[Federal Register Volume 68, Number 45 (Friday, March 7, 2003)]
[Proposed Rules]
[Pages 11234-11292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-5206]



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Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 412



Medicare Program; Prospective Payment System for Long-Term Care 
Hospitals: Proposed Annual Payment Rate Updates and Policy Changes; 
Proposed Rule

  Federal Register / Vol. 68 , No. 45 / Friday, March 7, 2003 / 
Proposed Rules  

[[Page 11234]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1472-P]
RIN 0938-AL92


Medicare Program; Prospective Payment System for Long-Term Care 
Hospitals: Proposed Annual Payment Rate Updates and Policy Changes

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

ACTION: Proposed rule.

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SUMMARY: In this proposed annual update of the payment rates for the 
Medicare prospective payment system (PPS) for inpatient hospital 
services provided by long-term care hospitals (LTCHs), we are proposing 
to change the annual period during which the updated payment rates for 
the LTCH PPS would be effective from October 1 through September 30 to 
July 1 through June 30. We also are proposing to change the publication 
schedule for these updates to allow for an effective date of July 1 
(instead of August 1). The proposed payment amounts and factors used to 
determine the proposed updated Federal rates that are described in this 
proposed rule have been determined based on this proposed revised 
update rate year. In addition, we are proposing that the annual update 
of the long-term care diagnosis-related groups (LTC-DRG) 
classifications and relative weights will remain linked to the annual 
adjustments of the acute care hospital inpatient diagnosis-related 
group system, effective each October 1. The proposed outlier threshold 
for July 1, 2003 through June 30, 2004 would be derived from the 
proposed rate year calculations. In order to conform to a proposed 
change in the acute care hospital inpatient PPS (IPPS) outlier policy, 
we are proposing a change for outlier payments under the LTCH PPS.
    We also are proposing a policy change eliminating bed-number 
restrictions for pre-1997 LTCHs that have established satellite 
facilities and that elect to be paid 100 percent of the Federal rate.

DATES: Comments will be considered if received at the appropriate 
address, as provided below, no later than 5 p.m. on May 6, 2003.

ADDRESSES: Mail written comments (an original and three copies) to the 
following address only: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1472-P, PO Box 
8010, Baltimore, MD 21244-1850.
    If you prefer, you may deliver, by hand or courier, your written 
comments (an original and three copies) to one of the following 
addresses:

Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or
Room C5-14-03, Central Building, 7500 Security Boulevard, Baltimore, MD 
21244-1850.

(Because access to the interior of the Humphrey Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for commenters who wish to retain proof of filing by stamping 
in and keeping an extra copy of the comments being filed.)

    Comments mailed to those addresses specified as appropriate for 
courier delivery may be delayed and could be considered late.
    Because of staffing and resource limitation, we cannot accept 
comments by facsimile (FAX) transmission. In commenting, please refer 
to file code CMS-1472-P.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.
    For comments that relate to information collection requirements, 
mail a copy of comments to the following address:

Centers for Medicare & Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs, Security and Standards Group, 
Regulations Development and Issuances Group Standards, PRA Reports 
Clearance Office, 7500 Security Boulevard, Baltimore, MD 21244-1850. 
Attn: John Burke, CMS-1472-P; and
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 3001, New Executive Office Building, Washington, DC 20503, 
Attn: Brenda Aguilar, CMS Desk Officer.

FOR FURTHER INFORMATION CONTACT:
Tzvi Hefter, (410) 786-4487 (General information)
Judy Richter, (410) 786-2590 (General information, transition payments, 
payment adjustments, and onsite discharges and readmissions)
Michele Hudson, (410) 786-5490 (Calculation of the payment rates, 
relative weights and case-mix index, and payment adjustments)
Tiffany Eggers, (410) 786-0400 (Market basket update, short-stay 
outliers and interrupted stays)
Ann Fagan, (410) 786-5662 (Patient classification system)
Miechal Lefkowitz, (410) 786-5316 (High-cost outliers and budget 
neutrality)
Linda McKenna, (410) 786-4537 (Payment adjustments and transition 
period)
Kathryn McCann, (410) 786-7623 (Medigap)
Robert Nakielny, (410) 786-4466 (Medicaid)

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments

    Comments received timely will be available for public inspection as 
they are processed, generally beginning approximately 4 weeks after 
publication of a document, in Room C5-12-08 of the Centers for Medicare 
& Medicaid Services, 7500 Security Blvd., Baltimore, MD, on Monday 
through Friday of each week from 8:30 a.m. to 5 p.m. Please call (410) 
786-7197 to schedule an appointment to view public comments.

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 
Documents, PO Box 371954, Pittsburgh, PA 15250-7954. Specify the date 
of the issue requested and enclose a check or money order payable to 
the Superintendent of Documents, or enclose your Visa or Master Card 
number and expiration date. Credit card orders can also be placed by 
calling the order desk at (202) 512-1800 or by faxing to (202) 512-
2250. The cost for each copy is $10. As an alternative, you can view 
and photocopy the Federal Register document at most libraries 
designated as Federal Depository Libraries and at many other public and 
academic 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 Web site address is: http://www.access.gpo.gov/nara/index.html.
    To assist readers in referencing sections contained in this 
preamble, we are providing the following table of contents.

Table of Contents

I. Background
    A. Legislative and Regulatory Authority
    B. Criteria for Classification as a LTCH

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    C. Transition Period for Implementation of the LTCH PPS
    D. Limitation on Charges to Beneficiaries
    E. System Implementation for the LTCH PPS
II. Summary of the Major Contents of This Proposed Rule
    A. Proposed Change in the Annual Update
    B. Proposed Update Changes
III. Proposed Changes in the Annual Update of the LTCH PPS
IV. Proposed Changes in Long-Term Care Diagnosis-Related Group (LTC-
DRG) Classifications and Relative Weights
    A. Background
    B. Patient Classifications into DRGs
    C. Organization of DRGs
    D. Update of LTC-DRGs
    E. ICD-9-CM Coding System
    1. Uniform Hospital Discharge Data Set (UHDDS) Definitions
    2. Maintenance of the ICD-9-CM Coding System
    3. Coding Rules and Use of ICD-9-CM Codes in LTCHs
    F. Proposed Changes to the Method for Updating the LTC-DRG 
Relative Weights
V. Proposed Policy Change Relating to Payments to LTCHs That Are 
Satellite Facilities
VI. Proposed Changes to the LTCH PPS Rates for the Proposed 2004 
LTCH PPS Rate Year
    A. Overview of the Development of the Proposed Payment Rates
    B. Proposed Update to the Standard Federal Rate for the Proposed 
2004 LTCH PPS Rate Year
    1. Proposed Standard Federal Rate Update
    a. Description of the Proposed Market Basket for the Proposed 
2004 LTCH PPS Rate Year
    b. Proposed LTCH Market Basket Increase for the Proposed 2004 
LTCH PPS Rate Year
    2. Proposed Standard Federal Rate for the Proposed 2004 LTCH PPS 
Rate Year
    C. Calculation of Proposed LTCH Prospective Payments for the 
Proposed 2004 LTCH PPS Rate Year
    1. Proposed Adjustment for Area Wage Levels
    2. Proposed Adjustment for Cost-of-Living in Alaska and Hawaii
    3. Proposed Adjustment for High-Cost Outliers
    4. Proposed Adjustment for Special Cases
    a. General
    b. Short-Stay Outlier Cases
    c. Interrupted Stay
    d. Onsite Discharges and Readmittances
    e. Treatment of Swing Beds Under the Interrupted Stay and Onsite 
Discharge and Readmittance Policies
    5. Other Proposed Payment Adjustments
    6. Proposed Budget Neutrality Offset to Account for the 
Transition Methodology
VII. Computing the Proposed Adjusted Federal Prospective Payments
VIII. Transition Period
IX. Proposed Payments to New LTCHs
X. Method of Payment
XI. Monitoring
XII. Collection of Information Requirements
XIII. Regulatory Impact Analysis
    A. Introduction
    1. Executive Order 12866
    2. Regulatory Flexibility Act (RFA)
    3. Impact on Rural Hospitals
    4. Unfunded Mandates
    5. Federalism
    B. Anticipated Effects
    1. Budgetary Impact
    2. Impact on Providers
    3. Calculation of Prospective Payments
    4. Results
    5. Effect on the Medicare Program
    6. Effect on Medicare Beneficiaries
    C. Executive Order 12866
XIV. Response to Public Comments
Regulations Text
Addendum-Tables

Acronyms

    Because of the many terms to which we refer by acronym in this 
proposed rule, we are listing the acronyms used and their corresponding 
terms in alphabetical order below:

BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health Insurance 
Program] Balanced Budget Refinement Act of 1999, Pub. L. 106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health Insurance 
Program] Benefits Improvement and Protection Act of 2000, Pub. L. 106-
554
CMS Centers for Medicare & Medicaid Services
DRGs Diagnosis-related groups
FY Federal fiscal year
HCRIS Hospital Cost Report Information System
HHA Home health agency
HIPAA Health Insurance Portability and Accountability Act, Pub. L. 104-
191
IPPS Acute Care Hospital Inpatient Prospective Payment System
IRF Inpatient rehabilitation facility
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare provider analysis and review file
OSCAR Online Survey Certification and Reporting (System)
PPS Prospective Payment System
QIO Quality Improvement Organization (formerly Peer Review Organization 
(PRO))
SNF Skilled nursing facility
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97-248

I. Background

A. Legislative and Regulatory Authority

    The Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA) (Pub. 
L. 106-113) and the Medicare, Medicaid, and SCHIP Benefits Improvement 
and Protection Act of 2000 (BIPA) (Pub. L. 106-554) provide for payment 
for both the operating and capital-related costs of hospital inpatient 
stays in long-term care hospitals (LTCHs) under Medicare Part A based 
on prospectively set rates. The Medicare prospective payment system for 
LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of 
the Social Security Act (the Act), effective for cost reporting periods 
beginning on or after October 1, 2002. Section 1886(d)(1)(B)(iv)(I) of 
the Act defines a LTCH as ``a hospital which has an average inpatient 
length of stay (as determined by the Secretary) of greater than 25 
days.'' Section 1886(d)(1)(B)(iv)(II) of the Act also provides another 
definition of LTCHs: Specifically, a hospital that first received 
payment under section 1886(d) of the Act in 1986 and has an average 
inpatient length of stay (as determined by the Secretary) of greater 
than 20 days and has 80 percent or more of its annual Medicare 
inpatient discharges with a principal diagnosis that reflects a finding 
of neoplastic disease in the 12-month cost reporting period ending in 
FY 1997.
    Section 123 of Pub. L. 106-113 requires the prospective payment 
system for LTCHs to be a per discharge system with a diagnosis-related 
group (DRG) based patient classification system that reflects the 
differences in patient resources and costs in LTCHs while maintaining 
budget neutrality. Section 123 also requires that the system be 
implemented for cost reporting periods beginning on or after October 1, 
2002.
    Section 307(b)(1) of Pub. L. 106-554 mandates the examination of 
the feasibility and the impact of basing payment under the LTCH 
prospective payment system (LTCH PPS) on the use of existing (or 
refined) hospital DRGs that have been modified to account for different 
resource use of LTCH patients as well as the use of the most recently 
available hospital discharge data. Further, section 307(b)(1) provides 
that the Secretary shall examine and may provide for adjustments to 
payments under the LTCH PPS, including adjustments to DRG weights, area 
wage adjustments, geographic reclassification, outliers, updates, and a 
disproportionate share adjustment.
    In a Federal Register document issued on August 30, 2002 (67 FR 
55954), we implemented the LTCH PPS authorized under Pub. L. 106-113 
and Pub. L. 106-554. This system uses

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information from LTCH patient records to classify patients into 
distinct long-term care diagnosis-related groups (LTC-DRGs) based on 
clinical characteristics and expected resource needs. Payments are 
calculated for each LTC-DRG and provisions are made for appropriate 
payment adjustments. Payment rates under the LTCH PPS are updated 
annually and published in the Federal Register.
    The LTCH PPS replaced the reasonable cost-based payment system 
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), 
Pub. L. 97-248, for payments for inpatient services provided by a LTCH 
with a cost reporting period beginning on or after October 1, 2002. 
(The regulations implementing the TEFRA hospital payment provisions are 
located at 42 CFR part 413.) With the implementation of the prospective 
payment system for inpatient acute care hospitals authorized by the 
Social Security Amendments of 1983 (Pub. L. 98-21), which added section 
1886(d) to the Act, certain hospitals, including LTCHs, were excluded 
from the PPS for acute care hospitals and paid their reasonable costs 
for inpatient services subject to a per discharge limitation or target 
amount under the TEFRA system. For each cost reporting period, a 
ceiling on payments to each hospital excluded from the acute care 
hospital inpatient prospective payment system (IPPS) was determined by 
multiplying the hospital's updated target amount by the number of total 
current year Medicare discharges. The August 30, 2002 final rule 
further details payment policy under the TEFRA system (67 FR 55954).
    In the August 30, 2002 final rule, we presented an in-depth 
discussion of the LTCH PPS, including the patient classification 
system, relative weights, payment rates, additional payments, and the 
budget neutrality requirements mandated by section 123 of Pub. L. 106-
113. That same final rule, which established regulations for the LTCH 
PPS under 42 CFR part 412, Subpart O, also contained provisions related 
to covered inpatient services, limitation on charges to beneficiaries, 
medical review requirements, furnishing of inpatient hospital services 
directly or under arrangement, and reporting and recordkeeping 
requirements.
    We refer readers to the August 30, 2002 final rule for a 
comprehensive discussion of the research and data that supported the 
establishment of the LTCH PPS.

B. Criteria for Classification as a LTCH

    LTCHs must have a provider agreement with Medicare and must have an 
average Medicare inpatient length of stay of greater than 25 days, or, 
for cost reporting periods beginning on or after August 5, 1997, for a 
hospital that was first excluded from the PPS in 1986, must have an 
average inpatient length of stay for all patients, including both 
Medicare and non-Medicare inpatients, of greater than 20 days and 
demonstrate that at least 80 percent of its annual Medicare inpatient 
discharges in the 12-month cost reporting period ending in FY 1997 have 
a principle diagnosis that reflects a finding of neoplastic disease. 
Subject to the provisions of Sec.  412.23(e)(3), the average Medicare 
inpatient length of stay is determined based on all covered and 
noncovered days of stay of Medicare patients as calculated by dividing 
the total number of covered and noncovered days of stay of Medicare 
inpatients (less leave or pass days) by the number of total Medicare 
discharges for the hospital's most recent complete cost reporting 
period. Fiscal intermediaries verify that LTCHs meet the average length 
of stay requirements.
    The fiscal intermediary's determination of whether or not a 
hospital qualifies as an LTCH is based on the hospital's discharge data 
from its most recent cost reporting period and is effective at the 
start of the hospital's next cost reporting period, under Sec.  
412.22(d). If a hospital does not meet the length of stay requirement, 
the hospital may provide the intermediary with data indicating a change 
in the hospital's average length of stay by the same method for the 
immediately preceding 6-month period (Sec.  412.23(e)(3)(ii)). (For 
procedural efficiency and in order to comply with the timing 
requirement of Sec.  412.22(d), we have a longstanding policy of 
allowing hospitals to submit data for a period greater than 5 months 
for this purpose.) Requirements for hospitals seeking classification as 
LTCHs that have undergone a change in ownership, as described in Sec.  
489.18, are set forth in Sec.  412.23(e)(3)(iii).
    LTCHs that exist as hospitals-within-hospitals or satellite 
facilities must also meet the criteria set forth in Sec.  412.22(e) or 
Sec.  412.22(h), respectively, to be excluded from the IPPS and paid 
under the LTCH PPS.
    The following hospitals are paid under special payment provisions, 
as described in Sec.  412.22(c) and, therefore, are not subject to the 
LTCH PPS rules:
    [sbull] Veterans Administration hospitals.
    [sbull] Hospitals that are reimbursed under State cost control 
systems approved under 42 CFR part 403.
    [sbull] Hospitals that are reimbursed in accordance with 
demonstration projects authorized under section 402(a) of Pub. L. 90-
248 (42 U.S.C. 1395b-1) or section 222(a) of Pub. L. 92-603 (42 U.S.C. 
1395b-1 (note)) (statewide all-payer systems, subject to the rate-of-
increase test at section 1814(b) of the Act).
    [sbull] Nonparticipating hospitals furnishing emergency services to 
Medicare beneficiaries.

C. Transition Period for Implementation of the LTCH PPS

    In the August 30, 2002 final rule (67 FR 56038), we provided for a 
5-year transition period from cost-based reimbursement to fully Federal 
prospective payment for LTCHs. During the 5-year period, two payment 
percentages are to be used to determine a LTCH's total payment under 
the PPS. The blend percentages are as follows:

------------------------------------------------------------------------
                                              Prospective
                                                payment      Cost-based
Cost reporting periods beginning on or after    federal    reimbursement
                                                  rate          rate
                                               percentage    percentage
------------------------------------------------------------------------
Oct. 1, 2002................................          20            80
Oct. 1, 2003................................          40            60
Oct. 1, 2004................................          60            40
Oct. 1, 2005................................          80            20
Oct. 1, 2006................................         100             0
------------------------------------------------------------------------

    The phase-in for payments to the full prospective payment Federal 
rate will apply according to each LTCH's cost reporting period.

D. Limitation on Charges to Beneficiaries

    In the August 30, 2002 final rule, we presented an in-depth 
discussion of beneficiary liability under the LTCH prospective payment 
system (67 FR 55974-55975). Under Sec.  412.507, as consistent with 
other established hospital prospective payment systems, a LTCH may not 
bill a Medicare beneficiary for more than the deductible and 
coinsurance amounts as specified under Sec. Sec.  409.82, 409.83, and 
409.87 and for items and services as specified under Sec.  489.30(a), 
if the Medicare payment to the LTCH is the full LTC-DRG payment amount. 
However, if the Medicare payment was for a short-stay outlier case 
(Sec.  412.529) that was less than the full LTC-DRG payment amount, the 
LTCH could also charge the beneficiary for services for which the costs 
of those services or the days those services were provided were not a 
basis for calculating the Medicare short-stay outlier payment (Sec.  
412.507).
    Since the origin of the Medicare system, the intent of our 
regulations has been to set limits on beneficiary liability and to 
clearly establish the circumstances under which the

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beneficiary would be required to assume responsibility for payment; 
that is, upon exhausting benefits described in 42 CFR part 409, subpart 
F. The discussion in the August 30, 2002 final rule was not meant to 
establish rates or payments for, or define, Medicare-eligible expenses. 
While CMS regulates beneficiary liability for coinsurance and 
deductibles for hospital stays that are covered by Medicare, payments 
from Medigap insurers to providers for inpatient hospital coverage 
after Medicare benefits are exhausted are not regulated by CMS. 
Furthermore, regulations beginning at Sec.  403.200 and the 1991 
National Association of Insurance Commissioners (NAIC) Model Regulation 
for Medicare Supplemental Insurance, which was incorporated by 
reference into section 1882 of the Act, govern the relationship between 
Medigap insurers and beneficiaries.

E. System Implementation for the LTCH PPS

    When we established the regulations to implement the LTCH PPS on 
August 30, 2002 (67 FR 55954), effective for cost reporting periods 
that began on or after October 1, 2002, we did not have computer system 
changes in place that were necessary to accommodate claims processing 
and payment under the system. However, after January 1, 2003, we made 
the necessary system changes. Accordingly, after January 1, 2003, the 
fiscal intermediary will reconcile the payment amounts that had been 
made to LTCHs for all covered inpatient hospital services furnished to 
Medicare beneficiaries from cost reporting periods that began on or 
after October 1, 2002, through January 1, 2003, with the amounts that 
were payable under the LTCH PPS methodology. Because the LTCH PPS was 
effective at the start of the LTCH's first cost reporting period that 
began on or after October 1, 2002, only those LTCHs with cost reporting 
periods that started October 1, 2002, through January 1, 2003, will 
experience the payment reconciliation necessitated by this 3-month 
period prior to systems implementation. The claims submission procedure 
of using ICD-9-CM codes has not changed following the systems 
implementation of the LTCH PPS.
    We also want to note that as of October 16, 2002, a LTCH that was 
required to comply with the Administrative Simplification Standards 
under the Health Insurance Portability and Accountability Act (HIPAA) 
(Pub. L. 104-191) and that had not obtained an extension in compliance 
with the Administrative Compliance Act (Pub. L. 107-105) is obligated 
to comply with the standards for submitting claim forms to the LTCH's 
Medicare fiscal intermediary (45 CFR 162.1002 and 45 CFR 162.1102). 
Beginning October 16, 2003, LTCHs that obtained an extension and that 
are required to comply with the HIPPA Administrative Simplification 
Standards must start submitting electronic claims in compliance with 
the HIPPA regulations cited above, among others.

II. Summary of the Major Contents of This Proposed Rule

    In this proposed rule, we are setting forth the proposed annual 
update to the payment rates for the Medicare LTCH PPS and proposing 
other policy changes. The following is a summary of the major areas 
that we are addressing in this proposed rule:

A. Proposed Change in the Annual Update

    We are proposing to change the annual update to the Federal payment 
rate under the LTCH PPS from the Federal fiscal year (October 1 through 
September 30) to a ``LTCH rate year'' of July 1 through June 30, 
beginning July 1, 2003, as discussed in section III. of this preamble. 
(In this proposed rule, we would define the LTCH rate year as the 
period of July 1 to June 30 for updates to the LTCH PPS.) We are 
proposing to publish information on the annual update in the Federal 
Register by June 1 of each year. We recognize that it may be necessary 
to address issues affecting LTCHs at a time that does not conform to 
this schedule and in those circumstances, we could utilize the IPPS 
proposed and final rule for this purpose.

B. Proposed Update Changes

    [sbull] In section IV. of this preamble, we are proposing that the 
annual update of the LTC-DRG classifications and relative weights would 
remain linked to the annual adjustments of the acute care hospital 
inpatient DRG system, which are based on the annual revisions to the 
International Classification of Diseases, Ninth Revision, Clinical 
Modification (ICD-9-CM) codes, effective each October 1.
    [sbull] In section V. of this preamble, we discuss a proposed 
policy change in how Medicare payment under the LTCH PPS would be made 
to certain LTCHs that have satellite facilities.
    [sbull] In sections VI. through X. of this preamble, we discuss our 
proposed determination of the LTCH PPS rates that would be applicable 
to the proposed LTCH rate year of July 1, 2003 through June 30, 2004, 
including proposed revisions to the wage index, the proposed excluded 
hospital with capital market basket that would be applied to the 
current standard Federal rate to determine the prospective payment 
rates, the applicable adjustments to payments, the proposed outlier 
threshold, the transition period, and the proposed budget neutrality 
factor.
    [sbull] We are also proposing to revise Sec.  412.525(a) and Sec.  
412.529(c)(4) regarding adjustments to outlier payments under the LTCH 
PPS in order to conform the regulation to a proposed policy change 
under the IPPS that is published in the Federal Register on March 4, 
2003.
    [sbull] In section XI. of this preamble, we discuss our continuing 
monitoring efforts to evaluate the LTCH PPS.
    [sbull] In section XIII. of this preamble, we set forth an analysis 
of the impact of the proposed changes in this proposed rule on Medicare 
expenditures and on Medicare-participating LTCHs and Medicare 
beneficiaries.

III. Proposed Changes in the Annual Update of the LTCH PPS

    In existing regulations at Sec.  412.535 that were issued in the 
August 30, 2002 final rule, we specify a schedule for publishing 
information on the LTCH PPS on or before August 1, which coincided with 
the statutorily mandated publication schedule for the IPPS. We are 
proposing to revise Sec.  412.535 to provide generally for a change in 
the annual rate update for the LTCH PPS, starting on July 1.
    Section 1886(e)(5)(A) of the Act requires that, for the IPPS, the 
proposed rule be published in the Federal Register ``not later than the 
April 1 before each fiscal year; and the final rule, not later than the 
August 1 before such fiscal year.'' The statute imposes no such 
publication schedule for the LTCH PPS. In the August 30, 2002 final 
rule (67 FR 55977), we stated that we were considering changing the 
publication schedule of the LTCH PPS annual rulemaking cycle in order 
to avoid concurrent publication of annual rules for these two systems 
for purposes of administrative feasibility and efficiency. In 
considering a change in the publication schedule of the LTCH PPS final 
rule, we contemplated a change in the effective date for updating the 
Federal rates for the LTCH PPS. Therefore, in this proposed rule, we 
are proposing to change the effective date of the annual update for the 
LTCH PPS from October 1 to July 1 of each year in order to facilitate a 
timely publication of these two significant payment updates (acute care 
hospital inpatient and LTCH). Thus, the annual update of the

[[Page 11238]]

LTCH PPS Federal rates would no longer be linked to the start of the 
Federal fiscal year, as is the update of the IPPS. This proposed change 
would necessitate publication of the final rule for the LTCH PPS by no 
later than June 1 of each year (proposed revised Sec.  412.535).
    We also are proposing to amend Sec.  412.503 to include a 
definition of ``long-term care hospital rate year''. A ``long-term care 
hospital rate year'' would mean the 12-month period of July 1 through 
June 30. We would use this period for those calculations related to 
updating the Federal rate for payments under the LTCH PPS. The 
determination of the proposed fixed-loss threshold for outlier payment 
calculations, under Sec.  412.525(a), would also be calculated based on 
the proposed LTCH rate year. (Section VI.C. of this proposed rule 
includes a more detailed discussion of our proposed outlier policy.)
    Proposing a change for the annual Federal rate update period for 
the LTCH PPS has also necessitated a proposed recalculation of the 
excluded hospital market basket with capital estimate for the proposed 
forthcoming payment year, July 1, 2003 through June 30, 2004. In the 
August 30, 2002 final rule, we adopted a Federal rate of $34,956 that 
was computed based on the excluded hospital with capital market basket 
calculated for the 12-month Federal fiscal year of October 1, 2002 
through September 30, 2003. As already noted, we are proposing to 
change the Federal rate update for the LTCH PPS from the Federal fiscal 
year to a 12-month year of July 1 through June 30, and the proposed 
rates in this proposed rule are based on this period. Because the 
Federal rate of $34,956 was originally computed based on a 12-month 
year, but in actuality will only be utilized for 9 months, if the 
proposed change in the LTCH PPS rate update year is finalized, we are 
proposing a budget neutral adjustment to the market basket update 
taking this 3-month differential into account in setting the Federal 
rate for July 1, 2003 through June 30, 2004. In addition, we are 
proposing that the change in the proposed 2004 LTCH PPS rate year be 
budget neutral. In section VI.B.1 of this proposed rule, we describe 
this proposed adjustment in greater detail.
    We are proposing to update the LTCH PPS wage index that adjusts for 
differences in area wages under Sec.  412.525(c) using the FY 1999 IPPS 
wage data because these are the best available data (as discussed in 
section VI.C. of this preamble).
    We also are proposing to recalculate the budget neutrality offset 
to account for the effect of the transition period and the policy 
allowing LTCHs to elect 100 percent Federal rate payments rather than 
the transition blend. In addition, we are proposing an updated fixed-
loss amount for determining outlier payments based on the updated 
proposed Federal rate (as discussed in section VII. of this preamble).
    As discussed in section IV.C. of this proposed rule, we are not 
proposing an update to the LTC-DRG classifications or relative weights 
at this time. Currently, the LTC-DRG patient classifications utilized 
by the LTCH PPS for FY 2003 are based directly on the same version of 
DRGs used by the IPPS, that is, GROUPER 20.0. Therefore, we are not 
proposing any change to the timing of the annual update of the LTC-DRG 
classifications and relative weights. They would remain linked to the 
annual adjustments of the acute care hospital inpatient DRG system, 
which are based on the annual revisions to the ICD-9-CM codes, 
effective each October 1. Table 3 of the Addendum to the August 30, 
2002 final rule (67 FR 56076-56084), which we are reprinting as Table 3 
of the Addendum to this proposed rule, contains the LTC-DRG 
classifications and relative weights that we propose to continue to 
apply to discharges occurring during the period of July 1, 2003 through 
September 30, 2003. As an aid in calculating payment under the short-
stay outlier policy, under Sec.  412.529, we also are including, in 
column 3 of Table 3, the proposed five-sixths average length of stay 
that would be applied to each LTC-DRG in determining whether the LTCH 
stay is a short-stay outlier. The average length of stay for each DRG 
based on the FY 2001 MedPAR data, which were used for the FY 2003 LTCH 
PPS final rule, are still the best available complete LTCH discharge 
data available at this time.
    The revised LTC-DRG classifications and relative weights for 
discharges occurring from October 1, 2003 through September 30, 2004, 
for payments under the LTCH PPS during that period would continue to be 
based on the annual updates to the acute care hospital inpatient DRG 
system. The FY 2004 DRGs and relative weights for the IPPS have not yet 
been proposed and we are unable to propose updated LTC-DRGs and 
relative weights (which would be based on the proposed updated acute 
care hospital inpatient DRGs and relative weights) at this time. Thus, 
we are proposing that the LTC-DRG classifications and relative weights 
would be presented for public comment in the proposed rule for the IPPS 
and finalized in the IPPS final rule, for an effective date of October 
1, 2003.
    The proposed change in the rate year for the LTCH PPS from October 
1 through September 30 to July 1 through June 30 means that, although 
the Federal rate calculations in the August 30, 2002 final rule were 
based on a 12-month year, only 9 months will elapse before the proposed 
July 1, 2003 update. We are proposing a prospective adjustment to the 
market basket update to take into account this 3-month differential in 
setting the proposed rates for July 1, 2003 through June 30, 2004.
    Specifically, the proposed updates for the proposed 2004 LTCH PPS 
rate year would be affected as follows:
    [sbull] The proposed update to the standard Federal rate calculated 
in accordance with Sec.  412.523(c)(3) would be adjusted to account for 
updating the standard Federal rate on July 1, 2003, instead of October 
1, 2003.
    [sbull] The fixed-loss amount for determining high-cost outlier 
payments under Sec.  412.525(a) would also be updated based on the 
proposed Federal rate effective for July 1, 2003 through June 30, 2004.
    In section VI.B.1 of this proposed rule, we discuss the proposed 
computational adjustments resulting from our proposed establishment of 
a LTCH PPS rate year beginning July 1, 2003 through June 30, 2004.
    Several provisions of the LTCH PPS would not be affected by the 
proposed change in the annual rate update year for the LTCH PPS from 
October 1 to July 1 because these policies are not based on any of the 
Federal rate calculations for the LTCH PPS. Specifically, the following 
provisions would not be affected:
    [sbull] The transition blends provided for under Sec.  412.533(a) 
would not be affected because they are linked to the start of each 
LTCH's cost reporting period, rather than to the start of the Federal 
fiscal year. (LTCHs being paid under the transition blend methodology 
would receive those blends for the entire 5-year transition period, 
unless they elect payments based on 100 percent of the Federal rate.) 
For instance, for cost reporting periods that began on or after October 
1, 2002, and before October 1, 2003, the total payment for a LTCH is 80 
percent of the amount that would have been calculated under the TEFRA 
payment system for that specific LTCH and 20 percent of the Federal 
prospective payment amount. For cost reporting periods beginning on or 
after October 1, 2003 and before October 1, 2004, the total payment for 
a LTCH is 60 percent of the amount that would have been calculated 
under the

[[Page 11239]]

TEFRA payment system for that specific LTCH and 40 percent of the 
Federal prospective payment amount.
    [sbull] The 5-year phase-in of the adjustment for differences in 
area wage levels under Sec.  412.525(c) would not be affected because 
they are linked to the start of each LTCH's cost reporting period, 
rather than to the start of the Federal fiscal year. For cost reporting 
periods that began on or after October 1, 2002 and before September 30, 
2003, the applicable LTCH PPS wage index is one-fifth of the full LTCH 
wage index value, and for cost reporting periods beginning on or after 
October 1, 2003 and before September 30, 2004, the applicable LTCH PPS 
wage index is two-fifths of the full LTCH wage index value.
    [sbull] The LTC-DRGs and their relative weights and the GROUPER 
would not be affected since they would continue to be updated effective 
October 1 through September 30 each year based on the changes to the 
DRGs published in the IPPS final rule.
    Section XII. of this proposed rule contains an impact analysis that 
reflects the impact of these proposed changes.
    In summary, we are proposing to amend Sec.  412.535 to indicate 
that information on the unadjusted Federal payment rates and a 
description of the methodology and data used to calculate the payment 
rates under the LTCH PPS would be published in the Federal Register on 
or before June 1 prior to the beginning of each proposed LTCH PPS rate 
year beginning July 1. We are proposing that information on the DRG 
classification system and associated weighting factors, with the DRGs 
from which the LTC-DRGs are derived, would be published in the proposed 
IPPS rule and, ultimately, the final rule for the IPPS (the final IPPS 
rule is published on or before August 1 of each Federal fiscal year).

IV. Proposed Changes in Long-Term Care Diagnosis-Related Group (LTC-
DRG) Classifications and Relative Weights

A. Background

    Section 123 of Pub. L. 106-113 specifically requires that the PPS 
for LTCHs be a per discharge system with a DRG-based patient 
classification system reflecting the differences in patient resources 
and costs in LTCHs while maintaining budget neutrality. Section 
307(b)(1) of Pub. L. 106-554 modified the requirements of section 123 
of Pub. L. 106-113 by specifically requiring that the Secretary examine 
``the feasibility and the impact of basing payment under such a system 
[the LTCH PPS] on the use of existing (or refined) hospital diagnosis-
related groups (DRGs) that have been modified to account for different 
resource use of long-term care hospital patients as well as the use of 
the most recently available hospital discharge data.''
    In accordance with section 307(b)(1) of Pub. L. 106-554 and Sec.  
412.515 of our existing regulations, the LTCH PPS uses information from 
LTCH patient records to classify patient cases into distinct long-term 
care diagnosis-related groups (LTC-DRGs) based on clinical 
characteristics and expected resource needs. The LTC-DRGs used as the 
patient classification component of the LTCH PPS correspond to the DRGs 
in the IPPS. We apply weights to the existing hospital inpatient DRGs 
to account for the difference in resource use by patients exhibiting 
the case complexity and multiple medical problems characteristic of 
LTCHs.
    In a departure from the IPPS, we use low volume LTC-DRGs (less than 
25 LTCH cases) in determining the LTC-DRG weights, since LTCHs do not 
typically treat the full range of diagnoses as do acute care hospitals. 
In order to deal with the large number of low volume DRGs (all DRGs 
with fewer than 25 cases), we group low volume DRGs into 5 quintiles 
based on average charge per discharge. (A listing of the composition of 
low volume quintiles appears in the August 30, 2002 final rule at 67 FR 
55986.) We also take into account adjustments to payments for cases in 
which the stay at the LTCH is five-sixths of the geometric average 
length of stay and classify these cases as short-stay outlier cases. (A 
detailed discussion of the application of the Lewin Group model that 
was used to develop the LTC-DRGs appears in the August 30, 2002 final 
rule at 67 FR 55978.)

B. Patient Classifications into DRGs

    Generally, under the LTCH PPS, Medicare payment is made at a 
predetermined specific rate for each discharge; that payment varies by 
the LTC-DRG to which a beneficiary's stay is assigned. Cases are 
classified into LTC-DRGs for payment based on the following six data 
elements:
    (1) Principal diagnosis.
    (2) Up to eight additional diagnoses.
    (3) Up to six procedures performed.
    (4) Age.
    (5) Sex.
    (6) Discharge status of the patient.
    Upon the discharge of the patient from a LTCH, the LTCH must assign 
appropriate diagnosis and procedure codes from the ICD-9-CM. As of 
October 16, 2002, a LTCH that was required to comply with the HIPAA 
Administrative Simplification Standards and that had not obtained an 
extension in compliance with the Administrative Compliance Act (Pub. L. 
107-105) is obligated to comply with the standards at 45 CFR 162.1002 
and 45 CFR 162.1102. Completed claim forms are to be submitted to the 
LTCH's Medicare fiscal intermediary.
    Medicare fiscal intermediaries enter the clinical and demographic 
information into their claims processing systems and subject this 
information to a series of automated screening processes called the 
Medicare Code Editor (MCE). These screens are designed to identify 
cases that require further review before assignment into a DRG can be 
made. During this process, the following type of cases are selected for 
further development:
    [sbull] Cases that are improperly coded. (For example, diagnoses 
are shown that are inappropriate, given the sex of the patient. Code 
68.6, Radical abdominal hysterectomy, would be an inappropriate code 
for a male.)
    [sbull] Cases including surgical procedures not covered under 
Medicare (for example, organ transplant in a nonapproved transplant 
center).
    [sbull] Cases requiring more information. (For example, ICD-9-CM 
codes are required to be entered at their highest level of specificity. 
There are valid 3-digit, 4-digit, and 5-digit codes. That is, code 
136.3, Pneumocystosis, contains all appropriate digits, but if it is 
reported with either fewer or more than 4 digits, the claim will be 
rejected by the MCE as invalid.)
    [sbull] Cases with principal diagnoses that do not usually justify 
admission to the hospital. (For example, code 437.9, Unspecified 
cerebrovascular disease. While this code is valid according to the ICD-
9-CM coding scheme, a more precise code should be used for the 
principal diagnosis.)
    After screening through the MCE, each claim will be classified into 
the appropriate LTC-DRG by the Medicare LTCH GROUPER. The LTCH GROUPER 
is specialized computer software based on the same GROUPER used by the 
IPPS. The GROUPER software was developed as a means of classifying each 
case into a DRG on the basis of diagnosis and procedure codes and other 
demographic information (age, sex, and discharge status). Following the 
LTC-DRG assignment, the Medicare fiscal intermediary will determine the 
prospective payment by using the Medicare PRICER program, which 
accounts for hospital-specific adjustments. As provided for under the 
IPPS, we provide an opportunity for the

[[Page 11240]]

LTCH to review the LTC-DRG assignments made by the fiscal intermediary 
and to submit additional information within a specified timeframe 
(Sec.  412.513(c)).
    The GROUPER is used both to classify past cases in order to measure 
relative hospital resource consumption to establish the DRG weights and 
to classify current cases for purposes of determining payment. The 
records for all Medicare hospital inpatient discharges are maintained 
in the MedPAR file. The data in this file are used to evaluate possible 
DRG classification changes and to recalibrate the DRG weights during 
our annual update. DRG weights are based on data for the population of 
LTCH discharges, reflecting the fact that LTCH patients represent a 
different patient mix than patients in short-term acute care hospitals.

C. Organization of DRGs

    The DRGs are organized into 25 Major Diagnostic Categories (MDCs), 
most of which are based on a particular organ system of the body; the 
remainder involve multiple organ systems (such as MDC 22, Burns). 
Accordingly, the principal diagnosis determines MDC assignment. Within 
most MDCs, cases are then divided into surgical DRGs and medical DRGs. 
Surgical DRGs are assigned based on a surgical hierarchy that orders 
operating room (O.R.) procedures or groups of O.R. procedures by 
resource intensity. The GROUPER does not recognize all ICD-9-CM 
procedure codes as procedures that affect DRG assignment, that is, 
procedures which are not surgical (for example, EKG), or minor surgical 
procedures (for example, 86.11, Biopsy of skin and subcutaneous 
tissue).
    The medical DRGs are generally differentiated on the basis of 
diagnosis. Both medical and surgical DRGs may be further differentiated 
based on age, sex, discharge status, and presence or absence of 
complications or comorbidities (CC). We note that CCs are defined by 
certain secondary diagnoses not related to, or not inherently a part 
of, the disease process identified by the principal diagnosis. (For 
example, the GROUPER would not recognize a code from the 800.0x series, 
Skull fracture, as a CC when combined with principal diagnosis 850.4, 
Concussion with prolonged loss of consciousness, without return to 
preexisting conscious level.) In addition, we note that the presence of 
additional diagnoses does not automatically generate a CC, as not all 
DRGs recognize a comorbid or complicating condition in their 
definition. (For example, DRG 466, Aftercare without History of 
Malignancy as Secondary Diagnosis, is based solely on the principal 
diagnosis, without consideration of additional diagnoses for DRG 
determination.)
    In its June 2000 Report to Congress, MedPAC recommended that the 
Secretary ``* * * improve the hospital inpatient prospective payment 
system by adopting, as soon as practicable, diagnosis-related group 
refinements that more fully capture differences in severity of illness 
among patients.'' (Recommendation 3A, p. 63) We have determined it is 
not practical at this time to develop a refinement to inpatient 
hospital DRGs based on severity due to time and resource requirements. 
However, this does not preclude us from development of a severity-
adjusted DRG refinement in the future. That is, a refinement to the 
list of comorbidities and complications could be incorporated into the 
existing DRG structure. It is also possible a more comprehensive 
severity adjusted structure may be created if a new code set is 
adopted. That is, if ICD-9-CM is replaced by ICD-10-CM (for diagnostic 
coding) and ICD-10-CS (for procedure coding) or by other code sets, a 
severity concept may be built into the resulting DRG assignments. Of 
course any change to the code set would be adopted through the process 
established in the HIPAA Administrative Simplification provisions.

D. Update of LTC-DRGs

    For FY 2003, the LTC-DRG patient classification system was based on 
LTCH data from the FY 2001 MedPAR file, which contained hospital bills 
received through March 31, 2001, for hospital discharges occurring in 
FY 2001. The patient classification system consisted of 510 DRGs that 
formed the basis of the FY 2003 LTCH PPS GROUPER. The 510 LTC-DRGs 
included two ``error DRGs''. As in the IPPS, we included two error DRGs 
in which cases that cannot be assigned to valid DRGs will be grouped. 
These two error DRGs are DRG 469 (Principal Diagnosis Invalid as a 
Discharge Diagnosis) and DRG 470 (Ungroupable). (See the August 1, 
2001, Medicare Program final rule, Changes to the Hospital Inpatient 
Prospective Payment Systems and Rates and Costs of Graduate Medical 
Education; Fiscal Year 2002 Rates, 66 FR 40062.) The other 508 LTC-DRGs 
are the same DRGs used in the IPPS GROUPER for FY 2003 (Version 20.0).
    In the health care industry, annual changes to the ICD-9-CM codes 
are effective for discharges occurring on or after October 1 each year. 
Thus, the manual and electronic versions of the GROUPER software, which 
are based on the ICD-9-CM codes, are also revised annually and 
effective for discharges occurring on or after October 1 each year. As 
discussed earlier, the patient classification system for the LTCH PPS 
(LTC-DRGs) is based on the IPPS patient classification system (CMS-
DRGs), which is updated annually and effective for discharges occurring 
on or after October 1 through September 30 each year. The updated DRGs 
and GROUPER software are based on the latest revision to the ICD-9-CM 
codes, which are published annually in the IPPS proposed rule and final 
rule. The new or revised ICD-9-CM codes are not used by the industry 
for either the IPPS or the LTCH PPS until the beginning of the next 
Federal fiscal year (effective for discharges occurring on or after 
October 1 through September 30). (The use of the ICD-9-CM codes in this 
manner is consistent with current usage and the HIPAA regulations.) 
October 1 is also when the changes to the CMS-DRGs and the next version 
of the GROUPER software becomes effective.
    As discussed in section III. of this proposed rule, we are 
proposing to make the annual update to the LTCH PPS effective from July 
1 through June 30 each year. As a result of this change the LTCH PPS 
would use two GROUPERS during the course of a 12-month period: one 
GROUPER for 3 months (from July 1 through September 30); and an updated 
GROUPER for 9 months (from October 1 through June 30). The need to use 
two GROUPERs is based upon the October 1 effective date of the updated 
ICD-9-CM coding system. As previously discussed, new ICD-9-CM codes may 
result in changes to the structure of the DRGs. In order for the 
industry to be on the same schedule (for both the IPPS and the LTCH 
PPS) for the use of the most current ICD-9-CM codes, it is necessary 
for us to propose to apply two GROUPER programs to the LTCH PPS. 
Although we do not believe that this will have any adverse effect on 
LTCHs, we are interested in receiving comments on this issue. LTCHs 
would continue to code diagnosis and procedures using the most current 
version of the ICD-9-CM coding system.
    Currently, for Federal FY 2003, we are using Version 20.0 of the 
GROUPER software for both the IPPS and the LTCH PPS. For discharges 
beginning on October 1, 2003 (Federal FY 2004), we are proposing our 
intent to use Version 21.0 of the GROUPER software for both the IPPS 
and the LTCH PPS. Thus, proposed changes to the CMS-DRGs

[[Page 11241]]

(the DRGs on which the LTC-DRGs are based), and their relative weights, 
as well as the LTC-DRGs and their relative weights that would be 
effective for October 1, 2003 through September 30, 2004, would be 
presented in the IPPS FY 2004 proposed rule that will be published in 
the spring of 2003 in the Federal Register. Accordingly, we would then 
notify LTCHs of any revised LTC-DRG relative weights based on the final 
DRGs and Version 21.0 GROUPER for the IPPS that would be effective 
October 1, 2003.

E. ICD-9-CM Coding System

1. Uniform Hospital Discharge Data Set (UHDDS) Definitions
    Because the assignment of a case to a particular LTC-DRG will help 
determine the amount that will be paid for the case, it is important 
that the coding is accurate. Classifications and terminology used in 
the LTCH PPS are consistent with the ICD-9-CM and the UHDDS, as 
recommended to the Secretary by the National Committee on Vital and 
Health Statistics (``Uniform Hospital Discharge Data: Minimum Data Set, 
National Center for Health Statistics, April 1980'') and as revised in 
1984 by the Health Information Policy Council (HIPC) of the U.S. 
Department of Health and Human Services.
    We wish to point out that the ICD-9-CM coding terminology and the 
definitions of principal and other diagnoses of the UHDDS are 
consistent with the requirements of the HIPPA Administrative 
Simplification Act of 1996 (45 CFR Part 162). Furthermore, the UHDDS 
has been used as a standard for the development of policies and 
programs related to hospital discharge statistics by both governmental 
and nongovernmental sectors for over 30 years. In addition, the 
following definitions (as described in the 1984 Revision of the UHDDS, 
approved by the Secretary of Health and Human Services for use starting 
January 1986) are requirements of the ICD-9-CM coding system, and have 
been used as a standard for the development of the CMS-DRGs:
    [sbull] Diagnoses include all diagnoses that affect the current 
hospital stay.
    [sbull] Principal diagnosis is defined as the condition established 
after study to be chiefly responsible for occasioning the admission of 
the patient to the hospital for care.
    [sbull] Other diagnoses (also called secondary diagnoses or 
additional diagnoses) are defined as all conditions that coexist at the 
time of admission, that develop subsequently, or that affect the 
treatment received or the length of stay or both. Diagnoses that relate 
to an earlier episode of care that have no bearing on the current 
hospital stay are excluded.
    [sbull] All procedures performed will be reported. This includes 
those that are surgical in nature, carry a procedural risk, carry an 
anesthetic risk, or require specialized training.
    We provide LTCHs with a 60-day window after the date of the notice 
of the initial LTC-DRG assignment to request review of that assignment. 
Additional information may be provided by the LTCH to the fiscal 
intermediary as part of that review.
2. Maintenance of the ICD-9-CM Coding System
    The ICD-9-CM Coordination and Maintenance (C&M) Committee is a 
Federal interdepartmental committee, co-chaired by the National Center 
for Health Statistics (NCHS) and CMS, that is charged with maintaining 
and updating the ICD-9-CM system. The C&M Committee is jointly 
responsible for approving coding changes, and developing errata, 
addenda, and other modifications to the ICD-9-CM to reflect newly 
developed procedures and technologies and newly identified diseases. 
The C&M Committee is also responsible for promoting the use of Federal 
and non-Federal educational programs and other communication techniques 
with a view toward standardizing coding applications and upgrading the 
quality of the classification system.
    The NCHS has lead responsibility for the ICD-9-CM diagnosis codes 
included in the Tabular List and Alphabetic Index for Diseases, while 
CMS has lead responsibility for the ICD-9-CM procedure codes included 
in the Tabular List and Alphabetic Index for Procedures.
    The C&M Committee encourages participation by health-related 
organizations in the above process and holds public meetings for 
discussion of educational issues and proposed coding changes twice a 
year at the CMS Central Office located in Baltimore, Maryland. The 
agenda and dates of the meetings can be accessed on the CMS Web site 
at: http://www.cms.gov/paymentsystems/icd9.
    All changes to the ICD-9-CM coding system affecting DRG assignment 
are addressed annually in the IPPS proposed and final rules. Because 
the DRG-based patient classification system for the LTCH PPS is based 
on the IPPS DRGs, these changes will also affect the LTCH PPS LTC-DRG 
patient classification system.
    As discussed above, the ICD-9-CM coding changes that have been 
adopted by the C&M Committee become effective at the beginning of each 
Federal fiscal year, October 1. Regardless of the proposed change to 
the annual update of the LTCH PPS year to July 1, we are proposing that 
coders would use the most current updated ICD-9-CM coding book from 
October 1 through September 30 of each year. This would mean that 
coders and LTCHs that use the updated ICD-9-CM coding system would be 
on the same schedule (effective October 1) as the rest of the health 
care industry. The newest version of ICD-9-CM is not available for use 
until October 1, which would be 4 months after the date that we are 
proposing to publish the LTCH annual payment rate update final rule. 
The new codes on which the LTC-DRGs are based would go into effect and 
be available for use for discharges occurring on or after October 1 
through September 30 of each year. This annual schedule of the revision 
to the ICD-9-CM coding system and the change of the ICD-9-CM coding 
books or electronic coding programs has been in effect since the 
adoption of Revision 9 of the ICD in 1979.
    Of particular note to LTCHs will be the invalid diagnosis codes 
(Table 6C) and the invalid procedure codes (Table 6D) located in the 
annual proposed and final rules for the IPPS. Claims with invalid codes 
will not be processed by the Medicare claims processing system.
3. Coding Rules and Use of ICD-9-CM Codes in LTCHs
    We emphasize the need for proper coding by LTCHs. Inappropriate 
coding of cases can adversely affect the uniformity of cases in each 
LTC-DRG and produce inappropriate weighting factors at recalibration. 
We continue to urge LTCHs to focus on improved coding practices. 
Because of concerns raised by LTCHs concerning correct coding, we have 
asked the American Hospital Association (AHA) to provide additional 
clarification or instruction on proper coding in the LTCH setting. The 
AHA will provide this instruction via their established process of 
addressing questions through their publication ``Coding Clinic for ICD-
9-CM''. Written questions or requests for clarification may be 
addressed to the Central Office on ICD-9-CM, American Hospital 
Association, One North Franklin, Chicago, IL 60606. A form for the 
question(s) is available to be downloaded and mailed on AHA's Web site 
at: http://www.ahacentraloffice.org. In addition, current coding 
guidelines are available at the National Center for Health Statistics 
(NCHS) Web site:

[[Page 11242]]

http://www.cdc.gov/nchs.icd9.htm.
    In conjunction with the cooperating parties of the C&M Committee 
(AHA, AHIMA, and NCHS), we have reviewed actual medical records and are 
concerned about the quality of the documentation under the LTCH PPS, as 
was the case at the beginning of the IPPS. We fully believe that, with 
experience, the quality of the documentation and coding will improve, 
just as it did for the IPPS. As noted above, the cooperating parties 
have plans to assist their members with improvement in documentation 
and coding issues for the LTCHs through specific questions and coding 
guidelines. The importance of good documentation is emphasized in the 
revised ICD-9-CM Official Guidelines for Coding and Reporting (October 
1, 2002): ``A joint effort between the attending physician and coder is 
essential to achieve complete and accurate documentation, code 
assignment, and reporting of diagnoses and procedures. The importance 
of consistent, complete documentation in the medical record cannot be 
overemphasized. Without such documentation, the application of all 
coding guidelines is a difficult, if not impossible, task. (Coding 
Clinic for ICD-9-CM, Fourth Quarter 2002, page 115)
    To improve medical record documentation, LTCHs should be aware that 
if the patient is being admitted for continuation of treatment of an 
acute or chronic condition, guidelines at Section I.B.10 of the Coding 
Clinic for ICD-9-CM, Fourth Quarter 2002 (page 129) are applicable 
concerning selection of principal diagnosis. To clarify coding advice 
issued in the August 30, 2002 final rule (67 FR 55979-55981), we would 
like to point out that, at Guideline I.B.12, Late Effects, a late 
effect is considered to be the residual effect (condition produced) 
after the acute phase of an illness or injury has terminated (Coding 
Clinic for ICD-9-CM, Fourth Quarter 2002, page 129). We have received 
question regarding whether a LTCH should report the ICD-9-CM code(s) 
for an unresolved acute condition instead of the code(s) for late 
effect or rehabilitation. Depending on the documentation in the medical 
record, either code could be appropriate in a LTCH. Since 
implementation of the LTCH PPS, our Medicare fiscal intermediaries have 
been conducting training and providing assistance to LTCHs in correct 
coding. We have also issued manuals containing procedures as well as 
coding instructions to LTCHs and fiscal intermediaries. We will 
continue to conduct such training and provide guidance on an as-needed 
basis. We also refer readers to the detailed discussion on correct 
coding practices in the August 30, 2002 final rule (67 FR 55979-55981).

F. Proposed Changes to the Method for Updating the LTC-DRG Relative 
Weights

    As previously discussed, under the LTCH PPS, each LTCH will receive 
a payment that represents an appropriate amount for the efficient 
delivery of care to Medicare patients. The system must be able to 
account adequately for each LTCH's case-mix in order to ensure both 
fair distribution of Medicare payments and access to adequate care for 
those Medicare patients whose care is more costly. Therefore, in 
accordance with Sec.  412.523(c), we adjust the standard Federal PPS 
rate by the LTC-DRG relative weights in determining payment to LTCHs 
for each case.
    Under this payment system, relative weights for each LTC-DRG are a 
primary element used to account for the variations in cost per 
discharge and resource utilization among the payment groups (Sec.  
412.515). To ensure that Medicare patients who are classified to each 
LTC-DRG have access to an appropriate level of services and to 
encourage efficiency, we calculate a relative weight for each LTC-DRG 
that represents the resources needed by an average inpatient LTCH case 
in that LTC-DRG. For example, cases in a LTC-DRG with a relative weight 
of 2 will, on average, cost twice as much as cases in a LTC-DRG with a 
weight of 1.
    As we discussed in the August 30, 2002 final rule (67 FR 55984-
55995), the LTC-DRG relative weights effective under the LTCH PPS for 
Federal FY 2003 were calculated using the March 2002 update of FY 2001 
MedPAR data and Version 20.0 of the CMS GROUPER software. We use total 
days and total charges in the calculation of the LTC-DRG relative 
weights.
    By nature, LTCHs often specialize in certain areas, such as 
ventilator-dependent patients and rehabilitation and wound care. Some 
case types (DRGs) may be treated, to a large extent, in hospitals that 
have, from a perspective of charges, relatively high (or low) charges. 
Such distribution of cases with relatively high (or low) charges in 
specific LTC-DRGs has the potential to inappropriately distort the 
measure of average charges. To account for the fact that cases may not 
be randomly distributed across LTCHs, we use a hospital-specific 
relative value method to calculate relative weights. We believe this 
method removes this hospital-specific source of bias in measuring 
average charges. Specifically, we reduce the impact of the variation in 
charges across providers on any particular LTC-DRG relative weight by 
converting each LTCH's charge for a case to a relative value based on 
that LTCH's average charge. (See the August 30, 2002 final rule (67 FR 
55985) for further information of the hospital-specific relative value 
methodology.)
    In order to account for LTC-DRGs with low volume (that is, with 
fewer than 25 LTCH cases), we grouped those low volume LTC-DRGs into 
one of five categories (quintiles) based on average charges, for the 
purposes of determining relative weights. For FY 2003 based on the FY 
2001 MedPAR data, we identified 161 LTC-DRGs that contained between 1 
and 24 cases. This list of low volume LTC-DRGs was then divided into 
one of the five low volume quintiles, each containing a minimum of 32 
LTC-DRGs (161/5 = 32 with 1 LTC-DRG as a remainder). Each of the low 
volume LTC-DRGs grouped to a specific quintile received the same 
relative weight and average length of stay using the formula applied to 
the regular LTC-DRGs (25 or more cases), as described below. (See the 
August 30, 2002 final rule (67 FR 55985-55988) for further explanation 
of the development and composition of each of the five low volume 
quintiles for FY 2003.)
    After grouping the cases in the appropriate LTC-DRG, we calculate 
the relative weights by first removing statistical outliers and cases 
with a length of stay of 7 days or less. Next, we adjust the number of 
cases in each LTC-DRG for the effect of short-stay outlier cases under 
Sec.  412.529. The short-stay adjusted discharges and corresponding 
charges were used to calculate ``relative adjusted weights'' in each 
LTC-DRG using the hospital-specific relative value method described 
above. (See the August 30, 2002 final rule (67 FR 55989-55995) for 
further details on the steps for calculating the LTC-DRG relative 
weights.)
    We also adjust the LTC-DRG relative weights to account for 
nonmonotonically increasing relative weights. That is, we make an 
adjustment if cases classified to the LTC-DRG ``with comorbidities 
(CCs)'' of a ``with CC''/``without CC'' pair had a lower average charge 
than the corresponding LTC-DRG ``without CCs'' by assigning the same 
weight to both LTC-DRGs in the ``with CC''/``without CC'' pair. (See 
August 30, 2002, 67 FR 55990-55991). In addition, of the 510 LTC-DRGs 
in the LTCH PPS for FY 2003, based on the FY 2001 MedPAR data, we 
identified 159 LTC-DRGs for which there were no LTCH cases in the 
database. That is, no

[[Page 11243]]

patients who would have been classified to those DRGs were treated in 
LTCHs during FY 2001 and, therefore, no charge data were reported for 
those DRGs. Thus, in the process of determining the relative weights of 
LTC-DRGs, we were unable to determine weights for these 159 LTC-DRGs 
using the method described above. However, since patients with a number 
of the diagnoses under these LTC-DRGs may be treated at LTCHs beginning 
in FY 2003, we assigned relative weights to each of the 159 ``no 
volume'' LTC-DRGs based on clinical similarity and relative costliness 
to one of the remaining 351 (510 - 159 = 351) LTC-DRGs for which we 
were able to determine relative weights, based on the FY 2001 claims 
data. (A list of the no volume LTC-DRGs and further explanation of 
their relative weight assignment can be found in the August 30, 2002 
final rule (67 FR 55991-55994).)
    Furthermore, we establish LTC-DRG relative weights of 0.0000 for 
heart, kidney, liver, lung, pancreas, and simultaneous pancreas/kidney 
transplants (LTC-DRGs 103, 302, 480, 495, 512 and 513, respectively) 
because Medicare will only cover these procedures if they are performed 
at a hospital that has been certified for the specific procedures by 
Medicare and presently no LTCH has been so certified. If in the future, 
however, a LTCH applies for certification as a Medicare-approved 
transplant center, we believe that the application and approval 
procedure would allow sufficient time for us to propose appropriate 
weights for the LTC-DRGs effected. At the present time, though, we only 
include these six transplant LTC-DRGs in the GROUPER program for 
administrative purposes because since the LTCH PPS uses the same 
GROUPER program for LTCHs as is used under the IPPS, removing these 
DRGs would be administratively burdensome.
    As we stated previously, we are proposing that we would continue to 
use the same LTC-DRGs and relative weights until October 1, 2003. 
Accordingly, Table 3 in the Addendum to this proposed rule lists the 
LTC-DRGs and their respective relative weights and arithmetic mean 
length of stay that we are proposing would continue to be used for the 
period of July 1, 2003 through September 30, 2003. (This table is the 
same as Table 3 of the Addendum to the August 30, 2002 final rule (67 
FR 56076-56084), except that it includes the proposed five-sixth of the 
average length of stay for short-stay outliers under Sec.  412.529. As 
we noted in section IV.D. of this preamble, we are proposing that the 
final DRGs and GROUPER for FY 2004 that would be used for the IPPS and 
the LTCH PPS, effective October 1, 2003, would be presented in the IPPS 
FY 2004 final rule published no later than August 1, 2003 in the 
Federal Register.
    Accordingly, we would notify LTCHs of the revised LTC-DRG relative 
weights for use in determining payments for discharges occurring 
between October 1, 2003 and September 30, 2004, based on the final DRGs 
and Version 21.0 GROUPER published in the IPPS rule on or before August 
1, 2003.

V. Proposed Policy Change Related to Payments to LTCHs That Are 
Satellite Facilities

    In the March 22, 2002 proposed rule related to the establishment of 
the LTCH PPS (67 FR 13416), we stated that we were considering 
proposing the elimination of the bed limit in Sec.  412.22(h)(2)(i) for 
pre-1997 excluded hospitals once the applicable prospective payment 
system was fully phased in and all payments were based on 100 percent 
of the Federal prospective payment rates. This statement generated a 
number of comments and in the August 30, 2002 final rule (67 FR 56012), 
we stated our agreement with commenters who urged us to adopt a policy 
eliminating the bed-number restrictions for pre-1997 LTCHs with 
satellite facilities, as soon as a LTCH elected to be paid based on 100 
percent of the Federal prospective rate. However, we also noted that we 
would address a change in the policy concerning bed limits in the next 
update of the LTCH PPS. Therefore, we are now proposing to eliminate 
the application of the bed-number restrictions set forth in Sec.  
412.22(h)(i) for LTCHs established prior to 1997 with satellite 
facilities, effective at the start of the first cost reporting year 
that the LTCH is paid under the 100 percent fully Federal prospective 
payment system. This would be either when the LTCH elects to be paid 
based on 100 percent of the Federal prospective rate or when the LTCH 
is transitioned to 100 percent of the Federal prospective rate, 
whichever comes first.
    Presently, section 1886(b)(3) of the Act, as amended by section 
4414 of Pub. L. 105-33, requires existing LTCHs to be subject to caps 
on their target amounts for cost reporting periods beginning on or 
after October 1, 1997 through September 30, 2002. For purposes of 
calculating these caps, the statute required the Secretary to 
``estimate the 75th percentile of the target amounts for such hospitals 
within [each] class for cost reporting periods ending during fiscal 
year 1996.'' Section 1886(b)(3)(H) of the Act, as amended by section 
121 of Pub. L. 106-113, directed the Secretary to provide for an 
appropriate wage adjustment to the caps on the target amounts for 
psychiatric and rehabilitation hospitals and units and LTCHs effective 
for cost reporting periods beginning on or after October 1, 1999 
through September 30, 2002. In addition, payment limits were 
established for new excluded hospitals or units (excluding children's 
hospitals) effective October 1, 1997. For new excluded hospitals (that 
is, post-1997 LTCHs), section 1886(b)(7) of the Act, as added by 
section 4416 of Pub. L. 105-33, specified that the payment amount for 
the facility's first two 12-month cost reporting periods, for which the 
hospital has a settled cost report, must not exceed 110 percent of the 
national median of target amounts of similarly classified hospitals for 
cost reporting periods ending during FY 1996, updated by the hospital 
market basket increase percentage to the first cost reporting period in 
which the hospital receives payment, as adjusted by section 
1886(b)(7)(C) of the Act. The result of section 4414 and 4416 of Pub. 
L. 105-33 was a distinction between the LTCHs established prior to and 
those established after 1997 with lower payment caps for the post-1997 
LTCHs.
    In the July 30, 1999 final rule for the IPPS (64 FR 41532-41533), 
we promulgated regulations at Sec.  412.22(h)(2)(i) to discourage pre-
1997 excluded hospitals, which had the higher caps on target amounts as 
discussed above (under Sec.  413.40(c)(4)(iii), which implemented 
section 4414 of Pub. L. 105-33), from creating satellite arrangements 
rather than establishing new hospitals, in order to avoid the payment 
impact of the lower caps that apply to new hospitals (under Sec.  
413.40(f)(2)(ii) which implemented section 4416 of Pub. L. 105-33). 
Under the July 30, 1999 acute care hospital inpatient final rule (64 FR 
41490), in order to address this possibility of gaming if a pre-1997 
excluded hospital, such as a LTCH, established a satellite facility 
and, in doing so, its total beds, in both the parent hospital (or unit) 
and the satellite facility, exceeded the number of State-licensed and 
Medicare-certified beds in the parent hospital on the last day of its 
last cost reporting period beginning before October 1, 1997, the 
excluded hospital would be paid under the inpatient DRG system instead 
of receiving payment as an excluded hospital under the TEFRA payment 
system. Although the excluded hospital

[[Page 11244]]

could ``transfer'' bed capacity from the parent facility to the 
satellite, it could not increase its total bed capacity beyond the 
level it had in the most recent cost reporting period beginning before 
October 1, 1997, and still be paid as a hospital excluded from the 
IPPS. However, no such limitation was imposed on a LTCH (or other 
excluded facility) established after October 1, 1997 because it would 
have already been subject to the lower payment limits under Sec.  
413.40(f)(2)(ii) of 110 percent of the national median of target 
amounts for similarly classified hospitals. Therefore, it would not 
benefit from the higher 75 percent cap on target amounts under Sec.  
413.40(c)(4) by establishing a satellite facility, as would a pre-1997 
LTCH.
    The rationale for the bed-limit provision based on the distinction 
between these groups of hospitals was the potential for gaming, by 
creating a satellite facility with a higher TEFRA target cap where, in 
reality, the satellite facility should have been a separately certified 
excluded facility, which would have been subject to the lower cap on 
payments to new (post-1997) facilities paid under the TEFRA system. 
Once the LTCH is paid based on 100 percent of the Federal prospective 
rate, however, the LTCH will no longer be subject to TEFRA caps and 
LTCH prospective payments will be the same regardless of when the LTCH 
was established. Therefore, we are proposing to eliminate the bed-limit 
provision once the LTCH is paid based on 100 percent of the LTCH 
Federal PPS rate. Finally, under this proposed policy, the bed 
limitation on ``existing'' LTCHs would, however, continue to apply to 
those LTCHs while they are paid based on the transition blend, and, 
therefore, continue to receive a percentage of their payments based on 
the TEFRA payment rules, until they transition to a rate based on 100 
percent of the Federal prospective payment rate.

VI. Proposed Changes to the LTCH PPS Rates for the Proposed 2004 LTCH 
PPS Rate Year

A. Overview of the Development of the Proposed Payment Rates

    The PPS for LTCHs was effective for cost reporting periods 
beginning on or after October 1, 2002. Effective with that cost 
reporting period, LTCHs are paid, during a 5-year transition period, on 
the basis of an increasing proportion of the LTCH PPS Federal rate and 
a decreasing proportion of a hospital's payment under TEFRA, unless the 
hospital makes a one-time election to receive payment based on 100 
percent of the Federal rate (see Sec.  412.533). New LTCHs (as defined 
at Sec.  412.23(e)(4)) are paid based on 100 percent of the Federal 
rate, with no phase-in transition payments.
    The basic methodology for determining LTCH PPS Federal prospective 
payment rates is set forth in our regulations at Sec. Sec.  412.521 
through 412.529. Below we discuss the factors that we are proposing to 
use to update the LTCH PPS standard Federal rate for the proposed 2004 
LTCH PPS rate year, which would be effective for LTCHs paid under the 
PPS for discharges occurring on or after July 1, 2003 through June 30, 
2004.
    In the August 30, 2002 final rule (67 FR 56029-56031), for cost 
reporting periods beginning on or after October 1, 2002 (FY 2003), we 
computed the LTCH PPS standard Federal payment rate by updating the 
best available (FY 1998 or FY 1999) Medicare inpatient operating and 
capital costs per case data, using the excluded hospital market basket.
    Section 123(a)(1) of Pub. L. 106-113 requires that the PPS 
developed for LTCHs be budget neutral. Therefore, in calculating the 
standard Federal rate for FY 2003 under Sec.  412.523(d)(2), we set 
total estimated PPS payments equal to estimated payments that would 
have been made under the TEFRA methodology if the PPS for LTCHs were 
not implemented. Section 307(a) of Pub. L. 106-554 specified that the 
increases to the hospital-specific target amounts and cap on the target 
amounts for LTCHs for FY 2002 provided for by section 307(a)(1) of Pub. 
L. 106-554 shall not be taken into account in the development and 
implementation of the LTCH PPS. In addition, the statute provides for 
enhanced bonus payments for LTCHs for FY 2001 and FY 2002 provided for 
by section 122 of Pub. L. 106-113. Furthermore, as specified at Sec.  
412.523(d)(1), the standard Federal rate is reduced by an adjustment 
factor to account for the estimated proportion of outlier payments 
under the LTCH PPS to total LTCH PPS payments (8 percent). For further 
details on the development of the FY 2003 standard Federal rate, see 
the August 30, 2002 final rule (67 FR 56027-56037). Under the existing 
regulations at Sec.  412.523(c)(3)(ii) for fiscal years after FY 2003, 
we update the standard Federal rate annually to adjust for the most 
recent estimate of the projected increases in prices for LTCH inpatient 
hospital services.

B. Proposed Update to the Standard Federal Rate for the Proposed 2004 
LTCH PPS Rate Year

    In the August 30, 2002 final rule (67 FR 56033), we established a 
LTCH PPS standard Federal rate of $34,956.15 for FY 2003. Based on the 
most recent estimate of the excluded hospital with capital market 
basket, adjusted to account for the proposed change in the rate year 
update cycle for the LTCH PPS rates discussed in section III. of this 
proposed rule, the proposed LTCH PPS standard Federal rate, effective 
from July 1, 2003 through June 30, 2004, would be $35,726.64 (as 
discussed below).
    In the discussion that follows, we explain how we developed the 
proposed update to the standard Federal rate. The proposed Federal rate 
for the proposed 2004 LTCH PPS rate year is calculated based on the 
proposed update factor of 1.0250. Thus, the proposed standard Federal 
rate for the proposed 2004 LTCH PPS rate year would increase 2.2 
percent compared to the FY 2003 standard Federal rate.
1. Proposed Standard Federal Rate Update
    In the August 30, 2002 final rule, we established in Sec.  412.523 
that, for years after FY 2003, the annual update to the LTCH PPS 
standard Federal rate will be equal to the percentage change in the 
excluded hospital with capital market basket (described in further 
detail below). As we discussed in the August 30, 2002 final rule (67 FR 
56087), in the future we may propose to develop a framework to update 
payments to LTCHs that would account for other appropriate factors that 
affect the efficient delivery of services and care provided to Medicare 
patients. Because the LTCH PPS has only been implemented for cost 
reporting periods beginning on or after October 1, 2002, we have not 
yet collected sufficient data to allow for the analysis and development 
of an update framework under the LTCH PPS. Therefore, at this time, we 
are not proposing an update framework for the LTCH PPS. However, a 
conceptual basis for the proposal of developing an update framework in 
the future can be found in Appendix B of the August 30, 2002 final rule 
(67 FR 56086-56090).
a. Description of the Proposed Market Basket for LTCHs for the Proposed 
2004 LTCH PPS Rate Year
    A market basket has historically been used in the Medicare program 
to account for price increases of the services furnished by providers. 
The market basket used for the LTCH PPS includes both operating and 
capital-related costs of LTCHs because the LTCH PPS uses a single 
payment rate for both operating and capital-related costs. The 
development of the LTCH

[[Page 11245]]

PPS standard Federal rate is discussed in further detail in the August 
30, 2002 final rule (67 FR 56027-56037).
    Under the reasonable cost-based TEFRA reimbursement system, the 
excluded hospital market basket was used to update the hospital-
specific limits on payment for operating costs of LTCHs. The excluded 
hospital market basket is based on operating costs from FY 1992 cost 
report data and includes Medicare-participating long-term care, 
rehabilitation, psychiatric, cancer, and children's hospitals. Since 
LTCHs' costs are included in the excluded hospital market basket, this 
market basket index, in part, also reflects the costs of LTCHs. 
However, in order to capture the total costs (operating and capital-
related) of LTCHs, we added a capital component to the excluded 
hospital market basket for use under the LTCH PPS. We refer to this 
index as the excluded hospital with capital market basket.
    Beginning with the implementation of the LTCH PPS in FY 2003, the 
excluded hospital with capital market basket based on FY 1992 Medicare 
cost report data has been used for updating payments to LTCHs. The FY 
1992-based market basket reflected the distribution of costs in FY 1992 
for Medicare-participating freestanding rehabilitation, long-term care, 
psychiatric, cancer, and children's hospitals. This information was 
derived from the FY 1992 Medicare cost reports. A full discussion of 
the methodology and data sources used to construct the FY 1992-based 
excluded hospital with capital market basket is included in Appendix A 
of the August 30, 2001 final rule (67 FR 56085-56086). In this proposed 
rule, we are proposing to revise and rebase the excluded hospital with 
capital market basket, based on more recent data, to an FY 1997 base 
year for application beginning with the proposed 2004 LTCH PPS rate 
year.
    We believe it is appropriate to propose to rebase the LTCH PPS 
market basket based on the most recent complete data available (FY 
1997) since these data would more accurately reflect LTCH current 
costs. This proposed rebasing of the LTCH PPS market basket from an FY 
1992 base year to a FY 1997 base year is consistent with the rebasing 
of both the IPPS and the excluded hospital market basket used under the 
TEFRA payment system for FY 2003, as discussed in the August 1, 2002 
IPPS final rule (67 FR 50032-50047).
    The operating portion of the proposed FY 1997-based excluded 
hospital with capital market basket that we are proposing to use under 
the LTCH PPS is derived from the FY 1997-based excluded hospital market 
basket used under the TEFRA payment system. The methodology we proposed 
to use to develop the proposed operating portion of the market basket 
under the LTCH PPS is the same methodology used to describe the 
rebasing of the excluded hospital market basket used under the TEFRA 
payment system, which is described in greater detail in the August 1, 
2002 IPPS final rule (67 FR 50042-50044). In brief, the operating cost 
category weights in the FY 1997-based excluded market basket added to 
100.0. These weights were determined from FY 1997 Medicare cost report 
data, the 1997 Business Expenditure Survey, and the 1997 Annual Input-
Output data from the Bureau of the Census. In this proposed rule, in 
applying the proposed FY 1997-based market basket we are proposing to 
make the same two methodological revisions that we established when we 
rebased the hospital inpatient market basket and the excluded hospital 
market basket in the August 1, 2002 IPPS final rule: (1) Changing the 
wage and benefit price proxies to use the Employment Cost Index (ECI) 
wage and benefit data for hospital workers; and (2) adding a cost 
category for blood and blood products.
    When we add the weight for capital costs to the excluded hospital 
market basket, the sum of the operating and capital weights must still 
equal 100.0. Based on FY 1997 Medicare cost reports for excluded 
hospitals, the capital cost weight would be 8.968 percent. Because 
capital costs would account for 8.968 percent of total costs for 
excluded hospitals in FY 1997, operating costs must, therefore, account 
for 91.032 percent (100 percent-8.968 percent). Each operating cost 
category weight in the FY 1997-based excluded hospital market basket 
from the August 1, 2002 IPPS final rule (67 FR 50442-50444) was 
multiplied by 0.91032 to determine its weight in the FY 1997-based 
excluded hospital with capital market basket.
    The aggregate capital component of the proposed FY 1997-based 
excluded hospital market basket (8.968 percent) was determined from the 
same set of Medicare cost reports used to derive the operating 
component. The detailed capital cost categories of depreciation, 
interest, and other capital expenses were also determined using the 
Medicare cost reports. We needed to determine two sets of weights for 
the capital portion of the proposed revised and rebased market basket. 
The first set of weights identifies the proportion of capital 
expenditures attributable to each capital cost category; the second set 
represents relative vintage weights for depreciation and interest. The 
vintage weights identify the proportion of capital expenditures that is 
attributable to each year over the useful life of capital assets within 
a cost category (See 67 FR 50046-50047, August 1, 2002, for a 
discussion of how vintage weights are determined).
    The cost categories, price proxies, and base-year FY 1992 and 
proposed FY 1997 weights for the proposed excluded hospital with 
capital market basket are presented below in Table I. The vintage 
weights for the proposed FY 1997-based excluded hospital with capital 
market basket are presented in Table II.

 Table I.--Proposed Excluded Hospital With Capital Input Price Index (FY 1992-Based and Proposed FY 1997-Based)
                                              Structure and Weights
----------------------------------------------------------------------------------------------------------------
                                                               Weights (%), base-year     Proposed weights (%)
          Cost category               Price/wage variable            FY 1992 1 2          base-year FY 1997 1 2
----------------------------------------------------------------------------------------------------------------
Total............................                             100.000                   100.000
Compensation.....................                             57.935                    57.579
    Wages and Salaries...........  ECI--Wages and Salaries,   47.417                    47.335
                                    Civilian Hospital
                                    Workers.
    Employee Benefits............  ECI--Benefits, Civilian    10.519                    10.244
                                    Hospital Workers to
                                    Capture Total Costs.
Professional fees: Non-Medical...  ECI--Compensation:         1.908                     4.423
                                    Professional & Technical.
Utilities........................  .........................  1.524                     1.180
    Electricity..................  PPI--Commercial Electric   0.916                     0.726
                                    Power.
    Fuel Oil, Coal, etc..........  PPI--Commercial Natural     0.365                     0.248
                                    Gas.
    Water and Sewerage...........  CPI-U--Water & Sewerage     0.243                     0.206
                                    Maintenance.

[[Page 11246]]

 
Professional Liability Insurance.  CMS--Professional           0.983                     0.733
                                    Liability Insurance
                                    Premiums Index.
All Other Products and Services..                              28.571                    27.117
    All Other Products...........                              22.027                    17.914
        Pharmaceuticals..........  PPI--Ethical                2.791                     6.318
                                    (Prescription) Drugs.
        Food: Direct Purchase....  PPI--Processed Foods and    2.155                     1.122
                                    Feeds.
        Food: Contract Service...  CPI-U--Food Away from       0.998                     1.043
                                    Home.
        Chemicals................  PPI--Industrial Chemicals   3.413                     2.133
        Blood and Blood Products.  PPI--Blood and Blood                                  0.748
                                    Derivatives, Human Use.
        Medical Instruments......  PPI--Medical Instruments    2.868                     1.795
                                    & Equipment.
        Photographic Supplies....  PPI--Photographic           0.364                     0.167
                                    Supplies.
        Rubber and Plastics......  PPI--Rubber & Plastic       4.423                     1.366
                                    Products.
        Paper Products...........  PPI--Converted Paper and    1.984                     1.110
                                    Paperboard Products.
        Apparel..................  PPI--Apparel.............   0.809                     0.478
        Machinery and Equipment..  PPI--Machinery &            0.193                     0.852
                                    Equipment.
        Miscellaneous Products...  PPI--Finished Goods Less    2.029                     0.783
                                    Food and Energy.
    All Other Services...........                              6.544                     9.203
        Telephone................  CPI-U--Telephone Services   0.574                     0.348
        Postage..................  CPI-U--Postage...........   0.268                     0.702
        All Other: Labor           ECI--Compensation for       4.945                     4.453
         Intensive.                 Private Service
                                    Occupations.
        All Other: Non-Labor       CPI-U--All Items.........   0.757                     3.700
         Intensive.
Capital-Related Costs............                              9.080                     8.968
    Depreciation.................                              5.611                     5.586
        Building & Fixed           Boeckh-Institutional        3.570                     3.503
         Equipment.                 Construct. Index--
                                    Vintage Weighted (23
                                    years).
        Movable Equipment........  PPI--Machinery &            2.041                     2.083
                                    Equipment--Vintage
                                    Weighted (11 Years).
    Interest Costs...............                              3.212                     2.682
        Government/ Nonprofit....  Yield on Domestic           2.730                     2.280
                                    Municipal Bonds (Bond
                                    Buyer 20 Bonds)--Vintage
                                    Weighted (23 years).
        For-profit...............  Yield on Moody's Aaa        0.482                     0.402
                                    Bonds--Vintage Weighted
                                    (23 Years).
        Other Capital-Related      CPI-U--Residential Rent..   0.257                     0.699
         Costs.
----------------------------------------------------------------------------------------------------------------
\1\ The operating cost category weights in the excluded hospital market basket described in the August 1, 2002
  final rule (67 FR 50042-50044) add to 100.0. When we add an additional set of cost category weights (total
  capital weight = 8.968 percent) to this original group, the sum of the weights in the new index must still add
  to 100.0. Capital costs account for 8.968 percent of the market basket; operating costs account for 91.032
  percent. Each weight in the FY 1997-based excluded hospital market basket from the August 1, 2002 final rule
  (67 FR 50042-50044) was multiplied by 0.91032 to determine its weight in the proposed FY 1997-based excluded
  hospital with capital market basket.
\2\ Weights may not sum to 100.0 due to rounding.


Table II.--Proposed Excluded Hospital With Capital Input Price Index (FY
                          1997) Vintage Weights
------------------------------------------------------------------------
                                       Building                Interest:
                                       and fixed    Movable    capital-
 Year (from farthest to most recent)   equipment   equipment    related
                  *                    (23-year    (11-year    (23-year
                                      weights) *  weights) *  weights) *
------------------------------------------------------------------------
1...................................      0.018       0.063       0.007
2...................................      0.021       0.068       0.009
3...................................      0.023       0.074       0.011
4...................................      0.025       0.080       0.012
5...................................      0.026       0.085       0.014
6...................................      0.028       0.091       0.016
7...................................      0.030       0.096       0.019
8...................................      0.032       0.101       0.022
9...................................      0.035       0.108       0.026
10..................................      0.039       0.114       0.030
11..................................      0.042       0.119       0.035
12..................................      0.044   ..........      0.039
13..................................      0.047   ..........      0.045
14..................................      0.049   ..........      0.049
15..................................      0.051   ..........      0.053
16..................................      0.053   ..........      0.059
17..................................      0.057   ..........      0.065
18..................................      0.060   ..........      0.072
19..................................      0.062   ..........      0.077
20..................................      0.063   ..........      0.081
21..................................      0.065   ..........      0.085

[[Page 11247]]

 
22..................................      0.064   ..........      0.087
23..................................      0.065   ..........      0.090
                                     -------------
    Total...........................      1.0000      1.0000      1.0000
------------------------------------------------------------------------
* Weights may not sum to 1.000 due to rounding.

    Table III. compares the FY 1992-based excluded hospital with 
capital market basket to the proposed FY 1997-based excluded hospital 
with capital market basket. As shown in the table, the proposed rebased 
and revised market basket grows slightly faster over the FY 1999-2001 
period than the FY 1992-based market basket. The major reason for this 
was the switching of the wage and benefit proxy to the ECI for hospital 
workers from the previous occupational blend. This revision had a 
similar impact on the IPPS and excluded market baskets, as described in 
the August 1, 2002 final rule (67 FR 50043-50047).

 Table III.--Percent Changes in the FY 1992-Based and Proposed FY 1997-
   Based Excluded Hospital with Capital Market Baskets, FYs 1999-2004
------------------------------------------------------------------------
                                                    Percentage change
                                               -------------------------
                                                  FY 1992-     Proposed
                                                   based      rebased FY
               Fiscal year (FY)                   excluded    1997-based
                                                  hospital     excluded
                                                   market       market
                                                   basket       basket
------------------------------------------------------------------------
1999..........................................          2.3          2.7
2000..........................................          3.4          3.1
2001..........................................          3.9          4.0
Average historical............................          3.2          3.3
2002..........................................          2.8          3.7
2003..........................................          2.8          3.1
2004..........................................          3.0          3.3
Average forecast..............................          2.9          3.3
------------------------------------------------------------------------

    In the August 30, 2002 LTCH PPS final rule (67 FR 56016 and 56085-
56086), we discussed why we believe the excluded hospital with capital 
market basket provides a reasonable measure of the price changes facing 
LTCHs. However, we have been researching the feasibility of developing 
a market basket specific to LTCH services. This research has included 
analyzing data sources for cost category weights, specifically the 
Medicare cost reports, and investigating other data sources on cost, 
expenditure, and price information specific to LTCHs. Based on this 
research (as discussed below), at this time we are not proposing to 
develop a market basket specific to LTCH services.
    Our analysis of the Medicare cost reports indicates that the 
distribution of costs among major cost report categories (wages, 
pharmaceuticals, capital) for LTCHs is not substantially different from 
the proposed 1997-based excluded hospital with capital market basket 
presented in this proposed rule. Data on other major cost categories 
(benefits, blood, contract labor) that we would like to analyze were 
excluded by many LTCHs in their Medicare cost reports. An analysis 
based on only the data available to us for these cost categories 
presented a potential problem since no other major cost category weight 
would be based on LTCH data.
    We conducted a sensitivity analysis of annual percent changes in 
the market basket when the weights for wages, pharmaceuticals, and 
capital in LTCHs were substituted into the excluded hospital with 
capital market basket. Other cost categories were recalibrated using 
ratios available from the IPPS market basket. On average between FY 
1995 and FY 2002, the proposed excluded hospital with capital market 
basket shows increases at nearly the same average annual rate (2.9 
percent) as the market basket with LTCH weights for wages, 
pharmaceuticals, and capital (2.8 percent). This difference is less 
than the 0.25 percentage point criterion that determines whether a 
forecast error adjustment is warranted under the IPPS update framework.
    We believe that an excluded hospital with capital market basket 
adequately reflects the price changes facing LTCHs. We will continue to 
solicit comments about issues particular to LTCHs that should be 
considered in relation to the proposed FY 1997-based excluded hospital 
with capital market basket and to encourage suggestions for additional 
data sources that may be available.
    b. Proposed LTCH Market Basket Increase for the Proposed 2004 LTCH 
PPS Rate Year
    As stated earlier, for LTCHs paid under the LTCH PPS, we are 
proposing that the 2004 rate year update would apply to discharges 
occurring from July 1, 2003 through June 30, 2004. Because we are 
proposing to change the timeframe of the standard Federal rate annual 
update, we needed to calculate an update factor that would reflect this 
proposed change in the update cycle. Presently, the current rate cycle 
is October 1, 2002 through September 30, 2003. This means that the 
standard Federal rate ($34.956.15; see the August 30, 2002 final rule, 
67 FR 56033) was determined based on the market basket increase through 
September 30, 2003. Since we are proposing to change the rate update 
cycle and, therefore, update the standard Federal rate 3 months earlier 
(that is, July 1, 2003 instead of October 1, 2003), we need to propose 
an adjustment to the projected full (12-month) market basket increase 
to eliminate the projected increase for the 3-month overlapping period 
(July 1, 2003 through September 30, 2003).
    Thus, we needed to account for the fact that the FY 2003 standard 
Federal rate of $34,956.15 already includes an update for the 3-month 
period from July 1, 2003 through September 30, 2003. In the absence of 
this proposed change, the update for FY 2004 would have been calculated 
using the estimated increase between FY 2003 and FY 2004. For the 
proposed update for the proposed 2004 LTCH PPS rate year, we calculated 
the estimated increase between FY 2003 and the proposed 2004 LTCH PPS 
rate year. Based on the fourth quarter 2002 forecast of the proposed 
rebased FY 1997-based excluded hospital with capital market basket, 
this calculation results in an increase that is 0.8 percentage points 
less than it would have been if the proposed change in the LTCH PPS 
rate cycle would not be made. The projected market basket increase for 
this 3-month period (0.8

[[Page 11248]]

percent) was already included in the FY 2003 standard Federal rate and, 
therefore, needs to be deducted from the projected market basket 
increase for the 12-month period of July 1, 2003 through June 30, 2004 
(3.3 percent) in order to account for the proposed change in the update 
cycle.
    Consistent with our historical practice of estimating market basket 
increases, based on Global Insights' (formerly DRI-WEFA) fourth quarter 
2002 forecast of the proposed rebased FY 1997-based excluded hospital 
with capital market basket, we are proposing an update of 2.5 percent, 
as shown in Table IV. below.

    Table IV.--Calculation of Proposed Market Basket Increase for the
         Proposed 2004 LTCH Prospective Payment System Rate Year
------------------------------------------------------------------------
                                                                 Percent
------------------------------------------------------------------------
Proposed 2004 rate year full market basket with capital              3.3
 increase*....................................................
Adjustment for the proposed change in the update cycle**......      -0.8
Proposed 2004 market basket increase..........................      2.5
------------------------------------------------------------------------
\*\ Projected market basket increase for the 12-month period of July 1,
  2003 through June 30, 2004.
\**\ Projected market basket increase for the 3-month period of July 1,
  2003 through September 30, 2003 already included in the FY 2003
  standard Federal rate.

    In addition, based on the best available data for 194 LTCHs, we 
estimate that LTCH prospective payment system payments would be $1.960 
billion for the proposed 2004 LTCH prospective payment system rate 
year. As indicated previously, we are proposing to update the FY 2003 
standard Federal rate and wage index data 3 months early (July 1, 2003 
instead of October 1, 2003). We are proposing that this change be 
budget neutral because, as we discussed in the August 30, 2002 final 
rule (67 FR 56027), total estimated LTCH PPS payments in FY 2003 will 
equal estimated payments that would have been made under the reasonable 
cost-based principles if the LTCH PPS were not implemented. Based on 
the most recent data, for the 3-month period from July 1, 2003 through 
September 30, 2003, the proposed increase in the standard Federal rate 
would result in an additional cost of $5.66 million to the FY 2003 
Federal budget. Accordingly, in order to maintain budget neutrality for 
the proposed change in the rate update cycle, under proposed Sec.  
412.523(c)(3)(ii), we are proposing to adjust the standard Federal rate 
by a factor of 0.997 (($1.960 billion--$5.66 million)/$1.960 billion) 
or -0.003. Also, we propose to revise this adjustment factor in the 
final rule based on the best available data.
    Therefore, we are proposing to update the current standard Federal 
rate ($34,956.15) established in the August 30, 2002 final rule (67 FR 
56033) by 2.2 percent (2.5 percent minus 0.3 percent) for discharges 
paid under the LTCH PPS that occur on or after July 1, 2003 through 
June 30, 2004. This proposed update represents the most recent estimate 
of the increase in the excluded hospital with capital market basket for 
the proposed 2004 LTCH PPS rate year, adjusted by the above described 
factor to transition to the proposed change in the rate update cycle to 
July 1, and is based on the best available data for 194 LTCHs.
2. Proposed Standard Federal Rate for the Proposed 2004 LTCH PPS Rate 
Year
    In the August 30, 2002 LTCH PPS final rule (67 FR 56033), we 
established a standard Federal rate of $34,956.15. For the proposed 
2004 LTCH PPS rate year, we are proposing a standard Federal rate of 
$35,726.64. Since the proposed standard Federal rate has already been 
adjusted for differences in case-mix, wages, cost-of-living, and high-
cost outlier payments, we are not proposing any additional adjustments 
in the proposed standard Federal rate for these factors.

C. Calculation of Proposed LTCH Prospective Payments for the Proposed 
2004 LTCH PPS Rate Year

    The basic methodology for determining prospective payment rates for 
LTCH inpatient operating and capital-related costs is set forth in 
Sec.  412.521. In accordance with Sec.  412.515, we assign appropriate 
weighting factors to each LTC-DRG to reflect the estimated relative 
cost of hospital resources used for discharges within that group as 
compared to discharges classified within other groups. The amount of 
the prospective payment is based on the standard Federal rate, 
established under Sec.  412.523, and adjusted for the LTC-DRG relative 
weights, differences in area wage levels, cost-of-living in Alaska and 
Hawaii, high-cost outliers, and other special payment provisions 
(short-stay outliers under Sec.  412.529 and interrupted stays under 
Sec.  412.531). In accordance with Sec.  412.533, during the 5-year 
transition period, payment is based on the applicable transition blend 
percentage of the adjusted Federal rate and the TEFRA rate unless the 
LTCH makes a one-time election to receive payment based on 100 percent 
of the Federal rate. A LTCH defined as ``new'' under Sec.  412.23(e)(4) 
is paid based on 100 percent of the Federal rate with no blended 
transition payments (Sec.  412.533(d)). As discussed in the August 30, 
2002 final rule and in accordance with Sec.  412.533(a), the applicable 
transition blends are as follows:

------------------------------------------------------------------------
                                                    Federal
  Cost reporting periods beginning on or after       rate     TEFRA rate
                                                  percentage  percentage
------------------------------------------------------------------------
Oct. 1, 2002....................................         20          80
Oct. 1, 2003....................................         40          60
Oct. 1, 2004....................................         60          40
Oct. 1, 2005....................................         80          20
Oct. 1, 2006....................................        100           0
------------------------------------------------------------------------

    Accordingly, for cost reporting periods beginning during FY 2003 
(that is, on or after October 1, 2002, and before September 30, 2003), 
blended payments under the transition methodology are based on 80 
percent of the LTCH's TEFRA rate and 20 percent of the adjusted Federal 
rate. For cost reporting periods beginning during FY 2004 (that is, on 
or after October 1, 2003 and before September 30, 2004), blended 
payments under the transition methodology will be based on 60 percent 
of the LTCH's TEFRA rate and 40 percent of the adjusted Federal rate.
1. Proposed Adjustment for Area Wage Levels
    Under the authority of section 307(b) of Pub. L. 106-554, we 
established an adjustment to account for differences in LTCH area wage 
levels under Sec.  412.525(c) using the labor-related share estimated 
by the excluded hospital market basket with capital and wage indices 
that were computed using wage data from acute care inpatient hospitals 
without regard to reclassification under section 1886(d)(8) or section 
1886(d)(10) of the Act. Furthermore, as we discussed in the August 30, 
2002 final rule (67 FR 56015-56019), we established a 5-year transition 
to the full wage adjustment. For cost reporting periods beginning on or 
after October 1, 2002 and before September 30, 2003 (FY 2003), the 
applicable LTCH wage index value is one-fifth of the full FY 2002 acute 
care hospital inpatient wage index data, without taking into account 
geographic reclassification under section 1886(d)(8) and section 
1886(d)(10) of the Act.
    In that same final rule (67 FR 56018), we stated that we would 
continue to reevaluate LTCH data as they become available and would 
propose to adjust the phase-in if subsequent data support

[[Page 11249]]

a change. Because the LTCH PPS was only recently implemented, 
sufficient new data have not been generated that would enable us to 
conduct a comprehensive reevaluation of the appropriateness of 
adjusting the phase-in. However, we have reviewed the most recent data 
available and did not find any evidence to support a change in the 5-
year phase-in of the wage index. Therefore, we are not proposing to 
adjust the phase-in at this time. In addition, as stated earlier, the 
5-year phase-in of the wage index would not be affected by the proposed 
establishment of a LTCH PPS rate year of July 1 to June 30. Instead, 
the 5-year phase-in of the wage index established in the August 30, 
2002 final rule (67 FR 56018) will continue to follow the Federal 
fiscal year. That is, for cost reporting periods beginning on or after 
October 1, 2003 and before September 30, 2004 (FY 2004), the applicable 
proposed LTCH wage index will be two-fifths of the proposed applicable 
LTCH PPS index values discussed below. However, we will reevaluate LTCH 
data as they become available and would propose to adjust the phase-in 
if subsequent data support a change.
    Section 412.525(c) provides that the adjustment to account for 
differences in area wage levels is made by multiplying the labor-
related portion of the Federal rate by the appropriate wage index value 
for the area in which the LTCH is physically located. In the August 30, 
2002 final rule (67 FR 56018), based on the best available data at that 
time, we stated that the wage index adjustment is based on the FY 2002 
inpatient acute care hospital wage index data without taking into 
account geographic reclassification under section 1886(d)(8) and 
section 1886(d)(10) of the Act. For the proposed 2004 LTCH PPS rate 
year, we are proposing that the wage index adjustment provided for 
under Sec.  412.525(c) be based on the most recent available inpatient 
acute care hospital wage data, that is, the FY 2003 inpatient acute 
care hospital wage index data without taking into account geographic 
reclassification under section 1886(d)(8) and section 1886(d)(10) of 
the Act. As we noted above, the 5-year phase-in of the wage index 
adjustment would not be affected by the proposed change in the LTCH PPS 
rate update cycle and will continue to be based on the Federal fiscal 
year. However, we are proposing to update the data used to compute the 
annual wage index values on the proposed 2004 LTCH PPS rate year cycle 
(July through June). For example, for a LTCH with a cost reporting 
period from January 1, 2003 through December 31, 2003, the LTCH will be 
paid using the one-fifth wage index value for its entire cost reporting 
period. For the first 6 months of that period (January 1, 2003 through 
June 30, 2003), the one-fifth wage index value would be based on the FY 
2000 inpatient acute care hospital wage index data without taking into 
account geographic reclassifications under sections 1886(d)(8) and 
(d)(10) of the Act as established in the August 30, 2002 final rule (67 
FR 56018). Under our proposal to update the data used to compute the 
LTCH PPS wage index values for July 1, 2003 through June 30 2004, for 
the next 6 months (July 1, 2003 through December 31, 2003) the LTCH 
would still be paid using one-fifth of the wage index value, but the 
wage index value would now be computed using FY 2003 inpatient acute 
care hospital wage index data without taking into account geographic 
reclassifications under sections 1886(d)(8) and (d)(10) of the Act (as 
shown in Tables 1 and 2 of the Addendum of this proposed rule). For the 
LTCH's cost reporting period from January 1, 2004 through December 31, 
2004, the LTCH would be paid using the two-fifth wage index value. For 
the first 6 months of that period (January 1, 2004 through June 30, 
2004), the two-fifth wage index value would be based on the FY 2000 
inpatient acute care hospital wage index data without taking into 
account geographic reclassifications under sections 1886(d)(8) and 
(d)(10) of the Act, as shown in Tables 1 and 2 of the Addendum of this 
proposed rule.
    In the August 30, 2002 final rule (67 FR 56018), for FY 2003 we 
used the FY 2002 inpatient acute care hospital wage index data without 
taking into account geographic reclassifications under sections 
1886(d)(8) and (d)(10) of the Act. The inpatient acute care hospital 
wage index data, without taking into account geographic 
reclassification under section 1886(d)(8) or section 1886(d)(10) of the 
Act, is also used under other postacute care PPSs, such as the IRF PPS 
and the SNF PPS. As we discussed in the August 30, 2002 final rule (67 
FR 56019), since hospitals that are excluded from the IPPS are not 
required to provide wage-related information on the Medicare cost 
report and we would need to establish instructions for the collection 
of such LTCH data in order to establish a geographic reclassification 
adjustment under the LTCH PPS, the wage adjustment established under 
the LTCH PPS is based on a LTCH's actual location without regard to the 
urban or rural designation of any related or affiliated provider. In 
this proposed rule, for the proposed 2004 LTCH PPS rate year, we are 
proposing to use the FY 2000 inpatient acute care hospital wage index 
data without taking into account geographic reclassifications under 
sections 1886(d)(8) and (d)(10) of the Act, because it is the most 
recent available complete data. This is the same wage data that were 
used to compute the FY 2003 wage indices currently used under the IPPS. 
The proposed LTCH wage index values for July 1, 2003 through June 30, 
2004 is shown in Table 1 (for urban areas) and Table 2 (for rural 
areas) in the Addendum of this proposed rule. As noted above, for cost 
reporting periods beginning on or after October 1, 2002 and before 
September 30, 2003 (FY 2003), the applicable LTCH wage index is one-
fifth of the full FY 2003 acute care hospital inpatient wage index 
data, without taking into account geographic reclassifications under 
sections 1886(d)(8) and (d)(10) of the Act. For cost reporting periods 
beginning on or after October 1, 2003 and before September 30, 2003 (FY 
2004), the applicable proposed LTCH wage index would be two-fifths of 
the full FY 2003 acute care hospital inpatient wage index data, without 
taking into account geographic reclassification under sections 
1886(d)(8) and (d)(10) of the Act.
    In conjunction with our proposal to rebase the excluded hospital 
with capital market basket from an FY 1992 to an FY 1997 base year (as 
discussed in section VI.B.1.a. of this preamble), we also are proposing 
to use a labor-related share that is determined from our proposed FY 
1997-based excluded hospital with capital market basket. In the August 
30, 2002 final rule (67 FR 56016), we established a labor-related share 
of 72.885 percent based on the relative importance of the labor-related 
share of operating and capital costs of the excluded hospital with 
capital market basket with an FY 1992 base-year. In this proposed rule, 
as discussed in further detail below, we are proposing a labor-related 
share of 72.612 percent based on the relative importance of the labor-
related share of operating costs (wages and salaries, employee 
benefits, professional fees, postal services, and all other labor-
intensive services) and capital costs in the proposed FY 1997 rebased 
excluded hospital with capital market basket.
    To determine the proposed labor-related share, we use the cost 
categories contained in the proposed FY 1997-based excluded hospital 
with capital market basket that are influenced by local labor markets, 
which reflect the different rates of price change for these cost 
categories between the base year

[[Page 11250]]

(FY 1997) and this period. First, we estimate the portion related to 
operating costs, which we estimate to be 69.075 percent for the 
proposed LTCH PPS rate year of July 1, 2003 through June 30, 2004, 
calculated based on the Medicare cost reports for excluded hospitals as 
the sum of the relative importance for wages and salaries (48.967), 
employee benefits (11.032), professional fees (4.518), and labor-
intensive services (4.558), as shown in Table V. The labor-related 
share of capital costs in the market basket needed to be considered as 
well. After an analysis of FY 1997 Medicare cost report data, we found 
no evidence to revise our current estimate of the portion of capital 
costs that is influenced by local labor markets of 46 percent (see 67 
FR 56016, August 30, 2002). Based on the proposed change in the LTCH 
PPS rate update cycle, the relative importance of capital is estimated 
to be 7.692 percent. Because the relative importance of capital is 
7.692 percent of the proposed FY 1997-based excluded hospital with 
capital market basket for the proposed 2004 LTCH PPS rate year, we 
multiplied 46 percent by 7.692 percent to determine the labor-related 
share of capital costs to be 3.538 percent. We then added the 3.543 
that was calculated for capital costs to the 69.075 percent that was 
calculated for operating costs to determine the total labor-related 
relative importance of 72.612. Therefore, we are proposing to use a 
labor-related share of 72.612 percent for the proposed 2004 LTCH PPS 
rate year.

       Table V.--Proposed Labor-Related Share Relative Importance
------------------------------------------------------------------------
                                          Relative          Relative
                                        importance FY     importance FY
                                         1992-based        1997-based
            Cost category               market basket     market basket
                                       (proposed 2004    (proposed 2004
                                        LTCH PPS rate     LTCH PPS rate
                                            year)             year)
------------------------------------------------------------------------
Wages and salaries..................            50.572           48.967
Employee benefits...................            11.882           11.032
Professional fees...................             2.052            4.518
Postage.............................             0.254  ................
All other labor intensive services..             5.242            4.558
    Subtotal........................            70.001           69.075
                                     -------------------
Labor-related share of capital costs             3.412            3.538
                                     -------------------
    Total...........................            73.413           72.612* 
------------------------------------------------------------------------
\*\ Although the weights of the cost categories appear to add to 76.213,
  this is due to rounding; the actual labor-related share is 72.61246.

2. Proposed Adjustment for Cost-of-Living in Alaska and Hawaii
    Under Sec.  412.525(b), we make a cost-of-living adjustment (COLA) 
for LTCHs located in Alaska and Hawaii to account for the higher costs 
incurred in those States.
    For the proposed 2004 LTCH PPS rate year, under Sec.  412.525(b), 
we are proposing to make a COLA to payments for LTCHs located in Alaska 
and Hawaii by multiplying the standard Federal payment rate by the 
appropriate factor listed in Table VI. below. These factors are 
obtained from the U.S. Office of Personnel Management (OPM). If OPM 
releases revised COLA factors before May 1, 2003, we propose to use 
them for the development of payments and will publish them in the final 
rule.

  Table VI.--Proposed Cost-of-Living Adjustment Factors for Alaska and
        Hawaii Hospitals for the Proposed 2004 LTCH PPS Rate Year
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Alaska:
  All areas.....................................................  1.25
Hawaii:
  Honolulu County...............................................  1.25
  Hawaii County.................................................  1.165
  Kauai County..................................................  1.2325
  Maui County...................................................  1.2375
  Kalawao County................................................  1.2375
------------------------------------------------------------------------

3. Proposed Adjustment for High-Cost Outliers
    Under Sec.  412.525(a), we make an adjustment for additional 
payments for outlier cases that have extraordinarily high costs 
relative to the costs of most discharges. Providing additional payments 
for outliers strongly improves the accuracy of the LTCH PPS in 
determining resource costs at the patient and hospital level. These 
additional payments reduce the financial losses that would otherwise be 
caused by treating patients who require more costly care and, 
therefore, reduce the incentives to underserve these patients. We 
include a provision for outlier payments under the LTCH PPS and set the 
outlier threshold before the beginning of the applicable proposed rate 
update year so that total outlier payments are projected to equal 8 
percent of total payments under the LTCH PPS.
    Under Sec.  412.525(a), we make outlier payments for any discharges 
if the estimated cost of a case exceeds the adjusted LTCH PPS payment 
for the LTC-DRG plus a fixed-loss amount. The fixed-loss amount is the 
amount used to limit the loss that a hospital will incur under an 
outlier policy. This results in Medicare and the LTCH sharing financial 
risk in the treatment of extraordinarily costly cases. The LTCH's loss 
is limited to the fixed-loss amount and the percentage of costs above 
the marginal cost factor. We calculate the estimated cost of a case by 
multiplying the overall hospital cost-to-charge ratio by the Medicare 
allowable covered charge. In accordance with Sec.  412.525(a), we pay 
outlier cases 80 percent of the difference between the estimated cost 
of the patient case and the outlier threshold (the sum of the adjusted 
Federal prospective payment for the LTC-DRG and the fixed-loss amount).
    We determine a fixed-loss amount, that is, the maximum loss that a 
LTCH can incur under the PPS for a case with unusually high costs 
before the hospital will receive any additional payments. We calculate 
the fixed-loss amount by simulating aggregate payments with and without 
an outlier policy. The fixed loss amount would result in estimated 
total outlier payments being equal to 8

[[Page 11251]]

percent of projected total LTCH PPS payments.
    Outlier payments under the LTCH PPS are determined consistent with 
the IPPS outlier policy. Currently, under the IPPS, a floor and a 
ceiling are applied to an acute care hospital's cost-to-charge ratio 
and if the acute care hospital's cost-to-charge ratio is either below 
the floor or above the ceiling, the applicable statewide average cost-
to-charge ratio is assigned to the acute care hospital. Similarly, if a 
LTCH's cost-to-charge ratio is below the floor or above the ceiling, 
currently the applicable statewide average cost-to-charge ratio is 
assigned to the hospital. In addition, for LTCHs for which we are 
unable to compute a cost-to-charge ratio, we also assign the applicable 
statewide average. Currently, MedPAR claims data and cost-to-charge 
ratios based on the latest available cost report data from HCRIS and 
corresponding MedPAR claims data are used to establish a fixed-loss 
threshold amount under the LTCH PPS.
    For FY 2003, based on FY 2001 MedPAR claims data and cost-to-charge 
ratios based on the latest available data from HCRIS and corresponding 
MedPAR claims data from FYs 1998 and 1999, we established a fixed-loss 
amount of $24,450. For the proposed 2004 LTCH PPS rate year, we are 
proposing to continue to use the March 2002 update of the FY 2001 
MedPAR claims data to determine a fixed-loss threshold that would 
result in outlier payments being equal to 8 percent of total payments, 
based on the policies described in this proposed rule, because these 
data are the best data available. We would calculate cost-to-charge 
ratios for determining the proposed fixed-loss amount based on the 
latest available cost report data in HCRIS and corresponding MedPAR 
claims data from FYs 1998, 1999, and 2000. Consistent with the proposed 
outlier policy changes for acute care hospitals under the IPPS 
discussed in the March 4, 2003 proposed rule, we are proposing to no 
longer assign the applicable statewide average cost-to-charge ratio 
when a LTCH's cost-to-charge ratio falls below the floor. We are 
proposing this policy change because, as is the case for acute care 
hospitals, we believe LTCHs could arbitrarily increase their charges in 
order to maximize outlier payments. Even though this arbitrary increase 
in charges should result in a lower cost-to-charge ratio in the future 
(due to the lag time in cost report settlement), currently when a 
LTCH's actual cost-to-charge ratio falls below the floor, the LTCH's 
cost-to-charge ratio would be raised to the applicable statewide 
average. This application of the statewide average would result in 
inappropriately higher outlier payments. Accordingly, we are proposing 
to apply the LTCH's actual cost-to-charge ratio to determine the cost 
of the case, even where the LTCH's actual cost-to-charge ratio falls 
below the floor. No longer applying the applicable statewide average 
cost-to-charge ratio when a LTCH's actual cost-to-charge ratio falls 
below the floor would result in a lower future cost-to-charge ratio. 
Applying this lower cost-to-charge ratio to charges in the future to 
determine the cost of the case would result in more appropriate outlier 
payments. Therefore, consistent with the proposed policy change for 
acute care hospitals under the IPPS, we are proposing that LTCHs would 
receive their actual cost-to-charge ratios no matter how low their 
ratios fall. Also, consistent with the proposed policy change for acute 
care hospitals under the IPPS, we are proposing under Sec.  
412.525(a)(4), by cross-referencing proposed Sec.  412.84(i), to 
continue to apply the applicable statewide average cost-to-charge ratio 
when a LTCH's cost-to-charge ratio exceeds the ceiling by adopting the 
proposed policy at proposed Sec.  412.84(i)(1)(ii). Cost-to-charge 
ratios above this range are probably due to faulty data reporting or 
entry, and, therefore, should not be used to identify and make payments 
for outlier cases because such data are clearly errors and should not 
be relied upon. In addition, we are proposing to make a similar change 
to Sec.  412.529(c), by cross-referencing proposed Sec.  412.84(i), for 
determining short-stay outlier payments to indicate that the applicable 
statewide average cost-to-charge ratio would be applied when a LTCH's 
cost-to-charge ratio exceeds the ceiling, but not when a LTCH's cost-
to-charge ratio falls below the floor. Since cost-to-charge ratios are 
also used in determining short-stay outlier payments, the rationale for 
this proposed change mirrors that for high-cost outliers.
    Therefore, consistent with IPPS outlier policy in determining the 
proposed fixed-loss amount for the proposed 2004 LTCH PPS rate year, we 
are proposing to use only the current combined operating and capital 
cost-to-charge ratio ceiling under the IPPS of 1.421 (as explained in 
the acute care hospital inpatient PPS final rule (67 FR 50125, August 
1, 2002)). We believe that using the current combined IPPS operating 
and capital cost-to-charge ratio ceiling for LTCHs is appropriate 
since, as we explained in the August 30, 2002 final rule (67 FR 55960), 
LTCHs are certified as acute care hospitals that meet the criteria set 
forth in section 1861(e) of the Act in order to participate in the 
hospital in the Medicare program. As we also discussed in the August 
30, 2002 final rule (67 FR 55956), in general hospitals are paid as a 
LTCH only because their average length of stay is greater than 25 days 
in accordance with Sec.  412.23(e). Furthermore, prior to qualifying as 
a LTCH under Sec.  412.23(e)(2)(i), the hospitals generally are paid as 
acute care hospitals under the IPPS during the period in which they 
demonstrate that they have an average length of stay of greater than 25 
days. Accordingly, if a LTCH's cost-to-charge ratio is above this 
ceiling, we are proposing to assign the applicable IPPS statewide 
average cost-to-charge ratio. (Currently, the applicable IPPS statewide 
averages can be found in Tables 8A and 8B of the August 1, 2002 IPPS 
final rule (67 FR 50263).) We would also assign the applicable 
statewide average for LTCHs for which we are unable to compute a cost-
to-charge ratio. Accordingly, for the proposed 2004 LTCH PPS rate year, 
we are proposing a fixed-loss amount of $19,978. Thus, we would pay an 
outlier case 80 percent of the difference between the estimated cost of 
the case and the outlier threshold (the sum of the adjusted Federal 
LTCH payment for the LTC-DRG and the proposed fixed-loss amount of 
$19,978).
    As we discussed in section IV.D. of this preamble, the IPPS 
standard Federal rate and relative weights are updated simultaneously, 
effective October 1 of each year, when the new GROUPER with the final 
DRGs and the new relative weights are implemented for that fiscal year. 
The LTCH PPS utilizes the same DRGs and Medicare GROUPER program as the 
IPPS. The GROUPER in effect on July 1, 2003 will be version 20.0. 
Although we are proposing to update the LTCH PPS standard Federal rate 
on July 1, 2003, version 21.0 of the GROUPER will not be available at 
the time the final rule following this proposed rule is published. To 
the extent that the LTC-DRG weights in the version 21.0 GROUPER may 
change, total LTCH PPS payments may also change. Therefore, as 
explained in section IV.F. of this proposed rule, we are not proposing 
an update to the LTC-DRG weights for the period of July 1, 2003 through 
September 30, 2003, and the LTCH PPS would continue to use version 20.0 
of the GROUPER and the LTC-DRG relative weights published in Table 3 of 
the Addendum to the August 30, 2002 final rule (reprinted in Table 3 of 
the Addendum to this proposed rule) for the

[[Page 11252]]

period from July 1, 2003 through September 30, 2003.
    The calculation of the fixed-loss amount is dependent in part on 
the LTC-DRG relative weights because the fixed-loss amount is set so 
that estimated total outlier payments are estimated to be equal to 8 
percent of total LTCH PPS payments. We are proposing to calculate a 
fixed-loss amount that would result in total estimated outlier payments 
being equal to 8 percent of total LTCH PPS payments for the proposed 
2004 LTCH PPS rate year, using the LTC-DRG relative weights based on 
the version 20.0 GROUPER. We are proposing to use the version 20.0 
GROUPER in determining the fixed-loss amount for the period of July 1, 
2003 through June 30, 2004 as it contains the best available data at 
the time the fixed-loss amount is determined.
    As we discuss below, we are not proposing to change the fixed-loss 
amount to account for changes in the version 21.0 GROUPER because we 
believe implementing two fixed-loss amounts would be administratively 
burdensome. Implementing a single fixed-loss amount which would be in 
effect for a full 12 months (July through June) would be consistent 
with other components of the LTCH PPS, such as the standard Federal 
rate and the wage index, both of which would be in effect for a full 
12-month period (July through June). Similarly, the relative weights 
and the GROUPER program are in effect for 12 months (October through 
September). However, because the update to the ICD-9-CM codes, as 
described in section IV.E.2. of this proposed rule, is effective at the 
beginning of the Federal fiscal year, we will continue to update the 
GROUPER and the relative weights on October 1. Furthermore, we do not 
anticipate that the fixed-loss amount calculated using the relative 
weights based on the version 20.0 GROUPER would be significantly 
different from a fixed-loss amount calculated using the relative 
weights based on the version 21.0 GROUPER. We believe this based on the 
fact that the LTCH PPS outlier policy, one component of which is a 
fixed-loss amount, was based on the IPPS outlier policy. The annual 
reclassification and recalibration of DRGs under the IPPS generally 
does not result in a significant impact on the IPPS fixed-loss amount 
(although this impact would vary from year to year depending on the 
actual DRG changes). Therefore, as explained above, we are proposing to 
calculate a single fixed-loss amount for each LTCH PPS rate year based 
on the version of the GROUPER that is in effect as of July 1 of that 
year.
    Since the proposed effective date of the updated LTCH PPS standard 
Federal rate would be July 1, while the updated GROUPER would not be 
effective until October 1, we did consider an alternative proposal that 
would establish two separate fixed-loss amounts: one for July through 
September based on the current GROUPER and another for October through 
June based on the updated GROUPER. We decided not to propose this 
alternative because, as we discussed above, calculating and 
implementing two fixed-loss amounts in one proposed LTCH PPS rate year 
is administratively burdensome.
    As we stated in the August 30, 2002 final rule (67 FR 56026), under 
some rare circumstances, a LTCH discharge could qualify as a short-stay 
outlier case (as defined under Sec.  412.529 and discussed in section 
VI. of this preamble) and also as a high-cost outlier case. In such a 
scenario, a patient could be hospitalized for less than five-sixths of 
the geometric average length of stay for the specific LTC-DRG, and yet 
incur extraordinarily high treatment costs. If the costs exceeded the 
outlier threshold (that is, the short-stay outlier payment plus the 
fixed-loss amount), the discharge would be eligible for payment as a 
high-cost outlier. Thus, for short-stay outlier in the proposed 2004 
LTCH PPS rate year, the high-cost outlier payment would be based on 80 
percent of the difference between the estimated cost of the case plus 
the outlier threshold (the sum of the proposed fixed-loss amount of 
$19,978 and the amount paid under the short-stay outlier policy).
    Under existing regulations at Sec.  412.525(a) (as established in 
the August 30, 2002 LTCH PPS final rule (67 FR 56026)), we specify that 
no retroactive adjustment will be made to the outlier payments upon 
cost report settlement to account for differences between the estimated 
cost-to-charge ratios and the actual cost-to-charge ratios for outlier 
cases. This policy is consistent with the existing outlier payment 
policy for short-term acute care hospitals under the IPPS. However, we 
note that in the proposed rule on March 4, 2003, we proposed to revise 
the methodology for determining cost-to-charge ratios for acute care 
hospitals under the IPPS because, as we discussed in that notice, we 
became aware that payment vulnerabilities exist in the current IPPS 
outlier policy.
    Because the LTCH PPS high-cost outlier and short-stay policies are 
modeled after the outlier policy in the IPPS, we believe they are 
susceptible to the same payment vulnerabilities and, therefore, merit 
revision. As proposed for acute care hospitals under the IPPS at 
proposed Sec.  412.84(m) in the March 4, 2003 proposed rule, we are 
proposing under Sec.  412.525(a)(4)(ii), by cross-referencing proposed 
Sec.  412.84(m), that for LTCHs any reconciliation of outlier payments 
would be made upon cost report settlement to account for differences 
between the estimated cost-to-charge ratio for the period during which 
the discharge occurs. As is the case with the proposed changes to the 
outlier policy for acute care hospitals under the IPPS, we are still 
assessing the procedural changes that would be necessary to implement 
this change. In addition, we are proposing to make a similar change in 
Sec.  412.529(c)(4)(ii), by cross-referencing proposed Sec.  412.84(m), 
to indicate that any reconciliation of payments for short-stay outliers 
would be made upon cost report settlement to account for differences 
between the estimated cost-to-charge ratio and the actual cost-to-
charge ratio for the period during which the discharge occurs.
    In addition, because we currently use cost-to-charge ratios based 
on the latest settled cost report, again consistent with the policy for 
acute care hospitals under the IPPS, any dramatic increases in charges 
during the payment year are not reflected in the cost-to-charge ratios 
when making outlier payments. Consistent with the proposed policy 
change for acute care hospitals under the IPPS at proposed Sec.  
412.84(i) discussed in the March 4, 2003 proposed rule, because a LTCH 
has the ability to increase its outlier payments through a dramatic 
increase in charges and because of the lag time in the data used to 
calculate cost-to-charge ratios, we are proposing that fiscal 
intermediaries would use more recent data when determining a LTCH's 
cost-to-charge ratio. Therefore, under Sec.  412.525(a)(4)(ii), by 
cross-referencing proposed Sec.  412.84(i), we are proposing that 
fiscal intermediaries would use either the most recent settled cost 
report or the most recent tentative settled cost report, whichever is 
later. In addition, we are proposing to make a similar change in Sec.  
412.529(c)(4)(ii), by cross-referencing proposed Sec.  412.84(i), to 
indicate that subject to the proposed provisions in the regulations at 
Sec.  412.84(i), fiscal intermediaries would use either the most recent 
settled cost report or the most recent tentative settled cost report, 
whichever is later.

[[Page 11253]]

4. Proposed Adjustments for Special Cases
a. General
    As discussed in the August 30, 2002 final rule (67 FR 55995), under 
section 123 of Pub. L. 106-113 the Secretary generally has broad 
authority in developing the PPS for LTCHs, including whether (and how) 
to provide for adjustments to reflect variations in the necessary costs 
of treatment among LTCHs.
    Generally, LTCHs, as described in section 1886(d)(1)(B)(iv) of the 
Act, are distinguished from other inpatient hospital settings by 
maintaining an average length of stay of greater than 25 days. However, 
LTCHs may have cases that have stays of considerably less than the 
average length of stay and that receive significantly less than the 
full course of treatment for a specific LTC-DRG. As we explained in the 
August 30, 2002 final rule (67 FR 55995), such cases would be paid 
inappropriately if the hospital were to receive the full LTC-DRG 
payment. While we are not proposing any changes to the payment policy 
for special cases at this time, below we discuss the payment 
methodology for these special cases as implemented in the August 30, 
2002 final rule (67 FR 55955-56010).
b. Short-Stay Outlier Cases
    A short-stay outlier case may occur when a beneficiary receives 
less than the full course of treatment at the LTCH before being 
discharged. These patients may be discharged to another site of care or 
they may be discharged and not readmitted because they no longer 
require treatment. Furthermore, patients may expire early in their LTCH 
stay.
    As noted above, generally LTCHs are defined by statute as having an 
average length of stay of greater than 25 days. We believe that a 
payment adjustment for short-stay outlier cases results in more 
appropriate payments, because these cases most likely would not receive 
a full course of treatment in such a short period of time and a full 
LTC-DRG payment may not always be appropriate. Payment-to-cost ratios 
simulated for LTCHs, for the cases described above, show that if LTCHs 
receive a full LTC-DRG payment for those cases, they would be 
significantly ``overpaid'' for the resources they have actually 
expended.
    Under Sec.  412.529, we adjust the per discharge payment to the 
least of 120 percent of the cost of the case, 120 percent of the LTC-
DRG specific per diem amount multiplied by the length of stay of that 
discharge, or the full LTC-DRG payment, for all cases with a length of 
stay up to and including five-sixths of the geometric average length of 
stay of the LTC-DRG.
    As we discussed above, in section VI.C.3. of this preamble, in the 
March 4, 2003 proposed rule we proposed to revise the methodology for 
determining cost-to-charge ratios for acute care hospitals under the 
IPPS because, as we discussed in that notice, we became aware that 
payment vulnerabilities exist in the current IPPS outlier policy. 
Because the LTCH PPS high-cost outlier and short-stay outlier policies 
are modeled after the outlier policy in the IPPS, we believe they are 
susceptible to the same payment vulnerabilities and, therefore, merit 
revision. As proposed for acute care hospitals under the IPPS at 
proposed Sec.  412.84(i) and (m) in the March 4, 2003 proposed rule and 
as we are proposing above for high-cost outlier payments at Sec.  
412.525(a)(4)(ii), we are proposing under Sec.  412.529 that short-stay 
outlier payments would be subject to the proposed provisions in the 
regulations at Sec.  412.84(i) and (m). Therefore, consistent with the 
proposed changes to the high-cost outlier policy discussed above in 
section VI.C.3. of this preamble, we are proposing, by cross-
referencing Sec.  412.84(i), that fiscal intermediaries would use 
either the most recent settled cost report or the most recent tentative 
settled cost report, whichever is later, in determining a LTCH's cost-
to-charge ratio. We also are proposing, by cross-referencing Sec.  
412.84(i), that the applicable statewide average cost-to-charge ratio 
would be applied when a LTCH's cost-to-charge ratio exceeds the 
ceiling. Finally, we are proposing, by cross-referencing Sec.  
412.84(m), that any reconciliation of payments for short-stay outliers 
would be made upon cost report settlement to account for differences 
between the estimated cost-to-charge ratio and the actual cost-to-
charge ratio for the period during which the discharge occurs. As is 
the case with the proposed changes to the outlier policy for acute care 
hospitals under the IPPS, we are still assessing the procedural changes 
that would be necessary to implement this change.
c. Interrupted Stay
    In Sec.  412.531(a), we define an ``interruption of a stay'' as a 
stay at a LTCH during which a Medicare inpatient is transferred upon 
discharge to an acute care hospital, an IRF, or a SNF for treatment or 
services that are not available in the LTCH and returns to the same 
LTCH within applicable fixed day periods. For a discharge to an acute 
care hospital, the applicable fixed-day period is 9 days. For a 
discharge to an IRF, the applicable fixed-day period is 27 days. For a 
discharge to a SNF, the applicable fixed-day period is 45 days. The 
counting of the days begins on the day of discharge from the specified 
facility and ends on the 9th, 27th, or 45th day for an acute care 
hospital, an IRF, or a SNF, respectively. (We refer readers to section 
VI.C.4.e. of this preamble for a discussion of application of this 
interrupted stay policy to Medicare-participating providers with 
approved swing beds.)
    If the patient's length of stay away from the LTCH does not exceed 
the fixed-day thresholds, the return to the LTCH is considered part of 
the first admission and only a single LTCH PPS payment will be made. 
(From the standpoint of implementing this policy, in the event that a 
Medicare inpatient is discharged from a LTCH and is readmitted and the 
stay qualifies as an interrupted stay, the provider should cancel the 
claim generated by the original stay in the LTCH and submit one claim 
for the entire stay. For further details, see Program Memorandum 
Transmittal A-02-093, September 2002.) On the other hand, if the 
patient stay exceeds the total fixed-day threshold outside of the LTCH 
at another facility before being readmitted, two separate LTC-DRG 
payments will be made, one based on the principal diagnosis for the 
first admittance and the other based on the principal diagnosis for the 
second admittance. Moreover, if the principal diagnoses are the same 
for both admissions, the hospital could receive two similar payments. 
(See section VI.C.4.e. of this proposed rule for application of the 
interrupted stay policy to transfers to swing bed hospitals.)
d. Onsite Discharges and Readmittances
    Under Sec.  412.532, generally, if a LTCH readmits more than 5 
percent of its Medicare patients who are discharged to an onsite SNF, 
IRF, or psychiatric facility, or to an onsite acute care hospital, only 
one LTC-DRG payment will be made to the LTCH for discharges and 
readmittances during the LTCH's cost reporting period. Therefore, 
payment for the entire stay will be paid either as one full LTC-DRG 
payment or a short-stay outlier, depending on the duration of the 
entire LTCH stay.
    In applying the 5-percent threshold, we apply one threshold for 
discharges and readmittances with a co-located acute care hospital. 
There is also a separate 5-percent threshold for all discharges and 
readmittances with co-located SNFs, IRFs, and psychiatric facilities. 
In the case of a LTCH that is co-located with an acute care hospital,

[[Page 11254]]

an IRF, or a SNF, the interrupted stay policy at Sec.  412.531 applies 
until the 5-percent threshold is reached. However, once the applicable 
threshold is reached, all such discharges and readmittances to the 
applicable site(s) for that cost reporting period are paid as one 
discharge. This means that even if a discharged LTCH Medicare patient 
was readmitted to the LTCH following a stay in an acute care hospital 
of greater than 9 days, if the facilities share a common location and 
the 5-percent threshold were exceeded, the subsequent discharge from 
the LTCH will not represent a separate hospitalization for payment 
purposes. Only one LTC-DRG payment will be made for all such discharges 
during a cost reporting period to the acute care hospital, regardless 
of the length of stay at the acute care hospital, that are followed by 
readmittances to the onsite LTCH.
    Similarly, if the LTCH has exceeded its 5-percent threshold for all 
discharges to an onsite IRF, SNF, or psychiatric hospital or unit with 
readmittances to the LTCH, the subsequent LTCH discharge for patients 
from those sites for the entire cost reporting period will not be 
treated as a separate discharge for Medicare payment purposes. (As 
under the interrupted stay policy, payment to an acute care hospital 
under the IPPS, to an IRF under the IRF PPS, and to a SNF under the SNF 
PPS, will not be affected. Payments to the psychiatric facility also 
will not be affected.)
e. Treatment of Swing Beds Under the Interrupted Stay and Onsite 
Discharge and Readmittance Policies
    A swing-bed hospital is defined at Sec.  413.114(b) as a hospital 
or critical access hospital (CAH) participating in Medicare that has an 
approval from CMS to provide posthospital SNF care as defined in Sec.  
409.20 and meets the requirements specified in Sec.  482.66 or Sec.  
485.645. Swing beds are otherwise licensed hospital beds that may, 
under certain circumstances, be used temporarily as SNF beds. Under 
Sec.  413.114(a)(2), posthospital SNF care furnished in general routine 
inpatient beds in rural hospitals (other than CAHs) is paid in 
accordance with the provisions of the SNF PPS for services furnished 
for cost reporting periods beginning on or after July 1, 2002. Since it 
is possible for a Medicare beneficiary to be discharged from a LTCH for 
posthospital SNF care that is being provided by another hospital-level 
Medicare provider with swing beds, such a discharge would be considered 
the same as if it were to a individual SNF. We interpret the extension 
of the SNF PPS to swing beds to require that all payment policy 
determinations regarding patient movement between LTCHs and SNFs, 
including the onsite policy described above, also apply to swing beds.
    We want to emphasize that our inclusion of swing beds in payment 
policy determinations for all patient movement between LTCHs and SNFs 
(see section VI.C.4.c. of this preamble) would mean that a readmission 
to a LTCH from posthospital SNF care being provided in a swing bed that 
is located either in the LTCH itself or in another onsite Medicare 
provider would have the same policy consequences as would a readmission 
to the LTCH from an onsite SNF.
5. Other Proposed Payment Adjustments
    As indicated earlier, we had broad authority under section 123 of 
Pub. L. 106-113, including whether (and how) to provide for adjustments 
to reflect variations in the necessary costs of treatment among LTCHs. 
Thus, in the August 30, 2002 final rule (67 FR 56014-56027), we 
discussed our extensive data analysis and rationale for not 
implementing an adjustment for geographic reclassification, rural 
location, treating a disproportionate share of low-income patients 
(DSH), or indirect medical education (IME) costs. In that same final 
rule, we stated that we would collect data and reevaluate the 
appropriateness of these adjustments in the future once more LTCH data 
become available after the LTCH PPS is implemented. Because the LTCH 
PPS was only recently implemented, sufficient new data have not yet 
been generated that would enable us to conduct a comprehensive 
reevaluation of these payment adjustments. Therefore, we are not 
proposing an adjustment for geographic reclassification, rural 
location, DSH, or IME at this time. However, we will continue to 
collect and interpret new data as they become available in the future 
to determine if these data support proposing any additional payment 
adjustments.
6. Proposed Budget Neutrality Offset to Account for the Transition 
Methodology
    Under Sec.  412.533, we implemented a 5-year transition period from 
cost-based TEFRA reimbursement to prospective payment, during which a 
LTCH will be paid an increasing percentage of the LTCH PPS rate and a 
decreasing percentage of its payments under the TEFRA payment 
principles for each discharge. Furthermore, we allow a LTCH to elect to 
be paid based on 100 percent of the standard Federal rate in lieu of 
the blend methodology.
    As we discussed in further detail in the August 30, 2002 final rule 
(67 FR 56032-56037), the standard Federal rate was determined as if all 
LTCHs will be paid based on 100 percent of the standard Federal rate. 
As stated earlier, we provide for a 5-year transition period 
methodology that allows LTCHs to receive payments based partially on 
reasonable cost principles. In order to maintain budget neutrality as 
required by section 123(a)(1) of the Pub. L. 106-113 and Sec.  
412.523(d)(2), during the 5-year transition period, we reduce all LTCH 
Medicare payments (whether a LTCH elects payment based on 100 percent 
of the Federal rate or whether a LTCH is being paid under the 
transition blend methodology) by a factor that is equal to 1 minus the 
ratio of the estimated TEFRA reasonable cost-based payments that would 
have been made if the LTCH PPS had not been implemented, to the 
projected total Medicare program PPS payments (that is, payments made 
under the transition methodology and the option to elect payment based 
on 100 percent of the Federal rate).
    For FY 2003, based on a comparison of the estimated FY 2003 
payments to each LTCH based on 100 percent of the standard Federal rate 
and the transition blend methodology, we projected that approximately 
49 percent of LTCHs would elect to be paid based on 100 percent of the 
standard Federal rate rather than receive payment based on the 
transition blend methodology. This projection was based on our estimate 
that those 49 percent of LTCHs would receive higher payments based on 
100 percent of the standard Federal rate compared to the payments they 
would receive under the transition blend methodology. Similarly, we 
projected that the remaining 51 percent of LTCHs would choose to be 
paid based on the transition blend methodology (80 percent of TEFRA and 
20 percent of the PPS) in FY 2003, because those payments would be 
higher than if they were paid based on 100 percent of the standard 
Federal rate.
    In the August 30, 2002 final rule (67 FR 56034), we projected that 
the full effect of the 5-year transition period and the election option 
would result in a cost to the Medicare program of $240 million as 
follows: For FY 2003, $50 million; for FY 2004, $80 million; for FY 
2005, $60 million; for FY 2006, $40 million; for FY 2007, $10 million. 
Thus, in order to maintain budget neutrality, we applied a 6.6 percent 
reduction (0.934) to all LTCHs' payments in FY 2003 to account for the 
estimated cost

[[Page 11255]]

of $50 million for FY 2003. Furthermore, in order to maintain budget 
neutrality, we indicated that, in the future, we would propose a budget 
neutrality offset for each of the remaining years of the transition 
period to account for the estimated payments for the respective fiscal 
year. Based on the data available at that time, in the August 30, 2002 
final rule (67 FR 56037) we estimated the following budget neutrality 
offsets to LTCH payments during the remainder of transition period: 5.0 
percent (0.950) in FY 2004; 3.4 percent (0.996) in FY 2005; and 1.7 
percent (0.983) in FY 2006. We also stated that no budget neutrality 
offset is necessary in the 5th year of the transition period (FY 2007) 
because under the transition methodology at Sec.  412.533, all LTCHs 
will be paid based on 100 percent of the standard Federal rate and zero 
percent of the TEFRA rate.
    For the proposed 2004 LTCH PPS rate year, based on the best 
available data and the policies presented in this proposed rule, we 
project that approximately 49 percent of LTCHs would be paid based on 
100 percent of the proposed standard Federal rate rather than receive 
payment under the transition blend methodology. Using the same 
methodology described in the August 30, 2002 final rule (67 FR 56034), 
this projection, which uses updated data and inflation factors, is 
based on our estimate that LTCHs would receive higher payments based on 
100 percent of the proposed standard Federal rate compared to the 
payments they would receive under the transition blend methodology. 
Similarly, we project that the remaining 51 percent of LTCHs would 
choose to be paid based on the transition blend methodology (80 percent 
of TEFRA and 20 percent of the PPS for cost reporting periods beginning 
during FY 2003; and 60 percent of TEFRA and 40 percent of the PPS for 
cost reporting periods beginning during FY 2004 in accordance with 
Sec.  412.533(a)) because they would receive higher payments than if 
they were paid based on 100 percent of the proposed standard Federal 
rate. We note that, as discussed in section VIII. of this preamble, we 
are not proposing to change the 5-year transition period set forth in 
Sec.  412.533(a) in conjunction with the proposed change in the 
proposed 2004 LTCH PPS rate update discussed in detail in section III. 
of this preamble. Therefore, the applicable transition blend percentage 
will apply for a LTCH's entire cost reporting period beginning on or 
after October 1 (unless the LTCH elects payment based on 100 percent of 
the Federal rate).
    In this proposed rule, based on the best available data and the 
proposed policy revisions described, we project that the full effect of 
the remaining 4 years of the transition period (including the election 
option) would result in a cost to the Medicare program of $300 million 
as follows:

------------------------------------------------------------------------
                                                              Estimated
                Proposed LTCH PPS rate year                   cost  (in
                                                              millions)
------------------------------------------------------------------------
2004......................................................          $120
2005......................................................            90
2006......................................................            60
2007......................................................            30
------------------------------------------------------------------------

    Therefore, we are proposing a 5.7 percent reduction (0.943) to all 
LTCHs' payments for discharges occurring on or after July 1, 2003 and 
through June 30, 2004, to account for the estimated cost of the $120 
million for the proposed 2004 LTCH PPS rate year. We emphasize that the 
budget neutrality offset to account for the transition methodology is 
calculated based on and effective for payments made for discharges 
occurring during the proposed 2004 LTCH PPS rate year of July 1, 2003 
through June 30, 2004, not the Federal FY 2004 of October 1, 2003 
through September 30, 2004.
    As we stated above, in order to maintain budget neutrality, we 
indicated that we would propose a budget neutrality offset for each of 
the remaining years of the transition period to account for the 
estimated costs for the respective fiscal year. Based on the best 
available data at this time, we are proposing the following budget 
neutrality offsets to LTCH payments during the transition period: 4.4 
percent (0.956) in proposed 2005 LTCH PPS rate year; 2.9 percent 
(0.971) in proposed 2006 LTCH PPS rate year; and 1.2 percent (0.988) in 
proposed 2007 LTCH PPS rate year.
    As we discussed in the August 30, 2002 final rule (67 FR 56036), 
consistent with the statutory requirement for budget neutrality in 
section 123(a)(1) of Pub. L. 106-113, we intend for estimated aggregate 
payments under the LTCH PPS to equal the estimated aggregate payments 
that would be made if the LTCH PPS was not implemented. Our methodology 
for estimating proposed payments for purposes of the proposed budget 
neutrality calculations used the best available data at this time and 
necessarily reflects assumptions. As the LTCH PPS progresses, we are 
monitoring payment data and will evaluate the ultimate accuracy of the 
assumptions used in the budget neutrality calculations (for example, 
inflation factors, intensity of services provided, or behavioral 
response to the implementation of the LTCH PPS) described in the August 
30, 2002 final rule (67 FR 56027-56037). To the extent these 
assumptions significantly differ from actual experience, the aggregate 
amount of actual payments may turn out to be significantly higher or 
lower than the estimates on which the budget neutrality calculations 
were based.
    Section 123 of Pub. L. 106-113 and section 307 of Pub. L. 106-554 
provide the Secretary broad authority in developing the LTCH PPS, 
including the authority for appropriate adjustments. Under this broad 
authority, as implemented in the regulations at Sec.  412.523(d)(3), we 
have provided for the possibility of making a one-time prospective 
adjustment to the LTCH PPS rates by October 1, 2006, so that the effect 
of any significant difference between actual payments and estimated 
payments for the first year of the LTCH PPS would not be perpetuated in 
the PPS rates for future years.
    In the August 30, 2002 final rule (67 FR 56037), we estimated that 
total Medicare program payments for LTCH services over 5 years would be 
$1.59 billion for FY 2003; $1.69 billion for FY 2004; $1.79 billion for 
FY 2005; $1.90 billion for FY 2006; and $2.00 billion for FY 2007. In 
this proposed rule, based on the best available data, we estimate that 
total Medicare program payments for LTCH services from the proposed 
LTCH PPS rate years of 2004 through 2008 would be:

------------------------------------------------------------------------
                                                              Estimated
                Proposed LTCH PPS rate year                 payments  ($
                                                            in billions)
------------------------------------------------------------------------
2004......................................................         $2.17
2005......................................................          2.29
2006......................................................          2.42
2007......................................................          2.56
2008......................................................          2.71
------------------------------------------------------------------------

    As in our August 30, 2002 final rule (67 FR 56037), these estimates 
are based on the projection that 49 percent of LTCHs would elect to be 
paid based on 100 percent of the proposed standard Federal rate rather 
than the transition blend, and an update of our estimate of proposed 
2004 LTCH PPS rate year payments to LTCHs using our Office of the 
Actuary's most recent estimate of the excluded hospital with capital 
market basket of 2.5 percent for proposed 2004 LTCH PPS rate year 
(adjusted to account for the proposed change in the rate update cycle 
discussed in section VI.B.1.b. of this preamble), 3.1 percent for 
proposed 2005 LTCH PPS rate year, 3.0 percent for proposed 2006 LTCH 
PPS rate year, 2.9 percent for proposed 2007 LTCH

[[Page 11256]]

PPS rate year, and 3.0 percent for proposed 2008 LTCH PPS rate year. We 
also have taken into account our Office of the Actuary's projection 
that there would be an increase in Medicare beneficiary enrollment of 
1.3 percent in proposed 2004 LTCH PPS rate year, 1.6 percent in 
proposed 2005 LTCH PPS rate year, and 1.9 percent in proposed 2006 LTCH 
PPS rate year and 2.0 percent in proposed 2007 LTCH PPS rate year and 
2.1 percent in proposed 2008 LTCH PPS rate year.
    Because the LTCH PPS was only recently implemented, sufficient new 
data have not been generated that would enable us to conduct a 
comprehensive reevaluation of our budget neutrality calculations. 
Therefore, we are not proposing an adjustment for budget neutrality 
under Sec.  412.523(d)(3) at this time. However, we will continue to 
collect and interpret new data as the data become available in the 
future to determine if such an adjustment should be proposed.

VII. Computing the Proposed Adjusted Federal Prospective Payments

    In accordance with Sec.  412.525 and as discussed in sections VI. 
of this proposed rule, the proposed standard Federal rate would be 
adjusted to account for differences in area wages by multiplying the 
labor-related share of the proposed standard Federal rate by the 
appropriate proposed LTCH wage index. The proposed standard Federal 
rate would also be adjusted to account for the higher costs of 
hospitals in Alaska and Hawaii by multiplying the nonlabor-related 
share of the proposed standard Federal rate by the appropriate 
adjustment factor shown in the table in section VI.C.2. of this 
preamble. To illustrate the methodology we are using to adjust the 
proposed Federal prospective payments, we are providing the following 
example:
    During the proposed 2004 LTCH PPS rate year, a Medicare patient is 
in a LTCH located in Chicago, Illinois (MSA 1600) with a proposed two-
fifths wage index value of 1.0418 (see Table 1 in the Addendum to this 
proposed rule). The Medicare patient is classified into LTC-DRG 4 
(Spinal Procedures), which has a proposed relative weight of 1.2493 
(see Table 3 of the Addendum to this proposed rule). To calculate the 
LTCH's total adjusted Federal prospective payment for this Medicare 
patient, we compute the wage-adjusted Federal prospective payment 
amount by multiplying the unadjusted proposed standard Federal rate 
($35,830.05) by the labor-related share (72.612 percent) and the 
proposed wage index (1.0418). This wage-adjusted amount is then added 
to the nonlabor-related portion of the unadjusted proposed standard 
Federal rate (27.388 percent) to determine the adjusted proposed 
Federal rate, which is then multiplied by the proposed LTC-DRG relative 
weight (1.2493) to calculate the total adjusted proposed Federal 
prospective payment for the proposed 2004 LTCH PPS rate year 
($46,121.11). In addition, as discussed in section VI.C.6. of this 
preamble, for the proposed 2004 LTCH PPS rate year, we are proposing to 
reduce the LTCH PPS payment by 5.6 percent for the proposed budget 
neutrality offset to account for the costs of the transition 
methodology. The following illustrates the components of the 
calculations in this example:

 
Proposed Unadjusted Standard Federal Prospective              $35,830.05
 Payment Rate........................................
Labor-Related Share..................................            0.72612
Labor-Related Portion of the Federal Rate............       = $26,016.92
Proposed \2/5\th Wage Index (MSA 1600)...............             1.0418
Wage-Adjusted Labor Share............................       = $27,104.43
Nonlabor-Related Portion of the Federal Rate                + $ 9,813.36
 (adjusted for COLA if applicable)...................
Adjusted Proposed Federal Rate.......................       = $36,917.56
Proposed LTC-DRG 4 Relative Weight...................           x 1.2493
Total Adjusted Proposed Federal Prospective Payment         = $46,121.11
 (Before the Proposed Budget Neutrality Offset)......
Proposed Budget Neutrality Offset....................            x 0.944
Total Proposed Federal Prospective Payment (With the        = $43,538.33
 Proposed Budget Neutrality Offset)..................
 

VIII. Transition Period

    To provide a stable fiscal base for LTCHs, under Sec.  412.533, we 
implemented a 5-year transition period from reasonable cost-based 
reimbursement under the TEFRA system to a prospective payment based on 
industry-wide average operating and capital-related costs. Under the 
average pricing system, payment is not based on the experience of an 
individual hospital. We believe that a 5-year phase-in will provide 
LTCHs time to adjust their operations and capital financing to the new 
LTCH PPS, which is based on prospectively determined Federal payment 
rates. Furthermore, we believe that the 5-year phase-in of the LTCH PPS 
allows LTCH personnel to develop proficiency with the LTC-DRG coding 
system, resulting in improvement in the quality of the data used for 
generating our annual determination of relative weights and payment 
rates.
    In accordance with Sec.  412.533, the transition period for all 
hospitals subject to the LTCH PPS begins with the hospital's first cost 
reporting period beginning on or after October 1, 2002 and extends 
through the hospital's last cost reporting period beginning before 
October 1, 2007. During the 5-year transition period, a LTCH's total 
payment under the LTCH PPS is based on two payment percentages--one 
based on reasonable cost-based (TEFRA) payments and the other based on 
the standard Federal prospective payment rate. The percentage of 
payment based on the LTCH PPS Federal rate increases by 20 percentage 
points each year, while the TEFRA rate percentage decreases by 20 
percentage points each year, for the next 4 fiscal years. For cost 
reporting periods beginning on or after October 1, 2006, Medicare 
payment to LTCHs will be determined entirely under the Federal PPS 
methodology. The blend percentages are as follows:

------------------------------------------------------------------------
                                                             Reasonable
                                                                cost
Cost reporting periods beginning on or after  Federal rate   principles
                                               percentage       rate
                                                             percentage
------------------------------------------------------------------------
October 1, 2002.............................            20            80
October 1, 2003.............................            40            60
October 1, 2004.............................            60            40

[[Page 11257]]

 
October 1, 2005.............................            80            20
October 1, 2006.............................           100             0
------------------------------------------------------------------------

    For a cost reporting period that began on or after October 1, 2002, 
and before October 1, 2003 (FY 2003), the total payment for a LTCH is 
80 percent of the amount calculated under reasonable cost principles 
for that specific LTCH and 20 percent of the Federal prospective 
payment amount. For cost reporting periods beginning on or after 
October 1, 2003 and before October 1, 2004 (Federal FY 2004), the total 
payment for a LTCH will be 60 percent of the amount calculated under 
reasonable cost principles for that specific LTCH and 40 percent of the 
Federal prospective payment amount. We note that the proposed change in 
the effective date of the proposed 2004 LTCH PPS rate year update 
discussed in section III. of this preamble has no effect on the LTCH 
PPS transition period as set forth in Sec.  412.533(a). That is, LTCHs 
paid under the transition blend under Sec.  412.533(a), will receive 
those blended for the entire 5-year transition period (unless they 
elect payments based on 100 percent of the Federal rate). Furthermore, 
LTCHs paid under the transition blend will receive the appropriate 
blend percentages of the Federal and reasonable cost-based rate for 
their entire cost reporting period as prescribed in Sec.  412.533(a)(1) 
through (a)(5). For example, a LTCH with a cost reporting period 
beginning on July 1, 2003 (which is the LTCH's first cost reporting 
period since the implementation of the LTCH PPS) would receive payments 
based on 80 percent of the reasonable cost-based rate and 20 percent of 
the Federal rate for its discharges occurring on or after July 1, 2003 
through June 30, 2004 (if the LTCH does not elect payment based on 100 
percent of the Federal rate).
    The reasonable cost-based rate percentage is a LTCH specific amount 
that is based on the amount that the LTCH would have been paid (under 
TEFRA) if the PPS were not implemented. Medicare fiscal intermediaries 
will continue to compute the LTCH reasonable cost-based payment amount 
according to Sec.  412.22(b) of the regulations and sections 1886(d) 
and (g) of the Act. We note that several reasonable cost-based payment 
provisions that were previously in effect are no longer effective, 
starting with cost reporting periods beginning in FY 2003. For 
instance, the caps on the target amounts for ``existing'' LTCHs 
provided for under section 4414 of the BBA (see Sec.  
413.40(c)(4)(iii)) for FYs 1998 through 2002 will no longer be 
applicable for cost reporting periods beginning in FY 2003. Thus, a 
LTCH's target amount for FYs 2003 and beyond will be determined by 
updating its prior year's target amount (which for FY 2003 was subject 
to the FY 2002 cap). In addition, the 15-percent reduction to payments 
to LTCHs for capital-related costs provided for under section 4412 of 
Pub. L. 105-33 (Sec.  413.40(j)) is only applicable for portions of 
cost reporting periods occurring in FYs 1998 through FY 2002. This 
reduction is no longer applicable for cost reporting periods beginning 
in FY 2003. Therefore, the TEFRA portion of a LTCH's payment for 
capital-related costs during the LTCH PPS transition period is based on 
100 percent of its Medicare allowable capital costs.
    As we discussed in the August 30, 2002 final rule (67 FR 56038), in 
implementing the PPS for LTCHs, one of our goals is to transition 
hospitals to full prospective payments as soon as appropriate. 
Therefore, under Sec.  412.533(c), we allow a LTCH, which is subject to 
a blended rate, to elect payment based on 100 percent of the Federal 
rate at the start of any of its cost reporting periods during the 5-
year transition period rather than incrementally shifting from 
reasonable cost-based payments to prospective payments. Once a LTCH 
elects to be paid based on 100 percent of the Federal rate, it will not 
be able to revert to the transition blend. For cost reporting periods 
beginning on or after December 1, 2002, and for the remainder of the 5-
year transition period, a LTCH must notify its fiscal intermediary in 
writing of its election on or before the 30th day prior to the start of 
the LTCH's next cost reporting period. For example, a LTCH with a cost 
report period that begins on October 15, 2003, must notify its fiscal 
intermediary in writing of an election before September 15, 2003.
    Under Sec.  412.533(c)(2)(i), the notification by the LTCH to make 
the election must be made in writing to the Medicare fiscal 
intermediary. Under Sec.  412.533(c)(2)(ii) and (iii), the intermediary 
must receive the request on or before the specified date (that is, 
before November 1, 2002 for cost reporting periods that begin on or 
after October 1, 2002 through November 30, 2002 and on or before the 
30th day before the applicable cost reporting period begins for cost 
reporting periods beginning on or after December 1, 2002 through 
September 30, 2006), regardless of any postmarks or anticipated 
delivery dates.
    Notifications received, postmarked, or delivered by other means 
after the specified date will not be accepted. If the specified date 
falls on a day that the postal service or other delivery sources are 
not open for business, the LTCH will be responsible for allowing 
sufficient time for the delivery of the request before the deadline. If 
a LTCH's notification is not received timely, payment will be based on 
the transition period rates.

IX. Proposed Payments to New LTCHs

    Under Sec.  412.23(e)(4), for purposes of Medicare payment under 
the LTCH PPS, we define a new LTCH as a provider of inpatient hospital 
services that otherwise meets the qualifying criteria for LTCHs, set 
forth in Sec. Sec.  412.23(e)(1) and (e)(2) and, under present or 
previous ownership (or both), and its first cost reporting period as a 
LTCH begins on or after October 1, 2002. We also specify in Sec.  
412.500 that the LTCH PPS applies to hospitals with a cost reporting 
period beginning on or after October 1, 2002.
    This definition of new LTCHs should not be confused with those 
LTCHs first paid under the TEFRA payment system for discharges 
occurring on or after October 1, 1997, described in section 
1886(b)(7)(A) of the Act, added by section 4416 of Pub. L. 105-33. As 
stated in Sec.  413.40(f)(2)(ii), for cost reporting periods beginning 
on or after October 1, 1997, the payment amount for a ``new'' (post-FY 
1998) LTCH is the lower of the hospital's net inpatient operating cost 
per case or 110 percent of the national median target amount payment 
limit for hospitals in the same class for cost reporting periods ending 
during FY 1996, updated to the applicable cost reporting period (see 62 
FR 46019, August 29, 1997). Under the PPS for LTCHs, those ``new'' 
LTCHs that meet the definition of ``new'' under

[[Page 11258]]

Sec.  413.40(f)(2)(ii) and that have first cost reporting periods prior 
to October 1, 2002, will be paid under the transition methodology 
described in Sec.  412.533.
    As noted above and in accordance with Sec.  412.533(d), new LTCHs 
will not participate in the 5-year transition from reasonable cost-
based reimbursement to prospective payment. The transition period is 
intended to provide existing LTCHs time to adjust to payment under the 
new system. Since these new LTCHs with cost reporting periods beginning 
on or after October 1, 2002, would not have received payment under 
reasonable cost-based reimbursement for the delivery of LTCH services 
prior to the effective date of the LTCH PPS, we do not believe that 
those new LTCHs require a transition period in order to make 
adjustments to their operations and capital financing, as will LTCHs 
that have been paid under reasonable cost-based.
    For example, a ``new'' LTCH (post-FY 1998) that first began 
receiving payment as a LTCH on October 1, 2001, will be subject to the 
110 percent of the median target amount payment limit for LTCHs (in 
accordance with Sec.  413.40(f)(2)(ii)) for both its FY 2002 (October 
1, 2001 through September 30, 2002) and FY 2003 (October 1, 2002 
through September 30, 2003) cost reporting periods. Assuming the 
hospital has not elected to be paid 100 percent of the Federal rate for 
its cost reporting period beginning on October 1, 2002 (the first cost 
reporting period when the LTCH will be subject to the PPS), the 
hospital would be paid under the transition methodology whereby the 
LTCH's reasonable cost-based portion of its payment for operating costs 
(80 percent) is limited by the 110 percent of the median target amount 
payment limit for LTCHs under Sec.  413.40(f)(2)(ii). For its cost 
reporting period beginning on October 1, 2003 (which is the hospital's 
third cost reporting period), under the transition methodology, that 
LTCH's reasonable cost-based portion of its payment for operating costs 
(60 percent) will be limited to its target amount as determined under 
Sec.  413.40(c)(4)(v). Furthermore, if a hospital is designated as a 
LTCH on September 1, 2002, it would not be considered a new LTCH under 
Sec.  412.23(e)(4), even if it had not discharged any patients or 
received any payments as of the implementation date of the LTCH PPS on 
October 1, 2002, because its first cost reporting period did not begin 
on or after October 1, 2002. Thus, it would be paid according to Sec.  
413.40(f)(2)(ii) from September 1, 2002 through August 30, 2003. This 
LTCH will not be subject to payments under the LTCH PPS until the start 
of its next cost reporting period on September 1, 2003. At the 
beginning of its second cost reporting period as a LTCH (that is, 
September 1, 2003), this LTCH would be subject to the transition period 
in Sec.  412.533(a)(1), because this provision applies to cost 
reporting periods beginning on or after October 1, 2002, and before 
October 1, 2003. Under the blended payments of the transition period in 
Sec.  412.533(a)(1), 80 percent of payments for operating costs would 
be paid under the reasonable cost principles, as described in Sec.  
413.40(f)(2)(ii). (This hospital could also elect to be paid 100 
percent of the Federal rate for its cost reporting period beginning 
September 1, 2003.)

X. Method of Payment

    Under Sec.  412.513, a Medicare LTCH patient is classified into a 
LTC-DRG based on the principal diagnosis, up to eight additional 
(secondary) diagnoses, and up to six procedures performed during the 
stay, as well as age, sex, and discharge status of the patient. The 
LTC-DRG is used to determine the Federal prospective payment that the 
LTCH will receive for the Medicare-covered Part A services the LTCH 
furnished during the Medicare patient's stay. Under Sec.  412.541(a), 
the payment is based on the submission of the discharge bill. The 
discharge bill also provides data to allow for reclassifying the stay 
from payment at the full LTC-DRG rate to payment for a case as a short-
stay outlier (under Sec.  412.529) or as an interrupted stay (under 
Sec.  412.531), or to determine if the case will qualify for a high-
cost outlier payment (under Sec.  412.525(a)).
    Accordingly, the ICD-9-CM codes and other information used to 
determine if an adjustment to the full LTC-DRG payment is necessary 
(for example, length of stay or interrupted stay status) are recorded 
by the LTCH on the Medicare patient's discharge bill and submitted to 
the Medicare fiscal intermediary for processing. The payment made 
represents payment in full, under Sec.  412.521(b), for inpatient 
operating and capital-related costs, but not for the costs of an 
approved medical education program, bad debts, blood clotting factors, 
anesthesia services by hospital-employed nonphysician anesthetists or 
obtained under arrangement, or the costs of photocopying and mailing 
medical records requested by a QIO, which are costs paid outside the 
LTCH PPS.
    As under the previous (reasonable cost-based) payment system, under 
Sec.  412.541(b) a LTCH may elect to be paid using the periodic interim 
payment (PIP) method described in Sec.  413.64(h) and may be eligible 
to receive accelerated payments as described in Sec.  413.64(g).
    For those LTCHs that are paid during the 5-year transition based on 
the blended transition methodology in Sec.  412.533 for cost reporting 
periods beginning on or after October 1, 2002, and before October 1, 
2006, the PIP amount is based on the transition blend. For those LTCHs 
that are paid based on 100 percent of the standard Federal rate, the 
PIP amount is based on the estimated prospective payment for the year 
rather than on the estimated reasonable cost-based reimbursement. We 
exclude outlier payments that are paid upon submission of a discharge 
bill from the PIP amounts. In addition, Part A costs that are not paid 
for under the LTCH PPS, including Medicare costs of an approved medical 
education program, bad debts, blood clotting factors, anesthesia 
services by hospital-employed nonphysician anesthetists or obtained 
under arrangement, and the costs of photocopying and mailing medical 
records requested by a QIO, are subject to the interim payment 
provisions (Sec.  412.541(c)).
    Under Sec.  412.541(d), LTCHs with unusually long lengths of stay 
and that are not receiving payment under the PIP method may bill on an 
interim basis (60 days after an admission and at intervals of at least 
60 days after the date of the first interim bill) and should include 
any outlier payment determined as of the last day for which the 
services have been billed.

XI. Monitoring

    In the August 30, 2002 final rule (67 FR 56014), we discussed our 
intent to develop a monitoring system that will assist us in evaluating 
the LTCH PPS. Specifically we discussed the monitoring of the various 
policies that we believed would provide equitable payment for stays 
that reflect less than the full course of treatment and reduce the 
incentives for inappropriate admissions, transfers, or premature 
discharges of patients that are present in a discharge-based 
prospective payment system. We also stated our intent to collect and 
interpret data on changes in average lengths of stay under the PPS for 
specific LTC-DRGs and the impact of these changes on the Medicare 
program. We stated that if our data indicate that changes might be 
warranted, we may revisit these issues and consider proposing revisions 
to these policies in the future. To this end, we have designed systems 
features that will enable CMS and the fiscal intermediary to track a 
beneficiary to

[[Page 11259]]

and from a LTCH and to and from another Medicare provider.
    In that same final rule, we also explained that, given that the 
only unique requirement that distinguishes a LTCH from other hospitals 
is an average length of stay of greater than 25 days, we continue to be 
concerned about the extent to which LTCH services and patients differ 
from those services and patients treated in other Medicare covered 
settings (for example, SNFs and IRFs) and how the LTCH PPS will affect 
the access, quality, and costs across the health care continuum. Thus, 
we will monitor trends in the supply and utilization of LTCHs and 
Medicare's costs in LTCHs relative to other Medicare providers. For 
example, we may conduct medical record reviews of Medicare patients to 
monitor changes in service use (for example, ventilator use) over a 
LTCH episode of care and to assess patterns in the average length of 
stay at the facility level. We will consider future changes to LTCH 
coverage and payment policy based upon the results of such analyses.

XII. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995.

XIII. Regulatory Impact Analysis

A. Introduction

    We have examined the impact of this proposed rule as required by 
Executive Order 12866. We also have examined the impacts of this 
proposed rule under the criteria of the Regulatory Flexibility Act 
(RFA) (Pub. L. 96-354), section 1102(b) of the Social Security Act (the 
Act), the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4), 
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 proposed and final rules that 
constitute significant regulatory action, including rules that have an 
economic effect of $100 million or more in any one year (major rules). 
We have determined that this proposed rule would not be a major rule 
within the meaning of Executive Order 12866 because the redistributive 
effects do not constitute a shift of $100 million in any one year. As 
we discuss in further detail below, and in section VI.B.1.b. of the 
preamble of this proposed rule, we are proposing that the proposed 
change to the LTCH PPS rate update cycle be budget neutral. Therefore, 
we estimate that there would be no budgetary impact for the Medicare 
program as a result of the proposed change to the LTCH PPS rate update 
cycle. Based on the best available data for 194 LTCHs, we estimate that 
the proposed 2.2 percent increase in the standard Federal rate for the 
proposed 2004 LTCH PPS rate year would result in $21.4 million and 
there are no significant redistributive effects among any groups of 
hospitals. (Section VI.C.6. of this preamble includes an estimate of 
Medicare program payments for LTCH services.)
2. Regulatory Flexibility Act (RFA)
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses in issuing a proposed and final rule. For purposes 
of the RFA, small entities include small businesses, nonprofit 
organizations, and government agencies. Most hospitals and most other 
providers and suppliers are small entities, either by nonprofit status 
or by having revenues of $25 million or less annually. For purposes of 
the RFA, all hospitals are considered small entities. Medicare fiscal 
intermediaries are not considered to be small entities. Individuals and 
States are not included in the definition of a small entity. We certify 
that this proposed rule would not have a significant impact on a 
substantial number of small entities, in accordance with RFA.
3. Impact on Rural Hospitals
    Section 1102(b) of the Social Security Act requires us to prepare a 
regulatory impact analysis if a proposed or final rule may have a 
significant impact on the operations of a substantial number of small 
rural hospitals. This analysis must conform to the provisions of 
section 604 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
an MSA and has fewer than 100 beds. As discussed in detail in section 
XIII.B. of this preamble, this proposed rule would not have a 
substantial impact on the seven rural hospitals for which data were 
available that have fewer than 100 beds and that are located in rural 
areas.
4. Unfunded Mandates
    Section 202 of the UMRA requires that agencies assess anticipated 
costs and benefits before issuing any proposed rule or any final rule 
preceded by a rule that may result in expenditures in any one year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $110 million or more. This proposed rule would not 
mandate any requirements for State, local, or tribal governments nor 
would it result in expenditures by the private sector of $110 million 
or more in any one year.

5. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications.
    We have examined this proposed rule under the criteria set forth in 
Executive Order 13132 and have determined that this proposed rule will 
not have any significant impact on the rights, roles, and 
responsibilities of State, local, or tribal governments or preempt 
State law.

B. Anticipated Effects

    We discuss the impact of this proposed rule below in terms of its 
fiscal impact on the Federal Medicare budget and on LTCHs.
1. Budgetary Impact
    Section 123(a)(1) of Pub. L. 106-113 requires us to set the payment 
rates contained in this proposed rule such that total payments under 
the LTCH PPS are projected to equal the amount that would have been 
paid if this PPS had not been implemented. However, as discussed in 
greater detail in the August 30, 2002 final rule (67 FR 56033-56036), 
the FY 2003 standard Federal rate ($34,956.15) was calculated as if all 
LTCHs will be paid based on 100 percent of the standard Federal rate in 
FY 2003. As discussed in section VI.C.6. of this proposed rule, we are 
applying a budget neutrality offset to payments to account for the 
monetary effect of the 5-year transition period and the policy to 
permit LTCHs to elect to be paid based on 100 percent of the standard 
Federal rate rather than a blend of Federal prospective payments and 
reasonable cost-based payments during the transition. The amount of the 
offset is equal to 1 minus the ratio of the estimated reasonable cost-
based payments that would have been made if the LTCH PPS had not been 
implemented, to the projected total

[[Page 11260]]

Medicare program payments that would be made under the transition 
methodology and the option to elect payment based on 100 percent of the 
Federal prospective payment rate.
    Our Office of the Actuary computed an update factor to update LTCH 
PPS payments from the current rate period (Federal FY 2003) to the 
proposed new LTCH PPS rate year (July 1, 2003 through June 30, 2004). 
The proposed LTCH PPS rate year overlaps the current rate period by 3 
months (July 1, 2003 through September 30, 2003). The update for 
Federal FY 2003 is currently estimated at 3.5 percent and the proposed 
update factor for the proposed 2004 LTCH PPS rate year is estimated at 
2.5 percent (as discussed in section VI.B. of the preamble of this 
proposed rule). Therefore, over the period from FY 2002 through the 
proposed 2004 LTCH PPS rate year (June 30, 2004), the cumulative 
increase would be 6.0 percent [1.035 * 1.025 = 1.060]. This cumulative 
increase matches (within rounding) the cumulative increase calculated 
by using the index level in the new proposed effective period and the 
index level in FY 2002, such that having two separate updates result in 
the same cumulative update as if we had used a single update for the 
entire 21-month period (October 1, 2002 through June 30, 2004). Thus, 
the proposed change to the proposed 2004 LTCH PPS rate update cycle 
would not result in a higher or lower update than would have been the 
case (except due to rounding) if no change had been made to the LTCH 
PPS update cycle. In addition, as discussed in section VI.B.1.b. of the 
preamble of this proposed rule, we proposed to apply a budget 
neutrality adjustment of 0.997 in determining the proposed standard 
Federal rate to account for the estimated $5.66 million budgetary 
impact for the Medicare program in FY 2003 as a result of the proposed 
change to LTCH PPS rate update cycle.
2. Impact on Providers
    The basic methodology for determining a LTCH PPS payment is set 
forth in the regulations at Sec.  412.521 through Sec.  412.525. In 
addition to the basic LTC-DRG payment (standard Federal rate x LTC-DRG 
relative weight), we make adjustments for differences in area wage 
levels, cost-of-living adjustment for Alaska and Hawaii, and short-stay 
outliers. In addition, LTCHs may also receive high-cost outlier 
payments for those cases that qualify under the threshold established 
each rate year. Section 412.533 provides for a 5-year transition to 
fully prospective payments from payment based on reasonable cost-based 
principles. During the 5-year transition period, payments to LTCHs are 
based on an increasing percentage of the LTCH PPS Federal rate and a 
decreasing percentage of payment based on reasonable cost-based 
principles. Section 412.533(c) provides for a one-time opportunity for 
LTCHs to elect payments based on 100 percent of the LTCH PPS Federal 
rate.
    In order to understand the impact of the proposed changes to the 
LTCH PPS discussed in this proposed rule on different categories of 
LTCHs for the proposed 2004 LTCH PPS rate year, it is necessary to 
estimate payments per discharge under the current (Federal FY 2003) 
LTCH PPS rates and factors (see the August 30, 2002 final rule) and 
payments per discharge that would be made under the proposed LTCH PPS 
rates and factors for the proposed 2004 LTCH PPS rate year (July 1, 
2003 through June 30, 2004). We also evaluated the percent change in 
payments per discharge of estimated FY 2003 prospective payments to 
estimated proposed 2004 LTCH PPS rate year payments for each category 
of LTCHs.
    Hospital groups were based on characteristics provided in OSCAR 
data and FYs 1999 through 2000 cost report data from HCRIS. Hospitals 
with incomplete characteristics were grouped into the ``unknown'' 
category. Hospital groups include:
    [sbull] Location: Large Urban/Other Urban/Rural.
    [sbull] Participation Date.
    [sbull] Ownership Control.
    [sbull] Census Region.
    [sbull] Bed Size.
    To estimate the impacts among the various categories of providers 
during the transition period, it is imperative that reasonable cost-
based principle payments and prospective payments contain similar 
inputs. More specifically, in the impact analysis showing the impact 
reflecting the applicable transition blend percentages of prospective 
payments and reasonable cost-based principle payments and the option to 
elect payment based on 100 percent of the Federal rate (Table I below), 
we estimated payments only for those providers that we are able to 
calculate payments based on reasonable cost-based principles. For 
example, if we did not have FYs 1996 through 1999 cost data for a LTCH, 
we were unable to determine an update to the LTCH's target amount to 
estimate payment under the current reasonable cost-based principles.
    Using LTCH cases from the FY 2001 MedPAR file and cost data from 
FYs 1996 through 2000 in HCRIS to estimate payments under the current 
reasonable cost-based principles, we have both case-mix and cost data 
for 194 LTCHs. Thus, for the impact analyses reflecting the applicable 
transition blend percentages of prospective payments and reasonable 
cost-based principle payments and the option to elect payment based on 
100 percent of the Federal rate (see Table VII. below), we used data 
from 194 LTCHs. However, using cases from the FY 2001 MedPAR file, we 
had case-mix data for 250 LTCHs. Cost data to determine current 
payments under reasonable cost-based principle payments are not needed 
to simulate payments based on 100 percent of the Federal rate. 
Therefore, for the impact analyses reflecting fully phased-in 
prospective payments (see Table VIII. below), we used data from 250 
LTCHs.
    These impacts reflect the estimated ``losses'' or ``gains'' among 
the various classifications of providers for the 12-month period from 
October 1, 2002 through September 30, 2003 (Federal FY 2003) compared 
to the 12-month period from July 1, 2003 through June 30, 2004 
(proposed 2004 LTCH PPS rate year). Proposed 2004 LTCH rate year 
prospective payments were based on the proposed standard Federal rate 
of $35,726.64 and the hospital's estimated case-mix based on FY 2001 
claims data. Prospective payments for Federal FY 2003 were based on the 
standard Federal rate of $34,956.15 and the same FY 2001 claims data.
3. Calculation of Prospective Payments
    To estimate payments under the LTCH PPS, we simulated payments on a 
case-by-case basis by applying the payment policy for short-stay 
outliers (as described in section VI.C.4.b. of this proposed rule) and 
the adjustments for area wage differences (as described in section 
VI.C.1. of this proposed rule) and for the cost-of-living for Alaska 
and Hawaii (as described in section VI.C.2. of this proposed rule). 
Additional payments would also be made for high-cost outlier cases (as 
described in section VI.C.3. of this proposed rule). As noted in 
section VI.C.5. of this proposed rule, we are not proposing to make 
adjustments for geographic reclassification, indirect medical education 
costs, or a disproportionate share of low-income patients.
    The adjustment for area wage differences for estimated FY 2003 
payments was done by using the applicable LTCH PPS wage index (one-
fifth of the full FY 2002 acute care hospital inpatient wage index 
data, without taking into account geographic reclassification under 
sections 1886(d)(8) and (d)(10) of the Act (see

[[Page 11261]]

August 30, 2002, 67 FR 56057-56075). For the estimated proposed 2004 
LTCH PPS rate year payments, we used a weighted average of a LTCH's 
applicable wage index during the period from July 1, 2003, through June 
30, 2004, since some providers may experience a change in the wage 
index phase-in percentage during the period from July 1, 2003 through 
June 30, 2004. For cost reporting periods beginning on or after October 
1, 2002 and before September 30, 2003, the applicable proposed LTCH 
wage index is one-fifth of the full FY 2002 acute care hospital 
inpatient wage index data, without taking into account geographic 
reclassification under sections 1886(d)(8) and (d)(10) of the Act. For 
cost reporting periods beginning on or after October 1, 2003 and before 
September 30, 2004, the applicable LTCH wage index would be two-fifths 
of the full FY 2003 acute care hospital inpatient wage index data, 
without taking into account geographic reclassification under sections 
1886(d)(8) and (d)(10) of the Act. Therefore, a provider with a cost 
reporting period beginning October 1, 2003, would have 3 months of 
payments under the one-fifth wage index value and 9 months of payment 
under the two-fifths wage index value. For this provider, we computed a 
blended wage index of 25 percent (3 months/12 months) of the one-fifth 
wage index value and 75 percent (9 months/12 months) of the two-fifths 
wage index value.
    We also calculated payments using the applicable transition blend 
percentages. For FY 2003, the applicable transition blend percentage is 
80 percent of payment based on reasonable cost-based principles and 20 
percent of payment under the LTCH PPS. For the proposed 2004 LTCH PPS 
rate year based on the transition blend percentages set forth in Sec.  
412.533(a), some providers may experience a change in the transition 
blend percentage during the period from July 1, 2003 through June 30, 
2004. For example during the 12-month period from July 1, 2003 through 
June 30, 2004, a provider with a cost reporting period beginning on 
October 1, 2002 (which is paid under the 80/20 transition blend (80 
percent of payments based on reasonable cost-based principles and 20 
percent of payments under the LTCH PPS) beginning October 1, 2002) 
would have 3 months (July 1, 2003 through September 30, 2003) under the 
80/20 blend and 9 months (October 1, 2003 through June 30, 2004) of 
payment under the 60/40-transition blend (60 percent of payments based 
on reasonable cost-based principles and 40 percent of payments under 
the LTCH PPS). (The 60 percent/40 percent blend would continue until 
the provider is cost report period beginning on October 1, 2004.) In 
estimating blended transition payments, we estimated payments based on 
reasonable cost-based principles in accordance with the methodology in 
section 1886(b) of the Act. We compared the estimated blended 
transition payment to the LTCH's estimated payment if it would elect 
payment based on 100 percent of the Federal rate. If we estimated that 
a LTCH would be paid more based on 100 percent of the Federal rate, we 
assumed that it would elect to bypass the transition methodology and to 
receive immediate prospective payments.
    Then we applied the 6.6 percent reduction to payment to account for 
the effect of the 5-year transition methodology and election of payment 
based on 100 percent of the Federal rate on Medicare program payments 
established in the August 30, 2002 final rule (67 FR 56034) to each 
LTCH's estimated payments under the PPS for FY 2003. Similarly, we 
applied the proposed 5.7 percent reduction to payment to account for 
the effect of the 5-year transition methodology and election of payment 
based on 100 percent of the Federal rate on Medicare program payments 
(see section VI.C.6. of this proposed rule) to each LTCH's estimated 
payments under the PPS for the proposed 2004 LTCH PPS rate year. The 
impact based on our projection of whether a LTCH would be paid based on 
the transition blend methodology or would elect payment based on 100 
percent of the Federal rate is shown below in Table VII.
    In Table VIII. below, we also show the impact if the LTCH PPS were 
fully implemented; that is, as if there were an immediate transition to 
fully Federal prospective payments under the LTCH PPS for Federal FY 
2003 and the proposed 2004 LTCH PPS rate year. Accordingly, the 
proposed 5.7 percent reduction to account for the 5-year transition 
methodology on LTCHs' Medicare program payments for the proposed 2004 
LTCH PPS rate year and the 6.6 percent reduction to account for the 5-
year transition methodology on LTCHs' Medicare program payments 
established for FY 2003 were not applied to LTCHs' estimated payments 
under the PPS.
    Tables VII. and VIII. below illustrate the aggregate impact of the 
payment system among various classifications of LTCHs. The first 
column, LTCH Classification, identifies the type of LTCH. The second 
column lists the number of LTCHs of each classification type; the third 
column identifies the number of long-term care cases; and the fourth 
column shows the estimated payment per discharge for FY 2003; the fifth 
column shows the estimated payment per discharge for proposed 2004 LTCH 
PPS rate year; and the sixth column shows the percent change of FY 2003 
compared to proposed 2004 LTCH PPS rate year.

Table VII.--Projected Impact Reflecting Applicable Transition Blend Percentages of Proposed Prospective Payments
 and Reasonable Cost-Based (TEFRA) Payments and Option To Elect Payment Based on 100 Percent of the Federal Rate
                                                       \1\
             [FY 2003 Payments Compared to Proposed 2004 LTCH Prospective Payment System Rate Year]
----------------------------------------------------------------------------------------------------------------
                                                                                         Average
                                                                                        proposed
                                                                           Average      2004 LTCH
                                              Number of     Number of    Federal FY    prospective     Percent
            LTCH classification                 LTCHs      LTCH cases   2003 payment     payment       change
                                                                        per case \2\   system rate
                                                                                      year payment
                                                                                      per case \3\
----------------------------------------------------------------------------------------------------------------
All Providers.............................           194        71,811       $26,919       $27,227           1.1
By Location:
    Rural.................................             7         2,153        20,668        20,864           1.0
    Urban.................................           187        69,658        27,113        27,424           1.1
        Large.............................           113        47,705        27,445        27,742           1.1

[[Page 11262]]

 
        Other.............................            74        21,953        26,391        26,733           1.3
By Participation Date:
    After October 1993....................           124        41,876        28,137        28,506           1.3
    Before October 1983...................            16         7,836        20,060        20,270           1.0
    October 1983--September 1993..........            45        19,990        27,194        27,427           0.9
    Unknown...............................             9         2,109        25,636        25,791           0.6
By Ownership Control:
    Voluntary.............................            48        17,730        24,756        25,096           1.4
    Proprietary...........................           136        51,626        27,688        27,990           1.1
    Government............................            10         2,455        26,371        26,587           0.8
By Census Region:
    New England...........................            14         9,487        20,146        20,320           0.9
    Middle Atlantic.......................             9         3,276        28,519        28,714           0.7
    South Atlantic........................            20         6,571        31,310        31,660           1.1
    East North Central....................            33         9,057        28,964        29,238           0.9
    East South Central....................            10         2,863        25,761        25,905           0.6
    West North Central....................            11         2,898        26,611        26,947           1.3
    West South Central....................            71        30,248        26,147        26,479           1.3
    Mountain..............................            15         2,491        28,399        28,933           1.9
    Pacific...............................            11         4,920        34,145        34,608           1.4
By Bed Size:
    Beds: 0-24............................            17         2,453        29,299        29,570           0.9
    Beds: 25-49...........................            88        21,725        28,091        28,373           1.0
    Beds: 50-74...........................            24         8,209        28,492        28,659           0.6
    Beds: 75-124..........................            34        16,306        27,241        27,630           1.4
    Beds: 125-199.........................            21        13,820        24,579        24,856           1.1
    Beds: 200+............................             9         9,218        25,231        25,636           1.6
Unknown...................................             1            80         7,787         8,043          3.3
----------------------------------------------------------------------------------------------------------------
\1\ These calculations take into account that some providers may experience a change in the blend percentage
  changes during the July 1, 2003 through June 30, 2004 rate cycle. For example, during the 12-month period of
  July 1, 2003 through June 30, 2004, a provider with a cost reporting period beginning October 1 would have 3
  months (July 1, 2003 through September 30, 2003) of payments under the 80/20 blend and 9 months (October 1,
  2003 through June 30, 2004) of payment under the 60/40 blend.
\2\ Average payment per case for the 12-month period of October 1, 2002 through September 30, 2003.
\3\ Average payment per case for the 12-month period of July 1, 2003 through June 30, 2004.


           Table VIII.--Projected Impact Reflecting the Fully Phased-In Proposed Prospective Payments
         [FY 2003 Payments Compared to Proposed 2004 LTCH Prospective Payment System Rate Year Payments]
----------------------------------------------------------------------------------------------------------------
                                                                                         Average
                                                                                        proposed
                                                                           Average      2004 LTCH
                                              Number of     Number of    Federal FY    prospective     Percent
            LTCH classification                 LTCHs      LTCH cases   2003 payment     payment       change
                                                                        per case \1\   system rate
                                                                                      year payment
                                                                                      per case \2\
----------------------------------------------------------------------------------------------------------------
All Providers.............................           250        82,625       $26,367       $26,959           2.2
By Location:
    Rural.................................            16         4,674        20,851        21,191           1.6
    Urban.................................           234        77,951        26,687        27,305           2.3
        Large.............................           135        52,256        27,027        27,661           2.3
        Other.............................            99        25,695        25,996        26,581           2.2
By Participation Date:
    After October 1993....................           177        51,656        27,308        27,822           1.9
    Before October 1983...................            17         7,897        20,826        20,780          -0.2
    October 1983--September 1993..........            45        20,004        26,724        27,719           3.7
    Unknown...............................            11         3,068        22,178        23,400           5.5
By Ownership Control:
    Voluntary.............................            55        19,853        24,314        25,020           2.9
    Proprietary...........................           148        54,269        27,490        28,027           2.0
    Government............................            47         8,503        23,893        24,672           3.3

[[Page 11263]]

 
By Census Region:
    New England...........................            16         9,609        21,094        20,937          -0.7
    Middle Atlantic.......................            15         4,162        28,982        29,622           2.2
    South Atlantic........................            23         7,051        30,441        31,329           2.9
    East North Central....................            48        12,145        28,356        28,860           1.8
    East South Central....................            14         3,722        28,561        28,523          -0.1
    West North Central....................            16         3,769        26,347        27,094           2.8
    West South Central....................            87        33,971        24,560        25,363           3.3
    Mountain..............................            19         2,993        26,529        27,705           4.4
    Pacific...............................            12         5,203        33,836        34,369           1.6
By Bed Size:
    Beds: 0-24............................            21         3,073        27,130        28,027           3.3
    Beds: 25-49...........................            98        24,386        27,954        28,153           0.7
    Beds: 50-74...........................            27         9,310        27,556        27,665           0.4
  Beds: 75-124............................            35        16,432        26,222        27,321           4.2
    Beds: 125-199.........................            21        13,838        24,945        25,564           2.5
    Beds: 200+............................            11         9,518        25,041        26,099           4.2
    Unknown...............................            37         6,068        23,354        24,095          3.2
----------------------------------------------------------------------------------------------------------------
\1\ Average payment per case for the 12-month period of October 1, 2002 through September 30, 2003.
\2\ Average payment per case for the 12-month period of July 1, 2003 through June 30, 2004.

4. Results
    We have prepared the following summary of the impact (as shown in 
Table VII.) of the LTCH PPS set forth in this proposed rule.
a. Location
    The majority of LTCHs are in urban areas. Approximately 3 percent 
of the LTCHs are identified as being located in a rural area, and 
approximately 3 percent of all LTCH cases are treated in these rural 
hospitals. Impact analysis in Table VII. shows that the percent change 
in estimated payments per discharge for FY 2003 compared to the 
proposed 2004 LTCH PPS rate year for rural LTCHs would be 1.0 percent, 
and would be 1.1 percent for urban LTCHs. Large urban LTCHs are 
projected to experience a 1.1 percent increase in payments per 
discharge percent from FY 2003 compared to the proposed 2004 LTCH PPS 
rate year, while other urban LTCHs projected to experience a 1.3 
percent increase in payments per discharge percent from FY 2003 
compared to the proposed 2004 LTCH PPS rate year. (See Table VII.)
b. Participation Date
    LTCHs are grouped by participation date into three categories: (1) 
Before October 1983; (2) between October 1983 and September 1993; and 
(3) after October 1993. We did not have sufficient OSCAR data on 9 
LTCHs, which we labeled as an ``Unknown'' category. The majority, 
approximately 58 percent, of the LTCH cases are in hospitals that began 
participating after October 1993 and are projected to experience a 1.3 
percent increase in payments per discharge percent from FY 2003 
compared to the proposed 2004 LTCH PPS rate year. Approximately 11 
percent of the cases are in LTCHs that began participating in Medicare 
before October 1983 and are projected to experience a 1.0 percent 
increase in payments per discharge percent from FY 2003 compared to the 
proposed 2004 LTCH PPS rate year. (See Table VII.)
c. Ownership Control
    LTCHs are grouped into three categories based on ownership control 
type--(1) voluntary; (2) proprietary; and (3) government.
    Approximately 25 percent of LTCHs are government run and we expect 
that voluntary LTCHs would ``gain'' the most from the proposed changes 
based on our projection that they would experience a 1.4 percent 
increase in payments per discharge from FY 2003 compared to the 
proposed 2004 LTCH PPS rate year. Government and proprietary LTCHs are 
projected to experience a 0.8 percent and 1.1 percent increase in 
payments per discharge percent from FY 2003 compared to the proposed 
2004 LTCH PPS rate year, respectively. (See Table VII.)
d. Census Region
    LTCHs located in most regions are expected to experience an 
increase in payments per discharge percent from FY 2003 compared to the 
proposed 2004 LTCH PPS rate year. Specifically, of the nine census 
regions, we expect that LTCHs in the Mountain region would experience 
the largest percent increase in payments per discharge percent from FY 
2003 compared to the proposed 2004 LTCH PPS rate year (1.9 percent). We 
expect LTCHs in the East South Central region would experience the 
smallest percent increase in payments per discharge percent from FY 
2003 compared to the proposed 2004 LTCH PPS rate year (0.6 percent). 
(See Table VII.)
e. Bed Size
    LTCHs were grouped into six categories based on bed size--0-24 
beds, 25-49 beds, 50-74 beds, 75-124 beds, 125-199 beds, and 200+ beds. 
We did not have sufficient OSCAR data on 1 LTCH, which we labeled as an 
``Unknown'' category.
    The percent increase in payments per discharge percent from FY 2003 
compared to the proposed 2004 LTCH PPS rate year are projected to 
increase for all bed size categories. Most LTCHs were in bed size 
categories where the percent increase in payments per discharge from FY 
2003 compared to the proposed 2004 LTCH PPS rate year is

[[Page 11264]]

estimated to be greater than 1.0 percent. Other than the LTCH whose bed 
size is unknown, LTCHs with 200 or more beds have the highest estimated 
percent change in payments per discharge percent from FY 2003 compared 
to the proposed 2004 LTCH PPS rate year (1.6 percent), while LTCHs with 
between 50-74 beds have the lowest projected increase in the percent 
change in payments per discharge percent from FY 2003 compared to the 
proposed 2004 LTCH PPS rate year (0.6 percent). (See Table VII.)
5. Effect on the Medicare Program
    Based on actuarial projections resulting from our experience with 
other prospective payment systems, we estimate that Medicare spending 
(total Medicare program payments) for LTCH services over the next 5 
years would be as follows:

------------------------------------------------------------------------
                                                              Estimated
                Proposed LTCH PPS rate year                 payments  ($
                                                            in billions)
------------------------------------------------------------------------
2004......................................................         $2.17
2005......................................................          2.29
2006......................................................          2.42
2007......................................................          2.56
2008......................................................          2.71
------------------------------------------------------------------------

    These estimates are based on the current estimate of increase in 
the excluded hospital market with capital basket of 2.5 percent for 
proposed 2004 LTCH PPS rate year (adjusted to account for the proposed 
change in the rate update cycle discussed in section VI.B.1.b. of the 
preamble of this proposed rule), 3.1 percent for proposed 2005 LTCH PPS 
rate year, 3.0 percent for proposed 2006 LTCH PPS rate year, 2.9 
percent for proposed 2007 LTCH PPS rate year, and 3.0 percent for 
proposed 2008 LTCH PPS rate year. We currently estimate that there 
would be an increase in Medicare beneficiary enrollment of 1.3 percent 
in proposed 2004 LTCH PPS rate year, 1.6 percent in proposed 2005 LTCH 
PPS rate year, 1.9 percent in proposed 2006 LTCH PPS rate year, 2.0 
percent in proposed 2007 LTCH PPS rate year, 2.1 percent in proposed 
2008 LTCH PPS rate year, and an estimated increase in the total number 
of LTCHs. Consistent with the statutory requirement for budget 
neutrality, we intend for estimated aggregate payments under the LTCH 
PPS in FY 2003 to equal the estimated aggregate payments that would be 
made if the LTCH PPS were not implemented. Our methodology for 
estimating payments for purposes of the budget neutrality calculations 
uses the best available data and necessarily reflects assumptions. As 
we collect data from LTCHs, we will monitor payments and evaluate the 
ultimate accuracy of the assumptions used to calculate the budget 
neutrality calculations (for example, inflation factors, intensity of 
services provided, or behavioral response to the implementation of the 
LTCH PPS). To the extent the assumptions significantly differ from 
actual experience, the aggregate amount of actual payments may turn out 
to be significantly higher or lower than the estimates on which the 
budget neutrality calculations are based.
    Section 123 of Pub. L. 106-113 and section 307 of Pub. L. 106-554 
provide the Secretary with extremely broad authority in developing the 
LTCH PPS, including the authority for appropriate adjustments. In 
accordance with this broad authority, we may discuss in a future 
proposed rule a possible one-time prospective adjustment to the LTCH 
PPS rates to maintain budget neutrality so that the effect of the 
difference between actual payments and estimated payments for the first 
year of LTCH PPS is not perpetuated in the PPS rates for future years. 
As the LTCH PPS was only implemented for cost reporting periods 
beginning on or after October 1, 2002, we do not yet have sufficient 
data to determine whether such an adjustment is warranted.
6. Effect on Medicare Beneficiaries
    Under the LTCH PPS, hospitals will receive payment based on the 
average resources consumed by patients for each diagnosis. We do not 
expect any changes in the quality of care or access to services for 
Medicare beneficiaries under the LTCH PPS, but we expect that paying 
prospectively for LTCH services will enhance the efficiency of the 
Medicare program.

C. Executive Order 12866

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

XIV. Response to Public Comments

    Because of the large number of items of correspondence we normally 
receive on a proposed rule, we are not able to acknowledge or respond 
to them individually. However, in preparing the final rule, we will 
consider all comments concerning the provisions of this proposed rule 
that we receive by the date and time specified in the DATES section of 
this preamble and respond to those comments in the preamble to that 
rule.

List of Subjects in 42 CFR Part 412

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

    In accordance with the discussion in this preamble, the Centers for 
Medicare & Medicaid Services proposes to amend 42 CFR chapter IV, part 
412, as set forth below:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

    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).

    2. Section 412.22 is amended by revising paragraph (h)(2) and 
adding a new paragraph (h)(6) to read as follows:


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

* * * * *
    (h) Satellite facilities. * * *
    (2) Except as provided in paragraphs (h)(3) and (h)(6) 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 for any period:
* * * * *
    (6) The provisions of paragraph (h)(2)(i) of this section do not 
apply to any long-term care hospital that is subject to the long-term 
care hospital prospective payment system under Subpart O of this part, 
effective for cost reporting periods occurring on or after October 1, 
2002, and that elects to be paid based on 100 percent of the Federal 
prospective payment rate as specified in Sec.  412.533(c), beginning 
with the first cost reporting period following that election, or to a 
new long-term care hospital, as defined in Sec.  412.23(e)(4).
    3. Section 412.503 is amended by adding a definition of ``long-term 
care hospital prospective payment system rate year'' in alphabetical 
order to read as follows:


Sec.  412.503  Definitions.

* * * * *
    Long-term care hospital prospective payment system rate year means 
the 12-month period of July 1 through June 30.
* * * * *
    4. Section 412.523 is amended by revising paragraphs (c)(3) and 
(d)(3) to read as follows:

[[Page 11265]]

Sec.  412.523  Methodology for calculating the Federal prospective 
payment rates.

* * * * *
    (c) * * *
    (3) Computation of the standard Federal rate. The standard Federal 
rate is computed as follows:
    (i) For FY 2003. Based on the updated costs per discharge and 
estimated payments for FY 2003 determined in paragraph (c)(2) of this 
section, CMS computes a standard Federal rate for FY 2003 that 
reflects, as appropriate, the adjustments described in paragraph (d) of 
this section. The FY 2003 standard Federal rate is effective for 
discharges occurring in cost reporting periods beginning on or after 
October 1, 2002 through June 30, 2003.
    (ii) For long-term care hospital prospective payment system rate 
years beginning July 1, 2003 and after. The standard Federal rate for 
long-term care hospital prospective payment system rate years beginning 
July 1, 2003 and after will be the standard Federal rate for the 
previous long-term care hospital prospective payment system rate year, 
updated by the increase factor described in paragraph (a)(2) of this 
section, and adjusted as appropriate as described in paragraph (d) of 
this section. For the rate year from July 1, 2003 through June 30, 
2004, the updated and adjusted standard Federal rate will be offset by 
a budget neutrality factor to account for updating the FY 2003 standard 
Federal rate on July 1 rather than October 1.
* * * * *
    (d) * * *
    (3) One-time prospective adjustment. The Secretary will review 
payments under this prospective payment system and may make a one-time 
prospective adjustment to the long-term care hospital prospective 
payment system rates by October 1, 2006, so that the effect of any 
significant difference between actual payments and estimated payments 
for the first year of the long-term care hospital prospective payment 
system is not perpetuated in the prospective payment rates for future 
years.
* * * * *
    5. Section 412.525 is amended by revising paragraph (a) to read as 
follows:


Sec.  412.525  Adjustments to the Federal prospective payment.

    (a) Adjustments for high-cost outliers.
    (1) CMS provides for an additional payment to a long-term care 
hospital if its estimated costs for a patient exceed the adjusted LTC-
DRG payment plus a fixed-loss amount. For each long-term care hospital 
rate year, CMS determines a fixed-loss amount that is the maximum loss 
that a hospital can incur under the prospective payment system for a 
case with unusually high costs.
    (2) The fixed-loss amount is determined for the long-term care 
hospital rate year using the LTC-DRG relative weights that are in 
effect on July 1 of the rate year.
    (3) The additional payment equals 80 percent of the difference 
between the estimated cost of the patient care (determined by 
multiplying the hospital-specific cost-to-charge ratios by the Medicare 
allowable covered charge) and the sum of the adjusted Federal 
prospective payment for the LTC-DRG prospective payment system payment 
and the fixed-loss amount.
    (4)(i) For discharges occurring on or after October 1, 2002 through 
June 30, 2003, no retroactive adjustments will be made to outlier 
payments upon cost report settlement to account for differences between 
the estimated cost-to-charge ratio and the actual cost-to-charge ratio 
of the case.
    (ii) For discharges occurring on or after July 1, 2003, high-cost 
outlier payments are subject to the provisions of Sec.  412.84(i) and 
(m) for adjustments of cost-to-charge ratios.
* * * * *
    6. Section 412.529 is amended by:
    A. Revising paragraph (c)(4).
    B. In paragraph (d), the term ``LTCH's'' is removed and the term 
``long-term care hospital's'' is added in its place.


Sec.  412.529  Special payment provision for short-stay outliers.

* * * * *
    (c) * * *
    (4)(i) For discharges occurring on or after October 1, 2002 through 
June 30, 2003, no retroactive adjustments will be made to short-stay 
outlier payments upon cost report settlement to account for differences 
between cost-to-charge ratio and the actual cost-to-charge ratio of the 
case.
    (ii) For discharges occurring on or after July 1, 2003, short-stay 
outlier payments are subject to the provisions of Sec.  412.84(i) and 
(m) for adjustments of cost-to-charge ratios.
* * * * *
    7. Section 412.535 is revised to read as follows:


Sec.  412.535  Publication of the Federal prospective payment rates.

    CMS publishes information pertaining to the long-term care hospital 
prospective payment system effective for each annual update in the 
Federal Register.
    (a) Information on the unadjusted Federal payment rates and a 
description of the methodology and data used to calculate the payment 
rates are published on or before June 1 prior to the start of each 
long-term care hospital prospective payment system rate year which 
begins July 1.
    (b) Information on the LTC-DRG classification and associated 
weighting factors is published on or before August 1 prior to the 
beginning of each Federal fiscal year.

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

    Dated: December 20, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: February 14, 2003.
Tommy G. Thompson,
Secretary.

Addendum

    This addendum contains the tables referred to throughout the 
preamble to this proposed rule. The tables presented below are as 
follows:
    Table 1.--Proposed Long-Term Care Hospital Wage Index for Urban 
Areas for Discharges Occurring from July 1, 2003 through June 30, 2004
    Table 2.--Proposed Long-Term Care Hospital Wage Index for Rural 
Areas for Discharges Occurring from July 1, 2003 through June 30, 2004
    Table 3.--Proposed LTC-DRG Relative Weights, Geometric Mean Length 
of Stay, and Short-Stay Five-Sixths Average Length of Stay for the 
Period of July 1, 2003 through September 30, 2003

  Table 1.--Proposed Long-Term Care Hospital Wage Index for Urban Areas
    for Discharges Occurring From July 1, 2003 Through June 30, 2004
------------------------------------------------------------------------
                                                 Full    \1/5\    \2/5\
                     Urban area  (Constituent    wage     wage     wage
        MSA                 counties)           index    index    index
                                                 \1\      \2\      \3\
------------------------------------------------------------------------
0040..............  Abilene, TX

[[Page 11266]]

 
                     Taylor, TX..............   0.7792   0.9558   0.9117
0060..............  Aguadilla, PR
                     Aguada, PR
                     Aguadilla, PR
                     Moca, PR................   0.4587   0.8917   0.7835
0080..............  Akron, OH
                     Portage, OH
                     Summit, OH..............   0.9600   0.9920   0.9840
0120..............  Albany, GA
                     Dougherty, GA
                     Lee, GA.................   1.0594   1.0119   1.0238
0160..............  Albany-Schenectady-Troy,
                     NY
                     Albany, NY
                     Montgomery, NY
                     Rensselaer, NY
                     Saratoga, NY
                     Schenectady, NY
                     Schoharie, NY...........   0.8384   0.9677   0.9354
0200..............  Albuquerque, NM
                     Bernalillo, NM
                     Sandoval, NM
                     Valencia, NM............   0.9315   0.9863   0.9726
0220..............  Alexandria, LA
                     Rapides, LA.............   0.7859   0.9572   0.9144
0240..............  Allentown-Bethlehem-
                     Easton, PA
                     Carbon, PA
                     Lehigh, PA
                     Northampton, PA            0.9735   0.9947   0.9894
0280..............  Altoona, PA
                     Blair, PA...............   0.9225   0.9845   0.9690
0320..............  Amarillo, TX
                     Potter, TX
                     Randall, TX.............   0.9034   0.9807   0.9614
0380..............  Anchorage, AK
                     Anchorage, AK...........   1.2358   1.0472   1.0943
0440..............  Ann Arbor, MI
                     Lenawee, MI
                     Livingston, MI
                     Washtenaw, MI...........   1.1103   1.0221   1.0441
0450..............  Anniston, AL
                     Calhoun, AL.............   0.8044   0.9609   0.9218
0460..............  Appleton-Oshkosh-Neenah,
                     WI
                     Calumet, WI
                     Outagamie, WI
                     Winnebago, WI...........   0.8997   0.9799   0.9599
0470..............  Arecibo, PR
                     Arecibo, PR
                     Camuy, PR
                     Hatillo, PR.............   0.4337   0.8867   0.7735
0480..............  Asheville, NC
                     Buncombe, NC
                     Madison, NC.............   0.9876   0.9975   0.9950
0500..............  Athens, GA
                     Clarke, GA
                     Madison, GA
                     Oconee, GA..............   1.0211   1.0042   1.0084
0520..............  Atlanta, GA
                     Barrow, GA
                     Bartow, GA
                     Carroll, GA
                     Cherokee, GA
                     Clayton, GA
                     Cobb, GA
                     Coweta, GA
                     DeKalb, GA
                     Douglas, GA
                     Fayette, GA
                     Forsyth, GA
                     Fulton, GA

[[Page 11267]]

 
                     Gwinnett, GA
                     Henry, GA
                     Newton, GA
                     Paulding, GA
                     Pickens, GA
                     Rockdale, GA
                     Spalding, GA
                     Walton, GA..............   0.9991   0.9998   0.9996
0560..............  Atlantic-Cape May, NJ
                     Atlantic, NJ
                     Cape May, NJ............   1.1017   1.0203   1.0407
0580..............  Auburn-Opelika, AL
                    Lee, AL..................   0.8325   0.9665   0.9330
0600..............  Augusta-Aiken, GA-SC
                     Columbia, GA
                     McDuffie, GA
                     Richmond, GA
                     Aiken, SC
                    Edgefield, SC............   1.0264   1.0053   1.0106
0640..............  Austin-San Marcos, TX
                     Bastrop, TX
                     Caldwell, TX
                     Hays, TX
                     Travis, TX
                     Williamson, TX..........   0.9637   0.9927   0.9855
0680..............  Bakersfield, CA
                     Kern, CA................   0.9877   0.9975   0.9951
0720..............  Baltimore, MD
                     Anne Arundel, MD
                     Baltimore, MD
                     Baltimore City, MD
                     Carroll, MD
                     Harford, MD
                     Howard, MD
                     Queen Anne's, MD........   0.9929   0.9986   0.9972
0733..............  Bangor, ME
                     Penobscot, ME...........   0.9664   0.9933   0.9866
0743..............  Barnstable-Yarmouth, MA
                     Barnstable, MA..........   1.3202   1.0640   1.1281
0760..............  Baton Rouge, LA
                     Ascension, LA
                     East Baton Rouge, LA
                     Livingston, LA
                     West Baton Rouge, LA....   0.8294   0.9659   0.9318
0840..............  Beaumont-Port Arthur, TX
                     Hardin, TX
                     Jefferson, TX
                     Orange, TX..............   0.8324   0.9665   0.9330
0860..............  Bellingham, WA
                     Whatcom, WA.............   1.2282   1.0456   1.0913
0870..............  Benton Harbor, MI
                     Berrien, MI.............   0.8965   0.9793   0.9586
0875..............  Bergen-Passaic, NJ
                     Bergen, NJ
                     Passaic, NJ.............   1.2150   1.0430   1.0860
0880..............  Billings, MT
                     Yellowstone, MT.........   0.9022   0.9804   0.9609
0920..............  Biloxi-Gulfport-
                     Pascagoula, MS
                     Hancock, MS
                     Harrison, MS
                     Jackson, MS.............   0.8757   0.9751   0.9503
0960..............  Binghamton, NY
                     Broome, NY
                     Tioga, NY...............   0.8341   0.9668   0.9336
1000..............  Birmingham, AL
                     Blount, AL
                     Jefferson, AL
                     St. Clair, AL
                     Shelby, AL..............   0.9222   0.9844   0.9689

[[Page 11268]]

 
1010..............  Bismarck, ND
                     Burleigh, ND
                     Morton, ND..............   0.7972   0.9594   0.9189
1020..............  Bloomington, IN
                     Monroe, IN..............   0.8907   0.9781   0.9563
1040..............  Bloomington-Normal, IL
                     McLean, IL..............   0.9109   0.9822   0.9644
1080..............  Boise City, ID
                     Ada, ID
                     Canyon, ID..............   0.9310   0.9862   0.9724
1123..............  Boston-Worcester-Lawrence-
                     Lowell-Brockton, MA-NH
                     (NH Hospitals)
                     Bristol, MA
                     Essex, MA
                     Middlesex, MA
                     Norfolk, MA
                     Plymouth, MA
                     Suffolk, MA
                     Worcester, MA
                     Hillsborough, NH
                     Merrimack, NH
                     Rockingham, NH
                     Strafford, NH...........   1.1229   1.0246   1.0492
1125..............  Boulder-Longmont, CO
                     Boulder, CO.............   0.9689   0.9938   0.9876
1145..............  Brazoria, TX
                     Brazoria, TX............   0.8535   0.9707   0.9414
1150..............  Bremerton, WA
                     Kitsap, WA..............   1.0944   1.0189   1.0378
1240..............  Brownsville-Harlingen-San
                     Benito, TX
                     Cameron, TX.............   0.8880   0.9776   0.9552
1260..............  Bryan-College Station, TX
                     Brazos, TX..............   0.8821   0.9764   0.9528
1280..............  Buffalo-Niagara Falls, NY
                     Erie, NY
                     Niagara, NY.............   0.9365   0.9873   0.9746
1303..............  Burlington, VT
                     Chittenden, VT
                     Franklin, VT
                     Grand Isle, VT..........   1.0052   1.0010   1.0021
1310..............  Caguas, PR
                     Caguas, PR
                     Cayey, PR
                     Cidra, PR
                     Gurabo, PR
                     San Lorenzo, PR.........   0.4371   0.8874   0.7748
1320..............  Canton-Massillon, OH
                     Carroll, OH
                     Stark, OH...............   0.8932   0.9786   0.9573
1350..............  Casper, WY
                     Natrona, WY.............   0.9690   0.9938   0.9876
1360..............  Cedar Rapids, IA
                     Linn, IA................   0.9056   0.9811   0.9622
1400..............  Champaign-Urbana, IL
                     Champaign, IL...........   1.0635   1.0127   1.0254
1440..............  Charleston-North
                     Charleston, SC
                     Berkeley, SC
                     Charleston, SC
                     Dorchester, SC..........   0.9235   0.9847   0.9694
1480..............  Charleston, WV
                     Kanawha, WV
                     Putnam, WV..............   0.8898   0.9780   0.9559
1520..............  Charlotte-Gastonia-Rock
                     Hill, NC-SC
                     Cabarrus, NC
                     Gaston, NC
                     Lincoln, NC
                     Mecklenburg, NC
                     Rowan, NC
                     Stanly, NC
                     Union, NC

[[Page 11269]]

 
                     York, SC................   0.9875   0.9975   0.9950
1540..............  Charlottesville, VA
                     Albemarle, VA
                     Charlottesville City, VA
                     Fluvanna, VA
                     Greene, VA..............   1.0438   1.0088   1.0175
1560..............  Chattanooga, TN-GA
                     Catoosa, GA
                     Dade, GA
                     Walker, GA
                     Hamilton, TN
                     Marion, TN..............   0.8976   0.9795   0.9590
1580..............  Cheyenne, WY
                     Laramie, WY.............   0.8628   0.9726   0.9451
1600..............  Chicago, IL
                     Cook, IL
                     DeKalb, IL
                     DuPage, IL
                     Grundy, IL
                     Kane, IL
                     Kendall, IL
                     Lake, IL
                     McHenry, IL
                     Will, IL................   1.1044   1.0209   1.0418
1620..............  Chico-Paradise, CA
                     Butte, CA...............   0.9745   0.9949   0.9898
1640..............  Cincinnati, OH-KY-IN
                     Dearborn, IN
                     Ohio, IN
                     Boone, KY
                     Campbell, KY
                     Gallatin, KY
                     Grant, KY
                     Kenton, KY
                     Pendleton, KY
                     Brown, OH
                     Clermont, OH
                     Hamilton, OH
                     Warren, OH..............   0.9381   0.9876   0.9752
1660..............  Clarksville-Hopkinsville,
                     TN-KY
                     Christian, KY
                     Montgomery, TN..........   0.8406   0.9681   0.9362
1680..............  Cleveland-Lorain-Elyria,
                     OH
                     Ashtabula, OH
                     Cuyahoga, OH
                     Geauga, OH
                     Lake, OH
                     Lorain, OH
                     Medina, OH..............   0.9670   0.9934   0.9868
1720..............  Colorado Springs, CO
                     El Paso, CO.............   0.9916   0.9983   0.9966
1740..............  Columbia, MO
                     Boone, MO...............   0.8496   0.9699   0.9398
1760..............  Columbia, SC
                     Lexington, SC
                     Richland, SC............   0.9307   0.9861   0.9723
1800..............  Columbus, GA-AL
                     Russell, AL
                     Chattahoochee, GA
                     Harris, GA
                     Muscogee, GA............   0.8374   0.9675   0.9350
1840..............  Columbus, OH
                     Delaware, OH
                     Fairfield, OH
                     Franklin, OH
                     Licking, OH
                     Madison, OH
                     Pickaway, OH............   0.9751   0.9950   0.9900
1880..............  Corpus Christi, TX

[[Page 11270]]

 
                     Nueces, TX
                     San Patricio, TX........   0.8729   0.9746   0.9492
1890..............  Corvallis, OR
                     Benton, OR..............   1.1453   1.0291   1.0581
1900..............  Cumberland, MD-WV (WV
                     Hospital)
                     Allegany, MD
                     Mineral, WV.............   0.7847   0.9569   0.9139
1920..............  Dallas, TX
                     Collin, TX
                     Dallas, TX
                     Denton, TX
                     Ellis, TX
                     Henderson, TX
                     Hunt, TX
                     Kaufman, TX
                     Rockwall, TX............   0.9998   1.0000   0.9999
1950..............  Danville, VA
                     Danville City, VA
                     Pittsylvania, VA........   0.8859   0.9772   0.9544
1960..............  Davenport-Moline-Rock
                     Island, IA-IL
                     Scott, IA
                     Henry, IL
                     Rock Island, IL.........   0.8835   0.9767   0.9534
2000..............  Dayton-Springfield, OH
                     Clark, OH
                     Greene, OH
                     Miami, OH
                     Montgomery, OH..........   0.9282   0.9856   0.9713
2020..............  Daytona Beach, FL
                     Flagler, FL
                     Volusia, FL.............   0.9071   0.9814   0.9628
2030..............  Decatur, AL
                     Lawrence, AL
                     Morgan, AL..............   0.8973   0.9795   0.9589
2040..............  Decatur, IL
                     Macon, IL...............   0.8055   0.9611   0.9222
2080..............  Denver, CO
                     Adams, CO
                     Arapahoe, CO
                     Denver, CO
                     Douglas, CO
                     Jefferson, CO...........   1.0601   1.0120   1.0240
2120..............  Des Moines, IA
                     Dallas, IA
                     Polk, IA
                     Warren, IA..............   0.8791   0.9758   0.9516
2160..............  Detroit, MI
                     Lapeer, MI
                     Macomb, MI
                     Monroe, MI
                     Oakland, MI
                     St. Clair, MI
                     Wayne, MI...............   1.0448   1.0090   1.0179
2180..............  Dothan, AL
                     Dale, AL
                     Houston, AL.............   0.8137   0.9627   0.9255
2190..............  Dover, DE
                     Kent, DE................   0.9356   0.9871   0.9742
2200..............  Dubuque, IA
                     Dubuque, IA.............   0.8795   0.9759   0.9518
2240..............  Duluth-Superior, MN-WI
                     St. Louis, MN
                     Douglas, WI.............   1.0368   1.0074   1.0147
2281..............  Dutchess County, NY
                     Dutchess, NY............   1.0684   1.0137   1.0274
2290..............  Eau Claire, WI
                     Chippewa, WI
                     Eau Claire, WI..........   0.8952   0.9790   0.9581
2320..............  El Paso, TX

[[Page 11271]]

 
                     El Paso, TX.............   0.9265   0.9853   0.9706
2330..............  Elkhart-Goshen, IN
                     Elkhart, IN.............   0.9722   0.9944   0.9889
2335..............  Elmira, NY
                     Chemung, NY.............   0.8416   0.9683   0.9366
2340..............  Enid, OK
                     Garfield, OK............   0.8376   0.9675   0.9350
2360..............  Erie, PA
                     Erie, PA................   0.8925   0.9785   0.9570
2400..............  Eugene-Springfield, OR
                     Lane, OR................   1.0944   1.0189   1.0378
2440..............  Evansville-Henderson, IN-
                     KY (IN Hospitals)
                     Posey, IN
                     Vanderburgh, IN
                     Warrick, IN
                     Henderson, KY...........   0.8177   0.9635   0.9271
2520..............  Fargo-Moorhead, ND-MN
                     Clay, MN
                     Cass, ND................   0.9684   0.9937   0.9874
2560..............  Fayetteville, NC
                     Cumberland, NC..........   0.8889   0.9778   0.9556
2580..............  Fayetteville-Springdale-
                     Rogers, AR
                     Benton, AR
                     Washington, AR..........   0.8100   0.9620   0.9240
2620..............  Flagstaff, AZ-UT
                     Coconino, AZ
                     Kane, UT................   1.0682   1.0136   1.0273
2640..............  Flint, MI
                     Genesee, MI.............   1.1135   1.0227   1.0454
2650..............  Florence, AL
                     Colbert, AL
                     Lauderdale, AL..........   0.7792   0.9558   0.9117
2655..............  Florence, SC
                     Florence, SC............   0.8780   0.9756   0.9512
2670..............  Fort Collins-Loveland, CO
                     Larimer, CO.............   1.0066   1.0013   1.0026
2680..............  Ft. Lauderdale, FL
                     Broward, FL.............   1.0297   1.0059   1.0119
2700..............  Fort Myers-Cape Coral, FL
                     Lee, FL.................   0.9680   0.9936   0.9872
2710..............  Fort Pierce-Port St.
                     Lucie, FL
                     Martin, FL
                     St. Lucie, FL...........   0.9823   0.9965   0.9929
2720..............  Fort Smith, AR-OK
                     Crawford, AR
                     Sebastian, AR
                     Sequoyah, OK............   0.7895   0.9579   0.9158
2750..............  Fort Walton Beach, FL
                     Okaloosa, FL............   0.9693   0.9939   0.9877
2760..............  Fort Wayne, IN
                     Adams, IN
                     Allen, IN
                     De Kalb, IN
                     Huntington, IN
                     Wells, IN
                     Whitley, IN.............   0.9457   0.9891   0.9783
2800..............  Forth Worth-Arlington, TX
                     Hood, TX
                     Johnson, TX
                     Parker, TX
                     Tarrant, TX.............   0.9446   0.9889   0.9778
2840..............  Fresno, CA
                     Fresno, CA
                     Madera, CA..............   1.0169   1.0034   1.0068
2880..............  Gadsden, AL
                     Etowah, AL..............   0.8505   0.9701   0.9402
2900..............  Gainesville, FL
                     Alachua, FL.............   0.9871   0.9974   0.9948
2920..............  Galveston-Texas City, TX

[[Page 11272]]

 
                     Galveston, TX...........   0.9465   0.9893   0.9786
2960..............  Gary, IN
                     Lake, IN
                     Porter, IN..............   0.9584   0.9917   0.9834
2975..............  Glens Falls, NY
                     Warren, NY
                     Washington, NY..........   0.8281   0.9656   0.9312
2980..............  Goldsboro, NC
                    Wayne, NC................   0.8892   0.9778   0.9557
2985..............  Grand Forks, ND-MN
                     Polk, MN
                     Grand Forks, ND.........   0.8897   0.9779   0.9559
2995..............  Grand Junction, CO
                     Mesa, CO................   0.9456   0.9891   0.9782
3000..............  Grand Rapids-Muskegon-
                     Holland, MI
                     Allegan, MI
                     Kent, MI
                     Muskegon, MI
                     Ottawa, MI..............   0.9525   0.9905   0.9810
3040..............  Great Falls, MT
                     Cascade, MT.............   0.8950   0.9790   0.9580
3060..............  Greeley, CO
                     Weld, CO................   0.9237   0.9847   0.9695
3080..............  Green Bay, WI
                     Brown, WI...............   0.9502   0.9900   0.9801
3120..............  Greensboro-Winston-Salem-
                     High Point, NC
                     Alamance, NC
                     Davidson, NC
                     Davie, NC
                     Forsyth, NC
                    Guilford, NC
                     Randolph, NC
                     Stokes, NC
                     Yadkin, NC..............   0.9282   0.9856   0.9713
3150..............  Greenville, NC
                     Pitt, NC................   0.9100   0.9820   0.9640
3160..............  Greenville-Spartanburg-
                     Anderson, SC
                     Anderson, SC
                     Cherokee, SC
                     Greenville, SC
                     Pickens, SC
                     Spartanburg, SC.........   0.9122   0.9824   0.9649
3180..............  Hagerstown, MD
                     Washington, MD..........   0.9268   0.9854   0.9707
3200..............  Hamilton-Middletown, OH
                     Butler, OH..............   0.9418   0.9884   0.9767
3240..............  Harrisburg-Lebanon-
                     Carlisle, PA
                     Cumberland, PA
                     Dauphin, PA
                     Lebanon, PA
                     Perry, PA...............   0.9223   0.9845   0.9689
3283..............  Hartford, CT
                     Hartford, CT
                     Litchfield, CT
                     Middlesex, CT
                     Tolland, CT.............   1.1549   1.0310   1.0620
3285..............  \2\ Hattiesburg, MS
                     Forrest, MS
                     Lamar, MS...............   0.7659   0.9532   0.9064
3290..............  Hickory-Morganton-Lenoir,
                     NC
                     Alexander, NC
                     Burke, NC
                     Caldwell, NC
                     Catawba, NC.............   0.9028   0.9806   0.9611
3320..............  Honolulu, HI
                     Honolulu, HI............   1.1457   1.0291   1.0583
3350..............  Houma, LA
                     Lafourche, LA
                     Terrebonne, LA..........   0.8317   0.9663   0.9327

[[Page 11273]]

 
3360..............  Houston, TX
                     Chambers, TX
                     Fort Bend, TX
                     Harris, TX
                     Liberty, TX
                     Montgomery, TX
                     Waller, TX..............   0.9892   0.9978   0.9957
3400..............  Huntington-Ashland, WV-KY-
                     OH
                     Boyd, KY
                     Carter, KY
                     Greenup, KY
                     Lawrence, OH
                     Cabell, WV
                     Wayne, WV...............   0.9636   0.9927   0.9854
3440..............  Huntsville, AL
                     Limestone, AL
                     Madison, AL.............   0.8903   0.9781   0.9561
3480..............  Indianapolis, IN
                     Boone, IN
                     Hamilton, IN
                     Hancock, IN
                     Hendricks, IN
                     Johnson, IN
                     Madison, IN
                     Marion, IN
                     Morgan, IN
                     Shelby, IN..............   0.9717   0.9943   0.9887
3500..............  Iowa City, IA
                     Johnson, IA.............   0.9587   0.9917   0.9835
3520..............  Jackson, MI
                     Jackson, MI.............   0.9532   0.9906   0.9813
3560..............  Jackson, MS
                     Hinds, MS
                     Madison, MS
                     Rankin, MS..............   0.8607   0.9721   0.9443
3580..............  Jackson, TN
                     Madison, TN
                     Chester, TN.............   0.9275   0.9855   0.9710
3600..............  Jacksonville, FL
                     Clay, FL
                     Duval, FL
                     Nassau, FL
                     St. Johns, FL...........   0.9381   0.9876   0.9752
3605..............  Jacksonville, NC
                     Onslow, NC..............   0.8239   0.9648   0.9296
3610..............  Jamestown, NY
                     Chautauqua, NY..........   0.7976   0.9595   0.9190
3620..............  Janesville-Beloit, WI
                     Rock, WI................   0.9849   0.9970   0.9940
3640..............  Jersey City, NJ
                     Hudson, NJ..............   1.1190   1.0238   1.0476
3660..............  Johnson City-Kingsport-
                     Bristol, TN-VA
                     Carter, TN
                     Hawkins, TN
                     Sullivan, TN
                     Unicoi, TN
                     Washington, TN
                     Bristol City, VA
                     Scott, VA
                     Washington, VA..........   0.8268   0.9654   0.9307
3680..............  Johnstown, PA
                     Cambria, PA
                     Somerset, PA............   0.8329   0.9666   0.9332
3700..............  Jonesboro, AR
                     Craighead, AR...........   0.7749   0.9550   0.9100
3710..............  Joplin, MO
                     Jasper, MO
                     Newton, MO..............   0.8613   0.9723   0.9445
3720..............  Kalamazoo-Battlecreek, MI

[[Page 11274]]

 
                     Calhoun, MI
                     Kalamazoo, MI
                     Van Buren, MI...........   1.0595   1.0119   1.0238
3740..............  Kankakee, IL
                     Kankakee, IL............   1.0790   1.0158   1.0316
3760..............  Kansas City, KS-MO
                     Johnson, KS
                     Leavenworth, KS
                     Miami, KS
                     Wyandotte, KS
                     Cass, MO
                     Clay, MO
                     Clinton, MO
                     Jackson, MO
                     Lafayette, MO
                     Platte, MO
                     Ray, MO.................   0.9736   0.9947   0.9894
3800..............  Kenosha, WI
                     Kenosha, WI.............   0.9686   0.9937   0.9874
3810..............  Killeen-Temple, TX
                     Bell, TX
                     Coryell, TX.............   1.0399   1.0080   1.0160
3840..............  Knoxville, TN
                     Anderson, TN
                     Blount, TN
                     Knox, TN
                     Loudon, TN
                     Sevier, TN
                     Union, TN...............   0.8970   0.9794   0.9588
3850..............  Kokomo, IN
                     Howard, IN
                     Tipton, IN..............   0.8971   0.9794   0.9588
3870..............  La Crosse, WI-MN
                     Houston, MN
                     La Crosse, WI...........   0.9400   0.9880   0.9760
3880..............  Lafayette, LA
                     Acadia, LA
                     Lafayette, LA
                     St. Landry, LA
                     St. Martin, LA..........   0.8452   0.9690   0.9381
3920..............  Lafayette, IN
                     Clinton, IN
                     Tippecanoe, IN..........   0.9278   0.9856   0.9711
3960..............  Lake Charles, LA
                     Calcasieu, LA...........   0.7965   0.9593   0.9186
3980..............  Lakeland-Winter Haven, FL
                     Polk, FL................   0.9357   0.9871   0.9743
4000..............  Lancaster, PA
                     Lancaster, PA...........   0.9078   0.9816   0.9631
4040..............  Lansing-East Lansing, MI
                     Clinton, MI
                     Eaton, MI
                     Ingham, MI..............   0.9726   0.9945   0.9890
4080..............  Laredo, TX
                     Webb, TX................   0.8472   0.9694   0.9389
4100..............  Las Cruces, NM
                     Dona Ana, NM............   0.8745   0.9749   0.9498
4120..............  Las Vegas, NV-AZ
                     Mohave, AZ
                     Clark, NV
                     Nye, NV.................   1.1521   1.0304   1.0608
4150..............  Lawrence, KS
                     Douglas, KS.............   0.8323   0.9665   0.9329
4200..............  Lawton, OK
                     Comanche, OK............   0.8315   0.9663   0.9326
4243..............  Lewiston-Auburn, ME
                     Androscoggin, ME........   0.9179   0.9836   0.9672
4280..............  Lexington, KY
                     Bourbon, KY

[[Page 11275]]

 
                     Clark, KY
                     Fayette, KY
                     Jessamine, KY
                     Madison, KY
                     Scott, KY
                     Woodford, KY............   0.8581   0.9716   0.9432
4320..............  Lima, OH
                     Allen, OH
                     Auglaize, OH............   0.9483   0.9897   0.9793
4360..............  Lincoln, NE
                     Lancaster, NE...........   0.9892   0.9978   0.9957
4400..............  Little Rock-North Little
                     Rock, AR
                     Faulkner, AR
                     Lonoke, AR
                     Pulaski, AR
                     Saline, AR..............   0.9097   0.9819   0.9639
4420..............  Longview-Marshall, TX
                     Gregg, TX
                     Harrison, TX
                     Upshur, TX..............   0.8629   0.9726   0.9452
4480..............  Los Angeles-Long Beach,
                     CA
                     Los Angeles, CA.........   1.2001   1.0400   1.0800
4520..............  \1\ Louisville, KY-IN
                     Clark, IN
                     Floyd, IN
                     Harrison, IN
                     Scott, IN
                     Bullitt, KY
                     Jefferson, KY
                     Oldham, KY..............   0.9276   0.9855   0.9710
4600..............  Lubbock, TX
                     Lubbock, TX.............   0.9646   0.9929   0.9858
4640..............  Lynchburg, VA
                     Amherst, VA
                     Bedford, VA
                     Bedford City, VA
                     Campbell, VA
                     Lynchburg City, VA......   0.9219   0.9844   0.9688
4680..............  Macon, GA
                     Bibb, GA
                     Houston, GA
                     Jones, GA
                     Peach, GA
                     Twiggs, GA..............   0.9204   0.9841   0.9682
4720..............  Madison, WI
                     Dane, WI................   1.0467   1.0093   1.0187
4800..............  Mansfield, OH
                     Crawford, OH
                     Richland, OH............   0.8900   0.9780   0.9560
4840..............  Mayaguez, PR
                     Anasco, PR
                     Cabo Rojo, PR
                     Hormigueros, PR
                     Mayaguez, PR
                     Sabana Grande, PR
                     San German, PR..........   0.4914   0.8983   0.7966
4880..............  McAllen-Edinburg-Mission,
                     TX
                     Hidalgo, TX.............   0.8428   0.9686   0.9371
4890..............  Medford-Ashland, OR
                     Jackson, OR.............   1.0498   1.0100   1.0199
4900..............  Melbourne-Titusville-Palm
                     Bay, FL
                     Brevard, FL.............   1.0253   1.0051   1.0101
4920..............  Memphis, TN-AR-MS
                     Crittenden, AR
                     DeSoto, MS
                     Fayette, TN
                     Shelby, TN
                     Tipton, TN..............   0.8920   0.9784   0.9568
4940..............  Merced, CA

[[Page 11276]]

 
                     Merced, CA..............   0.9742   0.9948   0.9897
5000..............  Miami, FL
                     Dade, FL................   0.9802   0.9960   0.9921
5015..............  Middlesex-Somerset-
                     Hunterdon, NJ
                     Hunterdon, NJ
                     Middlesex, NJ
                     Somerset, NJ............   1.1213   1.0243   1.0485
5080..............  Milwaukee-Waukesha, WI
                     Milwaukee, WI
                     Ozaukee, WI
                     Washington, WI
                     Waukesha, WI............   0.9893   0.9979   0.9957
5120..............  Minneapolis-St. Paul, MN-
                     WI
                     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...........   1.0903   1.0181   1.0361
5140..............  Missoula, MT
                    Missoula, MT.............   0.9157   0.9831   0.9663
5160..............  Mobile, AL
                     Baldwin, AL
                     Mobile, AL..............   0.8108   0.9622   0.9243
5170..............  Modesto, CA
                     Stanislaus, CA..........   1.0498   1.0100   1.0199
5190..............  Monmouth-Ocean, NJ
                     Monmouth, NJ
                     Ocean, NJ...............   1.0674   1.0135   1.0270
5200..............  Monroe, LA
                     Ouachita, LA............   0.8137   0.9627   0.9255
5240..............  Montgomery, AL
                     Autauga, AL
                     Elmore, AL
                     Montgomery, AL..........   0.7734   0.9547   0.9094
5280..............  Muncie, IN
                     Delaware, IN............   0.9284   0.9857   0.9714
5330..............  Myrtle Beach, SC
                     Horry, SC...............   0.8976   0.9795   0.9590
5345..............  Naples, FL
                     Collier, FL.............   0.9754   0.9951   0.9902
5360..............  Nashville, TN
                     Cheatham, TN
                     Davidson, TN
                     Dickson, TN
                     Robertson, TN
                     Rutherford TN
                     Sumner, TN
                     Williamson, TN
                     Wilson, TN..............   0.9578   0.9916   0.9831
5380..............  Nassau-Suffolk, NY
                     Nassau, NY
                     Suffolk, NY.............   1.3357   1.0671   1.1343
5483..............  New Haven-Bridgeport-
                     Stamford-Waterbury-
                     Danbury, CT
                     Fairfield, CT
                     New Haven, CT...........   1.2408   1.0482   1.0963
5523..............  New London-Norwich, CT
                     New London, CT..........   1.1767   1.0353   1.0707
5560..............  New Orleans, LA
                     Jefferson, LA
                     Orleans, LA

[[Page 11277]]

 
                     Plaquemines, LA
                     St. Bernard, LA
                     St. Charles, LA
                     St. James, LA
                     St. John The Baptist, LA
                     St. Tammany, LA.........   0.9046   0.9809   0.9618
5600..............  New York, NY
                     Bronx, NY
                     Kings, NY
                     New York, NY
                     Putnam, NY
                     Queens, NY
                     Richmond, NY
                     Rockland, NY
                     Westchester, NY.........   1.4414   1.0883   1.1766
5640..............  Newark, NJ
                     Essex, NJ
                     Morris, NJ
                     Sussex, NJ
                     Union, NJ
                     Warren, NJ..............   1.1381   1.0276   1.0552
5660..............  Newburgh, NY-PA
                     Orange, NY
                     Pike, PA................   1.1387   1.0277   1.0555
5720..............  Norfolk-Virginia Beach-
                     Newport News, VA-NC
                     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................   0.8574   0.9715   0.9430
5775..............  Oakland, CA
                     Alameda, CA
                     Contra Costa, CA........   1.5072   1.1014   1.2029
5790..............  Ocala, FL
                     Marion, FL..............   0.9402   0.9880   0.9761
5800..............  Odessa-Midland, TX
                     Ector, TX
                     Midland, TX.............   0.9397   0.9879   0.9759
5880..............  Oklahoma City, OK
                     Canadian, OK
                     Cleveland, OK
                     Logan, OK
                     McClain, OK
                     Oklahoma, OK
                     Pottawatomie, OK........   0.8900   0.9780   0.9560
5910..............  Olympia, WA
                     Thurston, WA............   1.0960   1.0192   1.0384
5920..............  Omaha, NE-IA
                     Pottawattamie, IA
                     Cass, NE
                     Douglas, NE
                     Sarpy, NE
                     Washington, NE..........   0.9978   0.9996   0.9991
5945..............  Orange County, CA
                     Orange, CA..............   1.1474   1.0295   1.0590
5960..............  Orlando, FL
                     Lake, FL
                     Orange, FL
                     Osceola, FL

[[Page 11278]]

 
                     Seminole, FL............   0.9640   0.9928   0.9856
5990..............  Owensboro, KY
                     Daviess, KY.............   0.8344   0.9669   0.9338
6015..............  Panama City, FL
                     Bay, FL.................   0.8865   0.9773   0.9546
6020..............  Parkersburg-Marietta, WV-
                     OH
                     Washington, OH
                     Wood, WV................   0.8127   0.9625   0.9251
6080..............  Pensacola, FL
                     Escambia, FL
                     Santa Rosa, FL..........   0.8610   0.9722   0.9444
6120..............  Peoria-Pekin, IL
                     Peoria, IL
                     Tazewell, IL
                     Woodford, IL............   0.8739   0.9748   0.9496
6160..............  Philadelphia, PA-NJ
                     Burlington, NJ
                     Camden, NJ
                     Gloucester, NJ
                     Salem, NJ
                     Bucks, PA
                     Chester, PA
                     Delaware, PA
                     Montgomery, PA
                     Philadelphia, PA........   1.0713   1.0143   1.0285
6200..............  Phoenix-Mesa, AZ
                     Maricopa, AZ
                     Pinal, AZ...............   0.9820   0.9964   0.9928
6240..............  Pine Bluff, AR
                     Jefferson, AR...........   0.7962   0.9592   0.9185
6280..............  Pittsburgh, PA
                     Allegheny, PA
                     Beaver, PA
                     Butler, PA
                     Fayette, PA
                     Washington, PA
                     Westmoreland, PA........   0.9365   0.9873   0.9746
6323..............  Pittsfield, MA
                     Berkshire, MA...........   1.0235   1.0047   1.0094
6340..............  Pocatello, ID
                     Bannock, ID.............   0.9372   0.9874   0.9749
6360..............  Ponce, PR
                     Guayanilla, PR
                     Juana Diaz, PR
                     Penuelas, PR
                     Ponce, PR
                     Villalba, PR
                     Yauco, PR...............   0.5169   0.9034   0.8068
6403..............  Portland, ME
                     Cumberland, ME
                     Sagadahoc, ME
                     York, ME................   0.9794   0.9959   0.9918
6440..............  Portland-Vancouver, OR-WA
                     Clackamas, OR
                     Columbia, OR
                     Multnomah, OR
                     Washington, OR
                     Yamhill, OR
                     Clark, WA...............   1.0667   1.0133   1.0267
6483..............  Providence-Warwick-
                     Pawtucket, RI
                     Bristol, RI
                     Kent, RI
                     Newport, RI
                     Providence, RI
                     Washington, RI..........   1.0854   1.0171   1.0342
6520..............  Provo-Orem, UT
                     Utah, UT................   0.9984   0.9997   0.9994
6560..............  Pueblo, CO
                     Pueblo, CO..............   0.8820   0.9764   0.9528

[[Page 11279]]

 
6580..............  Punta Gorda, FL
                     Charlotte, FL...........   0.9218   0.9844   0.9687
6600..............  Racine, WI
                     Racine, WI..............   0.9334   0.9867   0.9734
6640..............  Raleigh-Durham-Chapel
                     Hill, NC
                     Chatham, NC
                     Durham, NC
                     Franklin, NC
                     Johnston, NC
                     Orange, NC
                     Wake, NC................   0.9990   0.9998   0.9996
6660..............  Rapid City, SD
                     Pennington, SD..........   0.8846   0.9769   0.9538
6680..............  Reading, PA
                     Berks, PA...............   0.9295   0.9859   0.9718
6690..............  Redding, CA
                     Shasta, CA..............   1.1135   1.0227   1.0454
6720..............  Reno, NV
                     Washoe, NV..............   1.0648   1.0130   1.0259
6740..............  Richland-Kennewick-Pasco,
                     WA
                     Benton, WA
                     Franklin, WA............   1.1491   1.0298   1.0596
6760..............  Richmond-Petersburg, VA
                     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.......   0.9477   0.9895   0.9791
6780..............  Riverside-San Bernardino,
                     CA
                     Riverside, CA
                     San Bernardino, CA......   1.1365   1.0273   1.0546
6800..............  Roanoke, VA
                     Botetourt, VA
                     Roanoke, VA
                     Roanoke City, VA
                     Salem City, VA..........   0.8614   0.9723   0.9446
6820..............  Rochester, MN
                     Olmsted, MN.............   1.2139   1.0428   1.0856
6840..............  Rochester, NY
                     Genesee, NY
                     Livingston, NY
                     Monroe, NY
                     Ontario, NY
                     Orleans, NY
                     Wayne, NY...............   0.9194   0.9839   0.9678
6880..............  Rockford, IL
                     Boone, IL
                     Ogle, IL
                     Winnebago, IL...........   0.9625   0.9925   0.9850
6895..............  Rocky Mount, NC
                     Edgecombe, NC
                     Nash, NC................   0.9228   0.9846   0.9691
6920..............  Sacramento, CA
                     El Dorado, CA
                     Placer, CA
                     Sacramento, CA..........   1.1500   1.0300   1.0600
6960..............  Saginaw-Bay City-Midland,
                     MI
                     Bay, MI
                     Midland, MI
                     Saginaw, MI.............   0.9650   0.9930   0.9860
6980..............  St. Cloud, MN

[[Page 11280]]

 
                     Benton, MN
                     Stearns, MN.............   0.9700   0.9940   0.9880
7000..............  St. Joseph, MO
                     Andrew, MO
                     Buchanan, MO............   0.9544   0.9909   0.9818
7040..............  St. Louis, MO-IL
                     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..............   0.8855   0.9771   0.9542
7080..............  Salem, OR
                     Marion, OR
                     Polk, OR................   1.0500   1.0100   1.0200
7120..............  Salinas, CA
                     Monterey, CA............   1.4623   1.0925   1.1849
7160..............  Salt Lake City-Ogden, UT
                     Davis, UT
                     Salt Lake, UT
                     Weber, UT...............   0.9945   0.9989   0.9978
7200..............  San Angelo, TX
                     Tom Green, TX...........   0.8374   0.9675   0.9350
7240..............  San Antonio, TX
                     Bexar, TX
                     Comal, TX
                     Guadalupe, TX
                     Wilson, TX..............   0.8753   0.9751   0.9501
7320..............  San Diego, CA
                     San Diego, CA...........   1.1131   1.0226   1.0452
7360..............  San Francisco, CA
                     Marin, CA
                     San Francisco, CA
                     San Mateo, CA...........   1.4142   1.0828   1.1657
7400..............  San Jose, CA
                     Santa Clara, CA.........   1.4145   1.0829   1.1658
7440..............  San Juan-Bayamon, PR
                     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

[[Page 11281]]

 
                     Trujillo Alto, PR
                     Vega Alta, PR
                     Vega Baja, PR
                     Yabucoa, PR.............   0.4741   0.8948   0.7896
7460..............  San Luis Obispo-
                     Atascadero-Paso Robles,
                     CA
                     San Luis Obispo, CA.....   1.1271   1.0254   1.0508
7480..............  Santa Barbara-Santa Maria-
                     Lompoc, CA
                     Santa Barbara, CA.......   1.0481   1.0096   1.0192
7485..............  Santa Cruz-Watsonville,
                     CA
                    Santa Cruz, CA...........   1.3646   1.0729   1.1458
7490..............  Santa Fe, NM
                     Los Alamos, NM
                     Santa Fe, NM............   1.0712   1.0142   1.0285
7500..............  Santa Rosa, CA
                     Sonoma, CA..............   1.3046   1.0609   1.1218
7510..............  Sarasota-Bradenton, FL
                     Manatee, FL
                     Sarasota, FL............   0.9425   0.9885   0.9770
7520..............  Savannah, GA
                     Bryan, GA
                     Chatham, GA
                     Effingham, GA...........   0.9376   0.9875   0.9750
7560..............  Scranton--Wilkes-Barre-
                     Hazleton, PA
                     Columbia, PA
                     Lackawanna, PA
                     Luzerne, PA
                     Wyoming, PA.............   0.8599   0.9720   0.9440
7600..............  Seattle-Bellevue-Everett,
                     WA
                     Island, WA
                     King, WA
                     Snohomish, WA...........   1.1474   1.0295   1.0590
7610..............  Sharon, PA
                     Mercer, PA..............   0.7869   0.9574   0.9148
7620..............  Sheboygan, WI
                     Sheboygan, WI...........   0.8697   0.9739   0.9479
7640..............  Sherman-Denison, TX
                     Grayson, TX.............   0.9255   0.9851   0.9702
7680..............  Shreveport-Bossier City,
                     LA
                     Bossier, LA
                     Caddo, LA
                     Webster, LA.............   0.8987   0.9797   0.9595
7720..............  Sioux City, IA-NE
                     Woodbury, IA
                     Dakota, NE..............   0.9046   0.9809   0.9618
7760..............  Sioux Falls, SD
                     Lincoln, SD
                     Minnehaha, SD...........   0.9257   0.9851   0.9703
7800..............  South Bend, IN
                     St. Joseph, IN..........   0.9802   0.9960   0.9921
7840..............  Spokane, WA
                     Spokane, WA.............   1.0852   1.0170   1.0341
7880..............  Springfield, IL
                     Menard, IL
                     Sangamon, IL............   0.8659   0.9732   0.9464
7920..............  Springfield, MO
                     Christian, MO
                     Greene, MO
                     Webster, MO.............   0.8424   0.9685   0.9370
8003..............  Springfield, MA
                     Hampden, MA
                     Hampshire, MA...........   1.0927   1.0185   1.0371
8050..............  State College, PA
                     Centre, PA..............   0.8941   0.9788   0.9576
8080..............  Steubenville-Weirton, OH-
                     WV (WV Hospitals)
                     Jefferson, OH
                     Brooke, WV
                     Hancock, WV.............   0.8804   0.9761   0.9522
8120..............  Stockton-Lodi, CA
                     San Joaquin, CA.........   1.0506   1.0101   1.0202

[[Page 11282]]

 
8140..............  Sumter, SC
                     Sumter, SC..............   0.8273   0.9655   0.9309
8160..............  Syracuse, NY
                     Cayuga, NY
                     Madison, NY
                     Onondaga, NY
                     Oswego, NY..............   0.9714   0.9943   0.9886
8200..............  Tacoma, WA
                     Pierce, WA..............   1.0940   1.0188   1.0376
8240..............  Tallahassee, FL
                     Gadsden, FL
                     Leon, FL................   0.8504   0.9701   0.9402
8280..............  Tampa-St. Petersburg-
                     Clearwater, FL
                     Hernando, FL
                     Hillsborough, FL
                     Pasco, FL
                     Pinellas, FL............   0.9065   0.9813   0.9626
8320..............  Terre Haute, IN
                     Clay, IN
                     Vermillion, IN
                     Vigo, IN................   0.8599   0.9720   0.9440
8360..............  Texarkana, AR-Texarkana,
                     TX
                     Miller, AR
                     Bowie, TX...............   0.8088   0.9618   0.9235
8400..............  Toledo, OH
                     Fulton, OH
                     Lucas, OH
                     Wood, OH................   0.9810   0.9962   0.9924
8440..............  Topeka, KS
                     Shawnee, KS.............   0.9199   0.9840   0.9680
8480..............  Trenton, NJ
                     Mercer, NJ..............   1.0432   1.0086   1.0173
8520..............  Tucson, AZ
                     Pima, AZ................   0.8911   0.9782   0.9564
8560..............  Tulsa, OK
                     Creek, OK
                     Osage, OK
                     Rogers, OK
                     Tulsa, OK
                     Wagoner, OK.............   0.8332   0.9666   0.9333
8600..............  Tuscaloosa, AL
                     Tuscaloosa, AL..........   0.8130   0.9626   0.9252
8640..............  Tyler, TX
                     Smith, TX...............   0.9521   0.9904   0.9808
8680..............  Utica-Rome, NY
                     Herkimer, NY
                     Oneida, NY..............   0.8465   0.9693   0.9386
8720..............  Vallejo-Fairfield-Napa,
                     CA
                     Napa, CA
                     Solano, CA..............   1.3354   1.0671   1.1342
8735..............  Ventura, CA
                     Ventura, CA.............   1.1096   1.0219   1.0438
8750..............  Victoria, TX
                     Victoria, TX............   0.8756   0.9751   0.9502
8760..............  Vineland-Millville-
                     Bridgeton, NJ
                     Cumberland, NJ..........   1.0031   1.0006   1.0012
8780..............  Visalia-Tulare-
                     Porterville, CA
                     Tulare, CA..............   0.9418   0.9884   0.9767
8800..............  Waco, TX
                     McLennan, TX............   0.8073   0.9615   0.9229
8840..............  Washington, DC-MD-VA-WV
                     District of Columbia, DC
                     Calvert, MD
                     Charles, MD
                     Frederick, MD
                     Montgomery, MD
                     Prince Georges, MD
                     Alexandria City, VA
                     Arlington, VA

[[Page 11283]]

 
                     Clarke, VA
                     Culpeper, 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...........   1.0851   1.0170   1.0340
8920..............  Waterloo-Cedar Falls, IA
                     Black Hawk, IA..........   0.8069   0.9614   0.9228
8940..............  Wausau, WI
                     Marathon, WI............   0.9782   0.9956   0.9913
8960..............  West Palm Beach-Boca
                     Raton, FL
                     Palm Beach, FL..........   0.9939   0.9988   0.9976
9000..............  Wheeling, WV-OH
                     Belmont, OH
                     Marshall, WV
                     Ohio, WV................   0.7670   0.9534   0.9068
9040..............  Wichita, KS
                     Butler, KS
                     Harvey, KS
                     Sedgwick, KS............   0.9520   0.9904   0.9808
9080..............  Wichita Falls, TX
                     Archer, TX
                     Wichita, TX.............   0.8498   0.9700   0.9399
9140..............  Williamsport, PA
                     Lycoming, PA............   0.8544   0.9709   0.9418
9160..............  Wilmington-Newark, DE-MD
                     New Castle, DE
                     Cecil, MD...............   1.1173   1.0235   1.0469
9200..............  Wilmington, NC
                     New Hanover, NC
                     Brunswick, NC...........   0.9640   0.9928   0.9856
9260..............  Yakima, WA
                     Yakima, WA..............   1.0569   1.0114   1.0228
9270..............  Yolo, CA
                     Yolo, CA................   0.9434   0.9887   0.9774
9280..............  York, PA
                     York, PA................   0.9026   0.9805   0.9610
9320..............  Youngstown-Warren, OH
                     Columbiana, OH
                     Mahoning, OH
                    Trumbull, OH.............   0.9358   0.9872   0.9743
9340..............  Yuba City, CA
                     Sutter, CA
                     Yuba, CA................   1.0276   1.0055   1.0110
9360..............  Yuma, AZ
                     Yuma, AZ                   0.8589   0.9718  0.9436
------------------------------------------------------------------------
\1\ Prereclassification wage index from Federal FY 2003 based on fiscal
  year 1999 audited acute care hospital inpatient wage data that
  excludes wages for services provided by teaching physicians, interns
  and residents, and nonphysician anesthetists under Part B of the
  Medicare program.
\2\ One-fifth of the full wage index value, applicable for LTCH's cost
  reporting period beginning on or after October 1, 2002 through
  September 30, 2003 (Federal FY 2203). For example, for a LTCH's cost
  reporting period begins during Federal in FY 2003 and located in
  Chicago, Illinois (MSA 1600), the \1/5\ of the wage index value is
  computed as (1.1044 + 4)/5 = 1.0209. For further details on the 5-year
  phase-in of the wage index, see section VI.C.1. of this proposed rule.
 
\3\ Two-fifths of the full wage index value, applicable for LTCH's cost
  reporting period beginning on or after October 1, 2003 through
  September 30, 2003 (Federal FY 2004). For example, for a LTCH's cost
  reporting period begins during Federal in FY 2004 and located in
  Chicago, Illinois (MSA 1600), the \2/5\ of the wage index value is
  computed as ((2*1.1044) + 3))/5 = 1.0418. For further details on the 5-
  year phase-in of the wage index, see section VI.C.1. of this proposed
  rule.


[[Page 11284]]


  Table 2.--Proposed Long-Term Care Hospital Wage Index for Rural Areas
    for Discharges Occurring From July 1, 2003 Through June 30, 2004
------------------------------------------------------------------------
                                                 Full    \1/5\    \2/5\
                                                 wage     wage     wage
                Nonurban area                   index    index    index
                                                 \1\      \2\      \3\
------------------------------------------------------------------------
Alabama......................................   0.7660   0.9532   0.9064
Alaska.......................................   1.2293   1.0459   1.0917
Arizona......................................   0.8493   0.9699   0.9397
Arkansas.....................................   0.7666   0.9533   0.9066
California...................................   0.9899   0.9980   0.9960
Colorado.....................................   0.9015   0.9803   0.9606
Connecticut..................................   1.2394   1.0479   1.0958
Delaware.....................................   0.9128   0.9826   0.9651
Florida......................................   0.8827   0.9765   0.9531
Georgia......................................   0.8230   0.9646   0.9292
Hawaii.......................................   1.0255   1.0051   1.0102
Idaho........................................   0.8747   0.9749   0.9499
Illinois.....................................   0.8204   0.9641   0.9282
Indiana......................................   0.8755   0.9751   0.9502
Iowa.........................................   0.8315   0.9663   0.9326
Kansas.......................................   0.7900   0.9580   0.9160
Kentucky.....................................   0.8079   0.9616   0.9232
Louisiana....................................   0.7580   0.9516   0.9032
Maine........................................   0.8874   0.9775   0.9550
Maryland.....................................   0.8946   0.9789   0.9578
Massachusetts................................   1.1288   1.0258   1.0515
Michigan.....................................   0.9009   0.9802   0.9604
Minnesota....................................   0.9151   0.9830   0.9660
Mississippi..................................   0.7680   0.9536   0.9072
Missouri.....................................   0.7881   0.9576   0.9152
Montana......................................   0.8481   0.9696   0.9392
Nebraska.....................................   0.8204   0.9641   0.9282
Nevada.......................................   0.9577   0.9915   0.9831
New Hampshire................................   0.9839   0.9968   0.9936
New Jersey \4\...............................  .......  .......  .......
New Mexico...................................   0.8872   0.9774   0.9549
New York.....................................   0.8542   0.9708   0.9417
North Carolina...............................   0.8669   0.9734   0.9468
North Dakota.................................   0.7788   0.9558   0.9115
Ohio.........................................   0.8613   0.9723   0.9445
Oklahoma.....................................   0.7590   0.9518   0.9036
Oregon.......................................   1.0259   1.0052   1.0104
Pennsylvania.................................   0.8462   0.9692   0.9385
Puerto Rico..................................   0.4356   0.8871   0.7742
Rhode Island \4\.............................  .......  .......  .......
South Carolina...............................   0.8607   0.9721   0.9443
South Dakota.................................   0.7815   0.9563   0.9126
Tennessee....................................   0.7877   0.9575   0.9151
Texas........................................   0.7821   0.9564   0.9128
Utah.........................................   0.9312   0.9862   0.9725
Vermont......................................   0.9345   0.9869   0.9738
Virginia.....................................   0.8504   0.9701   0.9402
Washington...................................   1.0179   1.0036   1.0072
West Virginia................................   0.7975   0.9595   0.9190
Wisconsin....................................   0.9162   0.9832   0.9665
Wyoming......................................   0.9007   0.9801  0.9603
------------------------------------------------------------------------
\1\ Pre-reclassification wage index from Federal FY 2003 based on fiscal
  year 1999 audited acute care hospital inpatient wage data that exclude
  wages for services provided by teaching physicians, residents, and
  nonphysician anesthetists under Part B of the Medicare program.
\2\ One-fifth of the full wage index value, applicable for LTCH's cost
  reporting period beginning on or after October 1, 2002 through
  September 30, 2003 (Federal FY 2203). For example, for a LTCH's cost
  reporting period begins during Federal in FY 2003 and located in rural
  Illinois, the \1/5\ of the wage index value is computed as (0.8204 +
  4)/5 = 0.9641. For further details on the 5-year phase-in of the wage
  index, see section VI.C.1. of this proposed rule.
\3\ Two-fifths of the full wage index value, applicable for LTCH's cost
  reporting period beginning on or after October 1, 2003 through
  September 30, 2003 (Federal FY 2004). For example, for a LTCH's cost
  reporting period begins during Federal in FY 2004 and located in rural
  Illinois, the \2/5\ of the wage index value is computed as ((2*0.8204)
  + 3))/5 = 0.9282. For further details on the 5-year phase-in of the
  wage index, see section VI.C.1. of this proposed rule.
\4\ All counties within the State are classified as urban.


[[Page 11285]]


  Table 3.--Proposed LTC-DRG Relative Weights, Geometric Mean Length of
   Stay, and Short-Stays of Five-Sixths Average Length of Stay for the
            Period of July 1, 2003 Through September 30, 2003
------------------------------------------------------------------------
                                                                 Short-
                                                    Geometric   stays of
                                          Relative     mean      \5/6\
    LTC-DRG            Description         weight   length of   average
                                                       stay    length of
                                                                  stay
------------------------------------------------------------------------
1..............  CRANIOTOMY AGE 17 W CC \5\.
2..............  CRANIOTOMY AGE  17 W/O CC \5\.
3..............  CRANIOTOMY AGE 0-17*..     1.8783       46.3       38.5
4..............  SPINAL PROCEDURES \4\.     1.2493       31.3       26.0
5..............  EXTRACRANIAL VASCULAR      1.2493       31.3       26.0
                  PROCEDURES \4\.
6..............  CARPAL TUNNEL RELEASE*     0.4055       16.8       14.0
7..............  PERIPH & CRANIAL NERVE     1.7829       43.8       36.5
                  & OTHER NERV SYST
                  PROC W CC.
8..............  PERIPH & CRANIAL NERVE     1.2493       31.3       26.0
                  & OTHER NERV SYST
                  PROC W/O CC4.
9..............  SPINAL DISORDERS &         1.4118       34.6       28.8
                  INJURIES.
10.............  NERVOUS SYSTEM             0.8537       24.5       20.4
                  NEOPLASMS W CC \7\.
11.............  NERVOUS SYSTEM             0.8537       24.5       20.4
                  NEOPLASMS W/O CC \7\.
12.............  DEGENERATIVE NERVOUS       0.7773       27.1       22.5
                  SYSTEM DISORDERS.
13.............  MULTIPLE SCLEROSIS &       0.7207       25.6       21.3
                  CEREBELLAR ATAXIA.
14.............  INTERCRANIAL               0.8816       26.6       22.1
                  HEMORRHAGE & STROKE W
                  INFARCT.
15.............  NONSPECIFIC CVA &          0.9053       29.4       24.5
                  PRECEREBRAL
                  OCCULUSION W/O
                  INFARCT.
16.............  NONSPECIFIC                0.8864       27.0       22.5
                  CEREBROVASCULAR
                  DISORDERS W CC.
17.............  NONSPECIFIC                0.6655       21.9       18.2
                  CEREBROVASCULAR
                  DISORDERS W/O CC \2\.
18.............  CRANIAL & PERIPHERAL       0.7770       24.9       20.7
                  NERVE DISORDERS W CC.
19.............  CRANIAL & PERIPHERAL       0.5486       22.0       18.3
                  NERVE DISORDERS W/O
                  CC.
20.............  NERVOUS SYSTEM             1.2331       29.3       24.4
                  INFECTION EXCEPT
                  VIRAL MENINGITIS.
21.............  VIRAL MENINGITIS \1\..     0.4055       16.8       14.0
22.............  HYPERTENSIVE               0.6655       21.9       18.2
                  ENCEPHALOPATHY \2\.
23.............  NONTRAUMATIC STUPOR &      0.9623       27.2       22.6
                  COMA.
24.............  SEIZURE & HEADACHE AGE     0.8831       24.8       20.6
                  17 W CC.
25.............  SEIZURE & HEADACHE AGE     0.4830       20.4       17.0
                  17 W/O CC.
26.............  SEIZURE & HEADACHE AGE     0.4055       16.8       14.0
                  0-17*.
27.............  TRAUMATIC STUPOR &         1.1126       31.6       26.3
                  COMA, COMA 1 HR.
28.............  TRAUMATIC STUPOR &         1.1507       29.0       24.1
                  COMA, COMA <1 HR
                  AGE17 W CC.
29.............  TRAUMATIC STUPOR &         0.9268       27.2       22.6
                  COMA, COMA <1 HR
                  AGE17 W/O
                  CC.
30.............  TRAUMATIC STUPOR &         0.8284       23.3       19.4
                  COMA, COMA <1 HR AGE
                  0-17*.
31.............  CONCUSSION AGE 17 W CC \2\.
32.............  CONCUSSION AGE 17 W/O CC*.
33.............  CONCUSSION AGE 0-17*..     0.4055       16.8       14.0
34.............  OTHER DISORDERS OF         0.8385       25.1       20.9
                  NERVOUS SYSTEM W CC.
35.............  OTHER DISORDERS OF         0.6561       25.3       21.0
                  NERVOUS SYSTEM W/O CC.
36.............  RETINAL PROCEDURES*...     0.4055       16.8       14.0
37.............  ORBITAL PROCEDURES*...     0.4055       16.8       14.0
38.............  PRIMARY IRIS               0.4055       16.8       14.0
                  PROCEDURES*.
39.............  LENS PROCEDURES WITH       0.4055       16.8       14.0
                  OR WITHOUT
                  VITRECTOMY*.
40.............  EXTRAOCULAR PROCEDURES     0.4055       16.8       14.0
                  EXCEPT ORBIT AGE 17*.
41.............  EXTRAOCULAR PROCEDURES     0.4055       16.8       14.0
                  EXCEPT ORBIT AGE 0-
                  17*.
42.............  INTRAOCULAR PROCEDURES     0.4055       16.8       14.0
                  EXCEPT RETINA, IRIS &
                  LENS*.
43.............  HYPHEMA \3\...........     0.8284       23.3       19.4
44.............  ACUTE MAJOR EYE            0.6655       21.9       18.2
                  INFECTIONS \2\.
45.............  NEUROLOGICAL EYE           0.4055       16.8       14.0
                  DISORDERS \1\.
46.............  OTHER DISORDERS OF THE     0.6655       21.9       18.2
                  EYE AGE 17
                  W CC \2\.
47.............  OTHER DISORDERS OF THE     0.4055       16.8       14.0
                  EYE AGE 17
                  W/O CC \1\.
48.............  OTHER DISORDERS OF THE     0.4055       16.8       14.0
                  EYE AGE 0-17*.
49.............  MAJOR HEAD & NECK          1.8783       46.3       38.5
                  PROCEDURES*.
50.............  SIALOADENECTOMY*......     0.6655       21.9       18.2
51.............  SALIVARY GLAND             0.6655       21.9       18.2
                  PROCEDURES EXCEPT
                  SIALOADENECTOMY*.
52.............  CLEFT LIP & PALATE         0.6655       21.9       18.2
                  REPAIR*.
53.............  SINUS & MASTOID            0.6655       21.9       18.2
                  PROCEDURES AGE 17*.
54.............  SINUS & MASTOID            0.6655       21.9       18.2
                  PROCEDURES AGE 0-17*.
55.............  MISCELLANEOUS EAR,         0.6655       21.9       18.2
                  NOSE, MOUTH & THROAT
                  PROCEDURES \2\.
56.............  RHINOPLASTY*..........     0.6655       21.9       18.2
57.............  T&A PROC, EXCEPT           0.6655       21.9       18.2
                  TONSILLECTOMY &/OR
                  ADENOIDECTOMY ONLY,
                  AGE 17*.
58.............  T&A PROC, EXCEPT           0.6655       21.9       18.2
                  TONSILLECTOMY &/OR
                  ADENOIDECTOMY ONLY,
                  AGE 0-17*.
59.............  TONSILLECTOMY &/OR         0.6655       21.9       18.2
                  ADENOIDECTOMY ONLY,
                  AGE 17*.
60.............  TONSILLECTOMY &/OR         0.6655       21.9       18.2
                  ADENOIDECTOMY ONLY,
                  AGE 0-17*.
61.............  MYRINGOTOMY W TUBE         1.8783       46.3       38.5
                  INSERTION AGE 17 \5\.
62.............  MYRINGOTOMY W TUBE         0.6655       21.9       18.2
                  INSERTION AGE 0-17*.
63.............  OTHER EAR, NOSE, MOUTH     1.8783       46.3       38.5
                  & THROAT O.R.
                  PROCEDURES \5\.
64.............  EAR, NOSE, MOUTH &         1.0447       25.5       21.2
                  THROAT MALIGNANCY.
65.............  DYSEQUILIBRIUM........     0.5056       19.8       16.5
66.............  EPISTAXIS \1\.........     0.4055       16.8       14.0

[[Page 11286]]

 
67.............  EPIGLOTTITIS \1\......     0.4055       16.8       14.0
68.............  OTITIS MEDIA & URI AGE     0.8284       23.3       19.4
                  17 W CC
                  \3\.
69.............  OTITIS MEDIA & URI AGE     0.8284       23.3       19.4
                  17 W/O CC
                  \3\.
70.............  OTITIS MEDIA & URI AGE     0.4055       16.8       14.0
                  0-17*.
71.............  LARYNGOTRACHEITIS*....     0.4055       16.8       14.0
72.............  NASAL TRAUMA &             0.4055       16.8       14.0
                  DEFORMITY \1\.
73.............  OTHER EAR, NOSE, MOUTH     0.8097       23.7       19.7
                  & THROAT DIAGNOSES
                  AGE 17.
74.............  OTHER EAR, NOSE, MOUTH     0.4055       16.8       14.0
                  & THROAT DIAGNOSES
                  AGE 0-17*.
75.............  MAJOR CHEST PROCEDURES     1.8783       46.3       38.5
                  \5\.
76.............  OTHER RESP SYSTEM O.R.     2.7674       50.6       42.1
                  PROCEDURES W CC.
77.............  OTHER RESP SYSTEM O.R.     1.8783       46.3       38.5
                  PROCEDURES W/O CC \5\.
78.............  PULMONARY EMBOLISM....     0.6348       20.5       17.0
79.............  RESPIRATORY INFECTIONS     0.8916       22.2       18.5
                  & INFLAMMATIONS AGE
                  17 W CC.
80.............  RESPIRATORY INFECTIONS     0.7947       22.8       19.0
                  & INFLAMMATIONS AGE
                  17 W/O CC.
81.............  RESPIRATORY INFECTIONS     0.4055       16.8       14.0
                  & INFLAMMATIONS AGE 0-
                  17*.
82.............  RESPIRATORY NEOPLASMS.     0.7976       20.9       17.4
83.............  MAJOR CHEST TRAUMA W       0.7384       24.8       20.6
                  CC.
84.............  MAJOR CHEST TRAUMA W/O     0.4055       16.8       14.0
                  CC \1\.
85.............  PLEURAL EFFUSION W CC.     0.8207       23.6       19.6
86.............  PLEURAL EFFUSION W/O       0.6194       21.1       17.5
                  CC.
87.............  PULMONARY EDEMA &          1.6597       32.3       26.9
                  RESPIRATORY FAILURE.
88.............  CHRONIC OBSTRUCTIVE        0.7532       20.9       17.4
                  PULMONARY DISEASE.
89.............  SIMPLE PNEUMONIA &         0.8533       23.6       19.6
                  PLEURISY AGE 17 W CC.
90.............  SIMPLE PNEUMONIA &         0.7921       23.0       19.1
                  PLEURISY AGE 17 W/O CC.
91.............  SIMPLE PNEUMONIA &         0.8284       23.3       19.4
                  PLEURISY AGE 0-17*.
92.............  INTERSTITIAL LUNG          0.7251       19.1       15.9
                  DISEASE W CC.
93.............  INTERSTITIAL LUNG          0.5573       18.5       15.4
                  DISEASE W/O CC.
94.............  PNEUMOTHORAX W CC.....     0.7885       22.7       18.9
95.............  PNEUMOTHORAX W/O CC        0.4055       16.8       14.0
                  \1\.
96.............  BRONCHITIS & ASTHMA        0.8173       24.2       20.1
                  AGE 17 W
                  CC.
97.............  BRONCHITIS & ASTHMA        0.5940       17.9       14.9
                  AGE 17 W/O
                  CC.
98.............  BRONCHITIS & ASTHMA        0.4055       16.8       14.0
                  AGE 0-17*.
99.............  RESPIRATORY SIGNS &        1.1164       27.3       22.7
                  SYMPTOMS W CC.
100............  RESPIRATORY SIGNS &        1.0015       25.4       21.1
                  SYMPTOMS W/O CC.
101............  OTHER RESPIRATORY          0.9763       23.4       19.5
                  SYSTEM DIAGNOSES W CC.
102............  OTHER RESPIRATORY          0.9313       24.5       20.4
                  SYSTEM DIAGNOSES W/O
                  CC.
103............  HEART TRANSPLANT \6\..     0.0000        0.0        0.0
104............  CARDIAC VALVE & OTHER      1.8783       46.3       38.5
                  MAJOR CARDIOTHORACIC
                  PROC W CARDIAC CATH*.
105............  CARDIAC VALVE & OTHER      1.8783       46.3       38.5
                  MAJOR CARDIOTHORACIC
                  PROC W/O CARDIAC
                  CATH*.
106............  CORONARY BYPASS W          1.8783       46.3       38.5
                  PTCA*.
107............  CORONARY BYPASS W          1.8783       46.3       38.5
                  CARDIAC CATH*.
108............  OTHER CARDIOTHORACIC       0.6655       21.9       18.2
                  PROCEDURES \2\.
109............  CORONARY BYPASS W/O        1.8783       46.3       38.5
                  PTCA OR CARDIAC CATH*.
110............  MAJOR CARDIOVASCULAR       1.8783       46.3       38.5
                  PROCEDURES W CC \5\.
111............  MAJOR CARDIOVASCULAR       1.8783       46.3       38.5
                  PROCEDURES W/O CC \5\.
113............  AMPUTATION FOR CIRC        1.4103       36.9       30.7
                  SYSTEM DISORDERS
                  EXCEPT UPPER LIMB &
                  TOE.
114............  UPPER LIMB & TOE           1.3377       40.2       33.5
                  AMPUTATION FOR CIRC
                  SYSTEM DISORDERS.
115............  PRM CARD PACEM IMPL W      1.8783       46.3       38.5
                  AMI,HRT FAIL OR
                  SHK,OR AICD LEAD OR
                  GNRTR P \5\.
116............  OTH PERM CARD PACEMAK      0.8284       23.3       19.4
                  IMPL OR PTCA W
                  CORONARY ARTERY STENT
                  IMPLNT \3\.
117............  CARDIAC PACEMAKER          0.4055       16.8       14.0
                  REVISION EXCEPT
                  DEVICE REPLACEMENT*.
118............  CARDIAC PACEMAKER          0.4055       16.8       14.0
                  DEVICE REPLACEMENT
                  \1\.
119............  VEIN LIGATION &            0.6655       21.9       18.2
                  STRIPPING*.
120............  OTHER CIRCULATORY          1.4091       36.4       30.3
                  SYSTEM O.R.
                  PROCEDURES.
121............  CIRCULATORY DISORDERS      0.7167       21.6       18.0
                  W AMI & MAJOR COMP,
                  DISCHARGED ALIVE.
122............  CIRCULATORY DISORDERS      0.5144       19.0       15.8
                  W AMI W/O MAJOR COMP,
                  DISCHARGED ALIVE.
123............  CIRCULATORY DISORDERS      0.9412       20.9       17.4
                  W AMI, EXPIRED.
124............  CIRCULATORY DISORDERS      0.8284       23.3       19.4
                  EXCEPT AMI, W CARD
                  CATH & COMPLEX DIAG
                  \3\.
125............  CIRCULATORY DISORDERS      1.8783       46.3       38.5
                  EXCEPT AMI, W CARD
                  CATH W/O COMPLEX DIAG
                  \5\.
126............  ACUTE & SUBACUTE           0.7689       24.8       20.6
                  ENDOCARDITIS.
127............  HEART FAILURE & SHOCK.     0.7616       22.4       18.6
128............  DEEP VEIN                  0.6042       20.8       17.3
                  THROMBOPHLEBITIS.
129............  CARDIAC ARREST,            1.0534       20.9       17.4
                  UNEXPLAINED.
130............  PERIPHERAL VASCULAR        0.7914       24.8       20.6
                  DISORDERS W CC.
131............  PERIPHERAL VASCULAR        0.7081       23.7       19.7
                  DISORDERS W/O CC.
132............  ATHEROSCLEROSIS W CC..     0.8183       21.8       18.1
133............  ATHEROSCLEROSIS W/O CC     0.5484       18.5       15.4

[[Page 11287]]

 
134............  HYPERTENSION..........     0.6985       24.0       20.0
135............  CARDIAC CONGENITAL &       0.7331       20.3       16.9
                  VALVULAR DISORDERS
                  AGE 17 W
                  CC.
136............  CARDIAC CONGENITAL &       0.7075       21.0       17.5
                  VALVULAR DISORDERS
                  AGE 17 W/O
                  CC.
137............  CARDIAC CONGENITAL &       0.6655       21.9       18.2
                  VALVULAR DISORDERS
                  AGE 0-17*.
138............  CARDIAC ARRHYTHMIA &       0.7187       23.4       19.5
                  CONDUCTION DISORDERS
                  W CC.
139............  CARDIAC ARRHYTHMIA &       0.6482       20.4       17.0
                  CONDUCTION DISORDERS
                  W/O CC.
140............  ANGINA PECTORIS.......     0.7690       20.1       16.7
141............  SYNCOPE & COLLAPSE W       0.6252       23.2       19.3
                  CC.
142............  SYNCOPE & COLLAPSE W/O     0.5452       21.5       17.9
                  CC.
143............  CHEST PAIN............     0.7316       22.7       18.9
144............  OTHER CIRCULATORY          0.7870       21.9       18.2
                  SYSTEM DIAGNOSES W CC.
145............  OTHER CIRCULATORY          0.7637       25.0       20.8
                  SYSTEM DIAGNOSES W/O
                  CC.
146............  RECTAL RESECTION W CC      1.2493       31.3       26.0
                  \4\.
147............  RECTAL RESECTION W/O       1.2493       31.3       26.0
                  CC*.
148............  MAJOR SMALL & LARGE        2.8488       47.6       39.6
                  BOWEL PROCEDURES W CC.
149............  MAJOR SMALL & LARGE        0.6655       21.9       18.2
                  BOWEL PROCEDURES W/O
                  CC \2\.
150............  PERITONEAL                 0.4055       16.8       14.0
                  ADHESIOLYSIS W CC \1\.
151............  PERITONEAL                 0.4055       16.8       14.0
                  ADHESIOLYSIS W/O CC*.
152............  MINOR SMALL & LARGE        1.2493       31.3       26.0
                  BOWEL PROCEDURES W CC
                  \4\.
153............  MINOR SMALL & LARGE        0.8284       23.3       19.4
                  BOWEL PROCEDURES W/O
                  CC*.
154............  STOMACH, ESOPHAGEAL &      1.2493       31.3       26.0
                  DUODENAL PROCEDURES
                  AGE 17 W
                  CC \4\.
155............  STOMACH, ESOPHAGEAL &      0.8284       23.3       19.4
                  DUODENAL PROCEDURES
                  AGE 17 W/O
                  CC*.
156............  STOMACH, ESOPHAGEAL &      0.8284       23.3       19.4
                  DUODENAL PROCEDURES
                  AGE 0-17*.
157............  ANAL & STOMAL              0.4055       16.8       14.0
                  PROCEDURES W CC \1\.
158............  ANAL & STOMAL              0.4055       16.8       14.0
                  PROCEDURES W/O CC*.
159............  HERNIA PROCEDURES          1.2493       31.3       26.0
                  EXCEPT INGUINAL &
                  FEMORAL AGE 17 W CC \4\.
160............  HERNIA PROCEDURES          0.6655       21.9       18.2
                  EXCEPT INGUINAL &
                  FEMORAL AGE 17 W/O CC*.
161............  INGUINAL & FEMORAL         0.6655       21.9       18.2
                  HERNIA PROCEDURES AGE
                  17 W CC*.
162............  INGUINAL & FEMORAL         0.6655       21.9       18.2
                  HERNIA PROCEDURES AGE
                  17 W/O CC*.
163............  HERNIA PROCEDURES AGE      0.6655       21.9       18.2
                  0-17*.
164............  APPENDECTOMY W             0.8284       23.3       19.4
                  COMPLICATED PRINCIPAL
                  DIAG W CC*.
165............  APPENDECTOMY W             0.8284       23.3       19.4
                  COMPLICATED PRINCIPAL
                  DIAG W/O CC*.
166............  APPENDECTOMY W/O           0.6655       21.9       18.2
                  COMPLICATED PRINCIPAL
                  DIAG W CC*.
167............  APPENDECTOMY W/O           0.6655       21.9       18.2
                  COMPLICATED PRINCIPAL
                  DIAG W/O CC*.
168............  MOUTH PROCEDURES W CC      0.8284       23.3       19.4
                  \3\.
169............  MOUTH PROCEDURES W/O       0.6655       21.9       18.2
                  CC*.
170............  OTHER DIGESTIVE SYSTEM     1.5543       35.0       29.1
                  O.R. PROCEDURES W CC.
171............  OTHER DIGESTIVE SYSTEM     0.8284       23.3       19.4
                  O.R. PROCEDURES W/O
                  CC \3\.
172............  DIGESTIVE MALIGNANCY W     0.8553       24.2       20.1
                  CC.
173............  DIGESTIVE MALIGNANCY W/    0.5513       18.9       15.7
                  O CC.
174............  G.I. HEMORRHAGE W CC..     0.8741       23.6       19.6
175............  G.I. HEMORRHAGE W/O CC     0.8359       25.6       21.3
176............  COMPLICATED PEPTIC         0.7661       24.4       20.3
                  ULCER.
177............  UNCOMPLICATED PEPTIC       0.8284       23.3       19.4
                  ULCER W CC \3\.
178............  UNCOMPLICATED PEPTIC       0.6655       21.9       18.2
                  ULCER W/O CC \2\.
179............  INFLAMMATORY BOWEL         1.0975       23.4       19.5
                  DISEASE.
180............  G.I. OBSTRUCTION W CC.     0.8457       22.8       19.0
181............  G.I. OBSTRUCTION W/O       0.5638       19.5       16.2
                  CC.
182............  ESOPHAGITIS, GASTROENT     0.8829       25.9       21.5
                  & MISC DIGEST
                  DISORDERS AGE 17 W CC.
183............  ESOPHAGITIS, GASTROENT     0.6913       21.5       17.9
                  & MISC DIGEST
                  DISORDERS AGE 17 W/O CC.
184............  ESOPHAGITIS, GASTROENT     0.6655       21.9       18.2
                  & MISC DIGEST
                  DISORDERS AGE 0-17*.
185............  DENTAL & ORAL DIS          0.8284       23.3       19.4
                  EXCEPT EXTRACTIONS &
                  RESTORATIONS, AGE 17 \3\.
186............  DENTAL & ORAL DIS          0.8284       23.3       19.4
                  EXCEPT EXTRACTIONS &
                  RESTORATIONS, AGE 0-
                  17*.
187............  DENTAL EXTRACTIONS &       0.8284       23.3       19.4
                  RESTORATIONS*.
188............  OTHER DIGESTIVE SYSTEM     1.0490       24.2       20.1
                  DIAGNOSES AGE 17 W CC.
189............  OTHER DIGESTIVE SYSTEM     0.5852       17.4       14.5
                  DIAGNOSES AGE 17 W/O CC.
190............  OTHER DIGESTIVE SYSTEM     0.6655       21.9       18.2
                  DIAGNOSES AGE 0-17*.
191............  PANCREAS, LIVER &          1.8783       46.3       38.5
                  SHUNT PROCEDURES W CC
                  \5\.
192............  PANCREAS, LIVER &          1.2493       31.3       26.0
                  SHUNT PROCEDURES W/O
                  CC*.
193............  BILIARY TRACT PROC         1.2493       31.3       26.0
                  EXCEPT ONLY CHOLECYST
                  W OR W/O C.D.E. W CC
                  \4\.
194............  BILIARY TRACT PROC         0.8284       23.3       19.4
                  EXCEPT ONLY CHOLECYST
                  W OR W/O C.D.E. W/O
                  CC*.
195............  CHOLECYSTECTOMY W          0.8284       23.3       19.4
                  C.D.E. W CC*.
196............  CHOLECYSTECTOMY W          0.8284       23.3       19.4
                  C.D.E. W/O CC*.
197............  CHOLECYSTECTOMY EXCEPT     1.8783       46.3       38.5
                  BY LAPAROSCOPE W/O
                  C.D.E. W CC \5\.
198............  CHOLECYSTECTOMY EXCEPT     1.8783       46.3       38.5
                  BY LAPAROSCOPE W/O
                  C.D.E. W/O CC \5\.
199............  HEPATOBILIARY              0.8284       23.3       19.4
                  DIAGNOSTIC PROCEDURE
                  FOR MALIGNANCY \3\.

[[Page 11288]]

 
200............  HEPATOBILIARY              1.2493       31.3       26.0
                  DIAGNOSTIC PROCEDURE
                  FOR NON-MALIGNANCY
                  \4\.
201............  OTHER HEPATOBILIARY OR     1.8783       46.3       38.5
                  PANCREAS O.R.
                  PROCEDURES \5\.
202............  CIRRHOSIS & ALCOHOLIC      0.5736       18.4       15.3
                  HEPATITIS.
203............  MALIGNANCY OF              0.5897       18.2       15.1
                  HEPATOBILIARY SYSTEM
                  OR PANCREAS.
204............  DISORDERS OF PANCREAS      0.9444       22.1       18.4
                  EXCEPT MALIGNANCY.
205............  DISORDERS OF LIVER         0.6825       21.5       17.9
                  EXCEPT MALIG,CIRR,ALC
                  HEPA W CC.
206............  DISORDERS OF LIVER         0.6655       21.9       18.2
                  EXCEPT MALIG,CIRR,ALC
                  HEPA W/O CC \2\.
207............  DISORDERS OF THE           0.6979       21.5       17.9
                  BILIARY TRACT W CC.
208............  DISORDERS OF THE           0.4055       16.8       14.0
                  BILIARY TRACT W/O CC
                  \1\.
209............  MAJOR JOINT & LIMB         1.8783       46.3       38.5
                  REATTACHMENT
                  PROCEDURES OF LOWER
                  EXTREMITY \5\.
210............  HIP & FEMUR PROCEDURES     1.2493       31.3       26.0
                  EXCEPT MAJOR JOINT
                  AGE 17 W
                  CC \4\.
211............  HIP & FEMUR PROCEDURES     0.8284       23.3       19.4
                  EXCEPT MAJOR JOINT
                  AGE 17 W/O
                  CC*.
212............  HIP & FEMUR PROCEDURES     0.8284       23.3       19.4
                  EXCEPT MAJOR JOINT
                  AGE 0-17*.
213............  AMPUTATION FOR             1.2591       33.0       27.5
                  MUSCULOSKELETAL
                  SYSTEM & CONN TISSUE
                  DISORDERS.
216............  BIOPSIES OF                1.2493       31.3       26.0
                  MUSCULOSKELETAL
                  SYSTEM & CONNECTIVE
                  TISSUE \4\.
217............  WND DEBRID & SKN GRFT      1.3602       38.8       32.3
                  EXCEPT HAND,FOR
                  MUSCSKELET & CONN
                  TISS DIS.
218............  LOWER EXTREM & HUMER       0.8284       23.3       19.4
                  PROC EXCEPT
                  HIP,FOOT,FEMUR AGE
                  17 W CC
                  \3\.
219............  LOWER EXTREM & HUMER       0.8284       23.3       19.4
                  PROC EXCEPT
                  HIP,FOOT,FEMUR AGE
                  17 W/O CC*.
220............  LOWER EXTREM & HUMER       0.8284       23.3       19.4
                  PROC EXCEPT
                  HIP,FOOT,FEMUR AGE 0-
                  17*.
223............  MAJOR SHOULDER/ELBOW       1.2493       31.3       26.0
                  PROC, OR OTHER UPPER
                  EXTREMITY PROC W CC
                  \4\.
224............  SHOULDER,ELBOW OR          0.4055       16.8       14.0
                  FOREARM PROC,EXC
                  MAJOR JOINT PROC, W/O
                  CC \1\.
225............  FOOT PROCEDURES \4\...     1.2493       31.3       26.0
226............  SOFT TISSUE PROCEDURES     1.2493       31.3       26.0
                  W CC \4\.
227............  SOFT TISSUE PROCEDURES     0.8284       23.3       19.4
                  W/O CC \3\.
228............  MAJOR THUMB OR JOINT       0.6655       21.9       18.2
                  PROC,OR OTH HAND OR
                  WRIST PROC W CC*.
229............  HAND OR WRIST PROC,        0.6655       21.9       18.2
                  EXCEPT MAJOR JOINT
                  PROC, W/O CC \2\.
230............  LOCAL EXCISION &           0.4055       16.8       14.0
                  REMOVAL OF INT FIX
                  DEVICES OF HIP &
                  FEMUR \1\.
231............  LOCAL EXCISION &           1.8783       46.3       38.5
                  REMOVAL OF INT FIX
                  DEVICES EXCEPT HIP &
                  FEMUR \5\.
232............  ARTHROSCOPY*..........     0.4055       16.8       14.0
233............  OTHER MUSCULOSKELET        1.2493       31.3       26.0
                  SYS & CONN TISS O.R.
                  PROC W CC \4\.
234............  OTHER MUSCULOSKELET        0.4055       16.8       14.0
                  SYS & CONN TISS O.R.
                  PROC W/O CC \1\.
235............  FRACTURES OF FEMUR....     0.7540       28.5       23.7
236............  FRACTURES OF HIP &         0.7381       27.2       22.6
                  PELVIS.
237............  SPRAINS, STRAINS, &        0.6655       21.9       18.2
                  DISLOCATIONS OF HIP,
                  PELVIS & THIGH \2\.
238............  OSTEOMYELITIS.........     0.8275       27.5       22.9
239............  PATHOLOGICAL FRACTURES     0.6689       21.9       18.2
                  & MUSCULOSKELETAL &
                  CONN TISS MALIGNANCY.
240............  CONNECTIVE TISSUE          0.9260       26.0       21.6
                  DISORDERS W CC.
241............  CONNECTIVE TISSUE          0.5805       22.7       18.9
                  DISORDERS W/O CC.
242............  SEPTIC ARTHRITIS......     0.7725       26.3       21.9
243............  MEDICAL BACK PROBLEMS.     0.6596       23.4       19.5
244............  BONE DISEASES &            0.5756       20.6       17.1
                  SPECIFIC
                  ARTHROPATHIES W CC.
245............  BONE DISEASES &            0.4426       17.5       14.5
                  SPECIFIC
                  ARTHROPATHIES W/O CC.
246............  NON-SPECIFIC               0.6053       21.4       17.8
                  ARTHROPATHIES.
247............  SIGNS & SYMPTOMS OF        0.5590       20.4       17.0
                  MUSCULOSKELETAL
                  SYSTEM & CONN TISSUE.
248............  TENDONITIS, MYOSITIS &     0.7288       23.9       19.9
                  BURSITIS.
249............  AFTERCARE,                 0.8005       27.1       22.5
                  MUSCULOSKELETAL
                  SYSTEM & CONNECTIVE
                  TISSUE.
250............  FX, SPRN, STRN & DISL      0.8373       31.8       26.5
                  OF FOREARM, HAND,
                  FOOT AGE 17 W CC.
251............  FX, SPRN, STRN & DISL      0.6904       26.0       21.6
                  OF FOREARM, HAND,
                  FOOT AGE 17 W/O CC.
252............  FX, SPRN, STRN & DISL      0.4055       16.8       14.0
                  OF FOREARM, HAND,
                  FOOT AGE 0-17*.
253............  FX, SPRN, STRN & DISL      0.8054       28.0       23.3
                  OF UPARM,LOWLEG EX
                  FOOT AGE 17 W CC.
254............  FX, SPRN, STRN & DISL      0.6999       26.4       22.0
                  OF UPARM,LOWLEG EX
                  FOOT AGE 17 W/O CC.
255............  FX, SPRN, STRN & DISL      0.4055       16.8       14.0
                  OF UPARM,LOWLEG EX
                  FOOT AGE 0-17*.
256............  OTHER MUSCULOSKELETAL      0.8002       25.1       20.9
                  SYSTEM & CONNECTIVE
                  TISSUE DIAGNOSES.
257............  TOTAL MASTECTOMY FOR       0.6655       21.9       18.2
                  MALIGNANCY W CC \2\.
258............  TOTAL MASTECTOMY FOR       0.6655       21.9       18.2
                  MALIGNANCY W/O CC*.
259............  SUBTOTAL MASTECTOMY        0.6655       21.9       18.2
                  FOR MALIGNANCY W CC*.
260............  SUBTOTAL MASTECTOMY        0.6655       21.9       18.2
                  FOR MALIGNANCY W/O
                  CC*.
261............  BREAST PROC FOR NON-       0.4055       16.8       14.0
                  MALIGNANCY EXCEPT
                  BIOPSY & LOCAL
                  EXCISION*.
262............  BREAST BIOPSY & LOCAL      0.4055       16.8       14.0
                  EXCISION FOR NON-
                  MALIGNANCY \1\.
263............  SKIN GRAFT &/OR DEBRID     1.5388       45.0       37.5
                  FOR SKN ULCER OR
                  CELLULITIS W CC.
264............  SKIN GRAFT &/OR DEBRID     1.1645       38.8       32.3
                  FOR SKN ULCER OR
                  CELLULITIS W/O CC.
265............  SKIN GRAFT &/OR DEBRID     1.6569       45.6       38.0
                  EXCEPT FOR SKIN ULCER
                  OR CELLULITIS W CC.
266............  SKIN GRAFT &/OR DEBRID     0.8284       23.3       19.4
                  EXCEPT FOR SKIN ULCER
                  OR CELLULITIS W/O CC
                  \3\.
267............  PERIANAL & PILONIDAL       0.4055       16.8       14.0
                  PROCEDURES*.
268............  SKIN, SUBCUTANEOUS         1.2493       31.3       26.0
                  TISSUE & BREAST
                  PLASTIC PROCEDURES
                  \4\.
269............  OTHER SKIN, SUBCUT         1.3915       41.7       34.7
                  TISS & BREAST PROC W
                  CC.

[[Page 11289]]

 
270............  OTHER SKIN, SUBCUT         1.3879       41.6       34.6
                  TISS & BREAST PROC W/
                  O CC.
271............  SKIN ULCERS...........     0.9714       31.1       25.9
272............  MAJOR SKIN DISORDERS W     0.6846       21.0       17.5
                  CC.
273............  MAJOR SKIN DISORDERS W/    0.6655       21.9       18.2
                  O CC \2\.
274............  MALIGNANT BREAST           0.7872       22.0       18.3
                  DISORDERS W CC \7\.
275............  MALIGNANT BREAST           0.7872       22.0       18.3
                  DISORDERS W/O CC \7\.
276............  NON-MALIGANT BREAST        0.6655       21.9       18.2
                  DISORDERS \2\.
277............  CELLULITIS AGE 17 W CC.
278............  CELLULITIS AGE 17 W/O CC.
279............  CELLULITIS AGE 0-17*..     0.6655       21.9       18.2
280............  TRAUMA TO THE SKIN,        1.0097       30.9       25.7
                  SUBCUT TISS & BREAST
                  AGE 17 W
                  CC.
281............  TRAUMA TO THE SKIN,        0.7363       27.4       22.8
                  SUBCUT TISS & BREAST
                  AGE 17 W/O
                  CC.
282............  TRAUMA TO THE SKIN,        0.6655       21.9       18.2
                  SUBCUT TISS & BREAST
                  AGE 0-17*.
283............  MINOR SKIN DISORDERS W     0.8574       24.8       20.6
                  CC.
284............  MINOR SKIN DISORDERS W/    0.4055       16.8       14.0
                  O CC \1\.
285............  AMPUTAT OF LOWER LIMB      1.3692       31.7       26.4
                  FOR
                  ENDOCRINE,NUTRIT,&
                  METABOL DISORDERS.
286............  ADRENAL & PITUITARY        1.2493       31.3       26.0
                  PROCEDURES*.
287............  SKIN GRAFTS & WOUND        1.3195       39.6       33.0
                  DEBRID FOR ENDOC,
                  NUTRIT & METAB
                  DISORDERS.
288............  O.R. PROCEDURES FOR        1.8783       46.3       38.5
                  OBESITY \5\.
289............  PARATHYROID                0.4055       16.8       14.0
                  PROCEDURES*.
290............  THYROID PROCEDURES \1\     0.4055       16.8       14.0
291............  THYROGLOSSAL               0.4055       16.8       14.0
                  PROCEDURES*.
292............  OTHER ENDOCRINE,           1.2493       31.3       26.0
                  NUTRIT & METAB O.R.
                  PROC W CC \4\.
293............  OTHER ENDOCRINE,           0.6655       21.9       18.2
                  NUTRIT & METAB O.R.
                  PROC W/O CC*.
294............  DIABETES AGE 35.
295............  DIABETES AGE 0-35 \3\.     0.8284       23.3       19.4
296............  NUTRITIONAL & MISC         0.7710       24.3       20.2
                  METABOLIC DISORDERS
                  AGE 17 W
                  CC.
297............  NUTRITIONAL & MISC         0.6321       21.1       17.5
                  METABOLIC DISORDERS
                  AGE 17 W/O
                  CC.
298............  NUTRITIONAL & MISC         0.6655       21.9       18.2
                  METABOLIC DISORDERS
                  AGE 0-17*.
299............  INBORN ERRORS OF           0.8284       23.3       19.4
                  METABOLISM \3\.
300............  ENDOCRINE DISORDERS W      0.8670       23.3       19.4
                  CC.
301............  ENDOCRINE DISORDERS W/     0.4055       16.8       14.0
                  O CC \1\.
302............  KIDNEY TRANSPLANT \6\.     0.0000        0.0        0.0
303............  KIDNEY, URETER & MAJOR     1.8783       46.3       38.5
                  BLADDER PROCEDURES
                  FOR NEOPLASM \5\.
304............  KIDNEY, URETER & MAJOR     1.2493       31.3       26.0
                  BLADDER PROC FOR NON-
                  NEOPL W CC \4\.
305............  KIDNEY, URETER & MAJOR     0.6655       21.9       18.2
                  BLADDER PROC FOR NON-
                  NEOPL W/O CC \2\.
306............  PROSTATECTOMY W CC \3\     0.8284       23.3       19.4
307............  PROSTATECTOMY W/O CC       0.4055       16.8       14.0
                  \1\.
308............  MINOR BLADDER              0.8284       23.3   19.414.0
                  PROCEDURES W CC \3\.
309............  MINOR BLADDER              0.4055       16.8       26.0
                  PROCEDURES W/O CC*.
310............  TRANSURETHRAL              1.2493       31.3       14.0
                  PROCEDURES W CC \4\.
311............  TRANSURETHRAL              0.4055       16.8       38.5
                  PROCEDURES W/O CC \1\.
312............  URETHRAL PROCEDURES,       1.8783       46.3       14.0
                  AGE 17 W
                  CC \5\.
313............  URETHRAL PROCEDURES,       0.4055       16.8       14.0
                  AGE 17 W/O
                  CC*.
314............  URETHRAL PROCEDURES,       0.4055       16.8       14.0
                  AGE 0-17*.
315............  OTHER KIDNEY & URINARY     1.5800       39.5       32.9
                  TRACT O.R. PROCEDURES.
316............  RENAL FAILURE.........     0.9308       24.1       20.0
317............  ADMIT FOR RENAL            1.2493       31.3       26.0
                  DIALYSIS \4\.
318............  KIDNEY & URINARY TRACT     0.8075       21.5       17.9
                  NEOPLASMS W CC.
319............  KIDNEY & URINARY TRACT     0.6655       21.9       18.2
                  NEOPLASMS W/O CC \2\.
320............  KIDNEY & URINARY TRACT     0.7424       23.9       19.9
                  INFECTIONS AGE 17 W CC.
321............  KIDNEY & URINARY TRACT     0.6123       20.4       17.0
                  INFECTIONS AGE 17 W/O CC.
322............  KIDNEY & URINARY TRACT     0.6655       21.9       18.2
                  INFECTIONS AGE 0-17*.
323............  URINARY STONES W CC, &/    0.6655       21.9       18.2
                  OR ESW LITHOTRIPSY
                  \2\.
324............  URINARY STONES W/O CC      0.6655       21.9       18.2
                  \2\.
325............  KIDNEY & URINARY TRACT     0.8123       26.7       22.2
                  SIGNS & SYMPTOMS AGE
                  17 W CC.
326............  KIDNEY & URINARY TRACT     0.6655       21.9       18.2
                  SIGNS & SYMPTOMS AGE
                  17 W/O CC
                  \2\.
327............  KIDNEY & URINARY TRACT     0.4055       16.8       14.0
                  SIGNS & SYMPTOMS AGE
                  0-17*.
328............  URETHRAL STRICTURE AGE     0.6655       21.9       18.2
                  17 W CC*.
329............  URETHRAL STRICTURE AGE     0.4055       16.8       14.0
                  17 W/O CC
                  \1\.
330............  URETHRAL STRICTURE AGE     0.4055       16.8       14.0
                  0-17*.
331............  OTHER KIDNEY & URINARY     0.9267       24.6       20.5
                  TRACT DIAGNOSES AGE
                  17 W CC.
332............  OTHER KIDNEY & URINARY     0.6393       20.9       17.4
                  TRACT DIAGNOSES AGE
                  17 W/O CC.
333............  OTHER KIDNEY & URINARY     0.4055       16.8       14.0
                  TRACT DIAGNOSES AGE 0-
                  17*.
334............  MAJOR MALE PELVIC          1.2493       31.3       26.0
                  PROCEDURES W CC*.
335............  MAJOR MALE PELVIC          0.8284       23.3       19.4
                  PROCEDURES W/O CC*.

[[Page 11290]]

 
336............  TRANSURETHRAL              0.8284       23.3       19.4
                  PROSTATECTOMY W CC
                  \3\.
337............  TRANSURETHRAL              0.6655       21.9       18.2
                  PROSTATECTOMY W/O CC*.
338............  TESTES PROCEDURES, FOR     0.6655       21.9       18.2
                  MALIGNANCY*.
339............  TESTES PROCEDURES, NON-    0.4055       16.8       14.0
                  MALIGNANCY AGE 17 \1\.
340............  TESTES PROCEDURES, NON-    0.4055       16.8       14.0
                  MALIGNANCY AGE 0-17*.
341............  PENIS PROCEDURES \2\..     0.6655       21.9       18.2
342............  CIRCUMCISION AGE 17 \4\.
343............  CIRCUMCISION AGE 0-17.     0.4055       16.8       14.0
344............  OTHER MALE                 1.2493       31.3       26.0
                  REPRODUCTIVE SYSTEM
                  O.R. PROCEDURES FOR
                  MALIGNANCY \4\.
345............  OTHER MALE                 0.8284       23.3       19.4
                  REPRODUCTIVE SYSTEM
                  O.R. PROC EXCEPT FOR
                  MALIGNANCY \3\.
346............  MALIGNANCY, MALE           0.7070       21.6       18.0
                  REPRODUCTIVE SYSTEM,
                  W CC.
347............  MALIGNANCY, MALE           0.6655       21.9       18.2
                  REPRODUCTIVE SYSTEM,
                  W/O CC \2\.
348............  BENIGN PROSTATIC           0.4055       16.8       14.0
                  HYPERTROPHY W CC \1\.
349............  BENIGN PROSTATIC           0.4055       16.8       14.0
                  HYPERTROPHY W/O CC*.
350............  INFLAMMATION OF THE        0.6058       19.9       16.5
                  MALE REPRODUCTIVE
                  SYSTEM.
351............  STERILIZATION, MALE*..     0.4055       16.8       14.0
352............  OTHER MALE                 0.8284       23.3       19.4
                  REPRODUCTIVE SYSTEM
                  DIAGNOSES \3\.
353............  PELVIC EVISCERATION,       1.8783       46.3       38.5
                  RADICAL HYSTERECTOMY
                  & RADICAL VULVECTOMY*.
354............  UTERINE, ADNEXA PROC       1.2493       31.3       26.0
                  FOR NON-OVARIAN/
                  ADNEXAL MALIG W CC*.
355............  UTERINE, ADNEXA PROC       1.2493       31.3       26.0
                  FOR NON-OVARIAN/
                  ADNEXAL MALIG W/O CC*.
356............  FEMALE REPRODUCTIVE        1.2493       31.3       26.0
                  SYSTEM RECONSTRUCTIVE
                  PROCEDURES*.
357............  UTERINE & ADNEXA PROC      1.2493       31.3       26.0
                  FOR OVARIAN OR
                  ADNEXAL MALIGNANCY*.
358............  UTERINE & ADNEXA PROC      1.8783       46.3       38.5
                  FOR NON-MALIGNANCY W
                  CC \5\.
359............  UTERINE & ADNEXA PROC      0.4055       16.8       14.0
                  FOR NON-MALIGNANCY W/
                  O CC \1\.
360............  VAGINA, CERVIX & VULVA     0.4055       16.8       14.0
                  PROCEDURES \1\.
361............  LAPAROSCOPY &              0.6655       21.9       18.2
                  INCISIONAL TUBAL
                  INTERRUPTION*.
362............  ENDOSCOPIC TUBAL           0.6655       21.9       18.2
                  INTERRUPTION*.
363............  D&C, CONIZATION &          0.8284       23.3       19.4
                  RADIO-IMPLANT, FOR
                  MALIGNANCY*.
364............  D&C, CONIZATION EXCEPT     0.6655       21.9       18.2
                  FOR MALIGNANCY*.
365............  OTHER FEMALE               1.8783       46.3       38.5
                  REPRODUCTIVE SYSTEM
                  O.R. PROCEDURES \5\.
366............  MALIGNANCY, FEMALE         0.9654       23.9       19.9
                  REPRODUCTIVE SYSTEM W
                  CC.
367............  MALIGNANCY, FEMALE         0.8284       23.3       19.4
                  REPRODUCTIVE SYSTEM W/
                  O CC \3\.
368............  INFECTIONS, FEMALE         1.2493       31.3       26.0
                  REPRODUCTIVE SYSTEM
                  \4\.
369............  MENSTRUAL & OTHER          0.6655       21.9       18.2
                  FEMALE REPRODUCTIVE
                  SYSTEM DISORDERS \2\.
370............  CESAREAN SECTION W CC*     0.8284       23.3       19.4
371............  CESAREAN SECTION W/O       0.6655       21.9       18.2
                  CC*.
372............  VAGINAL DELIVERY W         0.6655       21.9       18.2
                  COMPLICATING
                  DIAGNOSES*.
373............  VAGINAL DELIVERY W/O       0.4055       16.8       14.0
                  COMPLICATING
                  DIAGNOSES*.
374............  VAGINAL DELIVERY W         0.4055       16.8       14.0
                  STERILIZATION &/OR
                  D&C*.
375............  VAGINAL DELIVERY W         0.4055       16.8       14.0
                  O.R. PROC EXCEPT
                  STERIL &/OR D&C*.
376............  POSTPARTUM & POST          0.4055       16.8       14.0
                  ABORTION DIAGNOSES W/
                  O O.R. PROCEDURE*.
377............  POSTPARTUM & POST          0.4055       16.8       14.0
                  ABORTION DIAGNOSES W
                  O.R. PROCEDURE*.
378............  ECTOPIC PREGNANCY*....     0.6655       21.9       18.2
379............  THREATENED ABORTION*..     0.4055       16.8       14.0
380............  ABORTION W/O D&C*.....     0.4055       16.8       14.0
381............  ABORTION W D&C,            0.4055       16.8       14.0
                  ASPIRATION CURETTAGE
                  OR HYSTEROTOMY*.
382............  FALSE LABOR*..........     0.4055       16.8       14.0
383............  OTHER ANTEPARTUM           0.4055       16.8       14.0
                  DIAGNOSES W MEDICAL
                  COMPLICATIONS*.
384............  OTHER ANTEPARTUM           0.4055       16.8       14.0
                  DIAGNOSES W/O MEDICAL
                  COMPLICATIONS*.
385............  NEONATES, DIED OR          0.4055       16.8       14.0
                  TRANSFERRED TO
                  ANOTHER ACUTE CARE
                  FACILITY*.
386............  EXTREME IMMATURITY*...     0.6655       21.9       18.2
387............  PREMATURITY W MAJOR        0.6655       21.9       18.2
                  PROBLEMS*.
388............  PREMATURITY W/O MAJOR      0.4055       16.8       14.0
                  PROBLEMS*.
389............  FULL TERM NEONATE W        1.2493       31.3       26.0
                  MAJOR PROBLEMS \4\.
390............  NEONATE W OTHER            0.6655       21.9       18.2
                  SIGNIFICANT PROBLEMS*.
391............  NORMAL NEWBORN*.......     0.4055       16.8       14.0
392............  SPLENECTOMY AGE 17*.
393............  SPLENECTOMY AGE 0-17*.     0.6655       21.9       18.2
394............  OTHER O.R. PROCEDURES      1.8783       46.3       38.5
                  OF THE BLOOD AND
                  BLOOD FORMING ORGANS
                  \5\.
395............  RED BLOOD CELL             0.8584       25.1       20.9
                  DISORDERS AGE 17.
396............  RED BLOOD CELL             0.4055       16.8       14.0
                  DISORDERS AGE 0-17*.
397............  COAGULATION DISORDERS.     0.7567       19.4       16.1
398............  RETICULOENDOTHELIAL &      0.9008       23.4       19.5
                  IMMUNITY DISORDERS W
                  CC.
399............  RETICULOENDOTHELIAL &      0.4055       16.8       14.0
                  IMMUNITY DISORDERS W/
                  O CC \1\.
400............  LYMPHOMA & LEUKEMIA W      0.8284       23.3       19.4
                  MAJOR O.R. PROCEDURE
                  \3\.
401............  LYMPHOMA & NON-ACUTE       1.2493       31.3       26.0
                  LEUKEMIA W OTHER O.R.
                  PROC W CC \4\.

[[Page 11291]]

 
402............  LYMPHOMA & NON-ACUTE       0.8284       23.3       19.4
                  LEUKEMIA W OTHER O.R.
                  PROC W/O CC*.
403............  LYMPHOMA & NON-ACUTE       0.9651       23.9       19.9
                  LEUKEMIA W CC.
404............  LYMPHOMA & NON-ACUTE       0.8980       19.1       15.9
                  LEUKEMIA W/O CC.
405............  ACUTE LEUKEMIA W/O         0.6655       21.9       18.2
                  MAJOR O.R. PROCEDURE
                  AGE 0-17*.
406............  MYELOPROLIF DISORD OR      1.8783       46.3       38.5
                  POORLY DIFF NEOPL W
                  MAJ O.R.PROC W CC \5\.
407............  MYELOPROLIF DISORD OR      0.8284       23.3       19.4
                  POORLY DIFF NEOPL W
                  MAJ O.R.PROC W/O CC*.
408............  MYELOPROLIF DISORD OR      1.2493       31.3       26.0
                  POORLY DIFF NEOPL W
                  OTHER O.R.PROC \4\.
409............  RADIOTHERAPY..........     0.5220       19.5       16.2
410............  CHEMOTHERAPY W/O ACUTE     0.4055       16.8       14.0
                  LEUKEMIA AS SECONDARY
                  DIAGNOSIS \1\.
411............  HISTORY OF MALIGNANCY      0.4055       16.8       14.0
                  W/O ENDOSCOPY*.
412............  HISTORY OF MALIGNANCY      0.4055       16.8       14.0
                  W ENDOSCOPY*.
413............  OTHER MYELOPROLIF DIS      0.9061       23.7       19.7
                  OR POORLY DIFF NEOPL
                  DIAG W CC \7\.
414............  OTHER MYELOPROLIF DIS      0.9061       23.7       19.7
                  OR POORLY DIFF NEOPL
                  DIAG W/O CC \7\.
415............  O.R. PROCEDURE FOR         1.4933       38.7       32.2
                  INFECTIOUS &
                  PARASITIC DISEASES.
416............  SEPTICEMIA AGE 17.
417............  SEPTICEMIA AGE 0-17*..     0.8284       23.3       19.4
418............  POSTOPERATIVE & POST-      0.8771       25.8       21.5
                  TRAUMATIC INFECTIONS.
419............  FEVER OF UNKNOWN           0.5948       20.5       17.0
                  ORIGIN AGE 17 W CC.
420............  FEVER OF UNKNOWN           0.4055       16.8       14.0
                  ORIGIN AGE 17 W/O CC \1\.
421............  VIRAL ILLNESS AGE 17 \4\.
422............  VIRAL ILLNESS & FEVER      0.4055       16.8       14.0
                  OF UNKNOWN ORIGIN AGE
                  0-17*.
423............  OTHER INFECTIOUS &         0.8701       24.7       20.5
                  PARASITIC DISEASES
                  DIAGNOSES.
424............  O.R. PROCEDURE W           1.8783       46.3       38.5
                  PRINCIPAL DIAGNOSES
                  OF MENTAL ILLNESS \5\.
425............  ACUTE ADJUSTMENT           0.6177       26.0       21.6
                  REACTION &
                  PSYCHOLOGICAL
                  DYSFUNCTION.
426............  DEPRESSIVE NEUROSES...     0.5739       26.9       22.4
427............  NEUROSES EXCEPT            0.6655       21.9       18.2
                  DEPRESSIVE \2\.
428............  DISORDERS OF               1.2493       31.3       26.0
                  PERSONALITY & IMPULSE
                  CONTROL \4\.
429............  ORGANIC DISTURBANCES &     0.5466       25.0       20.8
                  MENTAL RETARDATION.
430............  PSYCHOSES.............     0.4479       22.9       19.0
431............  CHILDHOOD MENTAL           0.4345       22.7       18.9
                  DISORDERS.
432............  OTHER MENTAL DISORDER      0.6655       21.9       18.2
                  DIAGNOSES \2\.
433............  ALCOHOL/DRUG ABUSE OR      0.2489       13.1       10.9
                  DEPENDENCE, LEFT AMA.
439............  SKIN GRAFTS FOR            1.3200       42.5       35.4
                  INJURIES.
440............  WOUND DEBRIDEMENTS FOR     1.3567       40.1       33.4
                  INJURIES.
441............  HAND PROCEDURES FOR        0.6655       21.9       18.2
                  INJURIES*.
442............  OTHER O.R. PROCEDURES      1.6442       39.7       33.0
                  FOR INJURIES W CC.
443............  OTHER O.R. PROCEDURES      0.6655       21.9       18.2
                  FOR INJURIES W/O CC
                  \2\.
444............  TRAUMATIC INJURY AGE       0.9614       30.7       25.5
                  17 W CC.
445............  TRAUMATIC INJURY AGE       0.8448       27.3       22.7
                  17 W/O CC.
446............  TRAUMATIC INJURY AGE 0-    0.8284       23.3       19.4
                  17*.
447............  ALLERGIC REACTIONS AGE     0.6655       21.9       18.2
                  17 \2\.
448............  ALLERGIC REACTIONS AGE     0.4055       16.8       14.0
                  0-17*.
449............  POISONING & TOXIC          0.8284       23.3       19.4
                  EFFECTS OF DRUGS AGE
                  17 W CC
                  \3\.
450............  POISONING & TOXIC          0.6655       21.9       18.2
                  EFFECTS OF DRUGS AGE
                  17 W/O CC
                  \2\.
451............  POISONING & TOXIC          0.4055       16.8       14.0
                  EFFECTS OF DRUGS AGE
                  0-17*.
452............  COMPLICATIONS OF           0.9596       25.5       21.2
                  TREATMENT W CC.
453............  COMPLICATIONS OF           0.6666       23.1       19.2
                  TREATMENT W/O CC.
454............  OTHER INJURY,              0.8284       23.3       19.4
                  POISONING & TOXIC
                  EFFECT DIAG W CC \3\.
455............  OTHER INJURY,              0.4055       16.8       14.0
                  POISONING & TOXIC
                  EFFECT DIAG W/O CC
                  \1\.
461............  O.R. PROC W DIAGNOSES      1.3383       38.0       31.6
                  OF OTHER CONTACT W
                  HEALTH SERVICES.
462............  REHABILITATION........     0.6469       23.5       19.5
463............  SIGNS & SYMPTOMS W CC.     0.7618       26.8       22.3
464............  SIGNS & SYMPTOMS W/O       0.6234       24.3       20.2
                  CC.
465............  AFTERCARE W HISTORY OF     0.8284       23.3       19.4
                  MALIGNANCY AS
                  SECONDARY DIAGNOSIS
                  \3\.
466............  AFTERCARE W/O HISTORY      0.8119       23.9       19.9
                  OF MALIGNANCY AS
                  SECONDARY DIAGNOSIS.
467............  OTHER FACTORS              0.6655       21.9       18.2
                  INFLUENCING HEALTH
                  STATUS \2\.
468............  EXTENSIVE O.R.             2.2177       45.5       37.9
                  PROCEDURE UNRELATED
                  TO PRINCIPAL
                  DIAGNOSIS.
469............  PRINCIPAL DIAGNOSIS        0.0000        0.0        0.0
                  INVALID AS DISCHARGE
                  DIAGNOSIS \6\.
470............  UNGROUPABLE \6\.......     0.0000        0.0        0.0
471............  BILATERAL OR MULTIPLE      1.8783       46.3       38.5
                  MAJOR JOINT PROCS OF
                  LOWER EXTREMITY*.
473............  ACUTE LEUKEMIA W/O         0.8047       17.1       14.2
                  MAJOR O.R. PROCEDURE
                  AGE 17.
475............  RESPIRATORY SYSTEM         2.0906       35.5       29.5
                  DIAGNOSIS WITH
                  VENTILATOR SUPPORT.
476............  PROSTATIC O.R.             1.8783       46.3       38.5
                  PROCEDURE UNRELATED
                  TO PRINCIPAL
                  DIAGNOSIS \5\.
477............  NON-EXTENSIVE O.R.         1.6791       39.7       33.0
                  PROCEDURE UNRELATED
                  TO PRINCIPAL
                  DIAGNOSIS.
478............  OTHER VASCULAR             1.6244       37.8       31.5
                  PROCEDURES W CC.
479............  OTHER VASCULAR             0.6655       21.9       18.2
                  PROCEDURES W/O CC \2\.

[[Page 11292]]

 
480............  LIVER TRANSPLANT \6\..     0.0000        0.0        0.0
481............  BONE MARROW                1.8783       46.3       38.5
                  TRANSPLANT*.
482............  TRACHEOSTOMY FOR FACE,     0.6655       21.9       18.2
                  MOUTH & NECK
                  DIAGNOSES*.
483............  TRACH W MECH VENT 96+      3.2319       54.6       45.5
                  HRS OR PDX EXCEPT
                  FACE, MOUTH & NECK
                  DIAG.
484............  CRANIOTOMY FOR             1.8783       46.3       38.5
                  MULTIPLE SIGNIFICANT
                  TRAUMA*.
485............  LIMB REATTACHMENT, HIP     1.8783       46.3       38.5
                  AND FEMUR PROC FOR
                  MULTIPLE SIGNIFICANT
                  TR*.
486............  OTHER O.R. PROCEDURES      0.8284       23.3       19.4
                  FOR MULTIPLE
                  SIGNIFICANT TRAUMA
                  \3\.
487............  OTHER MULTIPLE             1.0885       29.5       24.5
                  SIGNIFICANT TRAUMA.
488............  HIV W EXTENSIVE O.R.       1.8783       46.3       38.5
                  PROCEDURE \5\.
489............  HIV W MAJOR RELATED        0.8846       22.9       19.0
                  CONDITION.
490............  HIV W OR W/O OTHER         0.6952       20.4       17.0
                  RELATED CONDITION.
491............  MAJOR JOINT & LIMB         1.8783       46.3       38.5
                  REATTACHMENT
                  PROCEDURES OF UPPER
                  EXTREMITY*.
492............  CHEMOTHERAPY W ACUTE       0.8284       23.3       19.4
                  LEUKEMIA AS SECONDARY
                  DIAGNOSIS \3\.
493............  LAPAROSCOPIC               0.8284       23.3       19.4
                  CHOLECYSTECTOMY W/O
                  C.D.E. W CC \3\.
494............  LAPAROSCOPIC               0.4055       16.8       14.0
                  CHOLECYSTECTOMY W/O
                  C.D.E. W/O CC \1\.
495............  LUNG TRANSPLANT \6\...     0.0000        0.0        0.0
496............  COMBINED ANTERIOR/         1.2493       31.3       26.0
                  POSTERIOR SPINAL
                  FUSION*.
497............  SPINAL FUSION W CC \5\     1.8783       46.3       38.5
498............  SPINAL FUSION W/O CC       0.8284       23.3       19.4
                  \3\.
499............  BACK & NECK PROCEDURES     1.8783       46.3       38.5
                  EXCEPT SPINAL FUSION
                  W CC \5\.
500............  BACK & NECK PROCEDURES     0.8284       23.3       19.4
                  EXCEPT SPINAL FUSION
                  W/O CC*.
501............  KNEE PROCEDURES W PDX      1.8783       46.3       38.5
                  OF INFECTION W CC \5\.
502............  KNEE PROCEDURES W PDX      0.8284       23.3       19.4
                  OF INFECTION W/O CC*.
503............  KNEE PROCEDURES W/O        1.8783       46.3       38.5
                  PDX OF INFECTION \5\.
504............  EXTENSIVE 3RD DEGREE       1.8783       46.3       38.5
                  BURNS W SKIN GRAFT*.
505............  EXTENSIVE 3RD DEGREE       1.2493       31.3       26.0
                  BURNS W/O SKIN GRAFT
                  \4\.
506............  FULL THICKNESS BURN W      1.8783       46.3       38.5
                  SKIN GRAFT OR INHAL
                  INJ W CC OR SIG
                  TRAUMA \5\.
507............  FULL THICKNESS BURN W      0.8284       23.3       19.4
                  SKIN GRFT OR INHAL
                  INJ W/O CC OR SIG
                  TRAUMA*.
508............  FULL THICKNESS BURN W/     0.8284       23.3       19.4
                  O SKIN GRFT OR INHAL
                  INJ W CC OR SIG
                  TRAUMA \3\.
509............  FULL THICKNESS BURN W/     0.8284       23.3       19.4
                  O SKIN GRFT OR INH
                  INJ W/O CC OR SIG
                  TRAUMA \3\.
510............  NON-EXTENSIVE BURNS W      1.0734       32.2       26.8
                  CC OR SIGNIFICANT
                  TRAUMA.
511............  NON-EXTENSIVE BURNS W/     0.8284       23.3       19.4
                  O CC OR SIGNIFICANT
                  TRAUMA \3\.
512............  SIMULTANEOUS PANCREAS/     0.0000        0.0        0.0
                  KIDNEY TRANSPLANT \6\.
513............  PANCREAS TRANSPLANT        0.0000        0.0        0.0
                  \6\.
514............  CARDIAC DEFIBRILATOR       0.8284       23.3       19.4
                  IMPLANT W CARDIAC
                  CATH*.
515............  CARDIAC DEFIBRILATOR       1.2493       31.3       26.0
                  IMPLANT W/O CARDIAC
                  CATH \4\.
516............  PERCUTANEOUS               0.8284       23.3       19.4
                  CARDIVASCULAR
                  PROCEDURE W AMI*.
517............  PERCUTANEOUS               1.8783       46.3       38.5
                  CARDIVASCULAR PROC W
                  NON-DRUG ELUTING
                  STENT W/O AMI \5\.
518............  PERCUTANEOUS               1.2493       31.3       26.0
                  CARDIVASCULAR PROC W/
                  O CORONARY ARTERY
                  STENT OR AMI \4\.
519............  CERVICAL SPINAL FUSION     0.8284       23.3       19.4
                  W CC \3\.
520............  CERVICAL SPINAL FUSION     0.6655       21.9       18.2
                  W/O CC \2\.
521............  ALCOHOL/DRUG ABUSE OR      0.3755       18.6       15.5
                  DEPENDENCE W CC.
522............  ALCOHOL/DRUG ABUSE OR      0.4055       16.8       14.0
                  DEPENDENCE W
                  REHABILITATION
                  THERAPY W/O CC \1\.
523............  ALCOHOL/DRUG ABUSE OR      0.3860       21.2       17.6
                  DEPENDENCE W/O
                  REHABILITATION
                  THERAPY W/O CC.
524............  TRANSIENT ISCHEMIA....     0.6250       23.1       19.2
525............  HEART ASSIST SYSTEM        1.8783       46.3       38.5
                  IMPLANT*.
526............  PERCUTANEOUS               0.8284       23.3       19.4
                  CARVIOVASCULAR PROC W
                  DRUG-ELUTING STENT W
                  AMI*.
527............  PERCUTANEOUS               0.8284       23.3      19.4
                  CARVIOVASCULAR PROC W
                  DRUG-ELUTING STENT W/
                  O AMI*.
------------------------------------------------------------------------
* Relative weights for these LTC-DRGs were determined by assigning these
  cases to the appropriate low volume quintile because they had no LTCH
  cases in the FY 2001 MedPAR.
\1\ Relative weights for these LTC-DRGs were determined by assigning
  these cases to low volume quintile 1.
\2\ Relative weights for these LTC-DRGs were determined by assigning
  these cases to low volume quintile 2.
\3\ Relative weights for these LTC-DRGs were determined by assigning
  these cases to low volume quintile 3.
\4\ Relative weights for these LTC-DRGs were determined by assigning
  these cases to low volume quintile 4.
\5\ Relative weights for these LTC-DRGs were determined by assigning
  these cases to low volume quintile 5.
\6\ Relative weights for these LTC-DRGs were assigned a value of 0.0.
\7\ Relative weights for these LTC-DRGs were determined after adjusting
  to account for nonmonotonically (see step 5 above).

[FR Doc. 03-5206 Filed 3-3-03; 10:29 am]
BILLING CODE 4120-01-P