[Federal Register Volume 66, Number 152 (Tuesday, August 7, 2001)]
[Rules and Regulations]
[Pages 41316-41430]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-19313]



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Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 412 and 413



Medicare Program; Prospective Payment System for Inpatient 
Rehabilitation Facilities; Final Rule

  Federal Register / Vol. 66, No. 152 / Tuesday, August 7, 2001 / Rules 
and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 412 and 413

[CMS-1069-F]
RIN 0938-AJ55


Medicare Program; Prospective Payment System for Inpatient 
Rehabilitation Facilities

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This final rule establishes a prospective payment system for 
Medicare payment of inpatient hospital services provided by a 
rehabilitation hospital or by a rehabilitation unit of a hospital. It 
implements section 1886(j) of the Social Security Act (the Act), as 
added by section 4421 of the Balanced Budget Act of 1997 and as amended 
by section 125 of the Medicare, Medicaid, and SCHIP [State Children's 
Health Insurance Program] Balanced Budget Refinement Act of 1999 and by 
section 305 of the Medicare, Medicaid, and SCHIP Benefits Improvement 
and Protection Act of 2000. Section 1886(j) of the Act authorizes the 
implementation of a prospective payment system for inpatient 
rehabilitation hospitals and rehabilitation units of hospitals. This 
section also authorizes the Secretary to require rehabilitation 
hospitals and rehabilitation units to submit data as the Secretary 
deems necessary to establish and administer the prospective payment 
system. The prospective payment system described in this final rule 
replaces the reasonable cost-based payment system under which 
rehabilitation hospitals and rehabilitation units of hospitals are paid 
under Medicare.

DATES: Effective Date: These regulations are effective on January 1, 
2002.
    Applicability Date: The provisions of this final rule are effective 
for cost reporting periods beginning on or after January 1, 2002.

FOR FURTHER INFORMATION CONTACT:
Robert Kuhl, (410) 786-4597 (General information, the case-mix 
classification system, and transition payments).
Pete Diaz, (410) 786-1235 (Requirements for completing the patient 
assessment instrument, and other assessment instrument issues).
Nora Hoban, (410) 786-0675 (Payment system, calculation of the payment 
rates, update factors, relative weights/case-mix index, wage index, 
transfer policies, and payment adjustments).

SUPPLEMENTARY INFORMATION:

Availability of Copies, and Electronic Access

    Copies: To order copies of the Federal Register containing this 
document, send your request to: New Orders, Superintendent of 
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libraries throughout the country that receive the Federal Register. 
This Federal Register document is also available from the Federal 
Register online database through GPO Access, a service of the U.S. 
Government Printing Office. The website address is: http://www.access.gpo.gov/nara/index.html.
    To assist readers in referencing sections contained in this 
document, we are providing the following table of contents.

Table of Contents

I. Background
    A. General
    B. Summary of the Statutory Provisions Governing the IRF 
Prospective Payment System
    C. Summary of the November 3, 2000 Proposed Rule
    D. General Overview of the IRF Prospective Payment System
    E. Summary of Public Comments Received on the November 3, 2000 
Proposed Rule
II. Requirements and Conditions for Payment Under the Prospective 
Payment System for IRFs
    A. Classification Criteria for IRFs
    B. Completion of Patient Assessment Instrument
    C. Limitation on Charges to Beneficiaries
    D. Furnishing of Inpatient Hospital Services Directly or Under 
Arrangements
    E. Reporting and Recordkeeping Requirements
III. Research to Support the Establishment of the IRF Prospective 
Payment System
    A. Overview of Research for the Proposed Rule
    B. Updated Research for the Final Rule
    C. Research on the Patient Assessment Instrument for the Final 
Rule
    D. Analyses to Support Future Adjustments to the IRF Prospective 
Payment System
IV. The IRF Patient Assessment
    A. Implementation of a Patient Assessment Instrument
    B. The Patient Assessment Process
    C. Documentation Requirements for the Patient Assessment
    D. Patient Assessment Schedule and Data Transmission
    E. Quality Monitoring
    F. Training and Technical Support for IRFs
    G. Release of Information Collected Using the Patient Assessment 
Instrument
    H. Patient Rights
    I. Medical Review Under the IRF Prospective Payment System
V. Case-Mix Group Patient Classification System
    A. Background
    B. Description of Methodology Used to Develop the CMGs Based on 
the FIM-FRG Methodology for the Final Rule
    C. Description of Methodology Used to Develop the CMGs for 
Special Cases for the Final Rule
    D. Final Set of CMGs
    E. Methodology to Classify Patients into CMGs
    F. Adjustment to the CMGs
VI. Payment Rates
    A. Development of CMG Relative Weights
    B. Transfer Payment Policy
    C. Special Cases That Are Not Transfers
    D. Adjustments
    E. Calculation of the Budget Neutral Conversion Factor
    F. Development of the Federal Prospective Payments
    G. Examples of Computing the Adjusted Facility Prospective 
Payments
    H. Computing Total Payments under the IRF Prospective Payment 
System
    I. Method of Payment
    J. Update to the Adjusted Facility Federal Prospective Payments
    K. Publication of the Federal Prospective Payment Rates
    L. Limitations on Administrative or Judicial Review
VII. Provisions of the Final Regulations
VIII. Regulatory Impact Analysis
    A. Introduction
    B. Anticipated Effects of the Final Rule
    C. Alternatives Considered
    D. Executive Order 12866
IX. Collection of Information Requirements
X. Waiver of Proposed Rulemaking
Regulations Text
Addendum--Tables
Appendix A--Technical Discussion of Cases and Providers Used in RAND 
Analysis
Appendix B--Inpatient Rehabilitation Facility Patient Assessment 
Instrument
Appendix C--List of Comorbidities
Appendix D--The IRF Market Basket

Alphabetical List of Acronyms Appearing in the Final Rule

    ADL  Activities of Daily Living
    BBA  Balanced Budget Act of 1997, Public Law 105-33
    BBRA  Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Public 
Law 106-113
    BIPA  Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Public Law 106-554

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    CMGs  Case-mix groups
    CMI  Case-mix index
    CMS  Centers for Medicare & Medicaid Services (formerly the 
Health Care Financing Administration)
    COS  Clinical Outcomes Systems
    DRGs  Diagnosis-related groups
    FIM  Functional independence measure
    FRG  Function-related group
    FY  Federal fiscal year
    HCFA  Health Care Financing Administration (now the Centers for 
Medicare & Medicaid Services)
    HIPAA  Health Insurance Portability and Accountability Act of 
1996, Public Law 104-191
    HHAs  Home health agencies
    HMO  Health maintenance organization
    IRFs  Inpatient rehabilitation facilities
    MDCN  Medicare Data Collection Network
    MDS-PAC  Minimum Data Set for Post-Acute Care
    MedPAC  Medicare Payment Advisory Commission
    MedPAR  Medicare Provider Analysis and Review File Tool
    OASIS  Outcome and Assessment Information Set
    ProPAC  Prospective Payment Assessment Commission
    RAPs  Resident assessment protocols
    RICs  Rehabilitation impairment categories
    SNFs  Skilled nursing facilities
    TEFRA   Tax Equity and Fiscal Responsibility Act of 1982, Public 
Law 97-248
    UDSmr  Uniform Data Set for medical rehabilitation

I. Background

A. General

    On November 3, 2000, we published a proposed rule in the Federal 
Register (65 FR 66304, HCFA-1069-P) to announce, and solicit public 
comments on, our proposed plans to establish a prospective payment 
system under Medicare for inpatient hospital services furnished by a 
rehabilitation hospital or a rehabilitation unit of a hospital. (The 
proposed rule and all other important information regarding the 
proposed IRF prospective payment system is contained on our website at 
www.hcfa.gov/medicare/irfpps.htm.) Section 1886(j) of the Social 
Security Act (the Act), as added by section 4421 of the Balanced Budget 
Act of 1997 (BBA)(Public Law 105-33) and as amended by section 125 of 
the Medicare, Medicaid, and SCHIP [State Children's Health Insurance 
Program] Balanced Budget Refinement Act of 1999 (BBRA) (Public Law 106-
113) and section 305 of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (BIPA) (Public Law 106-554), 
authorizes the implementation of such a prospective payment system. 
Below we provide a history of Medicare payments for inpatient 
rehabilitation services and a discussion of the legislative changes 
that have affected these payments.
    When the Medicare statute was originally enacted in 1965, Medicare 
payment for hospital inpatient services was based on the reasonable 
costs incurred in furnishing services to Medicare beneficiaries. The 
statute was later amended by section 101(a) of the Tax Equity and 
Fiscal Responsibility Act of 1982 (Public Law 97-248) to limit payment 
by placing a limit on allowable costs per discharge. Section 601 of the 
Social Security Amendments of 1983 (Public Law 98-21) added a new 
section 1886(d) to the Act that replaced the reasonable cost-based 
payment system for most hospital inpatient services. Section 1886(d) of 
the Act provides for a prospective payment system for the operating 
costs of hospital inpatient stays effective with hospital cost 
reporting periods beginning on or after October 1, 1983.
    Although most hospital inpatient services became subject to a 
prospective payment system, certain specialty hospitals were excluded 
from that system. Inpatient rehabilitation hospitals and distinct part 
rehabilitation units in hospitals were among the excluded facilities. 
We refer to these inpatient rehabilitation hospitals and units as 
``inpatient rehabilitation facilities'' or ``IRFs'' throughout this 
rule.
    Subsequent to the implementation of the hospital inpatient 
prospective payment system, both the number of excluded IRFs, 
particularly distinct part units, and Medicare payments to these 
facilities grew rapidly. In order to control escalating costs, the 
Congress, through enactment of section 4421 of the BBA, section 125 of 
the BBRA, and section 305 of the BIPA, provided for the implementation 
of a prospective payment system for IRFs. Section 4421 of the BBA 
amended the Act by adding section 1886(j), which authorizes the 
implementation of a prospective payment system for inpatient 
rehabilitation services. Section 125 of the BBRA amended section 
1886(j) of the Act (as added by the BBA) to require the Secretary to 
use the discharge as the payment unit for inpatient rehabilitation 
services under the prospective payment system and to establish classes 
of patient discharges by functional-related groups. Section 305 of the 
BIPA further amended section 1886(j) of the Act to allow rehabilitation 
facilities to elect to be paid the full Federal prospective payment 
rather than the blended payments otherwise specified in the Act. This 
final rule implements the Medicare prospective payment system for IRFs, 
as authorized by section 1886(j) of the Act, as amended.
    The statute provides for the prospective payment system for IRFs to 
be implemented for cost reporting periods beginning on or after October 
1, 2000. However, because of the extensive changes required by the 
statute to change the payment systems for IRFs as well as the demands 
of simultaneously implementing new prospective payment systems for 
outpatient hospital and home health services, we determined, in the 
proposed rule, that it was not feasible to implement the IRF 
prospective payment system as of October 1, 2000. The creation of each 
new payment system or modification to an existing payment system 
requires an extraordinary amount of lead-time to develop and implement 
the necessary changes to our existing computerized claims processing 
systems. In addition, it requires additional time after implementation 
to ensure that these complex changes are properly administered. 
Therefore, in the November 3, 2000 proposed rule, we indicated our 
belief that the earliest feasible date to implement the IRF prospective 
payment system was for cost reporting periods beginning on or after 
April 1, 2001.
    We have evaluated the changes that will be necessary in our various 
systems for the IRF prospective payment system in order to accommodate 
suggestions made in the comments (such as developing and administering 
a revised patient assessment instrument described in section IV. of 
this preamble) along with changes to other Medicare payment systems 
required by the BBA, the BBRA, and the BIPA. After an extensive 
analysis of the changes required to both the providers' and our 
systems, we have now determined that the earliest feasible date to 
implement the IRF prospective payment system in this final rule is for 
cost reporting periods beginning on or after January 1, 2002. We 
believe that this is the earliest feasible date given the scope and 
magnitude of the implementation and administrative requirements, 
including provider training, associated with the IRF prospective 
payment system and other mandated payment systems.

B. Summary of the Statutory Provisions Governing the IRF Prospective 
Payment System

    Section 4421(a) of the BBA amended the Act by adding a new section 
1886(j) to the Act that provides for the implementation of a Medicare 
prospective payment system for inpatient hospital rehabilitation 
services furnished in all IRFs. Under the

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prospective payment system, IRFs will be paid based on predetermined 
amounts. These prospective payments will encompass the inpatient 
operating and capital costs of furnishing covered rehabilitation 
services (that is, routine, ancillary, and capital costs) but not costs 
of approved educational activities, bad debts, and other services or 
items that are outside the scope of the IRF prospective payment system. 
Covered rehabilitation services include services for which benefits are 
provided under Part A (the Hospital Insurance Program) of the Medicare 
program.
    Section 1886(j)(1)(A) of the Act provides that, notwithstanding 
section 1814(b) of the Act and subject to the provisions of section 
1813 of the Act regarding beneficiary deductibles and coinsurance 
responsibility, the amount of payment for inpatient rehabilitation 
hospital services equals an amount determined under section 1886(j) of 
the Act. Sections 1886(j)(1)(A)(i) and (j)(1)(A)(ii) of the Act, as in 
effect prior to the enactment of sections 305(b)(1)(A), (B), and (C) of 
the BIPA, provide for a transition period covering cost reporting 
periods that begin during FYs 2001 and 2002 under the prospective 
payment system. During this transition period, IRFs would receive a 
payment rate comprising a blend of the ``TEFRA percentage'' of the 
amount that would have been paid under Part A with respect to those 
costs if the prospective payment system had not been implemented, and 
the ``prospective payment percentage'' of payments using the IRF 
prospective payment system rate. The applicable transition percentages 
are described in section 1886(j)(1)(C) of the Act. Sections 
305(b)(1)(A) and (C) of the BIPA amended section 1886(j)(1)(A) and 
added a new subparagraph (F) to section 1886(j)(1) of the Act, 
respectively, to allow an IRF to elect to be paid the full Federal 
prospective payment rather than a payment determined under the 
transition period methodology described in detail below. The provisions 
of section 305(b) of the BIPA take effect as if included in the 
enactment of the BBA.
    Section 1886(j)(1)(B) of the Act, in effect prior to the enactment 
of section 305 of the BIPA, sets forth a requirement applicable to all 
IRFs for the payment rates under the fully implemented prospective 
payment system. Notwithstanding section 1814(b) of the Act and subject 
to the provisions of section 1813 of the Act regarding beneficiary 
deductibles and coinsurance responsibility, the amount of the payment 
for the operating and capital costs of an IRF for a payment unit (as 
defined in section 1886(j)(1)(D) of the Act) in a cost reporting period 
beginning on or after October 1, 2002 (FY 2003), will be equal to the 
per unit payment rate established under the prospective payment system 
for the fiscal year in which the payment unit of service occurs. 
Section 305(b)(1)of the BIPA amended section 1886(j)(1)(B) of the Act 
and added a new subparagraph (F) to section 1886(j)(l) to make the 
provisions of section 1886(j)(1)(B) of the Act applicable to an IRF 
that elects, not later than 30 days before its first cost reporting 
period for which it is subject to the payment methodology of section 
1886(j)(1) of the Act, to be paid the full Federal prospective payment 
rather than a payment determined under the transition period 
methodology.
    Sections 1886(j)(1)(C)(i) and (ii) of the Act set forth the 
applicable TEFRA and prospective payment rate percentages during the 
transition period. The two sections specify that, for a cost reporting 
period beginning on or after October 1, 2000, and before October 1, 
2001 (FY 2001), the ``TEFRA percentage'' is 66\2/3\ percent and the 
``prospective payment percentage'' is 33\1/3\ percent; and on or after 
October 1, 2001, and before October 1, 2002 (FY 2002), the ``TEFRA 
percentage'' is 33\1/3\ percent and the ``prospective payment 
percentage'' is 66\2/3\ percent. (As explained earlier in section I.A. 
of this final rule, we are implementing the IRF prospective payment 
system for cost reporting periods beginning on or after January 1, 
2002. See section VI.H. of this final rule for a discussion of the 
implementation of the transition period methodology.)
    Section 1886(j)(1)(D) of the Act contains the definition of 
``payment unit.'' Until the passage of the BBRA, ``payment unit'' was 
defined by the statute as ``a discharge, day of inpatient hospital 
services, or other unit of payment defined by the Secretary.'' Section 
125(a)(1) of the BBRA amended section 1886(j)(1)(D) of the Act by 
striking ``day of inpatient hospital services, or other unit of payment 
defined by the Secretary.'' Accordingly, the payment unit utilized in 
the IRF prospective payment system will be a discharge.
    Section 125(a)(3) of the BBRA amended the Act by adding a new 
section 1886(j)(1)(E) to the Act that states: ``Nothing in this 
subsection shall be construed as preventing the Secretary from 
providing for an adjustment to payments to take into account the early 
transfer of a patient from a rehabilitation facility to another site of 
care.'' Our transfer policy is discussed in section VI.B. of this 
preamble.
    Section 305(b)(1)(C) of the BIPA amended the Act by adding section 
1886(j)(1)(F) to provide that an IRF may elect, not later than 30 days 
before its first cost reporting period for which the payment 
methodology applies to the facility, to have payment made to the 
facility under the provision of section 1886(j)(1)(B) of the Act (the 
fully implemented prospective payment system) rather than section 
1886(j)(1)(A) of the Act (payment under the transition methodology) for 
each cost reporting period to which the payment methodology applies.
    Section 1886(j)(2)(A) of the Act, as added by section 4421 of the 
BBA, directed the Secretary to establish case-mix groups (CMGs) based 
on the factors as the Secretary deems appropriate, which may include 
impairment, age, related prior hospitalization, comorbidities, and 
functional capability of the patient. This section also requires the 
Secretary to establish a method of classifying specific patients in 
IRFs within these groups. Section 125(a)(2) of the BBRA amended section 
1886(j)(2)(A)(i) of the Act to establish classes of patient discharges 
by functional-related groups. Section 1886(j)(2)(A)(i) of the Act 
reads: ``classes of patient discharges of rehabilitation facilities by 
functional-related groups (each * * * referred to as a `case mix 
group'), based on impairment, age, comorbidities, and functional 
capability of the patient and such other factors as the Secretary deems 
appropriate to improve the explanatory power of functional independence 
measure-function related groups.''
    Section 1886(j)(2)(B) of the Act provides that the Secretary must 
assign each case-mix group a weighting factor that reflects the 
relative facility resources used for patients classified within the 
group as compared to patients classified within other groups.
    Section 1886(j)(2)(C)(i) of the Act directs the Secretary to adjust 
``from time to time'' the case-mix classifications and weighting 
factors ``as appropriate to reflect changes in treatment patterns, 
technology, case-mix, number of payment units for which payment is made 
* * * and other factors which may affect the relative use of 
resources.'' Such periodic adjustments must be made in a manner so that 
changes in aggregate payments are a result of real changes in case-mix, 
not changes in coding that are unrelated to real changes in case-mix. 
Section 1886(j)(2)(C)(ii) of the Act provides that, if the Secretary 
determines that adjustments to the case-mix classifications or 
weighting factors resulted in (or are likely to result in) a

[[Page 41319]]

change in aggregate payments that does not reflect real changes in 
case-mix, the Secretary must adjust the per payment unit payment rate 
for subsequent years so as to eliminate the effect of the coding or 
classification changes.
    Section 1886(j)(2)(D) of the Act authorizes the Secretary to 
require rehabilitation facilities that provide inpatient hospital 
services to submit such data as the Secretary deems necessary to 
establish and administer the IRF prospective payment system.
    Section 1886(j)(3)(A) of the Act describes how the prospective 
payment rate will be determined. A prospective payment rate must be 
determined for each payment unit for which an IRF is entitled to 
payment under the prospective payment system. The payment rate will be 
based on the average payment per payment unit for inpatient operating 
and capital costs of IRFs, using the most recently available data, and 
adjusted by the following factors:
     Updating the per-payment unit amount to the fiscal year 
involved by the applicable percentage increase (as defined by section 
1886(b)(3)(B)(ii) of the Act) covering the period from the midpoint of 
the period for such data through the midpoint of FY 2000 and by an 
increase factor specified by the Secretary for subsequent fiscal years.
     Reducing the rates by a factor that is equal to the 
proportion of Medicare payments under the prospective payment system as 
estimated by the Secretary based on prospective payment amounts that 
are additional payments relating to outlier and related payments.
     Accounting for area wage variations among IRFs.
     Applying the case-mix weighting factors.
     Adjusting for such other factors as the Secretary 
determines necessary to properly reflect variations in necessary costs 
of treatment among IRFs.
    Until the passage of the BIPA, section 1886(j)(3)(B) of the Act 
directed the Secretary to establish IRF prospective payment system 
payment rates during FYs 2001 and 2002 at levels so that, in the 
Secretary's estimation, total payments under the new system will equal 
98 percent of the amount of payments that would have been made for 
operating and capital costs in those years if the IRF prospective 
payment system had not been implemented. In establishing these payment 
amounts, the Secretary must consider the effects of the prospective 
payment system on the total number of payment units from IRFs and other 
factors. Section 305(a) of the BIPA amended section 1886(j)(3)(B) of 
the Act by striking ``98 percent'' and adding ``98 percent for fiscal 
year 2001 and 100 percent for fiscal year 2002''. The heading for 
section 305(a) of BIPA is ``Assistance with administrative costs 
associated with the completion of patient assessment.'' In addition, 
section 305(b)(2) amended section 1886(j)(3)(B) of the Act to clarify 
that in establishing the levels of the payment rates under section 
1886(j)(3)(B) of the Act, the Secretary is not to account for any 
payment adjustment for IRFs electing not to be paid under the 
transition period methodology as allowed under section 1886(j)(1)(F) of 
the Act as added by section 305(b)(1)(C) of the BIPA. Section VI.E. of 
this final rule contains a further discussion of the development of 
payment rates under section 1886(j)(3)(B) of the Act.
    Section 1886(j)(3)(C) of the Act provides for an annual increase 
factor. This factor must be based on an appropriate percentage increase 
in a market basket of goods and services comprising services for which 
payment is made under section 1886(j) of the Act (which may be the 
market basket percentage increase described in section 
1886(b)(3)(B)(iii) of the Act).
    Under section 1886(j)(4)(A) of the Act, the Secretary is 
authorized, but not required, to provide for an additional payment to a 
rehabilitation facility for patients in a case-mix group, based upon 
the patient being classified as an outlier based on an unusual length 
of stay, costs, or other factors specified by the Secretary. The amount 
of the additional payment must approximate the marginal cost of care 
above what otherwise would be paid and must be budget neutral. The 
total amount of the additional payments to IRFs under the prospective 
payment system for a fiscal year may not be projected to exceed 5 
percent of the total payments based on prospective payment rates for 
payment units in that year.
    Section 1886(j)(4)(B) of the Act establishes that the Secretary is 
authorized but not required to provide for adjustments to the payment 
amounts under the prospective payment system as the Secretary deems 
appropriate to take into account the unique circumstances of IRFs 
located in Alaska and Hawaii.
    Section 1886(j)(5) of the Act provides for the Secretary to publish 
in the Federal Register, on or before August 1 before each fiscal year, 
the classifications and weighting factors for the IRF case-mix groups 
and a description of the methodology and data used in computing the 
prospective payment rates for that fiscal year.
    Section 1886(j)(6) of the Act provides that the Secretary must 
adjust the proportion (as estimated by the Secretary from time to time) 
of IRFs' costs that are attributable to wages and wage-related costs, 
of the prospective payment rates for area differences in wage levels by 
a factor (established by the Secretary) reflecting the relative 
hospital wage level in the geographic area of the IRF compared to the 
national average wage level for such facilities. Additionally, the 
Secretary is required to make a budget-neutral update to the area wage 
adjustment factor no later than October 1, 2001, and at least once 
every 36 months thereafter. The budget neutral update is based on 
information available to the Secretary (and updated as appropriate) of 
the wages and wage-related costs incurred in furnishing rehabilitation 
services.
    Sections 1886(j)(7)(A), (B), (C), and (D) of the Act establish that 
there shall be no administrative or judicial review, under sections 
1869 and 1878 of the Act or otherwise, of the establishment of case-mix 
groups, the methodology for the classification of patients within these 
groups, the weighting factors, the prospective payment rates, outlier 
and special payments and area wage adjustments.
    Section 125(b) of the BBRA provides that the Secretary shall 
conduct a study of the impact on utilization and beneficiary access to 
services of the implementation of the IRF prospective payment system. A 
report on the study must be submitted to the Congress not later than 3 
years after the date the IRF prospective payment system is first 
implemented.

C. Summary of the November 3, 2000 Proposed Rule

    In the November 3, 2000 proposed rule, we proposed to establish a 
new subpart P under 42 CFR Part 412 of the Medicare regulations to 
implement the IRF prospective payment system and to make technical and 
conforming changes to other appropriate sections under Parts 412 and 
413.
    In the proposed rule, to support and explain our proposed policies, 
we presented the following:
     An overview of the reasonable cost-based payment system 
that would be replaced by the IRF prospective payment system.
     An extensive discussion of past research on IRF patient 
classification systems and prospective payment systems, including 
earlier research performed by the RAND Corporation that supported a per 
discharge based prospective payment system using a patient 
classification system known as Functional Independence Measures-
Functional Related Groups (FIM-FRGs).

[[Page 41320]]

     A discussion of the following policy objectives we 
identified to evaluate the relative merits of the various policy 
options considered:

--The creation of a beneficiary-centered payment system that promotes 
quality of care, access to care, and continuity of care and is 
administratively feasible while controlling costs.
--The provision of incentives to furnish services as efficiently as 
possible without diminishing the quality of the care or limiting access 
to care.
--The creation of a payment system that is fair and equitable to 
facilities, beneficiaries, and the Medicare program.
--The development of an IRF prospective payment system that has the 
capability to recognize legitimate cost differences among various 
settings furnishing the same service; and a patient classification 
system used to group patients and services that is based on clinically 
coherent categories and, at the same time, reflects similar resource 
use. This would limit opportunities to ``upcode'' or ``game'' the 
system.

     A discussion of options considered for the following major 
components of the proposed IRF prospective payment system: the patient 
assessment instrument; the patient classification system; the unit of 
payment; and the data used to construct the payment rates.
     A discussion of the proposed requirement that IRFs 
complete the Minimum Data Set for Post-Acute Care (MDS-PAC) (a patient 
assessment instrument) as a part of the data collection deemed 
necessary by the Secretary to implement and administer the IRF 
prospective payment system. (As explained in section IV. of this final 
rule, we are adopting a revised patient assessment instrument.)
     A discussion of the proposed IRF patient classification 
system using CMGs and the prospective payment system supported by 
RAND's research using 1996 and 1997 data. The results of this research 
were released in a report by RAND in July 2000. (This report is 
contained on our website: www.hcfa.gov/medicare/irfpps.htm.)
     A discussion of the impact of the proposed IRF prospective 
payment system on the Medicare program and on IRFs.

D. General Overview of the IRF Prospective Payment System

    In accordance with the requirements of section 1886(j) of the Act, 
and following issuance of the November 3, 2000 proposed rule and 
consideration of public comments, we are implementing a prospective 
payment system for IRFs that replaces the current reasonable cost-based 
payment system. The new prospective payment system utilizes information 
from a patient assessment instrument to classify patients into distinct 
groups based on clinical characteristics and expected resource needs. 
Separate payments are calculated for each group with additional case-
level and facility-level adjustments applied.
    We are requiring IRFs to complete the patient assessment instrument 
described in section IV. of this preamble, for all Medicare Part A fee-
for-service patients admitted or discharged on or after January 1, 
2002.
    Data from the patient assessment instrument will be used to--
     Determine the appropriate classification of a Medicare 
patient into a CMG for payment under the prospective payment system 
(using data from only the initial patient instrument completed after 
admission, as described in section IV. of this preamble);
     Implement a system to monitor the quality of care 
furnished to Medicare patients; and
     Ensure that appropriate case-mix and other adjustments can 
be made to the patient classification system.
    Further details of the CMG classification system are discussed in 
section V. of this preamble.
    IRFs are required to input the patient assessment data into a 
computerized data system. In general, this system consists of a 
computerized patient grouping software program (GROUPER software) and 
data transmission software.
    Upon the discharge of a Medicare patient, the GROUPER software will 
determine the appropriate CMG classification number. IRFs must enter 
the CMG classification number onto the Medicare claim form in 
accordance with Medicare claims processing procedures. The operational 
aspects and instructions for completing and submitting Medicare claims 
under the IRF prospective payment system will be addressed in a 
Medicare program memorandum issued prior to the effective date of this 
final rule. We are aware that, beginning October 16, 2002, the 
submission of electronic claims must be in compliance with the 
administrative simplification provisions of the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA), Public Law 104-191, 
as specified in the Standards for Electronic Transactions final rule 
published in the Federal Register on August 17, 2000 (65 FR 50312). We 
will be taking the necessary steps in the future to ensure compliance 
with this provision of the HIPAA.
    The payment unit for the IRF prospective payment system for 
Medicare patients will be a discharge. The payment rates will encompass 
inpatient operating and capital costs of furnishing covered inpatient 
rehabilitation hospital services, including routine, ancillary, and 
capital costs, but not the costs of bad debts or approved educational 
activities. (A detailed description of the payment policies, including 
the transition period methodology, appears in section VI. of this final 
rule.)

E. Summary of Public Comments Received on the November 3, 2000 Proposed 
Rule

    The November 3, 2000 proposed rule provided for a 60-day comment 
period ending January 2, 2001. We extended this initial comment period 
an additional 30 days, until February 1, 2001, through the publication 
of a notice in the Federal Register on December 27, 2000 (65 FR 81813).
    We received a total of 399 timely items of correspondence 
containing multiple comments on the November 3, 2000 proposed rule. 
Major issues addressed by commenters included the use of the MDS-PAC as 
the patient assessment instrument; various aspects of the CMG 
classification system, including the recognition of comorbidities; 
various aspects of the facility and case level payment adjustments; and 
the requirements to be classified as an IRF.
    Summaries of the public comments received and our responses to 
those comments are set forth below under the appropriate subject 
heading.

II. Requirements and Conditions for Payment Under the Prospective 
Payment System for IRFs

    In the November 3, 2000 proposed rule, we proposed the conditions 
that an IRF must meet to be paid under the IRF prospective payment 
system (proposed Sec. 412.604). In general, if the conditions are not 
met, we may reduce or withhold Medicare payments or may classify the 
IRF as a hospital that is paid under the acute care hospital 
prospective payment system (proposed Sec. 412.604(a)(2)).

A. Classification Criteria for IRFs

1. Provisions of Proposed Rule
    In the November 3, 2000 proposed rule, we stated that we were not 
proposing to change the existing criteria for a hospital or hospital 
unit to be classified as a rehabilitation hospital or a rehabilitation 
unit that is excluded

[[Page 41321]]

from the acute care hospital prospective payment systems under sections 
1886(d) and 1886(g) of the Act, that are codified in regulations in 42 
CFR Part 412. In addition, we indicated that we were not proposing to 
revise the survey and certification procedures applicable to entities 
seeking this classification.
    Under Sec. 412.604(b), we proposed that, to be classified as a 
rehabilitation hospital or rehabilitation unit, an IRF must meet the 
criteria set forth in existing Secs. 412.23(b), 412.25, and 412.29 for 
exclusion from the inpatient hospital prospective payment system. 
Existing Sec. 412.23(b) provides that a rehabilitation hospital must--
     Have a provider agreement under Part 489 to participate as 
a hospital;
     Except for a newly participating hospital seeking 
exclusion for its first 12-month cost reporting period, show that 
during its most recent 12-month cost reporting periods, it served an 
inpatient population of whom at least 75 percent required intensive 
rehabilitation services for one or more of 10 conditions specified in 
the regulations;
     Have in effect a preadmission screening procedure under 
which each prospective patient's condition and medical history are 
reviewed to determine whether the patient is likely to benefit 
significantly from an intensive inpatient hospital program or 
assessment;
     Ensure that patients receive close medical supervision and 
furnish rehabilitative nursing, physical therapy, and occupational 
therapy, plus, as needed, speech therapy, social or psychological 
services, and orthotic and prosthetic services, through the use of 
qualified personnel;
     Have a director of rehabilitation who meets the criteria 
specified in the regulations;
     Have a plan of treatment for each inpatient that is 
established, reviewed, and revised as needed by a physician in 
consultation with other professional personnel who provide services to 
the patient; and
     Use a coordinated multidisciplinary team approach in the 
rehabilitation of each inpatient in the manner specified in the 
regulations.
    Existing Sec. 412.25 provides that a rehabilitation unit must--
     Be part of an institution that has in effect an agreement 
under part 489 of this chapter to participate as a hospital; is not 
excluded in its entirety from the prospective payment systems; and has 
enough beds that are not excluded from the prospective payment systems 
to permit the provision of adequate cost information, as required by 
Sec. 413.24(c);
     Have written admission criteria that are applied uniformly 
to both Medicare and non-Medicare patients;
     Have admission and discharge records that are separately 
identified from those of the hospital in which it is located and are 
readily available;
     Have policies specifying that necessary clinical 
information is transferred to the unit when a patient of the hospital 
is transferred to the unit;
     Meet applicable State licensure laws;
     Have utilization review standards applicable for the type 
of care offered in the unit;
     Have beds physically separate from (that is, not 
commingled with) the hospital's other beds;
     Be serviced by the same fiscal intermediary as the 
hospital;
     Be treated as a separate cost center for cost finding and 
apportionment purposes;
     Use an accounting system that properly allocates costs;
     Maintain adequate statistical data to support the basis of 
allocation;
     Report its costs in the hospital's cost report covering 
the same fiscal period and using the same method of apportionment as 
the hospital;
     As of the first day of the first cost reporting period for 
which all other exclusion requirements are met, the unit is fully 
equipped and staffed and is capable of providing hospital inpatient 
rehabilitation care regardless of whether there are any inpatients in 
the unit on that date.
    In addition, existing Sec. 412.25 contains requirements on changes 
in hospital size and existing Sec. 412.29 includes specific 
requirements for new and converted units (as specified in Sec. 412.30), 
preadmission screening, staffing, plans of treatment, a coordinated 
multidisciplinary team approach as documented in clinical records, and 
administration.
2. Public Comments and Departmental Responses
    Comment: Many commenters suggested that we update the 10 conditions 
specified in Sec. 412.23(b)(2) that are used to determine if at least 
75 percent of facility's patients require intensive rehabilitative 
services. One commenter recommended completely eliminating the ``75 
percent'' rule to classify a facility or unit as an IRF because we 
proposed to use the 21 rehabilitation impairment categories (RICs) as 
defined in the proposed rule.
    Response: Currently, hospitals or hospital units that meet the 
requirements at existing Secs. 412.23(b), 412.25, and 412.29 are 
eligible to be classified as rehabilitation hospitals or rehabilitation 
units that are excluded from the acute care inpatient hospital 
prospective payment systems established under sections 1886(d) and 
1886(g) of the Act. Section 1886(j) of the Act was added to implement 
the prospective payment system described in this final rule for 
excluded hospitals and hospital units that are classified as 
rehabilitation hospitals and rehabilitation units. As we noted in the 
proposed rule, we were not proposing changes to the existing 
requirements for classification under Sec. 412.23(b)(2). We believe 
that the existing requirements are appropriate in classifying a 
hospital or unit as an IRF that is paid under section 1886(j) of the 
Act. Accordingly, for this final rule, we are not revising the existing 
requirements at Secs. 412.23(b), 412.25, and 412.29. However, as more 
data, including patient data associated with the RICs, become available 
after we initially implement the IRF prospective payment system, we may 
reconsider whether it would be appropriate to revisit the requirement 
regarding the ``75 percent'' rule in the future.
    Comment: Several commenters suggested that we amend Sec. 412.30 to 
clarify that hospitals seeking to convert skilled nursing facility 
(SNF) beds to excluded inpatient rehabilitation beds must wait for 12 
months before being excluded from the acute care hospital prospective 
payment system (and be paid under the IRF prospective payment system) 
just as acute care hospitals must do if they convert medical-surgical 
beds to excluded inpatient rehabilitation beds.
    Response: Currently, the 12-month delay for the conversion of beds 
under Sec. 412.30 to IRF beds does not apply to SNF beds. For this 
final rule, as stated in the proposed rule, we are not changing the 
existing criteria for a hospital or hospital unit to be classified as a 
rehabilitation hospital or a rehabilitation unit that is excluded from 
the acute care inpatient hospital prospective payment system. We 
believe that the existing requirements are appropriate in classifying a 
hospital unit as an IRF that is paid under section 1886(j) of the Act. 
In accordance with section 125(b) of the BBRA, we indicated that we 
will be conducting a study of the impact on utilization and beneficiary 
access to services of the implementation of the IRF prospective payment 
system. If this study shows the need to change this requirement to 
include converted SNF beds, we will propose to do so in the future. 
Accordingly, we are not making any

[[Page 41322]]

changes to the existing Sec. 412.30 as the commenters suggested.
3. Provisions of the Final Rule
    Under Secs. 412.604(a) and (b) of the final regulations, we are 
specifying that, for cost reporting periods beginning on or after 
January 1, 2002, hospitals or hospital units that are classified as 
rehabilitation hospitals or rehabilitation units will be paid under the 
IRF prospective payment system (except for IRFs that are paid under the 
special payment provisions at Sec. 412.22(c) of the regulations) as 
described below.
     Requirements for IRFs. The IRF prospective payment system 
will apply to inpatient rehabilitation services furnished by Medicare 
participating entities that are classified as rehabilitation hospitals 
or rehabilitation units under Secs. 412.23(b), 412.25, and 412.29. In 
addition, we are adopting as final the proposed technical changes to 
Secs. 412.22, 412.23, 412.25, and 412.29 to reflect the application of 
the classification criteria to IRFs under the IRF prospective payment 
system.
     Location of IRFs outside the 50 States. IRFs that meet the 
requirements of Secs. 412.22, 412.23, 412.25, 412.29, and 412.30 that 
are located in Puerto Rico, Guam, the Virgin Islands, American Samoa, 
the Northern Mariana Islands, and the District of Columbia will be 
subject to the IRF prospective payment system.
     Hospitals Not Subject to the IRF Prospective Payment 
System. The following hospitals are paid under special payment 
provisions described in Sec. 412.22(c) and, therefore, are not subject 
to the IRF prospective payment system rules:

--Veterans Administration hospitals.
--Hospitals that are reimbursed under State cost control systems 
approved under 42 CFR Part 403.
--Hospitals that are reimbursed in accordance with demonstration 
projects authorized under section 402(a) of Public Law 90-248 (42 
U.S.C. 1395b-1) or section 222(a) of Public Law 92-603 (42 U.S.C. 
1395b-1 (note)).

     Other Technical Changes. In addition to the technical 
changes to Secs. 412.22, 412.23, 412.25, and 412.29 cited above, we are 
adopting as final the proposed technical changes to Secs. 412.1, 
412.20, 412.116, 412.130, 413.1, 413.40, and 413.64 to reflect payment 
for inpatient rehabilitation services furnished by IRFs under the IRF 
prospective payment system, effective January 1, 2002.

B. Completion of Patient Assessment Instrument

    Proposed Sec. 412.604(c) provided that, for each Medicare patient 
admitted or discharged on or after April 1, 2001, the IRF must complete 
a patient assessment instrument. In the proposed rule under 
Sec. 412.606(b), we had proposed the use of the MDS-PAC as the patient 
assessment instrument. However, as discussed in detail in section IV.D. 
of this preamble, we are replacing the MDS-PAC with our inpatient 
rehabilitation facility patient assessment instrument. Under 
Sec. 412.604(c) of this final rule, we are requiring an IRF to complete 
our inpatient rehabilitation facility patient assessment instrument for 
each Medicare Part A fee-for-service patient admitted to or discharged 
from the IRF on or after January 1, 2002.

C. Limitation on Charges to Beneficiaries

    Proposed Sec. 412.604(d) specified that an IRF may not charge a 
beneficiary for any services for which payment is made by Medicare, 
even if the facility's costs of furnishing services to that beneficiary 
are greater than the amount the facility is paid under the IRF 
prospective payment system. Proposed Sec. 412.604(d) further specified 
that an IRF receiving a prospective payment for a covered hospital stay 
(that is, a stay that includes at least one covered day) may charge the 
Medicare beneficiary or other person only for the applicable deductible 
and coinsurance amounts under Secs. 409.82, 409.83, and 409.87 of the 
regulations.
    We did not receive any comments on proposed Sec. 412.604(d) and are 
adopting it as final with one modification. In the proposed rule, we 
inadvertently did not specify that, in addition to the applicable 
deductible and coinsurance amounts, a facility is limited to its 
charges to beneficiaries and other individuals on their behalf under 
existing Sec. 489.20(a) of the regulations.

D. Furnishing of Inpatient Hospital Services Directly or Under 
Arrangement

    Proposed Sec. 412.604(e) specified that an IRF must furnish all 
necessary covered services to the Medicare beneficiary either directly 
or under arrangements. The IRF prospective payments are payment in full 
for all inpatient hospital services, as defined in Sec. 409.10. We 
proposed that we would not pay any provider or supplier other than the 
IRF for services furnished to a Medicare beneficiary who is an 
inpatient of the IRF, except for physicians' services reimbursable 
under Sec. 405.550(b) and services of an anesthetist employed by a 
physician reimbursable under Sec. 415.102(a) of the regulations.
    We did not receive any comments on proposed Sec. 412.604(e) and are 
adopting it as final with two conforming changes:
    We are revising proposed paragraph (e)(1) to conform it to the 
provisions of existing Sec. 412.50, which lists the types of services 
that are not included as inpatient hospital services. Section 412.50 
was revised on April 7, 2000 (65 FR 18537). However, we inadvertently 
did not include the revised list in the proposed rule.
    Proposed Sec. 412.622(b) (which we are adopting as final) specifies 
that payments for approved educational activities, bad debts, and per 
units for blood clotting factor are separate payments made outside the 
scope of the full prospective payment to IRFs for inpatient 
rehabilitation services. We are including in Sec. 412.604(e)(l) a 
citation to Sec. 412.622(b) to clarify that payment for these three 
types of services are not included in the full prospective payment for 
all inpatient IRF services.

E. Reporting and Recordkeeping Requirements

    Under proposed Sec. 412.604(f), we specified that all IRFs 
participating in the IRF prospective payment system must meet the 
recordkeeping and cost reporting requirements of Secs. 413.20 and 
413.24 of the regulations.
    We did not receive any comments on proposed Sec. 412.604(f) and, 
therefore, are adopting it as final without modification.

III. Research To Support the Establishment of the IRF Prospective 
Payment System

A. Overview of Research for the Proposed Rule

    In 1995, the Rand Corporation (RAND) began extensive research, 
sponsored by us, on the development of a per discharge based 
prospective payment system using a patient classification system known 
as Functional Independence Measures-Functional Related Groups (FIM-
FRGs) using 1994 data. The results of RAND's earliest research were 
released in September 1997 and are contained in two reports available 
through the National Technical Information Service (NTIS). The reports 
are--
     Classification System for Inpatient Rehabilitation 
Patients--A Review and Proposed Revisions to the Function Independence 
Measure-Function Related Groups, NTIS order number PB98-105992INZ; and

[[Page 41323]]

     Prospective Payment System for Inpatient Rehabilitation, 
NTIS order number PB98-106024INZ.
    These reports can be ordered toll-free by calling the NTIS sales 
desk at 800-553-6847 or by e-mail at [email protected].
    In summarizing these reports, RAND found in the research based on 
1994 data that, with limitations, the FIM-FRGs were effective 
predictors of resource use based on the proxy measurement: length of 
stay. FRGs based upon FIM motor scores, cognitive scores, and age 
remained stable over time (prediction remained consistent between 1990 
and 1994 data). Researchers at RAND developed, examined, and evaluated 
a model payment system based upon FIM-FRG classifications that explains 
approximately 50 percent of patient costs and approximately 60 to 65 
percent of costs at the facility level. Based on this earlier analysis, 
RAND concluded that an IRF prospective payment system using this model 
is feasible.
    In July 1999, we contracted with RAND to update their earlier 
research. The update included an analysis of FIM data, the FRGs, and 
the model rehabilitation prospective payment system using more recent 
data from a greater number of IRFs. The purpose of updating the earlier 
research was to develop the underlying data necessary to support the 
Medicare IRF prospective payment system based on case-mix groups for 
the proposed rule. RAND expanded the scope of their earlier research to 
include the examination of several payment elements, such as 
comorbidities, facility-level adjustments, and implementation issues, 
including evaluation and monitoring.
    Specifically, as described in the proposed rule (65 FR 66313), RAND 
performed the following tasks:
     Constructed a data file, using 1996 and 1997 FIM data from 
the Uniform Data Set for medical rehabilitation (UDSmr) and the 
Clinical Outcomes System (COS). Our files and other sources were used 
to obtain data on Medicare beneficiaries and IRFs for 1996 and 1997.
     Determined that the FIM data from UDSmr and COS data are 
representative of the Medicare population.
     Identified factors or variables that were used to design 
the proposed prospective payment system.
     Developed data on the elements of the proposed prospective 
payment system regarding RICs, the CMGs, relative weights and payment 
rates for each CMG, facility-level adjustments, and patient-level 
adjustments.
     Developed data to examine the joint performance of all of 
the payment system elements by simulating facility payments for our 
analysis of the impact of implementing the payment system.
     Developed data to assist in identifying specific issues in 
connection with implementing the payment system.
     Presented options regarding the design and development of 
a system to monitor the effects of the payment system and other changes 
in the health care market on IRFs and on other post-acute care 
providers, including home health agencies and skilled nursing 
facilities, by measuring factors such as access, utilization, quality, 
and cost of care.
    RAND issued a report on the findings on its analysis of the 1996 
and 1997 data in July 2000. We have made the report available on our 
web site at www.hcfa.gov/medicare/irfpps.htm.

B. Updated Research for the Final Rule

    In the November 3, 2000 proposed rule, we indicated we would refine 
some of the patient CMGs and corresponding weights and rates if further 
analysis of the data file and consideration of the comments that we 
received in response to the proposed rule warranted such refinements.
    RAND has updated their research, as discussed below, to include 
patient assessment data and Medicare beneficiary data from more recent 
years than the data used to develop the provisions of the proposed 
rule. RAND's analysis of the later data assisted us in developing 
responses to comments on the proposed rule and identifying aspects of 
the patient classification and payment systems where refinements were 
justified or where further research was necessary. We discuss the 
details of refinements that we believe are necessary in section V. 
(Case-Mix Group Patient Classification System) and in section VI. 
(Payment Rates) of this final rule.
1. Sources and Description of More Recent Data
    We used 1996 and 1997 Medicare program data and patient assessment 
data to develop the provisions of the proposed rule. For this final 
rule, we used 1998 and 1999 Medicare program data and patient 
assessment data as follows:
     Medicare Program Data--Calendar year 1998 and 1999 
Medicare Provider Analysis and Review (MedPAR) files were used in 
RAND's updated research. The MedPAR file contains the records for all 
Medicare hospital inpatient discharges (including discharges for 
rehabilitation facilities). The data in the MedPAR file include patient 
demographics (age, gender, race, residence zip code), clinical 
characteristics (diagnoses and procedures), and hospitalization 
characteristics (admission date, discharge date, days in intensive care 
wards, charges by department, and payment information).
    The Medicare cost report data are contained in the Health Care 
Provider Cost Report Information System (HCRIS). The cost report files 
contain information on facility characteristics, utilization data, and 
cost and charge data by cost center. For RAND's updated research, we 
obtained the HCRIS data from the most current available cost data for 
cost reports (FYs 1998, 1997, and/or 1996). Supplementary information 
to this file includes: (1) The wage data for the area in which an IRF 
is located; (2) data on teaching hospitals, including the number of 
residents assigned to rehabilitation units and the distribution of 
resident time across inpatient and outpatient settings; (3) data on the 
number of Medicare cases at each IRF that represent Supplemental 
Security Income (SSI) beneficiaries; and (4) information about payments 
under the existing reasonable cost payment system.
     Patient Assessment Data--We entered into an agreement with 
the University at Buffalo Foundation Activities, Inc. to obtain 1998 
and 1999 UDSmr patient assessment data. For the proposed rule, we 
entered into an agreement with Caredata.com, Inc. to retrieve COS 
patient assessment data. However, as mentioned in the proposed rule, 
the COS has been discontinued as of July 2000. COS patient assessment 
data for 1998 and 1999 were available though, for a majority of COS 
providers that operate under the HealthSouth Corporation. Accordingly, 
we entered into an agreement with the HealthSouth Corporation to 
retrieve patient assessment data for 1998 and 1999. Collectively, we 
will refer to the patient assessment data from the UDSmr (1996 through 
1999), the COS (1996 and 1997), and the HealthSouth Corporation (1998 
and 1999) as FIM data throughout this final rule.
    The FIM data include demographic descriptions of the patient (birth 
date, gender, zip code, ethnicity, marital status, living setting), 
clinical descriptions of the patient (condition requiring 
rehabilitation, ICD-9-CM diagnoses, functional independence measures at 
admission and discharge) and the hospitalization data (encrypted 
hospital identifier, admission date,

[[Page 41324]]

discharge date, charges, payment source, and an indicator of whether 
this is the first rehabilitation hospitalization for this condition, a 
readmission, or a short stay for evaluation).
2. Description of the Methodology Used To Construct the Data File
    In the proposed rule (65 FR 66314), we described the methodology 
that RAND used to construct the data file that formed the basis of the 
proposed CMG patient classification system and the resulting payment 
weights, rates, and payment adjustments using 1996 and 1997 data. RAND 
updated and expanded the data file to include the 1998 and 1999 data as 
follows:
    RAND linked the 1998 and 1999 FIM patient records with patient 
records on the respective MedPAR files that describe the same 
discharge. RAND determined the Medicare provider number(s) that 
correspond to each facility code in the FIM data. Next, RAND matched 
the FIM patients and MedPAR patients within the paired facilities.
    Because of the proprietary and sensitive nature of the FIM patient 
records, certain data fields that specifically identify the patient and 
the servicing IRF were encrypted. Therefore, as in RAND's previous 
research, it was necessary to subject the FIM and MedPAR records to a 
sophisticated and complex matching probability technique. The result 
produces the most statistically valid match of patient/facility records 
and a data file that contains the characteristics of each Medicare 
beneficiary and his or her servicing IRF.
    Because of the complex scope and nature of the matching technique 
used, we have included in Appendix A of this final rule a technical 
discussion of each step taken to create the updated data file. The 
tables contained in Appendix A show the actual effects of applying the 
matching technique on both the patient and facility records for 1996 
through 1999.
3. Representativeness of the Updated Data File
    It is extremely important to examine the quality of the resulting 
match, including the extent to which the linked MedPAR and FIM records 
are representative of the MedPAR universe. We believe that the updated 
data file described in Appendix A, contains the best available and most 
representative data to construct a prospective payment system for all 
IRFs within the parameters of the statutory requirements. Our analysis 
of the updated data file allows us to develop the CMG patient 
classification and payment system, described in sections V. and VI. of 
this final rule.

C. Research on the Patient Assessment Instrument for the Final Rule

    In the proposed rule (65 FR 66315), we set forth the proposed 
requirements regarding the completion of the MDS-PAC rather than the 
FIM patient assessment instrument. We stated that we would test further 
whether the MDS-PAC results in patient classifications that are 
equivalent to the classifications that occurred with the FIM (that is, 
the assessment instruments that were used to design the prospective 
payment system).
    We expanded RAND's scope of work under the 1999 contract to include 
a study of the MDS-PAC and FIM instruments to answer the following 
questions:
     How accurate is the MDS-PAC for use in classifying cases 
into CMGs for the proposed IRF prospective payment system?
     How do the validity, reliability, and consistency of the 
FIM and the MDS-PAC elements compare?
     What are the costs associated with the data collection on 
the FIM and MDS-PAC instruments?
     Are comorbidities being coded accurately on the FIM and 
the MDS-PAC instruments?
     Does the additional data in the MDS-PAC provide an 
opportunity for better groupings in the future?
    Work on this project was performed by the Harvard Medical School 
under the RAND contract. The design and results of this study are 
discussed in detail in section IV. of this final rule.

D. Analyses to Support Future Adjustments to the IRF Prospective 
Payment System

    The principal goal of the analysis described in section III.B. of 
this final rule is to determine the extent to which measurable patient 
characteristics, as reported on a patient assessment instrument, permit 
classification of patients into identifiable groups that accurately 
reflect the use of resources in IRFs. The research to date indicates 
that CMGs are effective predictors of resource use as measured by 
proxies such as length of stay and cost. The use of these proxies is 
necessary because data that measure actual nursing and therapy time 
spent on patient care, and other resource use data, are not available. 
The collection of data on patient characteristics and patient-specific 
resource use may enhance our ability to refine the CMGs in a manner 
that supports our policy objectives for future refinement of the IRF 
prospective payment system. Accordingly, we have contracted with Aspen 
Systems Corporation to collect actual resource use data in a sample of 
IRFs. The data collected by Aspen will be submitted to RAND for 
analysis to determine if the data can be used to support future 
refinements to the CMGs.

IV. The IRF Patient Assessment

A. Implementation of a Patient Assessment Instrument

1. Statutory Authority and Proposed Rule
    Under section 1886(j)(2)(D) of the Act, ``The Secretary is 
authorized to require rehabilitation facilities that provide inpatient 
hospital services to submit such data as the Secretary deems necessary 
to establish and administer the prospective payment system under this 
subsection.'' The collection of patient data is indispensable for the 
successful development and implementation of the IRF prospective 
payment system. A comprehensive, reliable system for collecting 
standardized patient assessment data is necessary for: (a) The 
objective assignment of Medicare beneficiaries to appropriate IRF CMGs; 
(b) the development of a system to monitor the effects of an IRF 
prospective payment system on patient care and outcomes; (c) the 
determination of whether future adjustments to the IRF CMGs are 
warranted; and (d) the development of an integrated system for post-
acute care in the future.
2. Proposed Rule--Patient Assessment Instrument
    In the November 3, 2000 proposed rule (65 FR 66315), we proposed to 
use the MDS-PAC as the standardized patient assessment instrument under 
the IRF prospective payment system (Secs. 412.604(c) and 412.606). We 
acknowledged that the nature of the patient data we would collect may 
evolve over time. We stated our belief that the present structure of 
independent Medicare post-acute benefits, which includes payment 
systems, coverage requirements, and quality assessment instruments 
based primarily on site of care, may provide incentives that result in 
reduced access and choice for beneficiaries and may contribute to 
inappropriate care. We are continuing to reevaluate the methods we use 
to pay for the delivery of post-acute services, with the objective of 
developing an integrated approach. The use of post-acute care patient 
assessment instruments is one way to operationally advance an 
integrated

[[Page 41325]]

approach. We believe that MedPAC recognized the integrating function 
that post-acute care patient assessment instruments can play when, in 
its 1999 Report to Congress, MedPAC recommended that the Secretary 
collect a core set of patient assessment information across all post-
acute care settings (Recommendation 5A).
    As we strive to develop an integrated approach to the delivery of 
post-acute services, we are trying to implement MedPAC's March 2001 
Report to Congress recommendation that the Secretary: (1) minimize 
reporting burden and needless complexity; and (2) assure that only the 
data necessary for payment and quality monitoring are collected 
(Recommendation 6B). We believe that the revised IRF patient assessment 
instrument contained in this final rule meets this MedPAC 
recommendation.
    In the November 3, 2000 proposed rule, we proposed that only the 
IRF clinicians that we specified assess Medicare patients in IRFs using 
the MDS-PAC as the patient assessment instrument. We proposed that an 
IRF clinician assess a Medicare IRF patient on Day 4, Day 11, Day 30, 
and Day 60 of the patient's IRF stay, and also when the patient was 
discharged. We proposed that the patient assessment data for each of 
these assessments would be transmitted to us. In addition, we proposed 
to impose penalties on the IRF based on late completion of the MDS-PAC 
and late transmission of the MDS-PAC data.
    As discussed in detail in section IV.B. of this preamble, based on 
the public comments received, we have decided to use a patient 
assessment instrument that is different from the MDS-PAC and is more 
similar to the UDSmr patient assessment instrument.
3. Public Comments Received on Proposed Use of MDS-PAC as the Patient 
Assessment Instrument
    In the November 3, 2000 proposed rule, we sought public comment on 
the use of MDS-PAC as the assessment instrument for the IRF prospective 
payment system, including: comments and supporting data regarding the 
additional burden and cost, if any, associated with this instrument; 
the suitability of the instrument for the rehabilitation setting and as 
a model for other post-acute care settings; views on whether the 
instrument has been properly tested and validated for industry-wide 
use; and the utility and reliability of the quality data items 
contained in the instrument.
     We received numerous comments regarding our proposal to 
use the MDS-PAC as the patient assessment instrument. In general, the 
commenters stated that--
     We should use the UDSmr patient assessment instrument, 
commonly referred to as the ``FIM,'' instead of the MDS-PAC as the 
patient assessment instrument for the IRF prospective payment system;
     The MDS-PAC consisted of too many items;
     The reliability and validity of the items associated with 
monitoring quality of care had not been appropriately demonstrated;
     The FIM is as appropriate as the MDS-PAC to both classify 
patients into CMGs and monitor quality of care;
     The number of proposed patient assessments was excessive;
     The MDS-PAC item scoring scales for the FIM-like motor and 
cognitive items would contribute to errors scoring these items;
     The inconsistency of the item assessment time periods 
would detract from the accuracy of the assessment;
     An IRF's accreditation by JCAHO and CARF would be 
jeopardized or made unnecessarily burdensome and complicated if an IRF 
had to use the MDS-PAC;
     Clinicians other than those listed in the proposed rule 
should be allowed to certify that the assessment instrument had been 
properly completed;
     The list of the types of clinicians who could complete 
portions of the assessment should be expanded;
     The penalties associated with late completion or 
transmission of the MDS-PAC were too harsh;
     The policies for the IRF prospective payment system should 
only apply to patients admitted to an IRF after the system's 
implementation date; and
     More specifics regarding the assessment instrument test 
transmission should be given.
    Below we give an overview of the patient assessment policies 
specified in the proposed rule, followed by a discussion of the public 
comments received and our response to those comments.
    We have by no means abandoned our goal of ultimately establishing a 
common system to assess patient characteristics and care needs for all 
post-acute care services and pursing more integrated approaches to 
their payment and delivery. As we stated earlier, that goal was 
endorsed by MedPAC in its March 1999 Report to the Congress, in which 
MedPAC recommended that the Secretary collect a core set of patient 
assessment information across all post-acute care settings 
(Recommendation 5A).
    In its March 2001 Report to Congress, MedPAC recommends that ``The 
Secretary should develop for potential implementation a patient 
classification system that predicts costs within and across post-acute 
settings'' (Recommendation 6C). We continue to share MedPAC's view of 
the utility of implementing a common patient assessment data system and 
a common patient classification system across post-acute settings. The 
implementation of these common systems would facilitate across post-
acute settings consistency of payments, consistency of patient 
assessment burden, and consistency of quality of care monitoring. We 
believe that the assessment instrument set forth in this final rule 
will help achieve these goals.
    The patient assessment instrument adopted in this final rule 
supports both our payment and quality objectives. In addition, we note 
that section 545 of BIPA requires the Secretary to report to Congress 
by January 1, 2005, on the development of standard instruments for the 
assessment of the health and functional status of patients, for items 
and services offered in all settings and to include in the report a 
recommendation on the use of such standard instruments for payment 
purposes. We believe that as a result of the study necessary to develop 
the report, we will make refinements in the design and application of 
our IRF patient assessment instrument. The refinements will provide us 
with even more essential information on which to base policy decisions 
related to post-acute care and its characteristics, including the 
quality of care furnished and our payment methods. We note that only 
Medicare Part A fee-for-service (original Medicare) IRF patients must 
be assessed by an IRF clinician using the patient assessment 
instrument.
    In the proposed rule, we discussed our premise that the 
implementation of the per-case prospective payment system based on the 
``functional-related group'' methodology requires the use of a 
standardized data collection instrument that contains the elements 
required to classify a patient into a distinct CMG. To classify a 
patient into a distinct CMG, the data collection instrument must first 
assign the patient into one of the various high level categories that 
are based principally on ICD-9-CM diagnoses plus some additional 
patient information. These high level categories are called 
Rehabilitation Impairment Categories (RICs). After that initial 
classification step, the level of the patient's impairment, as 
determined by the patient's motor and cognitive function

[[Page 41326]]

scores, and the age of the patient are used to classify a patient into 
a distinct CMG within the higher level RIC. How a patient's 
comorbidities may affect a patient's CMG is discussed in section VI. of 
this preamble. Additional data elements are required to identify the 
patient and for monitoring the quality of care furnished to patients in 
IRFs.
    In the proposed rule, we indicated that we had explored several 
available approaches to the collection of the required data elements: 
These included: (a) The development of a new data collection 
instrument, the MDS-PAC (as discussed in the proposed rule); (b) the 
adoption of an instrument closely modeled on the UDSmr and the COS 
instrument; and (c) the incorporation verbatim into a new instrument 
(MDS-PAC) of the UDSmr/COS data elements that are relevant to payment. 
We indicated in the proposed rule that we proposed to use the first 
option, the MDS-PAC. We are referring readers to the November 3, 2000 
proposed rule for a detailed description of the MDS-PAC instrument (65 
FR 66304).
    Comment: We received many comments stating that the proposed MDS-
PAC assessment instrument was too long and too complex. The commenters 
stated that the length and complexity of the patient assessment 
instrument create an unreasonable time burden in terms of performing 
the patient assessment. The unreasonable time burden in turn translated 
into excessive IRF patient assessment costs. The commenters urged us to 
use the FIM as the patient assessment instrument.
    Response: Our goal was to collect comprehensive patient assessment 
data, with that data being used to classify patients into payment 
groups and for quality of care purposes. However, after analysis of the 
public comments, we have decided to reconsider the number and 
complexity of patient assessment items and, therefore, are adopting in 
this final rule the use of a modified version of the UDSmr patient 
assessment instrument (FIM) as our patient assessment instrument 
(Secs. 412.604(c) and 412.606(b)) rather than the MDS-PAC. We have 
decreased the number of assessment items and changed some of the FIM 
items in an effort to make them easier to understand and complete.
    We recognized that many rehabilitation hospitals already use the 
FIM. Another organization known as Caredata.com used to market a 
patient assessment instrument that is very similar to the UDSmr patient 
assessment instrument. (We have been notified that, as of July 2000, 
Caredata.com discontinued the part of its business operations related 
to patient data analysis and reporting that was similar to the function 
UDSmr continues to perform for IRFs.) The FIM assessment system has 
been under development since the mid-1980s. The FIM was developed by 
researchers who were funded by a consortium of rehabilitation 
professional associations and the Department of Education at the State 
University of New York (SUNY) at Buffalo in the 1980s. The FIM is 
marketed by the UDSmr, maintained by SUNY/Buffalo, and is proprietary. 
There has been extensive training in and experience with the data 
elements, particularly the functional components, that enter into the 
construction of the CMGs. We believe that with a few modifications it 
can be the basis for a valid and reliable instrument to measure 
impairments in IRFs. The reliability and validity of using the FIM to 
assess IRF patients have been documented by a substantial list of 
publications produced both in the United States and overseas (for 
example, Sweden and Japan), by the developers of the system and by 
independent investigators. We also conducted a study of the FIM. We 
discuss the results of that study concerning the reliability and 
validity of the patient assessment instrument in section IV.E. of this 
preamble.
    Many rehabilitation providers are clients of UDSmr. Our 1997 data 
show that approximately 68 percent of Medicare patients had a UDSmr or 
COS data file, indicating that these patients were assessed with the 
FIM. (We received comments indicating that currently approximately 85 
percent of IRFs use the FIM. UDSmr also indicated that approximately 85 
percent of IRFs currently use the FIM.)
    The developers of the FIM offer a certification course to train 
assessors in the use of the instrument. This results in high rates of 
intrarater and interrater reliability, with Cronbach alpha coefficients 
of more than 0.9 for both the motor and cognitive subscores. The 
Cronbach alpha coefficient is a statistical measure of interrater 
reliability with perfect reliability equal to 1.0. Therefore, a score 
of 0.9 indicates a very high level of interrater reliability.
    The principal objective of the FIM is to assess person-level 
disability in the inpatient medical rehabilitation setting. FIM data 
are collected at admission and discharge, and, when possible, 6 months 
after discharge. The strength of the FIM assessment instrument is that 
it is a well-evolved and extensively tested approach to the assessment 
of the critical components of care provided by IRFs and the measurement 
of patient improvement in functional capacity. The variations among 
facilities in the difference between the observed and expected 
improvement in function are used as indicators of the quality and the 
effectiveness of the facilities. UDSmr analyzes FIM data for providers 
and generates benchmark data that allow IRFs to compare the outcome of 
their performance on the functional independence measures relative to 
other providers participating in the system.
    In sections VIII. and IX. of this final rule, we discuss in detail 
the burden of the use of a modified version of the FIM patient 
assessment instrument that we will use under the IRF prospective 
payment system.
    Comment: Many commenters stated that the item scoring scales for 
the FIM-like motor and cognitive items would cause errors in scoring 
these items, because the scoring scales were different from the FIM 
motor and cognitive items.
    Response: We have incorporated the actual FIM motor and cognitive 
items into our revised patient assessment instrument. Therefore, the 
scoring of these items will be exactly as currently done for these FIM 
items. In addition, in consultation with UDSmr staff, we made the 
coding of some other items on our patient assessment instrument as 
similar as possible to how the FIM motor and cognitive items are coded.
    Comment: One commenter requested a patient assessment item that 
would be used to collect speech-language data that are more descriptive 
of speech-language problems the patient may have.
    Response: Our patient assessment instrument is now a slightly 
modified version of the UDSmr patient assessment instrument. 
Consequently, we will be using the UDSmr assessment items to assess a 
patient's communication ability. As we state repeatedly in this 
preamble, we want to limit the burden on IRFs. Therefore, we are being 
parsimonious in what items are added to the UDSmr instrument, and are 
only adding items that clearly increase the capability of our 
instrument to classify a patient into a CMG or items that clearly 
collect needed and proven quality of care data. At this time, we do not 
have data that clearly indicate the value of changing the UDSmr 
communication assessment category of items.
    Comment: Several commenters stated that the inconsistency of 
assessment time periods for different patient assessment instrument 
items would detract from the accuracy of the patient assessment. The 
different item assessment time periods would create confusion about how 
to perform the

[[Page 41327]]

assessment and create an additional assessment burden.
    Response: In the proposed rule, we specified that the item we 
proposed to use to assess ``Indicators of Delirium-Periodic Disordered 
Thinking/Awareness'' requires an assessment time period that is 7 
calendar days in length. We also specified that the items we proposed 
to use to assess ``Bladder Continence'' and ``Bowel Continence'' each 
requires an assessment time period that is 7 to 14 calendar days in 
length. We stated that we would conduct additional testing of the MDS-
PAC to determine if the assessment time period for these items should 
be changed. In addition, we stated that, if the additional testing 
indicated that the assessment time periods for these items should not 
be changed, we would make appropriate changes to the patient assessment 
schedule.
    We conducted testing of both the MDS-PAC and the UDSmr patient 
assessment instrument. Our additional testing confirmed that the 
assessment time periods for the bowel and bladder items should, in some 
cases, remain as long as 14 calendar days in length. In addition, we 
consulted with UDSmr staff regarding the assessment time period for the 
bladder and bowel items in the FIM, because the algorithms for these 
items indicate an assessment time period as long as 14 days. UDSmr 
staff recommended that the assessment time period for the bladder and 
bowel items remain as long as 14 days.
    Our patient assessment instrument is a slightly modified version of 
the UDSmr patient assessment instrument, and contains all 18 of the 
UDSmr patient assessment instrument functional independence measures 
that are used to measure both motor and cognitive functioning. 
Therefore, in accordance with the public comments that recommended we 
make the assessment time periods for our patient assessment instrument 
items consistent, and in recognition of the assessment time periods 
used for the items in the UDSmr patient assessment instrument, in this 
final rule we are requiring that the assessment time period for all of 
our patient assessment instrument items is 3 calendar days, except for 
some items as discussed below. We are not including in our assessment 
instrument the MDS-PAC item ``Indicators of Delirium-Periodic 
Disordered Thinking/Awareness.'' Our additional testing did not confirm 
that this MDS-PAC item was as valid or reliable as our earlier testing 
indicated.
    In general, the proposed rule specified an admission assessment 
time period that covers calendar days 1 through 3 of the patient's 
current IRF hospitalization, and an assessment reference date that is 
the third day of the admission assessment time period. These 3 calendar 
days are the days during which the patient's clinical condition would 
be assessed so that the clinical, as opposed to demographic, data that 
are required on the patient assessment instrument can be collected. In 
addition, these 3 calendar days must be days during which the patient 
was furnished Medicare Part A fee-for-service inpatient rehabilitation 
services. In this final rule, for the admission assessment, we are 
retaining the general guideline that the assessment reference date is 
the third calendar day of the admission assessment time period. 
However, we believe that it may be necessary to allow additional time 
to assess certain items in order to most appropriately capture patient 
information to facilitate the payment and quality of care monitoring 
objectives of our IRF patient assessment instrument. Our item-by-item 
guide will provide specific guidelines on the observation period for 
individual items. We note that the UDSmr coding manual allows for an 
admission assessment time period for some items that is longer than 3 
calendar days.
    Specifically, clinical experience may indicate the optimal clinical 
assessment of the activity covered by an item would be more accurately 
obtained by using a longer assessment time period. Consequently, for a 
given patient assessment item, the item-by-item guide may specify an 
assessment time period that is longer than the general guideline of the 
first 3 calendar days of the patient's current hospitalization. In that 
situation, the IRF may use information from a variety of sources to 
assess the patient's clinical condition for the time period that is 
prior to the patient's current IRF hospitalization. The other sources 
could be one or more of the following: (1) The patient's physician; (2) 
the patient's clinical record if the patient is coming directly from an 
acute care hospital or a SNF; (3) the medical record maintained by an 
HHA if the patient was being furnished services by an HHA immediately 
prior to the IRF hospitalization; (4) information obtained from the 
patient's family or someone who has personal knowledge of the patient's 
clinical condition; or (5) information obtained from the patient. For 
example, in order to perform the optimal clinical assessment for item 
``X'', the admission assessment time period may need to be 7 calendar 
days. Therefore, in this example, the IRF would assess that item using 
data collected during the first 3 calendar days of the patient's 
current IRF hospitalization, and for the other 4 calendar days 
preceding the admission use data gathered from one or more of the 
specified other sources.
    We believe that only one set calendar day should be the assessment 
reference date. In the example situation above, in order to have only 
one assessment reference date, the assessment reference date would 
remain being the third calendar day of the patient's current IRF 
hospitalization, but the span of calendar days for the admission 
assessment time period would be 7 calendar days with respect to that 
item.
    The discharge assessment may also have items that require an 
assessment time period longer than 3 calendar days. If the patient has 
not been an IRF patient during the time period covered by this longer 
assessment time period, the IRF may obtain the data for these items 
using one of more of the sources specified above.
    In this final rule, we are adopting the proposed provision that, 
for the discharge assessment, the assessment reference date is the day 
that the first of either of the two following events occurs: (1) The 
patient is discharged from the IRF; or (2) the patient stops being 
furnished Medicare Part A inpatient rehabilitation services, which 
includes the situation when a patient dies. In general, we are adopting 
the proposed rule provision that the assessment time period will be the 
3 calendar days immediately prior to the assessment reference date. 
However, similar to the admission assessment, the assessment time 
period for some items for the discharge assessment will be different 
than the 3 calendar days prior to the assessment reference date. In 
addition, for the discharge assessment, in no case will the discharge 
assessment time period include a calendar day(s) prior to the admission 
assessment reference calendar date or the admission assessment 
reference calendar date itself. For example, a patient admitted on July 
1, 2002, will have an admission assessment reference date of July 3, 
2002. If that patient is either discharged from the IRF or stops being 
furnished Medicare Part A inpatient rehabilitation services on July 12, 
2002, the discharge assessment reference date is July 12, 2002. In this 
case, the discharge assessment time period for any of the items will 
not be the time period prior to or include July 3, 2002. Otherwise, we 
would be capturing data already recorded on the admission assessment. 
The goal of the discharge assessment is to obtain motor and cognitive 
data for the time period between the admission

[[Page 41328]]

assessment and the discharge assessment.
    In the final rule, for admission assessments, we are adopting the 
proposed assessment completion date of 1 calendar day after the 
assessment reference date. For discharge assessments, the completion 
date is the 5th calendar day in the period beginning with the 
assessment reference date. Charts 1, 2, and 3 and the accompanying 
discussion of the charts in section IV.D. of this preamble further 
illustrate the application of the assessment reference date and other 
associated patient assessment schedule dates.
    Comment: Several commenters stated that they used the FIM to comply 
with the accreditation process administered by either the Joint 
Commission on Accreditation of Healthcare Organizations (JCAHO) or the 
Commission on Accreditation of Rehabilitation Facilities (CARF). These 
commenters believed that substituting the MDS-PAC for the FIM as the 
patient assessment instrument would jeopardize their accreditation that 
was based on use of the FIM. The commenters stated it would be 
burdensome if they had to use the MDS-PAC and the FIM to satisfy both 
our requirements and the requirements of JCAHO and CARF.
    Response: The patient assessment instrument that we are adopting in 
this final rule incorporates the majority of the UDSmr patient 
assessment instrument items. Therefore, we believe that use of our 
assessment instrument contains the same motor and cognitive items that 
IRFs need to maintain their JCAHO or CARF accreditation.
    Comment: Several commenters stated that our proposed list of 
clinicians who would be authorized to sign the patient assessment 
instrument attesting to the completion and accuracy of the data 
recorded in the assessment instrument was too restrictive. They 
believed that additional types of clinicians should be authorized. 
However, the commenters believed that no clinician should have to 
attest to the accuracy of the data recorded for each item, because it 
would normally be difficult or impossible for a clinician to verify the 
accuracy of the data recorded by one or more other clinicians during 
the time period we proposed to allow for completion of the assessment 
instrument.
    Several commenters stated that the type of clinician who was 
authorized to complete a portion of our assessment instrument should be 
expanded to include several other types of clinicians.
    Response: In this final rule, we are using a patient assessment 
instrument that is a modified version of the UDSmr patient assessment 
instrument. The UDSmr patient assessment instrument does not have an 
attestation section. Therefore, we are not including the attestation 
section in our patient assessment instrument in order to increase the 
similarity between the two assessment instruments. We are revising 
proposed Sec. 412.606 in these final regulations to remove the 
attestation provisions.
    In addition, because we are using a slightly modified version of 
the UDSmr patient assessment instrument, we will follow UDSmr's item 
coding format. The data for the UDSmr patient assessment instrument 
items can be collected and recorded on the instrument by any clinician 
trained in how to collect and record the data. Therefore, we have 
decided to allow any clinician who is employed by the IRF or is a 
contract clinician of the IRF, and who has been trained in how to 
perform a patient assessment using our assessment instrument, to 
perform a patient assessment and record data for any item on the 
patient assessment instrument. Similar to UDSmr, we believe that any 
clinician who has been properly trained in collecting the patient 
assessment data is capable of satisfactorily collecting the data. The 
IRF will be responsible for ensuring that the data recorded by any 
clinician of the IRF on the patient assessment instrument are accurate 
and complete and in accordance with the policies contained in these 
final regulations (Sec. 412.606(c)(1) and (2)).

B. The Patient Assessment Process

    As discussed in section IV.A. of this preamble, we are requiring 
that IRFs use our IRF patient assessment instrument to collect data on 
Medicare patients being furnished care in IRFs. In the proposed rule, 
we did not state specifically that Medicare Part A fee-for-service 
patients are the only Medicare patients that must be assessed using the 
CMS patient assessment instrument. Therefore, in this final rule, for 
clarity we are stating that Medicare Part A fee-for-service patients 
are the only Medicare patients that must be assessed using our IRF 
patient assessment instrument. Our IRF patient assessment instrument 
consists of nine sections, each to collect different categories of 
patient information. These categories include identification and 
demographic information about the patient, medical information, and 
information related to quality of care and basic patient safety. 
Appendix B of this final rule contains the CMS IRF patient assessment 
instrument. However, our IRF patient assessment instrument must be 
approved by the Office of Management and Budget (OMB) prior to its use. 
Therefore, we may be required to make changes to the patient assessment 
instrument while the instrument is undergoing the OMB approval process. 
After the patient assessment instrument is approved by OMB, we will 
make it available on the IRF prospective payment system website 
(www.hcfa.gov/medicare/irfpps.htm). (In the proposed rule, we included 
an item-by-item guide for the proposed MDS-PAC patient assessment 
instrument. Because we are changing the patient assessment instrument 
from the proposed MDS-PAC to a modified version of the UDSmr patient 
assessment instrument, we will need to develop additional instructions 
to supplement the UDSmr guide.)
    The additional instructions supplementing the UDSmr guide will, in 
effect, be our draft item-by-itself guide to the IRF patient assessment 
instrument. Once the IRF patient assessment instrument is approved by 
OMB, we will submit the draft item-by-item guide to OMB for public 
review and comment, in compliance with the Paperwork Reduction Act of 
1995 (PRA). When we submit the draft item-by-item guide to OMB for 
public review and comment, we will place it on the IRF prospective 
payment system website specified above. We anticipate that this draft 
item-by-item guide will be available for review and comment beginning 
September 2001. We will be providing appropriate training on the IRF 
patient assessment instrument and the item-by-item guide, after both 
the issuance of this final rule and OMB approval of the patient 
assessment instrument and the item-by-item guide.
    IRFs must computerize and electronically report the patient 
assessment data (Sec. 412.614). Each year tens of thousands of Medicare 
patients are treated in IRFs. As discussed in more detail later in 
section IV.D. of this preamble, each Medicare Part A fee-for-service 
patients will be assessed two times by an IRF clinician using our 
inpatient rehabilitation facility patient assessment instrument. 
Therefore, there will be a large quantity of data collected and 
submitted to us each year. As a result, it would be unrealistic for us 
to perform a meaningful analysis of this large amount of data for 
payment, medical review, and quality monitoring purposes in the absence 
of the capability to use automated data collection. An analysis of IRF 
patient assessment data would allow us to use the data in a manner 
similar to how we use SNF patient assessment data. (See 42 CFR 413.343 
and 483.20 and the July

[[Page 41329]]

30, 1999 SNF prospective payment system final rule (64 FR 41644).)
    One use of SNF patient assessment data is to support quality of 
care monitoring. The SNF patient assessment data is reliable and 
effective in supporting early identification of potential quality of 
care problems. Early identification, in turn, helps to focus the survey 
process on these identified problem areas.
    Using SNF patient assessment data, we have developed indicators of 
the quality of care in SNFs. These quality of care indicators are used 
for internal quality improvement and public reporting to help 
beneficiaries make more informed decisions. The quality of care 
indicators are also used to support analytical evaluations of the 
quality of services that SNFs furnish. For example, we use MDS data to 
provide us with objective and detailed measures of the clinical status 
and care outcomes of residents in a SNF. In addition, quality of care 
indicators can be used to analyze the relationship between Medicare 
policy changes and quality of care.
    Computerization of the IRF patient assessment data makes it easier 
and more practical for an IRF to use the patient assessment data to 
classify a patient into a CMG. Electronic transmission of the patient 
assessment data by the IRF makes the creation of an IRF patient 
assessment database feasible. That database, in turn, permits the data 
to be accessed easily in various formats for different analytical 
purposes, which can be used to support the Medicare program's fraud and 
abuse efforts, for medical review purposes, and for uses similar to how 
the SNF MDS data are used.
    Beginning on January 1, 2002, for Medicare Part A fee-for-service 
patients, IRFs must collect patient assessment data using the CMS IRF 
patient assessment instrument as part of the IRF's inpatient assessment 
process. This data collection requirement applies to Medicare 
beneficiaries who are already inpatients as of January 1, 2002, as well 
as beneficiaries admitted as inpatients on or after January 1, 2002 
(Sec. 412.606(b)). In addition, IRFs must use our patient assessment 
instrument to assess inpatients in accordance with the assessment 
schedule discussed in section IV.D. of this preamble and specified in 
Sec. 412.610(c).
    The IRFs must encode the patient assessment data by entering the 
data into a computer software program that we will provide at no charge 
to IRFs (Sec. 412.614(a)). The patient assessment data records will be 
considered ``locked'' when they have passed all of our specified edits 
and are accepted by the IRF patient assessment database to which the 
IRF transmitted its records.
    IRFs also must maintain all completed Medicare patient assessments 
that were performed using the CMS IRF patient assessment instrument for 
the previous 5 years, either in a paper format in the patient's 
clinical record or in an electronic computer file format that can be 
easily obtained (Sec. 412.610(f)). We are imposing this requirement 
because the assessments may be needed as part of a retrospective review 
conducted at the IRF for various purposes (for example, as part of the 
documentation that the IRF used to determine the medical necessity of 
the Medicare-covered services the IRF furnished). Also, completed 
patient assessments that are available at the IRF could be beneficial 
to other entities that appropriately have access to these records (for 
example, a State or Federal agency conducting an investigation due to a 
complaint of patient abuse or a suspicion of fraud). In addition, 
retention of the patient assessment instrument by the IRF will provide 
a backup to the electronic database.
    We will use data from the initial patient assessment to classify 
patients into a CMG (Sec. 412.620(a)(3)). The CMG determines the base 
payment rate that the IRF receives for the Medicare-covered Part A 
services furnished by the IRF during the Medicare beneficiary's episode 
of care.
    IRFs must complete a successful transmission of test patient 
assessment data to us by a date that we will specify in program 
instructions. A successful transmission by the IRFs of test data to us 
is necessary to determine connectivity with the system and to identify 
any transmission problems. Our system will transmit a test data 
feedback report to each IRF indicating that the test data transmission 
was either completely successful or experienced problems. Problems will 
be specified in the test data transmission report.
    We will provide training and technical support to the IRFs on 
administering and completing our IRF patient assessment instrument, as 
well as transmitting the data.

C. Documentation Requirements for the Patient Assessment

    The admission patient assessment will be used to classify each 
Medicare Part A fee-for-service patient into a CMG, and the CMG will be 
used to determine the IRF payment. While the admission assessment is 
used to place a patient in a CMG, the discharge assessment is used to 
determine the relevant weighting factors, if applicable, associated 
with comorbidities. Section VI. of this preamble discusses 
comorbidities. One principle governing appropriate Medicare payment and 
utilization of Medicare inpatient services is that there must be 
documentation establishing that the inpatient services furnished to a 
patient meet the requirements set forth in section 1862(a) of the Act 
(for example, are reasonable and necessary for the diagnosis or 
treatment of illness or injury) (Sec. 412.606(a) and (c)).
    When the data recorded on the patient assessment instrument 
accurately reflect the patient's clinical status, they form the basis 
for documenting that services furnished to the IRF Medicare inpatient 
are reasonable and necessary. There may be cases in which we raise 
questions about the accuracy of the recorded patient assessment items 
and, by extension, the associated medical necessity of the services 
that the IRF furnished. In these cases, other provider documentation 
may be examined to verify the information recorded on the patient 
assessment instrument. Other documentation that will support the 
accuracy of the recorded data (and the medical necessity for the 
services furnished to the inpatient) must be recorded in the patient's 
medical record and could include, but is not limited to: (1) 
Physician's orders; (2) physician's notes; (3) nursing notes; (4) notes 
from therapists; (5) diagnostic tests and their results; and (6) other 
associated information, such as social worker or case manager notes.
    A patient's clinical status for a given time period, as indicated 
by the completed patient assessment instrument, must be verifiable and 
consistent with the clinical information independently or separately 
recorded in the patient's clinical record. Otherwise, inaccurately 
completed patient assessments might be used to classify patients into 
CMGs that would, in turn, form the basis for Medicare payment for 
medically inappropriate or unnecessary services.
    Facilities must transmit each Medicare inpatient's patient 
assessments to us, and submit claims for Medicare payment to the fiscal 
intermediary, in accordance with the Medicare Part A claims processing 
procedures. Payment to the IRF will be made according to the CMG 
recorded on the claim sent to the fiscal intermediary.

D. Patient Assessment Schedule and Data Transmission

    In the November 3, 2000 proposed rule, we discussed our proposal to 
implement the patient assessment instrument as part of the IRF 
prospective payment system. We

[[Page 41330]]

included a discussion of the patient assessment schedule; what 
assessment items would be collected on each assessment; the penalties 
for late completion of assessments; the computerization of the patient 
assessment data; the transmission of the patient assessment data, 
including the late transmission penalty; and the patient assessment 
instrument computer software that would be required to be used.
1. Assessment Schedule
    In the proposed rule, we stated that we were proposing to require 
that a Medicare patient be assessed at Day 4, Day 11, Day 30, and Day 
60 of his or her IRF stay, and also when the patient either is 
discharged from the IRF or stops receiving Medicare Part A inpatient 
rehabilitation services (65 FR 66325 and 66326 and proposed 
Sec. 412.610(c)). Given that the mean length of stay in an IRF is 15.81 
days (median length of stay is 14 days), we solicited comments in the 
November 3, 2000 proposed rule on the benefits of mid-stay assessments, 
that is, the Day 11, Day 30, and Day 60 assessments. We noted that the 
IRF stay of a small percentage of patients is over 30 days, and an even 
smaller percentage of patients stay over 60 days.
    In proposed Sec. 412.602, we proposed that an interrupted stay is 
one in which an IRF patient is discharged from the IRF and returns to 
the same IRF within 3 consecutive calendar days. In counting the 3 
calendar day time period to determine the length of the interruption of 
the stay, the first day of the start of the interruption of the stay is 
counted as ``day 1,'' with midnight of that day serving as the end of 
that calendar day. The 2 calendar days that immediately follow would be 
days 2 and 3. If the patient returns to the IRF by midnight of the 
third calendar day, the patient would be determined to have had an 
interrupted stay of 3 calendar days or less. We are adopting as final 
the definition of interrupted stay as proposed, with further 
clarification that an interruption is 3 consecutive calendar days that 
begins with the day of discharge and ends on midnight of the third day.
    We indicated that when a patient has an interrupted stay, the 
interrupted stay must be documented on the assessment instrument 
interrupted stay tracking form. The data recorded on the interrupted 
stay tracking form must be transmitted to our patient data system 
within 7 calendar days of the date the patient returns to the IRF.
    We proposed that when an interruption of a patient's IRF stay 
occurs, it may affect the assessment reference dates, completion dates, 
encoding dates, and transmission dates.
    Comment: We received numerous comments stating that the proposed 
number of assessments was excessive and created an undue burden on the 
IRF. The commenters stated that they believed that assessing patients 
only upon the patient's admission and discharge to the IRF was 
sufficient to fulfill our payment classification and quality of care 
monitoring goals. Some of the commenters emphasized that the UDSmr 
patient assessment system requires patient assessment only upon the 
patient's IRF admission and discharge.
    Response: As described more fully in the proposed rule, we believe 
that a patient assessment at one or more points between a patient's 
admission and discharge would yield valuable quality of care monitoring 
data. However, after analyzing the public comments that stated that our 
proposed method was an undue time burden, we are making changes to 
reduce the burden associated with our proposed assessment schedule. In 
this final rule, we are requiring the completion of the patient 
assessment instrument only upon the patient's admission and discharge, 
for a total of two assessments (Sec. 412.610(c)).
    In addition to requiring the completion of the patient assessment 
instrument upon only the patient's admission and discharge, in section 
IV.D.2. of this final rule, we are specifying that patient assessment 
data for both the admission and discharge assessment are to be 
transmitted only once and at the same time (Sec. 412.614(c)). Thus, 
there will be only one transmission of all of the patient assessment 
data. To be consistent with the time requirement for transmission of 
the patient admission and discharge assessment data, we also are 
requiring that the interruption in stay data be transmitted only at the 
same time that the admission and discharge assessment data is 
transmitted (Sec. 412.618).
    We agree with the commenters who stated that, by collecting IRF 
patient assessment data only upon the patient's admission and discharge 
(as approximately 85 percent of IRFs that subscribe to the UDSmr 
patient assessment system currently do), we can achieve our goals of 
appropriately classifying a patient into a CMG, and at the same time 
monitor the quality of care furnished to the IRF patient. In our 
proposed rule, we stated that we believed that in order to monitor the 
quality of care furnished to a patient, we needed patient data 
collected between the admission and discharge assessments. However, we 
agree with the commenters that obtaining data for quality of care 
monitoring, using the method employed by approximately 85 percent of 
IRFs that our data indicate subscribe to the UDSmr patient assessment 
system, will be sufficient to meet our quality of care monitoring goal. 
We note that the IRF prospective payment system is a discharge-based 
system that pays based on the entire episode of the IRF stay. That is 
in contrast to the SNF prospective payment system which, because it is 
a per-diem based payment system, needs to have more frequent patient 
assessment data in order to evaluate if the prior per-diem payment rate 
that was previously determined based on patient assessment data is 
still appropriate.
    Patient Assessment Instrument Dates Associated with the Admission 
Assessment. The following Charts 1 and 2 and the accompanying 
discussion illustrate application of the final patient assessment 
schedule and associated assessment reference date, assessment 
instrument completion date, assessment instrument encoding date, and 
assessment instrument transmission date to the admission assessment.

                                     Chart 1.--Patient Instrument Admission Assessment Schedule and Associated Dates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                    Hospitalization                                                                                   Patient assessment
                                    time period and       Assessment      Patient assessment     Payment time     Patient assessment    instrument data
         Assessment type           observation time     reference date    instrument must be    covered by this      data must be           must be
                                        period                               completed by:        assessment:         encoded by:      transmitted by:**
--------------------------------------------------------------------------------------------------------------------------------------------------------
Admission assessment............  First 3 days......  Day 3*............  Day 4.............  Entire Medicare     Day 10............  See ** below for
                                                                                               Part A stay time                        how to calculate
                                                                                               period.                                 this date.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Except for some items, as discussed previously in section IV.A.3. of this preamble.

[[Page 41331]]

 
** Because all the assessment data for admission and discharge assessments must be transmitted together after the patient is discharged or stops
  receiving Medicare Part A services, the admission assessment data must be transmitted at the same time the discharge data are transmitted. That
  transmission date is by the 7th calendar day in the period beginning with the last permitted discharge patient assessment instrument ``encoded by''
  date.


 Chart 2.--Example Applying the Patient Assessment Instrument Admission Assessment Schedule and Associated Dates
----------------------------------------------------------------------------------------------------------------
                                                                      Patient      Patient
                                    Hospitalization                  assessment   assessment  Patient assessment
                                    time period and     Assessment   instrument   instrument    instrument data
         Assessment type            observation time    reference     must be     data must         must be
                                         period            date      completed    be encoded   transmitted by:**
                                                                        by:          by:
----------------------------------------------------------------------------------------------------------------
Admission assessment............  First 3 days            * 7/5/02       7/6/02      7/12/02  See ** below for
                                   (Patient admitted                                           how to calculate
                                   on 7/3/02).                                                 this date.
----------------------------------------------------------------------------------------------------------------
* Except for some items, as discussed previously in section IV.A.3. of this preamble.
** If the patient is discharged on 7/16/02, the last permitted discharge patient assessment instrument encoding
  date is 7/26/02, and the admission and discharge assessment data must be transmitted by 8/01/02. See Chart 3
  that illustrates how to apply the patient assessment instrument discharge dates. Note that the span of time to
  complete the admission assessment is different from the time to complete the discharge assessment as discussed
  in this section IV.D. of the preamble.

    Each Medicare Part A fee-for-service patient must be assessed by a 
clinician(s) using our IRF patient assessment instrument to perform a 
comprehensive assessment according to the schedule specified above. 
More than one clinician may contribute to the completion of the patient 
assessment instrument. We believe that the accuracy of the assessment 
would be enhanced if the data collected for a patient assessment item 
were collected by a clinician with specialized training and experience 
in the area of the data being collected. For example, although a 
registered nurse could fully assess all aspects of a patient and 
collect all the patient assessment instrument data, a physical 
therapist or an occupational therapist has the specialized training 
that may contribute to a more accurate assessment of some neuromuscular 
items. Our objective is to have data collected that would best reflect 
the patient's unique circumstances and clinical status during the 
assessment observation period, considering the accuracy of patient 
assessment is contingent on the training and experience of the 
clinician assessor.
    In Chart 6.--Critical Patient Assessment Items in section V.D. of 
this preamble, we specify the patient assessment instrument items that 
will be used to classify a patient into a specific CMG.
    If an interruption of 3 calendar days or less occurred for the 
admission assessment observation time period (for example, the days 
specified in the ``Hospitalization Time Period and Observation Time 
Period'' column in Charts 1 and 2 illustrated previously), the 
associated assessment reference date, patient assessment instrument 
completion date, patient assessment instrument encoded by date, and 
patient assessment instrument transmitted by date for the admission 
assessment would be shifted forward by the number of days that the 
patient was not an inpatient of the IRF. We refer to Chart 2 to help 
guide the reader during our discussion of the shifting forward of 
dates. With regard to the admission assessment, assume that the 
patient's stay began with admission to the IRF on July 3, 2002, but was 
interrupted on July 4, 2002, which would be day 2 of the patient's IRF 
hospitalization. The patient returned to the same IRF prior to midnight 
of July 6, 2002, and had an interrupted stay of 3 calendar days. The 
assessment reference date observation time period for the admission 
assessment would be shifted to July 6, 7, and 8. (Without the 
interrupted stay, the admission assessment reference date observation 
time period would have been July 3, 4, and 5, with the assessment 
reference date being July 5, 2002.) Because of the interruption in 
stay, the admission assessment reference date would be reset to July 8, 
2002. The admission assessment completion date would be reset to July 
9, 2002. The admission assessment ``patient assessment instrument must 
be encoded by'' date would be reset to July 15, 2002. The admission 
assessment ``patient assessment instrument must be transmitted by'' 
date would be reset to a date calculated according to the footnote for 
the ``patient assessment instrument must be transmitted by'' column in 
Chart 2.
    In the final rule, we are revising proposed Sec. 412.610 to specify 
under paragraph (c)(1) the admission assessment reference dates and the 
admission assessment completion dates.
    Patient Assessment Instrument Dates Associated with the Discharge 
Assessment. In this final rule, we are revising proposed 
Sec. 412.610(c) to specify under paragraph (2) that the assessment 
reference date for the discharge assessment is the actual day that one 
of two events occurs first: (1) The day on which the patient is 
discharged from the IRF; or (2) the day on which the patient ceases to 
receive Medicare-covered Part A inpatient rehabilitation services. Note 
that the day the patient ceases to receive Medicare-covered Part A 
inpatient rehabilitation services includes a situation when a patient 
dies. The discharge assessment is performed only at the first point in 
time that either of these events occurs. There may be cases when a 
patient ceases receiving Medicare Part A inpatient rehabilitation 
services, but is not discharged from the IRF.
    After the assessment reference date for the discharge assessment is 
determined, the completion date for the discharge assessment must be 
set. We are revising proposed Sec. 412.610(c) to include under 
paragraph (2)(i)(B) that the completion date for the discharge 
assessment is the 5th calendar day that follows the discharge 
assessment reference date with the discharge assessment reference date 
itself being counted as the first day of the 5 calendar day time 
period. To determine the 5th calendar day, the discharge assessment 
reference date is counted as day 1 of the 5 calendar days. For example, 
if the assessment reference date is July 16, 2002, the completion date 
would be July 20, 2002.
    We are not using the method used to determine the completion date 
for the admission assessment to determine the completion date for the 
discharge assessment.
    The reason for using a different method to determine the discharge 
completion date is because of the

[[Page 41332]]

definition of an interrupted stay. Previously, we specified that, after 
the patient returns to the IRF after an interrupted stay, another 
admission assessment is not performed, and the CMG into which the 
patient classified prior to starting the interrupted stay is still in 
effect. Therefore, in order to ensure that a clinician does not perform 
a discharge assessment on a patient who meets the criteria of an 
interrupted stay, it is necessary to make the completion date of the 
discharge assessment a date that exceeds the interrupted stay defined 
time period. This safeguard prevents the performance of unnecessary 
discharge assessments by the IRF.
    In addition, any discharge assessment that is transmitted to the 
CMS patient data system is used by the system to indicate that a 
patient is no longer hospitalized in the IRF. Therefore, if a discharge 
assessment that is associated with an interrupted stay is transmitted 
to our patient data system, it would result in our patient data system 
rejecting the subsequent true discharge assessment that would be 
transmitted when the patient is actually discharged or stops being 
furnished Medicare Part A inpatient rehabilitation services.
    We are revising proposed Sec. 412.610 to remove the contents of 
paragraph (d) that reference penalties for late completions (as 
discussed in section IV.D.4. of this preamble); to remove from 
paragraph (e) the provisions on assessment completion dates (which are 
now under paragraph (c)); and to specify under new paragraph (d) only 
encoding dates. (As conforming changes, proposed paragraphs (f) and (g) 
are redesignated as paragraphs (e) and (f), respectively.)
    We are providing that the discharge assessment ``must be encoded by 
date'' is the 7th calendar day in the period beginning with the 
determined discharge completion date. To determine the 7th calendar 
day, count the discharge assessment completion date as day 1 of the 7 
calendar days. For example, if the discharge assessment completion date 
is July 20, 2002, the assessment must be encoded by date would be July 
26, 2002.
    In this final rule, we also are revising proposed Sec. 412.614(c) 
to specify that the discharge assessment ``must be transmitted by 
date'' is the 7th calendar day in the period beginning with the 
discharge assessment ``must be encoded by date''. To determine the 7th 
calendar day, count the discharge assessment ``must be encoded by 
date'' as day 1 of the 7 calendar days. For example, if the discharge 
assessment ``must be encoded by date'' is July 26, 2002, the assessment 
``must be transmitted by date'' would be August 1, 2002.
    Chart 3 below illustrates the discharge assessment dates discussed 
above:

                                 Chart 3.--Example Applying the Patient Assessment Instrument Discharge Assessment Dates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                        Assessment         Assessment
                                                                                  Assessment         Assessment      instrument data    instrument data
                     Assessment type                        Discharge date *    reference date    Instrument must    must be encoded        must be
                                                                                                  be completed on:         by:          transmitted by:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Discharge assessment.....................................          * 7/16/02         ** 7/16/02            7/20/02            7/26/02           8/01/02
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This is either: (1) The day the patient is discharged from the IRF; or (2) the day the patient ceases receiving Medicare-covered Part A inpatient
  rehabilitation services.
** Except for some items, as discussed previously in section IV.A.3. of this preamble.

    Comment: Some commenters believed that the IRF prospective payment 
system policies should only apply to patients admitted to an IRF on or 
after the implementation date of the IRF prospective payment system. 
They did not believe that the IRF prospective payment system policies 
should apply to patients who were admitted prior to implementation of 
IRF prospective payment system, and are still patients on the day the 
IRF prospective payment system is effective.
    Response: Because the IRF prospective payment system is a 
discharge-based system, payment is made to the IRF based on the entire 
episode of stay of the patient in the IRF. Therefore, any IRF that 
discharges any patient after the IRF prospective payment system is 
implemented must be paid according to the IRF prospective payment 
system policies. Consequently, we are adopting as final the 
``Assessment Rule to Use if Medicare Beneficiaries Are Receiving IRF 
Services on the Effective Date of the Regulation'' policy (65 FR 66328) 
we proposed in the proposed rule.
2. Data Items To Be Collected
    In the proposed rule, we specified a list of data items that we 
were proposing to be collected for Day 4, Day 11, Day 30, and Day 60 of 
an admission and at discharge (65 FR 66328-66330).
    Comment: As stated previously, many commenters urged us to use the 
FIM as the patient assessment instrument. In addition, the commenters 
urged us to collect the patient assessment data according to the same 
schedule as the UDSmr uses for the FIM.
    Response: In sections IV.A. and B. of this preamble, we state that 
the patient assessment instrument we are adopting in this final rule is 
more similar to the UDSmr patient assessment instrument. We also state 
under this final rule that we are requiring IRFs to collect patient 
assessment data in a manner similar to how the UDSmr patient assessment 
data are collected, that is, only upon the admission and discharge of 
the patient. However, as we specified in the proposed rule (under 
proposed Sec. 412.610(c)(5)) and as we are adopting in this final rule 
under Sec. 412.610(c)(2)(ii), if the patient stops receiving Medicare 
Part A inpatient rehabilitation services before being discharged from 
the hospital, for purposes of the discharge assessment, the day that 
the patient stops receiving Medicare Part A services becomes the 
discharge day. In other words, in this situation the day that the 
patient stops receiving Medicare Part A services is the day to use as 
the discharge day. The net effect is that the patient is still only 
assessed twice during the patient's IRF stay. We note that the IRF is 
only required to collect patient assessment data on Medicare Part A 
fee-for-service patients.
    The IRF must record the items in the identification information, 
admission information, and payer information sections of the patient 
assessment instrument only once on the assessment instrument, and must 
transmit these items to the CMS patient data system when all of the 
admission and discharge assessment data are completed. Once entered 
into the computerized version of the assessment instrument, that data 
will be retained in the computerized version, negating the need to 
enter the same information again. Data for the other sections of the 
patient assessment instrument will be collected only upon the patient's 
admission or discharge as

[[Page 41333]]

appropriate; the patient assessment instrument clearly delineates which 
items are collected upon admission and which are collected upon 
discharge.
    The proposed rule contained a table entitled ``Table 7C.--MDS-PAC 
ITEMS REQUIRED BY TYPE OF ASSESSMENT''. That table specified the data 
items that would be collected during the admission, update, or 
discharge assessment. Chart 4 below (a replacement for proposed Table 
7C) is a category, sub-category, item name, and item number 
specification of the data items that are to be collected for the 
admission assessment and the discharge assessment. As would be 
expected, the data for all of the items will be recorded during the 
admission assessment, with the logical exception of the items for which 
data can only be recorded upon the patient's discharge. The ``X'' in 
the admission or discharge column indicates if that item is collected 
upon the admission or discharge assessment. Chart 4 takes into account 
that the admission assessment items associated with the patient 
assessment instrument categories of data related to patient 
identification, admission information, payer information, medical 
information, medical needs, function modifiers, FIM instrument, and 
quality indicators will be retained in the data fields of the 
computerized version (software) of the patient assessment instrument. 
Therefore, there are many data items that are not collected during the 
discharge assessment, but because the data items are retained in the 
patient assessment software, will also be transmitted when the 
discharge assessment items are completed and the entire assessment 
instrument is transmitted.

        Chart 4.--Patient Assessment Items by Type of Assessment
------------------------------------------------------------------------
  Item category, item sub-category, item name,     Admission   Discharge
                    item no.                      assessment  assessment
------------------------------------------------------------------------
                      Identification Information *
------------------------------------------------------------------------
1. Facility Information:
  A. Facility Name..............................         X
  B. Facility Medicare Provider Number..........         X
2. Patient Medicare Number......................         X
3. Patient Medicaid Number......................         X
4. Patient First Name...........................         X
5. Patient Last Name............................         X
6. Birth Date...................................         X
7. Social Security Number.......................         X
8. Gender.......................................         X
9. Race/Ethnicity (Check all that apply):
  American Indian or Alaska Native..............         X
  Asian.........................................         X
  Black or African American.....................         X
  Hispanic or Latino............................         X
  Native Hawaiian or Other Pacific Islander.....         X
  White.........................................         X
10. Marital Status..............................         X
11. Zip Code of Patient's Pre-Hospital Residence         X
------------------------------------------------------------------------
                         Admission Information *
------------------------------------------------------------------------
12. Admission Date..............................         X
13. Assessment Reference Date...................         X
14. Admission Class.............................         X
15. Admit From..................................         X
16. Pre-Hospital Living Setting.................         X
17. Pre-Hospital Living With....................         X
18. Pre-Hospital Vocational Category............         X
19. Pre-Hospital Vocational Effort..............         X
------------------------------------------------------------------------
                           Payer Information*
------------------------------------------------------------------------
20. Payment Source:
  A. Primary Source.............................         X
  B. Secondary Source...........................         X
------------------------------------------------------------------------
                          Medical Information *
------------------------------------------------------------------------
21. Impairment Group............................         X           X
22. Etiologic Diagnosis:........................         X
23. Date of Onset of Etiologic Diagnosis........         X
24. Comorbid Conditions:
  A.............................................         X           X
  B.............................................         X           X
  C.............................................         X           X
  D.............................................         X           X
  E.............................................         X           X
  F.............................................         X           X
  G.............................................         X           X
  H.............................................         X           X
  I.............................................         X           X
  J.............................................         X           X
------------------------------------------------------------------------
                              Medical Needs
------------------------------------------------------------------------
25. Is patient comatose at admission?...........         X
26 Is patient delirious at admission?...........         X
27. Swallowing Status:..........................         X           X
28. Clinical signs of dehydration...............         X           X
------------------------------------------------------------------------
                           Function Modifiers*
------------------------------------------------------------------------
29. Bladder Level...............................         X           X
30. Bladder Freq................................         X           X
31. Bowel Level.................................         X           X
32. Bowel Freq..................................         X           X
33. Tub Transfer................................         X           X
34. Shower Transfer.............................         X           X
35. Distance Walked (feet)......................         X           X
36. Distance Traveled in Wheelchair (feet)......         X           X
37. Walk........................................         X           X
38. Wheelchair..................................         X           X
------------------------------------------------------------------------
                            FIM Instrument *
------------------------------------------------------------------------
Self-care:
  A. Eating.....................................         X           X
  B. Grooming...................................         X           X
  C. Bathing....................................         X           X
  D. Dressing--Upper............................         X           X
  E. Dressing--Lower............................         X           X
  F. Toileting..................................         X           X
Sphincter Control:
  G. Bladder....................................         X           X
  H. Bowel......................................         X           X
Transfers:
  I. Bed, Chair, Wheelchair.....................         X           X
  J. Toilet.....................................         X           X
  K. Tub, Shower................................         X           X
Locomotion:
  L. Walk/Wheelchair............................         X           X
  M. Stairs.....................................         X           X
Communication:
  N. Comprehension..............................         X           X
  O. Expression.................................         X           X
Social Cognition:
  P. Social Interaction.........................         X           X
  Q. Problem Solving............................         X           X
  R. Memory.....................................         X           X
------------------------------------------------------------------------
                         Discharge Information*
------------------------------------------------------------------------
40. Discharge Date..............................  ..........         X
41. Patient discharge against medical advice:...  ..........         X
42. Program Interruptions.......................  ..........         X
43. Program Interruption Dates:
  A. 1st Transfer Date..........................  ..........         X
  B. 1st Return Date............................  ..........         X
  C. 2nd Transfer Date..........................  ..........         X
  D. 2nd Return Date............................  ..........         X
  E. 3rd Transfer Date..........................  ..........         X
  F. 3rd Return Date............................  ..........         X
44A. Discharge to Living Setting:...............  ..........         X
44B. Was patient discharged with Home Health      ..........         X
 Services?......................................
45. Discharge to Living With:...................  ..........         X
46. Diagnosis for Transfer or Death:............  ..........         X
47. Complications during rehabilitation stay:
  A.............................................  ..........         X
  B.............................................  ..........         X
  C.............................................  ..........         X
  D.............................................  ..........         X
  E.............................................  ..........         X
  F.............................................  ..........        X

[[Page 41334]]

 
                           Quality Indicators
------------------------------------------------------------------------
Respiratory Status:
  48. Shortness of breath with exertion.........         X           X
  49. Shortness of breath at rest...............         X           X
  50. Difficulty coughing.......................         X           X
Pain:
  51. Rate the highest level of pain reported by         X           X
   the patient within the assessment period.....
Push Scale:
Pressure Ulcers:
  52A. Highest current pressure ulcer stage.....         X           X
  52B. Number of current pressure ulcers........         X           X
  52C. Length multiplied by width (open wound            X           X
   surface area)................................
  52D. Exudate amount...........................         X           X
  52E. Tissue type..............................         X           X
  52F. Total Push Score.........................         X           X
------------------------------------------------------------------------
                                 Safety
------------------------------------------------------------------------
  53. Total number of falls during the            ..........         X
   rehabilitation stay..........................
------------------------------------------------------------------------
  54. Balance problem...........................         X          X
------------------------------------------------------------------------
* The FIM data set, measurement scale and impairment codes incorporated
  or referenced herein are the property of U B Foundation Activities,
  Inc.  1993, 2001 U B Foundation Activities, Inc. The FIM
  mark is owned by UBFA, Inc.

    The IRF must collect the patient assessment data upon admission and 
discharge, but must transmit the patient assessment data only one time 
to our patient data system. This transmission will contain all the 
admission data and the discharge data.
    In the proposed rule, we named the patient data system to which the 
IRF would transmit its patient assessment data the ``HCFA MDS-PAC 
system''. Because we are using a patient assessment instrument that is 
different from the MDS-PAC, we are renaming the HCFA MDS-PAC system 
``the CMS Patient Data System.'' The IRF will still encode the patient 
data into a computerized version of the patient assessment instrument. 
Also, the computer program will use the encoded admission assessment 
data to classify a patient into a CMG.
3. Data Transmission
a. Computerization of Patient Assessment Data
    In the proposed rule, we specified that the data for all MDS-PAC 
specified assessments must be encoded. Encoding the data means entering 
the data into the IRF's computer using appropriate software, including 
performing data edits. In Sec. 412.610(e)(3), we proposed that IRFs 
encode and edit the data for Medicare patients within 7 calendar days 
of the date that the MDS-PAC is completed. We proposed to specify a 
maximum of 7 calendar days because we believed that this is a 
reasonable amount of time for IRFs to complete these tasks (65 FR 
66330).
    In Sec. 412.610(f) we proposed that the encoded data must 
accurately reflect the patient's status at the time the data are 
collected. Because the patient's clinical status may change over time, 
the data must accurately represent a patient's clinical status as of a 
particular assessment reference date. Before transmission, the IRF must 
ensure that the data items on the paper copy match the encoded data 
that are sent to our patient data system. We also proposed to require 
that once the clinician(s) complete the assessment using either a paper 
copy of the instrument or an electronic version, the IRF must ensure 
that the data encoded into the computer and transmitted to our system 
accurately reflect the data collected by the clinician.
b. Transmission of Data
    The IRF must have a system that supports dial-up communication for 
the transmission of the patient assessment instrument data to our 
system. The patient assessment data will be submitted to our system via 
the Medicare Data Collection Network (MDCN). The MDCN is a secured 
private network. Specific instructions and telephone numbers will be 
provided to the IRFs in order for the IRFs to be able to access the 
MDCN.
    We will utilize the most current technology capable of maintaining 
the security of the patient data (for example, encryption technology) 
in order to ensure the security of the information transmitted to and 
from our system. For security purposes, there are two levels of user 
authentication required. For the first level, to obtain access to the 
MDCN, the IRF must obtain an individual network-identification code for 
each person submitting the data to our system. The CMS system 
administrator or our agents distribute this identification code. Then, 
to obtain access to our data system, an IRF must also obtain a 
facility-identification code from our system administrator. The IRF 
must transmit the patient assessment data via the MDCN secured lines to 
our data system. At that time, the data will be checked to ensure it 
complies with our system data formatting specifications.
    In Sec. 412.614, we proposed to require that the IRF electronically 
transmit to our patient data system accurate, complete, and encoded 
data for each Medicare patient. We also proposed that the data must be 
transmitted in a format that meets the general requirements specified 
in Sec. 412.614. We believed that once the patient assessment data are 
encoded and edited, it is a relatively simple procedure to complete the 
preparation of the data for transmission to our system. Therefore, we 
proposed that encoded and edited data that have not previously been 
transmitted, must be transmitted within 7 calendar days of the day by 
which the data must be encoded as specified in the assessment schedule 
and associated dates (Charts 1 and 3 in section IV.D. of this 
preamble). In addition, we proposed that the data must be transmitted 
in a manner that meets the locked data criteria specified in the 
proposed rule. At the end of the transmission file, an entry concerning 
the number of records being transmitted is required to complete the 
transmission process.
    As specified in section IV.D.2. of this preamble, we are changing 
the proposed patient assessment schedule so that a patient is now 
assessed only at admission and upon discharge. As a result of this 
revision, in this final rule we are revising proposed Sec. 412.614(c) 
to reflect transmission dates that conform to the schedule admission 
and discharge assessment and encoding dates.
c. Patient Instrument Computer Software
    In the proposed rule under Sec. 412.614(c), we proposed that the 
IRF encode and transmit the MDS-PAC data using the software available 
from us or other software that conforms to our standard data 
specifications, data dictionary, and other data requirements specified 
by us, and that includes the data items that match the most updated 
version of the patient assessment instrument. We indicated that our 
Minimum Data Set for Post-Acute Care Tool (MPACT) software would be 
able to be used for several purposes, such as to encode data, to 
maintain IRF and patient-specified information, to create export files 
to submit data, and to test alternative software. The MPACT software 
would provide comprehensive on-line help to users in encoding,

[[Page 41335]]

editing, and transmitting the data. Additionally, there would be a 
toll-free hotline to support this software product.
    Comment: Several commenters requested more information regarding 
the IRF patient assessment data test transmission that we will conduct.
    Response: Because we were not able to publish a final rule prior to 
February 1, 2001, we were not able to have IRFs conduct a patient data 
test transmission during February 2001 as stated in the proposed rule. 
At this time, we have not finalized when the test transmission time 
period will occur. We will train the IRFs on the CMS IRF patient 
assessment instrument and the patient assessment process. During that 
time, we will provide the IRFs with specifics about the patient data 
test transmission process.
4. Penalties for Late Assessments
    In the proposed rule, we proposed that the assessment is late if 
the assessment is not in accordance with the assessment reference date 
specification for the Day 4 assessment and outlined the penalties (65 
FR 66330; Sec. 412.614(d)). We stated that, if the IRF transmits the 
patient assessment data late, the IRF would be paid either a reduced 
CMG-determined payment or no CMG-determined payment. We proposed that 
the CMG-determined payment be reduced by 25 percent if the IRF 
transmitted the patient assessment data 10 or less calendar days late. 
We also proposed that if the IRF transmitted the patient assessment 
data more than 10 calendar days late, the IRF receives no payment for 
the Medicare Part A services the IRF furnished.
    Comment: Several commenters stated that the penalties associated 
with late completion and late transmission of the patient assessment 
data were too harsh.
    Response: In the proposed rule, we proposed a penalty for late 
completion of the MDS-PAC assessment. As specified in section IV.D.2. 
of this preamble, we are changing the assessment schedule so that the 
patient is only assessed upon admission and discharge. In addition, in 
this final rule, we are specifying that both the admission and 
discharge patient assessment data must be transmitted together. Because 
of these changes the focus of our patient assessment data monitoring 
will be the assessment reference date and the data transmission date, 
instead of the instrument completion date. In addition, as stated 
previously, we are deleting the proposed assessment attestation section 
of the patient assessment instrument. The attestation section was the 
basis for the completion penalty, because it contained the date on the 
assessment instrument form that specified when the data for all of the 
assessment instrument items had been recorded on the patient assessment 
instrument. Thus, the date on the proposed attestation section was the 
basis for determining the date when the assessment instrument had been 
completed. The result of eliminating the proposed attestation section 
is that the completion date that the IRF would record on the assessment 
instrument form that indicated when all of the assessment items had 
been completed is also eliminated. In order to have a completion 
penalty, there must be a completion date specified on the assessment 
form. For these reasons the completion penalty is eliminated. However, 
the IRF must still complete the CMS IRF patient assessment instrument 
in accordance with the calendar date specifications contained in this 
final rule.
    After analysis of the public comments we received, we have decided 
to revise the transmission penalty. In the proposed rule, we proposed 
that ``late transmission'' meant the IRF did not transmit MDS'PAC data 
in accordance with the transmission timeframes specified in Table 4C of 
section III. of the proposed rule. The payment penalties we proposed 
are described above under item 4.
    As specified in section IV.D.2. of this preamble, we are changing 
the patient assessment schedule so that a patient is now assessed only 
at admission and upon discharge. In addition, we are specifying that 
for each IRF stay, the patient assessment data will be transmitted only 
once. Because of the change in the patient assessment schedule, we no 
longer need the data to be transmitted more frequently. This less 
frequent assessment of the patient and transmission of the patient 
assessment data will reduce the time burden associated with the 
assessment process as requested by many commenters. Because of the 
changes to the patient assessment schedule, we are revising the 
specifications of what constitutes a late transmission. In this final 
rule, ``late transmission'' means the IRF did not transmit the patient 
assessment data in accordance with the transmission timeframes 
specified in Charts 1, 2, and 3 of section IV.D. of this final rule. In 
addition, we are persuaded by the commenters that the transmission 
penalty as proposed in the proposed rule, and described above under 
item 4, is too harsh. It is appropriate for the IRF to be paid some 
amount for the treatment the IRF furnished to the patient. To address 
the commenters' concern, we are reducing the amount of the penalty so 
that the IRF is paid some of the CMG associated payment for the patient 
care the IRF furnished (Sec. 412.614(d)).
    In this final rule under Sec. 412.614(d)(2), we are specifying that 
if the IRF transmits the patient assessment data more than 10 calendar 
days late, the IRF will be paid a CMG-determined payment that will be 
reduced by 25 percent. There will not be any other penalty associated 
with late transmission.

E. Quality Monitoring

    Before we present our specific strategies for quality monitoring in 
IRFs, we want to discuss our conceptual framework for understanding and 
advancing quality in the setting of IRFs, as well as other post-acute 
care settings.
    The degree of efficiency of any process that produces a service is 
measured by the span of time, the amount of resources, and the type of 
resources consumed to produce the service. The degree of effectiveness 
of the service is measured by the change that occurs when that service 
process is applied. The concept ``quality of care'' refers to the 
relationship between patient treatment (a service) efficiency and the 
resulting effect of that treatment process. Therefore, to measure the 
relationship (quality of care), we must collect and quantify both 
before and after treatment patient assessment data so that the 
correlation or consequences due to the efficiency (time, amount and 
type of resources used) and the effectiveness (outcomes) of the patient 
treatment process can be evaluated.
    To help promote efficiency in the rehabilitation treatment process, 
the IRF prospective payment system methodology uses historical data to 
determine a payment amount that, given the patient's clinical status, 
is representative of what we consider to be an appropriate use and mix 
of available treatment resources. To measure the relationship (that is, 
the quality of the care furnished) between the IRF treatment process 
resources used (and paid by Medicare) and the effects of the treatment 
process, we need to use generally acknowledged measures that indicate 
the results that are due to the treatment the patient was furnished. At 
a minimum, these measures must indicate that the patient's health and 
safety are being fostered. In addition, the measures should reveal 
changes in the patient's capabilities, with the changes reflecting the 
impact of the treatment process. The changes can be measured by changes 
in the patient's functional (motor), cognitive, and emotional status.

[[Page 41336]]

    The CMS IRF patient assessment instrument can be used to record 
(code) the patient's diseases and injuries. The patient assessment 
instrument focuses on generalized changes in a patient's functional, 
cognitive, and emotional status in response to the treatment furnished, 
as opposed to focusing on the impact of the application of a specific 
disease or injury treatment process. We note that we are exploring the 
potential for developing disease-specific quality of care measures.
    When measuring changes in the patient's functional, cognitive, 
emotional, or lifestyle status, a determination must be made if the 
changes reflect good or bad patient care. Therefore, the changes must 
be compared to either a predetermined standard or, because we believe 
that facility comparison promotes competitiveness which leads to 
enhanced quality, to similar patients treated in other but similar 
treatment facilities.
    Determining if a predetermined generally accepted standard of good 
care has been met means that the quality of care indicators must 
demonstrate that the patient care techniques used promoted a positive 
change in the patient's health. Examples of such patient care 
techniques include ensuring that the patient consumes appropriate 
amounts and types of food and fluid, the prevention of patient injury 
(for example, falls and pressure ulcers), the prevention of the 
exacerbation of existing injuries (for example, pressure ulcers), or 
enhancing the caliber of patient's lifestyle (for example, by 
preventing or mitigating pain). Therefore, to measure the relationship 
(quality of the care furnished) between the treatment resources used 
and resulting patient outcomes, we need to: (1) Be able to compare 
similar patients in similar facilities; and (2) have the ability to 
determine if some basic patient care, patient safety, and lifestyle 
enhancement measures are being implemented during the patient's 
treatment.
    From the above discussion, it is clear that quality of care is 
complex, sometimes difficult to define, and is multidimensional in 
nature. One dimension is that the care achieve its intended result, 
which in the context of the IRF setting is most often to improve the 
patient's functioning in order to foster more independent living. A 
second dimension of quality is the prevention of avoidable 
complications or other adverse events and minimizing the effects of 
adverse events. A third related dimension is to improve management of 
the patient's medical impairments, with the goal being to promote 
``improved'' health as well as function, or at least to improve the 
management of the patient's medical conditions. In addition, it is 
important to use data to identify other sentinel events. Identifying 
these potentially negative impacts to care allows us to perform root 
cause analysis and determine solutions to prevent them from 
reoccurring. Our specific quality monitoring processes should be 
developed in a way that supports this multidimensional view of quality.
    The consequences of detecting possible quality of care problems 
through IRF data are varied and could include-- (a) increasing 
educational efforts to beneficiaries to help them make better informed 
selections of providers; and (b) improving the survey and oversight of 
IRFs and accrediting organizations. An IRF's staff may use quality of 
care information from our patient assessment instrument for their own 
quality assurance and, ultimately, quality improvement activities. We 
also have the potential to develop refinements to the case-mix 
methodology which provide incentives for improving quality.
    As our payment policies continue to evolve, our objective is to 
move forward with a quality assessment and improvement agenda that is 
based on standardized data, beneficiaries' clinical characteristics, 
and patient care outcomes. To achieve that objective, we need to 
collect common data elements and develop standardized assessment tools 
that will enable us to focus on beneficiary care needs rather than the 
characteristics of the provider. We believe that the most important 
short-term goal of post-acute care quality monitoring is to assess the 
effects of implementing the changes in the payment system on the 
quality of care furnished in post-acute care settings.
    We are aware of MedPAC's concern that we may have only a limited 
ability to assess the impact of Medicare payment changes that either 
have been implemented or will soon be initiated--for example, the IRF 
prospective payment system. There is a need to enhance our ability to 
assess this impact in order to improve the policies associated with our 
Medicare prospective payment systems.
    In its March 2000 Report to Congress, MedPAC states that ``Quality 
monitoring systems could help ensure that payment systems are designed 
correctly and that providers are responding appropriately to the 
systems' incentives, and could also be used to accomplish several other 
important objectives.'' (page 62) MedPAC believes that such information 
``could assist in tracking trends over time, or provide an early 
warning of impending problems in quality'', and further indicated that 
``Attaining any of these ends requires routine, systematic measurement 
of health care quality.'' (page 62) We believe that our current patient 
assessment instrument is another step in the development of the process 
for monitoring quality of care in IRFs.
    The nonpayment-related items in our instrument are necessary to 
provide an inventory of patient factors that are necessary to monitor 
quality and assess risk. These data can be used by facilities to 
identify patients at risk for adverse outcomes. In addition, our 
patient assessment instrument data may contribute to development of the 
patient care plan. Information collected can identify patients at risk 
for adverse outcomes, such as weight loss, aspiration, or pressure 
ulcers, and support the monitoring of these patients to prevent 
outcomes that might negatively impact patients' likelihood of optimal 
rehabilitation.
    We believe that the data collected by our patient assessment 
instrument can be used to monitor the impact of the IRF prospective 
payment system upon IRFs and beneficiaries, including beneficiary 
access to care. Section 125 of the BBRA directs the Secretary to 
conduct a monitoring study, and to submit a report to the Congress no 
later than 3 years from the date that the IRF prospective payment is 
implemented. To both monitor the impact of the IRF prospective payment 
system on IRFs and beneficiaries, and support this BBRA-mandated report 
to the Congress, we need a data-driven monitoring system that will give 
us the capability to acquire objective (as opposed to anecdotal) data 
for analysis.
    The discharge assessment will provide data about a patient's 
clinical status at discharge and give us the ability to compare a 
patient's clinical status at discharge with the patient's clinical 
status at the admission assessment. Comparison of the patient's 
clinical status at admission and at discharge will give us the data to 
analyze the relationship between any changes in the patient's clinical 
status and the quantity and effectiveness of the services the IRF 
furnished to the patient. That comparison will provide us with data 
that will indicate the quality of the IRF services furnished, and if an 
IRF was not furnishing the level of Medicare-covered services the 
patient needed.
    Many studies have examined overall and condition-specific 
functional gain

[[Page 41337]]

from admission to discharge as a measure of the effectiveness of a 
rehabilitation program. National benchmarks of functional gain have 
been used by providers to measure their performance relative to other 
facilities. In addition, some work has also been devoted to 
understanding providers' efficiency by linking measures of length of 
stay and functional gain.
    The data associated with each patient assessment item will enhance 
our ability to monitor and, thus, safeguard the quality of care that 
beneficiaries receive. A quality of care improvement monitoring system 
that is based on our IRF patient assessment instrument data is 
consistent with other information-based quality monitoring programs, 
such as the ORYX process used by the JCAHO.
    While only some assessment items will be used to determine the CMG, 
we believe that the data provided by all assessment items are an 
essential first step in developing the type of quality monitoring 
system that both MedPAC and our favor. Possible uses of the data 
include: (1) strengthening existing quality assurance mechanisms; (2) 
generating indicators that will allow providers to assess their 
performance, and to compare it against benchmarks derived from 
standards of care or the performance of peers; and (3) creating a 
system that assists beneficiaries in making informed decisions when 
choosing among providers. In addition, the patient assessment items may 
be useful in developing core measures that provide meaningful 
information on patient characteristics and outcomes across post-acute 
care settings.
1. Monitoring the IRF Prospective Payment System
    We are planning a system that can be used to monitor access to 
rehabilitation facilities as well as to monitor the quality of the care 
delivered in these facilities. This will be done through the monitoring 
of payment for the care and the associated cost of the delivered care. 
Monitoring will include variables such as length of IRF stay, percent 
of IRF discharges to SNF, long-term care hospital, or intensive 
outpatient rehabilitation programs, change in motor function between 
admission and discharge, and the case-mix distribution of the facility. 
We plan to examine changes within ``market areas'' as well as 
individual facilities.
    In addition, we will be developing a variety of methods for 
monitoring the impact of the IRF prospective payment system. Monitoring 
may describe changes in access to rehabilitation, in payments to 
rehabilitation facilities, in quality of care, and in the cost of 
rehabilitation care. This monitoring will also help to identify 
unintended changes in the operations of providers, and help to identify 
refinements needed in the IRF prospective payment system. In addition, 
because the IRF prospective payment system may have effects on non-IRF 
providers, and because changes in the payment systems for other 
providers may affect IRFs once common core data elements are required 
across post-acute care providers and linked with other data, the 
monitoring system could also describe changes in access, utilization, 
quality, and cost of care in different types of post-acute care sites, 
including, but not limited to HHAs and SNFs. We could start these 
activities in approximately 2 years.
2. Quality Indicators
    Quality indicators are markers that indicate either the presence or 
absence of potentially poor facility care practices or outcomes. The 
development of quality indicators depends on the collection and 
analysis of sufficient patient assessment data from a representative 
national sample. We are attempting to design a monitoring system that 
would not only describe quality indicators, but also show how they can 
be used together to obtain a clear description of access, outcomes, and 
cost in IRFs. Quality indicators will be developed around the different 
dimensions of quality discussed earlier in this section. We believe 
that quality indicators developed for individual IRFs would help 
identify the IRFs that require attention because they may be coding 
incorrectly or providing lower quality care. Analysis of the 
distribution of hospital indicators within specific classes of 
hospitals (for example, teaching hospitals and rural hospitals) will 
help us to evaluate whether facility level adjustments are warranted.
    We will decide which quality indicators we will use to evaluate IRF 
quality of care outcomes based on the results of a contractor's 
analysis of patient assessment instrument data. Quality indicators are 
not direct measures of quality but rather point towards potential areas 
that require further investigation. Quality indicators identify the 
percent of a patient population with a certain condition and compare 
this percent to a state level and a national level. If a facility 
``flags'' for scoring ``high'' on a particular quality indicator, this 
does not necessarily mean that the facility has a quality of care 
problem but simply that further focused review of care practices may be 
required. Quality indicators have already been developed by the 
University of Wisconsin for use in SNFs and are being effectively used 
by State surveyors to target facilities for closer onsite review of 
care practices as well as by some nursing homes to identify potential 
problems within their facility.
    We have already begun consideration of quality indicators that may 
be created from IRF patient assessment data to evaluate care delivered 
in IRFs. However, we note that, due to the quality monitoring 
developmental process and the time needed to develop quality indicators 
and benchmarking information, quality monitoring based on the patient 
assessment instrument will not be implemented for at least 2 years. We 
agree with MedPAC's view that quality monitoring efforts be closely 
coordinated across different types of post-acute care providers. We 
expect to develop measures to be applied across different settings. We 
anticipate that measures of functional improvement from admission to 
discharge will be examined. In addition, during calendar year 2001, the 
infrastructure to collect the data to identify quality indicators for 
IRFs will be under development. Field validation of these indicators is 
expected to begin in FY 2003. Once the indicators have been field 
tested, we can begin to utilize these data to monitor quality. The next 
step will be validation of the assessment data. Piloting the reporting 
of data will be ongoing during this time period. ``Tool kits'' will be 
developed for targeted interventions to address common quality issues 
in IRFs. Examples of quality indicators currently being considered for 
IRFs are described below.
a. Functional Independence
    The main goal of an IRF is to assist the patient in regaining his 
or her prior level of functional ability. A measure of the quality of a 
rehabilitation program is the patient's ability to function 
independently upon discharge to the community. Using our IRF patient 
instrument assessment data, we believe it will be possible to measure 
the percent of all cases discharged to the community who are 
functionally independent or whose functional status has improved at the 
time of discharge.
    Functional independence on the patient assessment instrument would 
be measured using the functional modifiers and FIM instrument sections 
of the instrument. A patient's progress can be evaluated with respect 
to thresholds or milestones, developed after analysis of data collected 
during rehabilitation stays rather than based upon theoretical 
assumptions. The data also will assist in the development of quality 
indicators to predict the types of patients who have

[[Page 41338]]

the best prognosis for improvement in rehabilitation programs. In 
addition, this information may encourage referrals to IRFs for patients 
who might otherwise not have been referred. The data derived from 
functional information may also serve to better match patients with 
program characteristics to ``fine tune'' the delivery of rehabilitation 
services.
    Additional items on our patient assessment instrument will allow 
the facility to consider factors that may affect a patient's ability to 
return to his or her previous level of functional ability or live 
independently in the community. Indicators based on functional gain 
will be useful in public reporting to help beneficiaries make more 
educated decisions about the facility from which they choose to receive 
care. In addition, PROs may be able to use the data from successful 
IRFs to identify factors that are better at assisting patients in 
achieving functional independence and returning to the community. This 
information can be shared with other IRFs to help improve their success 
rate as well.
b. Incidence of Pressure Ulcers
    Pressure ulcers (also known as decubitus ulcers) are a problem in 
IRFs as well as in other post-acute care and acute care settings. 
Pressure ulcers will be documented using the PUSH scale developed by 
the National Ulcer Advisory Panel. Many facilities are already using 
this scale and laud its ability to present a true picture of the 
pressure ulcer status in a facility. In some situations, the patient is 
admitted with these ulcers. IRFs cannot be held responsible for ulcers 
that were present upon admission, but if these ulcers increase in size 
or grade, or if new ulcers develop, this can be an indicator of poor 
quality of care. Information about pressure ulcers would be collected 
in the quality indicators section of our patient assessment instrument. 
Information about bed mobility and transfer ability, bladder 
incontinence, and nutritional status is useful in identifying patients 
at high risk for developing new pressure ulcers. A pressure ulcer 
quality indicator could be used by the facility to institute such 
measures as staff training or more attention to techniques and 
equipment intended to prevent the development of pressure ulcers (such 
as frequent change of position of patients unable to move themselves 
and use of pressure relieving devices). In addition, quality indicators 
at the facility and State level can be compared to national averages 
for a better understanding of a facility's performance relative to its 
peers. Focused review will help identify which factors are contributing 
to the higher incidence of pressure ulcers. Analysis of patient 
assessment data can also be used to identify facilities that are 
successful in resolving and treating existing pressure ulcers. These 
facilities may have effective pressure ulcer reduction programs in 
place that can be shared with other facilities that are experiencing 
difficulty treating and reducing the incidence of pressure ulcers. 
Public reporting of the rate of pressure ulcers based on quality 
indicator information may help consumers make more informed choices 
when choosing a facility.
c. Falls Prevention
    Falls prevention is an important component of a rehabilitation 
program and is critical to avoiding repeat hospitalizations which, in 
turn, delay return to independence. Items in our patient assessment 
instrument such as balance, dizziness, and falls provide critical 
information regarding fall risk to help facilities identify patients 
who may be at risk for falls. This indicator may also be used to 
identify facilities with poorer track records in fall avoidance. 
Information about falls prevention also provides information so that 
facilities serving different types of patients can be distinguished. 
PROs may also use these data to teach facilities how to better identify 
patients at risk for falls and set up programs to reduce the incidence 
of falls through such methods as low beds or better monitoring of at-
risk patients.
    As illustrated by these examples, there are several ways the 
quality information gathered through our patient assessment instrument 
may be used. As noted, quality indicator data do not necessarily 
illustrate that a facility is providing a lower level of care, but this 
information can be useful in targeting facilities for closer review of 
their patient care practices and facility layout. Quality indicators 
can also be used to identify facilities with best practices. 
Identifying how these facilities maintain a high-quality level of care 
may provide valuable information to assist facilities.
3. Quality Improvement
    Quality assurance involves the establishment of standards and 
having a system to enforce compliance with these standards. Quality 
improvement fosters and facilitates continuous enhancement of whatever 
service or product an organization is engaged in or produces. The JCAHO 
require facilities to have quality improvement programs. Currently, the 
Medicare conditions of participation require hospitals to do quality 
assurance, which we believe can be supported with the information 
obtained from the IRF patient assessment instrument. The proposed 
change in these conditions for hospitals would require hospitals, 
including IRFs, to have quality improvement programs (62 FR 66726, 
December 19, 1997). Also, we are identifying opportunities in which 
PROs can use their expertise and skill mix to provide valuable 
information on quality improvement to post-acute care providers. For 
example, PROs have been working with SNFs for the past year, and 
feedback from the SNFs has indicated that the information shared by the 
PRO in a penalty-free environment has been valuable in helping the SNFs 
learn how to use the MDS to identify their own opportunities for 
quality improvement. In addition, many IRFs already have data-based 
quality improvement systems addressing some aspects of quality. PROs 
may build on their experience in SNFs and on the experience of IRFs and 
become a resource on how to use information derived from our patient 
assessment instrument to identify potential quality concerns. Quality 
improvement activities may include providing each facility with 
information derived from its submissions of its patient assessment data 
for use in self-monitoring, providing facilities with information 
comparing their performance with that of their peers, and maintaining a 
clearinghouse of ``best practices'' that can be used by facilities to 
improve the quality of care they deliver.
    IRFs may also use data from our patient assessment instrument to 
generate quality indicators on their own, and use this information to 
help them target specific problems within their facility, or identify 
areas where quality improvement projects may be most effective. IRFs 
can also use the data from our patient assessment instrument to perform 
their own monitoring of changes in quality of care within the facility.
    Comment: Many commenters questioned the reliability and validity of 
the patient assessment items that we had proposed to use for quality of 
care monitoring.
    Response: The patient assessment items that we had proposed for 
monitoring quality of care in IRFs were (1) being used by us to monitor 
quality of care in other post-acute settings; (2) the items that 
resulted from our extensive MDS-PAC pilot and field testing; or (3) the 
result of the consensus of the Technical Expert Panel. However, in 
accordance with our statement in the proposed rule that we would 
conduct

[[Page 41339]]

further study of the patient assessment instrument, after publishing 
the proposed rule we conducted additional field testing of all the MDS-
PAC items.
    In order to reduce the burden imposed by our patient assessment 
instrument, we have greatly decreased the number of items. The CMS IRF 
patient assessment instrument is now very similar to the UDSmr patient 
assessment instrument, because we used the UDSmr patient assessment 
instrument as the foundation for our assessment instrument. Our data 
indicate that approximately 85 percent of IRFs currently use the UDSmr 
patient assessment instrument to assess their patients.
    As stated in the proposed rule, an independent panel of technical 
experts highlighted areas of concern regarding the FIM's accuracy in 
predicting costs for patient care. Panelists were concerned that the 
scoring of some items, such as cognitive functioning, gave raters a 
great deal of discretion in determining what evidence was used in the 
assessment and how often the behavior had occurred. These technical 
experts also agreed that a functional status assessment for payment 
purposes should be based on clinical observation of performance rather 
than on the rater's assessment of the patient's capacity to perform the 
task.
    In order to address these and other concerns, a special study was 
completed to assess the validity and reliability of the MDS-PAC and the 
FIM instruments. This special study was also completed in accordance 
with our statement in the proposed rule that we would be conducting 
additional testing of the MDS-PAC and the FIM.
    In the proposed rule, we proposed to use the MDS-PAC as the patient 
assessment instrument for payment purposes. We qualified our proposal 
by indicating that we were in the process of performing a special study 
to assess the reliability and validity of both these instruments. We 
further indicated that the findings of this study would inform our 
final decisionmaking process regarding the instrument of choice for 
implementing the inpatient rehabilitation payment system.
    Our study was in a sample of facilities that are currently using 
UDSmr's FIM patient assessment instrument. These facilities completed 
the UDSmr instrument and the MDS-PAC on the same patient at the same 
time. We then compared the results of this paired assessment to 
determine the capability of the MDS-PAC instrument to accurately and 
consistently assign CMGs and whether the MDS-PAC assigns the same CMGs 
as the UDSmr instrument would.
    The purpose of this study was not only to assess the accuracy of 
the MDS-PAC for classifying cases into CMGs, but also to determine the 
time it would take clinicians to administer the FIM and the MDS-PAC, 
the accuracy of coding of comorbidities, and a comparison of the 
validity, reliability, and consistency of the FIM and the MDS-PAC. The 
following summarizes the findings from this study:
     Interrater reliabilities were higher on the FIM than on 
the MDS-PAC.
     The FIM and MDS-PAC functional and cognitive scores were 
able to produce the same case-mix groups 53 percent of the time and a 
comparison of a more FIM-like version of the MDS-PAC and the FIM 
increased the case-mix group match to 57 percent.
     The study found that payment differences between the two 
instruments varied by RIC. While overall the payment differences (using 
the two instruments) were small, 20 percent of the hospitals could see 
revenue differences of 10 percent or more depending on which instrument 
was used.
     The administrative burden associated with the MDS-PAC, 
that is, 120 minutes compared with 23 minutes to complete the FIM, was 
found to be substantial.
    As stated in the proposed rule, if the tests showed that patients 
are classified differently using the MDS-PAC, we would incorporate the 
phrasing and definitions of the FIM to replace sections of the MDS-PAC. 
This would meet our objective to field a more extensive instrument to 
provide a more complete picture of the condition of the patient and of 
the care provided in the IRF, while also retaining confidence in the 
validity of the CMG classification of the patient. Using the phrasing 
and definitions of many of the UDSmr patient assessment instrument 
items will minimize the effect on reliability and validity inherent in 
the design of new data collection instruments. Based upon our study 
findings, the comments received on the proposed rule, the earlier 
research and analysis supporting the design of the prospective payment 
system for inpatient rehabilitation facilities, and after conferring 
with UDSmr staff, we decided to use a majority of the UDSmr patient 
assessment instrument items and some other quality of care items to 
collect the information needed for implementation of the IRF 
prospective payment system.
    Comment: Many commenters indicated that they believed that using 
only the items on the UDSmr patient assessment instrument could fulfill 
our goals to classify patients into payment groups and monitor quality 
of care.
    Response: We believe that, in order to adequately monitor quality 
of care, we need to add quality items to the UDSmr patient assessment 
instrument. Therefore, we have added to the basic UDSmr patient 
assessment instrument a few items we believe are critical to monitor 
quality of care. Also, in response to the recommendations following 
additional data analysis by our contractor, RAND, and in consultation 
with and with the agreement of UDSmr, we have added functional 
independence measure modifiers to our patient assessment instrument. We 
will use the functional independence measure modifiers, and other items 
as specified in Chart 7.--Critical Patient Assessment Items in section 
V.E. of this preamble, to classify patients into CMG payment groups. We 
also will use the functional independence measure modifiers items and 
some other items as specified in the ``Critical Items'' chart to 
monitor quality of care.
    We used items similar to MDS-PAC items to modify the UDSmr patient 
assessment instrument because the MDS-PAC covers several topics, such 
as nutrition, swallowing, and pain, that are either not included in the 
FIM or not covered in sufficient detail in the FIM for clinical 
assessment purposes. Therefore, we decided to retain some of the 
nonpayment items from the MDS-PAC. The MDS-PAC items that we have 
chosen to retain in our patient assessment instrument are the items 
that we believe will yield significant quality of care data and will be 
used to direct and define development of quality indicators for use in 
IRFs.
4. Consumer Information
    We plan to use the quality information derived from our patient 
assessment instrument in our public reporting strategy. Our patient 
assessment data, after appropriate evaluation and validation, can be 
used to inform consumers about the performance of facilities in their 
area so that they can make informed decisions when selecting a 
rehabilitation facility. In addition, information derived from our 
patient assessment instrument and the comparable information available 
in SNFs and other settings will help us understand which patients fare 
better in which types of post-acute care settings, or even within 
subsets of IRFs, thus informing and shaping future long-term care 
quality initiatives.
    As part of our efforts in designing a monitoring system, in the 
November 3,

[[Page 41340]]

2000 proposed rule we solicited comments on whether we should also 
collect data related to medications and medication administration.
    Comment: One commenter stated that because data related to 
medications and medication administration will have no bearing on how 
the CMG is determined, collecting this information would be an 
unnecessary burden on the IRF.
    Response: Considering the consequences of both medication 
administration errors and the incorrect prescribing of medications, we 
believe that data on these issues are of benefit in monitoring quality 
of care. However, these data are contained in the patient's clinical 
record or in some other documentation maintained about the patient. 
Therefore, at this time we will not use the IRF patient assessment 
instrument to collect these data.

F. Training and Technical Support for IRFs

    We will provide educational and technical resources to IRFs to 
support both implementation of the CMS IRF patient assessment 
instrument and the computerization and transmission of the patient 
assessment data. We will provide training and technical support on the 
use of our patient assessment instrument by clinical staff and on the 
use of software to encode and transmit the patient assessment data.
    Although we will be providing both initial and ongoing training and 
technical support, IRFs will probably find it advantageous to designate 
a staff member as an IRF trainer, in order to have in-house capability 
both to train newly hired staff, and to have a designated person who 
can serve as the in-house resource for other staff.
    We will train and support the IRFs in the implementation of the IRF 
prospective payment system and automation of our patient assessment 
instrument by--
     Training IRFs on our patient assessment data set;
     Answering questions on the clinical aspects of our patient 
assessment instrument and providing information to IRFs on the use of 
the instrument to determine CMGs;
     Providing training to State agency staff in using our 
patient assessment data for survey activities;
     Training IRFs in interpreting validation reports;
     Providing information relative to hardware and software 
requirements; and
     Providing support for transmission of test data, 
supporting callers who request technical assistance, providing 
passwords to IRFs, and answering questions about the computer edits and 
reports.
    Comment: One commenter stated that having an IRF clinician that we 
[CMS] have trained to be the trainer of other clinicians at an IRF may 
lead to incorrect information being disseminated, because the clinician 
that we have trained might unintentionally distort the information when 
that clinician trains other clinicians. Other commenters stated that we 
underestimated the time needed to train clinicians, and the number of 
clinicians that need to be trained. One commenter indicated that only 5 
to 6 hours are needed by UDSmr to train IRF clinicians in how to 
perform a patient assessment using the UDSmr patient assessment 
instrument.
    Response: We, along with other organizations, have successfully 
used the ``train the trainer'' technique, in which the person trained 
then trains others. We acknowledge that there is the possibility that 
an IRF staff member trained by us might inadvertently train another IRF 
staff member incorrectly in some aspect of the IRF patient assessment 
process that is specified in our final rule. However, we note that all 
IRF staff will have the patient assessment instrument item-by-item 
guide available to them as a resource in how to perform the patient 
assessment. In addition, all staff members may refer to this final rule 
and call our contractors or us if they have questions about the patient 
assessment process.
    We are still in the process of finalizing our plans for training 
IRFs on the patient assessment process. However, we are aware that 
UDSmr estimates that it only takes a day to train IRF clinicians in how 
to perform a patient assessment using the UDSmr patient assessment 
instrument. We believe that ``a day'' means approximately 8 hours. Our 
patient assessment instrument is a slightly modified version of the 
UDSmr patient assessment instrument. Therefore, we believe that our 
estimate of 16 hours of initial training, in order to train the IRF 
lead clinician on our patient assessment instrument and assessment 
process, is a reasonable estimate. We believe that our estimate of 12 
hours of initial training to train the nonlead IRF clinicians also is a 
reasonable estimate. In addition, we believe that 5 hours to initially 
train clerical personnel is reasonable, because their tasks under the 
IRF patient assessment process are not as complicated as the tasks that 
the clinicians must perform. We note that the training hours specified 
in the rule, both for the initial training and for ongoing training, 
are estimates, and we will adjust the hours as needed when we finalize 
our training plans and schedules. In addition, due to the wide variety 
of the sizes of IRFs, we have no way of knowing how many clinicians are 
employed by an IRF. Therefore, we could only give estimates of how many 
clinicians would need to be trained. When we have a final training 
schedule, we will publish it on our IRF prospective payment system 
website.

G. Release of Information Collected Using the Patient Assessment 
Instrument

    As in the proposed rule under Sec. 412.616, in this final rule we 
are providing that the IRF and its agents must ensure the 
confidentiality of the information collected using the assessment 
instrument in the same manner as all other information in the medical 
record, in accordance with the hospital conditions of participation at 
Sec. 482.24(b)(3). While the conditions of participation include 
confidentiality requirements that apply broadly to all patient 
information used and disclosed by the IRF, in this final rule we are 
establishing additional requirements that apply specifically to data 
collected using the patient assessment instrument. Specifically, we are 
establishing a requirement to inform patients of their rights regarding 
collection of the patient assessment (Sec. 412.608), as well as 
requirements governing release of patient-identifiable information to 
IRF agents (Sec. 412.616(b)). The facility must ensure that information 
may be released only to authorized individuals and must ensure that 
unauthorized individuals cannot gain access to or alter patient 
records. The original medical record must be released by the facility 
or its agent only in accordance with Federal or State laws, court 
orders or subpoenas. In addition, we are providing that an agent acting 
on behalf of an IRF in accordance with a written contract with that IRF 
may only use the information for the purposes specified in the 
contract. We believe that these provisions will ensure that access to 
patient assessment data (paper copy as well as electronic data) is 
secured and controlled by the IRF, in accordance with Federal and State 
laws.
    On December 28, 2000, the Department of Health and Human Services 
published a final rule adopting standards for the privacy of certain 
individually identifiable health information (65 FR 82462) (Privacy 
Rule). The Privacy Rule is the second in a series of rules mandated by 
provisions of the Health Insurance Portability and Accountability Act 
of 1996 (HIPAA), Public Law 104-191. In part, the Privacy

[[Page 41341]]

Rule establishes a new Subpart E under 45 CFR Part 164. Subpart E 
establishes standards that entities covered by the statute--health 
plans, health care clearinghouses, and certain health care providers--
are required to comply with in order to protect the privacy of certain 
individually identifiable health information. The standards establish 
requirements relating to the use and disclosure of protected health 
information, the rights of individuals with respect to that 
information, and the procedure for exercising those rights.
    On February 26, 2001, the Department published a final rule (66 FR 
12434) correcting the effective date of the December 28, 2000 final 
rule. The new effective date is now April 14, 2001. In accordance with 
the requirements set forth in the Privacy Rule, we are proceeding with 
an implementation plan that will result in full compliance with these 
standards on or before April 14, 2003. This plan includes compliance 
with the standards as they relate to information collected as part of 
the IRF patient assessment instrument set forth in this final rule. 
Accordingly, as we proceed with its compliance efforts associated with 
the Privacy Rule, we may be making future changes in the regulations 
adopted in this final rule.
    In the proposed rule, we indicated that, as with other regulations 
that result in the creation of a new system of records, we are in the 
process of developing a notice describing the new system of records 
that is unique to MDS-PAC. We have typically issued notices describing 
new systems of records in conjunction with the issuing of a final rule. 
The notices, required by the Privacy Act of 1974, describe both the 
entities to whom identifiable and nonidentifiable data can be routinely 
disclosed, as well as the safeguards that will protect the privacy and 
the security of the data. While each system of records notice is unique 
to the system and the data instrument, readers interested in 
understanding a recent approach are referred to the notice of the new 
system of records published June 18, 1999 (64 FR 32992) for the ``Home 
Health Agency Outcome and Assessment Information Set (OASIS).''
    We solicited comments on issues germane to the notice that we would 
develop for the patient assessment records.
    Comment: Several commenters believed that the great number of items 
in the MDS-PAC are not necessary to determine that a payment is 
excessive. In the commenters' view, the excessive number of these 
nonpayment items is both of dubious value in monitoring quality of care 
and amount to a violation of the patient's privacy.
    Response: Our patient assessment instrument is now closely modeled 
on the UDSmr patient assessment instrument. The items that we have 
added to the UDSmr instrument either improve the capability of the 
instrument to determine a patient's CMG or collect quality of care 
data. We believe that the number of items we have added to the basic 
UDSmr patient assessment instrument is not excessive, especially 
considering the vital data these items will yield. The quality of care 
data items are few, especially when the number of these items are 
compared to all the nonpayment items in the MDS-PAC. In addition, the 
quality of care items now in our instrument collect basic data that we 
have found to be of significant value in monitoring quality of care. 
Therefore, we are only collecting data needed to appropriately classify 
a patient into a CMG and data that benefit the patient by helping 
monitor the quality of the services furnished. We will be publishing a 
system of records notice in the Federal Register that will detail our 
efforts to safeguard the privacy of the data that we collect using our 
inpatient rehabilitation facility patient assessment instrument in this 
final rule.

H. Patient Rights

    We are adopting the provision of the proposed rule under 
Sec. 412.608 that in order to receive payment for the Medicare IRF 
services furnished, a clinician must inform the Medicare inpatient of 
the following rights with respect to the assessment prior to performing 
the assessment. These rights include--
     The right to be informed of the purpose of the patient 
assessment data collection;
    The right to have any patient assessment information that is 
collected remain confidential and secure;
     The right to be informed that the patient assessment 
information will not be disclosed to others except for legitimate 
purposes allowed by the Federal Privacy Act and Federal and State 
regulations;
     The right to refuse to answer patient assessment data 
questions; and
     The right to see, review, and request changes on the 
patient assessment instrument.
    We are requiring the IRF to ensure that a clinician documents in 
the Medicare patient's clinical record that the patient has been 
informed of the above patient rights. IRFs should note that the above 
patient rights are in addition to the patient rights specified under 
the conditions of participation for hospitals in Sec. 482.13.
    Our statements of patient rights with regard to the IRF patient 
assessment instrument will be available via our Inpatient 
Rehabilitation Facility Prospective Payment System website. These 
statements may be revised in accordance with the Office of Management 
and Budget Paperwork Reduction Act reapproval process. Future revisions 
to these statements will be available via our Inpatient Rehabilitation 
Facility Prospective Payment System website, and in other instructional 
materials that we issue.
    Comment: Commenters asked what the IRF should do if the patient 
refuses to answer questions when the IRF clinician tries to collect 
patient assessment data, and how this would be indicated on the 
electronic version of the patient assessment instrument.
    Response: In the proposed rule, we proposed that data that are not 
obtained by direct observation by an IRF clinician of an activity 
performed by the patient can be obtained from the patient, the 
patient's clinical record, other patient documents or the patient's 
family. In addition to the patient's family, we are including in this 
final rule the provision that the data can be obtained from someone 
personally knowledgeable about the patient's clinical conditions or 
capabilities. Data that are obtained from the patient's clinical 
record, other patient documents, the patient's family, or someone 
personally knowledgeable about the patient's clinical conditions or 
capabilities do not have to be specially indicated or annotated on the 
paper or electronic version of the patient assessment instrument. 
However, the clinician has the discretion to note in the patient's 
clinical record that the information recorded for an item was obtained 
from one of these other sources, and not directly from the patient.
    We believe that the data for the items associated with observation 
by the clinician of a particular activity performed by the patient will 
always be recorded on the patient assessment instrument, because these 
items allow for the recording of the data in different ways, including 
recording that the activity did not occur. We reiterate that, for the 
patient assessment observational items, the clinician assessor should 
not require a patient to perform an activity that, in the clinician's 
professional judgment, is clinically contraindicated or hazardous to 
the patient.

[[Page 41342]]

I. Medical Review Under the IRF Prospective Payment System

    Under a discharge-based prospective payment system, IRFs might have 
financial incentives to miscode information on the patient assessment 
instrument in order to gain a higher CMG and, therefore, payment (that 
is, case-mix upcoding for payment). Data analysis may be conducted to 
identify program payment vulnerabilities or areas of risk, and medical 
review may be conducted to ensure that appropriate payment is being 
made for services furnished by IRFs.

V. Case-Mix Group Patient Classification System

A. Background

1. Statutory Authority for the Establishment of a Patient 
Classification System
    Section 1886(j)(2)(A)(i) of the Act, as amended by section 125 of 
the BBRA, requires the Secretary to establish ``classes of patient 
discharges of rehabilitation facilities by functional-related groups 
(each referred to * * * as a `case mix group'), based on impairment, 
age, comorbidities, and functional capability of the patient, and such 
other factors as the Secretary deems appropriate to improve the 
explanatory power of functional independence measure-function related 
groups.'' In addition, the Secretary is required to establish a method 
of classifying specific patients in IRFs within these groups. (These 
provisions are implemented in Sec. 412.620 of this final rule.)
2. Development of the Proposed Case-Mix Groups
    In the November 3, 2000 proposed rule, we proposed a methodology to 
establish a patient classification system using case-mix groups called 
CMGs (65 FR 66337). The proposed CMGs are based on the FIM-FRG 
methodology and reflect refinements to that methodology. In addition, 
we described in the proposed rule the process to classify a patient 
into a CMG.
    In general, a patient is first placed in a major group called a RIC 
based on the patient's primary reason for inpatient rehabilitation, 
such as a stroke or a hip fracture. Next, the patient is placed into a 
CMG within the RIC, based on the patient's ability to perform specific 
activities of daily living, and sometimes the patient's cognitive 
ability and/or age. Other special circumstances, such as the occurrence 
of very short stays or cases where the patient expired, would be 
considered in determining the appropriate CMG.
    In the proposed rule, we stated that our analysis of 1996 and 1997 
FIM and Medicare data validated our proposal to establish 21 RICs and 
92 CMGs based on the FIM-FRG methodology. The data also supported the 
establishment of five additional special CMGs that improved the 
explanatory power of the FIM-FRGs. That is, we proposed to establish 
one additional special CMG to account for very short stays and four 
additional special CMGs to account for cases where the patient expired. 
In addition, we proposed to pay an additional amount with the presence 
of at least one relevant comorbidity for certain CMGs.
    Comment: Several commenters suggested that we use the term ``FIM-
FRGs'' rather than ``CMGs'' to describe the patient classification 
groupings.
    Response: The FIM-FRGs' ability to predict resource use has been 
improved since their original development with the recognition of 
comorbidities and other special circumstances. We believe that 
identifying the groups as CMGs avoids any confusion that the basis of 
the CMGs is not only the original FIM-FRG methodology, but that it also 
includes improvements to that methodology. In addition, we believe that 
the statutory language also recognized that improvements have been made 
and may be made in the future to the original FIM-FRG methodology by 
referring to the groups as ``case mix groups.'' Accordingly, the 
patient classification system that we are implementing under 
Sec. 412.620(a) of these final regulations will classify patients into 
case-mix groups called CMGs.
3. Refinements to the Proposed CMGs
    We explained in the proposed rule that further analysis of FIM and 
Medicare data and our review of the comments received may result in 
refinements to some proposed CMGs. For this final rule, we use the most 
recent FIM and Medicare data from 1998 and 1999 as described in section 
III. of this preamble. Developing the CMGs with the 1998 and 1999 data 
results in 95 CMGs based on the FIM-FRG methodology rather than the 92 
CMGs described in the proposed rule. In addition, in the following 
subsections, we will describe the results of analyzing these later data 
that validate the use of the same 21 RICs and five special CMGs as 
proposed.

B. Description of Methodology Used To Develop the CMGs Based on the 
FIM-FRG Methodology for the Final Rule

1. Rehabilitation Impairment Categories
    In the first step to develop the CMGs, the FIM data from 1998 and 
1999 were used to group patients into RICs. Specifically, the 
impairment code from the assessment instrument used by clients of UDSmr 
and Healthsouth indicates the primary reason for the inpatient 
rehabilitation admission. This impairment code is used to group the 
patient into a RIC. Chart 5 below (a replacement for Table 1D in the 
proposed rule) shows each RIC and its associated impairment code.
    The earlier RAND research using 1994 data resulted in 20 RICs. We 
initially used RAND's statistical analysis of 1997 data which showed 
that the 1997 data generally performed as well as the 1994 data in 
predicting resource use in RICs 01 through 20. Based on this analysis, 
the impairment code 14.9 ``Status post major multiple fractures'' 
appeared to fit more appropriately into RIC 17. Also, based on the 1997 
data, we created a separate RIC for burn cases.
    For this final rule, we will continue to use the 21 RICs described 
in the proposed rule and shown in Chart 5 below.

  Chart 5.--Rehabilitation Impairment Categories (RICs) and Associated
                         Impairment Group Codes
------------------------------------------------------------------------
 Rehabilitation impairment category   Associated impairment group codes
------------------------------------------------------------------------
01  Stroke (Stroke)................  01.1  Left body involvement (right
                                      brain)
                                     01.2  Right body involvement (left
                                      brain)
                                     01.3  Bilateral Involvement
                                     01.4  No Paresis
                                     01.9  Other Stroke
------------------------------------------------------------------------
02  Traumatic brain injury (TBI)...  02.21  Open Injury
                                     02.22  Closed Injury
------------------------------------------------------------------------

[[Page 41343]]

 
03  Nontraumatic brain injury        02.1  Non-traumatic
 (NTBI).
                                     02.9  Other Brain
------------------------------------------------------------------------
04  Traumatic spinal cord injury     04.210 Paraplegia, Unspecified
 (TSCI).
                                     04.211  Paraplegia, Incomplete
                                     04.212  Paraplegia, Complete
                                     04.220  Quadriplegia, Unspecified
                                     04.2211  Quadriplegia, Incomplete
                                      C1-4
                                     04.2212  Quadriplegia, Incomplete
                                      C5-8
                                     04.2221  Quadriplegia, Complete C1-
                                      4
                                     04.2222  Quadriplegia, Complete C5-
                                      8
                                     04.230  Other traumatic spinal cord
                                      dysfunction
05  Nontraumatic spinal cord injury  04.110  Paraplegia, unspecified
 (NTSCI).
                                     04.111  Paraplegia, incomplete
                                     04.112  Paraplegia, complete
                                     04.120  Quadriplegia, unspecified
                                     04.1211  Quadriplegia, Incomplete
                                      C1-4
                                     04.1212  Quadriplegia, Incomplete
                                      C5-8
                                     04.1221  Quadriplegia, Complete C1-
                                      4
                                     04.1222  Quadriplegia, Complete C5-
                                      8
                                     04.130  Other non-traumatic spinal
                                      cord dysfunction
------------------------------------------------------------------------
06  Neurological (Neuro)...........  03.1  Multiple Sclerosis
                                     03.2  Parkinsonism
                                     03.3  Polyneuropathy
                                     03.5  Cerebral Palsy
                                     03.8  Neuromuscular Disorders
                                     03.9  Other Neurologic
------------------------------------------------------------------------
07  Fracture of LE (FracLE)........  08.11 Status post unilateral hip
                                      fracture
                                     08.12  Status post bilateral hip
                                      fractures
                                     08.2  Status post femur (shaft)
                                      fracture
                                     08.3  Status post pelvic fracture
------------------------------------------------------------------------
08  Replacement of LE joint          08.51  Status post unilateral hip
 (Rep1LE).                            replacement
                                     08.52  Status post bilateral hip
                                      replacements
                                     08.61  Status post unilateral knee
                                      replacement
                                     08.62  Status post bilateral knee
                                      replacements
                                     08.71  Status post knee and hip
                                      replacements (same side)
                                     08.72  Status post knee and hip
                                      replacements (different sides)
09  Other orthopedic (Ortho).......  08.9  Other orthopedic
------------------------------------------------------------------------
10  Amputation, lower extremity      05.3  Unilateral lower extremity
 (AMPLE).                             above the knee (AK)
                                     05.4  Unilateral lower extremity
                                      below the knee (BK)
                                     05.5  Bilateral lower extremity
                                      above the knee (AK/AK)
                                     05.6  Bilateral lower extremity
                                      above/below the knee (AK/BK)
                                     05.7  Bilateral lower extremity
                                      below the knee (BK/BK)
------------------------------------------------------------------------
11  Amputation, other (AMP-NLE)....  05.1  Unilateral upper extremity
                                      above the elbow (AE)
                                     05.2  Unilateral upper extremity
                                      below the elbow (BE)
                                     05.9  Other amputation
------------------------------------------------------------------------
12  Osteoarthritis (OsteoA)........  06.2  Osteoarthritis
------------------------------------------------------------------------
13  Rheumatoid, other arthritis      06.1  Rheumatoid Arthritis
 (RheumA).
                                     06.9  Other arthritis
------------------------------------------------------------------------
14  Cardiac (Cardiac)..............  09  Cardiac
------------------------------------------------------------------------
15  Pulmonary (Pulmonary)..........  10.1  Chronic Obstructive Pulmonary
                                      Disease
                                     10.9  Other pulmonary
------------------------------------------------------------------------
16  Pain Syndrome (Pain)...........  07.1  Neck pain
                                     07.2  Back pain
                                     07.3  Extremity pain
                                     07.9  Other pain
------------------------------------------------------------------------
17  Major multiple trauma, no brain  08.4  Status post major multiple
 injury or spinal cord injury (MMT-   fractures
 NBSCI).
                                     14.9  Other multiple trauma
------------------------------------------------------------------------
18  Major multiple trauma, with      14.1  Brain and spinal cord injury
 brain or spinal cord injury (MMT-
 BSCI).
                                     14.2  Brain and multiple fractures/
                                      amputation

[[Page 41344]]

 
                                     14.3  Spinal cord and multiple
                                      fractures/amputation
------------------------------------------------------------------------
19  Guillian Barre (GB)............  03.4
------------------------------------------------------------------------
20  Miscellaneous (Misc)...........  12.1  Spina Bifida
                                     12.9  Other congenital
                                     13  Other disabling impairments
                                     15  Developmental disability
                                     16  Debility
                                     17.1  Infection
                                     17.2  Neoplasms
                                     17.31  Nutrition (endocrine/
                                      metabolic) with intubation/
                                      parenteral nutrition
                                     17.32  Nutrition (endocrine/
                                      metabolic) without intubation/
                                      parenteral nutrition
                                     17.4  Circulatory disorders
                                     17.51  Respiratory disorders-
                                      Ventilator Dependent
                                     17.52  Respiratory disorders-Non-
                                      ventilator Dependent
                                     17.6  Terminal care
                                     17.7  Skin disorders
                                     17.8  Medical/Surgical
                                      complications
                                     17.9  Other medically complex
                                      conditions
21 Burns (Burns)...................  11  Burns
------------------------------------------------------------------------

    In the proposed rule, we stated in the footnote to Table 1D that we 
were analyzing the effect of moving the few cases with an impairment 
code of 12.1 (Spina Bifida) to one of the other spinal cord RICs (RIC 
05 or 04). Based on our analysis of the 1998 and 1999 data, there were 
a combined total of 45 cases with an impairment code for Spina Bifida 
for both years. With such a small sample of cases, the results of our 
analysis of the effects of moving these cases to another RIC were 
inconclusive. Therefore, in this final rule, we are retaining the 12.1 
impairment code in RIC 20 (Miscellaneous). We will continue our 
analysis of these cases in the future with later data to determine if 
moving them to another RIC would be appropriate.
2. Functional Status Measures and Age
    After using the RIC to define the first split among the inpatient 
rehabilitation groups, we used functional status measures and age to 
partition the cases further. For this final rule, we used more recent 
data (1998 and 1999 Medicare bills with corresponding FIM data) to 
create the CMGs and more thoroughly examine each item of the motor and 
cognitive measures. Based on this analysis, we found that we could 
improve upon the CMGs by making a slight modification to the motor 
measure. We modify the motor measure by removing the transfer to tub/
shower item because we found that an increase in a patient's ability to 
perform functional tasks with less assistance for this item is 
associated with an increase in cost, whereas an increase in other 
functional items decreases costs. We describe below the statistical 
methodology (Classification and Regression Trees (CART)) that we used 
to incorporate a patient's functional status measures (modified motor 
score and cognitive score), and age into the construction of the CMGs 
in this final rule.
    We used the CART methodology to split the rehabilitation cases 
further within each RIC. In general, CART can be used to identify 
statistical relationships among data and, using these relationships, 
construct a predictive model for organizing and separating a large set 
of data into smaller, similar groups. Further, in constructing the 
CMGs, we analyzed the extent to which the independent variables (motor 
score, cognitive score, and age) help predict the value of the 
dependent variable (the log of the cost per case).
    The CART methodology creates the CMGs that classify patients with 
clinically distinct resource needs into groups. CART is an iterative 
process that creates initial groups of patients and then searches for 
ways to split the initial groups to decrease the clinical and cost 
variances further and to increase the explanatory power of the CMGs. 
(Further information regarding this methodology can be found in the 
seminal literature on CART (Classification and Regression Trees, Leo 
Breiman, Jerome Friedman, Richard Olshen, Charles Stone, Wadsworth 
Inc., Belmont CA, 1984: pp. 78-80).)
    As a result of this analysis, Chart 6 lists 95 CMGs and their 
respective descriptions, including the motor and cognitive scores and 
age that will be used to classify discharges into CMGs in the IRF 
prospective payment system.
    Comment: One commenter suggested that spinal cord injury (SCI) 
patients who are ventilator-dependent should have their own CMG and an 
associated payment. The commenter stated that, under the proposed CMGs, 
an SCI ventilator-dependent patient would always result in an outlier 
payment. The commenter further noted that while there is not a large 
number of these patients, the outlier payment could result in a large 
financial loss to providers.
    Response: We are not including a separate CMG for ventilator-
dependent, spinal cord injury patients in this final rule. We will 
consider analyzing this group of patients for future refinements. Our 
current CMGs are based on historical data. In order to develop a 
separate CMG, we need to have data on a sufficient number of cases to 
develop coherent groups. As the commenter noted, the data that RAND 
analyzed did not have a sufficiently large number of these patients. 
The cost of caring for ventilator-dependent spinal cord injury patients 
is reflected in the relative weights for the CMGs in which these cases 
fall. Ventilator-dependent spinal cord injury cases will be classified 
to comorbidity tier 1. We grouped these types of cases only with other 
very expensive spinal cord injury patients, and the relative weights 
set forth in this final rule reflect the average cost for these cases. 
Therefore, we believe that the standard IRF prospective payment

[[Page 41345]]

plus the outlier payment (which addresses the marginal cost of care 
beyond the applicable threshold) will pay adequately for these cases. 
It is certainly possible that, for a given case, the total payment for 
the case might be lower than the cost for the case, but for other 
cases, the total payment might be higher than costs.
    Comment: A few commenters believed that payment for burns was 
insufficient.
    Response: For the proposed rule, we created one case-mix group, CMG 
2101, for all burn cases. For CMG 2101, we calculated an average length 
of stay of 18.5 days and a relative weight of 1.2863 as described in 
the proposed rule. However, for the CMGs set forth in this final rule, 
we use the latest available data as described in Appendix A. These data 
include more burn cases compared to the data used to create the CMGs in 
the proposed rule. We created two CMGs with the more recent data using 
the CART methodology described earlier in this preamble. The costs of 
providing care for patients with the lowest motor scores (those 
patients needing more assistance with tasks such as transferring, 
bathing, and dressing) are more on average than the costs for patients 
with higher motor scores. When we use the most recent data, we find 
that the CMG for a burn patient with the lower motor score, from 12 to 
45 (CMG 2102 with no comorbidities) has an average length of stay of 29 
days and a relative weight of 1.8226. The CMG for a burn patient with a 
higher motor score of 46 to 84 (CMG 2101) who can perform self-care 
task with less assistance reflects the lower costs of caring for these 
patients. The average length of stay for patients classified to CMG 
2101 with no comorbidities is 16 days and the relative weight is .8387. 
It is possible that, for a given case, the total payment for a burn 
case might be lower than the costs for the case, but for other burn 
cases, the total payment might be higher than costs. For burn cases 
with extremely high costs, outlier payments may be made as well. 
Therefore, we believe payment for burn cases will be sufficient.
3. Comorbidities
    A comorbidity is considered in the context of the principal 
diagnosis. That is, a comorbidity is a specific patient condition that 
is secondary to the patient's principal diagnosis or impairment that is 
used to place a patient into a RIC. A patient could have more than one 
comorbidity present during the inpatient rehabilitation stay.
    Our analysis found that the presence of a comorbidity could have a 
major effect on the cost of furnishing inpatient rehabilitation care. 
For the proposed rule, we found that the effect of comorbidities varied 
across RICs, significantly increasing the costs of patients in some 
RICs, while having no effect in others.
    We linked frequently occurring comorbidities to impairment 
categories in order to ensure that all of the chosen comorbidities are 
not an inherent part of the diagnosis that assigns the patient to the 
RIC. For example, providing rehabilitation services to a beneficiary 
with a total hip replacement can become both more complex and more 
costly if the beneficiary also has pneumonia. In contrast, hemiparesis 
paralysis of one side of the body would not have an impact on patients 
in RIC 01, stroke.
    In the proposed rule, we found comorbidities to affect cost per 
case for some of the CMGs, but not all. When comorbidities 
substantially increased the average cost of the CMG and were determined 
to be clinically relevant (not inherent in the diagnosis in the RIC), 
we developed CMG relative weights adjusted for comorbidities 
(Sec. 412.620(b)).
    In this final rule (as we had proposed in the November 3, 2000 
proposed rule), we are specifying that a payment adjustment will be 
made if one of the comorbidities listed in Appendix C of this final 
rule is present during the patient's stay.
    Comment: We received a number of comments suggesting that we take 
into account the existence of multiple comorbidities.
    Response: We have completed considerable analysis on how to account 
for the severity of each comorbidity that may be present during an 
inpatient rehabilitation stay. Further discussion of the results of 
this analysis appears in section VI. of this final rule.

C. Description of Methodology Used to Develop CMGs for Special Cases 
for the Final Rule

    As we did with the proposed rule, for this final rule, we analyzed 
the payment-to-cost ratios for special types of cases that were not 
typical cases to determine if costs could be predicted. (We define 
typical cases as those that stay more than 3 days, receive a full 
course of inpatient rehabilitation care, and are discharged to the 
community.) From this analysis, we believe that IRFs would be paid 
substantially more for cases in which the patient expires and cases 
with a length of stay of 3 days or less (not including transfer cases) 
than for the costs of these cases if facilities received the full CMG 
payment. To improve the explanatory power of the groups, we added four 
CMGs to account for cases in which the patient expires and one CMG for 
all cases that have a length of stay of 3 days or less (not including 
transfer cases). We explain these five types of special cases in 
greater detail in section VI. of this final rule.

D. Final Set of CMGs

    Chart 6 below shows the final set of 95 CMGs based on the FIM-FRG 
methodology and 5 special CMGs and their description. In section V.E. 
of this preamble, we discuss the process of how to classify a patient 
into a RIC and a CMG.

             Chart 6.--Definition of Case Mix Groups (CMGs)
------------------------------------------------------------------------
             CMG No. *                         CMG description
------------------------------------------------------------------------
0101..............................  Stroke with motor score from 69-84
                                     and cognitive score from 23-35.
0102..............................  Stroke with motor score from 59-68
                                     and cognitive score from 23-35.
0103..............................  Stroke with motor score from 59-84
                                     and cognitive score from 5-22.
0104..............................  Stroke with motor score from 53-58.
0105..............................  Stroke with motor score from 47-52.
0106..............................  Stroke with motor score from 42-46.
0107..............................  Stroke with motor score from 39-41.
0108..............................  Stroke with motor score from 34-38
                                     and patient is 83 years old or
                                     older.
0109..............................  Stroke with motor score from 34-38
                                     and patient is 82 years old or
                                     younger.
0110..............................  Stroke with motor score from 12-33
                                     and patient is 89 years old or
                                     older.
0111..............................  Stroke with motor score from 27-33
                                     and patient is between 82 and 88
                                     years old.
0112..............................  Stroke with motor score from 12-26
                                     and patient is between 82 and 88
                                     years old.
0113..............................  Stroke with motor score from 27-33
                                     and patient is 81 years old or
                                     younger.
0114..............................  Stroke with motor score from 12-26
                                     and patient is 81 years old or
                                     younger.

[[Page 41346]]

 
0201..............................  Traumatic brain injury with motor
                                     score from 52-84 and cognitive
                                     score from 24-35.
0202..............................  Traumatic brain injury with motor
                                     score from 40-51 and cognitive
                                     score from 24-35.
0203..............................  Traumatic brain injury with motor
                                     score from 40-84 and cognitive
                                     score from 5-23.
0204..............................  Traumatic brain injury with motor
                                     score from 30-39.
0205..............................  Traumatic brain injury with motor
                                     score from 12-29.
0301..............................  Non-traumatic brain injury with
                                     motor score from 51-84.
0302..............................  Non-traumatic brain injury with
                                     motor score from 41-50.
0303..............................  Non-traumatic brain injury with
                                     motor score from 25-40.
0304..............................  Non-traumatic brain injury with
                                     motor score from 12-24.
0401..............................  Traumatic spinal cord injury with
                                     motor score from 50-84.
0402..............................  Traumatic spinal cord injury with
                                     motor score from 36-49.
0403..............................  Traumatic spinal cord injury with
                                     motor score from 19-35.
0404..............................  Traumatic spinal cord injury with
                                     motor score from 12-18.
0501..............................  Non-traumatic spinal cord injury
                                     with motor score from 51-84 and
                                     cognitive score from 30-35.
0502..............................  Non-traumatic spinal cord injury
                                     with motor score from 51-84 and
                                     cognitive score from 5-29.
0503..............................  Non-traumatic spinal cord injury
                                     with motor score from 41-50.
0504..............................  Non-traumatic spinal cord injury
                                     with motor score from 34-40.
0505..............................  Non-traumatic spinal cord injury
                                     with motor score from 12-33.
0601..............................  Neurological with motor score from
                                     56-84.
0602..............................  Neurological with motor score from
                                     47-55.
0603..............................  Neurological with motor score from
                                     36-46.
0604..............................  Neurological with motor score from
                                     12-35.
0701..............................  Fracture of lower extremity with
                                     motor score from 52-84.
0702..............................  Fracture of lower extremity with
                                     motor score from 46-51.
0703..............................  Fracture of lower extremity with
                                     motor score from 42-45.
0704..............................  Fracture of lower extremity with
                                     motor score from 38-41.
0705..............................  Fracture of lower extremity with
                                     motor score from 12-37.
0801..............................  Replacement of lower extremity joint
                                     with motor score from 58-84.
0802..............................  Replacement of lower extremity joint
                                     with motor score from 55-57.
0803..............................  Replacement of lower extremity joint
                                     with motor score from 47-54.
0804..............................  Replacement of lower extremity joint
                                     with motor score from 12-46 and
                                     cognitive score from 32-35.
0805..............................  Replacement of lower extremity joint
                                     with motor score from 40-46 and
                                     cognitive score from 5-31.
0806..............................  Replacement of lower extremity joint
                                     with motor score from 12-39 and
                                     cognitive score from 5-31.
0901..............................  Other orthopedic with motor score
                                     from 54-84.
0902..............................  Other orthopedic with motor score
                                     from 47-53.
0903..............................  Other orthopedic with motor score
                                     from 38-46.
0904..............................  Other orthopedic with motor score
                                     from 12-37.
1001..............................  Amputation, lower extremity with
                                     motor score from 61-84.
1002..............................  Amputation, lower extremity with
                                     motor score from 52-60.
1003..............................  Amputation, lower extremity with
                                     motor score from 46-51.
1004..............................  Amputation, lower extremity with
                                     motor score from 39-45.
1005..............................  Amputation, lower extremity with
                                     motor score from 12-38.
1101..............................  Amputation, non-lower extremity with
                                     motor score from 52-84.
1102..............................  Amputation, non-lower extremity with
                                     motor score from 38-51.
1103..............................  Amputation, non-lower extremity with
                                     motor score from 12-37.
1201..............................  Osteoarthritis with motor score from
                                     55-84 and cognitive score from 34-
                                     35.
1202..............................  Osteoarthritis with motor score from
                                     55-84 and cognitive score from 5-
                                     33.
1203..............................  Osteoarthritis with motor score from
                                     48-54.
1204..............................  Osteoarthritis with motor score from
                                     39-47.
1205..............................  Osteoarthritis with motor score from
                                     12-38.
1301..............................  Rheumatoid, other arthritis with
                                     motor score from 54-84.
1302..............................  Rheumatoid, other arthritis with
                                     motor score from 47-53.
1303..............................  Rheumatoid, other arthritis with
                                     motor score from 36-46.
1304..............................  Rheumatoid, other arthritis with
                                     motor score from 12-35.
1401..............................  Cardiac with motor score from 56-84.
1402..............................  Cardiac with motor score from 48-55.
1403..............................  Cardiac with motor score from 38-47.
1404..............................  Cardiac with motor score from 12-37.
1501..............................  Pulmonary with motor score from 61-
                                     84.
1502..............................  Pulmonary with motor score from 48-
                                     60.
1503..............................  Pulmonary with motor score from 36-
                                     47.
1504..............................  Pulmonary with motor score from 12-
                                     35.
1601..............................  Pain syndrome with motor score from
                                     45-84.
1602..............................  Pain syndrome with motor score from
                                     12-44.
1701..............................  Major multiple trauma without brain
                                     or spinal cord injury with motor
                                     score from 46-84.
1702..............................  Major multiple trauma without brain
                                     or spinal cord injury with motor
                                     score from 33-45.
1703..............................  Major multiple trauma without brain
                                     or spinal cord injury with motor
                                     score from 12-32.
1801..............................  Major multiple trauma with brain or
                                     spinal cord injury with motor score
                                     from 45-84 and cognitive score from
                                     33-35.
1802..............................  Major multiple trauma with brain or
                                     spinal cord injury with motor score
                                     from 45-84 and cognitive score from
                                     5-32.
1803..............................  Major multiple trauma with brain or
                                     spinal cord injury with motor score
                                     from 26-44.

[[Page 41347]]

 
1804..............................  Major multiple trauma with brain or
                                     spinal cord injury with motor score
                                     from 12-25.
1901..............................  Guillian Barre with motor score from
                                     47-84.
1902..............................  Guillian Barre with motor score from
                                     31-46.
1903..............................  Guillian Barre with motor score from
                                     12-30.
2001..............................  Miscellaneous with motor score from
                                     54-84.
2002..............................  Miscellaneous with motor score from
                                     45-53.
2003..............................  Miscellaneous with motor score from
                                     33-44.
2004..............................  Miscellaneous with motor score from
                                     12-32 and patient is 82 years old
                                     or older.
2005..............................  Miscellaneous with motor score from
                                     12-32 and patient is 81 years old
                                     or younger.
2101..............................  Burns with motor score from 46-84.
2102..............................  Burns with motor score from 12-45.
5001..............................  Short-stay cases, length of stay is
                                     3 days or fewer.
5101..............................  Expired, orthopedic, length of stay
                                     is 13 days or fewer.
5102..............................  Expired, orthopedic, length of stay
                                     is 14 days or more.
5103..............................  Expired, not orthopedic, length of
                                     stay is 15 days or fewer.
5104..............................  Expired, not orthopedic, length of
                                     stay is 16 days or more.
------------------------------------------------------------------------
* The first two digits of the CMG number from 01 to 21 correspond with a
  specific RIC number shown on Chart 5.

E. Methodology to Classify Patients Into CMGs

    Data from the patient assessment instrument, described in section 
IV.A. of this preamble and specified in Sec. 412.620(a)(3) of the final 
regulations, will be used to classify a patient into a RIC and CMG. In 
Chart 7, we have identified the impairment code needed to classify a 
patient into a RIC and specific items that must be completed on the 
instrument in order to classify a patient into a CMG. The items from 
the instrument will be used to establish a motor score, a cognitive 
score, and age of the patient that corresponds with a specific CMG 
description.

               Chart 7.--Critical Patient Assessment Items
------------------------------------------------------------------------
  Item category, item sub-category, item name,     Admission   Discharge
                   item number                    assessment  assessment
------------------------------------------------------------------------
                      Identification Information *
------------------------------------------------------------------------
1. Facility Information:
  A. Facility Name..............................         X
  B. Facility Medicare Provider Number..........         X
2. Patient Medicare Number......................         X
3. Patient Medicaid Number......................         X
4. Patient First Name...........................         X
5. Patient Last Name............................         X
6. Birth Date **................................         X
7. Social Security Number.......................         X
8. Gender.......................................         X
9. Race/Ethnicity (Check all that apply):
  American Indian or Alaska Native..............         X
  Asian.........................................         X
  Black or African American.....................         X
  Hispanic or Latino............................         X
  Native Hawaiian or Other Pacific Islander.....         X
  White.........................................         X
10. Marital Status..............................         X
11. Zip Code of Patient's Pre-Hospital Residence         X
------------------------------------------------------------------------
                         Admission Information *
------------------------------------------------------------------------
12. Admission Date..............................         X
13. Assessment Reference Date...................         X
14. Admission Class.............................         X
15. Admit From..................................         X
16. Pre-Hospital Living Setting.................         X
17. Pre-Hospital Living With....................         X
18. Pre-Hospital Vocational Category............         X
19. Pre-Hospital Vocational Effort..............         X
------------------------------------------------------------------------
                           Payer Information *
------------------------------------------------------------------------
20. Payment Source:
  A. Primary Source.............................         X
  B. Secondary Source...........................         X
------------------------------------------------------------------------
                          Medical Information *
------------------------------------------------------------------------
21. Impairment Group **.........................         X           X
22. Etiologic Diagnosis.........................         X
23. Date of Onset of Etiologic Diagnosis........         X
24. Comorbid Conditions: **
  A.............................................         X           X
  B.............................................         X           X
  C.............................................         X           X
  D.............................................         X           X
  E.............................................         X           X
  F.............................................         X           X
  G.............................................         X           X
  H.............................................         X           X
  I.............................................         X           X
  J.............................................         X           X
------------------------------------------------------------------------
                              Medical Needs
------------------------------------------------------------------------
25. Is patient comatose at admission?...........         X
26. Is patient delirious at admission?..........         X
27. Swallowing Status...........................         X           X
28. Clinical signs of dehydration...............         X           X
------------------------------------------------------------------------
                          Function Modifiers *
------------------------------------------------------------------------
29. Bladder Level **............................         X           X
30. Bladder Freq. **............................         X           X
31. Bowel Level **..............................         X           X
32. Bowel Freq. **..............................         X           X
33. Tub Transfer **.............................         X           X
34. Shower Transfer **..........................         X           X
35. Distance Walked (feet) **...................         X           X
36. Distance Traveled in Wheelchair (feet) **...         X           X
37. Walk **.....................................         X           X
38. Wheelchair **...............................         X           X
------------------------------------------------------------------------
                            FIM Instrument *
------------------------------------------------------------------------
Self-Care:
  A. Eating **..................................         X           X
  B. Grooming **................................         X           X
  C. Bathing **.................................         X           X
  D. Dressing--Upper **.........................         X           X
  E. Dressing--Lower **.........................         X           X
  F. Toileting **...............................         X           X
------------------------------------------------------------------------
                            Sphincter Control
------------------------------------------------------------------------
  G. Bladder **.................................         X           X
  H. Bowel **...................................         X           X
------------------------------------------------------------------------

[[Page 41348]]

 
                                Transfers
------------------------------------------------------------------------
  I. Bed, Chair, Wheelchair **..................         X           X
  J. Toilet **..................................         X           X
  K. Tub, Shower................................         X           X
------------------------------------------------------------------------
                               Locomotion
------------------------------------------------------------------------
  L. Walk/Wheelchair **.........................         X           X
  M. Stairs **..................................         X           X
------------------------------------------------------------------------
                              Communication
------------------------------------------------------------------------
  N. Comprehension **...........................         X           X
  O. Expression **..............................         X           X
------------------------------------------------------------------------
                            Social Cognition
------------------------------------------------------------------------
  P. Social Interaction **......................         X           X
  Q. Problem Solving **.........................         X           X
  R. Memory **..................................         X           X
------------------------------------------------------------------------
                         Discharge Information *
------------------------------------------------------------------------
40. Discharge Date..............................                     X
41. Patient discharge against medical advice....                     X
42. Program Interruptions.......................                     X
43. Program Interruption Dates:
  A. 1st Transfer Date..........................                     X
  B. 1st Return Date............................                     X
  C. 2nd Transfer Date..........................                     X
  D. 2nd Return Date............................                     X
  E. 3rd Transfer Date..........................                     X
  F. 3rd Return Date............................                     X
44A. Discharge to Living Setting................                     X
44B. Was patient discharged with Home Health                         X
 Services?......................................
45. Discharge to Living With....................                     X
46. Diagnosis for Transfer or Death.............                     X
47. Complications during rehabilitation stay: **
  A.............................................                     X
  B.............................................                     X
  C.............................................                     X
  D.............................................                     X
  E.............................................                     X
  F.............................................                     X
------------------------------------------------------------------------
                           Quality Indicators
------------------------------------------------------------------------
Respiratory Status:
48. Shortness of breath with exertion...........         X           X
49. Shortness of breath at rest.................         X           X
50. Difficulty coughing.........................         X           X
------------------------------------------------------------------------
                                  Pain
------------------------------------------------------------------------
51. Rate the highest level of pain reported by           X           X
 the patient within the assessment period.......
------------------------------------------------------------------------
                               Push Scale
------------------------------------------------------------------------
Pressure Ulcers                                                      X
52A. Highest current pressure ulcer stage.......         X           X
52B. Number of current pressure ulcers..........         X           X
52C. Length multiplied by width (open wound              X           X
 surface area)..................................
52D. Exudate amount.............................         X           X
52E. Tissue type................................         X           X
52F. Total Push Score...........................         X           X
------------------------------------------------------------------------
                                 Safety
------------------------------------------------------------------------
53. Total number of falls during the                                 X
 rehabilitation stay............................
54. Balance problem.............................         X          X
------------------------------------------------------------------------
* The FIM data set, measurement scale, and impairment codes incorporated
  or referenced herein are the property of UB Foundation Activities,
  Inc. ``1993, 2001 UB Foundation Activities, Inc. The FIM mark is owned
  by UBFA, Inc.
** Denotes the items from the patient assessment instrument that must be
  recorded by item number to classify a patient into a CMG. All other
  items in this Chart will be used to administer, monitor, and analyze
  possible refinements to the IRF prospective payment system. The items
  identified will be further explained and may be refined in the manual
  associated with our patent assessment instrument.

Case Example

    The following is an example of how data from the admission patient 
assessment will be used to code the functional independence measure 
items of the IRF patient assessment instrument.

    Note: This is a fictitious patient.

    Martin P. is an 84-year-old left-handed male who was admitted to an 
acute care hospital at 11:00 A.M. An initial medical history was 
obtained from his wife. He is English speaking. Martin is retired and 
lives with his 72-year-old wife in a townhouse with three levels. He 
has been an adult-onset diabetic for 10 years, who has been treated 
with oral medication which provides adequate control of his blood 
glucose. He has a history of hypertension. He has, nevertheless, been 
actively traveling with his wife and actively involved with his 
daughter and her family who live a few blocks away. His wife explained 
that Martin complained of heaviness in his right arm and an overall 
tired or weak feeling prior to the onset and asked his wife to call the 
doctor. When his speech was affected, she called an ambulance.
    On admission to the hospital, Martin's speech was garbled, but he 
was able to follow simple commands. His right arm and leg were weak 
with diminished sensation.
    Diagnosis on admission: Ischemic stroke involving the left middle 
cerebral artery.
    Four days after admission to an acute care hospital, Martin was 
medically stable. He was alert, cooperative, and had the support of his 
family. He was transferred to an IRF for intensive inpatient 
rehabilitation. Functional assessment during the first 3 days after 
admission to the rehabilitation unit is as follows:
Eating
    Martin eats by himself after the helper provides setup assistance, 
such as opening milk and juice containers and cutting meat.
Grooming
    Martin performs grooming activities at the sink. He washes his 
face, combs his hair, rinses his dentures, and shaves himself after the 
helper provides setup assistance.
Bathing
    Martin washes, rinses, and dries just less than half of his body 
while sitting on a tub bench. Specifically, he bathes his chest, 
abdomen, and his left and right thighs. The helper then bathes Martin's 
arms, lower legs, buttocks, and perineal area.
Dressing--Upper Body
    Martin typically wears a sweatshirt to therapy. The helper threads 
the left and right sleeves of the sweatshirt. Martin pulls the shirt 
over his head and down over his trunk. Martin performs just over half 
of the effort.
Dressing--Lower Body
    Martin typically wears underwear, sweatpants, antiembolic 
stockings, and shoes on his lower body. The helper performs most of the 
lower body dressing tasks, with Martin performing just over one-fourth 
of the effort.
Toileting
    Martin uses a urinal to void and the toilet for bowel movements. 
The helper manages his clothing before and after using the toilet or 
urinal. Martin

[[Page 41349]]

cleanses himself after voiding and moving his bowels. Martin performs 
approximately one-third of the toileting effort.
Bladder Management
    Martin uses a urinal to void. The helper places the urinal within 
reach on the bedside table and empties it for Martin. He has had two 
bladder accidents during the past week.
Bowel Management
    Martin has not had any episodes of bowel incontinence. He does not 
use any assistive devices related to bowel management, but does take a 
stool softener every day.
Transfers: Bed, Chair, Wheelchair
    The helper provides lifting assistance to transfer Martin from the 
wheelchair to the bed. Although Martin assists during the transfer, he 
performs less than half of the effort.
Transfers: Toilet
    The helper provides lifting assistance to get Martin from a sitting 
position in the wheelchair to a standing position. Although Martin 
assists during the transfer, he performs less than half of the effort.
Locomotion: Walk/Wheelchair
    The therapist expects Martin to be ambulating at discharge. At 
admission, Martin travels in the wheelchair over 150 feet requiring 
supervision and cueing only. He walks only 15 feet at a time in therapy 
with one person assisting. Note: Since patient is expected to walk at 
discharge, record walking score.
Locomotion: Stairs
    Martin has not attempted going up or down stairs.
Comprehension
    Martin understands directions and questions about his daily 
activities. Martin indicates food and beverages preferences when 
someone reads the hospital menu. He does not understand more abstract 
information such as humor or discharge planning. Overall, Martin 
understands just over 90 percent of the basic information presented to 
him.
Expression
    During the day, Martin expresses basic daily information such as 
asking for pain medication and food preferences. His speech is slurred, 
but understandable. He does not express more complex information.
Social Interaction
    Martin interacts appropriately with the hospital staff, other 
patients and family members.
Problem Solving
    Martin recognizes and solves basic problems as he performs his 
daily activities such as asking for help as he tries to thread his 
shirt without success, and asking for assistance to wash his lower 
body. He has more trouble with unfamiliar tasks. For example, he is 
unable to solve more complex problems such as managing his medications.
Memory
    Martin recognizes people frequently encountered, and remembers his 
daily therapy schedule and directions in most situations. He has 
difficulty remembering under stressful situations, and requires 
prompting less than 10 percent of the time.
    In order to classify a patient into a CMG, the IRF will use the IRF 
patient assessment instrument admission assessment data to score a 
patient's functional independence measures that consist of what are 
termed ``motor'' items and the ``cognitive'' items. In addition to the 
functional independence measures, the patient's age will also influence 
the CMG into which the patient is classified. The motor items are 
generally indications of the patient's physical functioning level. The 
cognitive items are generally indications of the patient's mental 
functioning level, and are related to the patient's ability to process 
and respond to empirical factual information, use judgment, and 
accurately perceive what is happening. The motor items are eating, 
grooming, bathing, dressing upper body, dressing lower body, toileting, 
bladder management, bowel management, transfer to bed/chair/wheelchair, 
transfer to toilet, walking or wheelchair use, and stair climbing. The 
cognitive items are comprehension, expression, social interaction, 
problem solving, and memory. (The CMS IRF patient assessment instrument 
manual will include more information on these items.) Each item is 
generally recorded on our patient assessment instrument and scored on a 
scale of 1 to 7, with a 7 indicating complete independence in this area 
of functioning, and a 1 indicating that a patient is very impaired in 
this area of functioning.
    Under the current instructions for completing the FIM instrument, a 
1 is recorded if an activity did not occur indicating that the patient 
needs total assistance to perform the activity. For our patient 
assessment instrument, an 8 will be recorded to indicate that the 
activity did not occur. This will enable us to distinguish between 
patients who needed total assistance from patients who did not perform 
an activity. However, for the purpose of classifying a patient into a 
CMG, a recorded score of 8 will be recoded as a 1. This scoring 
methodology will then be consistent with the scoring methodology for 
the FIM data used to construct the CMGs in this final rule. The 
methodology to determine the score will be further explained in the 
manual associated with our patient assessment instrument.
    The coding of this patient's functional independence measures on 
the IRF patient assessment instrument is reflected in the chart below:

------------------------------------------------------------------------
                 Item                   Rating         Rationale *
------------------------------------------------------------------------
Eating...............................        5   The helper provides
                                                  assistance such as
                                                  opening containers--
                                                  Setup.
Grooming.............................        5   The helper provides
                                                  setup assistance--
                                                  Setup.
Bathing..............................        2   Martin washes less than
                                                  half of his body--
                                                  Maximal Assistance.
Dressing-Upper Body..................        3   The helper threads both
                                                  sweatshirt sleeves.
                                                  Martin threads his
                                                  neck through the
                                                  sweatshirt and pulls
                                                  the sweatshirt over
                                                  his trunk--Moderate
                                                  Assistance.
Dressing-Lower Body..................        2   Martin performs just
                                                  over one-fourth of the
                                                  effort--Total
                                                  Assistance.
Toileting............................        2   Martin does his own
                                                  perineal hygiene. The
                                                  helper manages
                                                  Martin's clothing
                                                  before and after
                                                  toilet/urinal use--
                                                  Maximal Assistance.

[[Page 41350]]

 
Bladder Management...................        3   Martin has had two
                                                  bladder accidents
                                                  (wetting linen/
                                                  clothing) during the
                                                  past week (level 3).
                                                  The helper provides
                                                  setup assistance for
                                                  bladder management.
                                                  Record the lower
                                                  rating--Moderate
                                                  Assistance.
Bowel Management.....................        6   Martin is not
                                                  incontinent of stool
                                                  (level 7) and does not
                                                  use any assistive
                                                  devices. He takes a
                                                  stool softener
                                                  (medication--level 6)--
                                                  Record the lower
                                                  rating--Modified
                                                  Independence.
Transfer: Bed, Chair, Wheelchair.....        2   Martin performs between
                                                  25 and 49 percent of
                                                  the effort--Maximal
                                                  Assistance.
Transfer: Toilet.....................        2   Martin performs between
                                                  25 and 49 percent of
                                                  the effort--Maximal
                                                  Assistance.
Walk/Wheelchair......................        1   Martin travels in a
                                                  wheelchair more than
                                                  150 feet with
                                                  supervision (level 5),
                                                  but is expected to
                                                  walk by discharge.
                                                  Record the rating
                                                  based on Martin's
                                                  walking: Level 1--
                                                  Total Assistance.
Stairs...............................        1   Martin has not
                                                  attempted stairs.
                                                  Activity Did Not
                                                  Occur--Code 8 on form,
                                                  and recode to 1 for
                                                  CMG assignment.
Comprehension........................        5   Martin understands over
                                                  90 percent of the
                                                  basic information
                                                  presented to him, but
                                                  not complex
                                                  information--Standby
                                                  Prompting.
Expression...........................        5   Martin expresses basic
                                                  information, not
                                                  complex information--
                                                  Standby Prompting.
Social Interaction...................        7   Martin interacts
                                                  appropriately with the
                                                  staff--Complete
                                                  Independence.
Problem Solving......................        5   Martin recognizes and
                                                  solves routine
                                                  problems only (not
                                                  complex)--Supervision
Memory...............................        5   Martin remembers more
                                                  than 90 percent of the
                                                  time. He only has
                                                  difficulty during
                                                  stressful situations--
                                                  Supervision.
------------------------------------------------------------------------
* The use of the rationale and the methodology to determine the rating
  (score) will be further explained in the manual associated with the
  patient assessment instrument.

    The patient's motor score (the sum of the scores for eating; 
grooming; bathing; dressing; toileting; bladder and bowel management; 
transfer: bed, chair, wheelchair; transfer: toilet; locomotion: walk/
wheelchair; and locomotion: stairs) equals 34. The patient's cognitive 
score (the sum of comprehension; expression; social interaction; 
problemsolving; and memory) equals 27. Based on this patient's reason 
for rehabilitation (ICD-9 coding: Cerebral artery occlusion--434.91, 
hemiplegia--342.9, aphasia--784.3), he is first classified into RIC 01 
for stroke. He is then classified into CMG 0108 because his motor score 
is between 34-38 and he is more than 83 years old. (The cognitive score 
does not affect this CMG assignment.)

F. Adjustment to the CMGs

    In accordance with Sec. 412.620(c) of the final regulations and 
section 1886(j)(2)(C)(i) of the Act, we adjust the CMGs periodically to 
reflect changes in treatment patterns, technology, number of 
discharges, and other factors affecting the relative use of resources. 
191

VI. Payment Rates

    The IRF prospective payment system in this final rule utilizes 
Federal prospective payment rates across 100 distinct CMGs. The Federal 
payment rates are established using a standard payment amount (referred 
to as the budget neutral conversion factor). A set of relative payment 
weights that account for the relative difference in resource use across 
the CMGs is applied to the budget neutral conversion factor and, 
finally, a number of facility-level and case-level adjustments may 
apply. The facility-level adjustments include those that account for 
geographic variation in wages (wage index), disproportionate share 
hospital (DSH) percentages, and location in a rural area. Case-level 
adjustments include those that apply for interrupted stays, transfer 
cases, short-stays, cases in which patients expire, and outlier cases, 
as described later in this section.
    The budget neutral conversion factor provides the basis for 
determining the CMG-based Federal payment rates. It is a standardized 
payment amount that is based on average costs from a base period and 
also reflects the combined aggregate effects of the payment weights, 
various facility-level and case-level adjustments, and other policies 
discussed in this section. Consequently, in discussing the methodology 
for development of the Federal payment rates, we begin by describing 
the various adjustments and factors that serve as the inputs used in 
establishing the budget neutral conversion factor.
    We developed prospective payments for IRFs using the following 
major steps:
     Develop the CMG relative weights.
     Determine the payment adjustments.
     Calculate the budget neutral conversion factor.
     Calculate the Federal CMG prospective payments.
    A description of each step and a discussion of our final policies 
follow.

A. Development of CMG Relative Weights

    Section 1886(j)(2)(B) of the Act requires that an appropriate 
relative weight be assigned to each CMG. Relative weights are a primary 
element of a case-mix adjusted prospective payment system that account 
for the variance in cost per discharge and resource utilization among 
the payment groups. The establishment of relative weights will help 
ensure that beneficiaries have access to care and receive the 
appropriate services that are

[[Page 41351]]

commensurate to other beneficiaries that are classified to the same 
CMG. In addition, prospective payments that are based on relative 
weights encourage provider efficiency and, hence, help ensure a fair 
distribution of Medicare payments. Accordingly, under 
Sec. 412.620(b)(1) of the final regulations, we calculate a relative 
weight for each CMG that is proportional to the resources needed by an 
average inpatient rehabilitation case in that CMG. For example, cases 
in a CMG with a relative weight of 2, on average, will cost twice as 
much as cases in a CMG with a relative weight of 1. We discuss the 
details of developing the relative weights below.
    As indicated in section III. of this final rule, we believe that 
the RAND analysis has shown that CMGs based on functional-related 
groups (adjusted for comorbidities) are effective predictors of 
resource use as measured by proxies such as length of stay and costs. 
The use of these proxies is necessary in developing the relative 
weights because data that measure actual nursing and therapy time spent 
on patient care, and other resource use data, are not available. 
Throughout this section of the final rule, we describe how we used 
these proxy measures of resource use to develop the relative weights 
for each CMG and the specific case-level adjustments.
1. Overview of Development of the CMG Relative Weights
    To calculate the relative weights, we estimate operating (routine 
and ancillary services) and capital costs of IRFs. For the payment 
rates set forth in this final rule, we use the same method for 
calculating the cost of a case as we did for the proposed rule; 
however, we have used the most recent data available. Specifically, for 
the relative weights set forth in this final rule, we obtained cost-to-
charge ratios for ancillary services and per diem costs for routine 
services from the most recent available cost report data (FYs 1998, 
1997, and/or 1996). We obtained charges from calendar year 1999 
Medicare bill data and derived corresponding functional measures from 
the FIM data. We omitted data from rehabilitation facilities that are 
classified as all-inclusive providers from the calculation of the 
relative weights, as well as from the parameters that we use to define 
transfer cases, because these facilities are paid a single, negotiated 
rate per discharge and they do not maintain a charge structure.
    For ancillary services, we calculate both operating and capital 
costs by converting charges from Medicare claims into costs using 
facility-specific, cost-center specific cost-to-charge ratios obtained 
from cost reports. Our data analysis showed that some departmental 
cost-to-charge ratios were missing or found to be outside a range of 
statistically valid values. For anesthesiology, a value greater than 
10, or less than 0.01, was found not to be statistically valid. For all 
other cost centers values greater than 10 or less than 0.5 were found 
not to be statistically valid. As with the proposed rule, we replace 
individual cost-to-charge ratios outside of these thresholds. The 
replacement value that we use for these aberrant cost-to-charge ratios 
is the mean value of the cost-to-charge ratio for the cost-center 
within the same type of hospital (either freestanding or unit).
    For routine services, per diem operating and capital costs are used 
to develop the relative weights. In addition, per diem operating and 
capital costs for special care services are used to develop the 
relative weights. (Special care services are furnished in intensive 
care units. We note that fewer than 1 percent of rehabilitation days 
are spent in intensive care units.) Per diem costs are obtained from 
each facility's Medicare cost report data. We use per diem costs for 
routine and special care services because, unlike for ancillary 
services, we cannot obtain cost-to-charge ratios for those services 
from the cost report data. To estimate the costs for routine and 
special care services included in developing the relative weights, we 
sum the product of routine cost per diem and Medicare inpatient days 
and the product of the special care per diem and the number of Medicare 
special care days.
    In this final rule, we use a hospital-specific relative value 
method to calculate relative weights as described in the proposed rule. 
We use the following basic steps to calculate the relative weights for 
this final rule:
    The first step in calculating the CMG weights is to estimate the 
effect that comorbidities have on costs. The second step is to adjust 
the cost of each Medicare discharge (case) to reflect the effects found 
in the first step. In the third step, the adjusted costs from the 
second step are used to calculate ``relative adjusted weights'' in each 
CMG using the hospital-specific relative value method. The final steps 
are to calculate the CMG relative weights by modifying the ``relative 
adjusted weight'' with the effects of the existence of the comorbidity 
tiers (explained below) and normalize the weights to 1.
    We describe each of these steps in greater detail below.
2. Steps for Calculating the Relative Weights
    Step 1--Estimate the effect of comorbidities on costs.

    We use regression analyses to determine if we should establish a 
separate relative weight for cases in a CMG with comorbidities meeting 
the appropriate criteria described in section V.B. of this preamble. In 
the proposed rule, we indicated that a higher payment would be made for 
cases that have at least one relevant comorbidity from the list 
included in Appendix C of the proposed rule. Under the proposed policy, 
payment for a case with one relevant comorbidity would be the same as a 
case with multiple relevant comorbidities.
    Comment: Several commenters suggested that additional payments 
should be made for more than one comorbidity. Further, some commenters 
suggested that payment for comorbidities should be based on a tiered 
approach. Specifically, a tiered approach provides for different 
payments based on the cost of the comorbidity.
    Response: In response to these comments, for this final rule we 
analyzed the use of a tiered approach that consists of three weighting 
levels that account for variations in severity of relevant 
comorbidities. The data indicate that arraying comorbidities into three 
categories based on whether the costs associated with the comorbidities 
are considered high, medium, or low improves the extent to which 
payment matches cost. As described later in this final rule, separate 
relative weights for three tiers will now be calculated for each CMG 
using the weighting methodology. Then, separate payment rates will be 
calculated by multiplying the relative weights by a standardized 
payment amount which is also discussed later in this final rule. The 
result is variations in payment for CMGs based on differences in costs 
among relevant comorbidities for each tier. When a case has more than 
one comorbidity, the applicable CMG payment rate will be determined by 
the comorbidity that results in the highest payment. We believe the use 
of this 3-tiered approach will improve the extent to which the IRF 
prospective payments accurately reflect case costs. Therefore, we will 
use the 3-tiered approach for the payment rates set forth in this final 
rule.
    Comment: Several commenters suggested that the list of 
comorbidities in the proposed Appendix C should be expanded to include 
specific diagnoses. In contrast, some commenters recommended that 
certain diagnoses

[[Page 41352]]

should be excluded from the list of comorbidities because they 
suggested these codes were inappropriate for care furnished in an 
inpatient rehabilitation setting.
    Response: We analyzed the comorbidities listed in Appendix C in the 
proposed rule extensively to determine the appropriateness of the 
diagnoses and improve the list. Based on the results of the analyses 
described below, we are modifying the list of comorbidities in Appendix 
C of this final rule. Specifically, we applied the following general 
criteria to refine the comorbidity list further: We deleted codes that 
we found to be irrelevant to the inpatient rehabilitation population 
and added codes that we found to be associated with higher costs in the 
inpatient rehabilitation population. We removed from the list those 
comorbidities that we determined to be preventable by good medical 
care. An example would be not to pay extra for urinary tract 
infections, many of which can be prevented by removing unnecessary 
Foley catheters. In addition, as we proposed, conditions that we 
determined to be inherent to a specific RIC were excluded from the list 
of relevant comorbidities for that RIC.
    We will continue to examine the appropriateness of the 
comorbidities and may refine the list in the future if warranted. We 
used the final list of comorbidities in Appendix C of this final rule 
to construct the payment rates effective with this final rule. This 
list of comorbidities will help determine which comorbidity tier may be 
appropriate for payment.
    To compute payments for the comorbidity tiers, we performed a 
regression analysis to determine if the comorbidity tiers affect costs 
per case by RIC. In the analysis, we found that each comorbidity tier 
does not have the same effect on each RIC. Therefore, if coefficients 
by RIC are positive and significant and the comorbidity is deemed to be 
relevant clinically to the CMG, we calculate separate relative weights 
for cases for each comorbidity tier in Step 3 below.
    Comment: One commenter requested clarification regarding why the 
CMGs that depicted expired patients were not affected by comorbidities.
    Response: The process of determining the effects of comorbidities 
excludes cases that end in death. The number of cases used to calculate 
the relative weights for cases that end in death is too small to 
develop different payments based on comorbidities. However, the effects 
of comorbidities are still accounted for in the payments. To the extent 
that comorbidities occur with cases ending in death, the costs of 
comorbidities are included in the average cost and, thus, the relative 
weight for these cases reflects comorbidities for these cases.
    Step 2--Adjust the costs of each discharge for the effects of 
comorbidities.
    The second step in the calculation of the weights is to adjust the 
resource use for each case to eliminate the effect of comorbidities. 
The adjusted cost (A) for a discharge is calculated as follows: Let x 
be a vector (a quantity completely specified by a magnitude and a 
direction) with three elements, one for each comorbidity tier. Each 
element of x will be 1 if the case is in that tier and 0 otherwise. The 
a is the transposed vector of coefficients corresponding to each tier 
in the RIC for the case. Then A = cost per discharge/exp(a*x). These 
adjusted costs for each discharge are then used to calculate the 
adjusted relative weight for each CMG, thereby eliminating the effect 
of comorbidities from the weight (signified by wk in the formula 
described in step 3 below).
    Step 3--Calculate the CMG relative weights adjusted for comorbidity 
tiers, on an iterative basis.
    The process of calculating the CMG relative weights is iterative. 
First, we give an initial case-mix index (CMI) value of 1 to each 
facility. Then, for each case, we calculate a facility-specific 
relative value by dividing the comorbidity-adjusted cost of the case by 
the average comorbidity-adjusted cost of all cases at the facility, and 
multiplying the result by the facility's CMI. We then set the CMG-
adjusted weights in proportion to the average of the facility-specific 
relative values. The result is a new CMI for each facility and, 
therefore, new facility-specific, relative values. The process 
continues until there is convergence between the weights produced at 
adjacent steps, for example, when the maximum difference is less than 
0.0001. After the first iteration, we remove statistical outlier--cases 
that differ from the CMG mean by more than three standard deviations in 
the log scale of standardized cost. We believe this method is a 
reasonable statistical approach to remove aberrant values that could 
skew the remainder of the data. We treat discharges that meet the 
definition of a transfer case as a fraction of a case. (See discussion 
of transfers in section VI.B. of this preamble.) We calculate relative 
weight for each relevant combination of CMG ``without comorbidity'', 
``tier 1'', ``tier 2'', and ``tier 3'', using the following formula:

W(k, x) = exp(a*x)wk

where x and a are the vectors described in step 2 (all elements of x 
are 0 if no comorbidities were present, so exp(a*x) = 1 when no 
comorbidities are present). The variable (wk) equals the 
comorbidity adjusted weight. If the coefficient (a) is not positive 
and significant as previously discussed in Step 1, then (a) will be 
set to equal 0 in the formula. This results in exp(a*x), in the 
formula, to equal 1 and the weight (W) will equal (wk).

    Step 4--Calculate the weight by modifying the relative adjusted 
weight with the effects of comorbidity and normalizing the weights to 
1.0.
    This step entails calculating a relative weight for each relevant 
combination of CMG and comorbidity tier. In this step, we determine the 
average cost per discharge for all the cases and use that value as the 
divisor to calculate the relative weights. For example, if the average 
cost per discharge across all discharges is $12,000, then the relative 
weight for a CMG with an average cost of $12,000 is 1, and the relative 
weight for a CMG with an average cost per discharge of $20,000 is 1.67. 
If ``r'' is the relative adjusted weight for a case in a CMG with a 
comorbidity given by:

w = k r exp(a*x),

then k is determined so that the average value of w is 1.
    Table 1 in the Addendum to this final rule lists the CMGs, the 
comorbidity tiers, and their respective relative weights. The relative 
weights reflect the inclusion of cases with a very short interruption 
(return on day of discharge or either of the next 2 days). Information 
obtained from the first assessment will be used to determine the 
appropriate CMG and corresponding payment.
    Comment: A few commenters suggested that additional payments should 
be made if the comorbidity develops at any time during the course of 
the inpatient stay, rather than only if the condition is recorded on 
the admission assessment.
    Response: For the proposed rule, we stated that we proposed to pay 
an additional amount with the presence of a relevant comorbidity based 
on the initial assessment. In this final rule, we are using a modified 
version of the UDSmr patient assessment instrument, the FIM. For the 
FIM instrument, comorbidity data are not coded until the discharge 
assessment. Because we are modifying our patient assessment instrument 
to reflect more closely the items and data collection methods from the 
FIM, we will obtain information regarding comorbidities from the 
discharge assessment. However, we will not use any comorbidities 
identified on the day prior to the day of discharge or the day of 
discharge to determine a comorbidity tier. We believe increasing 
payment for comorbidities that occur at the end of a beneficiary's stay 
is

[[Page 41353]]

inappropriate because these comorbidities have less effect on the 
resources consumed during the entire stay. Often, the occurrence of a 
comorbidity at the end of the stay may be part of the reason the 
rehabilitation stay was ended. Comorbidities that are identified on the 
day prior to the day of discharge or the day of discharge should not be 
listed on the discharge assessment; we will reevaluate the 
appropriateness of this type of coding in the future. Therefore, in 
order to determine the appropriate comorbidity, we will use the ICD-9-
CM codes (item 24 on the patient assessment instrument) obtained from 
the discharge assessment.
    If a relevant comorbidity is indicated on the discharge assessment, 
payment will be based on the relative weight from the appropriate 
comorbidity tier column in Table 1 in the Addendum to this final rule.
    Comment: Several commenters expressed concern regarding relative 
weight compression in the proposed classification system.
    Response: Subsequent to issuance of the proposed rule our analysis 
showed that the proposed CMG relative weights exhibited weight 
compression and suggested a methodology for addressing it. Weight 
compression may exist when payment for ``high weighted'' cases is less 
than the cost of the case and payment for ``low weighted'' cases is 
more than the cost of the case. Similarly, CMI compression may exist 
when facilities with high CMIs have higher standardized costs relative 
to their CMG than facilities with low CMIs.
    To measure compression, we use regression analysis to assess the 
relationship of the log of the average cost minus outlier payments at a 
facility and the log of the CMI. The coefficient on the CMI illustrates 
how much cost increases with increasing the CMI. If the weights are 
neither compressed or decompressed, the coefficient will be 1. A value 
greater than 1 indicates compression. The relative weights computed for 
this final rule also exhibited CMI compression with a coefficient of 
about 1.10. In other words, a facility with a case-mix index that is 10 
percent higher than another facility will, on average, cost about 11.0 
percent more.
    In light of the coefficient, we explored possible reasons for 
compression. Analysis of the data supports an assumption that the use 
by IRFs of a single uniform per diem charge for routine services may be 
a major cause of the observed compression. This results in data on IRF 
claims that may not fully reflect the relative resource requirements 
for nursing and other routine services. Further analysis also indicates 
that the likely causes for the compression may be due to the bundling 
of ancillary services into routine costs and varying nursing intensity 
across CMGs. However, at the present time, there is a lack of data to 
resolve these issues directly. When staff time measurements become 
available in the future (as discussed in section III. of this final 
rule), we will analyze these data in terms of potential explanation of 
compression and modify the relative weights or payment methodologies, 
if warranted.
    We believe it is important to alleviate compression to the extent 
that payment for higher cost cases is lower than costs, and payment for 
lower cost cases is higher than costs. If the weights are not adjusted, 
inappropriate incentives will exist to admit the lower cost cases. 
Limiting access to higher cost cases is not a desirable outcome. In 
order to adjust the relative weights for this final rule, we developed 
an algorithm using the relationship of IRF average costs and CMI. We 
believe that using this algorithm to adjust the relative weights will, 
to the extent possible, eliminate CMI compression and result in weights 
that are a better measure of costs than the compressed weights. 
Therefore, we adjust the relative weights using the following basic 
formula:

nw(i) = w(i) + 0.10(w(i)-1)

where nw(i) is the new relative weight and w(i) is the relative 
weight prior to the adjustment.

    The adjusted relative weights result in average payments per IRF 
that vary directly with average costs at the IRF. Although this formula 
is used to adjust the relative weights for each CMG, we do not apply it 
to the short-stay CMG because the result would be a negative relative 
weight. Instead, we reduce the case weight by 15 percent, which we 
believe based on our analysis is an appropriate amount to offset the 
increase in the relative weights at the high end (that is, over 1.0) 
and results in weights that we find are a better measure of costs than 
the compressed weights.

B. Transfer Payment Policy

1. Background
    In the November 3, 2000 proposed rule, we proposed a transfer 
policy under Sec. 412.624(f) to provide for payments that more 
accurately reflect facility resources used and services delivered. This 
reflected our belief that it is important to minimize the inherent 
incentives specifically associated with the early transfer of patients 
in a discharge-based payment system. Discharging patients early can be 
profitable in that IRFs can receive the full CMG payment without 
providing a complete course of treatment. As we previously stated, 
length of stay has been shown to be a good proxy measure of costs. 
Thus, in general, reducing lengths of stay will be profitable under the 
IRF prospective payment system. We are concerned that incentives might 
exist for IRFs to discharge patients prematurely, as well as to admit 
patients that may not be able to endure intense inpatient therapy 
services. Even if patients were transferred before receiving the 
typical, full course of inpatient rehabilitation, the IRF could still 
be paid the full CMG payment rate in the absence of a transfer policy. 
Accordingly, we proposed a transfer policy that reduces the full CMG 
payment rate when a Medicare beneficiary is transferred.
2. Definition of Site of Care
    In the proposed rule, for the purposes of our transfer policy, we 
proposed to define site of care as an ``institutional site'', although 
we were considering the option to extend the definition of site of care 
to the ``provider site'' definition. In addition, we solicited comments 
regarding the inclusion of nursing homes in the definition of site of 
care.
3. Criteria for Defining Transfer Cases
    In the proposed rule, we proposed that in order for a discharge 
from an IRF to be classified as an early transfer, the length of stay 
for the discharge must be less than the average length of stay for the 
given CMG (as shown in section XII. of the proposed rule), and the 
patient must be discharged to another rehabilitation facility, a long-
term care hospital, an inpatient hospital, or a nursing home that 
accepts payment under either the Medicare program or the Medicaid 
program, or both (65 FR 66346).
    Comment: Some commenters suggested that we limit or completely 
eliminate the transfer policy. Specifically, some commenters noted that 
a prospective payment system, by design, is based on averages, making 
adjustments for transfer cases unnecessary. Other commenters suggested 
that nursing homes be removed from the definition of transfer cases. 
Another commenter focused on potential access barriers for patients who 
use a nursing home as their residence.
    Response: With the development of each new prospective payment 
system, analysis of the inherent incentives is necessary to determine 
what factors will

[[Page 41354]]

motivate providers to optimize their payments inappropriately. As we 
stated in the proposed rule, a discharge-based payment system based on 
national average costs contains the inherent incentive to discharge 
patients prematurely and admit patients inappropriately. If these 
incentives are not addressed, Medicare funds will not be distributed in 
the most equitable manner possible or, more specifically, to those IRFs 
that are providing the full course of rehabilitative services. We note 
that a transfer policy for IRFs is contemplated under the statute. 
Specifically, section 1886(j)(1)(E) of the Act states: ``Nothing in 
this subsection shall be construed as preventing the Secretary from 
providing for an adjustment to payments to take into account the early 
transfer of a patient from a rehabilitation facility to another site of 
care.''
    Some commenters suggested that applying our transfer policy to 
cases discharged to nursing homes will pose access barriers to patients 
whose permanent residence is a nursing home because discharge prior to 
the average length of stay for a CMG will always involve a transfer 
payment. Thus, IRFs may decide to not admit nursing home patients 
because they want to avoid the risk of receiving a transfer payment for 
their services. We believe that payments for such cases (which include 
an additional half day payment for the first day) are adequate to cover 
costs of care and should mitigate any potential incentives not to admit 
these patients (see comment and response regarding increasing payment 
for transfer cases). Accordingly, we are not adopting the commenters' 
recommendation to eliminate or narrow the focus of the transfer policy.
    In the November 3, 2000 proposed rule, we stated that we were 
analyzing claims data to determine the extent to which we could 
distinguish among services that could be considered a substitution of 
care rather than an extension of the normal progression for inpatient 
rehabilitation care, and to determine the frequency and intensity of 
both home health and outpatient therapy services. We noted that 
estimating the potential substitution of home health therapy services 
was made more challenging because we had just developed the HHA 
prospective payment system, and it was difficult to anticipate how 
therapy services would be delivered after implementation of that 
system.
    We indicated in the proposed rule that we were not proposing to 
include home health services, outpatient therapy, and ``day programs'' 
in our transfer policy. However, we were considering including these 
services to the extent that we could distinguish when home health and 
outpatient therapy services are more intensive and used as a 
substitution for inpatient rehabilitation care. We proposed that if we 
could determine that the care is used as a substitution rather than 
just the normal progression of care, then we believed that these types 
of intensive home health and outpatient therapy services should be 
included as part of the transfer policy. We specifically solicited 
comments on this option.
    Comment: Several commenters recommended that the transfer policy 
should not be extended to include home health and outpatient 
rehabilitation services. Specifically, the commenters noted that many 
Medicare beneficiaries need and benefit from some short-term home 
health or outpatient therapy following discharge from an IRF. They also 
observed that home health and outpatient therapy services are the most 
appropriate and cost effective way to continue their care.
    Response: To date, claims data are not available to determine the 
extent to which we can distinguish those services that represent a 
substitution of care rather than an extension of the normal progression 
for inpatient rehabilitation care, and to determine the frequency and 
intensity of both home health and outpatient therapy services. 
Therefore, we believe it would be inappropriate to expand the transfer 
policy at this time to include discharges of patients who will receive 
home health and outpatient therapy services. We acknowledge that many 
patients will require some form of therapy after discharge from the 
IRF. However, we remain concerned about incentives to discharge 
patients prematurely under the IRF prospective payment system, and as 
part of the monitoring system we will analyze data to compare practice 
patterns prior to and after its implementation. Based on future 
analysis of practice patterns, we may refine payments in the future, if 
warranted.
    In the November 3, 2000 proposed rule, we also solicited comments 
on a monitoring system that includes transfers or discharges from an 
IRF to ``provider sites.'' This would have included transfers or 
discharges from an IRF to a SNF, a long-term care facility, an HHA, or 
an inpatient hospital. The monitoring system would include discharges 
and transfers from one IRF to a different IRF, including situations 
where the transfer occurs between organizations of common ownership. We 
indicated that although it does not currently appear that this type of 
transfer occurs frequently, further analysis of data regarding this 
type of transfer between IRFs may warrant an adjustment to payments. We 
did not receive any comments in response to our solicitation, and we 
will continue to develop a monitoring system that will allow us to 
assess the impact of the IRF prospective payment system on these types 
of situations.
4. Transfer Case Payment
    For the November 3, 2000 proposed rule, we proposed to compute the 
per diem-based payment for a transfer case as follows: first, calculate 
the unadjusted per diem amount for each CMG (except the short-stay CMG) 
by dividing the average length of stay for nontransfer cases (those 
cases discharged to the community with a length of stay exceeding 3 
days) in the CMG into the Federal prospective payment (with or without 
comorbidities) for that CMG. Next, multiply the CMG per diem payment 
from the first step by the number of days that the beneficiary was in 
the IRF prior to his or her transfer. The result equals the proposed 
unadjusted Federal prospective payment for the transfer case. We 
solicited comments on the appropriateness of our proposed methodology 
for computing payments for transfer cases.
    Comment: Several commenters suggested that there are additional 
costs associated with the initial day in comparison to each additional 
day a patient is in the IRF, and therefore recommended that we pay 
transfer cases at a higher rate. Further, the commenters noted the 
additional costs of the initial day are related to: processing the 
patient through the admissions department; integrating the patient into 
the facility; assessing the patient; and providing appropriate 
diagnostic tests, pharmaceuticals, and supplies. Most of the commenters 
recommended an additional half day payment for the first day to account 
for the higher costs incurred at the beginning of the stay. Some 
commenters recommended a transfer payment methodology similar to the 
acute transfer payment methodology, where the initial day is paid two 
times the per diem and each additional day at the per diem.
    Response: In light of these comments, we analyzed cost data for 
each day of stay to determine if per diem costs were significantly 
higher for the first day relative to subsequent days. The data support 
the commenters' recommendations to include an additional half day 
payment for the first day of a stay for transfer cases. However,

[[Page 41355]]

the data do not support payment at two times the per diem for the first 
day. Therefore, under Sec. 412.624(f) of these final regulations, we 
will pay transfer cases a per diem amount and include an additional 
half day payment for the first day. As with other adjustments, this 
payment will be made in a budget neutral manner. We are concerned that 
this more precise matching of payment to average historical costs has 
the potential to provide an incentive for IRFs to admit patients who 
are not appropriate for an intensive inpatient rehabilitation program. 
These patients may be less expensive to care for than patients 
requiring intensive rehabilitation and, thus, may be more profitable to 
hospitals even though these patients are soon transferred to another 
setting. We will monitor the appropriateness of admissions for patients 
who have shorter than average stays and are then transferred to another 
setting. We may make future payment refinements based on the extent to 
which this type of case increases.
    Comment: Several commenters suggested that the proposed payments 
did not account for long-stay transfers. The commenters stated that 
long-stay transfers would not receive adequate payments and suggested 
an increase in payment for these cases.
    Response: Based on the comments received, we believe it is 
necessary to clarify which cases were included in the construction of 
the CMGs, and also to identify the types of cases that were included in 
the construction of the relative weights for the CMGs. The cases 
included in the construction of the CMGs were those cases in which the 
patient returned home and had a length of stay greater than 3 days 
(short-stay and expired CMGs were created based on the remainder of the 
cases). For the proposed rule, we also used these data to determine the 
average length of stay for the groups based on these cases. Once we 
constructed the CMGs for the proposed rule, we then calculated the 
relative weights for each group using cases in which the patient 
returned home and had a length of stay greater than 3 days in addition 
to the long-stay transfer cases. Therefore, long-stay transfer cases 
were included for cases other than short stays and expired cases in the 
construction of the relative weights for the CMGs.
    For this final rule, we calculate the average length of stay for 
the CMGs which included those cases in which the patient returned home 
and had a length of stay greater than 3 days as well as long-stay 
transfer cases. We calculate the average length of stay in this manner 
so that the inputs are consistent with those used to develop the 
relative weights. For CMGs that have a very small number of cases (less 
than 10 cases), we use a model to estimate the average length of stay 
for that CMG. To do this, we estimate the average length of stay from 
an analysis of variance using the log of the length of stay as the 
dependent variable. The independent variables are the CMG and the 
comorbidity tier coefficient for each RIC. It is possible that payment 
for an individual case might be lower than the cost of the case, but 
for other cases, the total payment might be higher than costs.

C. Special Cases That Are Not Transfers

    Section 1886(j)(3)(A)(v) of the Act permits us to adjust the 
payment rates by such factors as the Secretary determines are necessary 
to properly reflect variations in necessary costs of treatment among 
rehabilitation facilities. There are three types of special cases that 
are not transfers. The special cases include short-stay outliers, cases 
in which the patient expires, and interrupted stays.
1. Short-Stay Outliers
    We proposed under Sec. 412.620(b)(2) of the proposed rule to 
develop separate weighting factor(s) for patients who are discharged 
(and not transferred) within a specified number of days after 
admission. We proposed to define a short-stay outlier as a case that 
has a length of stay of 3 days or less (regardless of the CMG) and that 
does not meet the definition of a transfer (as discussed in section 
VI.B. of this final rule). Payment-to-cost ratios for these cases show 
that, if facilities received a full CMG payment, the payment would 
substantially exceed the resources the IRF had expended.
    We proposed to pay short-stay outliers a relative weight of 0.1908. 
We computed this relative weight for short-stay outlier discharges by 
identifying all cases in which the length of stay is 3 days or less and 
the discharge does not meet the policy criteria to be considered a 
transfer. In the proposed rule, we calculated the relative weight for 
short-stay cases using the hospital-specific relative value 
methodology. For this final rule, we will pay short-stay cases a 
relative weight of 0.1651. This amount also was derived using the 
hospital-specific relative value method. However, we use the most 
recent data available (calendar year 1999 Medicare bills with 
corresponding FIM data) and we adjust the weight due to the results of 
the regression analyses described earlier in this preamble which 
measured the extent to which the relative weights reflect case costs.
    In addition, in the proposed rule we specifically solicited 
comments on the appropriate time period for our short-stay criteria. We 
proposed that the considerations underlying the short-stay policy might 
also apply to cases with a length of stay greater than 3 days. More 
specifically, we noted that some beneficiaries may have longer lengths 
of stay, and yet may not require intensive inpatient rehabilitative 
care, or may lack the capacity to participate in an intensive 
rehabilitation program. Thus, we were also considering a short-stay 
policy that could encompass certain cases with a length of stay longer 
than 3 days. We indicated that we were in the process of further 
analyzing claims data for Medicare beneficiaries to determine the most 
appropriate number of days to use in the definition of a short-stay 
case. We stated that if analysis of the data supported increasing the 
number of days for the short-stay criteria, we might adopt in the final 
rule a definition covering a longer timeframe than the 3-day period.
    Comment: One commenter suggested that adjustments for short-stay 
outliers are unnecessary, because the prospective payment system is 
based on averages; some patients have a longer length of stay, while 
others have a shorter length of stay.
    Response: Section 1886(j)(3)(A)(v) of the Act provides us with 
broad authority to adjust the payment rates under the IRF prospective 
payment system by such factors as the Secretary determines are 
necessary to properly reflect variations in necessary costs of 
treatment among rehabilitation facilities. Because the prospective 
payment system is based on a system of averages, certain cases could be 
paid significally more than their cost if the facility receives the 
full CMG payment. Due to the budget neutrality provision, excessive 
payment for short-stay outlier cases that do not actually entail the 
full course of rehabilitative care results in reducing payment for 
those cases that warrant full payment based on the rehabilitation 
services delivered. Adjusting for short-stay outlier cases is a means 
of matching payment as closely to cost as possible. Therefore, we are 
not adopting the suggestion to eliminate the short-stay outlier policy.
    Comment: Some commenters maintained that the time period used to 
define the short-stay outlier policy (3 days or less) is appropriate. 
Other commenters disagreed with increasing the short-stay outlier 
policy to encompass cases with a length of stay of longer than 3 days.

[[Page 41356]]

    Response: In developing the short-stay CMG for the proposed rule, 
we performed extensive analyses using the frequency distribution of 
existing claims data to determine the most appropriate length of stay 
for the short-stay CMG. Specifically, we found that a length of stay of 
3 days or less will capture the majority of those cases in which the 
beneficiary is unlikely to receive and benefit from a full course of 
rehabilitative treatment. Further, based on consultation with clinical 
experts, we determined the minimum length of time needed to acclimate a 
beneficiary to an IRF before intensive rehabilitation can begin. In 
view of administrative processes and the initial assessment activities, 
we believe that 3 days is appropriate. Based on these analyses, we are 
not expanding the 3-day period for the short-stay outlier policy. 
However, we will monitor the extent to which practice patterns change 
as a result of implementing this policy, and we may make refinements in 
the future, if warranted.
2. Cases in Which the Patient Expires
    In general, payment for cases that end in death might substantially 
exceed the costs if facilities received the full CMG payment for these 
cases. Even excluding all of the short-stay cases with a length of stay 
of 3 days or fewer, payment for the remaining expired cases as a whole 
would still be substantially more than the costs.
    In the proposed rule, we indicated that we had analyzed payment-to-
cost ratios and found that we could improve the accuracy of the 
payments if we split expired cases into two categories based on the 
RIC--one for orthopedic cases and one for all other types of RICs. We 
further found that splitting these cases based on length of stay also 
improves the accuracy of the payment system. Therefore, under proposed 
Sec. 412.620(b)(3), we proposed to determine weighting factor(s) for 
patients who expired within a specified number of days after admission. 
We proposed that expired cases in which a beneficiary dies within 3 
days after admission are classified into the short-stay CMG. Expired 
cases with a length of stay greater than 3 days are classified into one 
of four CMGs, based on length of stay and whether the discharge falls 
within an orthopedic RIC (RICs 07, 08, and 09). More specifically, one 
group includes orthopedic discharges with a length of stay of more than 
3 days but less than or equal to the average length of stay for expired 
cases classified within the orthopedic RIC. The second group includes 
orthopedic discharges with a length of stay greater than the average 
length of stay for expired cases classified within the orthopedic RIC. 
The third group includes nonorthopedic discharges with a length of stay 
of more than 3 days but less than or equal to the average length of 
stay of expired cases that are not classified within the orthopedic 
RIC. The fourth group includes nonorthopedic discharges with a length 
of stay greater than the average length of stay of expired cases that 
are not classified within the orthopedic RIC. We calculated the 
proposed relative weights for each expired CMG using the hospital-
specific relative value methodology discussed previously in this 
preamble.
    Comment: A few commenters suggested that adjustments for cases that 
end in death are not necessary in the IRF prospective payment system. 
Specifically, one commenter indicated that, since the system is based 
on averages, it should account for atypical cases.
    Response: Section 1886(j)(3)(A)(v) of the Act permits us to adjust 
the payment rates by such factors as the Secretary determines are 
necessary to properly reflect variations in necessary costs of 
treatment among rehabilitation facilities. In the proposed rule, we 
noted that certain cases (such as cases in which the patient expires) 
that receive less than the full course of treatment for a specific CMG 
would be paid inappropriately if the facility received the full CMG 
payment. In general, cases in which the patient expires might be paid 
substantially more than costs if we did not create separate CMGs for 
these cases. Further, other cases that warrant full payment because 
they receive the full course of rehabilitative care would instead 
receive reduced payments, due to the budget neutrality provision of the 
statute. Adjusting for cases in which the patient expires is a means of 
matching payment more closely to the cost of the case. Expired cases 
may also warrant additional outlier payments if the estimated cost of 
the case exceeds the adjusted CMG payment amount and the adjusted loss 
threshold amount. Therefore, in this final rule we are adopting as 
final the provision at proposed Sec. 412.620(b)(3), which provides for 
the development of weighting factor(s) for cases in which patients 
expire within the number of days after admission that we specify.
3. Interrupted Stay
    In proposed Sec. 412.602, we proposed to define an interrupted stay 
as a stay in which the beneficiary is discharged and returns to the 
same IRF within 3 consecutive calendar days. We proposed to pay one 
discharge payment for these cases. The assessment from the initial stay 
would be used to determine the appropriate CMG.
    Comment: Several commenters expressed concern about the proposed 
interrupted stay policy. Some commenters recommended that the 
interrupted stay policy be eliminated or limited to a 24-hour time 
period.
    Response: We believe that, in the absence of an interrupted stay 
policy, incentives might exist for facilities to attempt to 
inappropriately receive more than one CMG payment for the same patient 
by moving the patient out of the IRF, only to return the patient to the 
same IRF, solely to maximize payments. We believe this would be an 
undesirable outcome of the IRF prospective payment system. Therefore, 
we are not adopting the recommendation to eliminate or reduce the 
interrupted stay policy. In addition, in this final rule, we are 
clarifying in Sec. 412.602 that the duration of the interruption of 
stay of 3 consecutive calendar days begins with the day of discharge 
from the IRF and ends on midnight of the third day.
    Comment: One commenter suggested that we include the interrupted 
stay policy in the codified regulations text.
    Response: In response to this comment, we are adding language to 
the regulation text at Sec. 412.624(g).
    Comment: Other commenters requested clarification regarding how 
services during the interruption of the IRF stay would be paid.
    Response: As stated above, in this final rule we are adding a 
paragraph (g) to proposed Sec. 412.624 to specify special payment 
provisions for interrupted stays when a beneficiary is discharged from 
the IRF to an acute care hospital. Under Sec. 412.624(g), there will be 
no separate DRG payment to the acute care hospital when the beneficiary 
is discharged and returns to the same IRF on the same day. However, if 
a beneficiary receives inpatient acute care hospital services, the 
acute care hospital can receive a DRG payment if the beneficiary is 
discharged from the IRF and does not return to that IRF by the end of 
that same day.

D. Adjustments

    Section 1886(j)(6) of the Act requires an adjustment to the Federal 
prospective payments to account for geographic area wage variation. 
Section 1886(j)(3)(A)(v) of the Act confers broad discretion on the 
Secretary to adjust prospective payments ``by such other factors as the 
Secretary determines are necessary to properly reflect variations in 
necessary costs of treatment among rehabilitation facilities.'' Section 
1886(j)(4) of the Act authorizes (but

[[Page 41357]]

does not require) the Secretary to make specified payment adjustments 
(including an adjustment for outlier cases).
    Consistent with what we proposed in the November 3, 2000 proposed 
rule, in this final rule we will adjust payments for facilities located 
in rural areas, in addition to the geographical wage adjustment. 
Further, we will adjust payments to reflect the percentage of low-
income patients. We discuss these adjustments and the final payment 
methodologies below.
1. Area Wage Adjustment
    Section 1886(j)(6) of the Act specifies that payment rates under 
the IRF prospective payment system must be adjusted to account for 
geographic area wage variation. The statute requires the Secretary to 
adjust the labor-related portion of the prospective payment rates for 
area differences in wage levels by a factor reflecting the relative 
facility wage level in the geographic area of the rehabilitation 
facility compared to the national average wage level for these 
facilities. In accordance with Sec. 412.624(e)(1) of this final rule, 
we will adjust payment rates for geographic wage variations using the 
following methodology:
    To account for wage differences, we first identify the proportion 
of labor and nonlabor components of costs. In general, the labor-
related share is the sum of relative importance of wages, fringe 
benefits, professional fees, postal services, labor-intensive services, 
and a portion of the capital share from an appropriate market basket. 
We use the excluded hospital market basket with capital costs to 
determine the labor-related share. The excluded hospital market basket 
with capital costs is derived from available cost data for 
rehabilitation hospitals, long-term care hospitals, psychiatric 
hospitals, cancer hospitals, and children's hospitals. In the proposed 
rule, we estimated the labor-related share for FY 2001. However, 
because implementation of the IRF prospective payment system is 
effective with cost reporting periods beginning on or after January 1, 
2002 and before October 1, 2002, we are now estimating the labor-
related share for FY 2002.
    The labor-related share is the sum of the weights for those cost 
categories contained in the excluded hospital with capital market 
basket that are influenced by local labor markets. These cost 
categories include wages and salaries, employee benefits, professional 
fees, labor-intensive services and a 46-percent share of capital-
related expenses. The labor-related share for FY 2002 is the sum of the 
FY 2002 relative importance of each labor-related cost category, and 
reflects the different rates of price change for these cost categories 
between the base year and FY 2002. The sum of the relative importance 
for FY 2002 for operating costs (wages and salaries, employee benefits, 
professional fees, and labor-intensive services) is 68.821 percent, as 
shown in the chart below. The portion of capital that is influenced by 
local labor markets is estimated to be 46 percent, which is the same 
percentage used for the hospital inpatient capital-related prospective 
payment system. Because the relative importance for capital is 7.770 
percent of the excluded hospital with capital market basket in FY 2002, 
we take 46 percent of 7.770 percent to determine the labor-related 
share for FY 2002. The result is 3.574 percent, which we add to 68.821 
percent for operating cost to determine the total labor-related share 
for FY 2002. Thus, the labor-related share that we will use for 
rehabilitation facilities in FY 2002 is 72.395 percent, as show in the 
chart below.

                        Total Labor-Related Share
------------------------------------------------------------------------
                                                             Relative
                      Cost category                       Importance--FY
                                                          2002 (percent)
------------------------------------------------------------------------
Wages and salaries......................................        50.038
Employee benefits.......................................        11.285
Professional fees.......................................         2.045
Postal services.........................................         0.245
All other labor intensive services......................         5.208
                                                         ---------------
  Subtotal..............................................        68.821
Labor-related share of capital costs....................         3.574
                                                         ===============
    Total...............................................        72.395
------------------------------------------------------------------------

    Comment: A few commenters requested clarification of references to 
different labor-related shares in the proposed rule.
    Response: In the proposed rule, we described the methodology for 
computing the labor-related share for FY 2001 (71.301 percent). We 
proposed a wage adjustment using an estimated FY 2001 labor-related 
share which was appropriate given that the IRF prospective payment 
system was proposed to be implemented on or after April 1, 2001. 
However, in this final rule, we use the estimated FY 2002 labor-related 
share of 72.395 to develop the impacts among the various classes of 
IRFs, as well as for determining the payment rates set forth in this 
final rule. We use the estimated FY 2002 labor-related share for these 
purposes because the payment system will be implemented during FY 2002, 
and we updated the payments used in the impact analysis in section 
VIII. of this final rule to the midpoint of FY 2002.
    In the proposed rule as well as in this final rule, we apply an 
estimated labor-related share of 70.5 percent (FY 1998) in order to 
determine the facility-level adjustments other than the wage 
adjustment. For purposes of determining facility-level adjustments 
(other than the wage adjustment), the FY 1998 labor-related share 
continues to be appropriate, given that, for the proposed rule, the 
labor-related share was applied to FY 1998 cost report and cost per 
case data. Although we obtained more recent Medicare bill and FIM data 
in developing the payment rates set forth in this final rule, the cost 
report data are still primarily from FY 1998. Therefore, we believe the 
estimated labor-related share for FY 1998 remains most appropriate to 
apply to the data used in the regression analyses to determine the 
facility-level adjustments other than the wage adjustment.
    The labor-related portion of the unadjusted Federal payment is 
multiplied by a wage index value to account for area wage differences. 
We use inpatient acute care hospital wage data to compute the wage 
indices.
    The inpatient acute care hospital wage data that we use include the 
following categories of data associated with costs paid under the 
inpatient acute care hospital prospective payment system (as well as 
outpatient costs): salaries and hours from short-term, acute care 
hospitals, home office costs and hours, certain contract labor costs 
and hours, and wage-related costs. The wage data exclude the wages for 
services provided by teaching physicians, interns and residents, and 
nonphysician anesthetists under Medicare Part B, because these services 
are not covered under the IRF prospective payment system.
    Consistent with the wage index methodologies in other prospective 
payment systems, we divide hospitals into labor market areas. For 
purposes of defining labor market areas, we define an urban area as a 
Metropolitan Statistical Area (MSA) or New England County Metropolitan 
Area (NECMA), as defined by the Executive Office of Management and 
Budget. We define a rural area as any area outside an urban area. For 
the purposes of computing the wage index for IRFs, we determine the 
wage index values for urban and rural areas without regard to 
geographic reclassification under section 1886(d)(8) or 1886(d)(10) of 
the Act.

[[Page 41358]]

    Comment: One commenter questioned how we would compute the wage 
index for providers with more than one MSA. Also, a few commenters 
requested that we use ``post-reclassification'' wage data, that is, 
wage data that reflects any geographic reclassification, to compute the 
IRF wage index.
    Response: We believe the actual location of an IRF as opposed to 
the location of affiliated providers is most appropriate for 
determining the wage adjustment because the data support the premise 
that the prevailing wages in the area in which a facility is located 
influence the cost of a case. Further, IRFs provide services that are 
considered part of the post-acute continuum of care. In order to be 
consistent with the area wage adjustments made to other post-acute care 
providers (that is, under the existing SNF and HHA prospective payment 
systems), we are using the inpatient acute care hospital wage data 
without regard to any approved geographic reclassifications under 
section 1886(d)(8) or 1886(d)(10) of the Act. Therefore, we are not 
adopting the use of ``post-reclassification'' wage data and the wage 
index used by an IRF will be based on the facility's actual location, 
as shown in Tables 3A and 3B in the Addendum to this final rule, 
without regard to the urban or rural designation of any affiliated or 
related providers.
    In the November 3, 2000 proposed rule, we proposed to use an IRF 
wage index that was based on FY 1996 inpatient acute care hospital wage 
data (65 FR 66349). These data were also used to compute the FY 2000 
hospital inpatient prospective payment system wage indices. In the 
proposed rule, we also indicated that we proposed to use FY 1997 
inpatient acute care hospital wage data to develop the wage index for 
IRFs for this final rule. Because these are the most recent final data 
available, for this final rule, we used the FY 1997 inpatient acute 
care hospital wage data to develop the wage index for the IRF 
prospective payment system.
    Comment: Some commenters recommended that we research the 
development of a separate wage index for rehabilitation facilities. 
Further, commenters stated that the acute care hospital wage structure 
and labor classification are not necessarily representative of 
rehabilitative staffing and wages.
    Response: At this time, we are unable to develop a separate wage 
index for rehabilitation facilities. There is a lack of specific IRF 
wage and staffing data necessary to develop a separate IRF wage index 
accurately. Further, in order to accumulate the data needed for such an 
effort, we would need to make modifications to the cost report. In the 
future, we will continue to research a wage index specific to IRF 
facilities. Because we do not have an IRF specific wage index that we 
can compare to the hospital wage index, we are unable to determine at 
this time the degree to which the acute care hospital data fully 
represent IRF wages. However, we believe that a wage index based on 
acute care hospital wage data is the best and most appropriate wage 
index to use in adjusting payments to IRFs, since both acute care 
hospitals and IRFs compete in the same labor markets.
    The final IRF wage indices are computed as follows:
     Compute an average hourly wage for each urban and rural 
area.
     Compute a national average hourly wage.
     Divide the average hourly wage for each urban and rural 
area by the national average hourly wage--the result is a wage index 
for each urban and rural area.
    To calculate the adjusted facility payments for the payment rates 
set forth in this final rule, the prospectively determined Federal 
prospective payment is multiplied by the labor-related percentage 
(72.395) to determine the labor-related portion of the Federal 
prospective payments. This labor-related portion is then multiplied by 
the applicable IRF wage index shown in Table 3A for urban areas and 
Table 3B for rural areas in the Addendum to this final rule.
    The resulting wage-adjusted labor-related portion is added to the 
nonlabor-related portion, resulting in a wage-adjusted payment. The 
following example illustrates how a Medicare fiscal intermediary would 
calculate the adjusted facility Federal prospective payment for IRF 
services with a hypothetical Federal prospective payment of $10,000 for 
services provided in the rehabilitation facility located in Heartland, 
USA. The rehabilitation wage index value for facilities located in 
Heartland, USA is 1.0234. The labor-related portion (72.395 percent) of 
the Federal prospective payment is $7,239.50 = ($10,000*72.395 
percent), and the nonlabor related portion (27.605 percent) of the 
Federal prospective payment is $2,760.50 = ($10,000*27.605 percent). 
Therefore, the wage-adjusted payment calculation is as follows: 
$10,169.40 = ($7,239.50*1.0234) + $2,760.50
2. General Specifications to Determine Other Adjustments
    As indicated earlier, section 1886(j)(3)(A)(v) of the Act confers 
broad authority on the Secretary to adjust prospective payments ``by 
such other factors as the Secretary determines are necessary to 
properly reflect variations in necessary costs of treatment among 
rehabilitation facilities.'' To determine whether other payment 
adjustments are warranted for the IRF prospective payment system, we 
conducted extensive regression analyses of the relationship between IRF 
costs (including both operating and capital costs per case) and several 
facility characteristics such as percentage of low-income patients, 
geographic location, and other factors that may affect costs. The 
appropriateness of potential payment adjustments is based on both cost 
effects estimated by regression analysis and other factors, including 
simulated payments that we discuss in section VIII.B.2. of this final 
rule.
    Our analyses for developing the payment adjustments set forth in 
this final rule included 714 facilities for which cost and case-mix 
data were available. We estimated costs for each case by taking 
facility specific, cost-center specific cost-to-charge ratios and 
multiplying them by charges. We obtained cost-to-charge ratios from FYs 
1996, 1997, and/or 1998 cost report data, and obtained charges from the 
calendar years 1998 and 1999 Medicare claims data. We calculated the 
cost per case by summing all costs and dividing by the number of 
equivalent full cases. After calculating the cost per case for both 
years, we combined the number of cases and total costs for both years. 
For this final rule, we did not adjust the 1998 cost per case by the 
case-weighted average change in cost per case between 1998 and 1999 
because the difference is less than 0.2 percent and adjusting the 1998 
costs would have such a small effect. Using the data from both years 
should provide more stability in the payment adjustments than would 
using data for a single year. When data for only one year are 
available, we use the costs and number of equivalent cases for that 
year.
    Multivariate regression analysis is a standard way to examine 
facility cost variation and analyze potential payment adjustments. We 
looked at two standard models: (1) Fully specified explanatory models 
to examine the impact of all relevant factors that might potentially 
affect facility cost per case; and (2) payment models that examine the 
impact of those factors specifically used

[[Page 41359]]

to determine payment rates. The general specification for the multi-
variate regression is that the estimated average cost per case (the 
dependent variable) at the facility can be explained or predicted by 
several independent variables, including the CMI, the wage index for 
the facility, and a vector of additional explanatory variables that 
affect a facility's cost per case, such as its teaching program or the 
proportion of low-income patients. The CMI is the average of the CMG 
weights derived by the hospital-specific relative value method for each 
facility. We give transfer cases a partial weight based on the ratio of 
the length of stay for the transfer to the average length of stay for 
the CMG, in addition to an increase to account for the half-day payment 
for the first day. We count interrupted stay cases as a single stay. 
Using the regression coefficients, we then simulated payments and 
calculated payment-to-cost ratios for different classes of hospitals, 
for specific combinations of payment policies.
    For the proposed rule, we used payment variables from the hospital 
inpatient prospective payment system, including DSH patient percentage, 
both capital and operating teaching variables (resident-to-average 
daily census and resident-to-bed ratios, respectively) as well as the 
teaching variable (resident-to-adjusted average daily census ratio) 
used in the analyses for the hospital outpatient prospective payment 
system, and variables to account for location in a rural or large urban 
area.
    For this final rule, we updated the variables described above based 
on the availability of more recent data and refined some of the 
independent variables based on suggestions from the comments received. 
A discussion of the major payment variables and our findings for this 
final rule appears below.
3. Adjustments for Rural Location
    We examined costs per case for both large urban and rural IRFs. In 
the regression models, both explanatory and payment, the variable for 
rural IRFs was positive and significant (p0.05). The standardized cost 
per case for rural IRFs is almost 16 percent higher than the national 
average. On average, rural IRFs tend to have fewer cases, a longer 
length of stay, and a higher average cost per case. The difference in 
costs becomes more evident when the average cost per case is 
standardized for the CMI and the wage index. In the regression models, 
large urban IRFs were not significantly different from other urban 
facilities. Under Sec. 412.624(e)(3) of this final rule, we adjust for 
rural IRFs by multiplying the payment by 1.1914. This adjustment was 
determined by using the coefficients derived from the regressions.
    Comment: Two commenters suggested that we consider the patient's 
residence to determine eligibility for the rural adjustment, as opposed 
to the physical location of the IRF.
    Response: Our analysis of the IRF data has shown that the physical 
location of IRFs corresponds with the cost of a case, with rural IRFs 
experiencing higher costs other things being equal. Rural IRFs have 
higher costs because they exhibit practice patterns that contribute to 
increased expense relative to other facilities, such as lower transfer 
rates for longer lengths of stay. Further, if any effects in costs are 
associated with beneficiaries who reside in rural locations, the 
relative weights should address these differences. The purpose of the 
relative weights is to account for the level of severity of a given 
case. If beneficiaries who reside in rural locations require more 
costly care, the relative weights should account for these costs. 
Therefore, we are not adopting the recommendation to consider the 
beneficiary's place of residence to determine eligibility for the rural 
adjustment.
4. Adjustments for Indirect Teaching Costs
    In general, facilities with major teaching programs tend to be 
located in large urban areas and have more cases, a higher case mix, 
and a higher proportion of low-income patients. For the proposed rule, 
we found that when the regression models used only the payment 
variables that might warrant an adjustment under the prospective 
payment system (that is, percentage of low-income patients or rural/
urban status, rather than for-profit and not for-profit), the indirect 
teaching cost variable was not significant. Accordingly, we did not 
propose an adjustment for indirect teaching costs.
    For the proposed rule, we looked at different specifications for 
the teaching variable. We used a resident-to-average daily census ratio 
and a resident-to-bed ratio that we based on the estimated number of 
residents assigned to the inpatient area of the rehabilitation 
facility. We also used a resident-to-adjusted average daily census 
ratio based on the total number of residents at the hospital complex 
and outpatient as well as inpatient volume.
    For this final rule, we assessed the extent to which we could 
improve the variable used to measure indirect teaching intensity in 
order to reassess the appropriateness for an adjustment. However, 
developing an appropriate measure is complicated by differences in 
reporting resident counts for freestanding rehabilitation hospitals and 
units.
    To determine if an adjustment for indirect teaching costs is 
warranted for this final rule, we use the same approach that we used in 
the proposed rule to calculate the number of full-time equivalent (FTE) 
residents. That is, we use the number of residents reported for the 
rehabilitation units of acute care hospitals. For freestanding 
hospitals, we estimate the number of residents assigned to the routine 
area (that is, room and board and direct nursing care) based on the 
ratio of resident salaries apportioned to those areas to total resident 
salaries for the facility. We define teaching intensity as the ratio of 
FTE residents-to-average daily census. As in the proposed rule, the 
indirect teaching variable was insignificant in the payment 
regressions. Therefore, we will not adjust payments for costs 
associated with indirect teaching.
    Comment: A few commenters requested that we reconsider an 
adjustment for costs associated with indirect teaching.
    Response: As we previously stated, the results of the regression 
analyses for the proposed rule showed that the indirect teaching 
variable was significant only with the fully specified regression, and 
not with the payment regression. However, in the analyses conducted for 
this final rule, the indirect teaching variable was not significant for 
either the fully specified regression or the payment regression. Also, 
the impacts among the various classes of facilities reflecting the 
fully phased-in IRF prospective payment system in section VIII. of this 
final rule illustrate that IRFs with the highest measures of indirect 
teaching lose approximately 2 percent of estimated payments under the 
IRF prospective payment system. Further, these impacts among the 
various classes of facilities do not account for changes in behavior 
that facilities will likely adopt in response to the inherent 
incentives of the IRF prospective payment system. Accordingly, IRFs can 
change their behavior in ways to mitigate any potential losses. In 
considering the impacts among these types of facilities and the results 
of the regression analyses, we will not adjust payments for indirect 
teaching because we believe that this type of adjustment is not 
supported by our regression analyses or impact analyses.
5. Adjustments for Low-Income Patients
    We assessed the appropriateness of adjustments for facilities 
serving low-

[[Page 41360]]

income patients. For the proposed rule, we limited our analysis to the 
effects of serving low-income patients on costs per case rather than a 
subsidy for uncompensated care.
    Also, in the proposed rule, we evaluated a facility-level 
adjustment that takes into account both the percentage of Medicare 
patients who are receiving Supplemental Security Income (SSI) and the 
percentage of Medicaid patients who are not entitled to Medicare. We 
proposed to use the same measure of the percentage of low-income 
patients currently used for the acute care hospital inpatient 
prospective payment system, which is the DSH variable. The low-income 
payment adjustment we chose improves the explanatory power of the IRF 
prospective payment system because as a facility's percentage of low-
income patients increases, there is an incremental increase in a 
facility's costs. We proposed to adjust payments for each facility to 
reflect the facility's percentage of low-income patients using the DSH 
measure.
    Comment: One commenter suggested that the payment for the 
percentage of low-income patients adjustment should reflect all low-
income patients, including uninsured patients.
    Response: While we recognize that an adjustment accounting for the 
costs of serving uninsured patients may be desirable, we do not 
currently have access to data that would allow us to measure 
uncompensated care. However, we analyzed the performance of other 
measures of low-income patients, in addition to DSH, such as the SSI 
ratio, dual eligibles (Medicare beneficiaries entitled to Medicaid), 
and self-pay/charity cases (determined by UDSmr non-Medicare data by 
primary and secondary payer) in order to determine the measure that 
most accurately matches payment to costs. To do this, we used data for 
the IRFs for which we had all payer information. These data indicate 
that the DSH variable improves the explanatory power of the groups 
better than the other measures, with an r-squared of .0529. The measure 
of dual eligibles, self-pay/charity, and the SSI ratio did not predict 
costs as well as DSH. Further, the SSI ratio measure was not 
significant in our regression analyses. After examining the use of 
these alternative low-income measures, we found the DSH variable 
explained costs more fully than the other variables that we examined. 
Therefore, we are not adopting the commenter's suggestion and will use 
the DSH variable as the basis of the adjustment for low-income 
patients.
    Comment: A few commenters noted that the adjustment for low-income 
patients was not consistent with the name of the adjustment, 
``disproportionate'' share adjustment. In general, one commenter stated 
that if all IRFs are eligible to receive this adjustment, then the 
adjustment is not applicable only to those IRFs that treat a 
``disproportionate'' share of low-income patients.
    Response: In response to this comment, in this final rule, we will 
refer to the adjustment for low-income patients as the LIP adjustment. 
However, we will use the term DSH when we refer to the measure used to 
compute IRF's percentage of low-income patients because it is the same 
measure used to measure low-income patients in acute care hospitals.
    Comment: Some commenters suggested that the LIP adjustment have a 
threshold similar to the inpatient acute care hospital prospective 
payment system.
    Response: We analyzed different specifications for the LIP 
adjustment. One option had a threshold of 5 percent. In general, under 
this option, a facility would not be allowed to receive the LIP 
adjustment unless its DSH was greater than 5 percent. Although we 
considered this option, we favored the use of a LIP adjustment that 
matches payment as closely to cost as possible. The LIP adjustment we 
chose improves the explanatory power of the IRF prospective payment 
system because as a facility's percentage of low-income patients 
increases, there is an incremental increase in a facility's cost. It is 
also important to note that the thresholds established under the 
inpatient acute care hospital prospective payment system were 
statutorily mandated. Thus, we have decided to adjust the IRF payments 
set forth in this final rule for the percentage of low-income patients, 
but the adjustment does not have a threshold amount.
    As we stated in the proposed rule, section 4403(b) of the BBA 
requires us to develop a Report to the Congress containing a formula 
for determining additional payment amounts to hospitals under section 
1886(d)(5)(F) of the Act. In light of our current study of a new 
payment formula for determining adjustments for hospitals serving low-
income patients and MedPAC's related recommendation, in the November 3, 
2000 proposed rule, we indicated that we would consider these study 
results and other information as they become available and potentially 
refine the LIP adjustment in the future to ensure that we pay 
facilities in the most consistent and equitable manner possible.
    Comment: One commenter requested clarification of whether all 
facilities will receive a LIP adjustment.
    Response: All IRFs are eligible to receive a LIP adjustment. There 
is not a required threshold for a minimum number of beds or a minimum 
amount of DSH in order to receive the adjustment.
    In accordance with proposed Sec. 412.624(e)(2), which we are 
adopting as final, for the payment rates set forth in this final rule, 
we multiply each IRF's payment by the following formula to account for 
the cost of furnishing care to low-income patients:

                                              (1+DSH) raised to the 
power of .4838
[GRAPHIC] [TIFF OMITTED] TR07AU01.003

    Comment: One commenter stated that the calculation of the LIP 
adjustment should exclude the data that we imputed for 46 IRFs. The 
commenter indicated that the regressions are extremely sensitive to 
these imputed values.
    Response: In light of this comment, we analyzed the data to assess 
the extent to which the results of the multivariate regressions are 
sensitive to the imputed DSH values used to calculate the proposed 
adjustments. For the proposed rule, we used a 2-step process to impute 
missing values for our low-income patient measures: (1) For 
rehabilitation units where we were missing only the Medicaid days, we 
estimated the Medicaid rehabilitation days by applying the ratio of 
Medicaid acute care days to total acute care inpatient days to the 
total inpatient rehabilitation days. (2) If we were missing the SSI 
days or if we were also missing Medicaid days for the hospital, we 
imputed low-income variable values by assigning the State average DSH 
percentage for large urban and other facilities as appropriate. Our 
regression analyses indicated that the facilities

[[Page 41361]]

with missing values were significantly different from other facilities. 
The findings indicate that the results are sensitive to the imputation 
methodology described above.
    In this final rule, we have modified the imputation methodology for 
imputing DSH values for the LIP adjustments. To impute, we estimate the 
proportion of non-Medicare days in the rehabilitation facility that are 
attributable to Medicaid patients as a function of two variables: the 
facility's percentage of Medicare patients who are entitled to SSI and 
the State in which the facility is located. The results of the 
regressions are not sensitive to this methodology (r-squared = .4159). 
We believe the value of including the imputations is that it allows us 
to address other concerns the industry expressed in its comments. 
Specifically, these concerns referred to the number of facilities used 
to calculate the payment rates. Using an imputation method allows us to 
include more facilities than we could have otherwise if we had not 
imputed DSH values for this final rule. In order for an IRF to be 
included in the analysis for the facility-level adjustment, all values 
of the independent variables examined under the regression must exist. 
For example, if we are missing the DSH value for certain facilities, 
even if we know the remainder of the independent variables (such as the 
wage index), we cannot include these facilities in the regression. 
Therefore, in this final rule we use an improved imputation methodology 
for the DSH variable that does not influence the results of the 
adjustments.
    Comment: Several commenters expressed concern about the data used 
to measure DSH for purposes of calculating the LIP adjustment. 
Specifically, some commenters preferred the use of a DSH measure that 
better reflected the inpatient rehabilitation units, while others 
preferred the use of the overall acute care hospital DSH measure for 
the units.
    Response: We constructed the DSH variable, as described above, 
using the latest data available at the time that we developed the 
proposed rule. Specifically, we used the ratio of Medicaid days to 
total days specific to the rehabilitation unit when the facility 
identified this information on its cost report. When the unit-specific 
information was unavailable, we used the overall Medicaid days and 
total days for the entire facility. For the SSI portion of the DSH 
variable, we used the acute care hospitals' ratio of SSI days to total 
Medicaid days for the rehabilitation units.
    For purposes of constructing the LIP adjustment for this final 
rule, we obtained unit specific measures of the ratio of the SSI days 
to the total number of Medicare days. Further, we used the ratio of 
Medicaid (non-Medicare days) to total days when this information was 
available on the cost reports, in addition to the improved imputation 
methodology described above. Therefore, to the extent possible, the LIP 
adjustment set forth in this final rule is based on data specific to 
inpatient rehabilitation units, as well as freestanding inpatient 
rehabilitation hospitals. We believe data that are most reflective of 
the characteristics of the inpatient rehabilitation setting are most 
appropriate in determining payments under the IRF prospective payment 
system.
    Comment: Some commenters suggested that differences in Medicaid 
coverage rules would disadvantage IRFs in certain States because of the 
LIP adjustment.
    Response: In order to evaluate these concerns, we examined the 
feasibility of making an adjustment for the percentage of low-income 
patients using only the ratio of SSI to Medicare days. The results of 
this analysis indicated that the ratio of SSI to Medicare days would 
not predict the cost of a case as well as using the DSH variable. 
Specifically, the r-square value for the DSH variable is .0609 compared 
to the r-square value of .0525 for the SSI variable. Therefore, using 
the DSH variable enables us to develop a payment system that better 
predicts IRF costs compared to using the SSI variable. We acknowledge 
that Medicaid coverage rules may vary from State to State. However, 
based on considerable analysis, we believe that the DSH variable is the 
best current predictor of costs associated with treating low-income 
patients in IRFs. In addition, it is unclear whether certain IRFs in 
States are disadvantaged in the context of the entire payment 
(reflecting all adjustments). Further, analysis of the ``new payment to 
current payment ratios'' illustrated in Table II of section VIII. of 
this final rule indicates that the IRFs with the lowest DSH percentages 
gain approximately 2 percent of estimated payments under the IRF 
prospective payment system, while IRFs with moderate levels of DSH lose 
approximately 1 or 2 percent of estimated payments under the IRF 
prospective payment system. Therefore, if an IRF has a DSH amount that 
is lower than average due to Medicaid coverage rules for its State, the 
IRF may still experience a gain in payments under the IRF prospective 
payment system. In the future, we will assess the extent to which DSH 
continues to measure the percentage of low-income patients adequately. 
This future analysis may include the effect of the LIP adjustment on 
IRFs in various States.
    Comment: Some commenters requested clarification of how new 
providers would receive DSH payment adjustments.
    Response: New providers will receive a LIP adjustment when cost 
report data are available to determine a DSH amount. Until information 
from the cost report is available, the information used to calculate 
DSH is unknown and we will not be unable to determine the LIP 
adjustment. Once we have the information from the cost report, we will 
make final payments for the previous appropriate year in a lump sum and 
we will use these data in the calculation of future interim payments. 
We will issue further instructions in a Medicare program memorandum 
regarding the details of implementing this policy.
    Comment: One commenter suggested that the LIP adjustment is beyond 
our legislative authority and stated that the LIP adjustment fulfills 
no policy objectives.
    Response: Section 1886(j)(3)(A)(v) of the Act gives the Secretary 
broad authority to adjust the prospective payment rates by ``such other 
factors as the Secretary determines are necessary to properly reflect 
variations in necessary costs of treatment among rehabilitation 
facilities.'' Through the multivariate regression analyses described 
above, we found that providing a LIP adjustment would allow us to match 
payment more closely to cost. Therefore, as a matter of policy, the 
purpose of the LIP adjustment for the payment rates set forth in this 
final rule is to pay IRFs more accurately for the incremental increase 
in Medicare costs associated with the facility's percentage of low-
income patients.
6. Adjustments for Alaska and Hawaii
    Section 1886(j)(4)(B) provides that the Secretary is authorized, 
but not required, to take into account the unique circumstances of IRFs 
located in Alaska and Hawaii. There are currently three IRFs in Hawaii 
and one in Alaska. However, for the proposed rule, we had cost and 
case-mix data for only one of the facilities in Hawaii (982 cases) and 
the facility in Alaska (117 cases). Due to the small number of cases, 
analyses of the simulation results were inconclusive regarding whether 
a cost-of-living adjustment would improve payment equity for these 
facilities. Therefore, we did not propose to make an adjustment

[[Page 41362]]

for rehabilitation facilities located in Alaska and Hawaii.
    Comment: A few commenters suggested that a cost-of-living 
adjustment for Hawaii and Alaska should be revisited.
    Response: As with the proposed rule, in determining the adjustments 
for the final rule, we had cost and case-mix data for only one of the 
facilities in Hawaii and the facility in Alaska. Further, the total 
number of cases in the 1999 data (783) is smaller. Due to the small 
number of cases, analyses of the simulation results were inconclusive 
regarding whether a cost-of-living adjustment would improve payment 
equity for these facilities. Therefore, we are not making an adjustment 
under section 1886(j)(4)(B) of the Act for rehabilitation facilities 
located in Alaska and Hawaii for the payment rates set forth in this 
final rule.
7. Adjustments for Cost Outliers
    Section 1886(j)(4) of the Act specifies that the Secretary is 
authorized, but not required, to provide for additional payments for 
outlier cases. Further, section 1886(j)(4)(A)(iii) of the Act specifies 
that the total amount of the additional payments for outliers cannot be 
projected to exceed 5 percent of the total Medicare payments to IRFs in 
a given year. Providing additional payments for costs that are beyond a 
facility's control can strongly improve the accuracy of the IRF 
prospective payment system in determining resource costs at the patient 
and facility level. In general, outlier payments reduce the financial 
risk that would otherwise be substantial due to the relatively small 
size of many rehabilitation facilities. These additional payments 
reduce the financial losses caused by treating patients who require 
more costly care and, therefore, will reduce the incentives to 
underserve these patients.
    In the November 3, 2000 proposed rule (65 FR 66357), we considered 
various outlier policy options. Specifically, we examined outlier 
policies using 3, 4, and 5 percent of the total estimated payments. In 
order to determine the most appropriate outlier policy, we analyzed the 
extent to which the various options reduce financial risk, reduce 
incentives to underserve costly beneficiaries, and improve the overall 
fairness of the system. We proposed an outlier policy of 3 percent of 
total estimated payments because we believed this option would optimize 
the extent to which we could protect vulnerable facilities, while still 
providing adequate payment for all other cases.
    We proposed under Sec. 412.624(e)(4) to make outlier payments for 
discharges whose estimated cost exceeds an adjusted threshold amount 
($7,066 multiplied by the facility's adjustments) plus the adjusted CMG 
payment. We would adjust both the loss threshold and the CMG payment 
amount for wages, rural location, and disproportionate share. We 
proposed to calculate the estimated cost of a case by multiplying an 
overall facility-specific cost-to-charge ratio by the charge. Based on 
analysis of payment-to-cost ratios for outlier cases, and consistent 
with the marginal cost factor used under section 1886(d) of the Act, we 
proposed to pay outlier cases 80 percent of the difference between the 
estimated cost of the case and the outlier threshold (the sum of the 
CMG payment and the loss amount of $7,066, as adjusted). We calculated 
the outlier threshold by simulating aggregate payments with and without 
an outlier policy, and applying an iterative process to determine a 
threshold that would result in outlier payments being equal to 3 
percent of total payments under the simulation.
    Comment: Some commenters suggested that adjusting the outlier 
threshold by the rural adjustment and the LIP adjustment would be 
inappropriate.
    Response: In the proposed rule, we stated that the outlier 
threshold of $7,066 was to be multiplied by the facility-level 
adjustments reflecting facility characteristics such as geographic 
location and LIP. Before the above calculation can be done, we must 
first determine if any facility characteristics affect the cost of a 
case. Then we determine adjustments for these characteristics. As we 
previously discussed, the data showed that wage variation, IRFs located 
in rural areas, and the percentage of low-income patients affect case 
costs. Further, we calculate an IRF standardized budget neutral 
conversion factor that eliminates the effects of the IRF adjustments. 
We then determine the appropriate outlier percentage based on analyses 
of the data. As in the proposed rule, in this final rule we calculate 
the standardized threshold amount by eliminating the effects of the 
various adjustments. The standardized outlier threshold for the payment 
rates set forth in this final rule is $11,211. In this final rule, as 
with the proposed rule, the standardized outlier threshold is then 
adjusted for each IRF to account for its wage adjustment, its LIP 
adjustment, and its rural adjustment, if applicable. Using this 
facility-specific adjusted threshold amount to determine eligibility 
for outlier payments results in facility payments that do not unduly 
harm any particular class of IRFs and appears to distribute payments 
more equitably among the various cases as shown in section VIII. of 
this final rule. Therefore, we believe applying the facility-level 
adjustment to the threshold amount is appropriate.
    Comment: Some commenters, including MedPAC, suggested increasing 
the outlier provision from the proposed 3 percent to the full 5 percent 
allowed under the BBA. One commenter suggested that if we address the 
issue of compression with the relative weights (which we discuss in 
response to an earlier comment in this section VI. of this final rule), 
the increase to 5 percent may not be necessary.
    Response: Since outlier payments are a redistribution of payment, 
it is important to set the outlier percentage so that it maximizes 
resources available for all types of cases while still protecting a 
facility from the financial risk associated with extremely high-cost 
cases. As we stated earlier, section 1886(j)(4) of the Act authorizes, 
but does not require, us to provide for additional payments for outlier 
cases. Further, section 1886(j)(4)(A)(iii) of the Act provides that the 
total amount of the additional payments cannot be projected to exceed 5 
percent of the total payments projected or estimated to be made to 
prospective payment units in a given year. The outlier policy options 
specified in the proposed rule were evaluated by analyzing financial 
risk, accuracy of payment at the case level, and accuracy of payment at 
the hospital level.
    We measure financial risk of an IRF using the standard deviation of 
annual profit as a fraction of expected annual revenue. The outlier 
payment decreases the financial risk of an IRF as the outlier 
percentage increases. However, financial risk decreases at a declining 
rate of improvements as the outlier percentage increases. These results 
indicate that an outlier percentage lower than the statutory maximum 
amount of 5 percent of total estimated payments would allow us to pay 
more appropriately for both outlier and nonoutlier cases.
    Increasing the percentage of the outlier policy would leave less 
payments available to cover the costs of nonoutlier cases, due to the 
budget neutral provision of the statute. Specifically, an increase in 
the outlier percentage would decrease the budget neutral conversion 
factor and reduce payment for all nonoutlier cases. Although the 
purpose of outlier payments is to funnel more payments to high-cost 
cases in which the IRF

[[Page 41363]]

prospective payment system payment would be substantially less than the 
cost of the case, it is possible that in some instances the IRF total 
prospective payment, including the outlier payment, will exceed the 
cost of the case. Paying cases more than costs may occur with outlier 
payments because an IRF's overall cost-to-charge ratio, which is used 
to derive the estimated cost of the case to determine if the case is an 
outlier may differ substantially from an actual department (for 
example, a physical therapy cost center) cost-to-charge ratio in which 
the services are delivered. Specifically, analysis of the various 
outlier percentage options for the proposed rule illustrated that the 
amount by which payment is more than cost increases substantially as 
the outlier percentage increases. Simulating payments using the 1997 
data, the 1-percent outlier payment policy option resulted in an 
estimated total ``overpayment'' of approximately $300,000. When we 
simulated a 3-percent outlier percentage, estimated ``overpayments'' 
were at $1.0 million, and when we simulated outlier payments at 5 
percent, ``overpayments'' almost doubled to $1.9 million.
    Outlier payments funnel more resources to the most costly cases, 
which improves accuracy of payment at the case level. This is evident 
in the analysis of r-squared values, a statistical measure of how well 
the outlier payment matches the costs of the case. The percent 
improvement of the predictive r-squared value decreases as the outlier 
payment percentage increases. Using the 1997 cost data, going from the 
``no outlier'' policy option to setting the outlier policy at 1 percent 
increases the r-squared value by 30.7 percent, while going from a 4-
percent to a 5-percent outlier payment percentage increases the r-
squared value by only 4.2 percent.
    To evaluate an outlier policy at the hospital level, we compared 
payment-to-cost ratios over each outlier percentage option. Because 
outliers in the data sample appeared to be widely distributed across 
all types of hospitals, we found that the amount of the outlier payment 
has little effect on the payment-to-cost ratio for any specific group 
at the hospital level.
    In summary, the results of financial risk, accuracy at the case 
level, and accuracy at the hospital level suggest that there should be 
a limit on the outlier percentage that is less than the statutory limit 
and that balances the need to compensate accurately for high-cost care 
while still maximizing remaining resources to improve the payment 
accuracy of nonoutlier cases. The 3-percent outlier policy set forth in 
the proposed rule reflected a careful analysis of the previously 
discussed issues and research that supported this policy. Therefore, 
under Sec. 412.624(e)(4) of this final rule, we are adopting the 
outlier policy that we had proposed. Accordingly, we are establishing 
an outlier policy to adjust payments under Sec. 412.624(d)(1) of this 
final rule. This outlier policy reflects 3 percent of estimated 
aggregate payments under the IRF prospective payment system.
    Comment: Some commenters requested clarification of how new 
facilities will be able to qualify for outlier payments, since these 
facilities will not have the historical cost reports needed to compute 
the estimated cost that determines if the case is an outlier.
    Response: We will calculate national average cost-to-charge ratios 
for urban and rural areas. We will apply these cost-to-charge ratios to 
new facilities based on the facility's urban or rural status.
    Comment: Some commenters requested clarification of whether we will 
pay more or less for outlier cases retrospectively based on actual 
cost-to-charge ratios once they exist.
    Response: We will not make any retrospective adjustments for 
outlier payments.
    Comment: A few commenters suggested that we adjust payments in the 
initial 5 years of the IRF prospective payment system in order to 
provide a financial cushion for hospitals that experience significant 
losses.
    Response: We developed the adjustments described in this final rule 
based on an analysis of empirical data, as well as consideration of 
numerous comments. The impacts of the IRF prospective payment system 
among the various classes of providers are shown in section VIII. of 
this final rule. In general, the new payment to current payment ratios 
in Table II of section VIII. of this preamble illustrate that most 
groups of providers will benefit under the IRF prospective payment 
system. Further, based on these impacts, there is no strong indication 
that any particular group of providers will experience significant 
losses under the IRF prospective payment system. Therefore, we are not 
adopting the suggestion to provide an additional adjustment for those 
facilities that may be paid less than their costs under the IRF 
prospective payment system.
    Comment: Some commenters requested clarification regarding the 
order in which the case-level and facility-level payment provisions 
apply to a case.
    Response: First, we will discuss the order in which the case-level 
adjustments (excluding outlier payments) may apply to a case. Then we 
will describe the order in which the facility-level adjustments apply. 
Lastly, we will discuss the possible application of outlier payments.
    The first case-level adjustment that needs to be considered for 
possible application is whether or not the case meets the definition of 
an interrupted stay. If the case meets the definition of an interrupted 
stay, then one CMG payment will be made based on the assessments from 
the initial stay. Also, if the case meets the definition of an 
interrupted stay, the total number of days the beneficiary was in the 
IRF, both prior to and after the interruption, is counted in order to 
determine if the case meets the definition of a transfer case or the 
short-stay CMG.
    The next case-level adjustment considered for application is the 
transfer policy. To do this, the length of stay is considered, as well 
as the discharge destination. Specifically, if the length of stay of 
the case is less than the average length of stay for the given CMG and 
the patient is transferred to another IRF, long-term care hospital, 
inpatient hospital, or nursing home that accepts Medicare or Medicaid, 
then the case will be considered to be a transfer. If the case is not a 
transfer, then we determine whether or not the case falls under the 
short-stay CMG where the length of stay is 3 days or less, irrespective 
of whether the beneficiary expired. If the beneficiary's length of stay 
is more than 3 days and he or she expires, one of the four CMGs for 
expired cases will be applicable, depending on the length of stay and 
whether the beneficiary is classified to an orthopedic RIC or not. If 
none of the above case-level adjustments are applicable to a given 
case, then the case is classified to the appropriate CMG.
    After the appropriate case-level adjustments and the CMG is 
assigned, facility-level adjustments will be applied. First, the wage 
adjustment is applied by taking the labor-related share of the payment, 
multiplying by the appropriate wage index, and adding the results to 
the nonlabor-related portion of the payment. Then the adjustment for 
low-income patients is determined and multiplied by the wage adjusted 
payment. Also, if the IRF is a rural facility, the payment will be 
further multiplied by 1.1914. After all the adjustments described 
above, both case-level and facility-level, are applied to a case, a 
determination can be made as to whether or not an outlier payment is 
warranted.

[[Page 41364]]

E. Calculation of the Budget Neutral Conversion Factor

1. Overview of Development of the Budget Neutral Conversion Factor
    Prior to BIPA, section 1886(j)(3)(B) of the Act specified that, for 
prospective payment units during FYs 2001 and 2002, the amount of total 
payments, including any payment adjustments under sections 1886(j)(4) 
and (6) of the Act, must be projected to equal 98 percent of the amount 
of payments that would have been made during these fiscal years for 
operating and capital-related costs of rehabilitation facilities had 
section 1886(j) of the Act not been enacted. We proposed to incorporate 
this provision in proposed Sec. 412.624(d).
    Under proposed Sec. 412.624(c)(1) and (c)(3), we proposed to 
calculate the budget neutral conversion factor using the following 
steps:
    Step 1--Update the latest cost report data to the midpoint of the 
fiscal year 2001.
    Step 2--Estimate total payments under the current payment system.
    Step 3--Calculate the average weighted payment per discharge amount 
under the current payment system.
    Step 4--Estimate new payments under the proposed payment system 
without a budget neutral adjustment.
    Step 5--Determine the budget neutral conversion factor.
    These same steps are used in developing the payment rates set forth 
in this final rule.
    However, in this final rule, we update the latest cost report data 
to the midpoint of the FY 2002 because the IRF prospective payment 
system will be implemented on or after January 1, 2002 and before 
October 1, 2002.
2. Steps for Developing the Budget Neutral Conversion Factor
     Data Sources
    In the November 3, 2000 proposed rule, the data sources that we 
proposed under Sec. 412.624(a)(1) to construct the budget neutral 
conversion factor included the cost report data from FYs 1995, 1996, 
and 1997, a list obtained from the fiscal intermediaries of facility-
specific target amounts applicable for providers that applied to rebase 
their target amount in FY 1998, and calendar year 1996 and 1997 
Medicare claims with corresponding UDSmr or COS (FIM) data. We used 
data from 508 facilities to calculate the budget neutral conversion 
factor. These facilities represented those providers for which we had 
cost report data available from FYs 1995, 1996, and 1997. We used the 3 
years of cost report data to trend the data to the midpoint of the year 
2001 based on the facilities' historical relationship of costs and 
target amounts.
    In the proposed rule, we indicated that we were unable to calculate 
payment under the current payment system for some IRFs because cost 
report data were unavailable. We stated that we would attempt to obtain 
the most recent payment amounts for these IRFs through their Medicare 
fiscal intermediaries and we would consider using these data to 
construct the payment rates for the final rule. We also indicated that 
we would examine the extent to which certain IRFs (such as new 
facilities) are not included in the construction of the budget neutral 
conversion factor, and would consider the appropriateness of an 
adjustment to reflect total estimated payments for IRFs more 
accurately.
    In addition, because we did not have FIM data for all 
rehabilitation facilities, we indicated that for the final rule we 
would further analyze the extent to which the data used to construct 
the budget neutral conversion factor accurately reflect the 
relationship between case-mix and cost. We stated that we were 
considering the use of weighted averages to account more fully for 
those types of facilities that might be underrepresented with the given 
data.
    Comment: Some commenters suggested that the sample of IRFs used to 
develop the budget neutral conversion factor was not representative of 
all IRFs in terms of size, location, and case-mix. They added that a 
nonrepresentative sample would skew the development of a budget neutral 
conversion factor.
    Response: To address these concerns, for the final rule we used 
more IRFs in the construction of the budget neutral conversion factor. 
To do this, we modified the update methodology to include newer IRFs 
for which we were unable to obtain cost report data for FYs 1996, 1997, 
and 1998. We explain the modifications to the update methods below.
    For IRFs that did not have cost report data for FYs 1996, 1997, and 
1998, we updated their cost report data by applying the excluded 
hospital operating market basket update. For instance, if an IRF was 
new in FY 1997, we applied the excluded hospital operating market 
basket to update its cost report data to FY 1999. If the IRF was new in 
FY 1998, we used the excluded hospital operating market basket update 
to update its cost report data for FY 1999 and FY 2000. For IRFs that 
were not considered ``new,'' we used cost report data from FYs 1996, 
1997, and 1998 to trend the data to the midpoint of the year 2001 based 
on the IRF's historical relationship of costs and target amounts. The 
FY 1996 cost report data were used to determine the update to be used 
for FY 1999; the FY 1997 cost report data were used to determine the 
update to be used for FY 2000; and the FY 1998 cost report data were 
used to determine the update for FY 2001.
    In the proposed rule, we discussed the methodology for developing 
the budget neutral conversion factor in which we used data from only 
those IRFs that we had matching bill and FIM data and historical cost 
report data. In the proposed rule, we stated our intent to further 
analyze the extent to which the data used to construct the budget 
neutral conversion factor accurately reflects the relationship between 
case-mix and cost. Through this further analysis, we are able to 
include more IRFs into the data used to construct the budget neutral 
conversion factor. Including more IRFs with characteristics, as well as 
more cases in addition to the data for which we have Medicare bills 
matched with FIM data, allows for the development of prospective 
payments that will better reflect the IRF population.
    The CMI for an IRF is computed as the average of the CMG relative 
weights for all rehabilitation cases for that particular facility. The 
CMI reflects resource use and can be regarded as a measure of the 
average relative cost of each IRF's cases. Because case payment under 
the IRF will be a function of the budget neutral conversion factor as 
well as case-level and facility-level adjustments, the conversion 
factor can be influenced by each facility's historical CMI.
    In an attempt to include IRFs, as well as cases, with missing FIM 
data in the calculation of the budget neutral conversion factor, we 
developed a technique to estimate CMI data for these facilities. By 
utilizing the relationship between case-level and facility-level 
characteristics and their predictive power of an IRF's CMI, we can 
include more IRFs in the calculation of the budget neutral conversion 
factor, which should better reflect the characteristics of all types of 
facilities. We are able to estimate the CMI because we can obtain 
pertinent information regarding the characteristics of all IRFs, such 
as the facility's TEFRA payment, the facility's adjustment factor(s), 
(the wage adjustment, the LIP adjustment, and, if applicable, the rural 
adjustment) and other facility characteristics (for example, 
freestanding/unit status). We also use pertinent information regarding 
the characteristics of a case (even those cases for which we do not 
have matched

[[Page 41365]]

FIM data) such as surgical procedures performed during the preceding 
acute care stay, the principal diagnosis of the acute care stay, and 
all the diagnoses for the rehabilitation stay, the length of stay, and 
the type of facility the beneficiary may be transferred to after the 
rehabilitation stay. Using these facility and case characteristics, we 
estimated the CMI. We then combined these CMI estimates with the CMIs 
derived from those cases for which we had matching bill and FIM data 
and we calculated the budget neutral conversion factor using the 
methodology described in the proposed rule and in this final rule.
    By using these estimated CMIs, the data used to construct the 
budget neutral conversion factor better represents IRFS. The overall 
effect of using more data in the construction of the budget neutral 
conversion factor is an increase of 1.0 percent. The majority of this 
increase occurs because IRFs are less likely to report FIM data for 
very short stay cases.
    In summary, in this final rule, we specify under Sec. 412.624(a)(1) 
the data sources used to construct the budget neutral conversion factor 
(the basis for the prospective payment). For this final rule, the 
latest available data include the cost report data from FYs 1996, 1997, 
and 1998 and calendar year 1998 and 1999 Medicare claims with 
corresponding FIM data. We used data from 1,024 facilities to calculate 
the budget neutral conversion factor.
    The steps below describe the methodology we used to calculate the 
budget neutral conversion factor for the payment rates set forth in 
this final rule.
    Step 1--Update the latest operating and capital cost report data to 
the midpoint of fiscal year 2002.
    Section 1886(j)(3)(A)(i) of the Act and Sec. 412.624(b) of these 
final regulations specify that the per-payment-unit amount is to be 
updated to the midpoint of the fiscal year 2001, using the weighted 
average of the applicable percentage increases provided under section 
1886(b)(3)(B)(ii) of the Act. The statute allows us more discretion in 
determining an appropriate methodology to update from the years 2000 to 
2001. For this final rule, under Sec. 412.624(c)(2), we update from the 
midpoint of the year 2001 to the midpoint of the year 2002 using the 
same methodology provided under section 1886(b)(3)(B)(ii) of the Act. 
For this final rule, as in the proposed rule, we determine the 
appropriate update factor for each facility by using one of the 
following four methodologies:
     For facilities with costs that equal or exceed their 
target amounts by 10 percent or more for the most recent cost reporting 
period for which information is available, the update factor is the 
market basket percentage increase.
     For facilities that exceed their target by less than 10 
percent, the update factor is equal to the market basket minus .25 
percentage points for each percentage point by which operating costs 
are less than 10 percent over the target (but in no case less than 0).
     For facilities that are at or below their target but 
exceed two-thirds of the target amount, the update factor is the market 
basket minus 2.5 percentage points (but in no case less than 0).
     For facilities that do not exceed two-thirds of their 
target amount, the update factor is 0 percent.
    Step 2--Estimate total payments under the current payment system.
    Operating payments are calculated using the following methodology:
    Step 2a--We determine the facility-specific target amount, subject 
to the applicable cap on the target amounts for rehabilitation 
facilities. There are two national caps for rehabilitation facilities. 
We used the cap amounts for excluded rehabilitation hospitals and units 
published in the August 1, 2000 Federal Register (65 FR 47096). For 
facilities certified before October 1, 1997, the applicable cap for FY 
2001 is $15,164 for the labor-related share, adjusted by the 
appropriate geographic wage index and added to $6,029 for the nonlabor-
related share. For facilities certified on or after October 1, 1997, 
the cap applicable for FY 2001 is $13,002 for the labor-related share, 
adjusted by the appropriate geographic wage index and added to $5,169 
for the nonlabor-related share (65 FR 47098). We then inflate these 
amounts to the midpoint of the year 2002 by applying the excluded 
hospital operating market basket.
    Step 2b--We calculate the lower of the results of Step 2a.
     The facility-specific target amount (including application 
of the cap) times the Medicare discharges (the ceiling); or
     The facility average operating cost per case times 
Medicare discharges. We determine payment for operating costs by using 
one of the following methods:
    (1) For facilities whose operating costs are lower than or equal to 
the ceiling, payment is the lower of either the operating costs plus 15 
percent of the difference between the operating costs and the ceiling, 
or the operating costs plus 2 percent of the ceiling.
    (2) For facilities whose operating costs are more than 110 percent 
of the ceiling, payment is the lower of either the ceiling multiplied 
by 1.10 or half of the difference between 110 percent of the ceiling 
and the operating costs.
    (3) For facilities whose operating costs are greater than the 
ceiling but less than 110 percent of the ceiling, payment is the 
ceiling.
    Step 2c--After operating payments are computed, we determine 
capital payments. As we previously stated in step 1, capital cost 
report data are updated to the midpoint of FY 2002. Section 4412 of the 
BBA amended section 1886(g) of the Act by reducing capital payments 
that would otherwise be made for rehabilitation facilities. Payments 
for capital-related costs are made on a reasonable cost basis. The BBA 
mandated the reduction of capital payments by 15 percent. Therefore, we 
reduce capital payments for IRFs multiplying the costs by .85.
    Step 2d--The next step in determining total payments under the 
current payment system is to add operating and capital payments. 
Section 1886(j)(1)(A) of the Act specifies that the IRF prospective 
payment system will include both operating and capital-related costs. 
Once we determine appropriate payments for operating costs (including 
bonus and penalty payments as appropriate), and after making reductions 
for capital payments, we add the operating costs and the reduced 
capital-related costs together.
    Step 2e--The BIPA provides for the Secretary to adjust the rates so 
that the amount of total payments to IRFs are projected to equal 
payments that would have been paid in the absence of this new payment 
methodology. Payments made for cost reporting periods beginning on or 
after January 1, 2002 and before October 1, 2002 are based on both the 
facility-specific payment and the Federal prospective payment that we 
implement with this final rule. Therefore, in accordance with 
Sec. 412.624(d)(2) in this final rule, we adjust the Federal 
prospective payment rates for FY 2002 so that aggregate payments under 
the prospective payment system are estimated to equal the amount that 
would have been made to IRFs had the IRF prospective payment system not 
been implemented. However, under the amendments made by section 305(b) 
of BIPA, in calculating the budget neutrality adjustment, we do not 
take into account payment adjustments resulting from elections by 
hospitals under section 1886(j)(1)(F) of the Act (as added by section 
305(b)(1)(C) of BIPA) to not be paid under the transition period 
methodology described in section VI.H. of this final rule. In addition, 
we adjust total estimated payments to reflect the estimated proportion 
of additional outlier payments under Sec. 412.624(d)(1), and for coding 
and classification

[[Page 41366]]

changes under Sec. 412.624(d)(3). These payments are the numerator of 
the equation used to calculate the budget neutral adjustment.
    Step 3--Calculate the average weighted payment per discharge amount 
under the excluded hospital payment system.
    Once we calculate total payments under the excluded hospital 
payment system, we can then calculate an average per discharge payment 
amount weighted by the number of Medicare discharges under the current 
payment system. We do this by first determining the average payment per 
discharge amount under the excluded hospital payment system for each 
facility. We use cost report data to calculate each facility's average 
payment per discharge by dividing the number of discharges into the 
total payments. The next step is to determine the weighted average per 
discharge payment amount. To calculate this amount, we multiply the 
number of discharges from the Medicare bills by each facility's average 
payment per discharge amount. We then sum the amounts for all 
facilities and divide by the total number of discharges from the 
Medicare bills to derive an average payment per discharge amount that 
is weighted by the number of Medicare discharges.
    Step 4--Estimate payments under the IRF prospective payment system 
without a budget neutral adjustment.
    We then simulate payments under the IRF prospective payment system 
without a budget neutral adjustment. To do this, we multiply the 
following: each facility's CMI, the number of discharges from the 
Medicare bills, the appropriate wage index, the rural adjustment (if 
applicable), an appropriate LIP adjustment, and the weighted average 
per discharge payment amount computed in Step 3. We then add together 
the total payments for each facility. This total is the denominator in 
the calculation of the budget neutral adjustment.
    Step 5--Determine the budget neutral conversion factor.
    The denominator of the budget neutral adjustment equation is the 
total estimated payments for the prospective payment system without a 
budget neutral adjustment (the total amount calculated in Step 4). We 
calculate the budget neutral adjustment by dividing total reduced 
payments under the excluded hospital payment system (the total amount 
calculated in Step 2) by estimated payments for the prospective payment 
system implemented with this final rule. We then multiply the resulting 
budget neutral adjustment by the average weighted per discharge payment 
amount under the excluded hospital payment system to derive the budget 
neutral conversion factor.
    Comment: A few commenters suggested that the proposed budget 
neutral conversion factor was too low.
    Response: As explained in the proposed rule, the conversion factor 
is the payment amount adjusted for budget neutrality and standardized 
to account for a number of facility-level and case-level adjustments. 
Because the adjustments in this final rule reflect modifications from 
the proposed rule (specifically the LIP adjustment), the budget neutral 
conversion factor is higher compared to the proposed budget neutral 
conversion factor. We further adjust the budget neutral conversion 
factor to include a behavioral offset in order to calculate the final 
budget neutral conversion factor.
    As previously stated, to calculate the budget neutral conversion 
factor, we had to estimate what would have been paid under the excluded 
hospital payment system. However, due to the incentives for premature 
discharge inherent in the new IRF prospective payment system, we expect 
that differences in the utilization of these services might result. In 
the case of the IRF prospective payment system implemented with this 
final rule, discharges to other settings of care may take place earlier 
than under the excluded hospital payment system due to payments based 
on average costs. This would result in lower payments under that 
payment system for this care, which must be taken into account when 
computing budget neutral payment rates. Accounting for this effect 
through an adjustment is commonly known as a behavioral offset.
    For this final rule, the budget neutral conversion factor with a 
behavioral offset is $11,838.00. This represents a 1.16 percent 
reduction in the calculation of the budget neutral conversion factor 
otherwise calculated under the methodology described in this section 
VI.E. of this final rule. In determining this adjustment, we 
actuarially assumed that the IRFs would regain 15 percent of potential 
losses and augment payment increases by 5 percent through transfers 
occurring at or beyond the mean length of stay associated with CMG or 
home health care at any point. We applied this actuarial assumption, 
which was based on consideration of our historical experience with new 
payment systems, to the estimated ``losses'' and ``gains'' among the 
IRFs.
    Comment: Some commenters were concerned about the inclusion of the 
reduction to the budget neutral conversion factor (the behavioral 
offset) and suggested that the reduction be removed in the final 
calculation of the IRF prospective payments. For example, the 
commenters advanced various reasons for eliminating the offset, 
including the perception that the reduction penalizes efficient 
providers and the concern that the offset further reduces facility 
revenues to offset the costs of implementing the MDS-PAC.
    Response: We apply the behavioral offset as a reduction to the 
budget neutral conversion factor before applying all case-level and 
facility-level adjustments to determine a final payment amount. For 
this final rule, the behavioral offset is very low, at 1.16 percent and 
represents an integral part of the budget neutrality system. The 
justification for including an offset relates to the inherent 
incentives of a discharged-based prospective payment system. Because 
the prospective payment system bases payment rates on average costs for 
clinically similar cases, it will be more profitable for facilities to 
discharge patients earlier than under the excluded hospital cost-based 
payment system. We have identified the length of stay of a case as an 
important variable in predicting the costs of the case. Reductions in 
length of stay will reduce costs for the facilities while Medicare, in 
the absence of a behavioral offset, would continue to pay based on 
lengths of stay and rehabilitation services provided prior to the IRF 
prospective payment system. Our application of this adjustment is 
consistent with Section 1886(j)(3)(B) of the Act. This provision 
requires the Secretary, in establishing budget neutral rates, to 
consider the effects of the new payment system on utilization and other 
factors reflected in the composition of Medicare payments. Although one 
of the primary purposes of a prospective payment system is to provide 
incentives to be efficient, historic reductions in length of stay after 
a prospective payment system is implemented indicate the need to reduce 
the budget neutral conversion factor further. The purpose of the budget 
neutrality provision is to pay the same amount under the prospective 
payment system as would have been paid under the excluded hospital 
cost-based payment system for a given set of services, but not to pay 
that same amount for fewer services furnished as a result of the 
inherent incentives of the new prospective payment system. Thus, our 
methodology must account for the change in practice patterns due to new 
incentives in order to maintain a budget neutral payment system.
    Efficient providers are adept at modifying and adjusting practice 
patterns to maximize revenues while

[[Page 41367]]

still maintaining optimum quality of care for the patient. We take this 
behavior into account in the behavioral offset. Thus, the purpose of 
the offset is not just to account for the behavior of inefficient 
providers but also to account for the behavior of other providers who, 
due to the new incentives, provide more efficient care. Since providing 
more efficient care would have lowered reimbursement under the old 
payment system, the offset does not just account for inefficient 
behavior, but also accounts for what the costs will be under the new 
payment system as compared to the old one. For these reasons, we 
believe that such a minimal behavioral offset will not adversely affect 
efficient providers.
    Prior to BIPA, section 1886(j)(3)(B) of the Act specified that, for 
prospective payment units during FYs 2001 and 2002, the amount of total 
payments, including any payment adjustments under sections 1886(j)(4) 
and 1886(j)(6) of the Act, must be projected to equal 98 percent of the 
amount of payments that would have been made during these fiscal years 
for operating and capital-related costs of rehabilitation facilities 
had section 1886(j) of the Act not been enacted. Section 305(a) of BIPA 
amended section 1886(j)(3)(B) of the Act to delete the 2-percent 
reduction of the budget neutrality provision for FY 2002. This 
statutory change results in higher payment rates for IRFs; these 
additional monies can be used by IRFs to better assist them with the 
costs associated with completing patient assessment instruments.
    As we previously discussed, we believe including a behavioral 
offset is appropriate to ensure a budget neutral payment system for the 
IRF prospective payment system. We derived the low behavioral offset of 
the IRF prospective payment system through careful consideration of 
many factors, including the estimated impacts among the facilities and 
the analysis of the incentives inherent in the new payment system, as 
well as the recognition that, as more prospective payment systems 
evolve, there is a reduction in the extent to which providers can 
modify their behavior to influence payment.
    In summary, in this final rule, we are maintaining the methodology 
used to calculate the behavioral offset as specified in the proposed 
rule.

F. Development of the Federal Prospective Payment

    Once we calculate the relative weights for each CMG and the budget 
neutral conversion factor, we can determine the Federal prospective 
payments. In accordance with Sec. 412.624(c)(4) of these final 
regulations, we calculate these CMG payments by multiplying the budget 
neutral conversion factor by each of the CMG relative weights. The 
equation is as follows:

Federal Prospective Payment = CMG Relative Weight*Budget Neutral 
Conversion Factor

    Table 2 in the Addendum to this final rule displays the CMGs, the 
comorbidity tiers, and the corresponding Federal prospective payments.

G. Examples of Computing the Adjusted Facility Prospective Payments

    We will adjust the Federal prospective payments, described above, 
to account for geographic wage variation, low-income patients and, if 
applicable, facilities located in rural areas.
    To illustrate the methodology that we will use for adjusting the 
Federal prospective payments, we provide the following example. One 
beneficiary is in rehabilitation facility A and another beneficiary is 
in rehabilitation facility B. Rehabilitation facility A's DSH is 5 
percent, with a LIP adjustment of 1.0239 and a wage index of 0.987, and 
the facility is located in a rural area. Rehabilitation facility B's 
DSH is 15 percent, with a LIP adjustment of 1.0700 and a wage index of 
1.234, and the facility is located in an urban area. Both Medicare 
beneficiaries are classified to CMG 0111 (without comorbidities). This 
CMG represents a stroke with motor scores in the 27 to 33 range and the 
patient is between 82 and 88 years old. To calculate the facility's 
total adjusted Federal prospective payment, we compute the wage 
adjusted Federal prospective payment and multiply the result by: the 
appropriate disproportionate share adjustment and the rural adjustment 
(if applicable). The following table illustrates the components of the 
adjusted payment calculation.

     Examples of Computing a Facility's Federal Prospective Payment
------------------------------------------------------------------------
                                        Facility A         Facility B
------------------------------------------------------------------------
Federal Prospective Payment.......         $20,033.81         $20,033.81
Labor Share.......................          x  .72395          x  .72395
Labor Portion of Federal Payment..       = $14,503.48       = $14,503.48
Wage Index........................           x  0.987           x  1.234
Wage Adjusted Amount..............       = $14,314.93         $17,897.29
Non-Labor Amount..................        + $5,530.33        + $5,530.33
Wage Adjusted Federal Payment.....         $19,845.26         $23,427.62
Rural Adjustment..................          x  1.1914         x  1.000.0
                                   -------------------------------------
    Subtotal......................          23,643.65       = $23,427.62
DSH Adjustment....................          x  1.0239           x  1.070
                                   -------------------------------------
    Total Adjusted Federal                 $24,208.73         $25,067.56
     Prospective Payment..........
------------------------------------------------------------------------

    Thus, the adjusted payment for facility A will be $24,208.73 and 
the adjusted payment for facility B will be $25,067.56.

H. Computing Total Payments Under the IRF Prospective Payment System

    Under the BBA, section 1886(j)(1) of the Act describes how to 
compute a facility's payment during a transition period. Under the 
transition period, the prospective payment amount consists of a portion 
of the amount the facility would have been paid if the prospective 
payment system had not been implemented (facility-specific payment) and 
a portion of the adjusted facility Federal prospective payment. The 
transition period specifically covers cost reporting periods beginning 
on or after October 1, 2000 and before October 1, 2003. During the 
first transition period, for cost reporting periods beginning on or 
after October 1, 2000 and before October 1, 2001 (FY 2001), payment 
would consist of 66\2/3\ percent of the amount of the facility-specific 
payment and 33\1/3\ percent of the IRF adjusted facility Federal 
prospective payment. During the second transition period, for cost 
reporting periods beginning on or after October 1, 2001 and before 
October 1, 2002 (FY 2002), payment would consist of 33\1/3\ percent of 
the amount of the facility-specific payment and 66\2/3\ percent of the 
IRF adjusted facility

[[Page 41368]]

Federal prospective payment. For cost reporting periods beginning on or 
after October 1, 2002 (FY 2003), payment would be 100 percent of the 
adjusted facility Federal prospective payment.
    Section 305(b)(1)(C) of the BIPA added section 1886(j)(1)(F) to the 
Act, which allows an IRF to elect to be paid 100 percent of the 
adjusted facility Federal prospective payment for each cost reporting 
period to which the blended payment methodology would otherwise apply. 
This provision of the BIPA is effective as though it were included in 
the enactment of the BBA.
1. Payments Based on the Transition Period for Cost Reporting Periods 
Beginning During FY 2002
    In the proposed rule, we described how the application of the 
transition period percentages would be affected by the delay in 
implementation of the IRF prospective payment system. Specifically, as 
proposed, a facility with a cost reporting period beginning on or after 
October 1, 2000 and before April 1, 2001 (the planned implementation 
date as stated in the proposed rule) would not be paid under the IRF 
prospective payment system for that cost reporting period. For a 
facility with a cost reporting period beginning on or after April 1, 
2001 and before October 1, 2001, the prospective payment during that 
period would be comprised of the blended rate for FY 2001 as specified 
by the statute (66\2/3\ percent of the facility specific payment and 
33\1/3\ percent of the adjusted facility Federal prospective payment). 
For a facility with a cost reporting period beginning on or after 
October 1, 2001 and before October 1, 2002 (FY 2002), the prospective 
payment during that period would be comprised of the blended rate for 
FY 2002 as specified by the statute (33\1/3\ percent of the facility 
specific payment and 66\2/3\ percent of the adjusted facility Federal 
prospective payment). For cost reporting periods beginning on or after 
October 1, 2002, the prospective payment would be 100 percent of the 
adjusted facility Federal prospective payment.
    Comment: Many commenters suggested that it would be unfair for the 
transition period to apply to two cost reporting periods for some 
facilities while other facilities have the transition period apply to 
only one cost reporting period. In addition, some commenters believed 
that the law intended for all facilities to be afforded a 2-year 
transition period.
    Response: We recognize that the statute contemplated a 2-year 
transition period, but the statute (at section 1886(j)(1)(B) of the 
Act) also provides that the IRF prospective payment system must be 
fully implemented for cost reporting periods beginning on or after 
October 1, 2002. In other words, the statute provides that, for cost 
reporting periods beginning on or after October 1, 2002, payment will 
no longer be based on a blend of the Federal prospective payment and 
the facility-specific payment. As stated earlier, the earliest feasible 
date for implementation of the IRF prospective payment system is for 
cost reporting periods beginning on or after January 1, 2002, and we 
are adhering to the statutory payment formula applicable beginning 
January 1, 2002.
    We recognize that the delayed implementation of the IRF prospective 
payment system means that hospitals will be paid under the blend 
methodology for a period of less than 2 years (under section 
1886(d)(1)(F) of the Act, as added by section 305 of Public Law 106-
554, hospitals may elect to not be paid under the blend methodology at 
all). But we believe that a shortened transition period caused by a 
delay in implementation of the IRF prospective payment system is not 
inequitable. One purpose of the transition period is to give hospitals 
time to adjust before a prospective payment system is fully 
implemented. Hospitals have been on notice since the enactment of 
Public Law 105-33 that the IRF prospective payment system would be 
fully implemented for cost reporting period beginning on or after 
October 1, 2002. We did not shorten the timetable for full 
implementation of the prospective payment system payment rates, and 
hospitals have had ample time to prepare. Also, we note that, 
presumably, hospitals that would be ``disadvantaged'' by a shortened 
transition period (hospitals whose facility-specific rate is higher 
than the Federal prospective payment rate) have been ``advantaged'' by 
the delay in implementation.
    Accordingly, we are adhering to the statutory payment formula 
applicable for cost reporting periods beginning on January 1, 2002. In 
Sec. 412.626(a)(1)(i) of this final rule, we are specifying that 
payment to an IRF for cost reporting periods beginning on or after 
January 1, 2002 and before October 1, 2002 consists of 33\1/3\ percent 
of the facility-specific payment and 66\2/3\ percent of the adjusted 
Federal prospective payment. For cost reporting periods beginning on or 
after October 1, 2002, payment will be based entirely on the Federal 
prospective payment.
2. Payments Based on the Election To Apply the Full Prospective Payment 
for Cost Reporting Periods Beginning During FY 2002
    Under Sec. 412.626(b) of the final regulations, we are specifying 
that a provider may elect not to be paid under the transition period 
described in section VI.H.I. above. Payment to IRFs making this 
election will be based on 100 percent of the adjusted Federal 
prospective payment in effect for cost reporting periods beginning on 
or after January 1, 2002 and before October 1, 2002.
    An IRF must request this election no later than 30 days before the 
start of its first cost reporting period for which payment is based on 
the IRF prospective payment system. The IRF must make its request in 
writing to its Medicare fiscal intermediary. The intermediary must 
receive the request on or before the 30th day before the start of the 
cost reporting period, regardless of any postmarks or anticipated 
delivery dates. Requests received (whether mailed or delivered by other 
means) later than the 30th day before the cost reporting period will 
not be approved. If the 30th day before the start of the cost reporting 
period falls on a day on which the postal service or other delivery 
sources are not open for business, the IRF is responsible to ensure 
that enough time is allowed for the delivery of the request before the 
deadline. If an IRF's request is not received timely or is otherwise 
not approved, payment will be based on the transition period 
methodology.
3. Payments Based on the Full Prospective Payment for Cost Reporting 
Periods Beginning During FY 2003 and After
    Under Sec. 412.626(a)(l)(ii) of the final regulations, we are 
specifying that payment made to IRFs with cost reporting periods 
beginning on or after October 1, 2002 (FY 2003 and after) will consist 
of 100 percent of the adjusted Federal prospective payment. We 
described the basis of payments made for fiscal years after FY 2002 in 
Sec. 412.624 of the final regulations.

I. Method of Payment

    We will base a beneficiary's classification into a CMG on data 
obtained during the initial patient assessment. The CMG will determine 
the Federal prospective payment that the IRF receives for the Medicare-
covered Part-A services furnished during the Medicare beneficiary's 
episode of care. However, under Sec. 412.632(a) of these final 
regulations, the payment arises from the submission

[[Page 41369]]

of a discharge bill. This will allow us to pay for comorbidities 
diagnosed during the stay, classify cases appropriately to one of the 
five special CMGs (for cases in which the patient expires or has a very 
short length of stay), adjust the payment to reflect an early transfer, 
and determine if the case qualifies for an outlier payment. 
Accordingly, the IRF will record the CMG and other information on the 
beneficiary's discharge bill, and will submit the bill to its Medicare 
fiscal intermediary for processing. The payment made represents payment 
in full, under Sec. 412.622(b) of these final regulations, for 
inpatient operating and capital-related costs, but not for the costs of 
an approved medical education program, bad debts, blood clotting 
factors provided to patients with hemophilia, or other costs not paid 
for under the IRF prospective payment system.
    Under the existing payment system, (1) an IRF may be paid using the 
periodic interim payment (PIP) method described in Sec. 413.64(h) of 
the existing regulations; (2) rehabilitation units are paid under the 
PIP method if the hospital of which they are a part is paid under 
existing Sec. 412.116(b); (3) IRFs may be eligible to receive 
accelerated payments as described in existing Sec. 413.64(g); or (4) 
rehabilitation units are eligible for accelerated payments under 
existing Sec. 412.116(f). The statute does not preclude the 
continuation of PIP. We presently see no reason to discontinue our 
existing policy of allowing the PIP and accelerated payment methods 
under the prospective payment system for qualified IRFs, although we 
may choose to evaluate its continuing need in the future. Therefore, we 
will permit the continued availability of PIP and accelerated payments 
for services of IRFs paid under the prospective payment system at 
paragraphs (b) and (e) of Sec. 412.632 of the final regulations.
    For those services paid under the PIP method, the amount reflects 
the estimated prospective payments for the year rather than estimated 
cost reimbursement. An IRF receiving prospective payments, whether or 
not it received a PIP prior to receiving prospective payments, may 
receive a PIP if it meets the requirements in Sec. 412.632 and receives 
approval by its intermediary. Similarly, if an intermediary determines 
that an IRF that received a PIP prior to receiving prospective payments 
is no longer entitled to receive a PIP, it will remove the IRF from the 
PIP method. As provided in Sec. 412.632, intermediary approval of a PIP 
is conditioned upon the intermediary's best judgment as to whether 
making payment under the PIP method would not entail undue risk of 
resulting in an overpayment to the provider.
    Excluded from the PIP amount are outlier payments that are paid in 
final upon the submission of a discharge bill. In addition, Part A 
costs that are not paid for under the IRF prospective payment system, 
including Medicare bad debts and costs of an approved educational 
program, will be subject to the interim payment provisions of the 
existing regulations at Sec. 413.64.
    Under the prospective payment system, if an IRF is not paid under 
the PIP method, it may qualify to receive an accelerated payment. Under 
Sec. 412.632, the IRF must be experiencing financial difficulties due 
to a delay by the intermediary in making payment to the IRF, or there 
is a temporary delay in the IRF's preparation and submittal of bills to 
the intermediary beyond its normal billing cycle because of an 
exceptional situation. The IRF must make a request for an accelerated 
payment, which is subject to approval by the intermediary and by us. 
The amount of an accelerated payment is computed as a percentage of the 
net payment for unbilled or unpaid covered services. Recoupment of an 
accelerated payment occurs as bills are processed or through direct 
payment by the IRF.

J. Update to the Adjusted Facility Federal Prospective Payment

    Under section 1886(j)(3)(C) of the Act and under 
Sec. 412.624(c)(3)(ii) of the final regulations, future updates, for FY 
2003 and subsequent fiscal years, to the adjusted facility Federal 
prospective payments (budget neutral conversion factor) will include 
the use of an increase factor based on an appropriate percentage 
increase in a market basket of goods and services comprising services 
for which the IRF prospective payment system makes payment. This 
increase factor may be the market basket percentage increase described 
in section 1886(b)(3)(B)(iii) of the Act. We include in Appendix D of 
this final rule a description of the IRF market basket that we used in 
developing an increase factor under section 1886(j)(3)(C) of the Act.

K. Publication of the Federal Prospective Payment Rates

    In accordance with section 1886(j)(5) of the Act, we will publish 
in the Federal Register, on or before August 1 prior to the beginning 
of each fiscal year, the classifications and weighting factors for the 
IRF case-mix groups and a description of the methodology and data used 
in computing the prospective payment rates for that fiscal year 
(Sec. 412.628 of these final regulations).

L. Limitation on Administrative or Judicial Review

    In accordance with sections 1886(j)(7)(A), (B), and (C) of the Act, 
we are specifying under Sec. 412.630 of these final regulations that 
administrative or judicial review under sections 1869 or 1878 of the 
Act, or otherwise, is prohibited with regard to the establishment of 
the methodology to classify a patient into the case-mix groups and the 
associated weighting factors, the unadjusted Federal per discharge 
payment rates, additional payments for outliers and special payments, 
and the area wage index.

VII. Provisions of the Final Regulations

    After careful consideration of the public comments received on the 
November 3, 2000 proposed rule, we are adopting as final, with the 
modifications discussed throughout this preamble and summarized below, 
the proposed regulations set forth in 42 CFR Part 412, Subpart P, to 
implement the prospective payment system for IRFs, and the proposed 
technical and conforming changes to Secs. 412.1, 412.20, 412.22, 
412.23, 412.25, 412.29, 412.116, 412.130, 413.1, 413.40, and 413.64. 
The table of contents for Subpart P is as follows:

Subpart P--Prospective Payment for Inpatient Rehabilitation 
Hospitals and Rehabilitation Units

Sec.
412.600  Basis and scope of subpart.
412.602  Definitions.
412.604  Conditions for payment under the prospective payment system 
for inpatient rehabilitation facilities.
412.606  Patient assessment.
412.608  Patients' rights regarding the collection of patient 
assessment data.
412.610  Assessment schedule.
412.612  Coordination of the collection of patient assessment data.
412.614  Transmission of patient assessment data.
412.616  Release of information collected using the patient 
assessment instrument.
412.618  Assessment process for interrupted stays.
412.620  Patient classification system.
412.622  Basis of payment.
412.624  Methodology for calculating the Federal prospective payment 
rates.
412.626  Transition period.
412.628  Publication of the Federal prospective payment rates.
412.630  Limitation on review.
412.632  Method of payment under the inpatient rehabilitation 
facility prospective payment system.

     Throughout Subpart P and in Secs. 412.1, 412.20, 412.116, 
412.130,

[[Page 41370]]

413.1, and 413.40, we are changing the date and any related references 
for implementation of the IRF prospective payment system from ``April 
1, 2001'' to ``January 1, 2002''. Effective for cost reporting periods 
beginning on or after January 1, 2002, IRFs must meet the conditions 
specified in the Subpart P for payment of all covered inpatient 
hospital services furnished to beneficiaries under the IRF prospective 
payment system.
     Throughout Subpart P, we are changing all references to 
the MDS-PAC to either the CMS inpatient rehabilitation facility patient 
assessment instrument or deleting reference to the MDS-PAC, as 
appropriate, including deletion of the definition in Sec. 412.602. We 
are adding a new definition of ``patient assessment instrument'' to 
conform to the replacement of the MDS-PAC.
     Use of Authorized Clinician in Patient Assessments 
(Secs. 412.602--Definitions; 412.606--Patient assessment; 412.608--
Patients' rights regarding the collection of patient assessment data; 
and 412.612--Coordination of the collection of patient assessment 
data). As explained in section IV.A.3. of this final rule, we are 
deleting the definition of ``authorized clinician'' in proposed 
Sec. 412.602. In addition, we are revising proposed Secs. 412.606(c) 
and 412.612 to specify that any IRF clinician may perform the patient 
assessment and any clinician who is employed or contracted by the IRF 
and who is trained on how to conduct a patient assessment using our 
inpatient rehabilitation facility patient assessment instrument may 
complete items on the assessment instrument. We are deleting the 
provisions under proposed Secs. 412.606(c)(4) and 412.612(b) and (c) 
that an authorized clinician must sign the patient assessment 
instrument attesting to its completion and accuracy. We are revising 
proposed Sec. 412.606(c)(3) to clarify one of the other sources, in 
addition to direct patient observation, from which patient data may be 
obtained for the assessment process when appropriate and to the extent 
feasible. We are deleting the ``friends'' source and adding instead 
``someone personally knowledgeable about the patient's clinical 
condition or capabilities''.
    We are revising proposed Sec. 412.612(d) (Sec. 412.612(b) in this 
final rule) to specify that a person who knowingly and willfully 
completes or causes another person to complete a false patient 
assessment is subject to a civil money penalty. We are making 
conforming changes to proposed Sec. 412.608 to indicate that an IRF 
clinician must inform inpatients of their patient rights relating to 
the collection of patient assessment data.
     Patient Assessment Schedule and Data Transmission 
(Secs. 412.602--Definitions; 412.610--Assessment schedule; 412.614--
Transmission of patient assessment data; and 412.624--Methodology for 
calculating the Federal prospective payment rates). We are revising 
proposed Secs. 412.610(c) to specify that the patient assessment 
instrument is to be completed only twice, at the time of the patient's 
admission and at discharge. We are revising the definition of 
``discharge'' in Sec. 412.602 to add a provision that a Medicare 
patient in an IRF is also considered discharged when the patient stops 
receiving Medicare-covered Part A inpatient rehabilitation services.
    In addition, we are specifying the time period the admission 
assessment must cover; the assessment reference date for the admission 
and discharge assessments; and the dates by which the admission and 
discharge assessments must be completed. As conforming changes, we are 
revising the definition of ``assessment reference date'' in proposed 
Sec. 412.602; we are deleting the contents of proposed Sec. 412.610(d), 
which described the late assessment reference dates and related 
penalties for late completion of the patient assessment, which are no 
longer applicable; and we are deleting from proposed Sec. 412.610(e) 
the provisions on assessment completion dates, which are now specified 
in Sec. 412.610(c).
    We are revising proposed Sec. 412.610(e) (paragraph (d) in this 
final rule) to specify that admission and discharge assessments must be 
encoded by the 7th calendar day from the applicable assessment 
completion dates. (As conforming changes, proposed Secs. 412.610(f) and 
(g) are now Secs. 412.610(e) and (f), respectively.)
    We are revising proposed Sec. 412.614(c) to specify data 
transmission dates to us that are adjusted to reflect changes in the 
completion dates for admission and discharge assessments and for 
encoding data under Secs. 412.610(c) and (d).
    We are revising proposed Sec. 412.614(d)(2) to specify the date by 
which transmission of the assessment data is considered late (late 
transmission means more than 10 days after the 7th calendar day in the 
period beginning with the last permitted patient assessment encoding 
date) and to modify the penalties associated with late transmission of 
the patient assessment data. We also are revising proposed 
Sec. 412.624(e)(5) to specify the adjustment to the prospective payment 
to the IRF for late transmission of patient assessment data to reflect 
the provisions in Sec. 412.614(d)(2).
    These changes from the proposed rule are discussed in detail in 
sections IV.B. and IV.D. of this preamble.
     Interrupted Stays (Secs. 412.602--Definitions; 412.618--
Assessment process for interrupted stays; and 412.624--Methodology for 
calculating the prospective payment rates). We are revising the 
proposed definition of ``interrupted stay'' in proposed Sec. 412.602 to 
clarify that an interruption in a stay in an IRF is 3 consecutive 
calendar days that begins with the day of discharge and ends at 
midnight of the third day.
    We are revising proposed Secs. 412.618(a)(1) and (a)(3) (paragraphs 
(a)(1) and (a)(2) in this final rule) to specify that the initial case-
mix classification from the admission assessment remains in effect 
during the interrupted stay(s); and to specify that a discharge 
assessment must be completed when the patient stay (that includes one 
or more interrupted stays) is completed. We are deleting proposed 
Sec. 412.618(a)(2), which referenced the proposed multiple patient 
assessments that we are not adopting in this final rule; and deleting 
proposed Sec. 412.618(c), which discussed the transmission of data from 
the interrupted stay tracking form.
    In addition, we are revising proposed Sec. 412.618(d)(1) through 
(d)(4) (paragraphs (c)(1) and (c)(2) in this final rule) to specify the 
adjustment to dates to be used if an interrupted stay occurs before the 
patient admission assessment is completed or after the admission 
assessment is completed but before the discharge assessment is 
completed.
    We are adding new Sec. 412.624(g) to codify in this regulation text 
the policy on the adjustment to the IRF prospective payment for 
interrupted stays.
    These changes from the proposed rule are discussed in detail in 
sections IV.D. and VI.C.3. of this preamble.
     Patient Classification (Sec. 412.620--Patient 
classification system). We are revising proposed Sec. 412.620(a)(3) to 
specify that we will use the data from the admission assessment to 
classify the patient into the appropriate case-mix group as opposed to 
proposed data from the Day 4 assessment (the assessment schedule has 
been revised to specify only two assessments as discussed earlier).
    We are adding a definition of ``comorbidity'' in Sec. 412.602 and 
adding new paragraphs (a)(4) and (b)(4) under Sec. 412.620 to specify 
that we will determine a weighting factor(s) to account for the 
presence of a

[[Page 41371]]

comorbidity that is relevant to resource use in the classification 
system in determining payment rates under the IRF prospective payment 
system, and that we will use data from the discharge assessment to 
determine this weighting factor. These changes are discussed in detail 
in section VI.A. of the preamble in relation to our use in this final 
rule of a 3-tiered approach to determining adjustments in payment rates 
for CMGs based on differences in costs among relevant comorbidities.
     Payment Rates (Sec. 412.624--Methodology for calculating 
the prospective payment rates). We are revising the budget neutrality 
provision of proposed Sec. 412.624(d)(2) to reflect the deletion of the 
2-percent reduction as specified in section 305(a) of BIPA.
    We are revising proposed Sec. 412.624(e) to specify that the 
prospective payment rate for each IRF discharge will be based on 
whether the IRF's cost reporting period begins on or after January 1, 
2002 and before October 1, 2002 or begins after October 1, 2002.
    We are revising proposed Secs. 412.624(f)(2)(ii) and (f)(2)(iii) 
(paragraph (f)(2)(v) in this final rule) and adding new 
Secs. 412.624(f)(2)(iii) and (f)(2)(iv) to specify the adjustment to 
the prospective payment to the IRF for patients who are transferred to 
another site of care.
    These changes from the proposed rule are discussed in detail in 
sections VI.B., VI.D., and VI.E. of this preamble.
     Transition Period (Secs. 412.622--Basis of payment and 
412.626--Transition period). We are revising proposed 
Secs. 412.622(a)(2) and 412.626(a)(1) and adding new Sec. 412.626(b) to 
reflect the provisions under section 305(b) of BIPA that provide that, 
during the transition period, facilities may elect to be paid the full 
prospective payment rather than the payment determined under the 
transition period methodology.
    These changes from the proposed rule are discussed in detail in 
section VI.H. of this preamble.

Technical Changes

     Noncovered Items and Services (Sec. 412.604--Conditions 
for payment under the prospective payment system for inpatient 
rehabilitation facilities). We are revising proposed Sec. 412.604(d) to 
specify that in addition to the applicable deductible and coinsurance 
amounts, a facility may charge Medicare beneficiaries and other 
individuals on their behalf only for items and services as provided 
under existing regulations at Sec. 489.20(a).
    We are revising proposed Sec. 412.604(e)(1) to conform it to the 
provisions of existing Sec. 412.50 which lists the types of services 
that are not included as inpatient hospital services.
    We also are adding to Sec. 412.604(e)(1) a citation to the 
provisions of Sec. 412.622(b) to clarify that payments for certain 
services are not included in the full prospective payment to IRFs for 
inpatient rehabilitation services (that is, payment for approved 
educational activities, bad debts, and blood clotting factors).
    These changes from the proposed rule are discussed in detail in 
section II.B. of this preamble.

VIII. Regulatory Impact Analysis

A. Introduction

    We have examined the impacts of this final rule as required by 
Executive Order 12866, the Unfunded Mandate Reform Act of 1995 (Public 
Law 104-4), the Regulatory Flexibility Act (RFA) (Public Law 96-354), 
and Executive Order 13132 (Federalism).
1. Executive Order 12866
    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).
    We estimate that the impact of this final rule that implements 
section 1886(j) of the Act will result in a total cost to the Medicare 
program. Section 305(a) of BIPA eliminated the 2-percent reduction to 
the budget neutral adjustment. Under the amendments made by section 
305(a) of BIPA, then, we set payment amounts under the prospective 
payment system for FY 2002 so that payments under the IRF prospective 
payment system for FY 2002 are projected to equal ``100 percent * * * 
of the amount of payments that would have been made under this title * 
* * for operating and capital costs of rehabilitation facilities had 
this subsection not been enacted,'' but under the amendments made by 
section 305(b) of BIPA, in calculating the budget neutrality 
adjustment, we do not take into account payment adjustments resulting 
from elections by hospitals under section 1886(j)(1)(F) of the Act (as 
added by section 305(b)(1)(C) of BIPA) to not be paid under the 
transition period methodology described in section VI.H. of this final 
rule. Because elections under section 1886(j)(1)(F) of the Act are not 
taken into account in calculating the budget adjustment requirement, 
the implementation of the prospective payment system results in a cost.
    Payment to facilities that elect not to be paid under the 
transition period methodology will be based on 100 percent of the 
adjusted facility Federal prospective payment in effect for cost 
reporting periods beginning on or after January 1, 2002 and before 
October 1, 2002. Providers that will be paid more under the IRF 
prospective payment system than they would have been paid had the 
system not been in effect will likely elect to be paid based on 100 
percent of the Federal prospective payment rate. We estimate that, of 
the 1024 IRFs used to simulate the impacts among the various classes of 
IRFs, approximately 48 percent or 496 of these IRFs will elect not to 
be paid under the transition period methodology. For cost reporting 
periods beginning on or after January 1, 2002 and before October 1, 
2002, we estimate that the IRF prospective payment system will cost $60 
million, and for FY 2003, the costs will be $10 million. Because cost 
reporting periods can begin in one fiscal year and end in the next 
fiscal year, the FY 2002 estimated costs of $60 million are associated 
with the portion of IRF cost reporting periods between January 1, 2002 
and September 30, 2002. The FY 2003 estimated costs of $10 million are 
associated with the portion of IRF cost reporting periods between 
October 1, 2002, and September 30, 2003.
2. Regulatory Flexibility Act (RFA)
    The RFA requires agencies to analyze the economic impact of our 
regulations on small entities. If we determine that the regulation will 
impose a significant burden on a substantial number of small entities, 
we must examine options for reducing the burden. For purposes of the 
RFA, businesses include small businesses, nonprofit organizations, and 
governmental agencies. Most hospitals are considered small entities, 
either by nonprofit status or by having receipt of less than $25 
million per year. Because we lack data on individual hospital receipts, 
we cannot determine the number of small proprietary rehabilitation 
hospitals. Therefore, the analysis that follows is based on all 
rehabilitation facilities doing business with Medicare. Medicare fiscal 
intermediaries and carriers are not considered to be small entities. 
Individuals and States are not included in the definition of a small 
entity.

[[Page 41372]]

3. Unfunded Mandate
    Section 202 of the Unfunded Mandate 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 at least $110 million. This final rule will not have 
an effect on the governments mentioned nor will it affect private 
sector costs.
4. Executive Order 13132
    We examined this final rule in accordance with Executive Order 
13132 and determined that it will not have any negative impact on the 
rights, roles, or responsibilities of State, local, or tribal 
governments.
5. Impact on Rural Hospitals
    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis for any final rule that will have a significant impact 
on the operations of a substantial number of small rural hospitals. 
This analysis must conform to the provisions of section 604 of the RFA. 
For purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds.
6. Overall Impact
    For the reasons stated above, we have prepared an analysis under 
the RFA and section 1102(b) of the Act because we have determined that 
this final rule will 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 a rural hospitals. As 
discussed earlier in this preamble, we are adjusting payments for IRFs 
located in rural areas. Therefore, the impacts shown below reflect the 
adjustments that are designed to minimize or eliminate the negative 
impact that the IRF prospective payment system would otherwise have on 
rural facilities.
    This final rule sets forth the factors used to determine 
prospective payments under the Medicare program for IRFs. While section 
1886(j) of the Act specifies the basic methodology of constructing a 
case-mix adjusted prospective payment system, the statute does allow us 
some discretion in designing the key elements of the system, and we did 
consider alternatives for patient classification methodology based on 
functional-related groups, and adjustments to the prospective payments. 
We have included a detailed discussion of these elements and the 
alternatives that we considered in sections IV., V., and VI., 
respectively, of the preamble of this final rule.

B. Anticipated Effects of the Final Rule

    We discuss below the impacts of this final rule on the budget and 
on IRFs.
1. Budgetary Impact
    Section 1886(j)(3)(B) of the Act, as amended by section 305(a) of 
BIPA, requires us to set the payment rates contained in this final rule 
at levels such that total payments under the IRF prospective payment 
system are projected to equal the amount that would have been paid for 
operating and capital-related costs of rehabilitation facilities if 
this prospective payment system had not been implemented, but under the 
amendments made by section 305(b) of BIPA, in calculating budget 
neutrality, we do not take into account elections by facilities to 
receive the full Federal prospective payment rather than the payment 
determined under the transition period methodology. We project that 
implementing the IRF prospective payment system (as amended by section 
305(b) of BIPA) for cost reporting periods beginning on or after 
January 1, 2002 and before October 1, 2002 will cost the Medicare 
program $70 million over 2 years, as follows:

$60 million for FY 2002
$10 million for FY 2003
2. Impact on Providers
    In order to understand the impact of the new IRF prospective 
payment system on different categories of facilities, it is necessary 
to compare estimated payments under the current payment system (current 
payments) to estimated payments under the prospective payment system as 
set forth in this final rule (new prospective payments). To estimate 
the impact among the various classes of IRFs, it is imperative that the 
estimates of current payments and new prospective payments contain 
similar inputs. More specifically, we simulate new prospective payments 
only for those IRFs for which we are able to calculate current payment, 
and vice versa.
    As previously stated in section VI.D. of this preamble, we have 
both case-mix and cost data for 714 rehabilitation facilities. We used 
data from these facilities to analyze the appropriateness of various 
adjustments to the Federal unadjusted payment rates. However, for the 
impact analyses shown in the following tables, we simulate payments for 
1024 facilities. As we previously stated in section VI. of this final 
rule, we estimate the case-mix index for those IRFs and cases for which 
we do not have FIM data to match corresponding Medicare bills. 
Therefore, in this final rule, we are able to include more facilities 
in the impact analysis among the various classes of IRFs. Table I below 
reflect the estimated ``losses/gains'' among the various 
classifications of IRFs for cost reporting periods that begin on or 
after January 1, 2002 and before October 1, 2002. Table II below 
reflects the estimated ``losses/gains'' among the various 
classifications of IRFs for cost reporting periods that begin on or 
after October 1, 2002 and before October 1, 2003.
3. Calculation of Current Payments
    To calculate current payments, we trend cost report data forward 
from the midpoint of the cost reporting period to the midpoint of FY 
2002, using the methodology set forth in section VI.E.2. of this 
preamble. To estimate current payments, we calculate operating payments 
for each rehabilitation facility in accordance with section 1886(b) of 
the Act. Further, we compute capital payments by reducing reasonable 
costs by 15 percent, consistent with section 1886(g)(4) of the Act, as 
added by section 4412 of the BBA. To determine each facility's average 
per discharge payment amount under the current payment system, we add 
operating and capital-related payments together, and then divide the 
total payment by the number of Medicare discharges from the cost 
reports. We compute total payments for each facility by multiplying the 
number of discharges from the Medicare bills by the average per 
discharge payment amount.
4. Calculation of New Prospective Payments
    To estimate payments under the IRF prospective payment system as 
set forth in this final rule, we multiply each facility's case-mix 
index by the facility's number of Medicare discharges, the budget 
neutral conversion factor, the applicable wage index, a low income 
patient adjustment, and a rural adjustment (if applicable). We include 
a detailed description of the following specific adjustments in section 
VI.D. of the preamble of this final rule.
     The wage adjustment, calculated as follows: (.27605(.72395 
 x  Wage Index)).
     The disproportionate share adjustment, calculated as 
follows:

(1 + Disproportionate Share Percentage) raised to the power of .4838).

     The rural adjustment, if applicable, calculated by 
multiplying payments by 1.1914.
    After calculating the new Federal rate payments for each facility, 
we blend

[[Page 41373]]

together the appropriate percentages of the current payments and the 
new Federal rate payments to determine the appropriate amount for the 
first year of implementation of the IRF prospective payment system. 
Specifically, for cost reporting periods beginning on or after January 
1, 2002 and before October 1, 2002 we combine 33\1/3\ percent of the 
current payment amount with 66\2/3\ percent of the new Federal rate 
payment amount as shown in Table I below. However, for those providers 
that will receive higher payments under the IRF prospective payment 
system than they would have if the system had not been in effect, we 
simulate their payments in Table I as though they chose not to be paid 
under the transition payment methodology. (We estimate that 48 percent 
of the IRFs will elect not to be paid under the transition payment 
methodology.) For cost reporting periods beginning in FY 2003, we show 
the impact of the fully phased-in IRF prospective payment amount. All 
payment simulations reflect data trended to the midpoint of FY 2002. 
These data were not trended out to the midpoint of FY 2003.
    Tables I and II below illustrate the aggregate impact of the new 
payment system among various classifications of facilities. The first 
column, Facility Classifications, identifies the type of facility. The 
second column identifies the number of cases. The third column lists 
the number of facilities of each classification type, and the fourth 
column is the ratio of new prospective payments to current payments. 
The impact reflects the adjustments that we are making, including the 
specific geographic wage adjustment, the adjustment for rural 
facilities (if applicable), and a low-income patient adjustment for all 
facilities.

  Table I.--Projected Impact Reflecting 2/3 of New Prospective Payments
 Plus 1/3 of Current Payments and Option to Decline the Blended Payment
                                 Method
------------------------------------------------------------------------
                                                             New payment
                                    Number of    Number of    to current
     Facility Classifications         cases      facilities    payment
                                                                ratio
------------------------------------------------------------------------
All facilities...................      347,809        1,024         1.03
Geographic location
    Large Urban..................      163,970          489         1.04
    Other Urban..................      152,647          392         1.01
    Rural........................       31,192          143         1.03
Region
    New England..................       15,868           36         1.00
    Middle Atlantic..............       66,466          143         1.05
    South Atlantic...............       59,172          132         1.06
    East North Central...........       60,223          200         1.02
    East South Central...........       27,024           51         1.05
    West North Central...........       21,907           92         1.03
    West South Central...........       59,663          186         0.97
    Mountain.....................       15,697           65         1.04
    Pacific......................       21,789          119         1.04
Urban by Region
    Urban-New England............       15,039           32         1.01
    Urban-Middle Atlantic........       64,042          133         1.04
    Urban-South Atlantic.........       52,980          112         1.06
    Urban-East North Central.....       55,071          171         1.02
    Urban-East South Central.....       23,434           41         1.07
    Urban-West North Central.....       18,087           70         1.03
    Urban-West South Central.....       52,346          154         0.96
    Urban-Mountain...............       14,655           56         1.04
    Urban-Pacific................       20,963          112         1.04
Rural by Region
    Rural-New England............          829            4         0.95
    Rural-Middle Atlantic........        2,424           10         1.16
    Rural-South Atlantic.........        6,192           20         1.09
    Rural-East North Central.....        5,152           29         1.01
    Rural-East South Central.....        3,590           10         0.98
    Rural-West North Central.....        3,820           22         1.04
    Rural-West South Central.....        7,317           32         1.01
    Rural-Mountain...............        1,042            9         1.05
    Rural-Pacific................          826            7         1.00
Type and Size of Facility
    Unit of acute hospital.......      233,433          856         1.04
        Average Daily Census10...       39,123          289         1.00
        Average Daily Census 10-       122,904          436         1.05
         25......................
        Average Daily Census>25..       71,406          131         1.06
    Freestanding hospital........      114,376          168         0.99
        Average Daily Census25...        8,437           36         0.92
        Average Daily Census 25-        41,626           71         0.98
         50......................
        Average Daily Census>50..       64,313           61         1.01
Disproportionate Share
    Disproportionate Share10%....      121,046          329         1.05
    Disproportionate Share 10%-        101,405          261         1.02
     19%.........................
    Disproportionate Share 20%-         24,216           70         1.01
     29%.........................
    Disproportionate Share>= 30%.       14,851           72         1.05
    Disproportionate Share              86,291          292         1.01
     Missing.....................

[[Page 41374]]

 
Teaching Status
    Non-Teaching.................      285,112          872         1.03
    Resident to Average Daily           41,944           86         1.02
     Census  10%.................
    Resident to Average Daily           15,741           38         1.00
     Census 10%-19%..............
    Resident to Average Daily            5,012           28         1.02
     Census>19%..................
    Alaska/Hawaii................          991            4         0.99
------------------------------------------------------------------------


 Table II.--Projected Impact Reflecting the Fully Phased-In Prospective
                                Payments
------------------------------------------------------------------------
                                                             New payment
                                    Number of    Number of    to current
    Facilities classifications        cases       facility     payment
                                                                ratio
------------------------------------------------------------------------
All facilities...................      347,809        1,024         1.00
Geographic Location
    Large Urban..................      163,970          489         1.01
    Other Urban..................      152,647          392         0.99
    Rural........................       31,192          143         1.00
Region
    New England..................       15,868           36         0.98
    Middle Atlantic..............       66,466          143         1.02
    South Atlantic...............       59,172          132         1.04
    East North Central...........       60,223          200         0.99
    East South Central...........       27,024           51         1.03
    West North Central...........       21,907           92         1.01
    West South Central...........       59,663          186         0.93
    Mountain.....................       15,697           65         1.01
    Pacific......................       21,789          119         1.02
Urban by Region
    Urban-New England............       15,039           32         0.99
    Urban-Middle Atlantic........       64,042          133         1.02
    Urban-South Atlantic.........       52,980          112         1.03
    Urban-East North Central.....       55,071          171         0.99
    Urban-East South Central.....       23,434           41         1.05
    Urban-West North Central.....       18,087           70         1.01
    Urban-West South Central.....       52,346          154         0.92
    Urban-Mountain...............       14,655           56         1.01
    Urban-Pacific................       20,963          112         1.02
Rural by Region
    Rural-New England............          829            4         0.91
    Rural-Middle Atlantic........        2,424           10         1.14
    Rural-South Atlantic.........        6,192           20         1.07
    Rural-East North Central.....        5,152           29         0.98
    Rural-East South Central.....        3,590           10         0.94
    Rural-West North Central.....        3,820           22         1.02
    Rural-West South Central.....        7,317           32         0.97
    Rural-Mountain...............        1,042            9         1.04
    Rural-Pacific................          826            7         0.97
Type and Size of Facility
    Unit of acute hospital.......      233,433          856         1.02
        Average Daily Census10...       39,123          289         0.96
        Average Daily Census 10-       122,904          436         1.03
         25......................
        Average Daily Census>25..       71,406          131         1.04
    Freestanding hospital........      114,376          168         0.96
        Average Daily Census 25..        8,437           36         0.86
        Average Daily Census 25-        41,626           71         0.95
         50......................
        Average Daily Census>50..       64,313           61         0.99
Disproportionate Share
    Disproportionate Share10%....      121,046          329         1.02
    Disproportionate Share 10%-        101,405          261         0.99
     19%.........................
    Disproportionate Share 20%-         24,216           70         0.98
     29%.........................
    Disproportionate Share >= 30%       14,851           72         1.03
    Disproportionate Share              86,291          292         0.98
     Missing.....................
Teaching Status
    Non-Teaching.................      285,112          872         1.00
    Resident to Average Daily           41,944           86         1.00
     Census  10%.................
    Resident to Average Daily           15,741           38         0.97
     Census 10%-19%..............

[[Page 41375]]

 
    Resident to Average Daily            5,012           28         0.98
     Census >19%.................
    Alaska/Hawaii................          991            4         0.97
------------------------------------------------------------------------

5. Costs Associated With the Patient Assessment Instrument
    In this final rule, it is specified that an IRF must assess its 
Medicare Part A fee-for-service patients using the CMS IRF patient 
assessment instrument. Costs associated with the collection of the 
patient assessment data using the CMS IRF patient assessment 
instrument, and the associated reporting of data, are related to both 
personnel and equipment. These two classes of costs include the costs 
associated with using the CMS IRF patient assessment instrument to 
assess patients (data collection costs), the IRF's costs to start the 
patient assessment process using our patient assessment instrument, and 
the IRF's ongoing costs after the patient assessment process has been 
initiated. We note that many of the components of the costs associated 
with initiation of the patient assessment process specified in this 
final rule and the IRF's ongoing costs are the same.
a. Patient Assessment Instrument Data Collection Costs
    As stated in section IV. of this preamble, in this final rule we 
are using a modified version of the UDSmr patient assessment instrument 
that is frequently referred to as the FIM, as the CMS IRF patient 
assessment instrument. We are permitting any clinician who is employed 
or contracted by the IRF, and is trained on how to complete a patient 
assessment using our patient assessment instrument, to complete the 
data items on our patient assessment instrument (Sec. 412.606(c)).
    For this final rule, we calculated the cost to collect the patient 
assessment data using the CMS IRF patient assessment instrument by 
using the wage data and assumptions below. Although we are only 
specifying wage data for nine different types of clinicians, this 
should not be interpreted as meaning that these nine types are the only 
types of clinicians permitted to complete our patient assessment 
instrument.

    Note: The 2000-2001 version of the Occupational Outlook Handbook 
of the Bureau of Labor Statistics, U.S. Department of Labor, is 
still our most current source of salary data available.

     The hourly wage data for the nine specific types of 
clinicians, according to the Occupational Outlook Handbook of the 
Bureau of Labor Statistics, U.S. Department of Labor, are as follows 
(presented in ascending order):
    (1) The median earnings of social work assistants, which is 
included in the human service workers and assistants category, in 1998 
were $21,360. That is equivalent to a median hourly wage of $10.27. 
($21,360/52 weeks = $410.77/week. $410.77/40 hours = $10.27).
    (2) The median earnings of licensed practical nurses (licensed 
vocational nurses) in 1998 were $26,940. That is equivalent to a median 
hourly wage of $12.95. ($26,940/52 weeks = $518.07/week. $518.07/40 
hours = $12.95).
    (3) The median earnings of recreational therapists in 1998 were 
$27,760. That is equivalent to a median hourly wage of $13.35. 
($27,760/52 weeks = $533.84/week. $533.84/40 hours = $13.35).
    (4) The median earnings of social workers in 1998 were $30,590. 
That is equivalent to a median hourly wage of $14.71. ($30,590/52 weeks 
= $588.27/week. $588.27/40 hours = $14.7067).
    (5) The median earnings of dietitians and nutritionists in 1998 
were $35,020. That is equivalent to a median hourly wage of $16.84. 
($35,020/52 weeks = $673.46/week.$673.46/40 hours = $16.8365).
    (6) The median earnings of registered nurses in 1998 were $40,690. 
That is equivalent to a median hourly wage of $19.56. ($40,690/52 weeks 
= $782.50/week. $782.50/40 hours = $19.5625).
    (7) The median earnings of speech-language pathologists and 
audiologists in 1998 were $43,080. That is equivalent to a median 
hourly wage of $20.71. ($43,080/52 weeks = $828.46/week. $828.46/40 
hours = $20.7115).
    (8) The median earnings of occupational therapists in 1998 were 
$48,230. That is equivalent to a median hourly wage of $23.19. 
($48,230/52 weeks = $927.50/week. $927.50/40 hours = $23.1875).
    (9) The median earnings of physical therapists in 1998 were 
$56,600. That is equivalent to a median hourly wage of $27.21. 
($56,600/52 weeks = $1088.46/week. $1088.46/40 hours = $27.2115).
     IRF staff familiar with the MDS-PAC that was the product 
of our pilot and field testing required a median of 85 minutes to 
complete an admission intake assessment.
     IRF staff familiar with the MDS-PAC that was the product 
of our pilot and field testing required a median of 48 minutes to 
complete an update assessment.
     Our data indicate that in 1999 there were 390,048 IRF 
admissions and 1,165 IRFs, an average of 334.8 admissions per IRF. (For 
the calculations in the tables that follow, 334.8 admissions was 
rounded to 335 admissions.)
    We stated in the proposed rule that data from a non-HCFA associated 
source indicated that it could take a maximum of 45 minutes to complete 
an admission assessment using the FIM. However, according to 
information obtained from UDSmr, it takes an estimated combined time of 
25 minutes to collect both the admission and discharge patient 
assessment data using the UDSmr patient assessment instrument. We 
believe that the UDSmr estimated combined time of 25 minutes to collect 
both the admission and discharge data is the more accurate span of time 
estimate to use. Although in 2000 both the other non-HCFA source and 
UDSmr performed surveys to obtain instrument completion data, there is 
more precise data from the UDSmr survey results. Specifically, for the 
surveys that both performed: (1) The other non-HCFA associated source 
did not state its sample size or the numerical size of the universe 
from which the sample was obtained, while UDSmr had a sample size of 
303 facilities out of a universe of 600 to 700 IRFs; (2) the other non-
HCFA associated source only gave ranges of the span of times it took 
experienced or inexperienced personnel to complete the UDSmr 
instrument, while UDSmr provided the mean and median spans of times it 
took experienced and inexperienced personnel to complete the UDSmr 
instrument. In addition, we believe that UDSmr, instead of the other 
non-HCFA source, is more knowledgeable of the span of time it takes to 
complete its own instrument. We estimate that it will take a combined 
time of 45 minutes to collect both the

[[Page 41376]]

admission and discharge patient assessment data using our patient 
assessment instrument.
    We believe that IRFs that currently use the UDSmr patient 
assessment instrument to collect admission and discharge data, which we 
believe is 85 percent of the 1,165 IRFs (990 IRFs), are completing the 
entire UDSmr patient assessment instrument when collecting the 
admission and discharge data. Therefore, for IRFs currently using the 
UDSmr patient assessment instrument, we believe that the estimated 
additional time to collect both the admission and discharge patient 
assessment data using our patient assessment instrument
    For IRFs that are not currently using the UDSmr patient assessment 
instrument, or a similar instrument, which we believe is 15 percent of 
the 1,165 IRFs (175 IRFs), we estimate an additional assessment time 
burden of 45 minutes.
    The 1998 median hourly wages from the U.S. Dept. of Labor, Bureau 
of Labor Statistics, Occupational Outlook Handbook, 2000-2001 Edition, 
specified above have been updated, using our Occupational Compensation 
Index from the excluded hospital market basket. The update factor is 
1.159. Using the updated 1998 median hourly wages, we show in Table III 
below the range of the costs of the estimated additional patient 
assessment time burden by clinician discipline. In addition, we show in 
Table III the range of the costs of the minimum and maximum additional 
time burden by clinician discipline using the 1999 data of 390,048 IRF 
admissions and 1,165 IRFs (an average of approximately 335 admissions 
per IRF).

Table III.--Range of the Incremental Costs, To Collect Both the A  rge Patient Assessment Data Using the CMS IRF
                                          Patient Assessment Instrument
----------------------------------------------------------------------------------------------------------------
                                                                   (Column 3)                         (Column 5)
                                                                    Range of                           Range of
                                            (Column 2)  Range of  incremental  (Column 4)  Range of  incremental
                                             incremental time of    cost per    incremental time of    cost per
 (Column 1)  Updated hourly wages for each      20 minutes--        clinical       45 minutes--       clinicial
           clinician discipline             incremental cost per   discipline  incremental cost per   discipline
                                            clinician discipline   per IRF--   clinicial discipline    per IRF
                                               column 1 times       column 2    column 1 times 0.75    column 4
                                                  0.333333         times 335                          times 335
                                                                   admissions                         admissions
----------------------------------------------------------------------------------------------------------------
$11.90....................................             $3.97        $1,328.83             $8.93        $2,989.88
15.01.....................................              5.00         1,676.11             11.26         3,771.26
15.47.....................................              5.16         1,727.48             11.60         3,886.84
17.05.....................................              5.68         1,903.91             12.79         4,283.81
19.52.....................................              6.51         2,179.73             14.64         4,904.40
22.67.....................................              7.56         2,531.48             17.00         5,695.84
24.00.....................................              8.00         2,680.00             18.00         6,030.00
26.88.....................................              8.96         3,001.60             20.16         6,753.60
31.54.....................................             10.51         3,521.96             23.66         7,924.43
----------------------------------------------------------------------------------------------------------------

    Table IV below compares the average estimated time to complete the 
inpatient rehabilitation facility patient assessment instrument as 
specified in this final rule to the average estimated time to complete 
the MDS-PAC in the proposed rule, assuming that the expanded list of 
clinicians could complete the proposed MDS-PAC. We are only comparing 
the costs to perform the combined admission and discharge assessment 
using the CMS IRF patient assessment instrument in this final rule to 
the cost to perform the admission MDS-PAC assessment because the best 
time span data we have is how long it takes to do the admission MDS-PAC 
assessment. The admission MDS-PAC assessment took 85 minutes to 
perform, that is, to collect the data, (85 minutes divided by 60 
minutes is 1.412 (rounded)). Table IV is based on the assumption that 
all 1,165 IRFs would collect the assessment data.

Table IV.--Comparison of the Costs of Performing the Patient Assessment Using the CMS IRF Patient Assessment Instrument to Costs Using the Proposed MDS-
                                                                           PAC
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Costs to perform the combined admission and      Costs to perform only the admission
                                                                 discharge assessments using the CMS IFR patient        assessment using the MDS-PAC
                                                                              assessment instrument               --------------------------------------
                                                               ---------------------------------------------------  (Column 5)   (Column 6)
                                                                                       (Column 3)                    Range of     Range of
                                                                                        Range of                     maximum      maximum
                                                                (Column 2)  Range of  incremental                  incremental  incremental   (Column 7)
 (Column 1)  Updated Hourly Wages for each clinical discipline   incremental time of    cost per     (Column 4)     time of 85    cost per     National
                                                                    45 minutes--        clinical      National     minutes per    clinical      costs
                                                                incremental cost per   discipline  costs--(column    clinical    discipline   (column 6
                                                                clinician discipline   per IRF--    3 times 1,165   discipline    per IRF    Times 1,165
                                                                 column 1 times 0.75    column 2        IRFs)       (column 1    (column 5      IRFs)
                                                                        Hour)          times 335                      times      times 335
                                                                                       admissions                     1.412)    admissions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
$11.90........................................................              8.93           $2,990     $3,483,204        $16.80       $5,629   $6,557,713
$15.01........................................................             11.26            3,771      4,393,521         21.19        7,100    8,271,535
$15.47........................................................             11.60            3,887      4,528,166         21.84        7,318    8,525,027
$17.05........................................................             12.79            4,284      4,990,642         24.07        8,065    9,395,715
$19.52........................................................             14.64            4,904      5,713,626         27.56        9,233   10,756,853

[[Page 41377]]

 
$22.67........................................................             17.00            5,696      6,635,651         32.01       10,723   12,492,718
$24.00........................................................             18.00            6,030      7,024,950         33.89       11,352   13,225,639
$26.88........................................................             20.16            6,754      7,867,944         37.95       12,715   14,812,716
$31.54........................................................             23.66            7,924      9,231,955         44.53       14,919   17,380,694
--------------------------------------------------------------------------------------------------------------------------------------------------------

b. Start-Up Costs
    The costs that an IRF will incur to start the patient assessment 
process using our assessment instrument consist of material costs and 
personnel costs. Our data indicate that in 1999 there were 1,165 IRFs.
(1) Start-Up Hardware Costs
    We believe that all IRFs have the hardware computer capability 
(that is, hard drive, printer, RAM memory, modem) and the related 
software (that is, Internet Browser software) to be able to handle the 
computerization, data transmission, and GROUPER software requirements 
associated with our patient assessment instrument. Our belief is based 
on indications that (a) approximately 99 percent of all hospital 
inpatient claims currently are submitted electronically; (b) 
approximately 100 percent of IRFs submit their cost reports 
electronically; and (c) approximately 85 percent of IRFs that use the 
FIM subscribe to the full UDSmr FIM system and submit their data to 
UDSmr electronically.
    Because we will supply to the IRFs free of charge the software that 
performs the electronic functions associated with our patient 
assessment instrument, the IRFs will incur no software costs to 
purchase that software. Although we will supply the software version of 
our patient assessment instrument, which includes the GROUPER software 
and the data transmission software, IRFs may incur costs, which we are 
not able to estimate, associated with making changes to their 
information management systems to incorporate our patient assessment 
process software.
    IRFs have the option of purchasing data collection software that 
can be used to support other clinical or operational needs (for 
example, care planning, quality assurance, or billing), or other 
regulatory requirements for reporting patient information. However, the 
software associated with our patient assessment instrument will be 
available to IRFs at no charge through our IRF prospective payment 
system website. That website is: www.hcfa.gov/medicare/irfpps.htm. Our 
patient assessment instrument software will allow users to computerize 
their assessment data and transmit the data in a standard format 
specified by us to the CMS patient data system. Therefore, IRFs that 
plan to use our patient assessment instrument software will need 
Internet access and a dial-up Internet Service Provider account in 
order to be able to download and install our software into their 
computer system. We believe that all IRFs currently have the capability 
to access the Internet.
(2) Start-Up Training Costs
    IRF staff will require training in performing assessments with the 
CMS IRF patient assessment instrument, encoding assessment data, 
preparing the assessment data for electronic submission, and actually 
transmitting the data. We believe that the initial training of IRF 
clinical and data entry personnel will require about 129.5 hours of 
staff time.
    We expect that the IRF will send one discipline-specific lead 
clinician to a training session of 16 hours sponsored by us, and then 
have that individual train the other IRF clinicians. We estimate that, 
on average, nine nonlead clinicians per IRF will require 12 hours of 
training. These nonlead clinicians will be trained at their respective 
IRF. As stated in section IV. of this preamble, in this final rule we 
are permitting any clinician who is employed or contracted by the IRF 
and who is trained on how to perform a patient assessment using the CMS 
IRF patient assessment instrument to complete the data items on the CMS 
IRF patient assessment instrument.
    We also estimate that one data entry staff person will require 
approximately 5.5 hours of training. The estimated hourly wage cost of 
the data entry staff person from the proposed rule is $12.50. Using the 
update factor for hourly wages of the 1.159 cited earlier, we estimate 
that the updated hourly wage for the data entry staff person is $14.49 
(rounded). Using this updated hourly wage rate, we estimate that the 
5.5 hours of training will cost approximately $79.70 (5.5 hours  x  
$14.49) per IRF, for an estimated cost of $92,844 nationally ($79.70 
x  1,165 IRFs).
(3) Start-Up Data Entry and Data Transmission Costs
    We do not know the time span it takes to enter the UDSmr data into 
the UDSmr patient assessment software, or the time span it takes to 
perform a data entry audit on those data. Our patient assessment data 
will be collected for the admission and discharge assessments. The 
estimated wage cost of the data entry staff person is $14.49 per hour. 
We estimate 6 minutes for data entry and data review per assessment, 
for approximately 335 assessments per IRF, which equals 2,010 minutes 
(34 hours) per IRF per year. We estimate the associated data entry cost 
per IRF per year to be $493 (34 hours  x  $14.49), and the national 
costs to be $573,949 ($493  x  1,165 IRFs).
    We estimate that an IRF will perform a 15-minute monthly data entry 
audit for quality assurance purposes, equaling

[[Page 41378]]

3 hours per IRF per year (15 minutes per month  x  12 months). We 
estimate the cost per IRF per year to be $43 (3 hours  x  $14.49), and 
the national costs to be $50,643 ($43  x  1,165 IRFs).
    We believe that the combination of checking all the data prior to 
transmission of the data, and actual transmission of the data, will 
take an IRF 1 hour per month. Although we believe that approximately 85 
percent of the IRFs already transmit data to UDSmr, we do not know if 
these 85 percent of IRFs will stop transmitting data to UDSmr after 
they start transmitting data to us. Therefore, we are estimating for 
all 1,165 IRFs the same additional burden of 1 hour per month for the 
combination of checking all the data prior to transmission of the data 
and the actual transmission of the data. We estimate the cost per IFR 
per year to be $174 (rounded) (12 months  x  $14.49/hour), and the 
national costs to be $202,570 ($174  x  1,165 IRFs).
    IRFs will have flexibility in choosing the data entry software used 
to computerize the patient assessment data, but the software must, at a 
minimum, perform the same functions as our patient assessment software. 
In addition, when IRFs are performing data entry functions themselves, 
or contracting for the performance of these functions, the IRFs must 
ensure that the performance of data entry complies with our requirement 
for safeguarding the confidentiality of clinical records.
    IRFs must collect and transmit the patient assessment data to the 
CMS patient data system in accordance with the assessment schedule and 
transmission requirements specified in section IV. of this final rule. 
The data may be entered into the computerized version of the CMS IRF 
patient assessment instrument by an IRF staff member, using a paper 
version that has been completed by a clinical staff member who has been 
trained to perform a patient assessment using our patient assessment 
instrument according to this final rule, or by a data entry operator 
under contract to the IRF to key in data. The patient assessment data 
will be transmitted to the CMS patient data system. This system is 
similar to the systems that HHAs use to report OASIS data and that SNFs 
use to report MDS 2.0 data. IRFs will transmit the patient assessment 
data using the toll-free MDCN line.
    (4) Start-Up Systems Maintenance and Supplies Costs
    There are costs associated with normal maintenance related to 
computer equipment. Typically, this maintenance is provided through 
warranty agreements with the original equipment manufacturer, system 
retailer, or a firm that provides computer support. These maintenance 
costs are estimated to average no more than $100 per year per IRF. 
Although we believe that approximately 85 percent of the IRFs already 
have systems maintenance costs associated with transmitting data to 
UDSmr, we do not know if these 85 percent of IRFs will stop 
transmitting data to UDSmr after they start transmitting data to us. 
Therefore, we estimate for all 1,165 IRFs the same additional systems 
maintenance costs of $100 per IRF per year, for an estimated $116,500 
national yearly cost ($100  x  1,165 IRFs).
    Supplies necessary for collection and transmission of data, 
including forms, diskettes, computer paper, and toner, will vary 
according to the size of the IRF, the number of patients served, and 
the number of assessments conducted. Although we believe that 
approximately 85 percent of the IRFs already have supplies costs 
associated with transmitting data to UDSmr, we do not know if these 85 
percent of IRFs will stop transmitting data to UDSmr after they start 
transmitting data to us. Therefore, we estimate for all 1,165 IRFs the 
same additional supplies costs of $200 per IRF per year, for an 
estimated national yearly cost of $233,000 ($200  x  1,165 IRFs).
    Tables V-A, V-B, V-C, and V-D below illustrate our estimates of the 
different categories of start-up costs that we have discussed above. In 
addition, in the proposed rule we proposed to only allow four types of 
clinicians to collect patient assessment data. Table V illustrates the 
effect of allowing more types of clinicians to collect patient 
assessment data on IRF start-up costs. Also, instead of averaging the 
hourly wages of the nonlead clinicians, as we did in the proposed rule, 
in order to better specify costs in Table Va-A, we are illustrating a 
range of the nonlead clinicians' hourly wages and, thus, presenting a 
range of the training start-up costs for these nonlead clinicians. Due 
to the changes in illustrating and estimating the start-up costs, 
particularly the range of costs for training the nonlead clinicians, we 
estimate the total start-up costs to be approximately $2,988,580 to 
$5,825,775, which equal approximately $2,565 to $5,001 per IRF.

                  Table V-A.--IRF Start-Up Costs Associated With the CMS IRF Patient Assessment Instrument: Training Costs Per IRF1 \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            (Column 3)               (Column 5)  Range
                                               (Column 2)     Hourly     (Column 4)   of the costs per
          (Column 1)  Type of cost             Hours per    Wages per    Number of     IRF (column 2           (Column 6)  Range of national costs
                                                  IRF         staff        staff       times column 3
                                                              member                  times column 4)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Training on data collection for lead                   16       $11.90            1               $190  Column 5 Low and High Times 1,165
 clinicians for the admission and discharge                                                             $221,816 to $587,906
 assessments.
                                                       16        15.01            1                240
                                                       16        15.47            1                248
                                                       16        17.05            1                273
                                                       16        19.52            1                312
                                                       16        22.67            1                363
                                                       16        24.00            1                384
                                                       16        26.88            1                430
                                                       16        31.54            1                505
Training on data collection for other IRF              12        11.90            9              1,285  Column 5 Low and High Times 1,165
 clinicians for the admission and discharge                                                             $1,497,258 to $3,968,363
 assessments.
                                                       12        15.01            9              1,621
                                                       12        15.47            9              1,671  ................................................
                                                       12        17.05            9              1,841  ................................................

[[Page 41379]]

 
                                                       12        19.52            9              2,108
                                                       12        22.67            9              2,448
                                                       12        24.00            9              2,592
                                                       12        26.88            9              2,903
                                                       12        31.54            9              3,406
Data Entry (encoding and Transmission)                5.5        14.49            1              79.70  Column 5 Times 1,165
 training.                                                                                              $92,844
                                             -----------------------------------------------------------------------------------------------------------
    Total...................................  ...........  ...........  ...........  .................  $1,811,919 to $4,649,113
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Excludes the incremental clinician labor costs associated with collecting the patient assessment data.


  Table V-B.--IRF Start-Up Costs Associated With the CMS IRF Patient Assessment Instrument: Data Entry and Data
                                           Transmission Costs Per IRF
----------------------------------------------------------------------------------------------------------------
                                                                                                      (Column 6)
                                                  (Column 2)                (Column 4)                 National
                                                  Hours per    (Column 3)    Cost per    (Column 5)     costs
            (Column 1)  Type of Cost               IRF per    Hourly wage  IRF (column   Number of    (column 4
                                                     year                    2 times        IRFs        times
                                                                            column 3)                 Column 5)
----------------------------------------------------------------------------------------------------------------
Data Entry.....................................           34       $14.49         $493        1,165     $573,949
Data Entry Audits..............................            3        14.49           43        1.165       50,643
Data Transmissions.............................           12        14.49          174        1,165      202,570
                                                ----------------------------------------------------------------
    Total......................................  ...........  ...........  ...........  ...........      827,162
----------------------------------------------------------------------------------------------------------------


    Table V-C.--IRF Start-Up Costs Associated With the CMS IRF Patient
      Assessment Instrument: System Maintenance and Supplies Costs
------------------------------------------------------------------------
                                                              (Column 4)
                                    (Column 2)                 National
                                     Cost per    (Column 3)     costs
     (Column 1)  Type of Cost        IRF per     Number of    (column 2
                                       year         IRFs        times
                                                              column 3)
------------------------------------------------------------------------
Systems Maintenance..............         $100        1,165     $116,500
Supplies.........................          200        1,165      233,000
                                  --------------------------------------
    Total........................  ...........  ...........      349,500
------------------------------------------------------------------------


   Table V-D.--IRF Start-Up Costs Associated With the CMS IRF Patient
          Assessment Instrument: Total Range of Start-Up Costs
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Range of Start-up Training-Low to  $1,811,919
 High (From Table V-A).
                                   $4,649,113
Start-up Data Entry and Data       $827,162
 Transmission Costs (From Table V-
 B).
Start-up Systems Maintenance and   $349,500
 Supplies Costs (From Table V-C).
Grand Total Range of Start-up      $2,988,580 to $5,825,775
 Costs Per IRF.
Low Start-Up Cost per IRF          $2,565.31
 ($2,988,580 Divided by 1,165
 IRFs).
High Start-Up Cost per IRF         $5,000.67
 ($5,825,775 Divided by 1,165
 IRFs).
High Start-Up Costs Per Admission  $14.93
 ($4,971.69 Divided by 335
 Admissions).
------------------------------------------------------------------------

c. Ongoing Costs
    We want to differentiate between the one-time start-up costs the 
IRF will incur and costs we believe the IRFs will incur on a regular, 
yearly basis. Therefore, using the same cost concepts discussed above 
for the startup costs, we illustrate in Tables VI-A, VI-B, VI-C, and 
VI-D below the different categories of costs an IRF will incur on an 
ongoing basis.

[[Page 41380]]



              Table VI-A.--IRF Ongoing Costs Associated With the CMS IRF Patient Assessment Instrument: Ongoing Training Costs Per IRF \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  (Column 5)
                                                                                                Range of costs
                                               (Column 2)       (Column 3)       (Column 4)    per IRF  column
         (Column 1)  Type of cost            Hours per IRF     Hourly wages   Number of staff   2 times column     (Column 6)  Range of national costs
                                                                                                3 times column
                                                                                                      4)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Clinician training on data collection for                12           $11.90                1             $143  Column 5 Low and High Times 1,165.
 lead clinician.                                         12            15.01                1              180  $166,362 to $440,929.
                                                         12            15.47                1              186
                                                         12            17.05                1              205
                                                         12            19.52                1              234
                                                         12            22.67                1              272
                                                         12            24.00                1              288
                                                         12            26.88                1              323
                                                         12            31.54                1              378
Clinician training on data collection for                 2            11.90                9              214  $249,543 to $661,394.
 non-lead clinicians.                                     2            15.01                9              270
                                                          2            15.47                9              278
                                                          2            17.05                9              307
                                                          2            19.52                9              351
                                                          2            22.67                9              408
                                                          2            24.00                9              432
                                                          2            26.88                9              484
                                                          2            31.54                9              568
Data entry (encoding and transmission)                    5            14.49                1            72.45  Column 5 times 1,165.
 training.                                                                                                      $84,404.
                                           -------------------------------------------------------------------------------------------------------------
    Total.................................  ...............  ...............  ...............  ...............  $500,309 to $1,186,727.
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Excludes the incremental clinician labor costs associated with collecting the patient assessment data.


        Table VI-B.--IRF Ongoing Costs Associated With the CMS IRF Patient Assessment Instrument: Data Entry and Data Transmission Costs Per IRF
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          (Column 4)                        (Column 6)
                                                                        (Column 2)       (Column 3)      Cost per IRF      (Column 5)     National costs
                      (Column 1)  Type of cost                        Hours per IRF     Hourly wage    (column 2 times   Number of IRFs  (column 4 times
                                                                         per year                         column 3)                         column 5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Data entry.........................................................               34           $14.49             $493            1,165         $573,949
Data entry audits..................................................                3            14.49               43            1,165           50,643
Data transmissions.................................................               12            14.49              174            1,165          202,570
                                                                    ------------------------------------------------------------------------------------
    Total..........................................................  ...............  ...............  ...............  ...............          827,162
--------------------------------------------------------------------------------------------------------------------------------------------------------


Table VI-C.--IRF Ongoing Costs Associated with the CMS IRF Patient Assessment Instrument: System Maintenance and
                                                 Supplies Costs
----------------------------------------------------------------------------------------------------------------
                                                                                                    (Column 4)
                                                                  (Column 2)       (Column 3)     National costs
                   (Column 1)  Type of cost                      Cost per IRF    Number of IRFs  (column 2 times
                                                                   per year                         column 3)
----------------------------------------------------------------------------------------------------------------
Systems maintenance..........................................             $100            1,165         $116,500
Supplies.....................................................              200            1,165          233,000
                                                              --------------------------------------------------
    Total....................................................  ...............  ...............          349,500
----------------------------------------------------------------------------------------------------------------


Table VI-D.--IRF Ongoing Costs Associated with the CMS IRF Patient Assessment Instrument: Total Range of Ongoing
                                                      Costs
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Range of ongoing training--low to high (from Table VI-A)...  $500,309 to $1,186,727.
Ongoing data entry and data transmission costs (from Table   $827,162.
 VI-B).
Ongoing systems maintenance and supplies cost (from Table    $349,500.
 VI-C).
    Grand total range of ongoing costs per IRF.............  $1,676,971 to $2,363,389.
----------------------------------------------------------------------------------------------------------------


[[Page 41381]]

d. Clinical Labor Data Collection Costs
    As stated more fully in section VIII.B.5.a. of this final rule, we 
estimate that it will take a combined time of 45 minutes to collect 
both the admission and discharge patient assessment data using our 
patient assessment instrument. In addition, we stated more fully that 
it currently takes 25 minutes for 85 percent of 1,165 IRFs (990 IRFs) 
to complete the admission and discharge UDSmr patient assessment 
instrument, and that we believe that 15 percent of the IRFs (175 IRFs) 
are not currently using the UDSmr patient assessment instrument or a 
similar instrument.
    Table VII below illustrates the costs of the data collection burden 
for all IRFs.

                                       Table VII.--Clinician Incremental Labor Data Collection Costs for All IRFs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                          (Column 2)  Hours
                                           per IRF per year      (Column 3)     (Column 4)  Range
 (Column 1)  Incremental data collection   (column 1 times    Hourly wages per   of the costs per      (Column 5)        (Column 6)  Range of national
                  time                     335; admissions    clinician (from     IRF (column 2      Number of IRFs     costs (column 4 times column 5)
                                            divided by 60        Table III)      times column 3)
                                               minutes)
--------------------------------------------------------------------------------------------------------------------------------------------------------
20......................................             111.67             $11.90          $1,328.83             990.25  $1,315,877 to $3,487,627.
                                                                         15.01           1,676.12
                                                                         15.47           1,727.48
                                                                         17.05           1,903.92
                                                                         19.52           2,179.73
                                                                         22.67           2,531.48
                                                                         24.00           2,680.00
                                                                         26.88           3,001.60
                                                                         31.54           3,521.97
45......................................             251.25              11.90           2,989.88             174.75  $522,481 to $1,384,793.
                                                                         15.01
                                                                         15.47
                                                                         17.05
                                                                         19.52
                                                                         22.67
                                                                         24.00
                                                                         26.88
                                                                         31.54           7,924.43
                                         ---------------------------------------------------------------------------------------------------------------
    Total for All IRFs..................  .................  .................  .................  .................  $1,838,358 to $3,487,656.
--------------------------------------------------------------------------------------------------------------------------------------------------------

e. Conclusion
    As discussed above, IRFs will incur costs associated with the 
patient assessment process. In section IV. of this preamble, we 
specified each item of the CMS IRF patient assessment instrument that 
must be collected on either the admission or discharge assessment. In 
order to complete our analysis, we summarize in Table VIII below, by 
category of data, the data items of the CMS IRF patient assessment 
instrument. Table VIII illustrates the possible maximum number of items 
collected on the admission and discharge assessment. The term 
``possible maximum'' means that an item may allow for recording up to 
10 separate pieces of information. For example, the item that collects 
data on a patient's comorbid conditions allows the clinician to record 
up to 10 separate comorbid conditions. However, due to the patient's 
clinical status, the patient may only have 5 comorbid conditions, so 
only 5 comorbid conditions will be recorded. The combined total of all 
possible maximum admission and discharge items is 83 + 72, which equals 
155. Therefore, as is illustrated in Table VIII, 53.5 percent (83 
divided by 155) of the items may be collected during the admission 
assessment, and 46.5 percent (72 divided by 155) of the items may be 
collected during the discharge assessment.

  Table VIII.--Number of Admission and Discharge Items by Item Category
------------------------------------------------------------------------
                                             Admission       Discharge
              Item category                    items           items
------------------------------------------------------------------------
Identification Information..............              17               0
Admission Information...................               8               0
Payer Information.......................               2               0
Medical Information.....................              13              11
Medical Needs...........................               4               2
Function Modifiers......................              10              10
FIM Instrument..........................              18              18
Discharge Information...................               0              19
Quality Indicators......................              11              12
                                         -------------------------------
    Total...............................              83              72
------------------------------------------------------------------------

    Table IX below reflects an analysis of the per case costs for the 
approximately 85 percent of IRFs that we believe currently use the 
UDSmr patient assessment instrument to collect admission and discharge 
data. In Table IX, the time to complete each patient assessment 
instrument item is weighted equally at 1.000, which means that each 
data item

[[Page 41382]]

takes the same span of time to collect. The percentages in Table IX, 
column 2, are based on the data in Table VIII above. The maximum costs 
shown in Table IX will decrease after the first year of implementation 
because the greatest costs are in the first year.

                 Table IX.--Maximum Patient Assessment Costs per Case for 85 Percent of the IRFs
----------------------------------------------------------------------------------------------------------------
                                                             (Column 3)                            (Column 5)
                                          (Column 2)          Maximum                           Average maximum
                                          Percent of        incremental     (Column 4)  Total   incremental cost
                                           patient           clinician         incremental      per case (column
     (Column 1)  Assessment type          assessment         (physical       maximum cost per   4 divided by 335
                                       instrument items   therapist) cost     IRF (column 2         average
                                        completed (see     per IRF (from     times column 3)     admissions per
                                         Table VIII)         Table III)                               IRF)
----------------------------------------------------------------------------------------------------------------
Admission...........................              0.535          $3,521.96          $1,884.25              $5.62
Discharge...........................              0.465           3,521.96           1,637.71               4.89
                                     ---------------------------------------------------------------------------
    Total Average Maximum Costs Per   .................  .................  .................             $10.51
     Case...........................
----------------------------------------------------------------------------------------------------------------

    The estimated maximum start-up cost per IRF is approximately 
$5,001. We estimate a start-up cost per case of $14.93 ($5,001 by 335 
average admissions per IRF). Therefore, when we add the $10.51 average 
maximum incremental cost per case from column 5 of Table IX above to 
the $14.93 start-up costs per case, we arrive at an estimated total 
average maximum first year cost per case of $25.44 for 85 percent of 
the IRFs.
    Table X below reflects an analysis of the per case costs for the 
approximately 15 percent of IRFs that we believe do not currently use 
the UDSmr patient assessment instrument or a similar patient assessment 
instrument to collect admission and discharge data.

                 Table X.--Maximum Patient Assessment Costs per Case for 15 Percent of the IRFs
----------------------------------------------------------------------------------------------------------------
                                                             (Column 3)                            (Column 5)
                                          (Column 2)          Maximum                           Average maximum
                                          Percent of        incremental     (Column 4)  Total   incremental cost
                                           patient           clinician         incremental      per case (column
     (Column 1)  Assessment type          assessment         (physical       maximum cost per   4 divided by 335
                                       instrument items   therapist) cost     IRF (column 2         average
                                        completed (see     per IRF (from     times column 3)     admissions per
                                         Table VIII)         Table III)                               IRF)
----------------------------------------------------------------------------------------------------------------
Admission...........................              0.535          $7,924.43          $4,239.57             $12.66
Discharge...........................              0.465           7,924.43           3,684.86              11.00
                                     ---------------------------------------------------------------------------
    Total Average Maximum Cost Per    .................  .................  .................              23.66
     Case...........................
----------------------------------------------------------------------------------------------------------------

    As stated above, we estimate the maximum start-up cost per IRF is 
approximately $5,001. We estimate a start-up cost per case of $14.93 
($5,001 divided by 335 average admissions per IRF). Therefore, when we 
add the $23.66 average maximum incremental cost per case from column 5 
of Table X above to the $14.93 start-up costs per case, we arrive at a 
total average maximum first year cost per case of $38.59 for 15 percent 
of the IRFs.
    Table XI below illustrates the maximum national incremental start-
up costs when 85 percent of IRFs have an average maximum cost of $25.44 
per case, and 15 percent of IRFs have an average maximum cost of $38.59 
per case.

                     Table XI.--Total Maximum Patient Assessment Start-Up Costs for All IRFs
----------------------------------------------------------------------------------------------------------------
                                                                                                   (Column 4)
                                                             (Column 2)                         Average maximum
                                                              Average           (Column 3)       national costs
           (Column 1)  Cost per case per IRF               admissions per     Number of IRFs    (column 1 times
                                                                IRF                              column 2 times
                                                                                                   column 3)
----------------------------------------------------------------------------------------------------------------
$25.44 (for 85 Percent of IRFs)........................                335             990.25         $8,437,176
$38.59 (for 15 Percent of IRFs)........................                335             174.75          2,262,339
                                                        --------------------------------------------------------
    Total Maximum Start-up Costs.......................  .................  .................         10,699,515
----------------------------------------------------------------------------------------------------------------

    We believe that the estimated costs of administering our patient 
assessment instrument are justified when considered within the context 
of the statutory requirement and the methodology needed to implement 
the IRF prospective payment system, the probability that our patient 
assessment process will lead to increased quality of care for IRF 
patients, as well as the potential uses of the automated data by the 
IRFs themselves, States, fiscal intermediaries, and us. Our cost 
estimates may actually overstate anticipated costs, because they do not 
take into account cost savings that IRFs may achieve by improving their 
management information systems, as well as potential improvements in 
the quality of patients' clinical care resulting from improved care 
planning under the patient assessment process.

C. Alternatives Considered

    In the proposed rule, we proposed to use the MDS-PAC as the patient 
assessment instrument. However, as

[[Page 41383]]

more fully explained in section IV. of this preamble, we have decided 
to use a modified version of the UDSmr patient assessment instrument as 
the CMS IRF patient assessment instrument. We agree with the vast 
majority of the commenters who stated that a patient assessment 
instrument and patient assessment schedule patterned after the UDSmr 
patient assessment instrument and assessment schedule will achieve our 
goals of paying IRFs appropriately and monitoring the quality of the 
care the IRFs furnish. Our payment system was in part determined by 
using both UDSmr and COS patient admission and discharge assessment 
data. Therefore, we believe that using a modified version of the UDSmr 
patient assessment instrument that retains the basic UDSmr items used 
by RAND in its data analysis to determine the CMGs and payment rates 
(our payment system) is appropriate. (Note: COS has ceased its IRF 
patient assessment data business operations, so we are patterning our 
assessment system after the UDSmr system.)

D. Executive Order 12866

    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

IX. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide 30-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 PRA 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.
    In the November 3, 2000 proposed rule, we solicited public comment 
for 60 days on each of these issues for the sections that contain 
information collection requirements.

Section 412.23  Excluded hospitals: Classifications

     Section 412.23(b)(2) requires that, except in the case of 
a newly participating hospital seeking classification as a 
rehabilitation hospital for its first 12-month cost reporting period, 
the entity show that during its most recent 12-month cost reporting 
period it served an inpatient population of whom at least 75 percent 
required intensive rehabilitative services for treatment of one or more 
specified conditions.
     Section 412.23(b)(8) requires that a hospital seeking 
classification as a rehabilitation hospital for the first 12-month cost 
reporting period that occurs after it becomes a Medicare-participating 
hospital may provide a written certification that the inpatient 
population it intends to serve meets the requirements of 
Sec. 412.23(b)(2), instead of showing that it has treated this 
population during its most recent 12-month cost reporting period.
    The information collection requirements of these two paragraphs of 
this section are currently approved under OMB approval number 0938-0358 
(Psychiatric Unit Criteria Work Sheet, Rehabilitation Hospital Criteria 
Work Sheet, Rehabilitation Unit Criteria Work Sheet) through November 
30, 2003. Any changes to these two paragraphs and the work sheets will 
be submitted to OMB for approval.

Sections 412.116(a)(3)  Method of Payment and 412.632(b) Method of 
Payment Under Inpatient Rehabilitation Facility Prospective Payment 
System: Periodic Interim Payments

    Under Sec. 412.116(a)(3), for cost reporting periods beginning on 
or after January 1, 2002, payment to a rehabilitation hospital or 
rehabilitation unit for inpatient hospital services under the 
prospective payment system will be made as described in Sec. 412.632. 
Section 412.632(b) provides that a rehabilitation hospital or unit 
under the prospective payment system may receive periodic interim 
payments for Part A services subject to the provisions of 
Sec. 413.64(h). Section 413.64(h)(3) specifies that the request for 
periodic interim payments must be made to the fiscal intermediary.
    The burden associated with this provision is the time it takes a 
hospital to prepare and submit its request for periodic interim 
payments. We estimate that 34 IRFs will request periodic interim 
payments under the prospective payment system and that it will take 
each 1 hour to prepare and make the request.

Sections 412.604(c)  Completion of Patient Assessment Instrument, 
412.606(a) Patient Assessment, 412.606(c) Comprehensive Assessments, 
and 412.610(c) Assessment Schedule

     Section 412.604(c) requires an IRF to complete the CMS IRF 
patient assessment instrument for each Medicare fee-for-service patient 
who is admitted to or discharged (or who stopped receiving Medicare 
Part A inpatient rehabilitation services) from the IRF on or after 
January 1, 2002. Section 412.606(c) requires that an IRF clinician 
perform a comprehensive, accurate, standardized, and reproducible 
assessment of each Medicare fee-for-service patient using the CMS IRF 
patient assessment instrument as part of his or her assessment. The 
assessment must include direct patient observation and communication 
with the patient, and, when appropriate and to the extent feasible, 
patient data from the patient's physician(s), family, someone 
personally knowledgeable about the patient's clinical condition or 
capabilities, the patient's clinical record, and other sources. Section 
412.610(c) provides for an assessment upon admission, an assessment 
upon discharge, and, if the patient is not discharged but stops 
receiving Medicare Part A covered inpatient rehabilitation services, an 
assessment at the time he or she stops receiving these services.
    For the proposed rule, we used 1997 data that showed that there 
were approximately 359,000 admissions to 1,123 IRFs, averaging 320 
admissions annually. For the final rule, we are using more recent 1999 
data that showed that there were approximately 390,000 admissions to 
1,165 IRFs, averaging 335 admissions annually. We estimate that it will 
take 45 minutes to complete both the admission and discharge 
assessments. The costs associated with the IRF patient assessment 
instrument are discussed in detail in section VIII.B.5. of this 
preamble. The IRF patient assessment instrument has been submitted to 
OMB for approval and was published in the Federal Register on July 13, 
2001 (66 FR 36795), in which the information collection is referred to 
as ``Request to Use Inpatient Rehabilitation Assessment Instrument and 
Data Set for PPS for Inpatient Rehabilitation Facilities.''
    We are furnishing an estimate that assumes that no facility is 
currently completing all items of the FIM instrument. With that in 
mind, we estimate a national burden of 292,500 hours (390,000 
admissions x 45 minutes/60 minutes).

[[Page 41384]]

    We also are including training in our burden estimates: 16 hours to 
train the lead clinician and 12 hours to train the other clinicians (an 
average of 9 hours). This totals 144,460 hours nationally for a one-
time burden. In addition, we estimate an ongoing burden for training of 
14 hours per IRF per year (16,310 hours nationally).
     Section 412.606(a) requires that, at the time each 
Medicare patient is admitted, the facility must have physician orders 
for the patient's care during the time the patient is hospitalized.
    This requirement is subject to the PRA. However, we believe that 
the burden associated with it is exempt as defined in 5 CFR 
1320.3(b)(2), because the time, effort, and financial resources 
necessary to comply with the requirement are incurred by persons in the 
normal course of their activities.

Section 412.608  Patients' Rights Regarding the Collection of Patient 
Assessment Data

    Under Sec. 412.608(a), before performing an assessment of a 
Medicare inpatient using the IRF patient assessment instrument, an IRF 
clinician must inform the Medicare inpatient of the following patient 
rights:
    (1) The right to be informed of the purpose of the collection of 
the patient assessment data;
    (2) The right to have the patient assessment information collected 
kept confidential and secure;
    (3) The right to be informed that the patient assessment 
information will not be disclosed to others, except for legitimate 
purposes allowed by the Federal Privacy Act and Federal and State 
regulations;
    (4) The right to refuse to answer patient assessment questions; and
    (5) The right to see, review, and request changes on his or her 
patient assessment.
    Under Sec. 412.608(b), the IRF must ensure that a clinician 
documents in the patient's clinical record that the patient was 
informed of these patient rights. The patient rights in Sec. 412.608(a) 
are in addition to the patient rights specified under the conditions of 
participation for hospitals in Sec. 482.13.
    The burden of disclosure to IRF patients and documenting that 
disclosure is in addition to the burden in Sec. 482.13 on hospitals 
furnishing a patient rights statement. The hospitals will easily be 
able to give both statements to patients upon admission, along with 
other required notifications. The burden for the general patient rights 
statement has not yet been approved but is under development. We 
estimate that it takes each hospital 5 minutes to disclose the general 
hospital statement to each patient on admission. The disclosure of the 
IRF patient rights statement will increase that time by an estimated 2 
minutes. Since this disclosure will occur for each admission and there 
are, on average, an estimated 335 admissions annually per IRF, we are 
estimating that this disclosure will occur, on average, 335 times 
annually per IRF.

Section 412.610(f)  Patient Assessment Instrument Record Rretention

    Section 412.610(f) requires an IRF to maintain all patient 
assessment data sets completed within the previous 5 years either in a 
paper format in the patient's clinical record or in an electronic 
computer file format that the IRF can easily obtain.
    We estimate that, for IRFs that choose to file a paper copy, it 
will take the IRF 5 minutes to print out, or copy, each assessment and 
file it in the patient's record. On average, we estimate that each IRF 
will need to obtain a copy of and file 670 assessments per year, for a 
burden of 56 hours. We cannot estimate how many facilities will choose 
to file paper copies. However, we are assuming that most facilities 
will choose to retain the assessments in an electronic format, which 
would not add to the paperwork burden.

Section 412.614  Transmission of Patient Assessment

    Section 412.614(a) requires each IRF to encode and transmit data 
using the computer program(s) available from us; or using a computer 
program(s) that conforms to our standard electronic record layout, data 
specifications, and data dictionary, includes the required patient 
assessment data set, and meets our other specifications. Section 
412.614(b) requires each IRF to electronically transmit complete, 
accurate, and encoded data to our patient data system using electronic 
communications software that provides a direct telephone connection 
from the IRF to our system.
    The patient assessment data may be entered into the computerized 
system by an IRF staff member from a paper document completed by an IRF 
clinician or by a data entry operator under contract to the IRF to key 
in data. Also, IRFs will have to allow time for data validation, 
preparation of data for transmission, and correction of returned 
records that failed checks by the inpatient rehabilitation facility 
patient assessment system.
    We estimate that an average IRF with 335 admissions per year will 
require 3 minutes for data review and entry per assessment for up-front 
review and another 3 minutes for data entry review, for a total of 6 
minutes. The burden of entering and reviewing the data is contained in 
that 6 minutes. We estimate the yearly burden will be 34 hours per 
facility.
    In addition, we estimate that an IRF will perform a 15-minute 
monthly data entry audit for quality assurance purposes. We estimate 
the yearly burden will be 3 hours per facility.
Other Data Transmission Functions
    We estimate that it will take about one additional hour of staff 
time to perform data transmission-related tasks each month. With 1,165 
facilities, we estimate the national burden will be 13,980 hours.
    We estimate that it will require a one-time burden of 5.5 hours per 
hospital to train the personnel to be able to complete data 
transmission tasks. With 1,165 facilities, we estimate the national 
burden will be 6,408 hours.

Section 412.616  Release of Information Collected Using the Patient 
Assessment Instrument

    Under Sec. 412.616(b), an IRF may release information that is 
patient-identifiable to an agent only in accordance with a written 
contract under which the agent agrees not to use or disclose the 
information except for the purposes specified in the contract and to 
the extent the facility itself is permitted to do so.
    The burden associated with this information collection requirement 
is the time required to include the necessary information in the 
contract. While this requirement is subject to the PRA, we believe the 
burden associated with it is exempt as defined in 5 CFR 1320.3(b)(2) 
because the time, effort, and financial resources necessary to comply 
with the requirement will be incurred by persons in the normal course 
of their activities.

Section 412.618(b)  Assessment Process for Interrupted Stay: Recording 
and Encoding the Data

    Section 412.618(b) requires that if a patient has an interrupted 
stay, the IRF must record the interrupted stay data on the patient 
assessment instrument.
    We currently have no data on the incidence of interrupted stays. We 
estimate, however, that it will take no more than 5 minutes to record 
the interrupted stay data.

[[Page 41385]]

Section 412.626(b)  Transition Period: Election Not To Be Paid Under 
the Transition Period Methodology

    Under Sec. 412.626(b), an IRF may elect a payment that is based 
entirely on the adjusted Federal prospective payment for cost reporting 
periods beginning on or after January 1, 2002, and before October 1, 
2002 without regard to the transition period percentages. Section 
412.626(b)(2) specifies that the request to make the election must be 
made in writing to the Medicare fiscal intermediary for the facility.
    We estimate that 580 IRFs will make a request under this section 
and that it will take each IRF 1 hour to complete the request.

Public Comments Received and Departmental Responses

    Comment: Many commenters stated that the length and complexity of 
the MDS-PAC patient assessment instrument in the proposed rule create 
an unreasonable burden for performing patient assessments and result in 
excessive IRF patient assessment costs.
    Response: As indicated in section IV. of this final rule, we are 
changing the patient assessment instrument from the MDS-PAC to the CMS 
IRF patient assessment instrument that is similar to the UDSmr patient 
assessment instrument, FIM. Because the patient assessment instrument 
we are adopting in this final rule is based upon the FIM, we have 
estimated the burden hours based upon the actual estimate contained in 
the special study completed by RAND. In the study entitled ``Assessment 
Instruments for PPS,'' two tests of administration times were performed 
(that is, institutional teams and calibration teams). The institutional 
and calibration teams were not familiar with the MDS-PAC and, 
therefore, they were trained to complete it. The institutional teams 
were familiar with the FIM and had previously completed the instrument. 
The calibration teams were not familiar with the FIM instrument and, 
therefore, they were trained to complete it. The study found that the 
average time to complete the admission FIM (the instrument we will be 
using for the purposes of payment) was 25 minutes for the institutional 
team. For the calibration team, the FIM burden was 148 minutes for a 
small number of cases. The estimated burden hours for the MDS-PAC were 
145 minutes for the institutional team and 221 minutes for the 
calibration team.
    We have expanded the UDSmr patient assessment instrument to include 
a minimal number of questions related to quality of care. For the 
purposes of estimating the burden, we are maintaining the burden 
estimates for the assessment stated in the proposed rule. In that 
proposed rule, we estimated that there was a range of 30 to 45 minutes 
to complete the UDSmr patient assessment instrument. For the purpose of 
the estimate in this final rule, we are using the maximum number of 45 
minutes to calculate the burden required to complete the admission and 
discharge assessments associated with our IRF patient assessment 
instrument. In addition, because the majority of IRFs currently use the 
UDSmr patient assessment instrument, we have used the experience from 
the institutional teams in our time burden estimates.
    The burden estimate for this final rule represents a considerable 
reduction in the burden that we had estimated using the MDS-PAC in the 
proposed rule.

Submission to OMB

    We have submitted a copy of this final rule to OMB for its review 
of the information collection requirements in Secs. 412.23, 412.116, 
412.604 through 412.610, 412.614 through 412.618, and 412.626. These 
requirements are not effective until they have been approved by OMB. As 
stated earlier, the information collection requirements under 
Sec. 412.23 are already approved by OMB through November 30, 2003 (OMB 
approval number 0938-0358).

X. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule. The 
notice of proposed rulemaking includes a reference to the legal 
authority under which the rule is proposed, and the terms and 
substances of the proposed rule or a description of the subjects and 
issues involved. The notice of proposed rulemaking can be waived, 
however, if an agency finds good cause that notice and comment 
procedures are impracticable, unnecessary, or contrary to the public 
interest, and it incorporates a statement of the finding and its 
reasons in the rule issued.
    On November 3, 2000, we published a proposed rule addressing 
proposed policies for establishment of the Medicare prospective payment 
system for inpatient hospital services furnished by a rehabilitation 
hospital or a rehabilitation unit of a hospital (65 FR 66304). On 
December 21, 2000, Public Law 106-554 was enacted. Section 305 of 
Public Law 106-554 amends section 1886(j) of the Act, and this final 
rule incorporates the amendments made by section 305 of Public Law 106-
554. We find good cause to waive notice and comment procedures with 
respect to the provisions of this final rule implementing the 
amendments made to section 305 of Public Law 106-554 because the 
amendments do not require an exercise of discretion and therefore 
publishing a notice of proposed rulemaking with respect to the 
amendments is unnecessary.

List of Subjects

42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Puerto Rico, 
Reporting and recordkeeping requirements.

    42 CFR Chapter IV is amended as set forth below:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

    A. Part 412 is amended as follows:
    1. The authority citation for part 412 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

Subpart A--General Provisions

    2. Section Sec. 412.1 is revised to read as follows:


Sec. 412.1  Scope of part.

    (a) Purpose. (1) This part implements sections 1886(d) and (g) of 
the Act by establishing a prospective payment system for the operating 
costs of inpatient hospital services furnished to Medicare 
beneficiaries in cost reporting periods beginning on or after October 
1, 1983 and a prospective payment system for the capital-related costs 
of inpatient hospital services furnished to Medicare beneficiaries in 
cost reporting periods beginning on or after October 1, 1991. Under 
these prospective payment systems, payment for the operating and 
capital-related costs of inpatient hospital services furnished by 
hospitals subject to the systems (generally, short-term, acute-care 
hospitals) is made on the basis of prospectively determined rates and 
applied on a per discharge basis. Payment for other costs related to 
inpatient hospital services (organ acquisition costs incurred by 
hospitals with approved organ transplantation centers, the costs of 
qualified nonphysician anesthetist's services, as described in 
Sec. 412.113(c), and direct

[[Page 41386]]

costs of approved nursing and allied health educational programs) is 
made on a reasonable cost basis. Payment for the direct costs of 
graduate medical education is made on a per resident amount basis in 
accordance with Sec. 413.86 of this chapter. Additional payments are 
made for outlier cases, bad debts, indirect medical education costs, 
and for serving a disproportionate share of low-income patients. Under 
either prospective payment system, a hospital may keep the difference 
between its prospective payment rate and its operating or capital-
related costs incurred in furnishing inpatient services, and the 
hospital is at risk for inpatient operating or inpatient capital-
related costs that exceed its payment rate.
    (2) This part implements section 1886(j) of the Act by establishing 
a prospective payment system for the inpatient operating and capital 
costs of inpatient hospital services furnished to Medicare 
beneficiaries by a rehabilitation hospital or rehabilitation unit that 
meets the conditions of Sec. 412.604.
    (b) Summary of content. (1) This subpart describes the basis of 
payment for inpatient hospital services under the prospective payment 
systems specified in paragraph (a)(1) of this section and sets forth 
the general basis of these systems.
    (2) Subpart B sets forth the classifications of hospitals that are 
included in and excluded from the prospective payment systems specified 
in paragraph (a)(1) of this section, and sets forth requirements 
governing the inclusion or exclusion of hospitals in the systems as a 
result of changes in their classification.
    (3) Subpart C sets forth certain conditions that must be met for a 
hospital to receive payment under the prospective payment systems 
specified in paragraph (a)(1) of this section.
    (4) Subpart D sets forth the basic methodology by which prospective 
payment rates for inpatient operating costs are determined under the 
prospective payment system specified in paragraph (a)(1) of this 
section.
    (5) Subpart E describes the transition ratesetting methods that are 
used to determine transition payment rates for inpatient operating 
costs during the first 4 years of the prospective payment system 
specified in paragraph (a)(1) of this section.
    (6) Subpart F sets forth the methodology for determining payments 
for outlier cases under the prospective payment system specified in 
paragraph (a)(1) of this section.
    (7) Subpart G sets forth rules for special treatment of certain 
facilities under the prospective payment system specified in paragraph 
(a)(1) of this section for inpatient operating costs.
    (8) Subpart H describes the types, amounts, and methods of payment 
to hospitals under the prospective payment system specified in 
paragraph (a)(1) of this section for inpatient operating costs.
    (9) Subpart K describes how the prospective payment system 
specified in paragraph (a)(1) of this section for inpatient operating 
costs is implemented for hospitals located in Puerto Rico.
    (10) Subpart L sets forth the procedures and criteria concerning 
applications from hospitals to the Medicare Geographic Classification 
Review Board for geographic redesignation under the prospective payment 
systems specified in paragraph (a)(1) of this section.
    (11) Subpart M describes how the prospective payment system 
specified in paragraph (a)(1) of this section for inpatient capital-
related costs is implemented effective with reporting periods beginning 
on or after October 1, 1991.
    (12) Subpart P describes the prospective payment system specified 
in paragraph (a)(2) of this section for rehabilitation hospitals and 
rehabilitation units and sets forth the general methodology for paying 
for the operating and capital-related costs of inpatient hospital 
services furnished by rehabilitation hospitals and rehabilitation units 
effective with cost reporting periods beginning on or after January 1, 
2002.

Subpart B--Hospital Services Subject to and Excluded from the 
Prospective Payment Systems for Inpatient Operating Costs and 
Inpatient Capital-Related Costs

    3. Section 412.20 is amended by:
    A. Revising paragraph (a).
    B. Redesignating paragraph (b) as paragraph (c).
    C. Adding a new paragraph (b).
    D. Revising the introductory text of the redesignated paragraph 
(c).


Sec. 412.20  Hospital services subject to the prospective payment 
systems.

    (a) Except for services described in paragraphs (b) and (c) of this 
section, all covered inpatient hospital services furnished to 
beneficiaries during subject cost reporting periods are paid under the 
prospective payment systems specified in Sec. 412.1(a)(1).
    (b) Effective for cost reporting periods beginning on or after 
January 1, 2002, covered inpatient hospital services furnished to 
Medicare beneficiaries by a rehabilitation hospital or rehabilitation 
unit that meet the conditions of Sec. 412.604 are paid under the 
prospective payment system described in subpart P of this part.
    (c) Inpatient hospital services will not be paid under the 
prospective payment systems specified in Sec. 412.1(a)(1) under any of 
the following circumstances:
* * * * *

    4. Section 412.22 is amended by:
    A. Revising paragraphs (a) and (b).
    B. Revising the introductory text of paragraph (e).
    C. Revising introductory text of paragraph (h)(2).


Sec. 412.22  Excluded hospitals and hospital units: General rules.

    (a) Criteria. Subject to the criteria set forth in paragraph (e) of 
this section, a hospital is excluded from the prospective payment 
systems specified in Sec. 412.1(a)(1) of this part if it meets the 
criteria for one or more of the excluded classifications described in 
Sec. 412.23.
    (b) Cost reimbursement. Except for those hospitals specified in 
paragraph (c) of this section and Sec. 412.20(b), all excluded 
hospitals (and excluded hospital units, as described in Secs. 412.23 
through 412.29) are reimbursed under the cost reimbursement rules set 
forth in part 413 of this subchapter, and are subject to the ceiling on 
the rate of hospital cost increases described in Sec. 413.40 of this 
subchapter.
* * * * *
    (e) Hospitals within hospitals. Except as provided in paragraph (f) 
of this section, for cost reporting periods beginning on or after 
October 1, 1997, a hospital that occupies space 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, must meet the 
following criteria in order to be excluded from the prospective payment 
systems specified in Sec. 412.1(a)(1):
* * * * *
    (h) Satellite facilities. * * *
    (2) Except as provided in paragraph (h)(3) of this section, 
effective for cost reporting periods beginning on or after October 1, 
1999, a hospital that has a satellite facility must meet the following 
criteria in order to be excluded from the prospective payment systems 
specified in Sec. 412.1(a)(1) for any period:
* * * * *

    5. Section 412.23 is amended by:
    A. Revising the introductory text of the section.

[[Page 41387]]

    B. Revising the introductory text of paragraph (b).
    C. Revising paragraphs (b)(2) introductory text, (b)(8), and 
(b)(9).


Sec. 412.23  Excluded hospitals: Classifications.

    Hospitals that meet the requirements for the classifications set 
forth in this section are not reimbursed under the prospective payment 
systems specified in Sec. 412.1(a)(1):
* * * * *
    (b) Rehabilitation hospitals. A rehabilitation hospital must meet 
the following requirements to be excluded from the prospective payment 
systems specified in Sec. 412.1(a)(1) and to be paid under the 
prospective payment system specified in Sec. 412.1(a)(2) and in Subpart 
P of this part:
* * * * *
    (2) Except in the case of a newly participating hospital seeking 
classification under this paragraph as a rehabilitation hospital for 
its first 12-month cost reporting period, as described in paragraph 
(b)(8) of this section, show that during its most recent 12-month cost 
reporting period, it served an inpatient population of whom at least 75 
percent required intensive rehabilitative services for treatment of one 
or more of the following conditions:
* * * * *
    (8) A hospital that seeks classification under this paragraph as a 
rehabilitation hospital for the first full 12-month cost reporting 
period that occurs after it becomes a Medicare-participating hospital 
may provide a written certification that the inpatient population it 
intends to serve meets the requirements of paragraph (b)(2) of this 
section, instead of showing that it has treated that population during 
its most recent 12-month cost reporting period. The written 
certification is also effective for any cost reporting period of not 
less than one month and not more than 11 months occurring between the 
date the hospital began participating in Medicare and the start of the 
hospital's regular 12-month cost reporting period.
    (9) For cost reporting periods beginning on or after October 1, 
1991, if a hospital is excluded from the prospective payment systems 
specified in Sec. 412.1(a)(1) or is paid under the prospective payment 
system specified in Sec. 412.1(a)(2) for a cost reporting period under 
paragraph (b)(8) of this section, but the inpatient population it 
actually treated during that period does not meet the requirements of 
paragraph (b)(2) of this section, we adjust payments to the hospital 
retroactively in accordance with the provisions in Sec. 412.130.
* * * * *

    6. In Sec. 412.25, paragraph (a) introductory text and paragraph 
(e)(2) introductory text are revised to read as follows:


Sec. 412.25  Excluded hospital units: Common requirements.

    (a) Basis for exclusion. In order to be excluded from the 
prospective payment systems specified in Sec. 412.1(a)(1), a 
psychiatric or rehabilitation unit must meet the following 
requirements.
* * * * *
    (e) Satellite facilities. * * *
    (2) Except as provided in paragraph (e)(3) of this section, 
effective for cost reporting periods beginning on or after October 1, 
1999, a hospital unit that establishes a satellite facility must meet 
the following requirements in order to be excluded from the prospective 
payment systems specified in Sec. 412.1(a)(1) for any period:
* * * * *

    7. In Sec. 412.29, the introductory text is revised to read as 
follows:


Sec. 412.29  Excluded rehabilitation units: Additional requirements.

    In order to be excluded from the prospective payment systems 
described in Sec. 412.1(a)(1) and to be paid under the prospective 
payment system specified in Sec. 412.1(a)(2), a rehabilitation unit 
must meet the following requirements:
* * * * *

Subpart H--Payments to Hospitals Under the Prospective Payment 
Systems

    8. In Sec. 412.116, paragraph (a) is revised to read as follows:


Sec. 412.116  Method of payment.

    (a) General rule. (1) Unless the provisions of paragraphs (b) and 
(c) of this section apply, hospitals are paid for hospital inpatient 
operating costs and capital-related costs for each discharge based on 
the submission of a discharge bill.
    (2) Payments for inpatient hospital services furnished by an 
excluded psychiatric unit of a hospital (or by an excluded 
rehabilitation unit of a hospital for cost reporting periods beginning 
before January 1, 2002) are made as described in Secs. 413.64(a), (c), 
(d), and (e) of this chapter.
    (3) For cost reporting periods beginning on or after January 1, 
2002, payments for inpatient hospital services furnished by a 
rehabilitation hospital or a rehabilitation unit that meets the 
conditions of Sec. 412.604 are made as described in Sec. 412.632.
* * * * *

    9. In Sec. 412.130, paragraphs (a)(1), (a)(2), and (b) are revised 
to read as follows:


Sec. 412.130  Retroactive adjustments for incorrectly excluded 
hospitals and units.

    (a) Hospitals for which adjustment is made.* * *
    (1) A hospital that was excluded from the prospective payment 
systems specified in Sec. 412.1(a)(1) or paid under the prospective 
payment system specified in Sec. 412.1(a)(2), as a new rehabilitation 
hospital for a cost reporting period beginning on or after October 1, 
1991 based on a certification under Sec. 412.23(b)(8) of this part 
regarding the inpatient population the hospital planned to treat during 
that cost reporting period, if the inpatient population actually 
treated in the hospital during that cost reporting period did not meet 
the requirements of Sec. 412.23(b)(2).
    (2) A hospital that has a unit excluded from the prospective 
payment systems specified in Sec. 412.1(a)(1) or paid under the 
prospective payment system specified in Sec. 412.1(a)(2), as a new 
rehabilitation unit for a cost reporting period beginning on or after 
October 1, 1991, based on a certification under Sec. 412.30(a) 
regarding the inpatient population the hospital planned to treat in 
that unit during the period, if the inpatient population actually 
treated in the unit during that cost reporting period did not meet the 
requirements of Sec. 412.23(b)(2).
* * * * *
    (b) Adjustment of payment. (1) For cost reporting periods beginning 
before January 1, 2002, the intermediary adjusts the payment to the 
hospitals described in paragraph (a) of this section as follows:
    (i) The intermediary calculates the difference between the amounts 
actually paid during the cost reporting period for which the hospital, 
unit, or beds were first excluded as a new hospital, new unit, or newly 
added beds under subpart B of this part, and the amount that would have 
been paid under the prospective payment systems specified in 
Sec. 412.1(a)(1) for services furnished during that period.
    (ii) The intermediary makes a retroactive adjustment for the 
difference between the amount paid to the hospital based on the 
exclusion and the amount that would have been paid under the 
prospective payment systems specified in Sec. 412.1(a)(1).
    (2) For cost reporting periods beginning on or after January 1, 
2002,

[[Page 41388]]

the intermediary adjusts the payment to the hospitals described in 
paragraph (a) of this section as follows:
    (i) The intermediary calculates the difference between the amounts 
actually paid under subpart P of this part during the cost reporting 
period for which the hospital, unit, or beds were first classified as a 
new hospital, new unit, or newly added beds under subpart B of this 
part, and the amount that would have been paid under the prospective 
payment systems specified in Sec. 412.1(a)(1) for services furnished 
during that period.
    (ii) The intermediary makes a retroactive adjustment for the 
difference between the amount paid to the hospital under subpart P of 
this part and the amount that would have been paid under the 
prospective payment systems specified in Sec. 412.1(a)(1).

Subparts N and O--[Reserved]

    10. Subparts N and O are added and reserved.

    11. A new subpart P, consisting of Secs. 412.600, 412.602, 412.604, 
412.606, 412.608, 412.610, 412.612, 412.614, 412.616, 412.618, 412.620, 
412.622, 412.624, 412.626, 412.628, 412.630, and 412.632, is added to 
read as follows:
Subpart P--Prospective Payment for Inpatient Rehabilitation Hospitals 
and Rehabilitation Units
Sec.
412.600  Basis and scope of subpart.
412.602  Definitions.
412.604  Conditions for payment under the prospective payment system 
for inpatient rehabilitation facilities.
412.606  Patient assessments.
412.608  Patients' rights regarding the collection of patient 
assessment data.
412.610  Assessment schedule.
412.612  Coordination of the collection of patient assessment data.
412.614  Transmission of patient assessment data.
412.616  Release of information collected using the patient 
assessment instrument.
412.618  Assessment process for interrupted stays.
412.620  Patient classification system.
412.622  Basis of payment.
412.624  Methodology for calculating the Federal prospective payment 
rates.
412.626  Transition period.
412.628  Publication of the Federal prospective payment rates.
412.630  Limitation on review.
412.632  Method of payment under the inpatient rehabilitation 
facility prospective payment system.

Subpart P--Prospective Payment for Inpatient Rehabilitation 
Hospitals and Rehabilitation Units


Sec. 412.600  Basis and scope of subpart.

    (a) Basis. This subpart implements section 1886(j) of the Act, 
which provides for the implementation of a prospective payment system 
for inpatient rehabilitation hospitals and rehabilitation units (in 
this subpart referred to as ``inpatient rehabilitation facilities'').
    (b) Scope. This subpart sets forth the framework for the 
prospective payment system for inpatient rehabilitation facilities, 
including the methodology used for the development of payment rates and 
associated adjustments, the application of a transition phase, and 
related rules. Under this system, for cost reporting periods beginning 
on or after January 1, 2002, payment for the operating and capital 
costs of inpatient hospital services furnished by inpatient 
rehabilitation facilities to Medicare Part A fee-for-service 
beneficiaries is made on the basis of prospectively determined rates 
and applied on a per discharge basis.


Sec. 412.602  Definitions.

    As used in this subpart--
    Assessment reference date means the specific calendar day in the 
patient assessment process that sets the designated endpoint of the 
common patient observation period, with most patient assessment items 
usually referring back in time from this endpoint.
    CMS stands for the Centers for Medicare & Medicaid Services.
    Comorbidity means a specific patient condition that is secondary to 
the patient's principal diagnosis that is the primary reason for the 
inpatient rehabilitation stay.
    Discharge. A Medicare patient in a inpatient rehabilitation 
facility is considered discharged when--
    (1) The patient is formally released;
    (2) The patient stops receiving Medicare-covered Part A inpatient 
rehabilitation services; or
    (3) The patient dies in the inpatient rehabilitation facility.
    Encode means entering data items into the fields of the 
computerized patient assessment software program.
    Functional-related groups refers to the distinct groups under which 
inpatients are classified using proxy measurements of inpatient 
rehabilitation relative resource usage.
    Interrupted stay means a stay at an inpatient rehabilitation 
facility during which a Medicare inpatient is discharged from the 
inpatient rehabilitation facility and returns to the same inpatient 
rehabilitation facility within 3 consecutive calendar days. The 
duration of the interruption of the stay of 3 consecutive calendar days 
begins with the day of discharge from the inpatient rehabilitation 
facility and ends on midnight of the third day.
    Outlier payment means an additional payment beyond the standard 
Federal prospective payment for cases with unusually high costs.
    Patient assessment instrument refers to a document that contains 
clinical, demographic, and other information on a patient.
    Rural area means an area as defined in Sec. 412.62(f)(1)(iii).
    Transfer means the release of a Medicare inpatient from an 
inpatient rehabilitation facility to another inpatient rehabilitation 
facility, a short-term, acute-care prospective payment hospital, a 
long-term care hospital as described in Sec. 412.23(e), or a nursing 
home that qualifies to receive Medicare or Medicaid payments.
    Urban area means an area as defined in Sec. 412.62(f)(1)(ii).


Sec. 412.604  Conditions for payment under the prospective payment 
system for inpatient rehabilitation facilities.

    (a) General requirements. (1) Effective for cost reporting periods 
beginning on or after January 1, 2002, an inpatient rehabilitation 
facility must meet the conditions of this section to receive payment 
under the prospective payment system described in this subpart for 
inpatient hospital services furnished to Medicare Part A fee-for-
service beneficiaries.
    (2) If an inpatient rehabilitation facility fails to comply fully 
with these conditions with respect to inpatient hospital services 
furnished to one or more Medicare Part A fee-for-service beneficiaries, 
we may, as appropriate--
    (i) Withhold (in full or in part) or reduce Medicare payment to the 
inpatient rehabilitation facility until the facility provides adequate 
assurances of compliance; or
    (ii) Classify the inpatient rehabilitation facility as an inpatient 
hospital that is subject to the conditions of subpart C of this part 
and is paid under the prospective payment systems specified in 
Sec. 412.1(a)(1).
    (b) Inpatient rehabilitation facilities subject to the prospective 
payment system. Subject to the special payment provisions of 
Sec. 412.22(c), an inpatient rehabilitation facility must meet the 
criteria to be classified as a rehabilitation hospital or 
rehabilitation unit set forth in Secs. 412.23(b), 412.25, and 412.29 
for exclusion from the

[[Page 41389]]

inpatient hospital prospective payment systems specified in 
Sec. 412.1(a)(1).
    (c) Completion of patient assessment instrument. For each Medicare 
Part A fee-for-service patient admitted to or discharged from an IRF on 
or after January 1, 2002, the inpatient rehabilitation facility must 
complete a patient assessment instrument in accordance with 
Sec. 412.606.
    (d) Limitation on charges to beneficiaries--(1) Prohibited charges. 
Except as provided in paragraph (d)(2) of this section, an inpatient 
rehabilitation facility may not charge a beneficiary for any services 
for which payment is made by Medicare, even if the facility's costs of 
furnishing services to that beneficiary are greater than the amount the 
facility is paid under the prospective payment system.
    (2) Permitted charges. An inpatient rehabilitation facility 
receiving payment under this subpart for a covered hospital stay (that 
is, a stay that includes at least one covered day) may charge the 
Medicare beneficiary or other person only for the applicable deductible 
and coinsurance amounts under Secs. 409.82, 409.83, and 409.87 of this 
subchapter and for items or services as specified under Sec. 489.20(a) 
of this chapter.
    (e) Furnishing of inpatient hospital services directly or under 
arrangement. (1) Subject to the provisions of Sec. 412.622(b), the 
applicable payments made under this subpart are payment in full for all 
inpatient hospital services, as defined in Sec. 409.10 of this 
subchapter. Inpatient hospital services do not include the following:
    (i) Physicians' services that meet the requirements of 
Sec. 415.102(a) of this subchapter for payment on a fee schedule 
basis).
    (ii) Physician assistant services, as defined in section 
1861(s)(2)(K)(i) of the Act.
    (iii) Nurse practitioners and clinical nurse specialist services, 
as defined in section 1861(s)(2)(K)(ii) of the Act.
    (iv) Certified nurse midwife services, as defined in section 
1861(gg) of the Act.
    (v) Qualified psychologist services, as defined in section 1861(ii) 
of the Act.
    (vi) Services of an anesthetist, as defined in Sec. 410.69 of this 
chapter.
    (2) Medicare does not pay any provider or supplier other than the 
inpatient rehabilitation facility for services furnished to a Medicare 
beneficiary who is an inpatient of the inpatient rehabilitation 
facility, except for services described in paragraphs (e)(1)(i) through 
(e)(1)(vi) of this section.
    (3) The inpatient rehabilitation facility must furnish all 
necessary covered services to the Medicare beneficiary either directly 
or under arrangements (as defined in Sec. 409.3 of this subchapter).
    (f) Reporting and recordkeeping requirements. All inpatient 
rehabilitation facilities participating in the prospective payment 
system under this subpart must meet the recordkeeping and cost 
reporting requirements of Secs. 413.20 and 413.24 of this subchapter.


Sec. 412.606  Patient assessments.

    (a) Admission orders. At the time that each Medicare Part A fee-
for-service patient is admitted, the inpatient rehabilitation facility 
must have physician orders for the patient's care during the time the 
patient is hospitalized.
    (b) Patient assessment instrument. An inpatient rehabilitation 
facility must use the CMS inpatient rehabilitation facility patient 
assessment instrument to assess Medicare Part A fee-for-service 
inpatients who--
    (1) Are admitted on or after January 1, 2002; or
    (2) Were admitted before January 1, 2002, and are still inpatients 
as of January 1, 2002.
    (c) Comprehensive assessments. (1) A clinician of the inpatient 
rehabilitation facility must perform a comprehensive, accurate, 
standardized, and reproducible assessment of each Medicare Part A fee-
for-service inpatient using the inpatient rehabilitation facility 
patient assessment instrument specified in paragraph (b) of this 
section as part of his or her patient assessment in accordance with the 
schedule described in Sec. 412.610.
    (2) A clinician employed or contracted by an inpatient 
rehabilitation facility who is trained on how to perform a patient 
assessment using the inpatient rehabilitation facility patient 
assessment instrument specified in paragraph (b) of the section must 
record appropriate and applicable data accurately and completely for 
each item on the patient assessment instrument.
    (3) The assessment process must include--
    (i) Direct patient observation and communication with the patient; 
and
    (ii) When appropriate and to the extent feasible, patient data from 
the patient's physician(s), family, someone personally knowledgeable 
about the patient's clinical condition or capabilities, the patient's 
clinical record, and other sources.


Sec. 412.608  Patients' rights regarding the collection of patient 
assessment data.

    (a) Before performing an assessment using the patient assessment 
instrument, a clinician of the IRF must inform the Medicare Part A fee-
for-service inpatient of the following patient rights:
    (1) The right to be informed of the purpose of the collection of 
the patient assessment data;
    (2) The right to have the patient assessment information collected 
be kept confidential and secure;
    (3) The right to be informed that the patient assessment 
information will not be disclosed to others, except for legitimate 
purposes allowed by the Federal Privacy Act and Federal and State 
regulations;
    (4) The right to refuse to answer patient assessment questions; and
    (5) The right to see, review, and request changes on his or her 
patient assessment.
    (b) The inpatient rehabilitation facility must ensure that a 
clinician documents in the Medicare Part A fee-for-service inpatient's 
clinical record that the patient was informed of the patient rights 
specified in paragraph (a) of this section.
    (c) The patient rights specified in paragraph (a) of this section 
are in addition to the patient rights specified under the conditions of 
participation for hospitals in Sec. 482.13 of this chapter.


Sec. 412.610  Assessment schedule.

    (a) General. For each Medicare Part A fee-for-service inpatient, an 
inpatient rehabilitation facility must complete a patient assessment 
instrument as specified in Sec. 412.606 that covers a time period that 
is in accordance with the assessment schedule specified in paragraph 
(c) of this section.
    (b) Starting the assessment schedule day count. The first day that 
the Medicare Part A fee-for-service inpatient is furnished Medicare-
covered services during his or her current inpatient rehabilitation 
facility hospital stay is counted as day one of the patient assessment 
schedule.
    (c) Assessment schedules and reference dates. The inpatient 
rehabilitation facility must complete a patient assessment instrument 
upon the Medicare Part A fee-for-service patient's admission and 
discharge as specified in paragraphs (c)(1) and (c)(2) of this section.
    (1) Admission assessment.
    (i) General rule. The admission assessment--
    (A) Time period is a span of time that covers calendar days 1 
through 3 of the patient's current Medicare Part A fee-for-service 
hospitalization;
    (B) Has an admission assessment reference date that is the third 
calendar day of the span of time specified in

[[Page 41390]]

paragraph (c)(1)(i)(A) of this section; and
    (C) Must be completed on the calendar day that follows the 
admission assessment reference day.
    (ii) Exception to the general rule. We may specify in the patient 
assessment instrument item-by-item guide and in other issued 
instructions, items that have a different admission assessment time 
period to most appropriately capture patient information for payment 
and quality of care monitoring objectives.
    (2) Discharge assessment.
    (i) General rule. The discharge assessment--
    (A) Time period is a span of time that covers 3 calendar days, and 
is the discharge assessment reference date itself specified in 
paragraph (c)(2)(ii) of this section and the 2 calendar days prior to 
the discharge assessment reference date; and
    (B) Must be completed on the 5th calendar day that follows the 
discharge assessment reference date specified in paragraph (c)(2)(ii) 
of this section with the discharge assessment reference date itself 
being counted as the first day of the 5 calendar day time span.
    (ii) Discharge assessment reference date. The discharge assessment 
reference date is the actual day that the first of either of the 
following two events occurs:
    (A) The patient is discharged from the IRF; or
    (B) The patient stops being furnished Medicare Part A fee-for-
service inpatient rehabilitation services.
    (iii) Exception to the general rule. We may specify in the patient 
assessment instrument item-by-item guide and in other issued 
instructions, items that have a different discharge assessment time 
period to most appropriately capture patient information for payment 
and quality of care monitoring objectives.
    (d) Encoding dates. The admission and discharge patient assessments 
must be encoded by the 7th calendar day from the completion dates 
specified in paragraph (c) of this section.
    (e) Accuracy of the patient assessment data. The encoded patient 
assessment data must accurately reflect the patient's clinical status 
at the time of the patient assessment.
    (f) Patient assessment instrument record retention. An inpatient 
rehabilitation facility must maintain all patient assessment data sets 
completed on Medicare Part A fee-for-service patients within the 
previous 5 years either in a paper format in the patient's clinical 
record or in an electronic computer file format that the inpatient 
rehabilitation facility can easily obtain.


Sec. 412.612  Coordination of the collection of patient assessment 
data.

    (a) Responsibilities of the clinician. A clinician of an inpatient 
rehabilitation facility who has participated in performing the patient 
assessment must have responsibility for--
    (1) The accuracy and thoroughness of the specific data recorded by 
that clinician on the patient's assessment instrument; and
    (2) The accuracy of the assessment reference date inserted on the 
patient assessment instrument completed under Sec. 412.610(c).
    (b) Penalty for falsification.
    (1) Under Medicare, an individual who knowingly and willfully--
    (i) Completes a material and false statement in a patient 
assessment is subject to a civil money penalty of not more than $1,000 
for each assessment; or
    (ii) Causes another individual to complete a material and false 
statement in a patient assessment is subject to a civil money penalty 
of not more than $5,000 for each assessment.
    (2) Clinical disagreement does not constitute a material and false 
statement.


Sec. 412.614  Transmission of patient assessment data.

    (a) Data format. The inpatient rehabilitation facility must encode 
and transmit data for each Medicare Part A fee-for-service inpatient--
    (1) Using the computerized version of the patient assessment 
instrument available from us; or
    (2) Using a computer program(s) that conforms to our standard 
electronic record layout, data specifications, and data dictionary, 
includes the required patient assessment instrument data set, and meets 
our other specifications.
    (b) How to transmit data. The inpatient rehabilitation facility 
must--
    (1) Electronically transmit complete, accurate, and encoded data 
from the patient assessment instrument for each Medicare Part A fee-
for-service inpatient to our patient data system in accordance with the 
data format specified in paragraph (a) of this section; and
    (2) Transmit data using electronic communications software that 
provides a direct telephone connection from the inpatient 
rehabilitation facility to the our patient data system.
    (c) Transmission dates. The inpatient rehabilitation facility must 
transmit both the admission patient assessment and the discharge 
patient assessments at the same time to the our patient data system by 
the 7th calendar day in the period beginning with the applicable 
patient assessment instrument encoding date specified in 
Sec. 412.610(d).
    (d) Late transmission penalty. (1) We assess a penalty when an 
inpatient rehabilitation facility does not transmit the required data 
from the patient assessment instrument to the our patient data system 
in accordance with the transmission timeframe in paragraph (c) of this 
section.
    (2) If the actual patient assessment data transmission date is 
later than 10 calendar days from the transmission date specified in 
paragraph (c) of this section, the patient assessment data is 
considered late and the inpatient rehabilitation facility receives a 
payment rate that is 25 percent less than the payment rate associated 
with a case-mix group.


Sec. 412.616  Release of information collected using the patient 
assessment instrument.

    (a) General. An inpatient rehabilitation facility may release 
information from the patient assessment instrument only as specified in 
Sec. 482.24(b)(3) of this chapter.
    (b) Release to the inpatient rehabilitation facility's agent. An 
inpatient rehabilitation facility may release information that is 
patient-identifiable to an agent only in accordance with a written 
contract under which the agent agrees not to use or disclose the 
information except for the purposes specified in the contract and only 
to the extent the facility itself is permitted to do so under paragraph 
(a) of this section.


Sec. 412.618  Assessment process for interrupted stays.

    For purposes of the patient assessment process, if a Medicare Part 
A fee-for-service patient has an interrupted stay, as defined under 
Sec. 412.602, the following applies:
    (a) Assessment requirements. (1) The initial case-mix group 
classification from the admission assessment remains in effect (that 
is, no new admission assessment is performed).
    (2) When the patient has completed his or her entire rehabilitation 
episode stay, a discharge assessment must be performed.
    (b) Recording and encoding of data. The clinician must record the 
interruption of the stay on the patient assessment instrument.
    (c) Revised assessment schedule. (1) If the interruption in the 
stay occurs before the admission assessment, the assessment reference 
date, completion dates, encoding dates, and data transmission dates for 
the admission

[[Page 41391]]

and discharge assessments are advanced by the same number of calendar 
days as the length of the patient's interruption in the stay.
    (2) If the interruption in the stay occurs after the admission 
assessment and before the discharge assessment, the completion date, 
encoding date, and data transmission date for the admission assessment 
are advanced by the same number of calendar days as the length of the 
patient's interruption in the stay.


Sec. 412.620  Patient classification system.

    (a) Classification methodology.
    (1) A patient classification system is used to classify patients in 
inpatient rehabilitation facilities into mutually exclusive case-mix 
groups.
    (2) For purposes of this subpart, case-mix groups are classes of 
Medicare patient discharges by functional-related groups that are based 
on a patient's impairment, age, comorbidities, functional capabilities, 
and other factors that may improve the ability of the functional-
related groups to estimate variations in resource use.
    (3) Data from admission assessments under Sec. 412.610(c)(1) are 
used to classify a Medicare patient into an appropriate case-mix group.
    (4) Data from the discharge assessment under Sec. 412.610(c)(2) are 
used to determine the weighting factors under paragraph (b)(4) of this 
section.
    (b) Weighting factors.
    (1) General. An appropriate weight is assigned to each case-mix 
group that measures the relative difference in facility resource 
intensity among the various case-mix groups.
    (2) Short-stay outliers. We will determine a weighting factor or 
factors for patients that are discharged and not transferred (as 
defined in Sec. 412.602) within a number of days from admission as 
specified by us.
    (3) Patients who expire. We will determine a weighting factor or 
factors for patients who expire within a number of days from admission 
as specified by us.
    (4) Comorbidities. We will determine a weighting factor or factors 
to account for the presence of a comorbidity, as defined in 
Sec. 412.602, that is relevant to resource use in the classification 
system.
    (c) Revision of case-mix group classifications and weighting 
factors. We may periodically adjust the case-mix groups and weighting 
factors to reflect changes in--
    (1) Treatment patterns;
    (2) Technology;
    (3) Number of discharges; and
    (4) Other factors affecting the relative use of resources.


Sec. 412.622  Basis of payment.

    (a) Method of payment.
    (1) Under the prospective payment system, inpatient rehabilitation 
facilities receive a predetermined amount per discharge for inpatient 
services furnished to Medicare Part A fee-for-service beneficiaries.
    (2) The amount of payment under the prospective payment system is 
based on the Federal payment rate, including adjustments described in 
Sec. 412.624 and, if applicable, during a transition period, on a blend 
of the Federal payment rate and the facility-specific payment rate 
described in Sec. 412.626.
    (b) Payment in full. (1) The payment made under this subpart 
represents payment in full (subject to applicable deductibles and 
coinsurance as described in subpart G of part 409 of this subchapter) 
for inpatient operating and capital-related costs associated with 
furnishing Medicare covered services in an inpatient rehabilitation 
facility, but not for the cost of an approved medical education program 
described in Secs. 413.85 and 413.86 of this chapter.
    (2) In addition to payments based on prospective payment rates, 
inpatient rehabilitation facilities receive payments for the following:
    (i) Bad debts of Medicare beneficiaries, as provided in Sec. 413.80 
of this chapter; and
    (ii) A payment amount per unit for blood clotting factor provided 
to Medicare inpatients who have hemophilia.


Sec. 412.624  Methodology for calculating the Federal prospective 
payment rates.

    (a) Data used. To calculate the prospective payment rates for 
inpatient hospital services furnished by inpatient rehabilitation 
facilities, we use--
    (1) The most recent Medicare data available, as of the date of 
establishing the inpatient rehabilitation facility prospective payment 
system, to estimate payments for inpatient operating and capital-
related costs made under part 413 under this subchapter;
    (2) An appropriate wage index to adjust for area wage differences;
    (3) An increase factor to adjust for the most recent estimate of 
increases in the prices of an appropriate market basket of goods and 
services included in covered inpatient rehabilitation services; and
    (4) Patient assessment data described in Sec. 412.606 and other 
data that account for the relative resource utilization of different 
patient types.
    (b) Determining the average costs per discharge for fiscal year 
2001. We determine the average inpatient operating and capital costs 
per discharge for which payment is made to each inpatient 
rehabilitation facility using the available data specified under 
paragraph (a)(1) of this section. The cost per discharge is adjusted to 
fiscal year 2001 by an increase factor, described in paragraph (a)(3) 
of this section, under the update methodology described in section 
1886(b)(3)(B)(ii) of the Act for each year through the midpoint of 
fiscal year 2001.
    (c) Determining the Federal prospective payment rates. (1) General. 
The Federal prospective payment rates will be established using a 
standard payment amount referred to as the budget neutral conversion 
factor. The budget neutral conversion factor is a standardized payment 
amount based on average costs from a base year which reflects the 
combined aggregate effects of the weighting factors, various facility 
and case level adjustments, and other adjustments.
    (2) Update the cost per discharge. We apply the increase factor 
described in paragraph (a)(3) of this section to the facility's cost 
per discharge determined under paragraph (b) of this section to compute 
the cost per discharge for fiscal year 2002. Based on the updated cost 
per discharge, we estimate the payments that would have been made to 
the facility for fiscal year 2002 under part 413 of this chapter 
without regard to the prospective payment system implemented under this 
subpart.
    (3) Computation of the budget neutral conversion factor. The budget 
neutral conversion factor is computed as follows:
    (i) For fiscal year 2002. Based on the updated costs per discharge 
and estimated payments for fiscal year 2002 determined in paragraph 
(c)(2) of this section, we compute a budget neutral conversion factor 
for fiscal year 2002, as specified by us, that reflects, as 
appropriate, the adjustments described in paragraph (d) of this 
section.
    (ii) For fiscal years after 2002. The budget neutral conversion 
factor for fiscal years after 2002 will be the standardized payments 
for the previous fiscal year updated by the increase factor described 
in paragraph (a)(3) of this section, including adjustments described in 
paragraph (d) of this section as appropriate.
    (4) Determining the Federal prospective payment rate for each case-
mix group. The Federal prospective payment rates for each case-mix 
group is the product of the weighting factors described in 
Sec. 412.620(b) and the budget neutral conversion factor described in 
paragraph (c)(3) of this section.
    (d) Adjustments to the budget neutral conversion factor. The budget 
neutral

[[Page 41392]]

conversion factor described in paragraph (c)(3) of this section will be 
adjusted for the following:
    (1) Outlier payments. We determine a reduction factor equal to the 
estimated proportion of additional outlier payments described in 
paragraph (e)(4) of this section.
    (2) Budget neutrality. We adjust the Federal prospective payment 
rates for fiscal year 2002 so that aggregate payments under the 
prospective payment system, excluding any additional payments 
associated with elections not to be paid under the transition period 
methodology under Sec. 412.626(b), are estimated to equal the amount 
that would have been made to inpatient rehabilitation facilities under 
part 413 of this subchapter without regard to the prospective payment 
system implemented under this subpart.
    (3) Coding and classification changes. We adjust the budget neutral 
conversion factor for a given year if we determine that revisions in 
case-mix classifications or weighting factors for a previous fiscal 
year (or estimates that such revisions for a future fiscal year) did 
result in (or would otherwise result in) a change in aggregate payments 
that are a result of changes in the coding or classification of 
patients that do not reflect real changes in case-mix.
    (e) Calculation of the adjusted Federal prospective payment. For 
each discharge, an inpatient rehabilitation facility's Federal 
prospective payment is computed on the basis of the Federal prospective 
payment rate that is in effect for its cost reporting period that 
begins in a Federal fiscal year specified under paragraph (c) of this 
section. A facility's Federal prospective payment rate will be 
adjusted, as appropriate, to account for area wage levels, payments for 
outliers and transfers, and for other factors as follows:
    (1) Adjustment for area wage levels. The labor portion of a 
facility's Federal prospective payment is adjusted to account for 
geographical differences in the area wage levels using an appropriate 
wage index. The application of the wage index is made on the basis of 
the location of the facility in an urban or rural area as defined in 
Sec. 412.602.
    (2) Adjustments for low-income patients. We adjust the Federal 
prospective payment, on a facility basis, for the proportion of low-
income patients that receive inpatient rehabilitation services as 
determined by us.
    (3) Adjustments for rural areas. We adjust the Federal prospective 
payment by a factor, as specified by us for facilities located in rural 
areas, as defined in Sec. 412.602.
    (4) Adjustment for high-cost outliers. We provide for an additional 
payment to a facility if its estimated costs for a patient exceeds a 
fixed dollar amount (adjusted for area wage levels and factors to 
account for treating low-income patients and for rural locations) as 
specified by us. The additional payment equals 80 percent of the 
difference between the estimated cost of the patient and the sum of the 
adjusted Federal prospective payment computed under this section and 
the adjusted fixed dollar amount.
    (5) Adjustments related to the patient assessment instrument. An 
adjustment to a facility's Federal prospective payment amount for a 
given discharge will be made, as specified under Sec. 412.614(d), if 
the transmission of data from a patient assessment instrument is late.
    (f) Special payment provision for patients that are transferred.
    (1) A facility's Federal prospective payment will be adjusted to 
account for a discharge of a patient who--
    (i) Is transferred from the inpatient rehabilitation facility to 
another site of care, as defined in Sec. 412.602; and
    (ii) Stays in the facility for a number of days that is less than 
the average length of stay for nontransfer cases in the case-mix group 
to which the patient is classified.
    (2) We calculate the adjusted Federal prospective payment for 
patients who are transferred in the following manner:
    (i) By dividing the Federal prospective payment by the average 
length of stay for nontransfer cases in the case-mix group to which the 
patient is classified to equal the payment per day.
    (ii) By multiplying the payment per day under paragraph (f)(2)(i) 
of this section by the number of days the patient stayed in the 
facility prior to being discharged to equal the per day payment amount.
    (iii) By multiplying the payment per day under paragraph (f)(2)(i) 
by 0.5 to equal an additional one half day payment for the first day of 
the stay before the discharge.
    (iv) By adding the per day payment amount under paragraph 
(f)(2)(ii) and the additional one-half day payment under paragraph 
(f)(2)(iii) to equal the unadjusted payment amount.
    (v) By applying the adjustments described in paragraphs (e)(1), 
(e)(2), and (e)(3) of this section to the unadjusted payment amount 
determined in paragraph (f)(2)(iv) of this section to equal the 
adjusted transfer payment amount.
    (g) Special payment provision for interrupted stays. When a patient 
in an inpatient rehabilitation facility has one or more interruptions 
in the stay, as defined in Sec. 412.602 and as indicated on the patient 
assessment instrument in accordance with Sec. 412.618(b), we will make 
payments in the following manner:
    (1) Interruption of one day or less. Payment for a patient stay 
with an interruption of one day or less will be the adjusted Federal 
prospective payment under paragraph (e) of this section that is based 
on the patient assessment data specified in Sec. 412.618(a)(1). Payment 
for an interruption of one day or less will only be made to the 
inpatient rehabilitation facility.
    (2) Interruption of more than one day. Payment for a patient stay 
with an interruption of more than one day but less than 3 consecutive 
days, as defined in Sec. 412.602, will be--
    (i) The adjusted Federal prospective payment under paragraph (e) of 
this section that is based on the patient assessment data specified in 
Sec. 412.618(a)(1) made to the inpatient rehabilitation facility; and
    (ii) If the reason for the interrupted patient stay is to receive 
inpatient acute care hospital services, an amount based on the 
prospective payment systems described in Sec. 412.1(a)(1) made to the 
acute care hospital.


Sec. 412.626  Transition period.

    (a) Duration of transition period and proportion of the blended 
transition rate. (1) Except for a facility that makes an election under 
paragraph (b) of this section, for cost reporting periods beginning on 
or after January 1, 2002 and before October 1, 2002, an inpatient 
rehabilitation facility receives a payment comprised of a blend of the 
adjusted Federal prospective payment, as determined under 
Sec. 412.624(e) or Sec. 412.624(f) and a facility-specific payment as 
determined under paragraph (a)(2) of this section.
    (i) For cost reporting periods beginning on or after January 1, 
2002 and before October 1, 2002, payment is based on 33\1/3\ percent of 
the facility-specific payment and 66\2/3\ percent of the adjusted FY 
2002 Federal prospective payment.
    (ii) For cost reporting periods beginning on or after October 1, 
2002, payment is based entirely on the adjusted Federal prospective 
payment.
    (2) Calculation of the facility-specific payment. The facility-
specific payment is equal to the payment for each cost reporting period 
in the transition period that would have been made without regard to 
this subpart. The facility's Medicare fiscal intermediary calculates

[[Page 41393]]

the facility-specific payment for inpatient operating costs and 
capital-related costs in accordance with part 413 of this chapter.
    (b) Election not to be paid under the transition period 
methodology. An inpatient rehabilitation facility may elect a payment 
that is based entirely on the adjusted Federal prospective payment for 
cost reporting periods beginning before fiscal year 2003 without regard 
to the transition period percentages specified in paragraph (a)(1)(i) 
of this section.
    (1) General requirement. An inpatient rehabilitation facility will 
be required to request the election under this paragraph (b) within 30 
days of its first cost reporting period for which payment is based on 
the IRF prospective payment system for cost reporting periods beginning 
on or after January 1, 2002 and before October 1, 2002.
    (2) Notification requirement to make election. The request by the 
inpatient rehabilitation facility to make the election under this 
paragraph (b) must be made in writing to the Medicare fiscal 
intermediary. The intermediary must receive the request on or before 
the 30th day before the applicable cost reporting period begins, 
regardless of any postmarks or anticipated delivery dates. Requests 
received, postmarked, or delivered by other means after the 30th day 
before the cost reporting period begins will not be approved. If the 
30th day before the cost reporting period begins falls on a day that 
the postal service or other delivery sources are not open for business, 
the inpatient rehabilitation facility is responsible for allowing 
sufficient time for the delivery of the request before the deadline. If 
an inpatient rehabilitation facility's request is not received or not 
approved, payment will be based on the transition period rate specified 
in paragraph (a)(1)(i) of this section.


Sec. 412.628  Publication of the Federal prospective payment rates.

    We publish information pertaining to the inpatient rehabilitation 
facility prospective payment system effective for each fiscal year in 
the Federal Register. This information includes the unadjusted Federal 
payment rates, the patient classification system and associated 
weighting factors, and a description of the methodology and data used 
to calculate the payment rates. This information is published on or 
before August 1 prior to the beginning of each fiscal year.


Sec. 412.630  Limitation on review.

    Administrative or judicial review under sections 1869 or 1878 of 
the Act, or otherwise, is prohibited with regard to the establishment 
of the methodology to classify a patient into the case-mix groups and 
the associated weighting factors, the unadjusted Federal per discharge 
payment rates, additional payments for outliers and special payments, 
and the area wage index.


Sec. 412.632  Method of payment under the inpatient rehabilitation 
facility prospective payment system.

    (a) General rule. Subject to the exceptions in paragraphs (b) and 
(c) of this section, an inpatient rehabilitation facility receives 
payment under this subpart for inpatient operating costs and capital-
related costs for each discharge only following submission of a 
discharge bill.
    (b) Periodic interim payments.
    (1) Criteria for receiving periodic interim payments.
    (i) An inpatient rehabilitation facility receiving payment under 
this subpart may receive periodic interim payments (PIP) for Part A 
services under the PIP method subject to the provisions of 
Sec. 413.64(h) of this subchapter.
    (ii) To be approved for PIP, the inpatient rehabilitation facility 
must meet the qualifying requirements in Sec. 413.64(h)(3) of this 
subchapter.
    (iii) Payments to a rehabilitation unit are made under the same 
method of payment as the hospital of which it is a part as described in 
Sec. 412.116.
    (iv) As provided in Sec. 413.64(h)(5) of this chapter, intermediary 
approval is conditioned upon the intermediary's best judgment as to 
whether payment can be made under the PIP method without undue risk of 
its resulting in an overpayment to the provider.
    (2) Frequency of payment. For facilities approved for PIP, the 
intermediary estimates the inpatient rehabilitation facility's Federal 
prospective payments net of estimated beneficiary deductibles and 
coinsurance and makes biweekly payments equal to 1/26 of the total 
estimated amount of payment for the year. If the inpatient 
rehabilitation facility has payment experience under the prospective 
payment system, the intermediary estimates PIP based on that payment 
experience, adjusted for projected changes supported by substantiated 
information for the current year. Each payment is made 2 weeks after 
the end of a biweekly period of service as described in 
Sec. 413.64(h)(6) of this subchapter. The interim payments are reviewed 
at least twice during the reporting period and adjusted if necessary. 
Fewer reviews may be necessary if an inpatient rehabilitation facility 
receives interim payments for less than a full reporting period. These 
payments are subject to final settlement.
    (3) Termination of PIP. (i) Request by the inpatient rehabilitation 
facility. Subject to the provisions of paragraph (b)(1)(iii) of this 
section, an inpatient rehabilitation facility receiving PIP may convert 
to receiving prospective payments on a non-PIP basis at any time.
    (ii) Removal by the intermediary. An intermediary terminates PIP if 
the inpatient rehabilitation facility no longer meets the requirements 
of Sec. 413.64(h) of this chapter.
    (c) Interim payments for Medicare bad debts and for Part A costs 
not paid under the prospective payment system. For Medicare bad debts 
and for costs of an approved education program and other costs paid 
outside the prospective payment system, the intermediary determines the 
interim payments by estimating the reimbursable amount for the year 
based on the previous year's experience, adjusted for projected changes 
supported by substantiated information for the current year, and makes 
biweekly payments equal to 1/26 of the total estimated amount. Each 
payment is made 2 weeks after the end of a biweekly period of service 
as described in Sec. 413.64(h)(6) of this chapter. The interim payments 
are reviewed at least twice during the reporting period and adjusted if 
necessary. Fewer reviews may be necessary if an inpatient 
rehabilitation facility receives interim payments for less than a full 
reporting period. These payments are subject to final cost settlement.
    (d) Outlier payments. Additional payments for outliers are not made 
on an interim basis. The outlier payments are made based on the 
submission of a discharge bill and represent final payment.
    (e) Accelerated payments. (1) General rule. Upon request, an 
accelerated payment may be made to an inpatient rehabilitation facility 
that is receiving payment under this subpart and is not receiving PIP 
under paragraph (b) of this section if the inpatient rehabilitation 
facility is experiencing financial difficulties because of the 
following:
    (i) There is a delay by the intermediary in making payment to the 
inpatient rehabilitation facility.
    (ii) Due to an exceptional situation, there is a temporary delay in 
the inpatient rehabilitation facility's preparation and submittal of 
bills to the intermediary beyond its normal billing cycle.
    (2) Approval of payment. An inpatient rehabilitation facility's 
request for an

[[Page 41394]]

accelerated payment must be approved by the intermediary and us.
    (3) Amount of payment. The amount of the accelerated payment is 
computed as a percentage of the net payment for unbilled or unpaid 
covered services.
    (4) Recovery of payment. Recovery of the accelerated payment is 
made by recoupment as inpatient rehabilitation facility bills are 
processed or by direct payment by the inpatient rehabilitation 
facility.
    B. Part 413 is amended as set forth below:

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

    1. The authority citation for part 413 is revised to read as 
follows:

    Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i) and 
(n), 1861(v), 1871, 1881, 1883, and 1886 of the Social Security Act 
(42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and (n), 
1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww).

Subpart A--Introduction and General Rules

    2. Section 413.1 is amended by:
    A. Revising paragraph (d)(2)(ii).
    B. Adding paragraphs (d)(2)(iv) and (d)(2)(v).


Sec. 413.1  Introduction.

* * * * *
    (d) * * *
    (2) * * *
    (ii) Payment to children's, psychiatric, and long-term hospitals 
(as well as separate psychiatric units (distinct parts) of short-term 
general hospitals), that are excluded from the prospective payment 
systems under subpart B of part 412 of this subchapter, and hospitals 
outside the 50 States and the District of Columbia is on a reasonable 
cost basis, subject to the provisions of Sec. 413.40.
* * * * *
    (iv) For cost reporting periods beginning before January 1, 2002, 
payment to rehabilitation hospitals (as well as separate rehabilitation 
units (distinct parts) of short-term general hospitals), that are 
excluded under subpart B of part 412 of this subchapter from the 
prospective payment systems is on a reasonable cost basis, subject to 
the provisions of Sec. 413.40.
    (v) For cost reporting periods beginning on or after January 1, 
2002, payment to rehabilitation hospitals (as well as separate 
rehabilitation units (distinct parts) of short-term general hospitals) 
that meet the conditions of Sec. 412.604 of this chapter is based on 
prospectively determined rates under subpart P of part 412 of this 
subchapter.
* * * * *

Subpart C-- Limits on Cost Reimbursement

    3. Section 413.40 is amended by:
    A. Republishing the introductory text of paragraph (a)(2)(i).
    B. Adding a new paragraph (a)(2)(i)(C).
    C. Revising paragraph (a)(2)(ii).
    D. Adding a new paragraph (a)(2)(iii).


Sec. 413.40  Ceiling on the rate of increase in hospital inpatient 
costs.

    (a) Introduction. * * *
    (2) Applicability. (i) This section is not applicable to--
* * * * *
    (C) Rehabilitation hospitals and rehabilitation units that are paid 
under the prospective payment system for inpatient hospital services in 
accordance with section 1886(j) of the Act and subpart P of part 412 of 
this subchapter for cost reporting periods beginning on or after 
January 1, 2002.
    (ii) For cost reporting periods beginning on or after October 1, 
1983, this section applies to--
    (A) Hospitals excluded from the prospective payment systems 
described in Sec. 412.1(a)(1) of this subchapter; and
    (B) Psychiatric and rehabilitation units excluded from the 
prospective payment systems, as described in Sec. 412.1(a)(1) of this 
chapter and in accordance with Secs. 412.25 through 412.30 of this 
chapter, except as limited by paragraph (a)(2)(iii) of this section 
with respect to rehabilitation hospitals and rehabilitation units 
specified in Secs. 412.23(b), 412.27, and 412.29 of this subchapter.
    (iii) For cost reporting periods beginning on or after October 1, 
1983 and before January 1, 2002, this section applies to rehabilitation 
hospitals and rehabilitation units that are excluded from the 
prospective payment systems described in Sec. 412.1(a)(1) of this 
subchapter.
* * * * *

Subpart E-- Payments to Providers

    4. In Sec. 413.64, paragraph (h)(2)(i) is revised to read as 
follows:


Sec. 413.64  Payment to providers: Specific rules.

* * * * *
    (h) Periodic interim payment method of reimbursement-- * * *
    (2) * * *
    (i) Part A inpatient services furnished in hospitals that are 
excluded from the prospective payment systems, described in 
Sec. 412.1(a)(1) of this chapter, under subpart B of part 412 of this 
chapter or are paid under the prospective payment system described in 
subpart P of part 412 of this chapter.
* * * * *

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

    Dated: June 11, 2001.
Thomas A. Scully,
Administrator, Centers for Medicare &, Medicaid Services.

    Dated: July 23, 2001.
Tommy G. Thompson,
Secretary.

    Editorial Note:  The following Addendum and Appendix A through 
Appendix D to the preamble will not appear in the Code of Federal 
Regulations.

Addendum--Tables

    This section contains tables referred to throughout the preamble to 
this final rule. The tables presented below are as follows:

Table 1--Relative Weights for Case-Mix Groups (CMGs)
Table 2--Federal Prospective Payments for Case-Mix Groups
Table 3A--Wage Index for Urban Areas
Table 3B--Wage Index for Rural Areas

                              Table 1.--Relative Weights for Case-Mix Groups (CMGs)
----------------------------------------------------------------------------------------------------------------
                       CMG description             Relative weights                 Average length of stay
        CMG               (M=motor,      -----------------------------------------------------------------------
                     C=cognitive, A=age)   Tier 1   Tier 2   Tier 3    None    Tier 1   Tier 2   Tier 3    None
----------------------------------------------------------------------------------------------------------------
0101..............  Stroke; M=69-84 and    0.4778   0.4279   0.4078   0.3859       10        9        6        8
                     C=23-35.
0102..............  Stroke; M=59-68 and    0.6506   0.5827   0.5553   0.5255       11       12       10       10
                     C=23-35.
0103..............  Stroke; M=59-84 and    0.8296   0.7430   0.7080   0.6700       14       12       12       12
                     C=5-22.
0104..............  Stroke; M=53-58.....   0.9007   0.8067   0.7687   0.7275       17       13       12       13
0105..............  Stroke; M=47-52.....   1.1339   1.0155   0.9677   0.9158       16       17       15       15

[[Page 41395]]

 
0106..............  Stroke; M=42-46.....   1.3951   1.2494   1.1905   1.1267       18       18       18       18
0107..............  Stroke; M=39-41.....   1.6159   1.4472   1.3790   1.3050       17       20       21       21
0108..............  Stroke; M=34-38 and    1.7477   1.5653   1.4915   1.4115       25       27       22       23
                     A;83.
0109..............  Stroke; M=34-38 and    1.8901   1.6928   1.6130   1.5265       24       24       22       24
                     A:82.
0110..............  Stroke; M=12-33 and    2.0275   1.8159   1.7303   1.6375       29       25       27       26
                     A;89.
0111..............  Stroke; M=27-33 and    2.0889   1.8709   1.7827   1.6871       29       26       24       27
                     A=82-88.
0112..............  Stroke; M=12-26 and    2.4782   2.2195   2.1149   2.0015       40       33       30       31
                     A=82-88.
0113..............  Stroke; M=27-33 and    2.2375   2.0040   1.9095   1.8071       30       27       27       28
                     A:81.
0114..............  Stroke; M=12-26 and    2.7302   2.4452   2.3300   2.2050       37       34       32       33
                     A:81.
0201..............  Traumatic brain        0.7689   0.7276   0.6724   0.6170       13       14       14       11
                     injury; M=52-84 and
                     C=24-35.
0202..............  Traumatic brain        1.1181   1.0581   0.9778   0.8973       18       16       17       16
                     injury; M=40-51 and
                     C=24-35.
0203..............  Traumatic brain        1.3077   1.2375   1.1436   1.0495       19       20       19       18
                     injury; M=40-84 and
                     C=5-23.
0204..............  Traumatic brain        1.6534   1.5646   1.4459   1.3269       24       23       22       22
                     injury; M=30-39.
0205..............  Traumatic brain        2.5100   2.3752   2.1949   2.0143       44       36       35       31
                     injury; M=12-29.
0301..............  Non-traumatic brain    0.9655   0.8239   0.7895   0.7195       14       14       12       13
                     injury; M=51-84.
0302..............  Non-traumatic brain    1.3678   1.1672   1.1184   1.0194       19       17       17       16
                     injury; M=41-50.
0303..............  Non-traumatic brain    1.8752   1.6002   1.5334   1.3976       23       23       22       22
                     injury; M=25-40.
0304..............  Non-traumatic brain    2.7911   2.3817   2.2824   2.0801       44       32       34       31
                     injury; M=12-24.
0401..............  Traumatic spinal       0.9282   0.8716   0.8222   0.6908       15       15       16       14
                     cord injury; M=50-
                     84.
0402..............  Traumatic spinal       1.4211   1.3344   1.2588   1.0576       21       18       22       19
                     cord injury; M=36-
                     49.
0403..............  Traumatic spinal       2.3485   2.2052   2.0802   1.7478       32       32       31       30
                     cord injury; M=19-
                     35.
0404..............  Traumatic spinal       3.5227   3.3078   3.1203   2.6216       46       43       62       40
                     cord injury; M=12-
                     18.
0501..............  Non-traumatic spinal   0.7590   0.6975   0.6230   0.5363       12       13       10       10
                     cord injury; M=51-
                     84 and C=30-35.
0502..............  Non-traumatic spinal   0.9458   0.8691   0.7763   0.6683       15       17       10       12
                     cord injury; M=51-
                     84 and C=5-29.
0503..............  Non-traumatic spinal   1.1613   1.0672   0.9533   0.8206       17       17       15       14
                     cord injury; M=41-
                     50.
0504..............  Non-traumatic spinal   1.6759   1.5400   1.3757   1.1842       23       21       21       19
                     cord injury; M=34-
                     40.
0505..............  Non-traumatic spinal   2.5314   2.3261   2.0778   1.7887       31       31       29       28
                     cord injury; M=12-
                     33.
0601..............  Neurological; M=56-    0.8794   0.6750   0.6609   0.5949       14       13       12       12
                     84.
0602..............  Neurological; M=47-    1.1979   0.9195   0.9003   0.8105       15       15       14       15
                     55.
0603..............  Neurological; M=36-    1.5368   1.1796   1.1550   1.0397       21       18       18       18
                     46.
0604..............  Neurological; M=12-    2.0045   1.5386   1.5065   1.3561       31       24       25       23
                     35.
0701..............  Fracture of lower      0.7015   0.7006   0.6710   0.5960       13       13       12       11
                     extremity; M=52-84.
0702..............  Fracture of lower      0.9264   0.9251   0.8861   0.7870       15       15       16       14
                     extremity; M=46-51.
0703..............  Fracture of lower      1.0977   1.0962   1.0500   0.9326       18       17       17       16
                     extremity; M=42-45.
0704..............  Fracture of lower      1.2488   1.2471   1.1945   1.0609       14       20       19       18
                     extremity; M=38-41.
0705..............  Fracture of lower      1.4760   1.4740   1.4119   1.2540       20       22       22       21
                     extremity; M=12-37.
0801..............  Replacement of lower   0.4909   0.4696   0.4518   0.3890        9        9        8        8
                     extremity joint;
                     M=58-84.
0802..............  Replacement of lower   0.5667   0.5421   0.5216   0.4490       10       10        9        9
                     extremity joint;
                     M=55-57.
0803..............  Replacement of lower   0.6956   0.6654   0.6402   0.5511        9       11       11       10
                     extremity joint;
                     M=47-54.
0804..............  Replacement of lower   0.9284   0.8881   0.8545   0.7356       15       14       14       12
                     extremity joint;
                     M=12-46 and C=32-35.
0805..............  Replacement of lower   1.0027   0.9593   0.9229   0.7945       16       16       14       14
                     extremity joint;
                     M=40-46 and C=5-31.
0806..............  Replacement of lower   1.3681   1.3088   1.2592   1.0840       21       20       19       18
                     extremity joint;
                     M=12-39 and C=5-31.
0901..............  Other orthopedic;      0.6988   0.6390   0.6025   0.5213       12       11       11       11
                     M=54-84.
0902..............  Other orthopedic;      0.9496   0.8684   0.8187   0.7084       15       15       14       13
                     M=47-53.
0903..............  Other orthopedic;      1.1987   1.0961   1.0334   0.8942       18       18       17       16
                     M=38-46.
0904..............  Other orthopedic;      1.6272   1.4880   1.4029   1.2138       23       23       23       21
                     M=12-37.
1001..............  Amputation, lower      0.7821   0.7821   0.7153   0.6523       13       13       12       13
                     extremity; M=61-84.
1002..............  Amputation, lower      0.9998   0.9998   0.9144   0.8339       15       15       14       15
                     extremity; M=52-60.
1003..............  Amputation, lower      1.2229   1.2229   1.1185   1.0200       18       17       17       18
                     extremity; M=46-51.
1004..............  Amputation, lower      1.4264   1.4264   1.3046   1.1897       20       20       19       19
                     extremity; M=39-45.
1005..............  Amputation, lower      1.7588   1.7588   1.6086   1.4670       21       25       23       23
                     extremity; M=12-38.
1101..............  Amputation, non-       1.2621   0.7683   0.7149   0.6631       18       11       13       12
                     lower extremity;
                     M=52-84.
1102..............  Amputation, non-       1.9534   1.1892   1.1064   1.0263       25       18       17       18
                     lower extremity;
                     M=38-51.
1103..............  Amputation, non-       2.6543   1.6159   1.5034   1.3945       33       23       22       25
                     lower extremity;
                     M=12-37.
1201..............  Osteoarthritis; M=55-  0.7219   0.5429   0.5103   0.4596       13       10       11        9
                     84 and C=34-35.
1202..............  Osteoarthritis; M=55-  0.9284   0.6983   0.6563   0.5911       16       11       13       13
                     84 and C=5-33.
1203..............  Osteoarthritis M=48-   1.0771   0.8101   0.7614   0.6858       18       15       14       13
                     54.
1204..............  Osteoarthritis M=39-   1.3950   1.0492   0.9861   0.8882       22       19       16       17
                     47.
1205..............  Osteoarthritis M=12-   1.7874   1.3443   1.2634   1.1380       27       21       21       20
                     38.
1301..............  Rheumatoid, other      0.7719   0.6522   0.6434   0.5566       13       14       13       11
                     arthritis M=54-84.
1302..............  Rheumatoid, other      0.9882   0.8349   0.8237   0.7126       16       14       14       14
                     arthritis M=47-53.
1303..............  Rheumatoid, other      1.3132   1.1095   1.0945   0.9469       20       18       16       17
                     arthritis M=36-46.
1304..............  Rheumatoid, other      1.8662   1.5768   1.5555   1.3457       25       25       29       22
                     arthritis M=12-35.
1401..............  Cardiac; M=56-84....   0.7190   0.6433   0.5722   0.5156       15       12       11       11
1402..............  Cardiac; M=48-55....   0.9902   0.8858   0.7880   0.7101       13       15       13       13
1403..............  Cardiac; M=38-47....   1.2975   1.1608   1.0325   0.9305       21       19       16       16
1404..............  Cardiac; M=12-37....   1.8013   1.6115   1.4335   1.2918       30       24       21       20
1501..............  Pulmonary; M=61-84..   0.8032   0.7633   0.6926   0.6615       15       13       13       13
1502..............  Pulmonary; M=48-60..   1.0268   0.9758   0.8855   0.8457       17       17       14       15
1503..............  Pulmonary; M=36-47..   1.3242   1.2584   1.1419   1.0906       21       20       18       18
1504..............  Pulmonary; M=12-35..   2.0598   1.9575   1.7763   1.6965       30       28       30       26
1601..............  Pain syndrome; M=45-   0.8707   0.8327   0.7886   0.6603       15       14       13       13
                     84.
1602..............  Pain syndrome; M=12-   1.3320   1.2739   1.2066   1.0103       21       20       20       18
                     44.
1701..............  Major multiple         0.9996   0.9022   0.8138   0.7205       16       14       11       13
                     trauma without
                     brain or spinal
                     cord injury; M=46-
                     84.
1702..............  Major multiple         1.4755   1.3317   1.2011   1.0634       21       21       20       18
                     trauma without
                     brain or spinal
                     cord injury; M=33-
                     45.
1703..............  Major multiple         2.1370   1.9288   1.7396   1.5402       33       28       27       24
                     trauma without
                     brain or spinal
                     cord injury; M=12-
                     32.
1801..............  Major multiple         0.7445   0.7445   0.6862   0.6282       12       12       12       10
                     trauma with brain
                     or spinal cord
                     injury; M=45-84 and
                     C=33-35.
1802..............  Major multiple         1.0674   1.0674   0.9838   0.9007       16       16       16       16
                     trauma with brain
                     or spinal cord
                     injury; M=45-84 and
                     C=5-32.

[[Page 41396]]

 
1803..............  Major multiple         1.6350   1.6350   1.5069   1.3797       22       25       20       22
                     trauma with brain
                     or spinal cord
                     injury; M=26-44.
1804..............  Major multiple         2.9140   2.9140   2.6858   2.4589       41       29       40       40
                     trauma with brain
                     or spinal cord
                     injury; M=12-25.
1901..............  Guillian Barre; M=47-  1.1585   1.0002   0.9781   0.8876       15       15       16       15
                     84.
1902..............  Guillian Barre; M=31-  2.1542   1.8598   1.8188   1.6505       27       27       27       24
                     46.
1903..............  Guillian Barre; M=12-  3.1339   2.7056   2.6459   2.4011       41       35       30       40
                     30.
2001..............  Miscellaneous; M=54-   0.8371   0.7195   0.6705   0.6029       12       13       11       12
                     84.
2002..............  Miscellaneous; M=45-   1.1056   0.9502   0.8855   0.7962       15       15       14       14
                     53.
2003..............  Miscellaneous; M=33-   1.4639   1.2581   1.1725   1.0543       20       18       18       18
                     44.
2004..............  Miscellaneous; M=12-   1.7472   1.5017   1.3994   1.2583       30       22       21       22
                     32 and A;82.
2005..............  Miscellaneous; M=12-   2.0799   1.7876   1.6659   1.4979       33       25       24       24
                     32 and A:81.
2101..............  Burns; M=46-84......   1.0357   0.9425   0.8387   0.8387       18       18       15       16
2102..............  Burns; M=12-45......   2.2508   2.0482   1.8226   1.8226       31       26       26       29
5001..............  Short-stay cases,     .......  .......  .......   0.1651  .......  .......  .......        3
                     length of stay is 3
                     days or fewer.
5101..............  Expired, orthopedic,  .......  .......  .......   0.4279  .......  .......  .......        8
                     length of stay is
                     13 days or fewer.
5102..............  Expired, orthopedic,  .......  .......  .......   1.2390  .......  .......  .......       23
                     length of stay is
                     14 days or more.
5103..............  Expired, not          .......  .......  .......   0.5436  .......  .......  .......        9
                     orthopedic, length
                     of stay is 15 days
                     or fewer.
5104..............  Expired, not          .......  .......  .......   1.7100  .......  .......  .......       28
                     orthopedic, length
                     of stay is 16 days
                     or more.
----------------------------------------------------------------------------------------------------------------


                        Table 2.--Federal Prospective Payments for Case-Mix Groups (CMGs)
----------------------------------------------------------------------------------------------------------------
                                                                                                   Payment rate
                       CMG                         Payment rate    Payment rate    Payment rate         no
                                                      tier 1          tier 2          tier 3       comorbidities
----------------------------------------------------------------------------------------------------------------
0101............................................       $5,656.20       $5,065.48       $4,827.54       $4,568.28
0102............................................        7,701.80        6,898.00        6,573.64        6,220.87
0103............................................        9,820.80        8,795.63        8,381.30        7,931.46
0104............................................       10,662.49        9,549.71        9,099.87        8,612.15
0105............................................       13,423.11       12,021.49       11,455.63       10,841.24
0106............................................       16,515.19       14,790.40       14,093.14       13,337.87
0107............................................       19,129.02       17,131.95       16,324.60       15,448.59
0108............................................       20,689.27       18,530.02       17,656.38       16,709.34
0109............................................       22,375.00       20,039.37       19,094.69       18,070.71
0110............................................       24,001.55       21,496.62       20,483.29       19,384.73
0111............................................       24,728.40       22,147.71       21,103.60       19,971.89
0112............................................       29,336.93       26,274.44       25,036.19       23,693.76
0113............................................       26,487.53       23,723.35       22,604.66       21,392.45
0114............................................       32,320.11       28,946.28       27,582.54       26,102.79
0201............................................        9,102.24        8,613.33        7,959.87        7,304.05
0202............................................       13,236.07       12,525.79       11,575.20       10,622.24
0203............................................       15,480.55       14,649.53       13,537.94       12,423.98
0204............................................       19,572.95       18,521.73       17,116.56       15,707.84
0205............................................       29,713.38       28,117.62       25,983.23       23,845.28
0301............................................       11,429.59        9,753.33        9,346.10        8,517.44
0302............................................       16,192.02       13,817.31       13,239.62       12,067.66
0303............................................       22,198.62       18,943.17       18,152.39       16,544.79
0304............................................       33,041.04       28,194.56       27,019.05       24,624.22
0401............................................       10,988.03       10,318.00        9,733.20        8,177.69
0402............................................       16,822.98       15,796.63       14,901.67       12,519.87
0403............................................       27,801.54       26,105.16       24,625.41       20,690.46
0404............................................       41,701.72       39,157.74       36,938.11       31,034.50
0501............................................        8,985.04        8,257.01        7,375.07        6,348.72
0502............................................       11,196.38       10,288.41        9,189.84        7,911.34
0503............................................       13,747.47       12,633.51       11,285.17        9,714.26
0504............................................       19,839.30       18,230.52       16,285.54       14,018.56
0505............................................       29,966.71       27,536.37       24,597.00       21,174.63
0601............................................       10,410.34        7,990.65        7,823.73        7,042.43
0602............................................       14,180.74       10,885.04       10,657.75        9,594.70
0603............................................       18,192.64       13,964.10       13,672.89       12,307.97
0604............................................       23,729.27       18,213.95       17,833.95       16,053.51
0701............................................        8,304.36        8,293.70        7,943.30        7,055.45
0702............................................       10,966.72       10,951.33       10,489.65        9,316.51
0703............................................       12,994.57       12,976.82       12,429.90       11,040.12
0704............................................       14,783.29       14,763.17       14,140.49       12,558.93
0705............................................       17,472.89       17,449.21       16,714.07       14,844.85
0801............................................        5,811.27        5,559.12        5,348.41        4,604.98
0802............................................        6,708.59        6,417.38        6,174.70        5,315.26
0803............................................        8,234.51        7,877.01        7,578.69        6,523.92
0804............................................       10,990.40       10,513.33       10,115.57        8,708.03
0805............................................       11,869.96       11,356.19       10,925.29        9,405.29
0806............................................       16,195.57       15,493.57       14,906.41       12,832.39
0901............................................        8,272.39        7,564.48        7,132.40        6,171.15

[[Page 41397]]

 
0902............................................       11,241.36       10,280.12        9,691.77        8,386.04
0903............................................       14,190.21       12,975.63       12,233.39       10,585.54
0904............................................       19,262.79       17,614.94       16,607.53       14,368.96
1001............................................        9,258.50        9,258.50        8,467.72        7,721.93
1002............................................       11,835.63       11,835.63       10,824.67        9,871.71
1003............................................       14,476.69       14,476.69       13,240.80       12,074.76
1004............................................       16,885.72       16,885.72       15,443.85       14,083.67
1005............................................       20,820.67       20,820.67       19,042.61       17,366.35
1101............................................       14,940.74        9,095.14        8,462.99        7,849.78
1102............................................       23,124.35       14,077.75       13,097.56       12,149.34
1103............................................       31,421.60       19,129.02       17,797.25       16,508.09
1201............................................        8,545.85        6,426.85        6,040.93        5,440.74
1202............................................       10,990.40        8,266.48        7,769.28        6,997.44
1203............................................       12,750.71        9,589.96        9,013.45        8,118.50
1204............................................       16,514.01       12,420.43       11,673.45       10,514.51
1205............................................       21,159.24       15,913.82       14,956.13       13,471.64
1301............................................        9,137.75        7,720.74        7,616.57        6,589.03
1302............................................       11,698.31        9,883.55        9,750.96        8,435.76
1303............................................       15,545.66       13,134.26       12,956.69       11,209.40
1304............................................       22,092.08       18,666.16       18,414.01       15,930.40
1401............................................        8,511.52        7,615.39        6,773.70        6,103.67
1402............................................       11,721.99       10,486.10        9,328.34        8,406.16
1403............................................       15,359.81       13,741.55       12,222.74       11,015.26
1404............................................       21,323.79       19,076.94       16,969.77       15,292.33
1501............................................        9,508.28        9,035.95        8,199.00        7,830.84
1502............................................       12,155.26       11,551.52       10,482.55       10,011.40
1503............................................       15,675.88       14,896.94       13,517.81       12,910.52
1504............................................       24,383.91       23,172.89       21,027.84       20,083.17
1601............................................       10,307.35        9,857.50        9,335.45        7,816.63
1602............................................       15,768.22       15,080.43       14,283.73       11,959.93
1701............................................       11,833.26       10,680.24        9,633.76        8,529.28
1702............................................       17,466.97       15,764.66       14,218.62       12,588.53
1703............................................       25,297.81       22,833.13       20,593.38       18,232.89
1801............................................        8,813.39        8,813.39        8,123.24        7,436.63
1802............................................       12,635.88       12,635.88       11,646.22       10,662.49
1803............................................       19,355.13       19,355.13       17,838.68       16,332.89
1804............................................       34,495.93       34,495.93       31,794.50       29,108.46
1901............................................       13,714.32       11,840.37       11,578.75       10,507.41
1902............................................       25,501.42       22,016.31       21,530.95       19,538.62
1903............................................       37,099.11       32,028.89       31,322.16       28,424.22
2001............................................        9,909.59        8,517.44        7,937.38        7,137.13
2002............................................       13,088.09       11,248.47       10,482.55        9,425.42
2003............................................       17,329.65       14,893.39       13,880.06       12,480.80
2004............................................       20,683.35       17,777.12       16,566.10       14,895.76
2005............................................       24,621.86       21,161.61       19,720.92       17,732.14
2101............................................       12,260.62       11,157.32        9,928.53        9,928.53
2102............................................       26,644.97       24,246.59       21,575.94       21,575.94
5001............................................  ..............  ..............  ..............        1,954.45
5101............................................  ..............  ..............  ..............        5,065.48
5102............................................  ..............  ..............  ..............       14,667.28
5103............................................  ..............  ..............  ..............        6,435.14
5104............................................  ..............  ..............  ..............       20,242.98
----------------------------------------------------------------------------------------------------------------


                  Table 3A.--Wage Index for Urban Areas
------------------------------------------------------------------------
                                                                  Wage
 MSA--Urban area (constituent counties or county equivalents)     index
------------------------------------------------------------------------
0040  Abilene, TX.............................................    0.8240
  Taylor, TX
0060  Aguadilla, PR...........................................    0.4391
  Aguada, PR
  Aguadilla, PR
  Moca, PR
0080  Akron, OH...............................................    0.9541
  Portage, OH
  Summit, OH
0120  Albany, GA..............................................    0.9893
  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.........................................    0.9146
  Bernalillo, NM
  Sandoval, NM
  Valencia, NM
0220  Alexandria, LA..........................................    0.8121
  Rapides, LA
0240  Allentown-Bethlehem-Easton, PA..........................    0.9839
  Carbon, PA
  Lehigh, PA

[[Page 41398]]

 
  Northampton, PA
0280  Altoona, PA.............................................    0.9317
  Blair, PA
0320  Amarillo, TX............................................    0.8673
  Potter, TX
  Randall, TX
0380  Anchorage, AK...........................................    1.2775
  Anchorage, AK
0440  Ann Arbor, MI...........................................    1.1093
  Lenawee, MI
  Livingston, MI
  Washtenaw, MI
0450  Anniston,AL.............................................    0.8284
  Calhoun, AL
0460  Appleton-Oshkosh-Neenah, WI.............................    0.9052
  Calumet, WI
  Outagamie, WI
  Winnebago, WI
0470  Arecibo, PR.............................................    0.4525
  Arecibo, PR
  Camuy, PR
  Hatillo, PR
0480  Asheville, NC...........................................    0.9479
  Buncombe, NC
  Madison, NC
0500  Athens, GA..............................................    0.9739
  Clarke, GA
  Madison, GA
  Oconee, GA
0520  Atlanta, GA.............................................    1.0097
  Barrow, GA
  Bartow, GA
  Carroll, GA
  Cherokee, GA
  Clayton, GA
  Cobb, GA
  Coweta, GA
  De Kalb, 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..............................    1.1167
  Atlantic City, NJ
  Cape May, NJ
0580  Auburn-Opelika, AL......................................    0.8079
  Lee, AL
0600  Augusta-Aiken, GA-SC....................................    0.9127
  Columbia, GA
  McDuffie, GA
  Richmond, GA
  Aiken, SC
  Edgefield, SC
0640  Austin-San Marcos, TX...................................    0.9540
  Bastrop, TX
  Caldwell, TX
  Hays, TX
  Travis, TX
  Williamson, TX
0680  Bakersfield, CA.........................................    0.9684
  Kern, CA
0720  Baltimore, MD...........................................    0.9223
  Anne Arundel, MD
  Baltimore, MD
  Baltimore City, MD
  Carroll, MD
  Harford, MD
  Howard, MD
  Queen Annes, MD
0733  Bangor, ME..............................................    0.9550
  Penobscot, ME
0743  Barnstable-Yarmouth, MA.................................    1.3801
  Barnstable, MA
0760  Baton Rouge, LA.........................................    0.8796
  Ascension, LA
  East Baton Rouge
  Livingston, LA
  West Baton Rouge, LA
0840  Beaumont-Port Arthur, TX................................    0.8734
  Hardin, TX
  Jefferson, TX
  Orange, TX
0860  Bellingham, WA..........................................    1.1439
  Whatcom, WA
0870  Benton Harbor, MI.......................................    0.8671
  Berrien, MI
0875  Bergen-Passaic, NJ......................................    1.1818
  Bergen, NJ
  Passaic, NJ
0880  Billings, MT............................................    0.9604
  Yellowstone, MT
0920  Biloxi-Gulfport-Pascagoula, MS..........................    0.8236
  Hancock, MS
  Harrison, MS
  Jackson, MS
0960  Binghamton, NY..........................................    0.8600
  Broome, NY
  Tioga, NY
1000  Birmingham, AL..........................................    0.8360
  Blount, AL
  Jefferson, AL
  St. Clair, AL
  Shelby, AL
1010  Bismarck, ND............................................    0.7625
  Burleigh, ND
  Morton, ND
1020  Bloomington, IN.........................................    0.8733
  Monroe, IN
1040  Bloomington-Normal, IL..................................    0.9095
  McLean, IL
1080  Boise City, ID..........................................    0.9006
  Ada, ID
  Canyon, ID
1123  Boston-Worcester-Lawrence-Lowell-Brockton, MA-NH........    1.1086
  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....................................    0.9731
  Boulder, CO
1145  Brazoria, TX............................................    0.8658
  Brazoria, TX
1150  Bremerton, WA...........................................    1.0975
  Kitsap, WA
1240  Brownsville-Harlingen-San Benito, TX....................    0.8714
  Cameron, TX
1260  Bryan-College Station, TX...............................    0.8237
  Brazos, TX
1280  Buffalo-Niagara Falls, NY...............................    0.9455
  Erie, NY
  Niagara, NY
1303  Burlington, VT..........................................    1.0840
  Chittenden, VT
  Franklin, VT
  Grand Isle, VT
1310  Caguas, PR..............................................    0.4548
  Caguas, PR
  Cayey, PR
  Cidra, PR
  Gurabo, PR
  San Lorenzo, PR
1320  Canton-Massillon, OH....................................    0.8480
  Carroll, OH
  Stark, OH
1350  Casper, WY..............................................    0.8724
  Natrona, WY
1360  Cedar Rapids, IA........................................    0.8716
  Linn, IA
1400  Champaign-Urbana, IL....................................    0.9189
  Champaign, IL
1440  Charleston-North Charleston, SC.........................    0.9029
  Berkeley, SC
  Charleston, SC
  Dorchester, SC
1480  Charleston, WV..........................................    0.9235
  Kanawha, WV
  Putnam, WV
1520  Charlotte-Gastonia-Rock Hill, NC-SC.....................    0.9321
  Cabarrus, NC
  Gaston, NC
  Lincoln, NC
  Mecklenburg, NC
  Rowan, NC
  Stanly, NC
  Union, NC
  York, SC
1540  Charlottesville, VA.....................................    1.0581
  Albemarle, VA
  Charlottesville City, VA
  Fluvanna, VA
  Greene, VA
1560  Chattanooga, TN-GA......................................    0.9790
  Catoosa, GA
  Dade, GA
  Walker, GA
  Hamilton, TN
  Marion, TN
1580  Cheyenne, WY............................................    0.8308
  Laramie, WY
1600  Chicago, IL.............................................    1.1092
  Cook, IL
  De Kalb, IL
  Du Page, IL
  Grundy, IL
  Kane, IL
  Kendall, IL
  Lake, IL
  McHenry, IL
  Will, IL

[[Page 41399]]

 
1620  Chico-Paradise, CA......................................    0.9918
  Butte, CA
1640  Cincinnati, OH-KY-IN....................................    0.9349
  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.........................    0.8173
  Christian, KY
  Montgomery, TN
1680  Cleveland-Lorain-Elyria, OH.............................    0.9528
  Ashtabula, OH
  Geauga, OH
  Cuyahoga, OH
  Lake, OH
  Lorain, OH
  Medina, OH
1720  Colorado Springs, CO....................................    0.9698
  El Paso, CO
1740  Columbia MO.............................................    0.8920
  Boone, MO
1760  Columbia, SC............................................    0.9557
  Lexington, SC
  Richland, SC
1800  Columbus, GA-AL.........................................    0.8531
  Russell,AL
  Chattanoochee, GA
  Harris, GA
  Muscogee, GA
1840  Columbus, OH............................................    0.9573
  Delaware, OH
  Fairfield, OH
  Franklin, OH
  Licking, OH
  Madison, OH
  Pickaway, OH
1880  Corpus Christi, TX......................................    0.8746
  Nueces, TX
  San Patricio, TX
1890  Corvallis, OR...........................................    1.1326
  Benton, OR
1900  Cumberland, MD-WV.......................................    0.8369
  Allegany, MD
  Mineral, WV
1920  Dallas, TX..............................................    0.9792
  Collin, TX
  Dallas, TX
  Denton, TX
  Ellis, TX
  Henderson, TX
  Hunt, TX
  Kaufman, TX
  Rockwall, TX
1950  Danville, VA............................................    0.8589
  Danville City, VA
  Pittsylvania, VA
1960  Davenport-Moline-Rock Island, IA-IL.....................    0.8897
  Scott, IA
  Henry, IL
  Rock Island, IL
2000  Dayton-Springfield, OH..................................    0.9384
  Clark, OH
  Greene, OH
  Miami, OH
  Montgomery, OH
2020  Daytona Beach, FL.......................................    0.9165
  Flagler, FL
  Volusia, FL
2030  Decatur, AL.............................................    0.8534
  Lawrence, AL
  Morgan, AL
2040  Decatur, IL.............................................    0.8095
  Macon, IL
2080  Denver, CO..............................................    1.0120
  Adams, CO
  Arapahoe, CO
  Denver, CO
  Douglas, CO
  Jefferson, CO
2120  Des Moines, IA..........................................    0.9073
  Dallas, IA
  Polk, IA
  Warren, IA
2160  Detroit, MI.............................................    1.0364
  Lapeer, MI
  Macomb, MI
  Monroe, MI
  Oakland, MI
  St. Clair, MI
  Wayne, MI
2180  Dothan, AL..............................................    0.7943
  Dale, AL
  Houston, AL
2190  Dover, DE...............................................    1.0078
  Kent, DE
2200  Dubuque, IA.............................................    0.8746
  Dubuque, IA
2240  Duluth-Superior, MN-WI..................................    1.0032
  St. Louis, MN
  Douglas, WI
2281  Dutchess County, NY.....................................    1.0187
  Dutchess, NY
2290  Eau Claire, WI..........................................    0.8761
  Chippewa, WI
  Eau Claire, WI
2320  El Paso, TX.............................................    0.9332
  El Paso, TX
2330  Elkhart-Goshen, IN......................................    0.9145
  Elkhart, IN
2335  Elmira, NY..............................................    0.8546
  Chemung, NY
2340  Enid, OK................................................    0.8610
  Garfield, OK
2360  Erie, PA................................................    0.8892
  Erie, PA
2400  Eugene-Springfield, OR..................................    1.0960
  Lane, OR
2440  Evansville-Henderson, IN-KY.............................    0.8137
  Posey, IN
  Vanderburgh, IN
  Warrick, IN
  Henderson, KY
2520  Fargo-Moorhead, ND-MN...................................    0.8750
  Clay, MN
  Cass, ND
2560  Fayetteville, NC........................................    0.8655
  Cumberland, NC
2580  Fayetteville-Springdale-Rogers, AR......................    0.7910
  Benton, AR
  Washington, AR
2620  Flagstaff, AZ-UT........................................    1.0681
  Coconino, AZ
  Kane, UT
2640  Flint, MI...............................................    1.1153
  Genesee, MI
2650  Florence, AL............................................    0.7616
  Colbert, AL
  Lauderdale, AL
2655  Florence, SC............................................    0.8737
  Florence, SC
2670  Fort Collins-Loveland, CO...............................    1.0620
  Larimer, CO
2680  Ft. Lauderdale, FL......................................    1.0118
  Broward, FL
2700  Fort Myers-Cape Coral, FL...............................    0.9247
  Lee, FL
2710  Fort Pierce-Port St. Lucie, FL..........................    0.9538
  Martin, FL
  St. Lucie, FL
2720  Fort Smith, AR-OK.......................................    0.8052
  Crawford, AR
  Sebastian, AR
  Sequoyah, OK
2750  Fort Walton Beach, FL...................................    0.9607
  Okaloosa, FL
2760  Fort Wayne, IN..........................................    0.8647
  Adams, IN
  Allen, IN
  De Kalb, IN
  Huntington, IN
  Wells, IN
  Whitley, IN
2800  Fort Worth-Arlington, TX................................    0.9392
  Hood, TX
  Johnson, TX
  Parker, TX
  Tarrant, TX
2840  Fresno, CA..............................................    1.0057
  Fresno, CA
  Madera, CA
2880  Gadsden, AL.............................................    0.8423
  Etowah, AL
2900  Gainesville, FL.........................................    0.9741
  Alachua, FL
2920  Galveston-Texas City, TX................................    0.9796
  Galveston, TX
2960  Gary, IN................................................    0.9451
  Lake, IN
  Porter, IN
2975  Glens Falls, NY.........................................    0.8361
  Warren, NY
  Washington, NY
2980  Goldsboro, NC...........................................    0.8423
  Wayne, NC
2985  Grand Forks, ND-MN......................................    0.8774
  Polk, MN
  Grand Forks, ND
2995  Grand Junction, CO......................................    0.8947
  Mesa, CO
3000  Grand Rapids-Muskegon-Holland, MI.......................    1.0070
  Allegan, MI
  Kent, MI
  Muskegon, MI
  Ottawa, MI

[[Page 41400]]

 
3040  Great Falls, MT.........................................    0.9065
  Cascade, MT
3060  Greeley, CO.............................................    0.9664
  Weld, CO
3080  Green Bay, WI...........................................    0.9207
  Brown, WI
3120  Greensboro-Winston-Salem-High Point, NC.................    0.9068
  Alamance, NC
  Davidson, NC
  Davie, NC
  Forsyth, NC
  Guilford, NC
  Randolph, NC
  Stokes, NC
  Yadkin, NC
3150  Greenville, NC..........................................    0.9402
  Pitt, NC
3160  Greenville-Spartanburg-Anderson, SC.....................    0.8894
  Anderson, SC
  Cherokee, SC
  Greenville, SC
  Pickens, SC
  Spartanburg, SC
3180  Hagerstown, MD..........................................    0.9409
  Washington, MD
3200  Hamilton-Middletown, OH.................................    0.9061
  Butler, OH
3240  Harrisburg-Lebanon-Carlisle, PA.........................    0.9338
  Cumberland, PA
  Dauphin, PA
  Lebanon, PA
  Perry, PA
3283  Hartford, CT............................................    1.1236
  Hartford, CT
  Litchfield, CT
  Middlesex, CT
  Tolland, CT
3285  Hattiesburg, MS.........................................    0.7490
  Forrest, MS
  Lamar, MS
3290  Hickory-Morganton-Lenoir, NC............................    0.9008
  Alexander, NC
  Burke, NC
  Caldwell, NC
  Catawba, NC
3320  Honolulu, HI............................................    1.1865
  Honolulu, HI
3350  Houma, LA...............................................    0.8100
  Lafourche, LA
  Terrebonne, LA
3360  Houston, TX.............................................    0.9663
  Chambers, TX
  Fort Bend, TX
  Harris, TX
  Liberty, TX
  Montgomery, TX
  Waller, TX
3400  Huntington-Ashland, WV-KY-OH............................    0.9876
  Boyd, KY
  Carter, KY
  Greenup, KY
  Lawrence, OH
  Cabell, WV
  Wayne, WV
3440  Huntsville, AL..........................................    0.8932
  Limestone, AL
  Madison, AL
3480  Indianapolis, IN........................................    0.9747
  Boone, IN
  Hamilton, IN
  Hancock, IN
  Hendricks, IN
  Johnson, IN
  Madison, IN
  Marion, IN
  Morgan, IN
  Shelby, IN
3500  Iowa City, IA...........................................    0.9537
  Johnson, IA
3520  Jackson, MI.............................................    0.9134
  Jackson, MI
3560  Jackson, MS.............................................    0.8749
  Hinds, MS
  Madison, MS
  Rankin, MS
3580  Jackson, TN.............................................    0.8796
  Chester, TN
  Madison, TN
3600  Jacksonville, FL........................................    0.9186
  Clay, FL
  Duval, FL
  Nassau, FL
  St. Johns, FL
3605  Jacksonville, NC........................................    0.7777
  Onslow, NC
3610  Jamestown, NY...........................................    0.7818
  Chautaqua, NY
3620  Janesville-Beloit, WI...................................    0.9587
  Rock, WI
3640  Jersey City, NJ.........................................    1.1440
  Hudson, NJ
3660  Johnson City-Kingsport-Bristol, TN-VA...................    0.8272
  Carter, TN
  Hawkins, TN
  Sullivan, TN
  Unicoi, TN
  Washington, TN
  Bristol City, VA
  Scott, VA
  Washington, VA
3680  Johnstown, PA...........................................    0.8767
  Cambria, PA
  Somerset, PA
3700  Jonesboro, AR...........................................    0.7831
  Craighead, AR
3710  Joplin, MO..............................................    0.8148
  Jasper, MO
  Newton, MO
3720  Kalmazoo-Battlecreek, MI................................    1.0440
  Calhoun, MI
  Kalamazoo, MI
  Van Buren, MI
3740  Kankakee, IL............................................    0.9902
  Kankakee, IL
3760  Kansas City, KS-MO......................................    0.9458
  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.............................................    0.9611
  Kenosha, WI
3810  Killeen-Temple, TX......................................    1.0164
  Bell, TX
  Coryell, TX
3840  Knoxville, TN...........................................    0.8221
  Anderson, TN
  Blount, TN
  Knox, TN
  Loudon, TN
  Sevier, TN
  Union, TN
3850  Kokomo, IN..............................................    0.9518
  Howard, IN
  Tipton, IN
3870  La Crosse, WI-MN........................................    0.9197
  Houston, MN
  La Crosse, WI
3880  Lafayette, LA...........................................    0.8390
  Acadia, LA
  Lafayette, LA
  St. Landry, LA
  St. Martin, LA
3920  Lafayette, IN...........................................    0.8834
  Clinton, IN
  Tippecanoe, IN
3960  Lake Charles, LA........................................    0.7399
  Calcasieu, LA
3980  Lakeland-Winter Haven, FL...............................    0.9239
  Polk, FL
4000  Lancaster, PA...........................................    0.9247
  Lancaster, PA
4040  Lansing-East Lansing, MI................................    0.9880
  Clinton, MI
  Eaton, MI
  Ingham, MI
4080  Laredo, TX..............................................    0.8168
  Webb, TX
4100  Las Cruces, NM..........................................    0.8639
  Dona Ana, NM
4120  Las Vegas, NV-AZ........................................    1.0796
  Mohave, AZ
  Clark, NV
  Nye, NV
4150  Lawrence, KS............................................    0.8190
  Douglas, KS
4200  Lawton, OK..............................................    0.8996
  Comanche, OK
4243  Lewiston-Auburn, ME.....................................    0.9003
  Androscoggin, ME
4280  Lexington, KY...........................................    0.8774
  Bourbon, KY
  Clark, KY
  Fayette, KY
  Jessamine, KY
  Madison, KY
  Scott, KY
  Woodford, KY
4320  Lima, OH................................................    0.9320
  Allen, OH
  Auglaize, OH
4360  Lincoln, NE.............................................    0.9619
  Lancaster, NE
4400  Little Rock-North Little, AR............................    0.8908
  Faulkner, AR
  Lonoke, AR
  Pulaski, AR
  Saline, AR

[[Page 41401]]

 
4420  Longview-Marshall, TX...................................    0.8922
  Gregg, TX
  Harrison, TX
  Upshur, TX
4480  Los Angeles-Long Beach, CA..............................    1.1984
  Los Angeles, CA
4520  Louisville, KY-IN.......................................    0.9261
  Clark, IN
  Floyd, IN
  Harrison, IN
  Scott, IN
  Bullitt, KY
  Jefferson, KY
  Oldham, KY
4600  Lubbock, TX.............................................    0.8848
  Lubbock, TX
4640  Lynchburg, VA...........................................    0.8851
  Amherst, VA
  Bedford City, VA
  Bedford, VA
  Campbell, VA
  Lynchburg City, VA
4680  Macon, GA...............................................    0.8848
  Bibb, GA
  Houston, GA
  Jones, GA
  Peach, GA
  Twiggs, GA
4720  Madison, WI.............................................    1.0316
  Dane, WI
4800  Mansfield, OH...........................................    0.8690
  Crawford, OH
  Richland, OH
4840  Mayaguez, PR............................................    0.4577
  Anasco, PR
  Cabo Rojo, PR
  Hormigueros, PR
  Mayaguez, PR
  Sabana Grande, PR
  San German, PR
4880  McAllen-Edinburg-Mission, TX............................    0.8566
  Hidalgo, TX
4890  Medford-Ashland, OR.....................................    1.0344
  Jackson, OR
4900  Melbourne-Titusville-Palm Bay, FL.......................    0.9688
  Brevard, FL
4920  Memphis, TN-AR-MS.......................................    0.8688
  Crittenden, AR
  De Soto, MS
  Fayette, TN
  Shelby, TN
  Tipton, TN
4940  Merced, CA..............................................    0.9559
  Merced, CA
5000  Miami, FL...............................................    1.0110
  Dade, FL
5015  Middlesex-Somerset-Hunterdon, NJ........................    1.0987
  Hunterdon, NJ
  Middlesex, NJ
  Somerset, NJ
5080  Milwaukee-Waukesha, WI..................................    0.9664
  Milwaukee, WI
  Ozaukee, WI
  Washington, WI
  Waukesha, WI
5120  Minneapolis-St. Paul, MN-WI.............................    1.0971
  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
5140  Missoula, MT............................................    0.9274
  Missoula, MT
5160  Mobile, AL..............................................    0.8006
  Baldwin, AL
  Mobile, AL
5170  Modesto, CA.............................................    1.0401
  Stanislaus, CA
5190  Monmouth-Ocean, NJ......................................    1.1293
  Monmouth, NJ
  Ocean, NJ
5200  Monroe, LA..............................................    0.8316
  Ouachita, LA
5240  Montgomery, AL..........................................    0.7642
  Autauga, AL
  Elmore, AL
  Montgomery, AL
5280  Muncie, IN..............................................    1.0683
  Delaware, IN
5330  Myrtle Beach, SC........................................    0.8440
  Horry, SC
5345  Naples, FL..............................................    0.9661
  Collier, FL
5360  Nashville, TN...........................................    0.9327
  Cheatham, TN
  Davidson, TN
  Dickson, TN
  Robertson, TN
  Rutherford, TN
  Sumner, TN
  Williamson, TN
  Wilson, TN
5380  Nassau-Suffolk, NY......................................    1.3784
  Nassau, NY
  Suffolk, NY
5483  New Haven-Bridgeport-Stamford-Waterbury-Danbury, CT.....    1.2192
  Fairfield, CT
  New Haven, CT
5523  New London-Norwich, CT..................................    1.2061
  New London, CT
5560  New Orleans, LA.........................................    0.9235
  Jefferson, LA
  Orleans, LA
  Plaquemines, LA
  St. Bernard, LA
  St. Charles, LA
  St. James, LA
  St. John The Baptist, LA
  St. Tammany, LA
5600  New York, NY............................................    1.4483
  Bronx, NY
  Kings, NY
  New York, NY
  Putnam, NY
  Queens, NY
  Richmond, NY
  Rockland, NY
  Westchester, NY
5640  Newark, NJ..............................................    1.1828
  Essex, NJ
  Morris, NJ
  Sussex, NJ
  Union, NJ
  Warren, NJ
5660  Newburgh, NY-PA.........................................    1.0847
  Orange, NY
  Pike, PA
5720  Norfolk-Virginia Beach-Newport News, VA-NC..............    0.8374
  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.............................................    1.5029
  Alameda, CA
  Contra Costa, CA
5790  Ocala, FL...............................................    0.9243
  Marion, FL
5800  Odessa-Midland, TX......................................    0.9206
  Ector, TX
  Midland, TX
5880  Oklahoma City, OK.......................................    0.8774
  Canadian, OK
  Cleveland, OK
  Logan, OK
  McClain, OK
  Oklahoma, OK
  Pottawatomie, OK
5910  Olympia, WA.............................................    1.0689
  Thurston, WA
5920  Omaha, NE-IA............................................    0.9470
  Pottawattamie, IA
  Cass, NE
  Douglas, NE
  Sarpy, NE
  Washington, NE
5945  Orange County, CA.......................................    1.1453
  Orange, CA
5960  Orlando, FL.............................................    0.9550
  Lake, FL
  Orange, FL
  Osceola, FL
  Seminole, FL
5990  Owensboro, KY...........................................    0.8159
  Daviess, KY
6015  Panama City, FL.........................................    0.9010
  Bay, FL
6020  Parkersburg-Marietta, WV-OH.............................    0.8258
  Washington, OH
  Wood, WV
6080  Pensacola, FL...........................................    0.8176
  Escambia, FL

[[Page 41402]]

 
  Santa Rosa, FL
6120  Peoria-Pekin, IL........................................    0.8494
  Peoria, IL
  Tazewell, IL
  Woodford, IL
6160  Philadelphia, PA-NJ.....................................    1.0753
  Burlington, NJ
  Camden, NJ
  Gloucester, NJ
  Salem, NJ
  Bucks, PA
  Chester, PA
  Delaware, PA
  Montgomery, PA
  Philadelphia, PA
6200  Phoenix-Mesa, AZ........................................    0.9628
  Maricopa, AZ
  Pinal, AZ
6240  Pine Bluff, AR..........................................    0.7771
  Jefferson, AR
6280  Pittsburgh, PA..........................................    0.9570
  Allegheny, PA
  Beaver, PA
  Butler, PA
  Fayette, PA
  Washington, PA
  Westmoreland, PA
6323  Pittsfield, MA..........................................    1.0130
  Berkshire, MA
6340  Pocatello, ID...........................................    0.9076
  Bannock, ID
6360  Ponce, PR...............................................    0.4993
  Guayanilla, PR
  Juana Diaz, PR
  Penuelas, PR
  Ponce, PR
  Villalba, PR
  Yauco, PR
6403  Portland, ME............................................    0.9687
  Cumberland, ME
  Sagadahoc, ME
  York, ME
6440  Portland-Vancouver, OR-WA...............................    1.0913
  Clackamas, OR
  Columbia, OR
  Multnomah, OR
  Washington, OR
  Yamhill, OR
  Clark, WA
6483  Providence-Warwick-Pawtucket, RI........................    1.0771
  Bristol, RI
  Kent, RI
  Newport, RI
  Providence, RI
  Washington, RI
6520  Provo-Orem, UT..........................................    1.0014
  Utah, UT
6560  Pueblo, CO..............................................    0.8783
  Pueblo, CO
6580  Punta Gorda, FL.........................................    0.9602
  Charlotte, FL
6600  Racine, WI..............................................    0.9231
  Racine, WI
6640  Raleigh-Durham-Chapel Hill, NC..........................    0.9583
  Chatham, NC
  Durham, NC
  Franklin, NC
  Johnston, NC
  Orange, NC
  Wake, NC
6660  Rapid City, SD..........................................    0.8779
  Pennington, SD
6680  Reading, PA.............................................    0.9105
  Berks, PA
6690  Redding, CA.............................................    1.1641
  Shasta, CA
6720  Reno, NV................................................    1.0550
  Washoe, NV
6740  Richland-Kennewick-Pasco, WA............................    1.1460
  Benton, WA
  Franklin, WA
6760  Richmond-Petersburg, VA.................................    0.9618
  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............................    1.1229
  Riverside, CA
  San Bernardino, CA
6800  Roanoke, VA.............................................    0.8663
  Botetourt, VA
  Roanoke, VA
  Roanoke City, VA
  Salem City, VA
6820  Rochester, MN...........................................    1.1334
  Olmsted, MN
6840  Rochester, NY...........................................    0.8991
  Genesee, NY
  Livingston, NY
  Monroe, NY
  Ontario, NY
  Orleans, NY
  Wayne, NY
6880  Rockford, IL............................................    0.8819
  Boone, IL
  Ogle, IL
  Winnebago, IL
6895  Rocky Mount, NC.........................................    0.8849
  Edgecombe, NC
  Nash, NC
6920  Sacramento, CA..........................................    1.1932
  El Dorado, CA
  Placer, CA
  Sacramento, CA
6960  Saginaw-Bay City-Midland, MI............................    0.9557
  Bay, MI
  Midland, MI
  Saginaw, MI
6980  St. Cloud, MN...........................................    0.9994
  Benton, MN
  Stearns, MN
7000  St. Joseph, MO..........................................    0.9071
  Andrews, MO
  Buchanan, MO
7040  St. Louis, MO-IL........................................    0.8947
  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
  Sullivan City, MO
7080  Salem, OR...............................................    1.0189
  Marion, OR
  Polk, OR
7120  Salinas, CA.............................................    1.4518
  Monterey, CA
7160  Salt Lake City-Ogden, UT................................    0.9782
  Davis, UT
  Salt Lake, UT
  Weber, UT
7200  San Angelo, TX..........................................    0.8083
  Tom Green, TX
7240  San Antonio, TX.........................................    0.8540
  Bexar, TX
  Comal, TX
  Guadalupe, TX
  Wilson, TX
7320  San Diego, CA...........................................    1.1784
  San Diego, CA
7360  San Francisco, CA.......................................    1.4250
  Marin, CA
  San Francisco, CA
  San Mateo, CA
7400  San Jose, CA............................................    1.3759
  Santa Clara, CA
7440  San Juan-Bayamon, PR....................................    0.4651
  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
  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..............    1.0673

[[Page 41403]]

 
  San Luis Obispo, CA
7480  Santa Barbara-Santa Maria-Lompoc, CA....................    1.0580
  Santa Barbara, CA
7485  Santa Cruz-Watsonville, CA..............................    1.4040
  Santa Cruz, CA
7490  Santa Fe, NM............................................    1.0538
  Los Alamos, NM
  Santa Fe, NM
7500  Santa Rosa, CA..........................................    1.2649
  Sonoma, CA
7510  Sarasota-Bradenton, FL..................................    0.9809
  Manatee, FL
  Sarasota, FL
7520  Savannah, GA............................................    0.9601
  Bryan, GA
  Chatham, GA
  Effingham, GA
7560  Scranton--Wilkes-Barre--Hazleton, PA....................    0.8401
  Columbia, PA
  Lackawanna, PA
  Luzerne, PA
  Wyoming, PA
7600  Seattle-Bellevue-Everett, WA............................    1.0985
  Island, WA
  King, WA
  Snohomish, WA
7610  Sharon, PA..............................................    0.7900
  Mercer, PA
7620  Sheboygan, WI...........................................    0.8379
  Sheboygan, WI
7640  Sherman-Denison, TX.....................................    0.8694
  Grayson, TX
7680  Shreveport-Bossier City, LA.............................    0.8705
  Bossier, LA
  Caddo, LA
  Webster, LA
7720  Sioux City, IA-NE.......................................    0.8471
  Woodbury, IA
  Dakota, NE
7760  Sioux Falls, SD.........................................    0.8790
  Lincoln, SD
  Minnehaha, SD
7800  South Bend, IN..........................................    0.9848
  St. Joseph, IN
7840  Spokane, WA.............................................    1.0496
  Spokane, WA
7880  Springfield, IL.........................................    0.8656
  Menard, IL
  Sangamon, IL
7920  Springfield, MO.........................................    0.8484
  Christian, MO
  Greene, MO
  Webster, MO
8003  Springfield, MA.........................................    1.0485
  Hampden, MA
  Hampshire, MA
8050  State College, PA.......................................    0.9022
  Centre, PA
8080  Steubenville-Weirton, OH-WV.............................    0.8548
  Jefferson, OH
  Brooke, WV
  Hancock, WV
8120  Stockton-Lodi, CA.......................................    1.0606
  San Joaquin, CA
8140  Sumter, SC..............................................    0.8271
  Sumter, SC
8160  Syracuse, NY............................................    0.9378
  Cayuga, NY
  Madison, NY
  Onondaga, NY
  Oswego, NY
8200  Tacoma, WA..............................................    1.1553
  Pierce, WA
8240  Tallahassee, FL.........................................    0.8482
  Gadsden, FL
  Leon, FL
8280  Tampa-St. Petersburg-Clearwater, FL.....................    0.8960
  Hernando, FL
  Hillsborough, FL
  Pasco, FL
  Pinellas, FL
8320  Terre Haute, IN.........................................    0.8268
  Clay, IN
  Vermillion, IN
  Vigo, IN
8360  Texarkana, AR-Texarkana, TX.............................    0.8341
  Miller, AR
  Bowie, TX
8400  Toledo, OH..............................................    0.9742
  Fulton, OH
  Lucas, OH
  Wood, OH
8440  Topeka, KS..............................................    0.9051
  Shawnee, KS
8480  Trenton, NJ.............................................    1.0113
  Mercer, NJ
8520  Tucson, AZ..............................................    0.8785
  Pima, AZ
8560  Tulsa, OK...............................................    0.8480
  Creek, OK
  Osage, OK
  Rogers, OK
  Tulsa, OK
  Wagoner, OK
8600  Tuscaloosa, AL..........................................    0.8064
  Tuscaloosa, AL
8640  Tyler, TX...............................................    0.9340
  Smith, TX
8680  Utica-Rome, NY..........................................    0.8547
  Herkimer, NY
  Oneida, NY
8720  Vallejo-Fairfield-Napa, CA..............................    1.2849
  Napa, CA
  Solano, CA
8735  Ventura, CA.............................................    1.1040
  Ventura, CA
8750  Victoria, TX............................................    0.8154
  Victoria, TX
8760  Vineland-Millville-Bridgeton, NJ........................    1.0501
  Cumberland, NJ
8780  Visalia-Tulare-Porterville, CA..........................    0.9551
  Tulare, CA
8800  Waco, TX................................................    0.8253
  McLennan, TX
8840  Washington, DC-MD-VA-WV.................................    1.0711
  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................................    0.8404
  Black Hawk, IA
8940  Wausau, WI..............................................    0.9418
  Marathon, WI
8960  West Palm Beach-Boca Raton, FL..........................    0.9699
  Palm Beach, FL
9000  Wheeling, OH-WV.........................................    0.7665
  Belmont, OH
  Marshall, WV
  Ohio, WV
9040  Wichita, KS.............................................    0.9502
  Butler, KS
  Harvey, KS
  Sedgwick, KS
9080  Wichita Falls, TX.......................................    0.7647
  Archer, TX
  Wichita, TX
9140  Williamsport, PA........................................    0.8332
  Lycoming, PA
9160  Wilmington-Newark, DE-MD................................
  New Castle, DE                                                  1.0826
  Cecil, MD
9200  Wilmington, NC..........................................    0.9394
  New Hanover, NC
  Brunswick, NC
9260  Yakima, WA..............................................    0.9876
  Yakima, WA
9270  Yolo, CA................................................    1.0199
  Yolo, CA
9280  York, PA................................................    0.9196
  York, PA
9320  Youngstown-Warren, OH...................................    0.9477
  Columbiana, OH
  Mahoning, OH
  Trumbull, OH
9340  Yuba City, CA...........................................    1.0706
  Sutter, CA
  Yuba, CA
9360  Yuma, AZ................................................    0.9529
  Yuma, AZ
------------------------------------------------------------------------


                  Table 3B.--Wage Index for Rural Areas
------------------------------------------------------------------------
                                                                  Wage
                         Nonurban area                            index
------------------------------------------------------------------------
Alabama.......................................................    0.7483

[[Page 41404]]

 
Alaska........................................................    1.2380
Arizona.......................................................    0.8309
Arkansas......................................................    0.7444
California....................................................    0.9857
Colorado......................................................    0.8967
Connecticut...................................................    1.1715
Delaware......................................................    0.9058
Florida.......................................................    0.8918
Georgia.......................................................    0.8326
Guam..........................................................  ........
Hawaii........................................................    1.1053
Idaho.........................................................    0.8650
Illinois......................................................    0.8152
Indiana.......................................................    0.8602
Iowa..........................................................    0.8000
Kansas........................................................    0.7574
Kentucky......................................................    0.7921
Louisiana.....................................................    0.7655
Maine.........................................................    0.8736
Maryland......................................................    0.8651
Massachusetts.................................................    1.1205
Michigan......................................................    0.8969
Minnesota.....................................................    0.8864
Mississippi...................................................    0.7481
Missouri......................................................    0.7693
Montana.......................................................    0.8679
Nebraska......................................................    0.8055
Nevada........................................................    0.9228
New Hampshire.................................................    0.9741
New Jersey \1\................................................  ........
New Mexico....................................................    0.8495
New York......................................................    0.8472
North Carolina................................................    0.8437
North Dakota..................................................    0.7676
Ohio..........................................................    0.8663
Oklahoma......................................................    0.7484
Oregon........................................................    1.0124
Pennsylvania..................................................    0.8535
Puerto Rico...................................................    0.4264
Rhode Island \1\..............................................  ........
South Carolina................................................    0.8369
South Dakota..................................................    0.7550
Tennessee.....................................................    0.7836
Texas.........................................................    0.7490
Utah..........................................................    0.9029
Vermont.......................................................    0.9266
Virginia......................................................    0.8181
Virgin Islands................................................  ........
Washington....................................................    1.0422
West Virginia.................................................    0.8206
Wisconsin.....................................................    0.8865
Wyoming.......................................................   0.8805
------------------------------------------------------------------------
\1\ All counties within the State are classified urban.

Appendix A--Technical Discussion of Cases and Providers Used in 
RAND Analysis

    This Appendix explains the methodology used to create the data 
files used to develop the final IRF prospective payment system. A 
general description of the process to create this data file is 
contained in section III.B. of this final rule. RAND has performed the 
following analysis to match FIM data (that is, collectively, patient 
assessment data from the Uniform Data System for medical rehabilitation 
(UDSmr) (1996 through 1999); the Caredata Data System (COS) for medical 
rehabilitation (1996 and 1997); and the HealthSouth Corporation (HS) 
(1998 and 1999)) and our Medicare data files.
    Table A shows that, for 1996 through 1999, the MedPAR files had 
over 12 million records per year. We are interested in a subset of 
these records: Cases paid by Medicare as rehabilitation stays that were 
excluded from the acute care hospital prospective payment system.

             Table A.--Number of MedPAR Cases and Facilities
------------------------------------------------------------------------
                                                 Number of    Number of
                 Calendar year                     cases      facilities
------------------------------------------------------------------------
1996..........................................   12,231,275        6,339
1997..........................................   12,263,463        6,257
1998..........................................   12,266,445        6,235
1999..........................................   12,073,949        6,223
------------------------------------------------------------------------

    Table B shows total 1996 through 1999 rehabilitation stays by type 
of provider (freestanding rehabilitation facility versus excluded unit 
of an acute care hospital). This was the ``sampling'' frame. In order 
to describe the IRF prospective payment system case-mix, RAND attached 
information from FIM instruments to each record in this frame, thereby 
obtaining ``complete'' records. To the extent that RAND was unable to 
add information to some records, it was important to know both how to 
and whether to weight the complete records so they would be 
representative of the 1996 through 1999 rehabilitation stays in the 
``sampling'' frames.

                         Table B.--Number of Rehabilitation MedPAR Cases and Facilities
----------------------------------------------------------------------------------------------------------------
                                                     Number of       Number of     Total  number   Total  number
     Calendar year                Type                 cases        facilities       of cases     of  facilities
----------------------------------------------------------------------------------------------------------------
1996..................  Excluded Unit...........         229,193             877         344,126           1,081
                        Freestanding............         114,933             204  ..............  ..............
1997..................  Excluded Unit...........         240,491             911         359,032           1,123
                        Freestanding............         118,541             212  ..............  ..............
1998..................  Excluded Unit...........         248,015             941         370,352           1,155
                        Freestanding............         122,337             214  ..............  ..............
1999..................  Excluded Unit...........         260,745             961         390,048           1,165
                        Freestanding............         129,303             204  ..............  ..............
----------------------------------------------------------------------------------------------------------------
Note: Freestanding facilities have characters 3-6 of the Medicare provider number in the range 3025-3099.
  Patients receiving rehabilitation care in excluded units of acute care hospitals have a ``provider code'' of T
  in their MedPAR records.

    Table C shows the number of facilities and the number of FIM 
records for calendar years 1996 through 1999. Our sources for 1996 and 
1997 were UDSmr and COS. For 1998 and 1999, we used UDSmr data and data 
from Caredata's principal client, HealthSouth Corporation. (Caredata 
ceased to exist prior to our getting its 1998 and 1999 data.) Our 
tables combine data from the different sources to preserve 
confidentiality.

         Table C.--Number of FIM Records and Facilities, by Year
------------------------------------------------------------------------
                                             Number of       Number of
   Calendar year           Sources            Records      Facilities *
------------------------------------------------------------------------
1996..............  UDSmr/COS...........         269,547             692
1997..............  UDSmr/COS...........         326,265             759
1998..............  UDSmr/HS............         343,004             751

[[Page 41405]]

 
1999..............  UDSmr/HS............         381,453            766
------------------------------------------------------------------------
* For the discussion that follows, consider facilities as distinct
  entities within a FIM source. We adjust our counts later for possible
  overlap and double counting.

Matching MedPAR and FIM Facilities

    The first step in the matching process is to link MedPAR facilities 
to FIM facilities. For each of these combinations, RAND counted the 
number of exact matches of MedPAR and FIM records based on admission 
date, discharge date, and zip code. Table D summarizes the results of 
this stage of the linking process. The number of facilities represented 
in our FIM data sets is slightly more than half of all IRFs.

                         Table D.--Numbers of FIM Facilities Linked to MedPAR Facilities
----------------------------------------------------------------------------------------------------------------
                                                  MedPAR  unique      MedPAR          MedPAR
     Calendar year               Sources                 a          multiple b      nonmatch c         Total
----------------------------------------------------------------------------------------------------------------
1996..................  UDSmr/COS...............             568              18             106             692
1997..................  UDSmr/COS...............             625              33             101             759
1998..................  UDSmr/HS................             730              19               2             751
1999..................  UDSmr/HS................             729              35               2            766
----------------------------------------------------------------------------------------------------------------
a FIM IRFs that appear to have a single MedPAR provider.
b FIM IRFs that appear to have more than one MedPAR provider.
c FIM IRFs that did not link to our Medicare files. The large drop between 1997 and 1998 is because SNF and long-
  term care hospital data were excluded from our 1998/1999 request.

    The FIM data do not contain the Medicare beneficiary identifier 
and, therefore, it was necessary to use a probabilistic matching 
algorithm based on characteristics of the beneficiary and the 
hospitalization. The matching was accomplished in a series of four 
steps:
    (1) Identify match variables;
    (2) Recode certain FIM variables to be consistent with MedPAR, 
create additional records for UDSmr interrupted stays, and eliminate 
duplicate cases;
    (3) Run a match algorithm to link FIM and MedPAR records; and
    (4) Choose a single MedPAR case if it matches multiple UDSmr or COS 
cases.

Step 1: Identify Match Variables

    A further search for matches only within the provider number and 
facility identifier pairings was performed. An attempt was made to 
match all MedPAR records to a FIM record for all facilities.
    For MedPAR, in addition to facility identity, six variables were 
used to link the records: admission date, discharge date, zip code, age 
at admission, sex, and race. For FIM, the same information in a 
slightly recoded form was available (for example, birth date). An 
indicator of whether Medicare was the primary payer was used to 
determine how to set certain parameters for the matching algorithm.

Step 2: Create/Delete FIM Records

    COS and HS coded interrupted stays in a manner similar to Medicare: 
one record per rehabilitation discharge episode. Therefore, these 
records did not require any additional processing. However, UDSmr codes 
multiple stays via a series of ``transfer/return'' dates on a single 
UDSmr record. To facilitate matching UDSmr and MedPAR records, multiple 
records for interrupted stays were created with admission and discharge 
dates corresponding to the beginning and ending of each stay. The 
additional records were then given the same chance of matching MedPAR 
records as any noninterrupted stay.
    For UDSmr, COS, and HS files, there were some duplicate cases that 
had to be eliminated.
    Table E shows the number of records present at the various stages 
of processing. The last column shows the number of cases that would be 
matched to MedPAR.

                         Table E.--Number of FIM Records At Various Stages of Processing
----------------------------------------------------------------------------------------------------------------
                                                                                 Number of records
                                                                 -----------------------------------------------
         Calendar year                       Source                                                    After
                                                                     Original          After         duplicate
                                                                                     expansion      elimination
----------------------------------------------------------------------------------------------------------------
1996..........................  UDSmr/COS.......................         269,547         276,554         275,378
1997..........................  UDSmr/COS.......................         326,265         334,794         333,370
1998..........................  UDSmr/HS........................         343,004         352,602         352,469
1999..........................  UDSmr/HS........................         381,453         391,820         391,627
----------------------------------------------------------------------------------------------------------------

Step 3: Match Discharges from MedPAR and FIM Facilities

    A match algorithm similar to the one used in Carter, Relles, et al. 
(1997) was run assuming that links are imperfect--any variable can be 
in error. A scoring function was developed, based on Bayes' Theorem, 
which gives the odds of a match based on how consistent variables tend 
to be for true matching and nonmatching cases.
    The scoring function selects pairs with the greatest likelihood of 
being correct matches. A cutoff under which

[[Page 41406]]

scores below are considered ``nonmatches'' and scores above are 
considered ``matches'' is chosen empirically. We sorted the pairings by 
score, and examined candidate matches as a function of this score. We 
wanted a conservative criterion--agreement between two ``matched'' 
records not likely to be resulting from chance. We noticed that cases 
in the 3.2 range and above appeared to be the same: race and sex 
agreeing, mild disagreement between usually at most one of the other 
match variables (admission date, discharge date, age, and zip code). We 
also looked at additional variables not employed in the matching 
process. For cases above the 3.2 threshold, a FIM variable tended to 
indicate that Medicare was the ``primary payer,'' and the Medicare 
provider code tended to be ``T'' in acute care hospitals; both were 
less likely below 3.2. Thus, we chose 3.2 as our cutoff.

Step 4: Choose a Single MedPAR Case for Multiple FIM Matches

    While the matching was unique within a facility/provider pair, some 
MedPAR providers were paired with different facilities, as shown in 
Table F. Also, some UDSmr and COS/HS facilities were the same: 6 
overlaps in 1996, 7 in 1997, 26 in 1998, and 1 in 1999.

       Table F.--MedPAR Facilities Paired With Multiple Facilities
------------------------------------------------------------------------
                                                              Number of
        Calendar year                    Sources              Facilities
------------------------------------------------------------------------
1996........................  UDSmr........................            5
                              COS..........................            5
1997........................  UDSmr........................            8
                              COS..........................           10
1998........................  UDSmr........................           10
                              HS...........................            0
1999........................  UDSmr........................           18
                              HS...........................            0
------------------------------------------------------------------------

    Each nonunique pairing had the potential of creating multiple 
matches to a single MedPAR record. We eliminated these matches in two 
steps. First, working within each UDSmr, COS, and HS file, we 
eliminated MedPAR duplicate links, keeping the match with the highest 
score. Then we checked for duplicate links between UDSmr and the 
corresponding COS/HS files within the same year, again keeping the 
match with the highest score. Table G provides results for cutoff score 
3.2, as discussed in Step 3.

                         Table G.--Number of Linked Records After Duplicates Elimination
----------------------------------------------------------------------------------------------------------------
                                                                                 Number of records
                                                                 -----------------------------------------------
         Calendar year                       Sources                                Duplicates        Overlap
                                                                  Total  records  eliminated \1\  eliminated \2\
----------------------------------------------------------------------------------------------------------------
1996..........................  UDSmr/COS.......................         191,173         190,480         188,889
1997..........................  UDSmr/COS.......................         227,696         226,411         222,682
1998..........................  UDSmr/HS........................         252,662         247,296         246,450
1999..........................  UDSmr/HS........................         281,230         273,772        273,548
----------------------------------------------------------------------------------------------------------------
\1\ Multiple pairings can link the same MedPAR record to more than one FIM case. This step eliminates those
  multiple links, keeping the link with the highest match score.
\2\ The same MedPAR provider might show up in both UDSmr and COS, again allowing the same MedPAR record to match
  more than one FIM case.

Quality of the Match

    There are two aspects to evaluating the quality of the match. The 
first is whether we actually matched all of the cases. To evaluate 
this, we computed match rates for each of our populations: FIM and 
MedPAR, by year. The second aspect is the representativeness of the 
match for the entire population. To evaluate this, we compared patient 
and facility characteristics to both linked and full population, and 
considered whether some form of weighting would make those populations 
look sufficiently the same.

Match Rates

    Table H suggests overall match rates in these FIM facilities for 
the eligible population in the IRF prospective payment system to be 
almost 90 percent. This was slightly higher than expected--the Carter, 
Relles, et al. (1997) match rates were about 86 percent.

                        Table H.--MedPAR Match Rates, Providers With a Full Year of Data
----------------------------------------------------------------------------------------------------------------
                                                                                                      Percent
         Calendar year                       Sources               MedPAR cases    Matched cases      matched
----------------------------------------------------------------------------------------------------------------
1996..........................  UDSmr/COS.......................         162,659         142,410            87.6
1997..........................  UDSmr/COS.......................         212,581         190,069            89.4
1998..........................  UDSmr/HS........................         234,623         208,769            89.0
1999..........................  UDSmr/HS........................         263,785         237,568           90.1
----------------------------------------------------------------------------------------------------------------
Note: Tabulations are for patients eligible for IRF prospective payment system.

    The FIM files contain many cases not paid by Medicare, but the 
files provide an indication of whether Medicare is the primary payer. 
Accordingly, restricting our attention to Medicare cases, we obtain the 
percentages shown in Table I.

[[Page 41407]]



                           Table I.--FIM Match Rates for Medicare as the Primary Payer
----------------------------------------------------------------------------------------------------------------
                                                                                                      Percent
         Calendar year                       Sources                 FIM cases     Matched cases      matched
----------------------------------------------------------------------------------------------------------------
1996..........................  UDSmr/COS.......................         188,892         180,783            95.7
1997..........................  UDSmr/COS.......................         223,351         213,053            95.4
1998..........................  UDSmr/HS........................         246,727         235,261            95.4
1999..........................  UDSmr/HS........................         273,303         261,969           95.9
----------------------------------------------------------------------------------------------------------------
Note: FIM cases matching any Medicare case.

    These match rates are also slightly higher than reported in Carter 
and Relles (1997), where a 93.7 percent rate was achieved for 1994 
UDSmr data. We consider these match rates to be acceptable, within the 
limitations of information available.

Representativeness of Linked MedPAR

    For analytical purposes, lack of representativeness is most 
important for characteristics that are related to outcomes we are 
trying to model. For example, if costs for treating a patient in 
freestanding facilities differed from costs in excluded units of acute 
care hospitals, we would consider re-weighting the sample of linked 
cases to adjust our total cost estimates.
    Tables J through N present an analysis of the characteristics of 
the facilities and cases in the matched sample described in the 
previous tables. The data in Tables J through N are the latest data 
available for the purposes of constructing a data file used to develop 
the IRF prospective payment system in this final rule.

Representativeness of Linked MedPAR Hospital Characteristics

    This section addresses the extent to which the facilities present 
in the FIM file are representative of the set of all facilities that 
provide inpatient rehabilitation care to Medicare beneficiaries, and 
the extent to which FIM patients are representative of all Medicare 
eligible patients under the IRF prospective payment system. This 
analysis reflects the effects of the partial-year sample available for 
some FIM facilities as well as the sampling of MedPAR facilities. The 
MedPAR records contain data from over 1,000 IRFs in each year. Table J 
divides these facilities into freestanding rehabilitation facilities 
(freestanding rehabilitation) and excluded rehabilitation units of 
acute care hospitals (excluded units). It presents the number of 
facilities in the linked MedPAR sample, along with the total MedPAR 
counts of rehabilitation patients at these facilities.

               Table J.--Comparison of Number of FIM and MedPAR Rehabilitation Facilities, by Type
----------------------------------------------------------------------------------------------------------------
                                             Number of facilities            Number of rehabilitation patients
                                   -----------------------------------------------------------------------------
      Year        Type of facility                  Total                                  Total
                                      FIM \a\     MedPAR \b\  Percent FIM    FIM \a\     MedPAR \b\  Percent FIM
----------------------------------------------------------------------------------------------------------------
1996...........  Freestanding               130          204           64       86,301      114,933           75
                  rehabilitation.
                 Excluded unit....          435          877           50      130,623      229,193           57
                ------------------------------------------------------------------------------------------------
                   Total..........          565        1,081           42      216,924      344,126           63
----------------------------------------------------------------------------------------------------------------
1997...........  Freestanding               142          212           67       94,327      118,541           80
                  rehabilitation.
                 Excluded unit....          489          911           54      150,787      240,491           63
                ------------------------------------------------------------------------------------------------
                   Total..........          631        1,123           56      245,114      359,032           68
----------------------------------------------------------------------------------------------------------------
1998...........  Freestanding               171          214           80      111,503      122,337           91
                  rehabilitation.
                 Excluded unit....          515          941           55      157,483      248,015           63
                ------------------------------------------------------------------------------------------------
                   Total..........          686        1,155           59      268,986      370,352           73
----------------------------------------------------------------------------------------------------------------
1999...........  Freestanding               170          204           83      120,284      129,303           93
                  rehabilitation.
                 Excluded unit....          554          961           58      171,886      260,745           66
                ------------------------------------------------------------------------------------------------
                   Total..........          724        1,165           62      292,170      390,048          75
----------------------------------------------------------------------------------------------------------------
\a\ Hospitals with at least one linked MedPAR/ FIM rehabilitation record.
\b\ Total (matched and unmatched) rehabilitation cases.

    As shown in Table J, for 1999, FIM facilities represented 62 
percent of the facilities, but served almost 75 percent of all MedPAR 
IRF cases. Based on data found in the table, in 1999, FIM freestanding 
facilities had an average of 708 patients, 442 more than other-MedPAR 
freestanding facilities; and FIM excluded units had an average of 310 
patients, 92 more than other-MedPAR excluded units.
    Table K shows the distribution of FIM IRFs by size. This shows both 
that freestanding facilities are larger than excluded units and that 
FIM IRFs tend to be larger than other MedPAR facilities within type of 
facility.

[[Page 41408]]



                                     Table K.--Comparison of Sizes of FIM and MedPAR Facilities, by Type of Facility
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Freestanding              Excluded unit             Freestanding              Excluded unit
                                                 -------------------------------------------------------------------------------------------------------
           Number of MedPAR  patients                             Other                     Other                     Other                     Other
                                                      FIM         MedPAR        FIM         MedPAR        FIM         MedPAR        FIM         MedPAR
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          1996
                                                                         1997
                                                 -------------------------------------------------------------------------------------------------------
1-100...........................................            2           23           30           97            4           24           33          105
101-200.........................................           14            9          139          140           14            7          143          126
201-300.........................................           14            2          105          102           11            5          123          103
301-400.........................................           14           10           59           48           17            9           65           40
401-500.........................................            8            8           38           27           12            7           52           29
501-1000........................................           56           16           58           26           59           15           67           18
1001-2000.......................................           20            6            6            2           24            3            6            1
2001-3000.......................................            1            0            0            0            0            0            0            0
3001-4000.......................................            1            0            0            0            1            0            0            0
                                                 -------------------------------------------------------------------------------------------------------
      Total.....................................          130           74          435          442          142           70          489          422
                                                 -------------------------------------------------------------------------------------------------------
                                                                          1998
                                                                         1999
                                                 -------------------------------------------------------------------------------------------------------
1-100...........................................            6           19           50          115            3           13           57          100
101-200.........................................           14            9          136          125           10            9          148          115
201-300.........................................           11            5          130           82           12            5          130           85
301-400.........................................           18            2           78           52           15            1           79           63
401-500.........................................           17            2           51           28           20            1           66           26
501-1000........................................           80            3           60           24           76            2           62           17
1001-2000.......................................           24            3           10            0           33            3           12            1
2001-3000.......................................            0            0            0            0            0            0            0            0
3001-4000.......................................            1            0            0            0            1            0            0            0
                                                 -------------------------------------------------------------------------------------------------------
      Total.....................................          171           43          515          426          170           34          554          407
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table L shows the percentage of cases in FIM facilities in each 
State.

                            Table L.--Number and Percentage of MedPAR Rehabilitation Cases for FIM Sample Hospitals, by State
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          MedPAR rehabilitation cases           Percent of cases in FIM hospital sample
                              State                              ---------------------------------------------------------------------------------------
                                                                     1996       1997       1998       1999       1996       1997       1998       1999
--------------------------------------------------------------------------------------------------------------------------------------------------------
AL..............................................................      7,839      8,654      8,855      8,667         91         96         79         81
AK..............................................................        247        302        280        301         55         51         56         55
AR..............................................................      6,581      6,973      8,349      9,626         43         48         63         65
AZ..............................................................      3,672      4,084      4,436      5,244         62         57         63         67
CA..............................................................     15,294     15,559     15,579     16,936         53         51         56         58
CO..............................................................      4,757      4,263      4,035      3,946         27         65         33         69
CT..............................................................      2,217      2,290      1,901      1,989         69         88         90         89
DC..............................................................      1,097        996      1,076      1,167         12         10          8         20
DE..............................................................      1,399      1,361      1,375      1,628         76         72         70         66
FL..............................................................     23,021     23,630     24,058     24,741         74         79         91         90
GA..............................................................      9,615     10,716     10,874     11,062         64         65         66         68
HI..............................................................      1,087      1,016        831        696        100        100        100        100
IA..............................................................      1,264      1,404      1,324      1,579        100        100         98        100
ID..............................................................      1,829      1,807      1,782      1,903         97         98         97         97
IL..............................................................     14,953     14,894     14,720     16,111         54         62         60         62
IN..............................................................      8,943      8,884      9,301      9,683         60         60         83         86
KS..............................................................      3,224      3,333      3,647      4,074         27         24         64         72
KY..............................................................      5,198      5,201      5,653      6,489         74         79         86         80
LA..............................................................      9,206     10,061     10,292     11,079         36         50         68         67
MA..............................................................      8,765      8,631      8,973      9,582         52         67         77         78
MD..............................................................        867        715        767        782         77         80         80         86
ME..............................................................      1,255      1,460      1,629      1,873         10         72         79         80
MI..............................................................     16,523     17,255     18,157     18,797         82         82         80         81
MN..............................................................      2,048      2,112      2,508      2,594         54         74         49         49
MO..............................................................      9,788     10,513     10,677     11,009         34         42         58         62
MS..............................................................      1,968      2,021      2,050      2,442         86         86         85         83
MT..............................................................        878        766        652        681        100        100        100        100
NC..............................................................      7,123      8,771      9,588      9,912         89         88         97         98
ND..............................................................      1,821      1,636      1,627      1,697         86         83         73         71
NE..............................................................      1,195      1,107      1,143      1,083         92         91         89         88
NH..............................................................      2,310      2,505      2,435      2,375         57         58         77         75
NJ..............................................................     11,234     11,083     11,172     11,988         89         96         93         99
NM..............................................................      1,283      1,277      1,355      1,537         28         35         40         45

[[Page 41409]]

 
NV..............................................................      2,230      2,303      2,855      3,471          0          0         52         51
NY..............................................................     21,431     22,875     25,755     26,271         37         51         58         72
OH..............................................................     11,837     13,888     13,683     13,938         76         73         75         71
OK..............................................................      6,356      6,949      7,757      8,716         51         59         58         54
OR..............................................................      1,179      1,184      1,198      1,173         70         61         74         75
PA..............................................................     36,989     35,700     34,201     35,552         63         69         71         73
RI..............................................................      2,247      2,307      1,771      1,460         61         66        100        100
SC..............................................................      4,536      4,878      5,691      6,182         83         86         83         82
SD..............................................................      2,096      2,101      2,031      2,071         80         81         79         78
TN..............................................................     10,731     11,917     12,317     12,744         71         71         72         76
TX..............................................................     33,619     36,616     38,871     40,387         58         62         70         72
UT..............................................................        858        984      1,044      1,673         43         62         57         65
VA..............................................................      6,738      7,235      7,544      7,671         73         78         70         73
VT..............................................................        603        567        582        691         74         73         68         75
WA..............................................................      3,753      3,608      3,598      3,918         99         99         99         91
WI..............................................................      6,591      6,690      6,468      6,643         87         93         89         89
WV..............................................................      3,497      3,574      3,467      3,899        100         99         99        100
WY..............................................................        334        376        418        315         31         75         23         49
                                                                 ---------------------------------------------------------------------------------------
      Total.....................................................    344,126    359,032    370,352    390,048         63         68         73         75
--------------------------------------------------------------------------------------------------------------------------------------------------------

Representativeness of Patient and Stay Characteristics

    Table M compares demographic characteristics of all Medicare 
rehabilitation patients with the matched FIM sample. Of all the 
characteristics examined, the FIM sample of discharges appears very 
similar.

              Table M.--Patient Characteristics for MedPAR Rehabilitation Inpatients, by FIM Status
----------------------------------------------------------------------------------------------------------------
                                                         Other       Total                   Other       Total
         Patient characteristic               FIM       MedPAR      MedPAR        FIM       MedPAR      MedPAR
----------------------------------------------------------------------------------------------------------------
                                                         1996
                                                         1997
                                         -----------------------------------------------------------------------
Sample Size.............................     171,626     172,500     344,126     206,032     153,000     359,032
Average Age.............................        75.4        75.6        75.5        75.4        75.6        75.5
Age 0-50................................        2.6%        2.8%        2.7%        2.8%        3.0%        2.8%
Age 51-60...............................        3.1%        3.1%        3.1%        3.2%        3.2%        3.2%
Age 61-70...............................       20.1%       19.3%       19.7%       19.5%       18.9%       19.2%
Age 71-80...............................       44.2%       42.8%       43.5%       43.9%       42.8%       43.4%
Age 81-90...............................       26.9%       28.1%       27.5%       27.4%       28.2%       27.7%
Age 91+.................................        3.2%        3.9%        3.5%        3.2%        4.0%        3.6%
Male....................................       37.9%       37.3%       37.6%       38.0%       37.6%       37.8%
White...................................       86.7%       85.8%       86.3%       86.6%       85.3%       86.1%
Black...................................        9.8%       10.6%       10.2%       10.1%       10.9%       10.4%
In-hospital death.......................        0.2%        0.6%        0.4%        0.3%        0.7%        0.4%
----------------------------------------------------------------------------------------------------------------
                                                         1998
                                                         1999
----------------------------------------------------------------------------------------------------------------
Sample Size.............................     232,691     137,661     370,352     257,024     133,024     390,048
Average Age.............................        75.5        75.7        75.6        75.8        76.0        75.9
Age 0-50................................        2.8%        2.9%        2.8%        2.8%        2.8%        2.8%
Age 51-60...............................        3.4%        3.5%        3.5%        3.5%        3.5%        3.5%
Age 61-70...............................       18.9%       18.4%       18.7%       18.1%       17.8%       18.0%
Age 71-80...............................       43.6%       42.1%       43.0%       42.8%       41.5%       42.3%
Age 81-90...............................       27.8%       28.8%       28.2%       28.9%       29.9%       29.2%
Age 91+.................................        3.6%        4.2%        3.8%        3.9%        4.5%        4.1%
Male....................................       37.9%       37.3%       37.7%       37.6%       37.2%       37.4%
White...................................       86.5%       84.8%       85.9%       86.6%       84.8%       86.0%
Black...................................       10.1%       10.8%       10.4%        9.8%       10.8%       10.2%
In-hospital death.......................        0.3%        0.6%        0.4%        0.3%        0.7%        0.4%
----------------------------------------------------------------------------------------------------------------

    Table N compares resources used for linked FIM stays with those for 
other Medicare rehabilitation patients. Average length of stay for FIM 
cases is the same as for non-FIM patients in 1996 and 1997, but is 
higher for FIM patients in 1998 and 1999. For cases in freestanding 
hospitals, FIM stays consume fewer resources in the first half of the 
data period, but not in the second half. During this time, the FIM 
database grew from 75 percent to 93 percent of all freestanding cases.

[[Page 41410]]



           Table N.--Comparison of Resource Use for Medicare Rehabilitation Inpatients, by FIM Status
----------------------------------------------------------------------------------------------------------------
                                                         All hospitals                Freestanding hospitals
                           Hospitalization     -----------------------------------------------------------------
         Year               characteristic                   Other      Total                 Other      Total
                                                   FIM       MedPAR     MedPAR      FIM       MedPAR     MedPAR
----------------------------------------------------------------------------------------------------------------
1996.................  Sample size............    171,626    172,500    344,126     65,349     49,584    114,933
                       Length of stay (days)..       16.2       16.2       16.2       18.0       18.9       18.4
                       Daily therapy charges..       $360       $351       $355       $360       $387       $371
                       Total therapy charges..     $5,960     $5,829     $5,894     $6,652     $7,605     $7,063
                       Total charges..........    $18,013    $18,790    $18,403    $19,443    $21,214    $20,207
1997.................  Sample size............    206,032    153,000    359,032     82,393     36,148    118,541
                       Length of stay (days)..       15.7       15.7       15.7       17.8       19.2       18.2
                       Daily therapy charges..       $379       $368       $374       $384       $406       $391
                       Total therapy charges..     $6,064     $5,924     $6,004     $7,002     $8,064     $7,325
                       Total charges..........    $18,348    $19,287    $18,748    $20,202    $22,541    $20,915
1998.................  Sample size............    232,691    137,661    370,352     96,262     26,075    122,337
                       Length of stay (days)..       15.8       14.6       15.3       18.2       17.1       18.0
                       Daily therapy charges..       $396       $383       $391       $398       $414       $402
                       Total therapy charges..     $6,361     $5,676     $6,106     $7,458     $7,285     $7,421
                       Total charges..........    $19,230    $19,090    $19,178    $21,129    $21,558    $21,220
1999.................  Sample size............    257,024    133,024    390,048    108,290     21,013    129,303
                       Length of stay (days)..       15.4       14.0       14.9       17.8       16.1       17.5
                       Daily therapy charges..       $425       $409       $419       $428       $436       $430
                       Total therapy charges..     $6,621     $5,843     $6,355     $7,789     $7,231     $7,698
                       Total charges..........    $20,000    $19,359    $19,781    $21,821    $21,449   $21,761
----------------------------------------------------------------------------------------------------------------
Note: FIM case totals count matched cases; hence, they differ from the total in Table J, which counts matched
  and unmatched cases.


BILLING CODE 4120-01-P

[[Page 41411]]

Appendix B--CMS Inpatient Rehabilitation Facility Patient 
Assessment Instrument
[GRAPHIC] [TIFF OMITTED] TR07AU01.000


[[Page 41412]]


[GRAPHIC] [TIFF OMITTED] TR07AU01.001


[[Page 41413]]


[GRAPHIC] [TIFF OMITTED] TR07AU01.002

BILLING CODE 4120-01-C

[[Page 41414]]



                                        Appendix C--List of Comorbidities
----------------------------------------------------------------------------------------------------------------
                                                                                                        Excluded
          ICD-9-CM code                 Abbreviated code title        Tier 1 **  Tier 2 **  Tier 3 **   RIC ***
----------------------------------------------------------------------------------------------------------------
112.4...........................  CANDIDIASIS OF LUNG...............          1          0          0         15
112.5...........................  DISSEMINATED CANDIDIASIS..........          1          0          0  .........
112.81..........................  CANDIDAL ENDOCARDITIS.............          1          0          0         14
112.83..........................  CANDIDAL MENINGITIS...............          1          0          0     03, 05
112.84..........................  CANDIDAL ESOPHAGITIS..............          1          0          0  .........
235.1...........................  UNC BEHAV NEO ORAL/PHAR...........          1          0          0  .........
260.............................  KWASHIORKOR.......................          1          0          0
261.............................  NUTRITIONAL MARASMUS..............          1          0          0  .........
262.............................  OTH SEVERE MALNUTRITION...........          1          0          0  .........
478.30..........................  VOCAL CORD PARALYSIS NOS..........          1          0          0         15
478.31..........................  VOCAL PARAL UNILAT PART...........          1          0          0         15
478.32..........................  VOCAL PARAL UNILAT TOTAL..........          1          0          0         15
478.33..........................  VOCAL PARAL BILAT PART............          1          0          0         15
478.34..........................  VOCAL PARAL BILAT TOTAL...........          1          0          0         15
478.6...........................  EDEMA OF LARYNX...................          1          0          0         15
579.3...........................  INTEST POSTOP NONABSORB...........          1          0          0  .........
933.1...........................  FOREIGN BODY IN LARYNX............          1          0          0         15
934.1...........................  FOREIGN BODY BRONCHUS.............          1          0          0         15
V440............................  TRACHEOSTOMY STATUS...............          1          0          0         15
V461............................  DEPENDENCE ON RESPIRATOR..........          1          0          0         15
008.42..........................  PSEUDOMONAS ENTERITIS.............          0          1          0  .........
008.45..........................  INT INF CLSTRDIUM DFCILE..........          0          1          0  .........
011.............................  PULMONARY TUBERCULOSIS *..........          0          1          0         15
011.0...........................  TB OF LUNG, INFILTRATIVE *........          0          1          0         15
011.00..........................  TB LUNG INFILTR-UNSPEC............          0          1          0         15
011.01..........................  TB LUNG INFILTR-NO EXAM...........          0          1          0         15
011.02..........................  TB LUNG INFILTR-EXM UNKN..........          0          1          0         15
011.03..........................  TB LUNG INFILTR-MICRO DX..........          0          1          0         15
011.04..........................  TB LUNG INFILTR-CULT DX...........          0          1          0         15
011.05..........................  TB LUNG INFILTR-HISTO DX..........          0          1          0         15
011.06..........................  TB LUNG INFILTR-OTH TEST..........          0          1          0         15
011.1...........................  TB OF LUNG, NODULAR *.............          0          1          0         15
011.10..........................  TB LUNG NODULAR-UNSPEC............          0          1          0         15
011.11..........................  TB LUNG NODULAR-NO EXAM...........          0          1          0         15
011.12..........................  TB LUNG NODUL-EXAM UNKN...........          0          1          0         15
011.13..........................  TB LUNG NODULAR-MICRO DX..........          0          1          0         15
011.14..........................  TB LUNG NODULAR-CULT DX...........          0          1          0         15
011.15..........................  TB LUNG NODULAR-HISTO DX..........          0          1          0         15
011.16..........................  TB LUNG NODULAR-OTH TEST..........          0          1          0         15
011.2...........................  TB OF LUNG W CAVITATION *.........          0          1          0         15
011.20..........................  TB LUNG W CAVITY-UNSPEC...........          0          1          0         15
011.21..........................  TB LUNG W CAVITY-NO EXAM..........          0          1          0         15
011.22..........................  TB LUNG CAVITY-EXAM UNKN..........          0          1          0         15
011.23..........................  TB LUNG W CAVIT-MICRO DX..........          0          1          0         15
011.24..........................  TB LUNG W CAVITY-CULT DX..........          0          1          0         15
011.25..........................  TB LUNG W CAVIT-HISTO DX..........          0          1          0         15
011.26..........................  TB LUNG W CAVIT-OTH TEST..........          0          1          0         15
011.3...........................  TUBERCULOSIS OF BRONCHUS *........          0          1          0         15
011.30..........................  TB OF BRONCHUS-UNSPEC.............          0          1          0         15
011.31..........................  TB OF BRONCHUS-NO EXAM............          0          1          0         15
011.32..........................  TB OF BRONCHUS-EXAM UNKN..........          0          1          0         15
011.33..........................  TB OF BRONCHUS-MICRO DX...........          0          1          0         15
011.34..........................  TB OF BRONCHUS-CULT DX............          0          1          0         15
011.35..........................  TB OF BRONCHUS-HISTO DX...........          0          1          0         15
011.36..........................  TB OF BRONCHUS-OTH TEST...........          0          1          0         15
011.4...........................  TB FIBROSIS OF LUNG *.............          0          1          0         15
011.40..........................  TB LUNG FIBROSIS-UNSPEC...........          0          1          0         15
011.41..........................  TB LUNG FIBROSIS-NO EXAM..........          0          1          0         15
011.42..........................  TB LUNG FIBROS-EXAM UNKN..........          0          1          0         15
011.43..........................  TB LUNG FIBROS-MICRO DX...........          0          1          0         15
011.44..........................  TB LUNG FIBROSIS-CULT DX..........          0          1          0         15
011.45..........................  TB LUNG FIBROS-HISTO DX...........          0          1          0         15
011.46..........................  TB LUNG FIBROS-OTH TEST...........          0          1          0         15
011.5...........................  TB BRONCHIECTASIS *...............          0          1          0         15
011.50..........................  TB BRONCHIECTASIS-UNSPEC..........          0          1          0         15
011.51..........................  TB BRONCHIECT-NO EXAM.............          0          1          0         15
011.52..........................  TB BRONCHIECT-EXAM UNKN...........          0          1          0         15
011.53..........................  TB BRONCHIECT-MICRO DX............          0          1          0         15
011.54..........................  TB BRONCHIECT-CULT DX.............          0          1          0         15
011.55..........................  TB BRONCHIECT-HISTO DX............          0          1          0         15
011.56..........................  TB BRONCHIECT-OTH TEST............          0          1          0         15

[[Page 41415]]

 
011.6...........................  TUBERCULOUS PNEUMONIA *...........          0          1          0         15
011.60..........................  TB PNEUMONIA-UNSPEC...............          0          1          0         15
011.61..........................  TB PNEUMONIA-NO EXAM..............          0          1          0         15
011.62..........................  TB PNEUMONIA-EXAM UNKN............          0          1          0         15
011.63..........................  TB PNEUMONIA-MICRO DX.............          0          1          0         15
011.64..........................  TB PNEUMONIA-CULT DX..............          0          1          0         15
011.65..........................  TB PNEUMONIA-HISTO DX.............          0          1          0         15
011.66..........................  TB PNEUMONIA-OTH TEST.............          0          1          0         15
011.7...........................  TUBERCULOUS PNEUMOTHORAX *........          0          1          0         15
011.70..........................  TB PNEUMOTHORAX-UNSPEC............          0          1          0         15
011.71..........................  TB PNEUMOTHORAX-NO EXAM...........          0          1          0         15
011.72..........................  TB PNEUMOTHORX-EXAM UNKN..........          0          1          0         15
011.73..........................  TB PNEUMOTHORAX-MICRO DX..........          0          1          0         15
011.74..........................  TB PNEUMOTHORAX-CULT DX...........          0          1          0         15
011.75..........................  TB PNEUMOTHORAX-HISTO DX..........          0          1          0         15
011.76..........................  TB PNEUMOTHORAX-OTH TEST..........          0          1          0         15
011.8...........................  PULMONARY TB NEC *................          0          1          0         15
011.80..........................  PULMONARY TB NEC-UNSPEC...........          0          1          0         15
011.81..........................  PULMONARY TB NEC-NO EXAM..........          0          1          0         15
011.82..........................  PULMON TB NEC-EXAM UNKN...........          0          1          0         15
011.83..........................  PULMON TB NEC-MICRO DX............          0          1          0         15
011.84..........................  PULMON TB NEC-CULT DX.............          0          1          0         15
011.85..........................  PULMON TB NEC-HISTO DX............          0          1          0         15
011.86..........................  PULMON TB NEC-OTH TEST............          0          1          0         15
011.9...........................  PULMONARY TB NOS *................          0          1          0         15
011.90..........................  PULMONARY TB NOS-UNSPEC...........          0          1          0         15
011.91..........................  PULMONARY TB NOS-NO EXAM..........          0          1          0         15
011.92..........................  PULMON TB NOS-EXAM UNKN...........          0          1          0         15
011.93..........................  PULMON TB NOS-MICRO DX............          0          1          0         15
011.94..........................  PULMON TB NOS-CULT DX.............          0          1          0         15
011.95..........................  PULMON TB NOS-HISTO DX............          0          1          0         15
011.96..........................  PULMON TB NOS-OTH TEST............          0          1          0         15
012.............................  OTHER RESPIRATORY TB *............          0          1          0         15
012.0...........................  TUBERCULOUS PLEURISY *............          0          1          0         15
012.00..........................  TB PLEURISY-UNSPEC................          0          1          0         15
012.01..........................  TB PLEURISY-NO EXAM...............          0          1          0         15
012.02..........................  TB PLEURISY-EXAM UNKN.............          0          1          0         15
012.03..........................  TB PLEURISY-MICRO DX..............          0          1          0         15
012.04..........................  TB PLEURISY-CULT DX...............          0          1          0         15
012.05..........................  TB PLEURISY-HISTOLOG DX...........          0          1          0         15
012.06..........................  TB PLEURISY-OTH TEST..............          0          1          0         15
012.1...........................  TB THORACIC LYMPH NODES *.........          0          1          0         15
012.10..........................  TB THORACIC NODES-UNSPEC..........          0          1          0         15
012.11..........................  TB THORAX NODE-NO EXAM............          0          1          0         15
012.12..........................  TB THORAX NODE-EXAM UNKN..........          0          1          0         15
012.13..........................  TB THORAX NODE-MICRO DX...........          0          1          0         15
012.14..........................  TB THORAX NODE-CULT DX............          0          1          0         15
012.15..........................  TB THORAX NODE-HISTO DX...........          0          1          0         15
012.16..........................  TB THORAX NODE-OTH TEST...........          0          1          0         15
012.2...........................  ISOLATED TRACH/BRONCH TB *........          0          1          0         15
012.20..........................  ISOL TRACHEAL TB-UNSPEC...........          0          1          0         15
012.21..........................  ISOL TRACHEAL TB-NO EXAM..........          0          1          0         15
012.22..........................  ISOL TRACH TB-EXAM UNKN...........          0          1          0         15
012.23..........................  ISOLAT TRACH TB-MICRO DX..........          0          1          0         15
012.24..........................  ISOL TRACHEAL TB-CULT DX..........          0          1          0         15
012.25..........................  ISOLAT TRACH TB-HISTO DX..........          0          1          0         15
012.26..........................  ISOLAT TRACH TB-OTH TEST..........          0          1          0         15
012.3...........................  TUBERCULOUS LARYNGITIS *..........          0          1          0         15
012.30..........................  TB LARYNGITIS-UNSPEC..............          0          1          0         15
012.31..........................  TB LARYNGITIS-NO EXAM.............          0          1          0         15
012.32..........................  TB LARYNGITIS-EXAM UNKN...........          0          1          0         15
012.33..........................  TB LARYNGITIS-MICRO DX............          0          1          0         15
012.34..........................  TB LARYNGITIS-CULT DX.............          0          1          0         15
012.35..........................  TB LARYNGITIS-HISTO DX............          0          1          0         15
012.36..........................  TB LARYNGITIS-OTH TEST............          0          1          0         15
012.8...........................  RESPIRATORY TB NEC *..............          0          1          0         15
012.80..........................  RESP TB NEC-UNSPEC................          0          1          0         15
012.81..........................  RESP TB NEC-NO EXAM...............          0          1          0         15
012.82..........................  RESP TB NEC-EXAM UNKN.............          0          1          0         15
012.83..........................  RESP TB NEC-MICRO DX..............          0          1          0         15
012.84..........................  RESP TB NEC-CULT DX...............          0          1          0         15

[[Page 41416]]

 
012.85..........................  RESP TB NEC-HISTO DX..............          0          1          0         15
012.86..........................  RESP TB NEC-OTH TEST..............          0          1          0         15
013.............................  CNS TUBERCULOSIS *................          0          1          0     03, 05
013.0...........................  TUBERCULOUS MENINGITIS *..........          0          1          0     03, 05
013.00..........................  TB MENINGITIS-UNSPEC..............          0          1          0     03, 05
013.01..........................  TB MENINGITIS-NO EXAM.............          0          1          0     03, 05
013.02..........................  TB MENINGITIS-EXAM UNKN...........          0          1          0     03, 05
013.03..........................  TB MENINGITIS-MICRO DX............          0          1          0     03, 05
013.04..........................  TB MENINGITIS-CULT DX.............          0          1          0     03, 05
013.05..........................  TB MENINGITIS-HISTO DX............          0          1          0     03, 05
013.06..........................  TB MENINGITIS-OTH TEST............          0          1          0     03, 05
013.1...........................  TUBERCULOMA OF MENINGES *.........          0          1          0     03, 05
013.10..........................  TUBRCLMA MENINGES-UNSPEC..........          0          1          0     03, 05
013.11..........................  TUBRCLMA MENING-NO EXAM...........          0          1          0     03, 05
013.12..........................  TUBRCLMA MENIN-EXAM UNKN..........          0          1          0     03, 05
013.13..........................  TUBRCLMA MENING-MICRO DX..........          0          1          0     03, 05
013.14..........................  TUBRCLMA MENING-CULT DX...........          0          1          0     03, 05
013.15..........................  TUBRCLMA MENING-HISTO DX..........          0          1          0     03, 05
013.16..........................  TUBRCLMA MENING-OTH TEST..........          0          1          0     03, 05
013.2...........................  TUBERCULOMA OF BRAIN *............          0          1          0         03
013.20..........................  TUBERCULOMA BRAIN-UNSPEC..........          0          1          0         03
013.21..........................  TUBRCLOMA BRAIN-NO EXAM...........          0          1          0         03
013.22..........................  TUBRCLMA BRAIN-EXAM UNKN..........          0          1          0         03
013.23..........................  TUBRCLOMA BRAIN-MICRO DX..........          0          1          0         03
013.24..........................  TUBRCLOMA BRAIN-CULT DX...........          0          1          0         03
013.25..........................  TUBRCLOMA BRAIN-HISTO DX..........          0          1          0         03
013.26..........................  TUBRCLOMA BRAIN-OTH TEST..........          0          1          0         03
013.3...........................  TB ABSCESS OF BRAIN *.............          0          1          0         03
013.30..........................  TB BRAIN ABSCESS-UNSPEC...........          0          1          0         03
013.31..........................  TB BRAIN ABSCESS-NO EXAM..........          0          1          0         03
013.32..........................  TB BRAIN ABSC-EXAM UNKN...........          0          1          0         03
013.33..........................  TB BRAIN ABSC-MICRO DX............          0          1          0         03
013.34..........................  TB BRAIN ABSCESS-CULT DX..........          0          1          0         03
013.35..........................  TB BRAIN ABSC-HISTO DX............          0          1          0         03
013.36..........................  TB BRAIN ABSC-OTH TEST............          0          1          0         03
013.4...........................  TUBERCULOMA SPINAL CORD *.........          0          1          0         05
013.40..........................  TUBRCLMA SP CORD-UNSPEC...........          0          1          0         05
013.41..........................  TUBRCLMA SP CORD-NO EXAM..........          0          1          0         05
013.42..........................  TUBRCLMA SP CD-EXAM UNKN..........          0          1          0         05
013.43..........................  TUBRCLMA SP CRD-MICRO DX..........          0          1          0         05
013.44..........................  TUBRCLMA SP CORD-CULT DX..........          0          1          0         05
013.45..........................  TUBRCLMA SP CRD-HISTO DX..........          0          1          0         05
013.46..........................  TUBRCLMA SP CRD-OTH TEST..........          0          1          0         05
013.5...........................  TB ABSCESS SPINAL CORD *..........          0          1          0         05
013.50..........................  TB SP CRD ABSCESS-UNSPEC..........          0          1          0         05
013.51..........................  TB SP CRD ABSC-NO EXAM............          0          1          0         05
013.52..........................  TB SP CRD ABSC-EXAM UNKN..........          0          1          0         05
013.53..........................  TB SP CRD ABSC-MICRO DX...........          0          1          0         05
013.54..........................  TB SP CRD ABSC-CULT DX............          0          1          0         05
013.55..........................  TB SP CRD ABSC-HISTO DX...........          0          1          0         05
013.56..........................  TB SP CRD ABSC-OTH TEST...........          0          1          0         05
013.6...........................  TB ENCEPHALITIS/MYELITIS *........          0          1          0         03
013.60..........................  TB ENCEPHALITIS-UNSPEC............          0          1          0         03
013.61..........................  TB ENCEPHALITIS-NO EXAM...........          0          1          0         03
013.62..........................  TB ENCEPHALIT-EXAM UNKN...........          0          1          0         03
013.63..........................  TB ENCEPHALITIS-MICRO DX..........          0          1          0         03
013.64..........................  TB ENCEPHALITIS-CULT DX...........          0          1          0         03
013.65..........................  TB ENCEPHALITIS-HISTO DX..........          0          1          0         03
013.66..........................  TB ENCEPHALITIS-OTH TEST..........          0          1          0         03
013.8...........................  CNS TUBERCULOSIS NEC *............          0          1          0     03, 05
013.80..........................  CNS TB NEC-UNSPEC.................          0          1          0     03, 05
013.81..........................  CNS TB NEC-NO EXAM................          0          1          0     03, 05
013.82..........................  CNS TB NEC-EXAM UNKN..............          0          1          0     03, 05
013.83..........................  CNS TB NEC-MICRO DX...............          0          1          0     03, 05
013.84..........................  CNS TB NEC-CULT DX................          0          1          0     03, 05
013.85..........................  CNS TB NEC-HISTO DX...............          0          1          0     03, 05
013.86..........................  CNS TB NEC-OTH TEST...............          0          1          0     03, 05
013.9...........................  CNS TUBERCULOSIS NOS *............          0          1          0     03, 05
013.90..........................  CNS TB NOS-UNSPEC.................          0          1          0     03, 05
013.91..........................  CNS TB NOS-NO EXAM................          0          1          0     03, 05
013.92..........................  CNS TB NOS-EXAM UNKN..............          0          1          0     03, 05

[[Page 41417]]

 
013.93..........................  CNS TB NOS-MICRO DX...............          0          1          0     03, 05
013.94..........................  CNS TB NOS-CULT DX................          0          1          0     03, 05
013.95..........................  CNS TB NOS-HISTO DX...............          0          1          0     03, 05
013.96..........................  CNS TB NOS-OTH TEST...............          0          1          0     03, 05
014.............................  INTESTINAL TB *...................          0          1          0  .........
014.0...........................  TUBERCULOUS PERITONITIS *.........          0          1          0  .........
014.00..........................  TB PERITONITIS-UNSPEC.............          0          1          0  .........
014.01..........................  TB PERITONITIS-NO EXAM............          0          1          0  .........
014.02..........................  TB PERITONITIS-EXAM UNKN..........          0          1          0  .........
014.03..........................  TB PERITONITIS-MICRO DX...........          0          1          0  .........
014.04..........................  TB PERITONITIS-CULT DX............          0          1          0  .........
014.05..........................  TB PERITONITIS-HISTO DX...........          0          1          0  .........
014.06..........................  TB PERITONITIS-OTH TEST...........          0          1          0  .........
014.8...........................  INTESTINAL TB NEC *...............          0          1          0  .........
014.80..........................  INTESTINAL TB NEC-UNSPEC..........          0          1          0  .........
014.81..........................  INTESTIN TB NEC-NO EXAM...........          0          1          0  .........
014.82..........................  INTEST TB NEC-EXAM UNKN...........          0          1          0  .........
014.83..........................  INTESTIN TB NEC-MICRO DX..........          0          1          0  .........
014.84..........................  INTESTIN TB NEC-CULT DX...........          0          1          0  .........
014.85..........................  INTESTIN TB NEC-HISTO DX..........          0          1          0  .........
014.86..........................  INTESTIN TB NEC-OTH TEST..........          0          1          0  .........
015.............................  TB OF BONE AND JOINT *............          0          1          0     03, 09
015.0...........................  TB OF VERTEBRAL COLUMN *..........          0          1          0     03, 09
015.00..........................  TB OF VERTEBRA-UNSPEC.............          0          1          0     03, 09
015.01..........................  TB OF VERTEBRA-NO EXAM............          0          1          0     03, 09
015.02..........................  TB OF VERTEBRA-EXAM UNKN..........          0          1          0     03, 09
015.03..........................  TB OF VERTEBRA-MICRO DX...........          0          1          0     03, 09
015.04..........................  TB OF VERTEBRA-CULT DX............          0          1          0     03, 09
015.05..........................  TB OF VERTEBRA-HISTO DX...........          0          1          0     03, 09
015.06..........................  TB OF VERTEBRA-OTH TEST...........          0          1          0     03, 09
015.1...........................  TB OF HIP *.......................          0          1          0         09
015.10..........................  TB OF HIP-UNSPEC..................          0          1          0         09
015.11..........................  TB OF HIP-NO EXAM.................          0          1          0         09
015.12..........................  TB OF HIP-EXAM UNKN...............          0          1          0         09
015.13..........................  TB OF HIP-MICRO DX................          0          1          0         09
015.14..........................  TB OF HIP-CULT DX.................          0          1          0         09
015.15..........................  TB OF HIP-HISTO DX................          0          1          0         09
015.16..........................  TB OF HIP-OTH TEST................          0          1          0         09
015.2...........................  TB OF KNEE *......................          0          1          0         09
015.20..........................  TB OF KNEE-UNSPEC.................          0          1          0         09
015.21..........................  TB OF KNEE-NO EXAM................          0          1          0         09
015.22..........................  TB OF KNEE-EXAM UNKN..............          0          1          0         09
015.23..........................  TB OF KNEE-MICRO DX...............          0          1          0         09
015.24..........................  TB OF KNEE-CULT DX................          0          1          0         09
015.25..........................  TB OF KNEE-HISTO DX...............          0          1          0         09
015.26..........................  TB OF KNEE-OTH TEST...............          0          1          0         09
015.5...........................  TB OF LIMB BONES *................          0          1          0    09, 10,
                                                                                                              11
015.50..........................  TB OF LIMB BONES-UNSPEC...........          0          1          0    09, 10,
                                                                                                              11
015.51..........................  TB LIMB BONES-NO EXAM.............          0          1          0    09, 10,
                                                                                                              11
015.52..........................  TB LIMB BONES-EXAM UNKN...........          0          1          0    09, 10,
                                                                                                              11
015.53..........................  TB LIMB BONES-MICRO DX............          0          1          0    09, 10,
                                                                                                              11
015.54..........................  TB LIMB BONES-CULT DX.............          0          1          0    09, 10,
                                                                                                              11
015.55..........................  TB LIMB BONES-HISTO DX............          0          1          0    09, 10,
                                                                                                              11
015.56..........................  TB LIMB BONES-OTH TEST............          0          1          0  .........
015.6...........................  TB OF MASTOID *...................          0          1          0  .........
015.60..........................  TB OF MASTOID-UNSPEC..............          0          1          0  .........
015.61..........................  TB OF MASTOID-NO EXAM.............          0          1          0  .........
015.62..........................  TB OF MASTOID-EXAM UNKN...........          0          1          0  .........
015.63..........................  TB OF MASTOID-MICRO DX............          0          1          0  .........
015.64..........................  TB OF MASTOID-CULT DX.............          0          1          0  .........
015.65..........................  TB OF MASTOID-HISTO DX............          0          1          0  .........
015.66..........................  TB OF MASTOID-OTH TEST............          0          1          0  .........
015.7...........................  TB OF BONE NEC *..................          0          1          0         09
015.70..........................  TB OF BONE NEC-UNSPEC.............          0          1          0         09

[[Page 41418]]

 
015.71..........................  TB OF BONE NEC-NO EXAM............          0          1          0         09
015.72..........................  TB OF BONE NEC-EXAM UNKN..........          0          1          0         09
015.73..........................  TB OF BONE NEC-MICRO DX...........          0          1          0         09
015.74..........................  TB OF BONE NEC-CULT DX............          0          1          0         09
015.75..........................  TB OF BONE NEC-HISTO DX...........          0          1          0         09
015.76..........................  TB OF BONE NEC-OTH TEST...........          0          1          0         09
015.8...........................  TB OF JOINT NEC *.................          0          1          0         09
015.80..........................  TB OF JOINT NEC-UNSPEC............          0          1          0         09
015.81..........................  TB OF JOINT NEC-NO EXAM...........          0          1          0         09
015.82..........................  TB JOINT NEC-EXAM UNKN............          0          1          0         09
015.83..........................  TB OF JOINT NEC-MICRO DX..........          0          1          0         09
015.84..........................  TB OF JOINT NEC-CULT DX...........          0          1          0         09
015.85..........................  TB OF JOINT NEC-HISTO DX..........          0          1          0         09
015.86..........................  TB OF JOINT NEC-OTH TEST..........          0          1          0         09
015.9...........................  TB OF BONE & JOINT NOS *..........          0          1          0         09
015.90..........................  TB BONE/JOINT NOS-UNSPEC..........          0          1          0         09
015.91..........................  TB BONE/JT NOS-NO EXAM............          0          1          0         09
015.92..........................  TB BONE/JT NOS-EXAM UNKN..........          0          1          0         09
015.93..........................  TB BONE/JT NOS-MICRO DX...........          0          1          0         09
015.94..........................  TB BONE/JT NOS-CULT DX............          0          1          0         09
015.95..........................  TB BONE/JT NOS-HISTO DX...........          0          1          0         09
015.96..........................  TB BONE/JT NOS-OTH TEST...........          0          1          0         09
016.............................  GENITOURINARY TB *................          0          1          0  .........
016.0...........................  TB OF KIDNEY *....................          0          1          0  .........
016.00..........................  TB OF KIDNEY-UNSPEC...............          0          1          0  .........
016.01..........................  TB OF KIDNEY-NO EXAM..............          0          1          0  .........
016.02..........................  TB OF KIDNEY-EXAM UNKN............          0          1          0  .........
016.03..........................  TB OF KIDNEY-MICRO DX.............          0          1          0  .........
016.04..........................  TB OF KIDNEY-CULT DX..............          0          1          0  .........
016.05..........................  TB OF KIDNEY-HISTO DX.............          0          1          0  .........
016.06..........................  TB OF KIDNEY-OTH TEST.............          0          1          0  .........
016.1...........................  TB OF BLADDER *...................          0          1          0  .........
016.10..........................  TB OF BLADDER-UNSPEC..............          0          1          0  .........
016.11..........................  TB OF BLADDER-NO EXAM.............          0          1          0  .........
016.12..........................  TB OF BLADDER-EXAM UNKN...........          0          1          0  .........
016.13..........................  TB OF BLADDER-MICRO DX............          0          1          0  .........
016.14..........................  TB OF BLADDER-CULT DX.............          0          1          0  .........
016.15..........................  TB OF BLADDER-HISTO DX............          0          1          0  .........
016.16..........................  TB OF BLADDER-OTH TEST............          0          1          0  .........
016.2...........................  TB OF URETER *....................          0          1          0  .........
016.20..........................  TB OF URETER-UNSPEC...............          0          1          0  .........
016.21..........................  TB OF URETER-NO EXAM..............          0          1          0  .........
016.22..........................  TB OF URETER-EXAM UNKN............          0          1          0  .........
016.23..........................  TB OF URETER-MICRO DX.............          0          1          0  .........
016.24..........................  TB OF URETER-CULT DX..............          0          1          0  .........
016.25..........................  TB OF URETER-HISTO DX.............          0          1          0  .........
016.26..........................  TB OF URETER-OTH TEST.............          0          1          0  .........
016.3...........................  TB OF URINARY ORGAN NEC *.........          0          1          0  .........
016.30..........................  TB URINARY NEC-UNSPEC.............          0          1          0  .........
016.31..........................  TB URINARY NEC-NO EXAM............          0          1          0  .........
016.32..........................  TB URINARY NEC-EXAM UNKN..........          0          1          0  .........
016.33..........................  TB URINARY NEC-MICRO DX...........          0          1          0  .........
016.34..........................  TB URINARY NEC-CULT DX............          0          1          0  .........
016.35..........................  TB URINARY NEC-HISTO DX...........          0          1          0  .........
016.36..........................  TB URINARY NEC-OTH TEST...........          0          1          0  .........
016.4...........................  TB OF EPIDIDYMIS *................          0          1          0  .........
016.40..........................  TB EPIDIDYMIS-UNSPEC..............          0          1          0  .........
016.41..........................  TB EPIDIDYMIS-NO EXAM.............          0          1          0  .........
016.42..........................  TB EPIDIDYMIS-EXAM UNKN...........          0          1          0  .........
016.43..........................  TB EPIDIDYMIS-MICRO DX............          0          1          0  .........
016.44..........................  TB EPIDIDYMIS-CULT DX.............          0          1          0  .........
016.45..........................  TB EPIDIDYMIS-HISTO DX............          0          1          0  .........
016.46..........................  TB EPIDIDYMIS-OTH TEST............          0          1          0  .........
016.5...........................  TB MALE GENITAL ORG NEC *.........          0          1          0  .........
016.50..........................  TB MALE GENIT NEC-UNSPEC..........          0          1          0  .........
016.51..........................  TB MALE GEN NEC-NO EXAM...........          0          1          0  .........
016.52..........................  TB MALE GEN NEC-EX UNKN...........          0          1          0  .........
016.53..........................  TB MALE GEN NEC-MICRO DX..........          0          1          0  .........
016.54..........................  TB MALE GEN NEC-CULT DX...........          0          1          0  .........
016.55..........................  TB MALE GEN NEC-HISTO DX..........          0          1          0  .........
016.56..........................  TB MALE GEN NEC-OTH TEST..........          0          1          0  .........

[[Page 41419]]

 
016.6...........................  TB OF OVARY AND TUBE *............          0          1          0  .........
016.60..........................  TB OVARY & TUBE-UNSPEC............          0          1          0  .........
016.61..........................  TB OVARY & TUBE-NO EXAM...........          0          1          0  .........
016.62..........................  TB OVARY/TUBE-EXAM UNKN...........          0          1          0  .........
016.63..........................  TB OVARY & TUBE-MICRO DX..........          0          1          0  .........
016.64..........................  TB OVARY & TUBE-CULT DX...........          0          1          0  .........
016.65..........................  TB OVARY & TUBE-HISTO DX..........          0          1          0  .........
016.66..........................  TB OVARY & TUBE-OTH TEST..........          0          1          0  .........
016.7...........................  TB FEMALE GENIT ORG NEC *.........          0          1          0  .........
016.70..........................  TB FEMALE GEN NEC-UNSPEC..........          0          1          0  .........
016.71..........................  TB FEM GEN NEC-NO EXAM............          0          1          0  .........
016.72..........................  TB FEM GEN NEC-EXAM UNKN..........          0          1          0  .........
016.73..........................  TB FEM GEN NEC-MICRO DX...........          0          1          0  .........
016.74..........................  TB FEM GEN NEC-CULT DX............          0          1          0  .........
016.75..........................  TB FEM GEN NEC-HISTO DX...........          0          1          0  .........
016.76..........................  TB FEM GEN NEC-OTH TEST...........          0          1          0  .........
016.9...........................  GENITOURINARY TB NOS *............          0          1          0  .........
016.90..........................  GU TB NOS-UNSPEC..................          0          1          0  .........
016.91..........................  GU TB NOS-NO EXAM.................          0          1          0  .........
016.92..........................  GU TB NOS-EXAM UNKN...............          0          1          0  .........
016.93..........................  GU TB NOS-MICRO DX................          0          1          0  .........
016.94..........................  GU TB NOS-CULT DX.................          0          1          0  .........
016.95..........................  GU TB NOS-HISTO DX................          0          1          0  .........
016.96..........................  GU TB NOS-OTH TEST................          0          1          0  .........
017.............................  TUBERCULOSIS NEC *................          0          1          0  .........
017.0...........................  TB SKIN & SUBCUTANEOUS *..........          0          1          0  .........
017.00..........................  TB SKIN/SUBCUTAN-UNSPEC...........          0          1          0  .........
017.01..........................  TB SKIN/SUBCUT-NO EXAM............          0          1          0  .........
017.02..........................  TB SKIN/SUBCUT-EXAM UNKN..........          0          1          0  .........
017.03..........................  TB SKIN/SUBCUT-MICRO DX...........          0          1          0  .........
017.04..........................  TB SKIN/SUBCUT-CULT DX............          0          1          0  .........
017.05..........................  TB SKIN/SUBCUT-HISTO DX...........          0          1          0  .........
017.06..........................  TB SKIN/SUBCUT-OTH TEST...........          0          1          0  .........
017.1...........................  ERYTHEMA NODOSUM IN TB *..........          0          1          0  .........
017.10..........................  ERYTHEMA NODOS TB-UNSPEC..........          0          1          0  .........
017.11..........................  ERYTHEM NODOS TB-NO EXAM..........          0          1          0  .........
017.12..........................  ERYTHEM NOD TB-EXAM UNKN..........          0          1          0  .........
017.13..........................  ERYTHEM NOD TB-MICRO DX...........          0          1          0  .........
017.14..........................  ERYTHEM NODOS TB-CULT DX..........          0          1          0  .........
017.15..........................  ERYTHEM NOD TB-HISTO DX...........          0          1          0  .........
017.16..........................  ERYTHEM NOD TB-OTH TEST...........          0          1          0  .........
017.2...........................  TB OF PERIPH LYMPH NODE *.........          0          1          0  .........
017.20..........................  TB PERIPH LYMPH-UNSPEC............          0          1          0  .........
017.21..........................  TB PERIPH LYMPH-NO EXAM...........          0          1          0  .........
017.22..........................  TB PERIPH LYMPH-EXAM UNK..........          0          1          0  .........
017.23..........................  TB PERIPH LYMPH-MICRO DX..........          0          1          0  .........
017.24..........................  TB PERIPH LYMPH-CULT DX...........          0          1          0  .........
017.25..........................  TB PERIPH LYMPH-HISTO DX..........          0          1          0  .........
017.26..........................  TB PERIPH LYMPH-OTH TEST..........          0          1          0  .........
017.3...........................  TB OF EYE *.......................          0          1          0  .........
017.30..........................  TB OF EYE-UNSPEC..................          0          1          0  .........
017.31..........................  TB OF EYE-NO EXAM.................          0          1          0  .........
017.32..........................  TB OF EYE-EXAM UNKN...............          0          1          0  .........
017.33..........................  TB OF EYE-MICRO DX................          0          1          0  .........
017.34..........................  TB OF EYE-CULT DX.................          0          1          0  .........
017.35..........................  TB OF EYE-HISTO DX................          0          1          0  .........
017.36..........................  TB OF EYE-OTH TEST................          0          1          0  .........
017.4...........................  TB OF EAR *.......................          0          1          0  .........
017.40..........................  TB OF EAR-UNSPEC..................          0          1          0  .........
017.41..........................  TB OF EAR-NO EXAM.................          0          1          0  .........
017.42..........................  TB OF EAR-EXAM UNKN...............          0          1          0  .........
017.43..........................  TB OF EAR-MICRO DX................          0          1          0  .........
017.44..........................  TB OF EAR-CULT DX.................          0          1          0  .........
017.45..........................  TB OF EAR-HISTO DX................          0          1          0  .........
017.46..........................  TB OF EAR-OTH TEST................          0          1          0  .........
017.5...........................  TB OF THYROID GLAND *.............          0          1          0  .........
017.50..........................  TB OF THYROID-UNSPEC..............          0          1          0  .........
017.51..........................  TB OF THYROID-NO EXAM.............          0          1          0  .........
017.52..........................  TB OF THYROID-EXAM UNKN...........          0          1          0  .........
017.53..........................  TB OF THYROID-MICRO DX............          0          1          0  .........
017.54..........................  TB OF THYROID-CULT DX.............          0          1          0  .........

[[Page 41420]]

 
017.55..........................  TB OF THYROID-HISTO DX............          0          1          0  .........
017.56..........................  TB OF THYROID-OTH TEST............          0          1          0  .........
017.6...........................  TB OF ADRENAL GLAND *.............          0          1          0  .........
017.60..........................  TB OF ADRENAL-UNSPEC..............          0          1          0  .........
017.61..........................  TB OF ADRENAL-NO EXAM.............          0          1          0  .........
017.62..........................  TB OF ADRENAL-EXAM UNKN...........          0          1          0  .........
017.63..........................  TB OF ADRENAL-MICRO DX............          0          1          0  .........
017.64..........................  TB OF ADRENAL-CULT DX.............          0          1          0  .........
017.65..........................  TB OF ADRENAL-HISTO DX............          0          1          0  .........
017.7...........................  TB OF SPLEEN *....................          0          1          0  .........
017.70..........................  TB OF SPLEEN-UNSPEC...............          0          1          0  .........
017.71..........................  TB OF SPLEEN-NO EXAM..............          0          1          0  .........
017.72..........................  TB OF SPLEEN-EXAM UNKN............          0          1          0  .........
017.73..........................  TB OF SPLEEN-MICRO DX.............          0          1          0  .........
017.74..........................  TB OF SPLEEN-CULT DX..............          0          1          0  .........
017.75..........................  TB OF SPLEEN-HISTO DX.............          0          1          0  .........
017.76..........................  TB OF SPLEEN-OTH TEST.............          0          1          0  .........
017.8...........................  TB OF ESOPHAGUS *.................          0          1          0  .........
017.80..........................  TB ESOPHAGUS-UNSPEC...............          0          1          0  .........
017.81..........................  TB ESOPHAGUS-NO EXAM..............          0          1          0  .........
017.82..........................  TB ESOPHAGUS-EXAM UNKN............          0          1          0  .........
017.83..........................  TB ESOPHAGUS-MICRO DX.............          0          1          0  .........
017.84..........................  TB ESOPHAGUS-CULT DX..............          0          1          0  .........
017.85..........................  TB ESOPHAGUS-HISTO DX.............          0          1          0  .........
017.86..........................  TB ESOPHAGUS-OTH TEST.............          0          1          0  .........
017.9...........................  TB OF ORGAN NEC *.................          0          1          0  .........
017.90..........................  TB OF ORGAN NEC-UNSPEC............          0          1          0  .........
017.91..........................  TB OF ORGAN NEC-NO EXAM...........          0          1          0  .........
017.92..........................  TB ORGAN NEC-EXAM UNKN............          0          1          0  .........
017.93..........................  TB OF ORGAN NEC-MICRO DX..........          0          1          0  .........
017.94..........................  TB OF ORGAN NEC-CULT DX...........          0          1          0  .........
017.95..........................  TB OF ORGAN NEC-HISTO DX..........          0          1          0  .........
017.96..........................  TB OF ORGAN NEC-OTH TEST..........          0          1          0  .........
018.............................  MILIARY TUBERCULOSIS *............          0          1          0  .........
018.0...........................  ACUTE MILIARY TB *................          0          1          0  .........
018.00..........................  ACUTE MILIARY TB-UNSPEC...........          0          1          0  .........
018.01..........................  ACUTE MILIARY TB-NO EXAM..........          0          1          0  .........
018.02..........................  AC MILIARY TB-EXAM UNKN...........          0          1          0  .........
018.03..........................  AC MILIARY TB-MICRO DX............          0          1          0  .........
018.04..........................  ACUTE MILIARY TB-CULT DX..........          0          1          0  .........
018.05..........................  AC MILIARY TB-HISTO DX............          0          1          0  .........
018.06..........................  AC MILIARY TB-OTH TEST............          0          1          0  .........
018.8...........................  MILIARY TB NEC *..................          0          1          0  .........
018.80..........................  MILIARY TB NEC-UNSPEC.............          0          1          0  .........
018.81..........................  MILIARY TB NEC-NO EXAM............          0          1          0  .........
018.82..........................  MILIARY TB NEC-EXAM UNKN..........          0          1          0  .........
018.83..........................  MILIARY TB NEC-MICRO DX...........          0          1          0  .........
018.84..........................  MILIARY TB NEC-CULT DX............          0          1          0  .........
018.85..........................  MILIARY TB NEC-HISTO DX...........          0          1          0  .........
018.86..........................  MILIARY TB NEC-OTH TEST...........          0          1          0  .........
018.9...........................  MILIARY TUBERCULOSIS NOS *........          0          1          0  .........
018.90..........................  MILIARY TB NOS-UNSPEC.............          0          1          0  .........
018.91..........................  MILIARY TB NOS-NO EXAM............          0          1          0  .........
018.92..........................  MILIARY TB NOS-EXAM UNKN..........          0          1          0  .........
018.93..........................  MILIARY TB NOS-MICRO DX...........          0          1          0  .........
018.94..........................  MILIARY TB NOS-CULT DX............          0          1          0  .........
018.95..........................  MILIARY TB NOS-HISTO DX...........          0          1          0  .........
018.96..........................  MILIARY TB NOS-OTH TEST...........          0          1          0  .........
027.0...........................  LISTERIOSIS.......................          0          1          0  .........
027.1...........................  ERYSIPELOTHRIX INFECTION..........          0          1          0  .........
027.2...........................  PASTEURELLOSIS....................          0          1          0  .........
027.8...........................  ZOONOTIC BACT DIS NEC.............          0          1          0  .........
027.9...........................  ZOONOTIC BACT DIS NOS.............          0          1          0  .........
036.0...........................  MENINGOCOCCAL MENINGITIS..........          0          1          0     03, 05
038.0...........................  STREPTOCOCCAL SEPTICEMIA..........          0          1          0  .........
038.1...........................  STAPHYLOCOCC SEPTICEMIA *.........          0          1          0  .........
038.10..........................  STAPHYLCOCC SEPTICEM NOS..........          0          1          0  .........
038.11..........................  STAPH AUREUS SEPTICEMIA...........          0          1          0  .........
038.19..........................  STAPHYLCOCC SEPTICEM NEC..........          0          1          0  .........
038.2...........................  PNEUMOCOCCAL SEPTICEMIA...........          0          1          0  .........
038.3...........................  ANAEROBIC SEPTICEMIA..............          0          1          0  .........

[[Page 41421]]

 
038.4...........................  GRAM-NEG SEPTICEMIA NEC *.........          0          1          0  .........
038.40..........................  GRAM-NEG SEPTICEMIA NOS...........          0          1          0  .........
038.41..........................  H. INFLUENAE SEPTICEMIA...........          0          1          0  .........
038.42..........................  E COLI SEPTICEMIA.................          0          1          0  .........
038.43..........................  PSEUDOMONAS SEPTICEMIA............          0          1          0  .........
038.44..........................  SERRATIA SEPTICEMIA...............          0          1          0  .........
038.49..........................  GRAM-NEG SEPTICEMIA NEC...........          0          1          0  .........
038.8...........................  SEPTICEMIA NEC....................          0          1          0  .........
038.9...........................  SEPTICEMIA NOS....................          0          1          0  .........
041.7...........................  PSEUDOMONAS INFECT NOS............          0          1          0  .........
042.............................  HUMAN IMMUNO VIRUS DIS............          0          1          0  .........
047.8...........................  VIRAL MENINGITIS NEC..............          0          1          0     03, 05
047.9...........................  VIRAL MENINGITIS NOS..............          0          1          0     03, 05
048.............................  OTH ENTEROVIRAL CNS DIS...........          0          1          0     03, 05
049.0...........................  LYMPHOCYTIC CHORIOMENING..........          0          1          0     03, 05
049.9...........................  VIRAL ENCEPHALITIS NOS............          0          1          0         03
052.0...........................  POSTVARICELLA ENCEPHALIT..........          0          1          0         03
053.0...........................  HERPES ZOSTER MENINGITIS..........          0          1          0     03, 05
053.13..........................  POSTHERPES POLYNEUROPATH..........          0          1          0         06
054.3...........................  HERPETIC ENCEPHALITIS.............          0          1          0         03
054.5...........................  HERPETIC SEPTICEMIA...............          0          1          0         03
054.72..........................  H SIMPLEX MENINGITIS..............          0          1          0     03, 05
055.0...........................  POSTMEASLES ENCEPHALITIS..........          0          1          0         03
072.1...........................  MUMPS MENINGITIS..................          0          1          0     03, 05
072.2...........................  MUMPS ENCEPHALITIS................          0          1          0         03
079.50..........................  RETROVIRUS-UNSPECIFIED............          0          1          0  .........
079.51..........................  HTLV-1 INFECTION OTH DIS..........          0          1          0         06
079.52..........................  HTLV-II INFECTN OTH DIS...........          0          1          0         06
079.53..........................  HIV-2 INFECTION OTH DIS...........          0          1          0  .........
079.59..........................  OTH SPECFIED RETROVIRUS...........          0          1          0  .........
090.42..........................  CONGEN SYPH MENINGITIS............          0          1          0     03, 05
094.2...........................  SYPHILITIC MENINGITIS.............          0          1          0     03, 05
098.89..........................  GONOCOCCAL INF SITE NEC...........          0          1          0  .........
114.2...........................  COCCIDIOIDAL MENINGITIS...........          0          1          0     03, 05
115.............................  HISTOPLASMOSIS *..................          0          1          0         15
115.0...........................  HISTOPLASMA CAPSULATUM *..........          0          1          0         15
115.00..........................  HISTOPLASMA CAPSULAT NOS..........          0          1          0         15
115.01..........................  HISTOPLASM CAPSUL MENING..........          0          1          0     03, 05
115.02..........................  HISTOPLASM CAPSUL RETINA..........          0          1          0  .........
115.03..........................  HISTOPLASM CAPS PERICARD..........          0          1          0         14
115.04..........................  HISTOPLASM CAPS ENDOCARD..........          0          1          0         14
115.05..........................  HISTOPLASM CAPS PNEUMON...........          0          1          0         15
115.09..........................  HISTOPLASMA CAPSULAT NEC..........          0          1          0         15
115.1...........................  HISTOPLASMA DUBOISII *............          0          1          0         15
115.10..........................  HISTOPLASMA DUBOISII NOS..........          0          1          0  .........
115.11..........................  HISTOPLASM DUBOIS MENING..........          0          1          0     03, 05
115.12..........................  HISTOPLASM DUBOIS RETINA..........          0          1          0  .........
115.13..........................  HISTOPLASM DUB PERICARD...........          0          1          0         14
115.14..........................  HISTOPLASM DUB ENDOCARD...........          0          1          0         14
115.15..........................  HISTOPLASM DUB PNEUMONIA..........          0          1          0         15
115.19..........................  HISTOPLASMA DUBOISII NEC..........          0          1          0         15
115.9...........................  HISTOPLASMOSIS UNSPEC  *..........          0          1          0         15
115.90..........................  HISTOPLASMOSIS NOS................          0          1          0         15
115.91..........................  HISTOPLASMOSIS MENINGIT...........          0          1          0     03, 05
115.92..........................  HISTOPLASMOSIS RETINITIS..........          0          1          0  .........
115.93..........................  HISTOPLASMOSIS PERICARD...........          0          1          0         14
115.94..........................  HISTOPLASMOSIS ENDOCARD...........          0          1          0         14
115.95..........................  HISTOPLASMOSIS PNEUMONIA..........          0          1          0         15
115.99..........................  HISTOPLASMOSIS NEC................          0          1          0         15
130.0...........................  TOXOPLASM MENINGOENCEPH...........          0          1          0     03, 05
139.0...........................  LATE EFF VIRAL ENCEPHAL...........          0          1          0         03
320.0...........................  HEMOPHILUS MENINGITIS.............          0          1          0     03, 05
320.1...........................  PNEUMOCOCCAL MENINGITIS...........          0          1          0     03, 05
320.2...........................  STREPTOCOCCAL MENINGITIS..........          0          1          0     03, 05
320.3...........................  STAPHYLOCOCC MENINGITIS...........          0          1          0     03, 05
320.7...........................  MENING IN OTH BACT DIS............          0          1          0     03, 05
320.81..........................  ANAEROBIC MENINGITIS..............          0          1          0     03, 05
320.82..........................  MNINGTS GRAM-NEG BCT NEC..........          0          1          0     03, 05
320.89..........................  MENINGITIS OTH SPCF BACT..........          0          1          0     03, 05
320.9...........................  BACTERIAL MENINGITIS NOS..........          0          1          0     03, 05
321.0...........................  CRYPTOCOCCAL MENINGITIS...........          0          1          0     03, 05

[[Page 41422]]

 
321.1...........................  MENING IN OTH FUNGAL DIS..........          0          1          0     03, 05
321.2...........................  MENING IN OTH VIRAL DIS...........          0          1          0     03, 05
321.3...........................  TRYPANOSOMIASIS MENINGIT..........          0          1          0     03, 05
321.4...........................  MENINGIT D/T SARCOIDOSIS..........          0          1          0     03, 05
321.8...........................  MENING IN OTH NONBAC DIS..........          0          1          0     03, 05
322.0...........................  NONPYOGENIC MENINGITIS............          0          1          0     03, 05
322.2...........................  CHRONIC MENINGITIS................          0          1          0     03, 05
322.9...........................  MENINGITIS NOS....................          0          1          0     03, 05
323.6...........................  POSTINFECT ENCEPHALITIS...........          0          1          0         03
323.8...........................  ENCEPHALITIS NEC..................          0          1          0         03
323.9...........................  ENCEPHALITIS NOS..................          0          1          0         03
356.4...........................  IDIO PROG POLYNEUROPATHY..........          0          1          0    03, 06,
                                                                                                              19
376.01..........................  ORBITAL CELLULITIS................          0          1          0  .........
438.82..........................  LATE EF CV DIS DYSPHAGIA..........          0          1          0         01
528.3...........................  CELLULITIS/ABSCESS MOUTH..........          0          1          0  .........
682.............................  OTHER CELLULITIS/ABSCESS *........          0          1          0  .........
682.0...........................  CELLULITIS OF FACE................          0          1          0  .........
682.1...........................  CELLULITIS OF NECK................          0          1          0  .........
682.2...........................  CELLULITIS OF TRUNK...............          0          1          0  .........
682.3...........................  CELLULITIS OF ARM.................          0          1          0  .........
682.4...........................  CELLULITIS OF HAND................          0          1          0  .........
682.5...........................  CELLULITIS OF BUTTOCK.............          0          1          0  .........
682.6...........................  CELLULITIS OF LEG.................          0          1          0         10
682.7...........................  CELLULITIS OF FOOT................          0          1          0         10
682.8...........................  CELLULITIS SITE NEC...............          0          1          0  .........
785.4...........................  GANGRENE..........................          0          1          0     10, 11
787.2...........................  DYSPHAGIA.........................          0          1          0         01
799.4...........................  CACHEXIA..........................          0          1          0  .........
998.5...........................  POSTOPERATIVE INFECTION *.........          0          1          0  .........
998.51..........................  INFECTED POSTOP SEROMA............          0          1          0  .........
998.59..........................  OTHER POSTOP INFECTION............          0          1          0  .........
V451............................  RENAL DIALYSIS STATUS.............          0          1          0  .........
036.2...........................  MENINGOCOCCEMIA...................          0          0          1     03, 05
036.3...........................  MENINGOCOCC ADRENAL SYND..........          0          0          1         05
036.40..........................  MENINGOCOCC CARDITIS NOS..........          0          0          1         14
036.42..........................  MENINGOCOCC ENDOCARDITIS..........          0          0          1         14
036.43..........................  MENINGOCOCC MYOCARDITIS...........          0          0          1         14
037.............................  TETANUS...........................          0          0          1         06
052.1...........................  VARICELLA PNEUMONITIS.............          0          0          1         15
054.79..........................  H SIMPLEX COMPLICAT NEC...........          0          0          1  .........
055.1...........................  POSTMEASLES PNEUMONIA.............          0          0          1         15
070.20..........................  HPT B ACTE COMA WO DLTA...........          0          0          1         03
070.21..........................  HPT B ACTE COMA W DLTA............          0          0          1         03
070.22..........................  HPT B CHRN COMA WO DLTA...........          0          0          1         03
070.23..........................  HPT B CHRN COMA W DLTA............          0          0          1         03
070.41..........................  HPT C ACUTE W HEPAT COMA..........          0          0          1         03
070.42..........................  HPT DLT WO B W HPT COMA...........          0          0          1         03
070.43..........................  HPT E W HEPAT COMA................          0          0          1         03
070.44..........................  CHRNC HPT C W HEPAT COMA..........          0          0          1         03
070.49..........................  OTH VRL HEPAT W HPT COMA..........          0          0          1         03
070.6...........................  VIRAL HEPAT NOS W COMA............          0          0          1         03
072.3...........................  MUMPS PANCREATITIS................          0          0          1  .........
093.20..........................  SYPHIL ENDOCARDITIS NOS...........          0          0          1         14
093.82..........................  SYPHILITIC MYOCARDITIS............          0          0          1         14
094.87..........................  SYPH RUPT CEREB ANEURYSM..........          0          0          1     01, 03
130.3...........................  TOXOPLASMA MYOCARDITIS............          0          0          1         14
130.4...........................  TOXOPLASMA PNEUMONITIS............          0          0          1         15
136.3...........................  PNEUMOCYSTOSIS....................          0          0          1         15
204.00..........................  ACT LYM LEUK W/O RMSION...........          0          0          1  .........
205.00..........................  ACT MYL LEUK W/O RMSION...........          0          0          1  .........
206.00..........................  ACT MONO LEUK W/O RMSION..........          0          0          1  .........
207.00..........................  ACT ERTH/ERYLK W/O RMSON..........          0          0          1  .........
208.00..........................  ACT LEUK UNS CL W/O RMSN..........          0          0          1  .........
250.40..........................  DMII RENL NT ST UNCNTRLD..........          0          0          1  .........
250.41..........................  DMI RENL NT ST UNCNTRLD...........          0          0          1  .........
250.42..........................  DMII RENAL UNCNTRLD...............          0          0          1  .........
250.43..........................  DMI RENAL UNCNTRLD................          0          0          1  .........
250.50..........................  DMII OPHTH NT ST UNCNTRL..........          0          0          1  .........
250.51..........................  DMI OPHTH NT ST UNCNTRLD..........          0          0          1  .........
250.52..........................  DMII OPHTH UNCNTRLD...............          0          0          1  .........

[[Page 41423]]

 
250.53..........................  DMI OPHTH UNCNTRLD................          0          0          1  .........
250.60..........................  DMII NEURO NT ST UNCNTRL..........          0          0          1         06
250.61..........................  DMI NEURO NT ST UNCNTRLD..........          0          0          1         06
250.62..........................  DMII NEURO UNCNTRLD...............          0          0          1         06
250.63..........................  DMI NEURO UNCNTRLD................          0          0          1         06
250.70..........................  DMII CIRC NT ST UNCNTRLD..........          0          0          1  .........
250.71..........................  DMI CIRC NT ST UNCNTRLD...........          0          0          1  .........
250.72..........................  DMII CIRC UNCNTRLD................          0          0          1  .........
250.73..........................  DMI CIRC UNCNTRLD.................          0          0          1  .........
250.80..........................  DMII OTH NT ST UNCNTRLD...........          0          0          1  .........
250.81..........................  DMI OTH NT ST UNCNTRLD............          0          0          1  .........
250.82..........................  DMII OTH UNCNTRLD.................          0          0          1  .........
250.83..........................  DMI OTH UNCNTRLD..................          0          0          1  .........
250.90..........................  DMII UNSPF NT ST UNCNTRL..........          0          0          1  .........
250.91..........................  DMI UNSPF NT ST UNCNTRLD..........          0          0          1  .........
250.92..........................  DMII UNSPF UNCNTRLD...............          0          0          1  .........
250.93..........................  DMI UNSPF UNCNTRLD................          0          0          1  .........
277.00..........................  CYSTIC FIBROS W/O ILEUS...........          0          0          1         15
277.01..........................  CYSTIC FIBROSIS W ILEUS...........          0          0          1         15
278.01..........................  MORBID OBESITY....................          0          0          1  .........
282.60..........................  SICKLE-CELL ANEMIA NOS............          0          0          1  .........
282.61..........................  HB-S DISEASE W/O CRISIS...........          0          0          1  .........
282.62..........................  HB-S DISEASE WITH CRISIS..........          0          0          1  .........
282.63..........................  SICKLE-CELL/HB-C DISEASE..........          0          0          1  .........
282.69..........................  SICKLE-CELL ANEMIA NEC............          0          0          1  .........
284.0...........................  CONGEN APLASTIC ANEMIA............          0          0          1  .........
284.8...........................  APLASTIC ANEMIAS NEC..............          0          0          1  .........
284.9...........................  APLASTIC ANEMIA NOS...............          0          0          1  .........
286.0...........................  CONG FACTOR VIII DIORD............          0          0          1  .........
286.1...........................  CONG FACTOR IX DISORDER...........          0          0          1  .........
286.6...........................  DEFIBRINATION SYNDROME............          0          0          1  .........
324.0...........................  INTRACRANIAL ABSCESS..............          0          0          1         03
324.1...........................  INTRASPINAL ABSCESS...............          0          0          1         03
324.9...........................  CNS ABSCESS NOS...................          0          0          1         03
342.00..........................  FLCCD HMIPLGA UNSPF SIDE..........          0          0          1         01
342.01..........................  FLCCD HMIPLGA DOMNT SIDE..........          0          0          1         01
342.02..........................  FLCCD HMIPLG NONDMNT SDE..........          0          0          1         01
342.10..........................  SPSTC HMIPLGA UNSPF SIDE..........          0          0          1         01
342.11..........................  SPSTC HMIPLGA DOMNT SIDE..........          0          0          1         01
342.12..........................  SPSTC HMIPLG NONDMNT SDE..........          0          0          1         01
342.80..........................  OT SP HMIPLGA UNSPF SIDE..........          0          0          1         01
342.81..........................  OT SP HMIPLGA DOMNT SIDE..........          0          0          1         01
342.82..........................  OT SP HMIPLG NONDMNT SDE..........          0          0          1         01
342.90..........................  UNSP HEMIPLGA UNSPF SIDE..........          0          0          1         01
342.91..........................  UNSP HEMIPLGA DOMNT SIDE..........          0          0          1         01
342.92..........................  UNSP HMIPLGA NONDMNT SDE..........          0          0          1         01
345.11..........................  GEN CNV EPIL W INTR EPIL..........          0          0          1     02, 03
345.3...........................  GRAND MAL STATUS..................          0          0          1     02, 03
348.1...........................  ANOXIC BRAIN DAMAGE...............          0          0          1     02, 03
357.2...........................  NEUROPATHY IN DIABETES............          0          0          1         06
376.02..........................  ORBITAL PERIOSTITIS...............          0          0          1  .........
376.03..........................  ORBITAL OSTEOMYELITIS.............          0          0          1  .........
398.0...........................  RHEUMATIC MYOCARDITIS.............          0          0          1         14
403.01..........................  MAL HYP REN W RENAL FAIL..........          0          0          1  .........
404.01..........................  MAL HYPER HRT/REN W CHF...........          0          0          1         14
404.03..........................  MAL HYP HRT/REN W CHF&RF..........          0          0          1         14
410.01..........................  AMI ANTEROLATERAL, INIT...........          0          0          1         14
410.11..........................  AMI ANTERIOR WALL, INIT...........          0          0          1         14
410.21..........................  AMI INFEROLATERAL, INIT...........          0          0          1         14
410.31..........................  AMI INFEROPOST, INITIAL...........          0          0          1         14
410.41..........................  AMI INFERIOR WALL, INIT...........          0          0          1         14
410.51..........................  AMI LATERAL NEC, INITIAL..........          0          0          1         14
410.61..........................  TRUE POST INFARCT, INIT...........          0          0          1         14
410.71..........................  SUBENDO INFARCT, INITIAL..........          0          0          1         14
410.81..........................  AMI NEC, INITIAL..................          0          0          1         14
410.91..........................  AMI NOS, INITIAL..................          0          0          1         14
415.1...........................  PULMON EMBOLISM/INFARCT*..........          0          0          1         15
415.11..........................  IATROGEN PULM EMB/INFARC..........          0          0          1         15
415.19..........................  PULM EMBOL/INFARCT NEC............          0          0          1         15
421.0...........................  AC/SUBAC BACT ENDOCARD............          0          0          1         14
421.1...........................  AC ENDOCARDIT IN OTH DIS..........          0          0          1         14

[[Page 41424]]

 
421.9...........................  AC/SUBAC ENDOCARDIT NOS...........          0          0          1         14
422.0...........................  AC MYOCARDIT IN OTH DIS...........          0          0          1         14
422.90..........................  ACUTE MYOCARDITIS NOS.............          0          0          1         14
422.91..........................  IDIOPATHIC MYOCARDITIS............          0          0          1         14
422.92..........................  SEPTIC MYOCARDITIS................          0          0          1         14
422.93..........................  TOXIC MYOCARDITIS.................          0          0          1         14
422.99..........................  ACUTE MYOCARDITIS NEC.............          0          0          1         14
427.41..........................  VENTRICULAR FIBRILLATION..........          0          0          1         14
427.5...........................  CARDIAC ARREST....................          0          0          1         14
430.............................  SUBARACHNOID HEMORRHAGE...........          0          0          1    01, 02,
                                                                                                              03
431.............................  INTRACEREBRAL HEMORRHAGE..........          0          0          1    01, 02,
                                                                                                              03
432.0...........................  NONTRAUM EXTRADURAL HEM...........          0          0          1    01, 02,
                                                                                                              03
432.1...........................  SUBDURAL HEMORRHAGE...............          0          0          1    01, 02,
                                                                                                              03
433.01..........................  OCL BSLR ART W INFRCT.............          0          0          1         01
433.11..........................  OCL CRTD ART W INFRCT.............          0          0          1         01
433.21..........................  OCL VRTB ART W INFRCT.............          0          0          1         01
433.31..........................  OCL MLT BI ART W INFRCT...........          0          0          1         01
433.81..........................  OCL SPCF ART W INFRCT.............          0          0          1         01
433.91..........................  OCL ART NOS W INFRCT..............          0          0          1         01
434.01..........................  CRBL THRMBS W INFRCT..............          0          0          1         01
434.11..........................  CRBL EMBLSM W INFRCT..............          0          0          1         01
434.91..........................  CRBL ART OCL NOS W INFRC..........          0          0          1         01
436.............................  CVA...............................          0          0          1         01
440.23..........................  ATH EXT NTV ART ULCRTION..........          0          0          1     10, 11
440.24..........................  ATH EXT NTV ART GNGRENE...........          0          0          1     10, 11
441.0...........................  DISSECTING ANEURYSM*..............          0          0          1  .........
441.00..........................  DSCT OF AORTA UNSP SITE...........          0          0          1  .........
441.01..........................  DSCT OF THORACIC AORTA............          0          0          1         05
441.02..........................  DSCT OF ABDOMINAL AORTA...........          0          0          1         05
441.03..........................  DSCT OF THORACOABD AORTA..........          0          0          1         05
441.1...........................  RUPTUR THORACIC ANEURYSM..........          0          0          1         05
441.3...........................  RUPT ABD AORTIC ANEURYSM..........          0          0          1         05
441.5...........................  RUPT AORTIC ANEURYSM NOS..........          0          0          1         05
441.6...........................  THORACOABD ANEURYSM RUPT..........          0          0          1         05
446.3...........................  LETHAL MIDLINE GRANULOMA..........          0          0          1  .........
452.............................  PORTAL VEIN THROMBOSIS............          0          0          1  .........
453.............................  OTH VENOUS THROMBOSIS*............          0          0          1  .........
453.0...........................  BUDD-CHIARI SYNDROME..............          0          0          1  .........
453.1...........................  THROMBOPHLEBITIS MIGRANS..........          0          0          1  .........
453.2...........................  VENA CAVA THROMBOSIS..............          0          0          1  .........
453.3...........................  RENAL VEIN THROMBOSIS.............          0          0          1  .........
464.11..........................  AC TRACHEITIS W OBSTRUCT..........          0          0          1         15
464.21..........................  AC LARYNGOTRACH W OBSTR...........          0          0          1         15
464.31..........................  AC EPIGLOTTITIS W OBSTR...........          0          0          1         15
466.1...........................  ACUTE BRONCHIOLITIS*..............          0          0          1         15
480.0...........................  ADENOVIRAL PNEUMONIA..............          0          0          1         15
480.1...........................  RESP SYNCYT VIRAL PNEUM...........          0          0          1         15
480.2...........................  PARINFLUENZA VIRAL PNEUM..........          0          0          1         15
480.8...........................  VIRAL PNEUMONIA NEC...............          0          0          1         15
480.9...........................  VIRAL PNEUMONIA NOS...............          0          0          1         15
481.............................  PNEUMOCOCCAL PNEUMONIA............          0          0          1         15
482.0...........................  K. PNEUMONIAE PNEUMONIA...........          0          0          1         15
482.1...........................  PSEUDOMONAL PNEUMONIA.............          0          0          1         15
482.2...........................  H.INFLUENZAE PNEUMONIA............          0          0          1         15
482.30..........................  STREPTOCOCCAL PNEUMN NOS..........          0          0          1         15
482.31..........................  PNEUMONIA STRPTOCOCCUS A..........          0          0          1         15
482.32..........................  PNEUMONIA STRPTOCOCCUS B..........          0          0          1         15
482.39..........................  PNEUMONIA OTH STREP...............          0          0          1         15
482.40..........................  STAPHYLOCOCCAL PNEU NOS...........          0          0          1         15
482.41..........................  STAPH AUREUS PNEUMONIA............          0          0          1         15
482.49..........................  STAPH PNEUMONIA NEC...............          0          0          1         15
482.8...........................  BACTERIAL PNEUMONIA NEC*..........          0          0          1         15
482.81..........................  PNEUMONIA ANAEROBES...............          0          0          1         15
482.82..........................  PNEUMONIA E COLI..................          0          0          1         15
482.83..........................  PNEUMO OTH GRM-NEG BACT...........          0          0          1         15
482.84..........................  LEGIONNAIRES' DISEASE.............          0          0          1         15
482.89..........................  PNEUMONIA OTH SPCF BACT...........          0          0          1         15

[[Page 41425]]

 
482.9...........................  BACTERIAL PNEUMONIA NOS...........          0          0          1         15
483.0...........................  PNEU MYCPLSM PNEUMONIAE...........          0          0          1         15
483.1...........................  PNEUMONIA D/T CHLAMYDIA...........          0          0          1         15
483.8...........................  PNEUMON OTH SPEC ORGNSM...........          0          0          1         15
484.1...........................  PNEUM W CYTOMEG INCL DIS..........          0          0          1         15
484.3...........................  PNEUMONIA IN WHOOP COUGH..........          0          0          1         15
484.5...........................  PNEUMONIA IN ANTHRAX..............          0          0          1         15
484.6...........................  PNEUM IN ASPERGILLOSIS............          0          0          1         15
484.7...........................  PNEUM IN OTH SYS MYCOSES..........          0          0          1         15
484.8...........................  PNEUM IN INFECT DIS NEC...........          0          0          1         15
485.............................  BRONCHOPNEUMONIA ORG NOS..........          0          0          1         15
486.............................  PNEUMONIA, ORGANISM NOS...........          0          0          1         15
487.0...........................  INFLUENZA WITH PNEUMONIA..........          0          0          1         15
506.0...........................  FUM/VAPOR BRONC/PNEUMON...........          0          0          1         15
506.1...........................  FUM/VAPOR AC PULM EDEMA...........          0          0          1         15
507.0...........................  FOOD/VOMIT PNEUMONITIS............          0          0          1         15
507.1...........................  OIL/ESSENCE PNEUMONITIS...........          0          0          1         15
507.8...........................  SOLID/LIQ PNEUMONIT NEC...........          0          0          1         15
510.0...........................  EMPYEMA WITH FISTULA..............          0          0          1         15
510.9...........................  EMPYEMA W/O FISTULA...............          0          0          1         15
511.1...........................  BACT PLEUR/EFFUS NOT TB...........          0          0          1         15
513.0...........................  ABSCESS OF LUNG...................          0          0          1         15
513.1...........................  ABSCESS OF MEDIASTINUM............          0          0          1         15
514.............................  PULM CONGEST/HYPOSTASIS...........          0          0          1         15
515.............................  POSTINFLAM PULM FIBROSIS..........          0          0          1         15
518.3...........................  PULMONARY EOSINOPHILIA............          0          0          1         15
518.5...........................  POST TRAUM PULM INSUFFIC..........          0          0          1         15
518.81..........................  ACUTE RESPIRATRY FAILURE..........          0          0          1         15
519.2...........................  MEDIASTINITIS.....................          0          0          1         15
530.0...........................  ACHALASIA & CARDIOSPASM...........          0          0          1  .........
530.3...........................  ESOPHAGEAL STRICTURE..............          0          0          1  .........
530.4...........................  PERFORATION OF ESOPHAGUS..........          0          0          1         15
530.6...........................  ACQ ESOPHAG DIVERTICULUM..........          0          0          1  .........
530.82..........................  ESOPHAGEAL HEMORRHAGE.............          0          0          1  .........
531.00..........................  AC STOMACH ULCER W HEM............          0          0          1  .........
531.01..........................  AC STOMAC ULC W HEM-OBST..........          0          0          1  .........
531.10..........................  AC STOMACH ULCER W PERF...........          0          0          1  .........
531.11..........................  AC STOM ULC W PERF-OBST...........          0          0          1  .........
531.20..........................  AC STOMAC ULC W HEM/PERF..........          0          0          1  .........
531.21..........................  AC STOM ULC HEM/PERF-OBS..........          0          0          1  .........
531.40..........................  CHR STOMACH ULC W HEM.............          0          0          1  .........
531.41..........................  CHR STOM ULC W HEM-OBSTR..........          0          0          1  .........
531.50..........................  CHR STOMACH ULCER W PERF..........          0          0          1  .........
531.51..........................  CHR STOM ULC W PERF-OBST..........          0          0          1  .........
531.60..........................  CHR STOMACH ULC HEM/PERF..........          0          0          1  .........
531.61..........................  CHR STOM ULC HEM/PERF-OB..........          0          0          1  .........
532.00..........................  AC DUODENAL ULCER W HEM...........          0          0          1  .........
532.01..........................  AC DUODEN ULC W HEM-OBST..........          0          0          1  .........
532.10..........................  AC DUODENAL ULCER W PERF..........          0          0          1  .........
532.11..........................  AC DUODEN ULC PERF-OBSTR..........          0          0          1  .........
532.20..........................  AC DUODEN ULC W HEM/PERF..........          0          0          1  .........
532.21..........................  AC DUOD ULC HEM/PERF-OBS..........          0          0          1  .........
532.40..........................  CHR DUODEN ULCER W HEM............          0          0          1  .........
532.41..........................  CHR DUODEN ULC HEM-OBSTR..........          0          0          1  .........
532.50..........................  CHR DUODEN ULCER W PERF...........          0          0          1  .........
532.51..........................  CHR DUODEN ULC PERF-OBST..........          0          0          1  .........
532.60..........................  CHR DUODEN ULC HEM/PERF...........          0          0          1  .........
532.61..........................  CHR DUOD ULC HEM/PERF-OB..........          0          0          1  .........
533.00..........................  AC PEPTIC ULCER W HEMORR..........          0          0          1  .........
533.01..........................  AC PEPTIC ULC W HEM-OBST..........          0          0          1  .........
533.10..........................  AC PEPTIC ULCER W PERFOR..........          0          0          1  .........
533.11..........................  AC PEPTIC ULC W PERF-OBS..........          0          0          1  .........
533.20..........................  AC PEPTIC ULC W HEM/PERF..........          0          0          1  .........
533.21..........................  AC PEPT ULC HEM/PERF-OBS..........          0          0          1  .........
533.40..........................  CHR PEPTIC ULCER W HEM............          0          0          1  .........
533.41..........................  CHR PEPTIC ULC W HEM-OBS..........          0          0          1  .........
533.50..........................  CHR PEPTIC ULCER W PERF...........          0          0          1  .........
533.51..........................  CHR PEPTIC ULC PERF-OBST..........          0          0          1  .........
533.60..........................  CHR PEPT ULC W HEM/PERF...........          0          0          1  .........
533.61..........................  CHR PEPT ULC HEM/PERF-OB..........          0          0          1  .........
534.00..........................  AC MARGINAL ULCER W HEM...........          0          0          1  .........

[[Page 41426]]

 
534.01..........................  AC MARGIN ULC W HEM-OBST..........          0          0          1  .........
534.10..........................  AC MARGINAL ULCER W PERF..........          0          0          1  .........
534.11..........................  AC MARGIN ULC W PERF-OBS..........          0          0          1  .........
534.20..........................  AC MARGIN ULC W HEM/PERF..........          0          0          1  .........
534.21..........................  AC MARG ULC HEM/PERF-OBS..........          0          0          1  .........
534.40..........................  CHR MARGINAL ULCER W HEM..........          0          0          1  .........
534.41..........................  CHR MARGIN ULC W HEM-OBS..........          0          0          1  .........
534.50..........................  CHR MARGINAL ULC W PERF...........          0          0          1  .........
534.51..........................  CHR MARGIN ULC PERF-OBST..........          0          0          1  .........
534.60..........................  CHR MARGIN ULC HEM/PERF...........          0          0          1  .........
534.61..........................  CHR MARG ULC HEM/PERF-OB..........          0          0          1  .........
535.01..........................  ACUTE GASTRITIS W HMRHG...........          0          0          1  .........
535.11..........................  ATRPH GASTRITIS W HMRHG...........          0          0          1  .........
535.21..........................  GSTR MCSL HYPRT W HMRG............          0          0          1  .........
535.31..........................  ALCHL GSTRITIS W HMRHG............          0          0          1  .........
535.41..........................  OTH SPF GASTRT W HMRHG............          0          0          1  .........
535.51..........................  GSTR/DDNTS NOS W HMRHG............          0          0          1  .........
535.61..........................  DUODENITIS W HMRHG................          0          0          1  .........
537.4...........................  GASTRIC/DUODENAL FISTULA..........          0          0          1  .........
537.83..........................  ANGIO STM/DUDN W HMRHG............          0          0          1  .........
540.0...........................  AC APPEND W PERITONITIS...........          0          0          1  .........
557.0...........................  AC VASC INSUFF INTESTINE..........          0          0          1  .........
562.02..........................  DVRTCLO SML INT W HMRHG...........          0          0          1  .........
562.03..........................  DVRTCLI SML INT W HMRHG...........          0          0          1  .........
562.12..........................  DVRTCLO COLON W HMRHG.............          0          0          1  .........
562.13..........................  DVRTCLI COLON W HMRHG.............          0          0          1  .........
567.0...........................  PERITONITIS IN INFEC DIS..........          0          0          1  .........
567.1...........................  PNEUMOCOCCAL PERITONITIS..........          0          0          1  .........
567.2...........................  SUPPURAT PERITONITIS NEC..........          0          0          1  .........
567.8...........................  PERITONITIS NEC...................          0          0          1  .........
567.9...........................  PERITONITIS NOS...................          0          0          1  .........
569.60..........................  COLSTOMY/ENTER COMP NOS...........          0          0          1  .........
569.61..........................  COLOSTY/ENTEROST INFECTN..........          0          0          1  .........
569.69..........................  COLSTMY/ENTEROS COMP NEC..........          0          0          1  .........
569.83..........................  PERFORATION OF INTESTINE..........          0          0          1  .........
569.85..........................  ANGIO INTES W HMRHG...............          0          0          1  .........
570.............................  ACUTE NECROSIS OF LIVER...........          0          0          1
572.0...........................  ABSCESS OF LIVER..................          0          0          1  .........
572.4...........................  HEPATORENAL SYNDROME..............          0          0          1  .........
573.4...........................  HEPATIC INFARCTION................          0          0          1  .........
575.4...........................  PERFORATION GALLBLADDER...........          0          0          1  .........
576.3...........................  PERFORATION OF BILE DUCT..........          0          0          1  .........
577.2...........................  PANCREAT CYST/PSEUDOCYST..........          0          0          1  .........
580.0...........................  AC PROLIFERAT NEPHRITIS...........          0          0          1  .........
580.4...........................  AC RAPIDLY PROGR NEPHRIT..........          0          0          1  .........
580.81..........................  AC NEPHRITIS IN OTH DIS...........          0          0          1  .........
580.89..........................  ACUTE NEPHRITIS NEC...............          0          0          1  .........
580.9...........................  ACUTE NEPHRITIS NOS...............          0          0          1  .........
583.4...........................  RAPIDLY PROG NEPHRIT NOS..........          0          0          1  .........
584.5...........................  LOWER NEPHRON NEPHROSIS...........          0          0          1  .........
584.6...........................  AC RENAL FAIL, CORT NECR..........          0          0          1  .........
584.7...........................  AC REN FAIL, MEDULL NECR..........          0          0          1  .........
584.8...........................  AC RENAL FAILURE NEC..............          0          0          1  .........
584.9...........................  ACUTE RENAL FAILURE NOS...........          0          0          1  .........
590.2...........................  RENAL/PERIRENAL ABSCESS...........          0          0          1  .........
596.6...........................  BLADDER RUPT, NONTRAUM............          0          0          1  .........
659.30..........................  SEPTICEMIA IN LABOR-UNSP..........          0          0          1  .........
659.31..........................  SEPTICEM IN LABOR-DELIV...........          0          0          1  .........
665.00..........................  PRELABOR RUPT UTER-UNSP...........          0          0          1  .........
665.01..........................  PRELABOR RUPT UTERUS-DEL..........          0          0          1  .........
665.03..........................  PRELAB RUPT UTER-ANTEPAR..........          0          0          1  .........
665.10..........................  RUPTURE UTERUS NOS-UNSP...........          0          0          1  .........
665.11..........................  RUPTURE UTERUS NOS-DELIV..........          0          0          1  .........
669.10..........................  OBSTETRIC SHOCK-UNSPEC............          0          0          1         03
669.11..........................  OBSTETRIC SHOCK-DELIVER...........          0          0          1         03
669.12..........................  OBSTET SHOCK-DELIV W P/P..........          0          0          1         03
669.13..........................  OBSTETRIC SHOCK-ANTEPAR...........          0          0          1         03
669.14..........................  OBSTETRIC SHOCK-POSTPART..........          0          0          1         03
669.30..........................  AC REN FAIL W DELIV-UNSP..........          0          0          1  .........
669.32..........................  AC REN FAIL-DELIV W P/P...........          0          0          1  .........
669.34..........................  AC RENAL FAILURE-POSTPAR..........          0          0          1  .........

[[Page 41427]]

 
673.00..........................  OB AIR EMBOLISM-UNSPEC............          0          0          1         01
673.01..........................  OB AIR EMBOLISM-DELIVER...........          0          0          1         01
673.02..........................  OB AIR EMBOL-DELIV W P/P..........          0          0          1         01
673.03..........................  OB AIR EMBOLISM-ANTEPART..........          0          0          1         01
673.04..........................  OB AIR EMBOLISM-POSTPART..........          0          0          1         01
673.10..........................  AMNIOTIC EMBOLISM-UNSPEC..........          0          0          1         01
673.11..........................  AMNIOTIC EMBOLISM-DELIV...........          0          0          1         01
673.12..........................  AMNIOT EMBOL-DELIV W P/P..........          0          0          1         01
673.13..........................  AMNIOTIC EMBOL-ANTEPART...........          0          0          1         01
673.14..........................  AMNIOTIC EMBOL-POSTPART...........          0          0          1         01
673.20..........................  OB PULM EMBOL NOS-UNSPEC..........          0          0          1         15
673.22..........................  PULM EMBOL NOS-DEL W P/P..........          0          0          1         15
673.23..........................  PULM EMBOL NOS-ANTEPART...........          0          0          1         15
673.24..........................  PULM EMBOL NOS-POSTPART...........          0          0          1         15
673.30..........................  OB PYEMIC EMBOL-UNSPEC............          0          0          1         03
673.31..........................  OB PYEMIC EMBOL-DELIVER...........          0          0          1         03
673.32..........................  OB PYEM EMBOL-DEL W P/P...........          0          0          1         03
673.33..........................  OB PYEMIC EMBOL-ANTEPART..........          0          0          1         03
673.34..........................  OB PYEMIC EMBOL-POSTPART..........          0          0          1         03
673.80..........................  OB PULMON EMBOL NEC-UNSP..........          0          0          1         15
673.81..........................  PULMON EMBOL NEC-DELIVER..........          0          0          1         15
673.82..........................  PULM EMBOL NEC-DEL W P/P..........          0          0          1         15
673.83..........................  PULMON EMBOL NEC-ANTEPAR..........          0          0          1         15
673.84..........................  PULMON EMBOL NEC-POSTPAR..........          0          0          1         15
674.00..........................  PUERP CEREBVASC DIS-UNSP..........          0          0          1     01, 03
765.01..........................  EXTREME IMMATUR 500G..............          0          0          1  .........
765.02..........................  EXTREME IMMATUR 500-749G..........          0          0          1  .........
765.03..........................  EXTREME IMMATUR 750-999G..........          0          0          1  .........
781.7...........................  TETANY............................          0          0          1         06
785.51..........................  CARDIOGENIC SHOCK.................          0          0          1         14
785.59..........................  SHOCK W/O TRAUMA NEC..............          0          0          1  .........
799.1...........................  RESPIRATORY ARREST................          0          0          1         15
958.0...........................  AIR EMBOLISM......................          0          0          1     02, 03
958.1...........................  FAT EMBOLISM......................          0          0          1     02, 03
958.5...........................  TRAUMATIC ANURIA..................          0          0          1  .........
996.02..........................  MALFUNC PROSTH HRT VALVE..........          0          0          1         14
996.61..........................  REACT-CARDIAC DEV/GRAFT...........          0          0          1         14
996.62..........................  REACT-OTH VASC DEV/GRAFT..........          0          0          1  .........
996.63..........................  REACT-NERV SYS DEV/GRAFT..........          0          0          1  .........
996.66..........................  REACT-INTER JOINT PROST...........          0          0          1         08
996.67..........................  REACT-OTH INT ORTHO DEV...........          0          0          1         09
996.69..........................  REACT-INT PROS DEVIC NEC..........          0          0          1         09
997.62..........................  INFECTION AMPUTAT STUMP...........          0          0          1    09, 10,
                                                                                                              11
998.0...........................  POSTOPERATIVE SHOCK...............          0          0          1  .........
998.3...........................  POSTOP WOUND DISRUPTION...........          0          0          1  .........
998.6...........................  PERSIST POSTOP FISTULA............          0          0          1  .........
999.1...........................  AIR EMBOL COMP MED CARE...........          0          0          1         03
V4975...........................  STATUS AMPUT BELOW KNEE...........          0          0          1         10
V4976...........................  STATUS AMPUT ABOVE KNEE...........          0          0          1         10
V4977...........................  STATUS AMPUT HIP..................          0          0          1        10
----------------------------------------------------------------------------------------------------------------
* Denotes this is a category rather than a code.
** A ``1'' identifies the particular tier to which the ICD-9-CM code belongs.
*** This column identifies those RICs for which the ICD-9-CM code is excluded from the associated tiers.

Appendix D--The IRF Market Basket

    Section 1886(j)(3)(C) of the Act requires the Secretary to 
establish an increase factor (for purposes of setting prospective 
payment system rates) based on a market basket index. The market basket 
needs to include both operating and capital costs of rehabilitation 
facilities (that is, freestanding rehabilitation hospitals). Under the 
reasonable cost-based reimbursement system, the excluded hospital 
market basket was used to update limits on payment for operating costs 
for rehabilitation facilities. The excluded hospital market basket is 
based on operating costs from 1992 cost report data and includes 
Medicare-participating rehabilitation, long-term care, psychiatric, 
cancer, and children's hospitals. Since freestanding rehabilitation 
hospital costs are reflected as a component of the excluded hospital 
market basket, this index in part reflects the cost shares of 
rehabilitation facilities. In order to capture total costs (operating 
and capital), we added a capital component to the excluded hospital 
market basket. We refer to this index as the excluded hospital with 
capital market basket. In the following discussion, we describe the 
methodology used to determine the operating portion of the market 
basket, the methodology used to determine the capital portion of the 
market basket, and

[[Page 41428]]

additional analyses that help support the extent to which 
rehabilitation cost shares are reflected in the excluded hospital with 
capital market basket.
    The operating portion of the excluded hospital with capital market 
basket consists of major cost categories and their respective weights. 
The major cost categories include wages and salaries, employee 
benefits, professional fees, pharmaceuticals, and a residual. The 
weights for the major cost categories are developed from the Medicare 
cost reports for FY 1992. The cost report data used include those 
hospitals excluded from the inpatient hospital prospective payment 
system where the Medicare average length of stay is within 15 percent 
(higher or lower) of the total facility average length of stay. Using 
the 15-percent threshold resulted in a subset of hospitals that had a 
significant amount of Medicare days and costs compared to using no 
adjustment or using a different threshold. Limiting the sample in this 
way provides a more accurate reflection of the structure of costs for 
Medicare. To the extent possible, we used total reimbursable facility 
costs to determine the weights for Medicare costs. We believe that 
total facility costs for facilities with high shares of Medicare 
patients are more representative of the Medicare population. We chose 
to compare the average length of stay for all patients to that of 
Medicare beneficiaries as the test of the similarity of the practice 
patterns for non-Medicare patients versus Medicare patients. Our goal 
was to measure cost shares that were reflective of case mix and 
practice patterns associated with providing services to Medicare 
beneficiaries (61 FR 46196, August 30, 1996). We chose to do this 
because we had to use facility-wide data to calculate the cost shares, 
but did not want to use facilities that did not reflect the Medicare 
population. By limiting the reports we used to those with similar 
length of stays for the Medicare and total facility populations we 
accomplished this goal. The detailed cost categories under the residual 
are derived from the Asset and Expenditure Survey, 1992 Census of 
Service Industries, by the Bureau of the Census, Economics and 
Statistics Administration, U.S. Department of Commerce. This survey is 
used in conjunction with the 1992 Input-Output Tables published by the 
Bureau of Economic Analysis, U.S. Department of Commerce. A more 
detailed description of the development of the operating portion of 
this index can be found in the final rule, Medicare Program; Changes to 
the Hospital Inpatient Prospective Payment Systems and Fiscal Year 1998 
Rates published in the Federal Register on August 29, 1997 (62 FR 45993 
through 45997).
    As previously stated, the market basket needs to reflect both 
operating and capital costs. Capital costs include depreciation, 
interest, and other capital-related costs. The cost categories for the 
capital portion of the excluded hospital with capital market basket are 
developed in a similar manner as those for the inpatient hospital 
prospective payment system capital input price index, which is 
explained in the August 30, 1996 Federal Register (61 FR 46196-46197). 
We calculated weights for capital costs, using the same set of Medicare 
cost reports used to develop the operating share. The resulting capital 
weight for the FY 1992 base year is 9.080 percent.
    Because capital is consumed over time, depreciation and interest 
costs in the current year reflect both current and previous capital 
purchases. We use vintage weighting to capture this effect. Vintage 
weighting, which is explained in the August 30, 1996 Federal Register 
(61 FR 46197 through 46203), is the process of weighting price changes 
for individual years in proportion to that year's share of total 
purchases still being consumed.
    In order to vintage weight the capital portion of the index as 
described above, the average useful life of both assets and debt 
instruments (for example, a loan, bond, or promissory note) needs to be 
developed. For depreciation expenses, the useful life of fixed and 
movable assets is calculated from the Medicare cost reports for 
excluded hospitals, including freestanding rehabilitation hospitals. 
The average useful life for fixed assets is 21 years and the average 
useful life for movable assets is 13 years. For interest expenses, we 
use the same useful life of debt instruments used in the inpatient 
hospital prospective payment system capital input price index. We 
believe that this useful life is appropriate, because it reflects the 
average useful life of hospital issuances of commercial and municipal 
bonds from all hospitals, including rehabilitation facilities. The 
average useful life of interest expense is determined to be 22 years 
(61 FR 46199). After the useful life is determined, a set of weights is 
calculated by determining the average proportion of depreciation and 
interest expense incurred in any given year during the useful life. 
This information is developed using the Medicare cost reports. These 
calculations are the same as those described for the inpatient hospital 
prospective payment system capital input price index in the August 30, 
1996 Federal Register (61 FR 46196 through 46198). The price proxies 
for each of the capital cost categories are the same as those used for 
the inpatient hospital prospective payment system capital input price 
index. The cost categories, price proxies, and base-year FY 1992 
weights for the excluded hospital with capital market basket are 
presented in Table 1 below. The vintage weights for the index are 
presented in Table 2 below.

  Table 1.--Excluded Hospital With Capital Input Price Index (FY 1992)
                          Structure and Weights
------------------------------------------------------------------------
                                                             Weights (%)
          Cost category               Price/wage variable     base-year:
                                                                 1992
------------------------------------------------------------------------
Total............................  ........................      100.000
Compensation.....................  ........................       57.935
    Wages and Salaries...........  HCFA Occupational Wage         47.417
                                    Proxy.
    Employee Benefits............  HCFA Occupational              10.519
                                    Benefit Proxy.
Professional fees: Non-Medical...  ECI--Compensation: Prof.        1.908
                                    & Technical.
Utilities........................  ........................        1.524
    Electricity..................  WPI--Commercial Electric        0.916
                                    Power.
    Fuel Oil, Coal, etc..........  WPI--Commercial Natural         0.365
                                    Gas.
    Water and Sewerage...........  CPI-U--Water & Sewage...        0.243
Professional Liability Insurance.  HCFA--Professional              0.983
                                    Liability Premiums.
All Other Products and Services..  ........................       28.571
    All Other Products...........  ........................       22.027
    Pharmaceuticals..............  WPI--Prescription Drugs.        2.791

[[Page 41429]]

 
    Food: Direct Purchase........  WPI--Processed Foods....        2.155
    Food: Contract Service.......  CPI-U--Food Away from           0.998
                                    Home.
    Chemicals....................  WPI--Industrial                 3.413
                                    Chemicals.
    Medical Instruments..........  WPI--Med. Inst. &               2.868
                                    Equipment.
    Photographic Supplies........  WPI--Photo Supplies.....        0.364
    Rubber and Plastics..........  WPI--Rubber & Plastic           4.423
                                    Products.
    Paper Products...............  WPI--Convert. Paper and         1.984
                                    Paperboard.
    Apparel......................  WPI--Apparel............        0.809
    Machinery and Equipment......  WPI--Machinery &                0.193
                                    Equipment.
    Miscellaneous Products.......  WPI--Finished Goods.....        2.029
All Other Services...............  ........................        6.544
    Telephone....................  CPI-U--Telephone                0.574
                                    Services.
    Postage......................  CPI-U--Postage..........        0.268
    All Other: Labor.............  ECI--Compensation:              4.945
                                    Service Workers.
    All Other: Non-Labor           CPI-U--All Items (Urban)        0.757
     Intensive.
Capital-Related Costs............  ........................        9.080
    Depreciation.................  ........................        5.611
    Fixed Assets.................  Boeckh-Institutional            3.570
                                    Construction: 21 Year
                                    Useful Life.
    Movable Equipment............  WPI--Machinery &                2.041
                                    Equipment: 13 Year
                                    Useful life.
    Interest Costs...............  ........................        3.212
    Non-profit...................  Avg. Yield Municipal            2.730
                                    Bonds: 22 Year Useful
                                    Life.
    For-profit...................  Avg. Yield AAA Bonds: 22        0.482
                                    Year Useful Life.
    Other Capital-Related Costs..  CPI-U--Residential Rent.       0.257
------------------------------------------------------------------------
* The wage and benefit proxies are a blend of 10 employment cost indices
  (ECI). A detailed discussion of the price proxies can be found in the
  August 30, 1996 and August 29, 1997 Federal Register final rules (61
  FR 46197 and 62 FR 45993). The operating cost categories in the
  excluded market basket described in the August 29, 1997 Federal
  Register (62 FR 45993 through 45996) had weights that added to 100.0.
  When we add an additional set of cost category weights (capital
  weight= 9.08 percent) to this original group, the sum of the weights
  in the new index must still add to 100.0. If capital cost category
  weights sum to 9.08, then operating cost category weights must add to
  90.92 percent. Each weight in the excluded hospital market basket from
  the August 29, 1997 Federal Register (62 FR 45996 through 45997) was
  multiplied by 0.9092 to determine its weight in the excluded hospital
  with capital market basket.


              Table 2.--Excluded Hospital With Capital Input Price Index (FY 1992) Vintage Weights
----------------------------------------------------------------------------------------------------------------
                                                                                                     Interest:
                                                                   Fixed assets   Movable assets     capital-
                              Year                                   (21-year        (13-year      related (22-
                                                                     weights)        weights)      year weights)
 
----------------------------------------------------------------------------------------------------------------
1...............................................................          0.0201          0.0454          0.0071
2...............................................................          0.0225          0.0505          0.0082
3...............................................................          0.0225          0.0562          0.0100
4...............................................................          0.0285          0.0620          0.0119
5...............................................................          0.0301          0.0660          0.0139
6...............................................................          0.0321          0.0710          0.0161
7...............................................................          0.0336          0.0764          0.0185
8...............................................................          0.0353          0.0804          0.0207
9...............................................................          0.0391          0.0860          0.0244
10..............................................................          0.0431          0.0923          0.0291
11..............................................................          0.0474          0.0987          0.0350
12..............................................................          0.0513          0.1047          0.0409
13..............................................................          0.0538          0.1104          0.0474
14..............................................................          0.0561  ..............          0.0525
15..............................................................          0.0600  ..............          0.0590
16..............................................................          0.0628  ..............          0.0670
17..............................................................          0.0658  ..............          0.0742
18..............................................................          0.0695  ..............          0.0809
19..............................................................          0.0720  ..............          0.0875
20..............................................................          0.0748  ..............          0.0931
21..............................................................          0.0769  ..............          0.0993
22..............................................................  ..............  ..............          0.1034
                                                                 -----------------------------------------------
    Total.......................................................          1.0000          1.0000          1.0000
----------------------------------------------------------------------------------------------------------------

    We further analyzed the extent to which the weights in the excluded 
hospital with capital market basket reflect the cost weights in 
rehabilitation hospitals, particularly since more than 50 percent of 
excluded hospitals are psychiatric hospitals. For this purpose, we 
conducted an analysis comparing the major cost weights for 
rehabilitation hospitals to the same set of cost weights for excluded 
hospitals. We analyzed the variations of wages, drugs, and capital

[[Page 41430]]

for rehabilitation and all excluded hospitals. This analysis showed 
that while these weights differed slightly between rehabilitation 
hospitals and all excluded hospitals, the difference was very small. 
When the rehabilitation hospital weights were substituted into the 
market basket structure for sensitivity analysis, the effect was less 
than 0.2 percentage points in any given year. This difference is less 
than the 0.25 percentage point criterion that determines whether a 
forecast error adjustment under the inpatient hospital prospective 
payment system is warranted. We conducted this analysis for both the 
base year (FY 1992) and for FY 1997 to determine if the difference in 
weights changed over time. Again, the differences were very small. 
Based on this analysis, we concluded that using the excluded hospital 
with capital market basket for the IRF prospective payment system will 
provide a reasonable measure of the price changes facing rehabilitation 
hospitals.
[FR Doc. 01-19313 Filed 7-31-01; 8:45 am]
BILLING CODE 4120-01-P