revenues of $5 million or less annually. For 
purposes of the RFA, all hospitals and long-term care facilities are 
considered to be small entities. Individuals and States are not 
included in the definition of a small entity.
    Section 1102(b) of the Act, requires us to prepare a regulatory 
impact analysis if a rule may have a significant impact on the 
operations of a substantial number of small rural hospitals. Such an 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 50 beds.
    We estimate that the following savings are attributable to the 
repeal of the Boren amendment.

[[Page 54267]]



                                              [Amounts in Millions]
----------------------------------------------------------------------------------------------------------------
                                                             FY1999     FY2000     FY2001     FY2002     FY2003
----------------------------------------------------------------------------------------------------------------
Federal..................................................         35         75        115        160        205
State....................................................         30         55         90        120        155
                                                          ------------------------------------------------------
    Total................................................         65        130        205        280        360
----------------------------------------------------------------------------------------------------------------

    These savings have been included in the Medicaid baseline spending 
projections for the President's FY 1999 budget.
    The repeal of the Borden Amendment, by the Balanced Budget Act of 
1997, is the reason for the estimated savings. The only regulatory 
requirement imposed on the States, by this rule, deals with the public 
notice process, which is unlikely to have any impact.
    Nevertheless, although the savings described above are directly 
attributed to the statutory change, and not to any rule placed on 
states in conjunction with the statute, this proposed regulation is 
economically significant and will have an impact of more than $100 
million starting in FY 2000.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

VI. Anticipated Effects

    In December of 1997, we issued written guidance to State agencies 
informing them of the options available to them in complying with the 
new statute. We provided a model preprint page that State agencies may 
use in order to indicate to us that they have in place, and use a 
public process which complies with the new statute. Over 80% of the 
State agencies have voluntarily complied with our guidance, having 
implemented rates established under the State's new public process.
    We have reviewed this proposed rule under the threshold criteria of 
Executive order 13132, Federalism. We have determined that it 
significantly affects the rights, roles and responsibilities of States.

List of Subjects in 42 CFR Part 447

    Accounting, Administrative practice and procedure, Drugs, Grant 
programs-health, Health facilities, Health professions, Medicaid, 
Reporting and recordkeeping requirements, Rural areas.
    42 CFR chapter IV would be amended as follows:

PART 447--PAYMENTS FOR SERVICES

    1. The authority citation for part 447 continues to read as 
follows:

    Authority: Sec. 1102 of the Social Security Act (42 U.S.C. 
1302), unless otherwise noted.

    2. In Sec. 447.205 B, the section heading and paragraph (a) are 
revised to read as follows:


Sec. 447.205  Public notice of changes in Statewide methods and 
standards for setting payment rates for non-institutional services.

    (a) When notice is required. Except as specified in paragraph (b) 
of this section, the agency must provide public notice of any 
significant proposed change in its methods and standards for setting 
payment rates for non-institutional services.
    30. Section Sec. 447.250 is revised to read as follows:


Sec. 447.250  Basis and purpose.

    (a) This subpart implements section 1902(a)(13)(A) of the Act, 
which requires States to use a public process for determining rates; 
publish proposed and final rates, the methodologies underlying the 
rates, and the justifications for the rates; and give interested 
parties a reasonable opportunity for review and comment on the proposed 
rates, methodologies, and justifications. In the case of hospitals, 
such rates must take into account the situation of hospitals that serve 
a disproportionate number of low-income patients with special needs.
    (b) Section 447.272(a)(2) implements section 1902(a)(30) of the 
Act, which requires that payments be consistent with efficiency, 
economy, and quality of care.
    (c) Section 447.271 implements section 1903(i)(3) of the Act, which 
requires that payments for inpatient hospital services not exceed the 
hospital's customary charges.
    (d) Section 447.280 implements section 1913(b) of the Act, which 
concerns payment for long-term care services furnished by swing-bed 
hospitals.
    4. Section Sec. 447.251 is revised to read as follows:


Sec. 447.251  Definitions.

    For the purposes of this subpart--
    Long-term care facility services means intermediate care facility 
services for the mentally retarded (ICF/MR) and nursing facility (NF) 
services.
    Provider means an institution that furnishes inpatient hospital 
services or an institution that furnishes long-term care facility 
services.
    Published means, at least, produced and made available in hard copy 
and, if possible, electronically, such that any interested party may 
readily obtain a copy of the proposed and final rates, the underlying 
methodologies, and justifications.
    5. Section 447.252 is republished to read as follows:


Sec. 447.252  State plan requirements.

    (a) The plan must provide that the requirements of this subpart are 
met.
    (b) The plan must specify comprehensively the methods and standards 
used by the agency to set payment rates in a manner consistent with 
Sec. 430.10 of this chapter.
    (c) If the agency chooses to apply the cost limits established 
under Medicare (see Sec. 413.30 of this chapter) on an individual 
provider basis, the plan must specify this requirement.


Sec. 447.253  [Removed and Reserved]

    6. Section 447.253 is removed and reserved.
    7. Section 447. 254 is added to read as follows:


Sec. 447.254  Public process requirements.

    (a) Steps in the process. The Agency must have in place, and use, a 
public process for determination of rates of payment under the plan for 
hospital services and long-term care facility services under which 
proposed and final rates, the methodologies underlying the 
establishment of such rates, and justifications for the rates are 
published. The public process must give providers, beneficiaries and 
their representatives, and other concerned State residents a reasonable 
opportunity for review and comment on the proposed rates, 
methodologies, and justifications prior to the proposed effective date. 
The final rates, methodologies and justifications may be published 
after the proposed effective date of the rates. Further, in the case of 
hospitals, such rates must take into account (in a manner consistent 
with section 1923 of the Act) the situation of hospitals that serve a 
disproportionate

[[Page 54268]]

number of low-income patients with special needs.
    (b) Report to HCFA. The State agency must indicate to HCFA that it 
has in place a public process that meets the requirements of paragraph 
(a) of this section. This language is to be submitted to HCFA only one 
time for approval. Once approved, the language will become a part of 
the State plan.


Sec. 447.255  [Removed and Reserved]

    8. Section 447.255 is removed and reserved.
    9. Section 447.256 is revised to read as follows:


Sec. 447.256  Procedures for HCFA action on State plan amendments.

    (a) Criteria for approval. (1) HCFA approval action on State plans 
and State plan amendments is taken in accordance with subpart B of part 
430 of this chapter and sections 1116, 1902(b) and 1915(f) of the Act.
    (2) In the case of State plan and plan amendment changes in payment 
methods and standards, HCFA bases its approval on the Medicaid agency's 
satisfaction of the requirements of Sec. 447.254 as well as the other 
requirements of this subpart.
    (b) Time limit. HCFA sends a notice to the agency of its 
determination as to whether the State plan amendment is acceptable 
within 90 days of the date HCFA receives the State plan amendment. If 
HCFA does not send a notice to the agency of its determination within 
this time limit and the provisions in paragraph (a) of this section are 
met, the State plan amendment will be deemed accepted and approved.
    (c) Effective date. A State plan amendment that is approved becomes 
effective not earlier than the first day of the calendar quarter in 
which an approvable amendment is submitted in accordance with 
Sec. 430.20 of this chapter.
    10. Section 447.257 is republished to read as follows:


Sec. 447.257  FFP: Conditions relating to institutional reimbursement.

    FFP is not available for a State's expenditures for hospital 
inpatient or long-term care facility services that are in excess of the 
amounts allowable under this subpart.
    11. Section 447.271 is republished to read as follows:


Sec. 447.271  Upper limits based on customary charges.

    (a) Except as provided in paragraph (b) of this section, the agency 
may not pay a provider more for inpatient hospital services under 
Medicaid than the provider's customary charges to the general public 
for the services.
    (b) The agency may pay a public provider that provides services 
free or at a nominal charge at the same rate that would be used if the 
provider's charges were equal to or greater than its costs.
    12. In Sec. 447.272, paragraph (c) is revised to read as follows:


Sec. 447.272  Application of upper payment limits.

* * * * *
    (c) Disproportionate share. The upper payment limitation 
established under paragraphs (a) and (b) of this section does not apply 
to payment adjustments made under a State plan to hospitals found to 
serve a disproportionate number of low-income patients with special 
needs as provided in section 1902(a)(13)(A)(iv) of the Act. 
Disproportionate share hospital payments shall be subject to the 
following limits:
    (1) The aggregate DSH limit using the Federal share of the 
disproportionate share hospital limits under section 1923(f) of the 
Act;
    (2) The hospital-specific DSH limits in section 1923(g) of the Act; 
and
    (3) The aggregate DSH limit for institutions for mental disease 
(IMDs) under section 1923(h) of the Act.
    13. Section 447.280 is republished to read as follows:


Sec. 447.280  Hospital providers of NF services (swing-bed hospitals).

    (a) General rule. If the State plan provides for NF services 
furnished by a swing-bed hospital, as specified in Secs. 440.40(a) and 
440.150(f) of this chapter, the methods and standards used to determine 
payment rates for routine NF services must--
    (1) Provide for payment at the average rate per patient day paid to 
NFs, as applicable for routine services furnished during the previous 
calendar year: or
    (2) Meet the State plan and payment requirements described in this 
subpart, as applicable.
    (b) Application of the rule. The payment methodology used by a 
State to set payment rates for routine NF services must apply to all 
swing-bed hospitals in the State.

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)

    Dated: April 1, 1999.
Nancy Ann Min DeParle,
Administrator, Health Care Financing Administration.

    Approved: May 25, 1999.
Donna E. Shalala,
Secretary.
[FR Doc. 99-25788 Filed 10-5-99; 8:45 am]
BILLING CODE 4120-01-P