[Federal Register Volume 65, Number 150 (Thursday, August 3, 2000)]
[Proposed Rules]
[Pages 47706-47709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-19669]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 413

[HCFA-1143-P]
RIN 0938-AK25


Medicare Program; Prospective Payment System for Hospital 
Outpatient Services: Revision of the Provider-Based Location Criteria 
for Certain PPS-Exempt Facilities

AGENCY: Health Care Financing Administration (HCFA), HHS

ACTION: Proposed rule.

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

SUMMARY: This proposed rule would revise the criteria related to 
provider-based status requirements for hospitals excluded from the 
hospital inpatient prospective payment system (PPS) under section 4417 
of the Balanced Budget Act of 1997 (BBA). We are proposing to require 
that satellites of a hospital that qualifies for a PPS exclusion under 
section 4417 of BBA must be located within the same Metropolitan 
Statistical Area as the hospital, instead of requiring that these 
satellites meet the existing requirement of location within the 
immediate vicinity of the hospital. The satellites of these excluded 
hospitals would still be required to comply with the other provider-
based status criteria.

DATES: We will consider comments if we receive them at the appropriate

[[Page 47707]]

address, as provided below, no later than 5 p.m. on October 2, 2000.

ADDRESSES: Mail written comments (1 original and 3 copies) to the 
following address: Health Care Financing Administration, Department of 
Health and Human Services, Attention: HCFA-1143-P, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    To ensure that mailed comments are received in time for us to 
consider them, please allow for possible delays in delivering them.
    If you prefer, you may deliver your written comments (1 original 
and 3 copies) to one of the following addresses: Room 445-G, Hubert H. 
Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201, 
or Room C5-16-03, 7500 Security Boulevard, Baltimore, MD 21244-8013.
    Comments mailed to the above addresses may be delayed and received 
too late to be considered.
    Because of staff and resource limitations, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code HCFA-1143-P. 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 445-G of 
the Department's office at 200 Independence Avenue, SW., Washington, 
DC, on Monday through Friday of each week from 8:30 to 5 p.m. (phone: 
(202) 690-7890).

FOR FURTHER INFORMATION CONTACT: Miechal Lefkowitz, (410) 786-5316.

SUPPLEMENTARY INFORMATION:

I. Background

A. Provider-Based Status

    On April 7, 2000, we published a final rule specifying the criteria 
that must be met for a determination regarding provider-based status 
(65 FR 18504). Since the beginning of the Medicare program, some 
providers, which we refer to as ``main providers,'' have owned and 
operated other facilities that were administered by the main provider. 
The subordinate facilities may or may not be located on the main 
provider's campus. To accommodate for the financial integration of the 
two facilities without creating an administrative burden, we have 
permitted the subordinate facility to be considered a provider-based 
facility. Furthermore, a portion of the costs incurred by the main 
provider may be allocated to a provider-based facility. This allocation 
can result in additional Medicare payments to the provider-based 
facility.
    The regulations at Sec. 413.65, effective October 10, 2000, define 
provider-based status as, ``the relationship between a main provider 
and a provider-based entity or a department of a provider, remote 
location of a hospital, or satellite facility, that complies with the 
provisions of this section.'' Before a main provider may bill for 
services of a facility as if the facility were provider-based, or 
before it includes costs of those services on its cost report, the 
facility must meet the criteria listed in the regulations at 
Sec. 413.65(d). Among these criteria are the requirements that the main 
provider and the facility must have common licensure (when 
appropriate), the facility must operate under the ownership and control 
of the main provider, and the facility must be located in the immediate 
vicinity of the main provider.

B. Satellite Facilities

    A satellite facility is defined at Sec. 412.22(h)(1) as, ``a part 
of a hospital that provides inpatient services in a building also used 
by another hospital, or in one or more entire buildings located on the 
same campus as buildings used by another hospital.'' A satellite 
facility is a type of facility that may be considered provider-based if 
it meets the criteria under Sec. 413.65(d). In some cases, a hospital 
may have several satellite locations.

C. Long Term Care Hospitals and Satellite Facilities

    Satellite facilities are common among long term care hospitals 
(LTHs). A LTH, as defined under section 1886(d) of the Social Security 
Act (the Act), is a hospital with an average length of stay of greater 
than 25 days. These hospitals are excluded from the prospective payment 
system (PPS) and are paid on a reasonable cost basis subject to a per-
discharge cost limit for inpatient hospital services. A LTH that has a 
satellite facility must comply with the regulations at 
Sec. 412.22(h)(2). Section 412.22(h)(2)(i) requires that if the 
hospital (other than a children's hospital) was excluded from the PPS 
for the most recent cost reporting period beginning before October 1, 
1997, the hospital's number of State-licensed and Medicare-certified 
beds, including those at the satellite facilities, must not exceed the 
hospital's number of State-licensed and Medicare-certified beds on the 
last day of the hospital's last cost reporting period beginning before 
October 1, 1997.

D. Exception for Certain LTHs

    Although section 1886(d) of the Act defines a LTH as a hospital 
with an average length of stay of greater than 25 days, under section 
4417 of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), as 
implemented in the regulations at Sec. 412.23(e)(2), the Congress 
extended the LTH exclusion to any hospital that first received payment 
under section 1886(d)(1)(B)(iv) of the Act in 1986, has an average 
length of stay of greater than 20 days, and had 80 percent or more of 
its annual Medicare inpatient discharges with a principal diagnosis of 
neoplastic disease in the 12-month cost reporting period ending in 
fiscal year 1997. On July 30, 1999, we published a final rule (64 FR 
41490) at Sec. 412.22(h)(2) specifying the criteria that a PPS exempt 
hospital with a remote inpatient satellite facility located within a 
PPS hospital must meet to qualify for payment as a PPS exempt hospital 
for services furnished at that satellite. We also stated in that final 
rule that, in view of the special status accorded to hospitals that 
qualify for LTH status under section 4417 of the BBA, we believed those 
hospitals should also be exempt from the requirements at 
Sec. 412.22(h)(2), which are applicable to satellite facilities of PPS-
excluded hospitals. Accordingly, at Sec. 412.22(h)(3)(ii), we specified 
that the criteria at Sec. 412.22(h)(2) do not apply to a hospital 
excluded from the PPS under Sec. 412.23(e)(2).

II. Provisions of This Proposed Rule

    Since the publication of the provider-based regulations on April 7, 
2000, it has come to our attention that hospitals that qualify as LTHs 
under section 4417 of the BBA could be precluded from having a 
satellite facility under the revised provider-based regulations. 
Although those hospitals' satellites might meet all other criteria 
under Sec. 413.65(d) for achieving provider-based status, they might 
not meet the requirement at Sec. 413.65(d)(7) of being located in the 
immediate vicinity of the main provider. Under Sec. 413.65(d)(7), to 
meet the provider-based criteria, the main provider must show that the 
satellite is located within its immediate vicinity by demonstrating 
that, either (A) at least 75 percent of the patients served by the 
satellite reside in the same zip code areas as at least 75 percent of 
the patients served by the main provider; or (B) at least 75 percent of 
the patients served by the facility or organization that required the 
type of care furnished by the main provider received that care from 
that provider (for example, at least 75 percent of the patients of a 
rural health clinic (RHC) seeking provider-based status received 
inpatient hospital services from the hospital that is the main 
provider); or

[[Page 47708]]

(C) if the facility or organization is unable to meet the criteria in 
Sec. 413.65(d)(7)(i)(A) or Sec. 413.65(d)(7)(i)(B) of this section 
because it was not in operation during all of the 12-month period 
described in the previous sentence, the facility or organization must 
be located in a zip code area included among those that, during all of 
the 12-month period described in the previous sentence, accounted for 
at least 75 percent of the patients served by the main provider.
    In view of this concern, and in consideration of the special status 
accorded to hospitals under section 4417 of the BBA, and consistent 
with our earlier regulatory provision allowing for satellites for these 
hospitals, we believe it is also appropriate to revise the criteria in 
Sec. 413.65(d)(7)(i) for hospitals excluded from the inpatient hospital 
PPS under section 4417 of the BBA. Specifically, we are proposing to 
require that satellites of a hospital that qualify for a PPS exclusion 
under Sec. 412.23(e)(2) must be located within the same Metropolitan 
Statistical Area (MSA) as the hospital, instead of requiring that these 
satellites meet the existing requirement of determining that the 
satellite is located within the immediate vicinity of the hospital. 
Therefore, we are proposing to amend the regulations by adding 
subparagraph (iv) to existing Sec. 413.65(d)(7) to allow for this 
revision to the provider-based rules. The satellites of these hospitals 
would still be required to comply with the other criteria in 
Sec. 413.65.

III. Collection of Information Requirements

    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.

IV. Response to Comments

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

V. Regulatory Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 and the Regulatory Flexibility Act (RFA) (Pub. L. 96-354). 
Executive Order 12866 directs agencies to assess all costs and benefits 
of available regulatory alternatives and, if regulation is necessary, 
to select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety effects, 
distributive impacts, and equity). A regulatory impact analysis (RIA) 
must be prepared for major rules with economically significant effects 
($100 million or more annually). This proposed rule is not a major rule 
because we have determined that the economic impact will be negligible 
since we know of only one hospital that may qualify for the revisions 
related to provider-based satellite facilities (of hospitals that 
qualify for LTH status under Sec. 412.23(e)(2)) that are located within 
the same MSA as the main provider.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospitals and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $5 
million or less annually. For purposes of the RFA, hospitals with 
provider-based satellite facilities are considered to be small 
entities. Individuals and States are not included in the definition of 
a small entity.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis for any final rule that 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. With the exception of hospitals located in 
certain New England counties, for purposes of section 1102(b) of the 
Act, we define a small rural hospital as a hospital with not more than 
100 beds that is located outside of a Metropolitan Statistical Area 
(MSA) or New England County Metropolitan Area (NECMA). Section 601(g) 
of the Social Security Amendments of 1983 (Pub. L. 98-21) designated 
hospitals in certain New England counties as belonging to the adjacent 
NECMA. Thus, for purposes of the prospective payment system, we 
classify these hospitals as urban hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in an expenditure in any one year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $100 million. This proposed rule will not have a 
significant economic effect on these governments or the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct compliance costs on State and local governments, 
preempts State law, or otherwise has Federalism implications. This 
proposed rule will not have a substantial effect on States or local 
governments.
    We are not preparing analyses for either the RFA or section 1102(b) 
of the Act because we have determined, and we certify, that this rule 
will not have a significant economic impact on a substantial number of 
small entities or a significant impact on the operations of a 
substantial number of small rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Puerto Rico, 
Reporting and recordkeeping requirements.
    For the reasons set forth in the preamble, HCFA proposes to amend 
42 CFR chapter IV as follows:

[[Page 47709]]

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; PROSPECTIVELY DETERMINED PAYMENT 
RATES FOR SKILLED NURSING FACILITIES

    1. The authority citation for part 413 continues ro read as 
follows:

    Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and 
(n), 1871, 1881, 1883, and 1886 of the Social Security Act (42 
U.S.C. 1302, 1395f(b), 1395g, 1395l, 1395l(a), (i), and (n), 
1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww).

Subpart E--Payments to Providers

    2. In Sec. 413.65, paragraph (d)(7)(iv) is added to read as 
follows:


Sec. 413.65  Requirements for a determination that a facility or an 
organization has provider-based status.

* * * * *
    (d) Requirements. * * *
    (7) Location in immediate vicinity. * * *
    (iv) A satellite facility that otherwise qualifies as a provider-
based satellite of a main provider that is excluded from the 
prospective payment systems under Sec. 412.23(e)(2) of this chapter, is 
considered to be located in the immediate vicinity of that main 
provider if it is located within the same Metropolitan Statistical Area 
as the main provider.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program)

    Dated: July 18, 2000.

    Approved: July 27, 2000.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
Donna E. Shalala,
Secretary.
[FR Doc. 00-19669 Filed 7-31-00; 2:48 pm]
BILLING CODE 4120-01-P