[Federal Register Volume 68, Number 95 (Friday, May 16, 2003)]
[Proposed Rules]
[Pages 26786-26837]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-11829]



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Part IV





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; Inpatient Rehabilitation Facility Prospective Payment 
System for FY 2004; Proposed Rule

  Federal Register / Vol. 68, No. 95 / Friday, May 16, 2003 / Proposed 
Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1474-P]
RIN 0938-AL95


Medicare Program; Inpatient Rehabilitation Facility Prospective 
Payment System for FY 2004

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule updates the prospective payment rates for 
inpatient rehabilitation facilities (IRFs) for Federal fiscal year 2004 
as required under section 1886(j)(3)(C) of the Social Security Act (the 
Act). Section 1886(j)(5) of the Act requires the Secretary of Health 
and Human Services (the Secretary) to publish in the Federal Register 
on or before August 1 before each fiscal year, the classification and 
weighting factors for the IRF case-mix groups and a description of the 
methodology and data used in computing the prospective payment rates 
for that fiscal year. In addition, in this proposed rule, we are 
proposing new policies, and changing or clarifying existing policies 
regarding the prospective payment system (PPS) within the authority 
granted under sections 1886(j) and 1886(d) of the Act.

DATES: We will consider comments if we receive them at the appropriate 
addresses, as provided below, no later than 5 p.m. on July 7, 2003.

ADDRESSES: In commenting, please refer to file code CMS-1474-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission or e-mail.
    Mail written comments (one original and two copies) to the 
following address only: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1474-P, P.O. 
Box 8010, Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be timely 
received in the event of delivery delays. If you prefer, you may 
deliver (by hand or courier) your written comments (one original and 
two copies) to one of the following addresses: Room 445-G, Hubert H. 
Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201, 
or Room C5-14-03, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    (Because access to the interior of the HHH 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 persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.) Comments 
mailed to the addresses indicated as appropriate for hand or courier 
delivery may be delayed and could be considered late.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Robert Kuhl, (410) 786-4597, Pete Diaz 
(410) 786-1235 or Nora Hoban, (410) 786-0675.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: Comments 
received timely will be available for public inspection as they are 
received, generally beginning approximately 3 weeks after publication 
of a document, at the headquarters of the Centers for Medicare & 
Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, 
Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule 
an appointment to view public comments, phone (410) 786-9994.
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Table of Contents

I. Background
    A. Requirements for Updating the Prospective Payment Rates for 
Inpatient Rehabilitation Facilities (IRFs)
    B. General Overview of the Current IRF PPS
    C. Operational Overview of the Current IRF PPS
    D. Proposals for FY 2004
II. Requirements and Conditions for Payment Under the IRF PPS
    A. Background of Subpart B Provisions
    B. Regulatory Background of the 75 Percent Rule
    C. CMS Evaluation of the 75 Percent Rule
III. Research to Support Case-Mix Refinements to the IRF PPS
    A. Research on IRFs
    B. RAND Research Background
    C. Data for Continuing Research
    D. Staff Time Measurement Data
    E. Monitoring
    F. Need to Develop Quality Indicators for IRFs
IV. The IRF PPS Patient Assessment Process
    A. Background
    B. Patient Rights
    C. When the IRF-PAI Must Be Completed
    D. Transmission of IRF-PAI Data
    E. Proposed Revision of the Definition of Discharge
    F. Waiver of the Penalty for Transmitting the IRF-PAI Data Late
    G. General Information Regarding the IRF-PAI Assessment Process
V. Patient Classification System for the IRF PPS
VI. Proposed Fiscal Year 2004 Federal Prospective Payment Rates
    A. Expiration of the IRF PPS Transition Period
    B. Description of the Proposed IRF Standardized Payment Amount
    C. Proposed Adjustments to Determine the Proposed FY 2004 
Standard Payment Conversion Factor
    1. IRF Market Basket Index
    2. Proposed Area Wage Adjustment
    3. Updated Wage Data
    4. Proposed Updated Labor-Related Share
    5. Proposed Budget Neutral Wage Adjustment Update Methodology
    D. Proposed Update of Payment Rates Under the IRF PPS for FY 
2004
    E. Examples of Computing the Total Proposed Adjusted IRF 
Prospective Payments
    F. Computing Total Payments Under the IRF PPS for the Transition 
Period
    G. IRF-specific Wage Data
    H. Proposed Adjustment for High-Cost Outliers under the IRF 
Prospective Payment System
    1. Current Outlier Payment Provision under the IRF PPS
    2. Proposed Changes to the IRF Outlier Payment Methodology
    3. Proposed Adjustment to IRF Outlier Payments
    4. Proposed Change to the Methodology for Calculating the 
Federal Prospective Payment Rates
VII. Provisions of the Proposed Rule
VIII. Collection of Information Requirements
IX. Responses to Comments
X. Regulatory Impact Analysis Regulations Text

Addendum--Tables

1--Proposed Relative Weights for Case-Mix Groups (CMGs)

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2--Proposed Fiscal Year 2004 Federal Prospective Payments for Case-
Mix Groups (CMGs)
3A--Proposed Urban Wage Index
3B--Proposed Rural Wage Index
4--Acceptable Impairment Group Codes
5--Acceptable ICD-9-CM Codes

Addendum--Charts

1--Estimates on Compliance With the 75 Percent Rule (2002 Data)
2--Example of Applying The Patient Assessment Instrument Discharge 
Assessment and Transmission Dates
3--Excluded Hospital With Capital Input Price Index (FY 1992 and 
Proposed FY 1997) Structure and Weights
4--Proposed Excluded Hospital with Capital Input Price Index (FY 
1997) Vintage Weights
5--Percent Changes in the 1992-based and proposed 1997-based 
Excluded Hospital with Capital Market Baskets, FY 1999-2004
6--Proposed FY 2004 Labor-Related Share Relative Importance
7--Examples of Computing an IRF's Proposed Federal Prospective 
Payment
8--Projected Impact of Proposed FY 2004 Update

Appendix

Appendix A--Methodology to Determine Compliance With the 75 Percent 
Rule
Appendix B--Inpatient Rehabilitation Facility Patient Privacy Forms 
Privacy Act Statement--Health Care Records, Data Collection 
Information Summary for Patients in Inpatient Rehabilitation 
Facilities

I. Background

A. Requirements for Updating the Prospective Payment Rates for 
Inpatient Rehabilitation Facilities (IRFs)

    On August 7, 2001, we published a final rule entitled ``Medicare 
Program; Prospective Payment System for Inpatient Rehabilitation 
Facilities (CMS-1069-F)'' in the Federal Register (66 FR 41316), that 
established a PPS for IRFs as authorized under section 1886(j) of the 
Act and codified at subpart P of part 412 of the Medicare regulations. 
In the August 7, 2001 final rule, we set forth per discharge Federal 
prospective payment rates for fiscal year (FY) 2002 that provided 
payment for inpatient operating and capital costs of furnishing covered 
rehabilitation services (that is, routine, ancillary, and capital 
costs) but not costs of approved educational activities, bad debts, and 
other services or items that are outside the scope of the IRF PPS. The 
provisions of that final rule were effective for cost reporting periods 
beginning on or after January 1, 2002. (On July 1, 2002, we also 
published a correcting amendment to the final rule (CMS-1069-F2) in the 
Federal Register (67 FR 44073). Any reference to the August 7, 2001 
final rule in this proposed rule includes the provisions effective in 
the correcting amendment.)
    Section 1886(j)(5) of the Act and Sec.  412.628 of the regulations 
require the Secretary to publish in the Federal Register, on or before 
August 1 of the preceding fiscal year, the classifications and 
weighting factors for the IRF case-mix groups (CMGs) and a description 
of the methodology and data used in computing the prospective payment 
rates for the upcoming fiscal year. On August 1, 2002, we published a 
notice in the Federal Register (67 FR 49928) to update the IRF Federal 
prospective payment rates from FY 2002 to FY 2003 using the methodology 
described in Sec.  412.624 of the regulations. As stated in that 
notice, we used the same classifications and weighting factors for the 
IRF CMGs that were set forth in the August 7, 2001 final rule to update 
the IRF Federal prospective payment rates from FY 2002 to FY 2003. The 
FY 2003 Federal prospective payment rates are effective for discharges 
on or after October 1, 2002 and before October 1, 2003.
    In this proposed rule, we are proposing to update the IRF Federal 
prospective payment rates from FY 2003 to FY 2004 using the methodology 
described in Sec.  412.624 of the regulations. See section VI of this 
proposed rule for further discussion of the proposed FY 2004 Federal 
prospective payment rates. The proposed FY 2004 Federal prospective 
payment rates will be effective for discharges on or after October 1, 
2003 and before October 1, 2004.

B. General Overview of the Current IRF PPS

    Section 4421 of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-
33), as amended by section 125 of the Medicare, Medicaid, and SCHIP 
Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113), and by 
section 305 of the Medicare, Medicaid, and SCHIP Benefits Improvement 
and Protection Act of 2000 (BIPA) (Pub. L. 106-554), provides for the 
implementation of a per discharge PPS, through new section 1886(j) of 
the Act, for inpatient rehabilitation hospitals and inpatient 
rehabilitation units of a hospital (IRFs). Payments under the IRF PPS 
encompass inpatient operating and capital costs of furnishing covered 
rehabilitation services (that is, routine, ancillary, and capital 
costs) but not costs of approved educational activities, bad debts, and 
other services or items outside the scope of the IRF PPS. Although a 
complete discussion of the IRF PPS provisions appears in the August 7, 
2001 final rule (66 FR 41316), we provide below a general description 
of the IRF PPS.
    The IRF PPS, as described in the August 7, 2001 final rule, uses 
Federal prospective payment rates across 100 distinct CMGs. Ninety-five 
CMGs were constructed using rehabilitation impairment categories, 
functional status (both motor and cognitive), and age (in some cases, 
cognitive status and age may not be a factor in defining a CMG). Five 
special CMGs were constructed to account for very short stays and for 
patients who expire in the IRF.
    For each of the CMGs, we developed relative weighting factors to 
account for a patient's clinical characteristics and expected resource 
needs. Thus, the weighting factors account for the relative difference 
in resource use across all CMGs. Within each CMG, the weighting factors 
were ``tiered'' based on the estimated effect that the existence of 
certain comorbidities have on resource use.
    The Federal PPS rates were established using a standardized payment 
amount (also referred to as the budget neutral conversion factor in the 
August 7, 2001 final rule (66 FR 41364 through 41367)). For each of the 
tiers within a CMG, the relative weighting factors were applied to the 
budget neutral conversion factor to compute the unadjusted Federal 
prospective payment rates. Adjustments that account for geographic 
variations in wages (wage index), the percentage of low-income patients 
(LIPs), and location in a rural area would be applied to the IRF's 
unadjusted Federal prospective payment rates. In addition, adjustments 
would be made to account for the early transfer of a patient, 
interrupted stays, and high cost outliers.
    Lastly, the IRF's final prospective payment amount would be 
determined under the transition methodology prescribed in section 
1886(j) of the Act. Specifically, for cost reporting periods that began 
on or after January 1, 2002 and before October 1, 2002, section 
1886(j)(1) of the Act and Sec.  412.626 of the regulations provide that 
IRFs transition into the prospective payment systems receiving a 
``blended payment.'' For cost reporting periods that began on or after 
January 1, 2002 and before October 1, 2002, these blended payments 
consisted of 66\2/3\ percent of the Federal IRF PPS rate and 33\1/3\ 
percent of the payment that the IRF would have been paid had the IRF 
PPS not been implemented. However, during the transition period, an IRF 
with a cost reporting period beginning on or after January 1, 2002 and 
before October 1, 2002 could have elected to bypass this blended 
payment

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and be paid 100 percent of the Federal IRF PPS rate. For cost reporting 
periods beginning on or after October 1, 2002 (FY 2003), however, the 
transition methodology expired, and payments for all IRFs consist of 
100 percent of the Federal IRF PPS.
    We established a CMS website that contains useful information 
regarding the IRF PPS. The website URL is www.cms.hhs.gov/providers/irfpps/default.asp and may be accessed to download or view 
publications, software, and other information pertinent to the IRF PPS.

C. Operational Overview of the Current IRF PPS

    As described in the August 7, 2001 final rule, upon the admission 
and discharge of a Medicare Part A fee-for-service patient, the IRF is 
required to complete the appropriate sections of a patient assessment 
instrument, the Inpatient Rehabilitation Facility--Patient Assessment 
Instrument (IRF-PAI). All required data must be electronically encoded 
into the IRF's PAI software product. Generally, the software product 
includes patient grouping programming called the GROUPER software. The 
GROUPER software uses specific PAI data elements to classify (or group) 
the patient into a distinct CMG and account for the existence of any 
relevant comorbidities. The GROUPER software produces a 5-digit CMG 
number. The first digit is an alpha-character that indicates the 
comorbidity tier. The last 4 digits represent the distinct CMG number. 
(Free downloads of the Inpatient Rehabilitation Validation and Entry 
(IRVEN) software product, including the GROUPER software, are available 
at the CMS website at www.cms.hhs.gov/providers/irfpps/default.asp).
    Once the patient is discharged, the IRF completes the Medicare 
claim (UB-92 or its equivalent) using the 5-digit CMG number and sends 
it to the appropriate Medicare fiscal intermediary (FI). (Claims 
submitted to Medicare must comply with the electronic claim 
requirements contained at www.cms.hhs.gov/providers/edi/default.asp, as 
reported in the Health Insurance Portability and Accountability Act 
(HIPAA) program claim memoranda issued by CMS and also published at 
that web site, and as listed in the addenda to the Medicare 
Intermediary Manual, Part 3, section 3600. Instructions for the limited 
number of claims submitted to Medicare on paper are located in section 
3604 of Part 3 of the Medicare Intermediary Manual.) The Medicare FI 
processes the claim through its software system. This software system 
includes pricing programming called the PRICER software. The PRICER 
software uses the CMG number, along with other specific claim data 
elements and provider-specific data, to adjust the IRF's prospective 
payment for interrupted stays, transfers, short stays, and deaths and 
then applies the applicable adjustments to account for the IRF's wage 
index, percentage of LIPs, rural location, and outlier payments.

D. Proposals for FY 2004

    In this proposed rule, we are proposing to update the data used to 
compute the IRF wage indices. In the August 7, 2001 final rule, we used 
FY 1997 acute care hospital wage data to compute the IRF wage indices 
for FY 2002. The August 1, 2002 notice that set forth the updated FY 
2003 IRF Federal prospective payment rates also used 1997 acute care 
hospital wage data to compute the FY 2003 IRF wage indices.
    In this proposed rule, we are proposing to update the IRF wage 
indices for FY 2004 by using FY 1999 acute care hospital data. We 
believe that the FY 1999 acute care hospital data are the best 
available because they are currently the most recent complete final 
data. However, any adjustments or updates made under section 1886(j)(6) 
of the Act must be made in a budget neutral manner. Therefore, in 
section VI of this proposed rule, we are proposing a methodology to 
update the wage indices for FY 2004 using 1999 acute care hospital data 
in a budget neutral manner.
    In this proposed rule, we are also proposing to update the 
underlying data used to compute the IRF market basket index. As 
explained in Appendix D of the August 7, 2001 final rule, we used 1992 
cost report data as the underlying data to develop the excluded 
hospital with capital market basket that formed the basis of the FY 
2002 and FY 2003 IRF market basket index. In section VI of this 
proposed rule, we are proposing to use 1997 cost report data, the most 
recent data available, to form the basis of the FY 2004 IRF market 
basket index.
    In section II of this proposed rule, we are proposing to modify or 
clarify certain criteria for a hospital or a hospital unit to be 
classified as an IRF. As stated in the August 7, 2001 final rule, we 
did not change the survey and certification procedures applicable to 
entities seeking classification as an IRF. Currently, to be paid under 
the IRF PPS, a hospital or unit of a hospital must first be deemed to 
be excluded from the diagnosis-related group (DRG)-based acute care 
hospital PPS under the general requirements in subpart B of part 412 of 
the regulations. Second, the excluded hospital or unit must meet the 
conditions for payment under the IRF PPS at Sec.  412.604 of the 
regulations.
    Lastly, we are proposing, in various sections of this proposed 
rule, to modify or clarify existing provisions of the IRF PPS. However, 
we are not proposing refinements to the FY 2002 case-mix classification 
system (the CMGs and the corresponding relative weights) and the case-
level and facility-level adjustments, due to the lack of available data 
to make such changes.

II. Requirements and Conditions for Payment Under the IRF PPS

    As issued in the August 7, 2001 final rule, Sec.  412.604 
``Conditions for payment under the prospective payment system for 
inpatient rehabilitation facilities'' describes the conditions that 
must be met for an IRF to be paid under the IRF PPS. Section 412.604(a) 
states the general requirements for payment to be made under the IRF 
PPS and the effects on Medicare payment if the conditions described 
therein are not met. Section 412.604(b) states the existing regulatory 
provisions that must be met for a hospital or unit of a hospital to be 
excluded from the acute care inpatient hospital PPS and to be 
classified as an IRF. Section 412.604(c) requires an IRF to complete a 
patient assessment instrument for each Medicare Part A fee-for-service 
patient admitted. Section 412.604(d) describes the limitations on IRFs 
for charging beneficiaries that receive Medicare covered services. 
Section 412.604(e) describes the requirements associated with 
furnishing inpatient hospital services directly or under arrangement. 
Section 412.604(f) states the reporting and recordkeeping requirements 
that IRFs must meet.
    In this section of the proposed rule, we describe proposed changes, 
if any, to the conditions or underlying requirements of Sec.  412.604.

Section 412.604(a) General Requirements

    Under paragraph (a)(2), we propose to change the word ``we'' to 
``CMS or its Medicare fiscal intermediary'' to read as follows:
    ``If an inpatient rehabilitation facility fails to comply fully 
with these conditions with respect to inpatient hospital services 
furnished to one or more Medicare Part A fee-for-service beneficiaries, 
CMS or its Medicare fiscal intermediary may, as appropriate--
    (i) Withhold (in full or in part) or reduce Medicare payment to the 
inpatient rehabilitation facility until the facility provides adequate 
assurances of compliance; or

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    (ii) Classify the inpatient rehabilitation facility as an inpatient 
hospital that is subject to the conditions of subpart C of this part 
and is paid under the prospective payment systems specified in Sec.  
412.1(a)(1).''

Section 412.604(b) Inpatient Rehabilitation Facilities Subject to the 
Prospective Payment System

    Section 412.604(b) states that, ``subject to the special payment 
provisions of Sec.  412.22(c), an inpatient rehabilitation facility 
must meet the general criteria set forth in Sec.  412.22 and the 
criteria to be classified as a rehabilitation hospital or 
rehabilitation unit set forth in Sec.  412.23(b), Sec.  412.25, and 
Sec.  412.29 for exclusion from the inpatient hospital prospective 
payment systems specified in Sec.  412.1(a)(1).'' The general criteria 
set forth in Sec.  412.22 and the criteria to be classified as a 
rehabilitation hospital or rehabilitation unit set forth in Sec.  
412.23(b), Sec.  412.25, and Sec.  412.29 are under subpart B of part 
412 of the regulations. In the August 7, 2001 final rule implementing 
the IRF PPS, we did not make any changes to the exclusion criteria and 
requirements to be classified as an IRF under subpart B of part 412. 
Since the implementation of the IRF PPS, a number of questions have 
been raised on the application of some of these requirements and the 
necessity of other criteria. Below, we will discuss each requirement as 
it relates to the classification of an IRF.

A. Background of Subpart B Provisions

    Section 601 of the Social Security Amendments of 1983 (Pub. L. 98-
21) added section 1886 to the Act that established a PPS for acute care 
inpatient hospital services for cost reporting periods beginning on or 
after October 1, 1983. Under section 1886(d)(1)(B) of the Act, several 
types of hospitals and units of hospitals are excluded from the 
inpatient hospital PPS. Sections 1886(d)(1)(B)(ii) and 1886(d)(1)(B) of 
the Act specify that rehabilitation hospitals and rehabilitation units 
of hospitals (as defined by the Secretary) are excluded from the 
inpatient PPS.
    Extensive discussion and public comments on developing the criteria 
under which a hospital or unit of a hospital can be excluded from the 
inpatient PPS as an IRF began with the September 1, 1983 publication of 
the interim final rule with comment period in the Federal Register (48 
FR 39752). (That interim final rule discussed the provisions necessary 
to implement section 1886 of the Act.) On January 3, 1984, we published 
a final rule (49 FR 234) that responded to public comments on the 
provisions of the September 1, 1983 interim final rule and established 
the initial set of criteria that must be met by a hospital or unit of a 
hospital seeking exclusion from the inpatient hospital PPS as an IRF. 
Since the publication of these earlier rules, the criteria to be an IRF 
have been revised and codified at subpart B of part 412 of the current 
Medicare regulations.

Section 412.20 Hospital Services Subject to the Prospective Payment 
Systems

    In the August 7, 2001 final rule, we added Sec.  412.20(b) stating 
that covered inpatient hospital services furnished to Medicare 
beneficiaries by a rehabilitation hospital or rehabilitation unit that 
meet the conditions of Sec.  412.604 are paid under the PPS described 
in subpart P of this part.
    In this proposed rule, we are proposing to redesignate current 
Sec.  412.20(b) as paragraph (b)(1) of Sec.  412.20 and add paragraph 
(b)(2) to ensure that inpatient hospital services will not be paid 
under the IRF PPS if the services are paid by a health maintenance 
organization (HMO) or competitive medical plan (CMP) that elects not to 
have CMS make payments to an IRF for services, which are inpatient 
hospital services, furnished to the HMO's or CMP's Medicare enrollees 
under part 417 of this chapter. This proposed provision is similar to 
the provision at Sec.  412.20(b)(3) that prohibits payments under the 
acute care hospital PPS for similar HMO or CMP services.

Section 412.22 Excluded Hospitals and Hospital Units: General Rules

    Section 412.22(h) describes the requirements to be a satellite 
facility that is excluded from the acute care hospital PPS. The 
following describes our proposal to eliminate the provision that limits 
the bed size of a satellite IRF.
    In the July 30, 1999 Federal Register (64 FR 41540), we revised 
Sec.  412.22(h) to require that in order to be excluded from the acute 
care hospital inpatient PPS, a satellite of a hospital: (1) Effective 
for cost reporting periods beginning on or after October 1, 2002, is 
not under the control of the governing body or chief executive officer 
of the hospital in which it is located, and furnishes inpatient care 
through the use of medical personnel who are not under the control of 
the medical staff or chief medical officer of the hospital in which it 
is located; (2) must maintain admission and discharge records that are 
separately identified from those of the hospital in which it is located 
and are readily available; (3) cannot commingle beds with beds of the 
hospital in which it is located; (4) must be serviced by the same FI as 
the hospital of which it is a part; (5) must be treated as a separate 
cost center of the hospital of which it is a part; (6) for cost 
reporting and apportionment purposes, must use an accounting system 
that properly allocates costs and maintains adequate data to support 
the basis of allocation; and (7) must report costs in the cost report 
of the hospital of which it is a part, covering the same fiscal period 
and using the same method of apportionment as the hospital of which it 
is a part. In addition, the satellite facility must independently 
comply with the qualifying criteria for exclusion from the acute care 
hospital inpatient PPS. Lastly, the total number of State-licensed and 
Medicare-certified beds (including those of the satellite facility) for 
a hospital (other than a children's hospital) that was excluded from 
the acute care hospital inpatient PPS for the most recent cost 
reporting period beginning before October 1, 1997, may not exceed the 
hospital's number of beds on the last day of that cost reporting 
period.
    In Sec.  412.22(h)(1), we define a satellite as ``a part of a 
hospital that provides inpatient services in a building also used by 
another hospital, or in one or more entire buildings located on the 
same campus as buildings used by another hospital.'' Satellite 
arrangements exist when an existing hospital that is excluded from the 
acute care hospital inpatient PPS and that is either a freestanding 
hospital or a hospital-within-a-hospital under Sec.  412.22(e) shares 
space in a building or on a campus occupied by another hospital in 
order to establish an additional location for the excluded hospital. 
The July 30, 1999 acute care hospital inpatient PPS final rule (64 FR 
41532-41534) includes a detailed discussion of our policies regarding 
Medicare payments for satellite facilities of hospitals excluded from 
the acute care hospital inpatient PPS.
    In accordance with section 1886(b) of the Act, as amended by 
sections 4414 and 4416 of Pub. L. 105-33, we established two different 
target limits on payments to excluded hospitals, depending upon when 
the IRF was established. The target amount limit for an IRF with a cost 
reporting period beginning before October 1, 1997 was set at the 75th 
percentile of the target amounts of IRFs, as specified in Sec.  
413.40(c)(4)(iii), updated to the applicable cost reporting period. For 
IRFs with a cost reporting period beginning on or after October 1, 
1997, under section 4416 of Pub. L. 105-33, the payment amount for the 
hospital's

[[Page 26790]]

first two 12-month cost reporting periods, as specified at Sec.  
413.40(f)(2)(ii)(A) and (B), could not exceed 110 percent of the 
national median of target amounts of IRFs 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 IRF receives 
payment.
    Because we were concerned that a number of pre-1997 excluded 
hospitals (including IRFs), governed by Sec.  413.40(c)(4)(iii), would 
seek to create satellite arrangements in order to avoid the effect of 
the lower payment caps that would apply to new hospitals under Sec.  
413.40(f)(2)(ii), we established rules regarding the exclusion of and 
payments to satellites of existing facilities. If the number of beds in 
the hospital or unit (including both the base hospital or unit and the 
satellite location) exceeds the number of State-licensed and Medicare-
certified beds in the hospital or unit on the last day of the 
hospital's or unit's last cost reporting period beginning before 
October 1, 1997, the facility would be paid under the acute care 
hospital inpatient DRG system. Therefore, while an excluded hospital or 
unit could ``transfer'' bed capacity from a base facility to a 
satellite, if it increased total bed capacity beyond the level it had 
in the most recent cost reporting period before October 1, 1997 (see 64 
FR 41532-41533, July 30, 1999), the hospital will not be paid as a 
hospital excluded from the acute care hospital inpatient PPS. However, 
no similar limitation was imposed with respect to the number of total 
beds in excluded hospitals and units and satellite facilities of those 
excluded hospitals and units established after October 1, 1997, since 
those excluded hospitals and units were subject to the lower payment 
limits of section 4416 of Pub. L. 105-33, and would, therefore, not 
benefit from the higher payment cap on target amounts under Sec.  
413.40(c)(4) by creating a satellite facility.
    On March 22, 2002, we published a proposed rule in the Federal 
Register (67 FR 13416) that set forth the proposed Medicare PPS for 
long-term care hospitals (LTCHs). Discussion of the comments received 
on that LTCH proposed rule and our responses were published in a final 
rule on August 30, 2002 Federal Register (67 FR 55954). Specific 
comments received were discussed on page 56013 of the LTCH final rule 
that urged us to eliminate the bed-number criteria in Sec.  
412.22(h)(2)(i) for pre-1997 IRFs since the applicable PPS is fully 
phased in. The rationale for the bed-number criteria provision at Sec.  
412.22(h)(2)(i) was the potential for circumventing the PPS by creating 
a satellite location that could have their payment based on a higher 
TEFRA target amount cap. However, once an IRF's payment under the IRF 
PPS does not include a TEFRA-based payment (referred to as the 
facility-specific payment under the transition period described in 
Sec.  412.626) and is based on 100 percent of the Federal prospective 
payment rate, we believe that the need for the bed-number criteria does 
not exist because IRF prospective payments will be the same regardless 
of when the IRF was established. Because all IRFs will be paid 100 
percent of the proposed FY 2004 Federal prospective payment rates, we 
are proposing to eliminate the bed-number criteria by amending Sec.  
412.22(h) for freestanding satellite IRFs. We are also proposing to 
eliminate the bed-number criteria for IRF satellite units of a hospital 
by amending Sec.  412.25(e) to conform with the proposed change in 
Sec.  412.22(h).

Section 412.23 Excluded Hospitals: Classifications

Classification as an IRF--``The 75 Percent Rule''
    Under the Sec.  412.23(b)(2) of the regulations, a facility may be 
classified as an IRF if it can show that during its most recent 12-
month cost reporting period it served an inpatient population of whom 
at least 75 percent required intensive rehabilitation services for the 
treatment of one or more of the following conditions:
    1. Stroke.
    2. Spinal cord injury.
    3. Congenital deformity.
    4. Amputation.
    5. Major multiple trauma.
    6. Fracture of femur (hip fracture).
    7. Brain injury.
    8. Polyarthritis, including rheumatoid arthritis.
    9. Neurological disorders, including multiple sclerosis, motor 
neuron diseases, polyneuropathy, muscular dystrophy, and Parkinson's 
disease.
    10. Burns.
    Under Sec.  412.604(b), the requirement at Sec.  412.23(b)(2) must 
be met as one of the conditions for payment under the IRF PPS. However, 
even before the implementation of the IRF PPS, the rehabilitation 
industry expressed an interest in having CMS re-examine the regulatory 
criteria used to determine the classification of a unit or hospital as 
an IRF. Recently this interest has focused on the regulatory 
requirement at Sec.  412.23(b)(2) commonly known as the ``75 Percent 
Rule.''

B. Regulatory Background of the 75 Percent Rule

    We initially stipulated the ``75 percent'' requirement in the 
September 1, 1983, interim final rule with comment period entitled 
``Medicare Program; Prospective Payments for Medicare Inpatient 
Hospital Services'' (48 FR 39752). That rule implemented the Social 
Security Amendments of 1983 (Pub. L. 98-21), changing the method of 
payment for inpatient hospital services from a cost-based, 
retrospective reimbursement system to a diagnosis specific PPS. 
However, the rule stipulated that in accordance with sections 
1886(d)(1)(B) and 1886(d)(1)(B)(ii) of the Act both a rehabilitation 
unit, which is a distinct part of a hospital, and a rehabilitation 
hospital were excluded from the inpatient hospital PPS. We noted that 
sections 1886(d)(1)(B) and 1886(d)(1)(B)(ii) of the Act also gave the 
Secretary discretion in defining what is a ``rehabilitation unit'' and 
a ``rehabilitation hospital.''
    In order to define a rehabilitation hospital we consulted with the 
Joint Commission on Accreditation of Hospitals (JCAH), and other 
accrediting organizations. (JCAH is currently known as the Joint 
Commission on Accreditation of Hospital Organizations.) The criteria we 
included in our definition of a rehabilitation hospital incorporated 
some of the accreditation requirements of these organizations. The 
definition also included other criteria, which we believed 
distinguished a rehabilitation hospital from a hospital that furnished 
general medical and surgical services as well as some rehabilitation 
services. One criterion was that ``The hospital must be primarily 
engaged in furnishing intensive rehabilitation services as demonstrated 
by patient medical records showing that, during the hospital's most 
recently completed 12-month cost reporting period, at least 75 percent 
of the hospital's inpatients were treated for one or more conditions 
specified in these regulations that typically require intensive 
inpatient rehabilitation.'' (48 FR 39756) This requirement was 
originally specified in Sec.  405.471(c)(2)(ii) of the regulations. We 
included this requirement, as a defining feature of a rehabilitation 
hospital, because we believed ``that examining the types of conditions 
for which a hospital's inpatients are treated, and the proportion of 
patients treated for conditions that typically require intensive 
inpatient rehabilitation, will help distinguish those hospitals in 
which the provisions of rehabilitation

[[Page 26791]]

services is a primary, rather than a secondary, goal.'' (48 FR 39756) 
Using a similar line of reasoning, we made compliance with the 75 
percent rule one of the characteristics that defined a rehabilitation 
unit.
    The original medical conditions specified in Sec.  
405.471(c)(2)(ii) were stroke, spinal cord injury, congenital 
deformity, amputation, major multiple trauma, fracture of femur (hip 
fracture), brain injury, and polyarthritis, including rheumatoid 
arthritis. This list of 8 medical conditions was partly based upon the 
information contained in a document entitled ``Sample Screening 
Criteria for Review of Admissions to Comprehensive Medical 
Rehabilitation Hospitals/Units.'' This document was a product of the 
Committee on Rehabilitation Criteria for PSRO of the American Academy 
of Physical Medicine and Rehabilitation and the American Congress of 
Rehabilitation Medicine. In addition, we received input from with the 
National Association of Rehabilitation Facilities, and the American 
Hospital Association.
    On January 3, 1984, we published a final rule entitled ``Medicare 
Program; Prospective Payment for Medicare Inpatient Hospital Services'' 
(49 FR 234). On page 240 of that final rule, we summarized comments 
that requested inclusion of neurological disorders, burns, chronic 
pain, pulmonary disorders, and cardiac disorders in the 75 percent 
rule's list of medical conditions. Our analysis of these comments led 
us to agree that neurological disorders (including multiple sclerosis, 
motor neuron diseases, polyneuropathy, muscular dystrophy, and 
Parkinson's disease) and burns should be added to the 75 percent rule's 
original list of 8 medical conditions. (49 FR 240) We did not agree 
with comments that we lower from 75 to 60 the percentage of patients 
that must meet one of the medical conditions. Nor did we agree with 
comments urging us to use IRF resource consumption, instead of a 
percentage of patients that must have one or more of the specified 
medical conditions, to help define what is an IRF. (49 FR 239-240) We 
also rejected suggestions, which proposed that when an IRF could not 
meet the 75 percent rule the facility could still be defined as an IRF 
based on the types of services it furnished.
    On August 31, 1984, we published a final rule entitled ``Medicare 
Program; Changes to the Inpatient Hospital Prospective Payment System 
and Fiscal Year 1985 Rates'' (49 FR 34728). In that rule we explained 
how the 75 percent rule applied to a new rehabilitation unit or 
rehabilitation hospital, or when a rehabilitation unit wanted to expand 
its size by adding beds.
    On March 29, 1985, we published a final rule entitled ``Medicare 
Program; Prospective Payment System for Hospital Inpatient Services; 
Redesignation of Rules'' (50 FR 12740). That rule redesignated 
provisions of Sec.  405.471 that addressed the 75 percent rule into 
Sec.  412.23.
    On August 30, 1991, we published a final rule entitled ``Medicare 
Program; Changes to the Inpatient Hospital Prospective Payment System 
and Fiscal Year 1992 Rates'' (56 FR 43196). Since October 1, 1983, the 
regulations allowed a new rehabilitation hospital or new rehabilitation 
unit, or an existing excluded rehabilitation unit which was to be 
expanded by the addition of new beds, to be excluded from the acute 
care PPS if, in addition to meeting other requirements, it submitted a 
written certification that during its first cost reporting period it 
would be in compliance with the 75 percent rule. The August 30, 1991, 
rule specified that if these facilities were later found to have not 
complied with the 75 percent rule CMS would determine the amount of 
actual payment under the exclusion, compute what we would have paid for 
the facility's services to Medicare patients under the acute care 
hospital PPS, and recover any difference in accordance with the rules 
on the recoupment of overpayments.
    On September 1, 1992, we published a final rule entitled ``Medicare 
Program; Changes to Hospital Inpatient Prospective Payment Systems and 
Fiscal Year 1993 Rates'' (57 FR 39746). In the rule we acknowledged 
that, for various reasons, a new rehabilitation hospital or a new 
rehabilitation unit might need to begin operations at some time other 
than at the start of its regular cost reporting period. Therefore, we 
specified such an IRF could submit a written certification that it 
would comply with the 75 percent rule for both a partial cost reporting 
period of up to 11 months, as well as the subsequent full 12-month cost 
reporting period.
    On September 1, 1994, we published a final rule entitled ``Medicare 
Program; Changes to the Hospital Inpatient Prospective Payment Systems 
and FY 1995 Rates'' (59 FR 45330). In that rule, we stated that we had 
miscellaneous comments requesting that oncology cases, pulmonary 
disorders, cardiac disorders, and chronic pain be added to the 75 
percent rule's list of medical conditions. (59 FR 45393) We responded 
that although the 75 percent rule had not been addressed in the 
associated May 27, 1994, proposed rule we would take these 
miscellaneous comments into consideration if we decided to make changes 
to the 75 percent rule.
    When we published the August 7, 2001 final rule (66 FR 41316), we 
acknowledged we had received comments requesting that we update the 75 
percent rule's list of medical conditions, or eliminate the 75 percent 
rule. (66 FR 41321) We responded that in our IRF PPS proposed rule we 
had not proposed changing the 75 percent rule, believed that the 
existing 75 percent rule was appropriate, and, therefore, would not be 
revising the 75 percent rule. However, we also stated that data 
obtained after we implemented the IRF PPS could lead us to reconsider 
revising the 75 percent rule.

C. CMS Evaluation of the 75 Percent Rule

    In the spring of 2002 we surveyed the fiscal intermediaries (FIs) 
in order to ascertain what methods were being used to verify if IRFs 
were complying with the 75 percent rule. Analysis of the survey data 
made us aware that inconsistent methods were being used to determine if 
an IRF was in compliance with the 75 percent rule, and that some IRFs 
were not being reviewed to determine if they were in compliance with 
the 75 percent rule. These survey results led us to become concerned 
that some IRFs may be out of compliance with the regulations. In 
addition, we were concerned that some FIs might be using methods to 
verify compliance with the 75 percent rule, which may cause an IRF to 
incorrectly be found out of compliance with the rule; this would thus 
cause an IRF to inappropriately lose its classification as an IRF. 
Therefore, on June 7, 2002, we suspended enforcement of the 75 percent 
rule until we conducted a careful examination of this area and 
determined whether changes were needed to the regulation, and the 
operating procedures that govern how compliance with the regulation is 
verified.
    In addition to our review of FI administrative procedures, we 
conducted an analysis of CMS administrative data to attempt to estimate 
overall compliance with the regulation. We examined both IRF-PAI data 
and claims from the years 1998, 1999, and 2002. Before discussing the 
results of this analysis, we note that the data does have some 
limitations. First, it is not possible to discern from the diagnosis 
data on the IRF-PAI or the claim whether or not there was a medical 
need to furnish the patient ``intensive rehabilitation.'' The diagnosis 
is a determination of a

[[Page 26792]]

patient's clinical status, but that is different from determining that 
there is a medical necessity to furnish treatment to a patient in an 
IRF as opposed to another type of treatment setting. In addition, it 
was not possible in many cases to map the diagnosis code on the claim 
data to one of the ten medical conditions listed in Sec.  412.23(b) 
because a large percentage of claims have an ICD-9-CM diagnosis code 
that is a general code indicating only care involving the use of 
rehabilitation procedures instead of a specific diagnosis.
    Chart 1 ``Estimates of Compliance with the 75 Percent Rule'' below 
shows the estimated percent of facilities with 75 percent of cases 
falling into the 10 conditions (13.35 percent) using 2002 available 
patient assessment data. Appendix A provides the technical detail 
regarding the method used to determine the percent of IRFs in calendar 
year 2002 that complied with the 75 percent rule. We believe our 
findings may tend to undercount cases falling within the 10 conditions 
because the IRF-PAI assessment process was first implemented during 
2002. We believe that learning the IRF-PAI assessment process probably 
resulted in IRFs erring when coding the impairment group on the IRF-PAI 
assessment form. Nevertheless, we believe the analysis is useful for 
providing an estimate of the overall compliance with this regulatory 
requirement. Our findings showed that overall about 50 percent of cases 
fall within the 10 conditions specified in the rule and the number of 
facilities meeting the requirement based upon Medicare discharges 
rather than all discharges is very low. In addition, it shows the 
estimated percent of facilities that meet lower thresholds. Finally, 
our analysis also found that a facility's Medicare case mix was a good 
predictor of case mix for non-Medicare IRF patients.

BILLING CODE 4120-01-P
[GRAPHIC][TIFF OMITTED]TP16MY03.006


[[Page 26793]]


[GRAPHIC][TIFF OMITTED]TP16MY03.007

BILLING CODE 4120-01-C
    While our estimate of compliance with the 75 percent rule is 
somewhat limited by the data available, we do believe it clearly 
demonstrates low compliance of the 75 percent rule by IRFs. Though IRFs 
are now paid under a PPS, the 75 percent rule still serves the relevant 
function of distinguishing IRFs from other types of inpatient 
facilities, thus facilitating compliance with sections 1886(d)(1)(B) 
and 1886(d)(1)(B)(ii) of the Act. Making this distinction is also 
critical to fulfilling the requirements of section

[[Page 26794]]

1886(j)(1)(A), which requires Medicare to make payments to IRFs under a 
PPS specifically designed for the services they furnish. Specifically, 
the 75 percent rule has the effect of limiting the type of patient that 
can be cared for in facilities identified as IRFs. This limitation 
serves to ensure that only patients requiring this type of specialized 
and more expensive care receive it. The medical conditions listed in 
the 75 percent rule are conditions in which patients require the 
services of rehabilitation professionals with specialized skills and 
experiences that may not be available in other settings.
    The largest group of patients treated in rehabilitation hospitals 
but not considered in this analysis to meet the 75 percent rule is 
patients with major joint replacements, specifically knee and hip 
replacements. Joint replacement patients have been more commonly 
admitted to rehabilitation hospitals in some areas of the country, and 
nationally, less than one quarter of Medicare beneficiaries are 
admitted to IRFs after surgery. Although some joint replacement 
patients may have ``polyarthritis,'' or another of the ten conditions 
specified in the 75 percent rule requiring intensive inpatient 
rehabilitation, these cases were generally not counted towards a 
facility's compliance with the 75 percent rule. Provider 
representatives also have requested that conditions classified into the 
cardiac and pulmonary RICs be added to the list of conditions in the 75 
percent rule. These two RICs currently represent about 8 percent of 
beneficiaries serviced in IRFs using the 2002 patient assessment data. 
We note that many private insurers do not cover acute inpatient 
rehabilitation care (in IRFs) for many of these patients whose 
rehabilitation needs can be met in an alternative setting such as a 
skilled nursing facility. We request comments on any conditions that 
necessitate the intensive, multidisciplinary care that IRFs are 
required to provide.
    As mentioned previously, we surveyed the FIs to determine the 
methods they were using to verify compliance with the 75 percent rule. 
Our analysis of that survey data led us to suspend enforcement of the 
75 percent rule. The process for determining compliance with the 75 
percent rule needs to be improved. However, we believe that currently 
there is no need to amend the regulation because it still appropriately 
functions to help distinguish an IRF from other types of inpatient 
treatment settings. We will instead be improving the method FIs use to 
verify compliance with the 75 percent rule, and ensuring that FIs are 
consistent in how they verify compliance with the 75 percent rule.
    When we suspended enforcement of the 75 percent rule we specified 
that the suspension of enforcement was not applicable to a facility 
that was first seeking classification as an IRF in accordance with 
Sec.  412.23(b)(8) or Sec.  412.30(b)(2). A facility first seeking 
classification as an IRF in accordance with Sec.  412.23(b)(8) or Sec.  
412.30(b)(2) only has to self-attest that during its next full 12-month 
cost reporting period it will meet the 75 percent rule. Accordingly, a 
facility first seeking classification as an IRF in accordance with 
Sec.  412.23(b)(8) or Sec.  412.30(b)(2) has never had an FI verify 
that its patient population actually met the 75 percent rule. Until the 
medical conditions of this facility's patient population have been 
evaluated this facility has not proven that for at least one full 12-
month cost reporting period it complied with the 75 percent rule and 
was appropriately classified as an IRF. Therefore, until a facility had 
proven that it qualified to be classified as an IRF because its patient 
population actually met the 75 percent rule it could not be eligible 
for suspension of enforcement of the 75 percent rule.
    We will be instructing FIs to re-institute appropriate enforcement 
action if a FI determines that an IRF has not met the 75 percent rule. 
We realize that an IRF may need time to come into compliance with the 
75 percent rule. An IRF's cost reporting period is the time period used 
to ascertain compliance with the 75 percent rule. Therefore, we will be 
instructing the FIs that the FI must use cost reporting periods that 
begin on or after October 1, 2003, as the time period to ascertain an 
IRF's compliance with the 75 percent rule.
    While this proposed rule does not propose changes to the 
regulations related to the 75 percent rule, we expect that improved 
enforcement and compliance with the existing rule will have varying 
impacts on providers and beneficiaries.
    Our analysis, detailed earlier in this section, indicates that 
approximately 50 percent of cases being cared for in IRFs fall outside 
of the ten conditions listed in the regulations. In addition, it 
estimates that potentially 86 percent of IRFs may currently be out of 
compliance. We again note that this analysis is based on Medicare 
administrative data (claims and patient assessments) rather than 
detailed medical record data and, thus, is limited in its ability to 
accurately classify all patients into one or more of the ten conditions 
cited in the regulations. Thus, we would expect our estimates of 
compliance to be higher if more detailed information from the medical 
records were available to perform the analysis.
    We also know from the data that cases observed in IRFs that do not 
fall in one of the ten conditions have, on the average, lower lengths 
of stay than those cases that fall into one of the ten conditions. 
Specifically, the cases that do not fall into one of the ten conditions 
(approximately 50 percent) account for approximately 40 percent of the 
Medicare covered days. Conversely, 60 percent of the Medicare covered 
days fall into one of the ten conditions.
    While it is difficult to predict the aggregate impact of improved 
compliance on provider revenues, we expect that IRFs and/or their 
parent hospitals (80 percent of IRFs are units of acute care hospitals) 
will change their behavior in a variety of ways. IRFs may change 
admission practices to alter their case mix, either Medicare or total 
patient population, by admitting patients with more intensive 
rehabilitative needs that fall into the ten conditions. This could have 
the effect of elevating the facility's revenues because cases requiring 
more intensive rehabilitation care generally receive higher Medicare 
payments than less complex cases.
    For example, in each of the three years of data examined, lower 
extremity joint replacements contained by far the largest number of 
cases not in the ten conditions (44 percent in 2002). Other conditions 
included cardiac (10.3 percent), pulmonary (4.8 percent) and pain (4.1 
percent). IRFs specializing in or treating a significant number of such 
cases may have to alter their admissions practice to achieve 
compliance. Treating fewer joint replacement cases (that result in 
relatively low payments under the IRF PPS) with cases requiring more 
intensive treatment could actually increase a facility's revenues.
    Conversely, some IRFs may not be able to find such cases and may be 
required to reduce capacity and serve fewer patients in order to 
achieve compliance, an action that may have the effect of lowering a 
facility's revenues. Since compliance with the 75 percent rule could be 
achieved with changes in admission practices for Medicare as well as 
non-Medicare patients, the impact on Medicare revenues may vary.
    The current regulation reflects the fact that a significant number 
(up to 25 percent) of medically necessary admissions may fall outside 
of the ten conditions. These cases can continue to be admitted and 
treated under the regulation. Other cases may appropriately receive 
rehabilitative care in alternative settings. For certain medically 
complex cases, it may be

[[Page 26795]]

appropriate to lengthen the patient's stay in an acute care setting in 
order to stabilize their condition to prepare the patient to 
participate in rehabilitation. Alternative settings for rehabilitative 
care could include the acute care hospital, skilled nursing facilities, 
long-term care hospitals, outpatient rehabilitation, and home health 
care. For this reason, we do not expect to see reduced access to care 
for Medicare beneficiaries as a result of improved compliance. In 
addition, because many hospitals having a Medicare certified IRF unit 
also have one or more other subunits that provide rehabilitation, 
revenues from these cases may be generated elsewhere within the same 
hospital.
    We have developed a case study (below) to illustrate the 
differences in Medicare payment for cases that do not fall into one of 
the ten conditions included in the 75 percent rule. As discussed above, 
this type of case could be treated in an alternative setting. For this 
example, we detail Medicare payment amounts for rehabilitation care in 
four alternative settings (skilled nursing facility, home health, long 
term care hospital, and outpatient rehabilitation). As noted above, 80 
percent of IRFs are units of hospitals. These hospitals may now choose 
to direct some patients to other settings. As explained above, it is 
difficult to predict the approach any individual or group of IRFs will 
follow in achieving compliance with this regulation, however, the case 
study illustrates some of the potential Medicare payment effects 
associated with providing similar levels of rehabilitation in different 
settings.
Case Example
    The following case example has been developed to illustrate the 
payments under Medicare for levels of rehabilitative care received in 
the various settings that may be a part of a hospital complex for a 
patient that has a primary diagnosis of a lower extremity joint 
replacement. The following case example describes one of the most 
common patient conditions (not included in the 75 percent rule) but is 
not meant to describe all possible conditions and their related payment 
effects. The payments for each PPS described in the example are based 
on case weights and standardized payment rates for 2003.
    The clinical description of the case example is as follows:

    A 74-year-old woman status post a right total knee arthroplasty 
(TKA), with a wound infection, fever, and high white blood count are 
noted on her second postoperative day. A work-up indicates the 
existence of staphylococcus aureus septicemia. Patient lacks full 
extension and has only 65 degrees of flexion on her third post-
operative day. The management options for this patient include: 
extension of acute care length of stay; transfer to a long term care 
hospital; admission to a skilled nursing facility; possibly home 
health services or outpatient services.

    Under the IRF PPS, this patient would be classified into case-mix 
group 804 (lower extremity joint replacement with some functional 
capabilities) with an average length of stay of 14 days. Furthermore, 
the existence of staphylococcus aureus septicemia, a comorbid condition 
(ICD-9-CM code 038.11), would place this patient into the tier 2 
payment category. The corresponding 2003 unadjusted payment amount for 
this patient would be $10,828.60.
    Under the skilled nursing facility (SNF) PPS, this patient is 
classified into either the very high (RVB) or ultra high (RUB) 
rehabilitation group based on the hours of therapy she receives per 
week. We believe that this patient would have a length of stay in the 
SNF of either 14 days or 20 days. The corresponding 2003 unadjusted 
payment amount for this patient would be $4,446.82 for RVB and 14 days, 
$6,670.23 for RVB and 20 days, $6,352.60 for RUB and 14 days, or 
$7,672.40 for RUB and 20 days.
    Under the long-term care hospital PPS, this patient would be 
classified into patient group 238 and would have a length of stay of 
either 14 days or 24 or more days. The corresponding 2003 unadjusted 
payment amount for this patient would be $17,671.22 for 14 days or 
$28,296.21 for 24 or more days.
    Under the home health PPS, this patient would be placed into the 
High/High/Moderate group. The corresponding 2003 unadjusted payment 
amount for this patient would be $5,165.26 for home health services 
delivered for a 60-day period.
    Under outpatient therapy, assuming 2 hours of physical therapy and 
1 hour of occupational therapy given during 12 days, payment for this 
patient would be $4,108.16
    If the patient remained in the original surgical acute care 
hospital stay, under the inpatient acute care hospital PPS this patient 
would be classified in to DRG 209 and payment at the 50th percentile 
would be $9,047.36. This illustrative example shows that this facility 
may have lower payments for the care of this patient relative to the 
IRF PPS payment if this patient is cared for in an SNF or receives home 
health or outpatient services. However, the facility may have higher 
payments relative to the IRF PPS payment if this patient is placed in a 
long-term care hospital unit. Overall, the example does show that this 
facility could continue to receive Medicare payments for this type of 
patient in a setting other than their IRF unit, and have the option of 
changing its IRF admitting practices without any potential negative 
effect on patient access to rehabilitative care. However, we invite 
public comment of this issue.

Section 412.29 Excluded Rehabilitation Units: Additional Requirements

    Under Sec.  412.29(a), an IRF unit must have met either the 
requirements for new units or converted units under Sec.  412.30. 
Section 412.29(a)(2) contains an incorrect reference to the 
requirements for converted units as ``Sec.  412.30(b).'' The correct 
reference to the requirements for converted units is Sec.  412.30(c). 
Accordingly, we are proposing to make a technical correction by 
changing the reference in paragraph (a)(2) to state ``Converted units 
under Sec.  412.30(c).''

Section 412.30 Exclusion of New Rehabilitation Units and Expansion of 
Units Already Excluded

    Under Sec.  412.30(b)(2), a hospital that seeks exclusion of a new 
IRF unit may provide written certification that the inpatient 
population the hospital intends the unit to serve meets the 
requirements of Sec.  412.23(b)(2). Section 412.30(b)(3) contains an 
incorrect reference to the required written certification described in 
``(a)(2)'' of this section. The correct reference to the written 
certification is described in paragraph (2) of Sec.  412.30(b). 
Accordingly, we are proposing to make a technical correction by 
changing the current reference to Sec.  412.23(a)(2) in Sec.  
412.23(b)(3) to state ``The written certification described in 
paragraph (b)(2) * * *''.
    Section 412.30(d)(1) defines new bed capacity for the purposes of 
expanding an existing excluded IRF unit. Section 412.30(d)(2)(i) 
contains an incorrect reference to the definition of new bed capacity 
under paragraph ``(c)(1)'' of this section. The correct reference to 
the definition of new bed capacity is paragraph (d)(1). Accordingly, we 
are proposing a technical correction to change the current reference to 
paragraph (c)(1) in paragraph (d)(2)(i) to state ``* * * under 
paragraph (d)(1) of this section.''

[[Page 26796]]

III. Research To Support Case-Mix Refinements to the IRF PPS

A. Research on IRFs

    As described in the August 7, 2001 final rule, we contracted with 
the RAND Corporation (RAND) to analyze IRF data to support our efforts 
in developing the CMG patient classification system and the IRF PPS. As 
discussed below, we are continuing our contract with RAND to support us 
in developing refinements to the classification and PPS, and in 
developing a system to monitor the effects of the IRF PPS. In addition, 
under a separate contract, we are developing and defining measures to 
monitor the quality of care and services provided to Medicare 
beneficiaries receiving care in an IRF.

B. RAND Research Background

    In 1995, the RAND Corporation (RAND) began extensive CMS-sponsored 
research to assist us in developing a per-discharge based inpatient 
rehabilitation PPS model using patient classification system known as 
Functional Independence Measures-Functional Related Groups (FIM-FRGs) 
using 1994 data. Initial results of RAND's earliest research were 
revealed in September 1997 and are contained in two reports available 
through the National Technical Information Service (NTIS). The reports 
are entitled ``Classification System for Inpatient Rehabilitation 
Patients--A Review and Proposed Revisions to the Functional 
Independence Measure-Function Related Groups,'' NTIS order number PB98-
105992INZ; and ``Prospective Payment System for Inpatient 
Rehabilitation,'' NTIS order number PB98-106024INZ.
    In summarizing these reports, RAND found in the research based on 
1994 data that, with limitations, the FIM-FRGs were effective 
predictors of resource use based on the proxy measurement: length of 
stay. FRGs based upon FIM motor score, cognitive scores, and age 
remained stable over time. Researchers at RAND developed, examined, and 
evaluated a model payment system based upon FIM-FRG classifications 
that explains approximately 50 percent of patient costs and 
approximately 60 percent to 65 percent of the costs at the facility 
level. Based on this earlier analysis, RAND concluded that an IRF PPS 
using this model is feasible.
    In July 1999, we contracted with RAND to update the earlier study. 
The update used their earlier research and included an analysis of FIM 
data, the FRGs, and the model rehabilitation PPS using more recent data 
from a greater number of IRFs. The purpose of updating the earlier 
research was to develop the underlying data necessary to support the 
Medicare IRF PPS based on case-mix groups for the proposed rule. RAND 
expanded the scope of their earlier research to include the examination 
of several payment elements, such as comorbidities, facility-level 
adjustments, and implementation issues, including evaluation and 
monitoring. This research was used in our development of the IRF PPS. 
RAND issued a report on its research which can be found on our Web site 
at http:cms.hhs.gov/providers/irfpps/research.asp.

C. Continuing Research

    RAND's data efforts over the past year were concentrated on 
archiving data from the first phase of the project, constructing the 
analytic files for monitoring special studies, and preparing for post-
IRF data that will be used for monitoring and for refinement. RAND's 
monitoring effort seeks to measure changes in IRF, post-IRF, and post-
acute care after implementation of the IRF PPS. The refinement effort 
necessitates that the methods used to create the initial set of CMGs 
weights, and facility adjustments be applied to more recent IRF data.
    Section 125(b) of the BBRA provides that the Secretary shall 
conduct a study of the impact on utilization and beneficiary access to 
services of the implementation of the IRF prospective payment system. A 
report on the study must be submitted to the Congress not later than 3 
years after the date the IRF prospective payment system is first 
implemented. Accordingly, to continue RAND's research, data from other 
health care settings are needed to assess the impact on utilization and 
beneficiary access to services because the IRF PPS can have an impact 
among other settings that deliver rehabilitative services. If we only 
analyzed data from IRFs, our assessment of utilization and access would 
not be complete. In addition to the data obtained from the IRF Medicare 
claims, functional measures from the IRF PAI, and cost reports, other 
data are required that shows the utilization and access of 
rehabilitative services delivered in other settings, such as skilled 
nursing facilities, long-term care facilities, home health agencies, 
and outpatient rehabilitation facilities. Analysis of these data may 
show changes in utilization of inpatient rehabilitation services and if 
the types or severity of patients treated in IRFs differs significantly 
from the data used to create the CMGs, case-mix refinements may be 
needed.
    In the next phase of their research, RAND will be developing and 
testing possible improvements to the payment system using existing 
data. This analysis will focus on potential improvements to the methods 
used to establish the CMGs, facility adjustments (such as teaching, 
rural, and low-income adjustments), and comorbidities.
    In constructing the CMGs for the IRF PPS, one of our primary goals 
was to create payments that would match payment to resource use as 
closely as possible. It is important to continue to examine the IRF PPS 
to ensure that the system remains a good predictor of resource use over 
time. Further, more complete data will be available in which we can 
assess the reliability and validity of the IRF PPS. We also expect 
improvements with certain data elements. For example, prior to 
implementation of the IRF PPS, IRFs were not required to code 
comorbidities. As a result of implementing the IRF PPS, we expect that 
IRFs will improve coding comorbidities because they may affect their 
payment amount. These improved data will allow us to determine the 
effects various conditions have on the cost of a case.
    RAND will use post-IRF PPS data when it becomes available, as well 
as existing data to support their research. RAND research includes: 
analyses of methodological improvements in the creation of CMGs, 
methodological improvements to the statistical approaches used to 
derive payment adjustments and characterizing IRFs into groups based on 
their case mix. As mentioned in Section I of this proposed rule, 
currently, RAND does not have enough post-IRF PPS data to analyze 
potential modifications to the classification and payment systems. 
Further, we will need a sufficient amount of these data to be able to 
determine our future refinements, if any are needed. Because IRFs began 
to be paid under the IRF PPS based on their cost report start date that 
occurred on or after January 1, 2002, sufficient data will not be 
available for those facilities whose cost report start date occurs 
later in the calendar year. Therefore, in this proposed rule, we are 
not proposing to change the CMG classification system or the facility 
level and case level adjustments, other than the wage adjustment. The 
proposed changes for the wage adjustment are discussed in detail in 
Section VI of this proposed rule.

D. Staff Time Measurement Data

    As described in the August 7, 2001 final rule, we contracted with 
Aspen Systems Corporation (ASPEN) to collect

[[Page 26797]]

actual resource use or staff time measurement (STM) data in a sample of 
IRFs. Data were collected using the MDS-PAC patient assessment 
instrument. FIM data were collected at the same time. We believe that 
these data that measure actual nursing and therapy time spent on 
patient care may be used to enhance our ability to refine the CMGs.
    RAND received ASPEN's analytical database in early spring 2002. 
After a brief period of working with the data, RAND discovered that 
their study required details that were not in this summary database. 
Specifically, about half of the cases within the analytic database had 
data for only the first part of the patient's stay. RAND needed to have 
data on how staff time use changed during the stay and the analytic 
database contained only the averages of the observed portions of the 
patient's stay. RAND needed data on patients during the second part of 
their stay.
    In late July 2002, RAND received the backup data, but did not 
assess it until late August 2002. Further technical questions about the 
data still exist and must be answered before the modeling of the data 
can occur.

E. Monitoring

    A greater part of the ongoing work to be performed by RAND is an 
analysis to develop a potential system of indicators to monitor the 
impact and performance of the IRF PPS. As part of their analysis, RAND 
will case-mix adjust these measures and distinguish between those that 
will track the direct impact of PPS on IRFs and IRF patients, and those 
that will track changes in the pool of potential IRF patients. We 
anticipate that RAND will develop a set of possible indicators needed 
to monitor the IRF PPS, develop potential access to care models and 
measures, and define a possible measure of outcomes.

F. Need To Develop Quality Indicators for IRFs

    The IRF-PAI is the data collection instrument for IRFs. It contains 
a blend of FIM items and proposed quality and medical needs questions. 
These quality and medical needs questions (which are currently 
collected on a voluntary basis) may need to be modified to encapsulate 
those data necessary for calculation of a quality indicator. One of the 
primary tasks of the RAND contract is to identify quality indicators 
pertinent to the inpatient rehabilitation setting and determine what 
information is necessary to calculate those quality indicators. These 
tasks include reviewing literature and other sources for existing 
rehabilitation quality indicators. It also involves identifying 
organizations involved in measuring or monitoring quality of care in 
the inpatient rehabilitation setting. RAND will convene a technical 
expert panel to identify a series of quality indicators that can be 
measured using the IRF-PAI. In addition, quality indicators and data 
elements must be developed for calculation as well as the independent 
testing of the developed indicators.

IV. The IRF PPS Patient Assessment Process

A. Background

    On August 7, 2001, we published the IRF PPS final rule (66 FR 
41316), which described how the IRF would use the IRF Patient 
Assessment Instrument (PAI) to assess an IRF patient. During the fall 
of 2001, we conducted training on the IRF-PAI assessment process. The 
training was held in the cities of Baltimore, Maryland, Chicago, 
Illinois, San Francisco, California, and Atlanta, Georgia. The training 
was videotaped. During the training sessions we stated that any IRF 
could obtain the videotapes free of charge. In addition, we stated on 
the CMS IRF PPS website that any IRF could obtain copies of the 
videotapes. The IRS-PAI manual, which contains detailed instructions 
regarding the completion of the IRS-PAI, is also available on the CMS 
IRF PPS website.

B. Patient Rights

    Section 412.608 specifies that prior to performing the IRS-PAI 
assessment, the IRF must inform the patient of the rights contained in 
this section. The rights specified in Sec.  412.608 are as follows:
    (1) The right to be informed of the purpose of the collection of 
the patient assessment data;
    (2) The right to have the patient assessment information collected 
be kept confidential and secure;
    (3) The right to be informed that the patient assessment 
information will not be disclosed to others, except for legitimate 
purposes allowed by the Federal Privacy Act and Federal and State 
regulations;
    (4) The right to refuse to answer patient assessment questions; and
    (5) The right to see, review, and request changes on his or her 
patient assessment.
    In addition to the rights specified in Sec.  412.608, a patient has 
privacy rights under the Privacy Act of 1974 (5 U.S.C. Sec.  
552a(e)(3)), and 45 CFR 5b.4(a)(3). The Privacy Act and 45 CFR 
5b.4(a)(3) require that an individual be informed under what authority, 
and for what purpose, individually identifiable information is being 
collected by a Federal agency and maintained in a system of records. In 
order to ensure compliance with the Privacy Act of 1974, and 45 CFR 
5b.4(a)(3), we are proposing that prior to performing the IRS-PAI 
assessment an IRF clinician must give to each Medicare inpatient two 
forms. We have published these forms in Appendix B of this proposed 
rule. In addition, we are proposing that the form entitled ``Privacy 
Act Statement--Health Care Records'' is a detailed description of the 
patient's privacy rights under the Privacy Act of 1974. Also, we are 
proposing that the form entitled ``Data Collection Information Summary 
for Patients in Inpatient Rehabilitation Facilities'' is the simplified 
plain language description of the Privacy Act Statement--Health Care 
Records. Additionally, we are proposing that by giving both of these 
forms to the patient before beginning the IRS-PAI assessment, the IRF 
would fulfill the requirement that the patient be informed of the five 
rights specified in Sec.  412.608. Accordingly we are proposing to 
amend Sec.  412.608 to read as follows:
    Patient's rights regarding the collection of patient assessment 
data.
    (a) Before performing an assessment using the inpatient 
rehabilitation facility patient assessment instrument, a clinician of 
the inpatient rehabilitation facility must give a Medicare inpatient 
each of these forms--
    (1) The form entitled ``Privacy Act Statement--Health Care 
Records;'' and
    (2) The simplified plain language description of the Privacy Act 
Statement--Health Care Records which is a form entitled ``Data 
Collection Information Summary for Patients in Inpatient Rehabilitation 
Facilities.''
    (b) The inpatient rehabilitation facility must document in the 
Medicare inpatient's clinical record that the Medicare inpatient has 
been given the documents specified in paragraph (a) of this section.
    (c) The Data Collection Information Summary for Patients in 
Inpatient Rehabilitation Facilities is the simplified plain language 
description of the Privacy Act Statement--Health Care Records.
    (d) By giving the Medicare inpatient the forms specified in 
paragraph (a) of this section the inpatient rehabilitation facility 
will inform the Medicare patient of--
    (1) Their privacy rights under the Privacy Act of 1974 and 45 CFR 
5b.4(a)(3); and
    (2) The following rights:

[[Page 26798]]

    (i) The right to be informed of the purpose of the collection of 
the patient assessment data;
    (ii) The right to have the patient assessment information collected 
be kept confidential and secure;
    (iii) The right to be informed that the patient assessment 
information will not be disclosed to others, except for legitimate 
purposes allowed by the Federal Privacy Act and Federal and State 
regulations;
    (iv) The right to refuse to answer patient assessment questions; 
and
    (v) The right to see, review, and request changes on his or her 
patient assessment.
    (e) The patient rights specified in this section are in addition to 
the patient rights specified in Sec.  482.13 of this chapter.
    It should be noted that when the IRF clinician gives the patient 
the forms entitled ``Data Collection Information Summary for Patients 
in Inpatient Rehabilitation Facilities'' and the ``Privacy Act 
Statement--Health Care Records'' prior to performing an assessment, 
these forms do not satisfy the privacy provisions contained in the 
HIPAA Privacy Rule (65 FR 82462 as modified by 67 FR 53182). For 
example, these forms do not meet the privacy notice requirements of the 
HIPAA Privacy Rule (see 45 CFR Sec.  164.520). Health plans and health 
care providers must meet the notice requirements of the HIPAA Privacy 
Rule by giving a Notice of Privacy Practices to their patients. The 
Notice of Privacy Practices describes a health plan or health care 
provider's uses and disclosures of protected health information and the 
individual rights that patients have with respect to their protected 
health information.

C. When the IRF-PAI Must Be Completed

    According to Sec.  412.606(b), an IRF must use the IRF-PAI to 
assess Medicare Part A fee-for-service inpatients. According to Sec.  
412.610(c)(1)(i)(A), the admission assessment covers the first 3 
calendar days of the inpatient's current IRF Medicare Part A fee-for-
service hospitalization. According to Sec.  412.610(c)(1)(i)(B), the 
admission assessment reference date is the third day of the 3-day 
admission assessment time period. Section 412.610(c)(1)(i)(C) specifies 
that the IRF-PAI for the admission assessment ``Must be completed on 
the calendar day that follows the admission assessment reference day.''
    We are concerned IRFs believe Sec.  412.610(c)(1)(i)(C) means that 
they may not start to record data on the IRF-PAI before the calendar 
day that follows the admission assessment reference day, which is not 
our intent. The ``completion requirement'' of the IRF-PAI means when 
the IRF's staff must have finished recording on the IRF-PAI the 
assessment data that the IRF's clinical staff obtained during an 
assessment of the inpatient that was performed during the admission 
assessment time period. In other words, the date when the IRF-PAI must 
be completed is a deadline date when the process of recording data on 
the IRF-PAI must be finished. The IRF's staff is permitted to enter 
assessment data on the IRF-PAI prior to the deadline date.
    How data are recorded on the IRF-PAI is specified in the IRF-PAI 
item-by-item guide, which is entitled the ``IRF-PAI Training Manual 
Revised 01/16/02.'' The instructions contained in the IRF-PAI item-by-
item guide are, when possible, very similar to the rules for coding the 
patient assessment instrument that we used as the model for the IRF-
PAI. The model for the IRF-PAI was the patient assessment instrument 
published by Uniform Data System for Medical Rehabilitation (UDSmr). 
The UDSmr rules for coding their assessment instrument specified that 
an item's score should reflect the inpatient's lowest level of 
functioning. Consequently, in order to be consistent with how an 
inpatient's functional performance was scored on the UDSmr patient 
assessment instrument, the IRF-PAI item-by-item guide likewise 
specifies that a patient's assessment must indicate the patient's 
lowest level of functioning.
    During the admission assessment, an IRF clinician records different 
types of data on the IRF-PAI. We believe that the sources of the data 
recorded in the categories of the IRF-PAI entitled ``Identification 
Information,'' ``Admission Information,'' and ``Payer Information'' 
makes these data easy and quick to obtain and record. For these 
categories of data the source of the data may be the patient, the 
patient's medical record, other patient documents, the patient's 
family, or a person that has personal knowledge of the patient. In 
contrast, in order to complete the data for the IRF-PAI categories 
entitled ``Function Modifiers'' and ``FIMTM Instrument,'' 
the clinician observes the patient's functional performance over the 
admission assessment time period, and makes clinical judgments 
regarding the patient's performance. Consequently, due to how the data 
for the Function Modifiers and FIMTM categories are 
obtained, we believe it is the time span that it takes to assess the 
patient's functional performance that will usually determine how long 
it takes to complete the admission assessment.
    Page III-3 of the IRF-PAI manual states that when determining the 
level of the patient's functional performance the clinician is to 
``record the lowest (most dependent) score.'' We believe that in the 
time span between the patient's admission to and discharge from the 
IRF, the patient's functional performance improves. We believe that on 
the patient's admission day and the next few days a patient's 
functional performance is poor in comparison to functional performance 
on subsequent days of the patient's current IRF hospitalization. 
Therefore, during the part of the admission assessment that is the 
first or second day of the patient's current IRF hospitalization, we 
believe that a patient's functional performance will usually be scored 
as indicating the most dependence.
    As stated previously, the IRF's clinical staff is permitted to 
record assessment data on the IRF-PAI at any time during the admission 
assessment process. Also, as stated previously, we believe it is the 
scoring of the patient's functional performance that will determine how 
long it takes to complete the admission assessment. The combination of: 
(1) Being able to record assessment data at any time during the 
admission assessment, (2) the requirement that the lowest level of 
functional performance be recorded, and (3) that the lowest level of 
functional performance will usually occur on the first or second day of 
the admission assessment, makes it possible to finish obtaining and 
recording all the assessment data before the day that follows the 
admission assessment reference date. However, in accordance with Sec.  
412.610(c)(1)(i)(C), an IRF has until the day following the admission 
assessment reference day to complete the IRF-PAI.
    In order to clarify that Sec.  412.610(c)(1)(i)(C) does not 
prohibit the IRF from recording any or all of the data on the IRF-PAI 
before the day that follows the admission assessment reference day, we 
are proposing to amend Sec.  412.610(c)(1)(i)(C) to read as follows: 
Must be completed by the calendar day that follows the admission 
assessment reference day.

D. Transmission of IRF-PAI Data

    As specified in Sec.  412.606(b), ``Patient assessment 
instrument,'' an IRF must use the IRF-PAI to assess Medicare Part A 
fee-for-service inpatients. There are nine categories of IRF-PAI 
assessment data. The nine categories are entitled ``identification 
information, admission

[[Page 26799]]

information, payer information, medical information, medical needs, 
function modifiers, the FIMTM instrument, discharge 
information, and quality indicators''. The data from some of these 
categories are used to classify a patient into a CMG. It is the CMG 
classification code, not the IRF-PAI raw data itself, that is part of 
the claim data the IRF submits to its FI when the IRF submits data in 
order to be paid for the services it furnished to the inpatient. We 
believe that an IRF's clinical staff will initially use the paper 
version of the IRF-PAI to record its assessment data. Then, in 
accordance with Sec.  412.610(d), the IRF would use the data that it 
recorded on the paper version of the IRF-PAI to enter the IRF-PAI data 
into an electronic version of the document. The electronic version of 
the IRF-PAI uses the patient assessment data to classify a patient into 
a CMG. Under the IRF PPS, it is the CMG payment code, along with other 
information that the IRF submits to the fiscal intermediary (FI), that 
will determine the payment the IRF receives for the services the IRF 
furnished to a Medicare Part A fee-for-service beneficiary.
    Section 412.614, ``Transmission of patient assessment data,'' 
specifies that an IRF must transmit to us the IRF-PAI assessment data 
for each Medicare Part A fee-for-service inpatient. It is the 
electronic version of the IRF-PAI that enables an IRF to transmit the 
IRF-PAI data to us. We require that IRFs transmit IRF-PAI data so that 
we have the IRF-PAI data that are associated with the CMG payment code 
that the IRF submitted to its FI.
    In most cases an IRF will submit claims data, including the 
patient's CMG, to the FI in order to be paid for the services it 
furnished to a Medicare Part A fee-for-service inpatient. However, 
there are situations when the IRF would submit claim data to its FI, 
but the submission of the claim data is not for the purpose of being 
paid for any of the services the IRF furnished to a Medicare Part A 
fee-for-service inpatient.
    In these situations, Medicare operational procedures that were in 
effect before implementation of the IRF PPS requires an IRF to send 
claim data to the FI. The purpose of the IRF sending claim data to the 
FI in these situations is to enable Medicare to monitor a beneficiary's 
period of entitlement. For instance, an IRF must still send the FI 
claim data even if the inpatient's non-Medicare primary payer paid for 
all of the IRF services the IRF furnished to the Medicare Part A fee-
for-service inpatient. Another instance when the IRF must still send 
the FI claim data is when any of the services that an inpatient's non-
Medicare primary payer did not pay for also do not qualify for payment 
under the IRF PPS.
    We want to relieve the IRF of the burden of transmitting IRF-PAI 
data to us when the IRF is not requesting that Medicare pay for any of 
the services the IRF furnished to a Medicare Part A fee-for-service 
inpatient. Accordingly, we are proposing to amend Sec.  412.614 by 
specifying that Sec.  412.614(a) is a general rule that would read as 
follows:
    (a) Data format. General rule. The inpatient rehabilitation 
facility must encode and transmit data for each Medicare Part A fee-
for-service inpatient--
    We are also proposing to further amend Sec.  412.614 by adding a 
new Sec.  412.614(a)(3), which would relieve the IRF of the burden of 
having to transmit the IRF-PAI data for a Medicare Part A fee-for-
service inpatient when Medicare will not be paying the IRF for any of 
the services the IRF furnished to that inpatient. New Sec.  
412.614(a)(3) would read as follows:
    Exception to the general rule. When the inpatient rehabilitation 
facility does not submit claim data to Medicare in order to be paid for 
any of the services it furnished to a Medicare Part A fee-for-service 
inpatient, the inpatient rehabilitation facility is not required to, 
but may, transmit to Medicare the inpatient rehabilitation facility 
patient assessment data associated with the services furnished to that 
same Medicare Part A fee-for-service inpatient.

E. Proposed Revision of the Definition of Discharge

    According to Sec.  412.602, a discharge has occurred when the 
patient has been formally released from the hospital, or has died in 
the hospital, or when the patient stops receiving Medicare-covered Part 
A inpatient rehabilitation services. Our intent in specifying this 
definition of when a discharge has occurred under the IRF PPS was to 
try to ensure that Medicare paid an IRF only for furnishing an IRF 
level of services to the Medicare Part A fee-for-service inpatient. 
However, in contrast to when a patient is formally released from the 
IRF or dies, the time when a patient stops receiving Medicare-covered 
Part A IRF services may be subject to different interpretations 
resulting in different determinations of when a discharge has occurred. 
The result of different determinations of when a discharge has occurred 
is inconsistency in determining the discharge date. This inconsistency 
could result in different IRFs furnishing the same services for the 
same period of time, but being paid differently, because the discharge 
date determines a patient's length-of-stay, and the patient's length-
of-stay is one of the factors that determines the amount of the CMG 
payment. For example, according to Sec.  412.624(f), a patient's 
length-of-stay as determined by the inpatient's discharge date may 
affect the amount of the IRF's CMG payment when a patient is 
transferred from an IRF to another site of care.
    In addition, there may be cases when an IRF believes an inpatient 
no longer has a medical need for Medicare-covered Part A inpatient 
rehabilitation services, but the IRF believes that the inpatient has a 
medical need for a SNF level of services. However, due to circumstances 
beyond the IRF's control, the IRF is unable to formally release the 
patient, because the IRF cannot place the patient in a SNF setting. In 
that situation, according to section 1861(v)(1)(G)(i) of the Act and 
Sec.  424.13(b), a physician may certify or recertify that the patient 
needs to continue to be hospitalized in the IRF. The effect of the 
physician's certification or recertification is that under Medicare the 
patient is not considered discharged until the patient is formally 
released from the IRF.
    In consideration of what can occur when discharge is defined as 
being when the inpatient stops receiving Medicare-covered Part A 
inpatient rehabilitation services, we are proposing to amend Sec.  
412.602 by revising the definition of ``discharge'' by removing the 
phrase ``(2) The patient stops receiving Medicare-covered Part A 
inpatient rehabilitation services, unless the patient qualifies for 
continued hospitalization under Sec.  424.13(b) of this chapter; or''. 
The proposed revised definition would read as follows:
    Discharge. A Medicare patient in an inpatient rehabilitation 
facility is considered discharged when--
    (1) The patient is formally released from the inpatient 
rehabilitation facility; or
    (2) The patient dies in the inpatient rehabilitation facility.

F. Waiver of the Penalty for Transmitting the IRF-PAI Data Late

    Section 412.614(c) ``Transmission dates'' states that the admission 
and discharge assessment data must be transmitted together. The 
discharge assessment is completed after the admission assessment has 
been completed. Therefore, the date when the IRF-PAI data must be 
transmitted is

[[Page 26800]]

determined by when the IRF-PAI discharge assessment is completed.
    After the discharge assessment has been completed, Sec.  412.610(d) 
``Encoding dates'' specifies that the data must be entered into the 
electronic version of the IRF-PAI, a process which Sec.  412.602 
defines as encoding the data. As specified in Sec.  412.610(d) the IRF 
has 7 calendar days to encode the discharge assessment. In order for 
the IRF-PAI data not to be considered as having been transmitted late, 
Sec.  412.614(d)(2) specifies that the IRF-PAI data must be transmitted 
to us no later than 10 calendar days from the date specified in Sec.  
412.614(c). The date specified in Sec.  412.614(c) is the 7th calendar 
day of the applicable encoding time period specified in Sec.  
412.610(d). The 7th calendar day of the applicable encoding date 
specified in Sec.  412.610(d) is the end of the discharge assessment 
encoding time period because none of the data can be transmitted until 
the discharge assessment has been encoded. The following example, which 
is very similar to the Chart 3 on page 41332 of the August 7, 2001 
final rule (66 FR 41316), is intended to clarify when CMS will 
determine that the IRF-PAI data was transmitted late.

  Chart 2.-- Example of Applying the Patient Assessment Instrument Discharge Assessment and Transmission Dates
----------------------------------------------------------------------------------------------------------------
                                                                                         IRF-PAI      Date when
                                                 Assessment    IRF-PAI      IRF-PAI        data     IRF-PAI data
        Assessment Type         Discharge date   reference    completed    encoded by  transmitted  transmission
                                                    date          by                        by         is late
----------------------------------------------------------------------------------------------------------------
Discharge Assessment..........        10/16/03     10/16/03     10/20/03     10/26/03     11/01/03   11/12/03 *
----------------------------------------------------------------------------------------------------------------
* Or any day after 11/12/03.

    If IRF-PAI data are transmitted later than 10 calendar days from 
the transmission date specified in Sec.  412.614(c), Sec.  
412.614(d)(2) specifies that we will assess a penalty by deducting 25 
percent from the CMG payment that is associated with the IRF-PAI data 
that were transmitted late. However, we believe that an IRF may 
encounter an extraordinary situation, which is beyond its control, and 
that extraordinary situation could render the IRF unable to comply with 
Sec.  412.614(c). The IRF must fully describe in the appropriate 
inpatient's clinical record, or by use of another documentation method 
as selected by the IRF, the extraordinary situation which the IRF 
encountered that resulted in the IRF being unable to comply with Sec.  
412.614(c). Although an IRF may believe that the facility has 
encountered an extraordinary situation, the IRF's belief does not mean 
that CMS is obligated to also automatically determine that the 
situation was of an extraordinary nature. CMS has the discretion to 
determine whether the situation described by the IRF is extraordinary.
    The extraordinary situation may be, but does not have to be, due to 
the occurrence of an unusual event. Examples of unusual events include, 
but are not limited to, fire, flood, earthquake, or other similar 
incidents that inflict extensive damage to an IRF. Another example of 
an extraordinary situation is the inability of an IRF to transmit any 
IRF-PAI data for an extended time period, because during that entire 
time period there was a problem with the data transmission system that 
was beyond the control of the IRF. An example of a data transmission 
system problem that is beyond the control of the IRF is the inability 
of an IRF to transmit its IRF-PAI data because the computer used by CMS 
to receive and process the data is malfunctioning. A further example of 
a data transmission system problem that is beyond the control of the 
IRF is the existence of a flaw in the software that was distributed by 
CMS to IRFs, or a flaw in the software specifications made available by 
CMS to vendors that prevent the IRF from transmitting its IRF-PAI data. 
In addition, an extraordinary situation may include a situation in 
which a facility has correctly followed CMS policies and procedures in 
order to be classified as an IRF and obtain an IRF provider number, but 
has experienced a delay in attaining an IRF provider number. In light 
of these possibilities, we are proposing a new Sec.  412.614(e) to read 
as follows: ``Exemption to being assessed a penalty for transmitting 
the IRF-PAI data late.'' CMS may waive the penalty specified in 
paragraph (d) of this section when, due to an extraordinary situation 
that is beyond the control of an inpatient rehabilitation facility, the 
inpatient rehabilitation facility is unable to transmit the patient 
assessment data in accordance with paragraph (c) of this section. Only 
CMS can determine if a situation encountered by an inpatient 
rehabilitation facility is extraordinary and qualifies as a situation 
for waiver of the penalty specified in paragraph (d)(2) of this 
section. An extraordinary situation may be due to, but is not limited 
to, fires, floods, earthquakes, or similar unusual events that inflict 
extensive damage to an inpatient rehabilitation facility. An 
extraordinary situation may be one that produces a data transmission 
problem that is beyond the control of the inpatient rehabilitation 
facility, as well as other situations determined by CMS to be beyond 
the control of the inpatient rehabilitation facility. An extraordinary 
situation must be fully documented by the inpatient rehabilitation 
facility.''

G. General Information Regarding the IRF-PAI Assessment Process

    We have received many questions regarding the IRF-PAI assessment 
process policies. We have posted the answers to most of these questions 
on the IRF PPS website.
1. The IRF PPS Website Address
    The current internet address for the IRF PPS website is http://www.cms.hhs.gov/providers/irfpps/. Due to changes in CMS internet 
policies during 2002, the current website address is different from the 
one we published in the August 7, 2001 final rule.
2. Exceptions to the IRF-PAI Admission and Discharge Assessment Time 
Period General Rules
    Section 412.610(c)(1)(i) states the general rule that the time span 
covered during the admission assessment is calendar days 1 through 3 of 
the patient's current Medicare Part A fee-for-service IRF 
hospitalization. Section 412.610(c)(2)(i) states the general rule that 
the discharge assessment time period is a span of time that covers 3 
calendar days, which includes the inpatient's discharge date, which is 
the same date as the discharge assessment reference date, and the 2 
calendar days

[[Page 26801]]

before the discharge date. We want to remind IRFs that, as specified in 
Sec.  412.610(c)(1)(ii) and Sec.  412.610(c)(2)(iii), we may use the 
IRF-PAI item-by-item guide and other instructions to identify items 
that have a different admission or discharge assessment time period. We 
may specify different admission and discharge assessment time periods 
in order to capture patient information for payment and quality of care 
monitoring objectives appropriately.

V. Patient Classification System for the IRF PPS

    As previously stated, in this proposed rule we are proposing to use 
the same case-mix classification system that was set forth in the 
August 7, 2001 final rule. It is our intention to pursue the 
development of possible refinements to the case-mix classification 
system that will continue to improve the ability of the PPS to 
accurately pay IRFs. We have awarded a contract to the RAND Corporation 
(RAND) to conduct additional research that will, in the initial stages, 
provide us with the data necessary to address the feasibility of 
developing and proposing refinements. When the study has been 
completed, we plan to review various approaches so that we can propose 
an appropriate methodology to develop and apply refinements. Any 
specific refinement proposal resulting from this research will be 
published in the Federal Register.
    Table 1, Proposed Relative Weights for Case-Mix Groups (CMGs), 
presents the proposed CMGs, comorbidity tiers, and corresponding 
Federal relative weights. We also present the average length of stay 
for each CMG. As we discussed in the August 7, 2001 final rule (66 FR 
41353), the average length of stay for each CMG, along with the 
discharge destination, is used to determine when an IRF discharge meets 
the definition of a transfer, which results in a per diem case level 
adjustment (66 FR 41354). Because these data elements are not changing 
as a result of this proposed rule, Table 1 is identical to Table 1 that 
was published in the August 7, 2001 final rule (66 FR 41394 through 
41396). The proposed relative weights reflect the inclusion of cases 
with an interruption of stay (patient returns on day of discharge or 
either of the next 2 days). The methodology we used to construct the 
data elements in Table 1 is described in detail in the August 7, 2001 
final rule (66 FR 41350 through 41353).

VI. Proposed Fiscal Year 2004 Federal Prospective Payment Rates

A. Expiration of the IRF PPS Transition Period

    The transition period provision under section 1886(j)(1) of the Act 
and Sec.  412.626 of the regulations expired for cost reporting periods 
beginning on or after October 1, 2002 (FY 2003 and beyond). 
Accordingly, the payment for discharges during FY 2004 will be based 
entirely on the proposed adjusted FY 2004 IRF Federal PPS rates.

B. Description of the IRF Standardized Payment Amount

    In the August 7, 2001 final rule, we established a standard payment 
amount referred to as the budget neutral conversion factor under Sec.  
412.624(c). In accordance with the methodology described in Sec.  
412.624(c)(3)(i), the budget neutral conversion factor for FY 2002, as 
published in the August 7, 2001 final rule, was $11,838.00. Under Sec.  
412.624(c)(3)(i), this amount reflects, as appropriate, any adjustments 
for outlier payments, budget neutrality, and coding and classification 
changes as described in Sec.  412.624(d).
    The budget neutral conversion factor is a standardized payment 
amount and the amount reflects the budget neutrality adjustment for FY 
2002, as described in Sec.  412.624(d)(2). The statute requires a 
budget neutrality adjustment only for fiscal years 2001 and 2002. 
Accordingly, we believe it is more consistent with the statute to refer 
to the standardized payment as the standardized payment conversion 
factor, rather than refer to it as a budget neutral conversion factor. 
Thus, after careful consideration, we are proposing to change all 
references to the budget neutral conversion factor in Sec. Sec.  
412.624(c) and 412.624(d) to the ``standard payment conversion 
factor.'' We believe that the standard payment conversion factor better 
describes the standardized payment amount especially in those fiscal 
years where a budget neutrality adjustment is not made.
    Thus, under Sec.  412.624(c)(3)(i), the standard payment conversion 
factor for FY 2002 of $11,838.00 reflected the budget neutrality 
adjustment described in Sec.  412.624(d)(2). Under current revised 
Sec.  412.624(c)(3)(ii), we updated the FY 2002 standard payment 
conversion factor ($11,838.00) to FY 2003 by applying an increase 
factor (the IRF market basket index) of 3.0 percent, as described in 
the August 1, 2002 update notice (67 FR 49931). This yielded the FY 
2003 standard payment conversion factor of $12,193.00 that was 
published in the August 1, 2002 update notice (67 FR 49931). The FY 
2003 standard payment conversion factor will be the basis of the 
updated FY 2004 standard payment conversion factor that will also 
reflect the adjustments described below.

C. Proposed Adjustments To Determine the Proposed FY 2004 Standard 
Payment Conversion Factor

1. IRF Market Basket Index
    Section 1886(j)(3)(C) of the Act requires the Secretary to 
establish an increase factor that reflects changes over time in the 
prices of an appropriate mix of goods and services included in IRF 
services paid for under the IRF PPS, which is referred to as the IRF 
market basket index. Accordingly, in updating the FY 2004 payment rates 
set forth in this proposed rule, we propose to apply an appropriate 
increase factor, that is equal to the IRF market basket, to the FY 2003 
IRF standardized payment amount.
    Beginning with the implementation of the IRF PPS in FY 2002 and 
with the FY 2003 IRF PPS update, the 1992-based excluded hospital with 
capital market basket has been used to determine the IRF market basket 
factor for updating payments to rehabilitation facilities. The 1992-
based market basket reflected the distribution of costs in 1992 for 
Medicare-participating freestanding rehabilitation, long-term care, 
psychiatric, cancer, and children's hospitals. This information was 
derived from the 1992 Medicare cost reports. A full discussion of the 
methodology and data sources used to construct the 1992-based excluded 
hospital with capital market basket is available in Appendix D of the 
IRF PPS August 7, 2001 final rule Federal Register (66 FR 41427).
    In this proposed rule, we propose to revise and rebase the excluded 
hospital with capital market basket to a 1997 base year. We believe 
that proposing to use 1997 data, rather than 1992 data, to construct 
the IRF market basket will allow us to more appropriately estimate 
increases in the costs of IRF goods and services from year to year.
    The operating portion of the 1997-based excluded hospital with 
capital market basket is derived from the 1997-based excluded hospital 
market basket. The methodology used to develop the excluded hospital 
market basket operating portion was described in the August 1, 2002 
Federal Register (67 FR 50042-50044). In brief, the operating cost 
category weights in the 1997-based excluded market basket added to 
100.0. These weights were determined from the Medicare cost reports, 
the 1997 Business Expenditure Survey from the

[[Page 26802]]

Bureau of the Census, and the 1997 Annual Input-Output data from the 
Bureau of Economic Analysis. In using the 1997 data, we made two 
methodological revisions to the 1997-based excluded hospital market 
basket: (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.
    Previously we used a combination of several ECIs, a great part of 
which are listed in the 1992-based index such as the hospital, 
professional, and technical workers ECIs. However, the ECI for hospital 
workers better represents the movement of hospital wages, salaries, and 
benefits and it is more reflective of current labor market conditions. 
For the 1992-based market baskets we were unable to find an adequate 
data source for the blood cost category. For the 1997-based excluded 
hospital market basket, we were able to obtain this data from Medicare 
cost reports. As discussed in the IPPS August 1, 2002 final rule (67 FR 
50035), BIPA required that we adequately reflect the price of blood and 
blood products in the hospital market basket when it was rebased and 
revised, which was done for the FY 2003 IPPS payment rates.
    We believe this revision is also appropriate for the excluded 
hospital with capital market basket because it results in a more 
precise measure of the 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. Because capital costs account for 8.968 percent of total 
costs for excluded hospitals in 1997, it holds that operating costs 
must account for 91.032 percent. Each operating cost category weight 
from the August 1, 2002 Federal Register (67 FR 50442-50444) was 
rebased to the 1997-based excluded hospital market basket by 
multiplying by 0.91032 to determine its weight in the 1997-based 
excluded hospital with capital market basket.
    The aggregate capital component of the 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. 
As explained below, two sets of weights for the capital portion of the 
revised and rebased market basket needed to be determined. The first 
set of weights identifies the proportion of capital expenditures 
attributable to each capital cost category, while 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 IPPS final rule published in the August 1, 2002 
Federal Register (67 FR 50046-50047)) 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 excluded hospital with capital market 
basket are presented in Chart 3 ``Excluded Hospital With Capital Input 
Price Index (FY 1992 and Proposed FY 1997) Structure and Weights.'' 
Chart 4 ``Proposed Excluded Hospital with Capital Input Price Index (FY 
1997) Vintage Weights'' presents the vintage weights for the proposed 
1997-based excluded hospital with capital market basket.

   Chart 3.--Excluded Hospital With Capital Input Price Index 1 2 (FY 1992 and Proposed FY 1997) Structure and
                                                     Weights
----------------------------------------------------------------------------------------------------------------
                                                                                                     Proposed
               Cost category                         Price wage variable            Weights (%)     weights (%)
                                                                                  base-year 1992  base-year 1997
----------------------------------------------------------------------------------------------------------------
    TOTAL..................................  ...................................         100.000         100.000
                                            --------------------------------------
Compensation...............................  ...................................          57.935          57.579
Wages and Salaries.........................  ECI--Wages and Salaries, Civilian            47.417          47.335
                                              Hospital Workers.
Employee Benefits..........................  ECI--Benefits, Civilian Hospital             10.519          10.244
                                              Workers to capture total costs
                                              (operating and capital), In order
                                              to capture total costs (operating
                                              and capital), HCFA Occupational
                                              Benefit Proxy.
Professional fees: Non-Medical.............  ECI--Compensation: Prof. &                    1.908           4.423
                                              Technical Technical.
Utilities..................................  ...................................           1.524           1.180
Electricity................................  WPI--Commercial Electric Power.....           0.916           0.726
Fuel Oil, Coal, etc........................  WPI--Commercial Natural Gas........           0.365           0.248
Water and Sewerage.........................  CPI-U--Water & Sewage..............           0.243           0.206
Professional Liability.....................  HCFA--Professional Liability                  0.983           0.733
                                              Premiums.
All Other Products and Services............  ...................................          28.571          27.117
All Other Products.........................  ...................................          22.027          17.914
Pharmaceuticals............................  WPI--Prescription Drugs............           2.791           6.318
Food: Direct Purchase......................  WPI--Processed Foods...............           2.155           1.122
Food: Contract Service.....................  CPI-U--Food Away from Home.........           0.998           1.043
Chemicals..................................  WPI--Industrial Chemicals..........           3.413           2.133
Blood and Blood Products...................  WPI--Blood and Derivatives.........                           0.748
Medical Instruments........................  WPI--Med. Inst. & Equipment........           2.868           1.795
Photographic Supplies......................  WPI--Photo Supplies................           0.364           0.167
Rubber and Plastics........................  WPI--Rubber & Plastic Products.....           4.423           1.366
Paper Products.............................  WPI--Convert. Paper and Paperboard.           1.984           1.110
Apparel....................................  WPI--Apparel.......................           0.809           0.478
Machinery and Equipment....................  WPI--Machinery & Equipment.........           0.193           0.852
Miscellaneous Products.....................  WPI--Finished Goods excluding Food            2.029           0.783
                                              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: Service Workers.           4.945           4.453
All Other: Non-Labor Intensive.............  CPI-U--All Items (Urban)...........           0.757           3.700

[[Page 26803]]

 
Capital-Related Costs......................  ...................................           9.080           8.968
Depreciation...............................  ...................................           5.611           5.586
Fixed Assets...............................  Boeckh-Institutional Construction:.           3.570           3.503
Movable Equipment..........................  WPI--Machinery & Equipment: 11 Year           2.041           2.083
                                              Useful Life.
Interest Costs.............................  ...................................           3.212           2.682
Non-profit.................................  Avg. Yield Municipal Bonds: 23 Year           2.730           2.280
                                              Useful Life.
For-profit.................................  Avg. Yield AAA Bonds: 23 Year                 0.482           0.402
                                              Useful Life.
Other Capital-Related Costs................  CPI-U--Residential Rent............           0.257          0.699
----------------------------------------------------------------------------------------------------------------
\1\ The operating cost category weights in the excluded hospital market basket described in the August 1, 2002
  Federal Register (67 FR 50442 through 50444) add to 100.0.
\2\ Due to rounding, weights sum to 1.000.

    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. Because capital costs 
account for 8.968 percent of the market basket, then operating costs 
account for 91.032 percent. Each weight in the 1997-based excluded 
hospital market basket from the IPPS final rule published in the August 
1, 2002 Federal Register (67 FR 50442-50444) was multiplied by 0.91032 
to determine its weight in the 1997-based excluded hospital with 
capital market basket.

          Chart 4.--Proposed Excluded Hospital With Capital Input Price Index (FY 1997) Vintage Weights
----------------------------------------------------------------------------------------------------------------
                                                                                                     Interest:
                                                                   Fixed assets   Movable assets     capital-
                Year from farthest to most recent                    (23-year        (11-year      related (23-
                                                                     weights)        weights)      year 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
22..............................................................           0.064  ..............           0.087
23..............................................................           0.065  ..............           0.090
                                                                 -----------------
    Total*......................................................          1.0000          1.0000         1.0000
----------------------------------------------------------------------------------------------------------------
* Due to rounding, weights sum to 1.000.

    Chart 5 ``Percent Changes in the 1992-based and proposed 1997-based 
Excluded Hospital with Capital Market Baskets, FY 1999-2004'' compares 
the 1992-based excluded hospital with capital market basket to the 
proposed 1997-based excluded hospital with capital market basket. As is 
shown, the rebased and revised market basket grows slightly faster over 
the 1999-2001 period than the 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. We 
believe that the ECI is the most appropriate price proxy for measuring 
changes in wage data facing IRFs. This wage series reflects actual wage 
data reported by civilian hospitals to the Bureau of Labor Statistics. 
The ECIs are fixed-weight indexes and strictly measure the change in 
wage rates and employee benefits per hour. They are appropriately not 
affected by shifts in skill mix. This differs from the proxy used in 
the FY 1992-based index in which a blended occupational wage index was 
used. The blended occupational wage proxy used in the FY 1992-based 
index and the ECI for wages and salaries for hospitals both reflect a 
fixed distribution of occupations within

[[Page 26804]]

a hospital. The major difference between the two proxies is in the 
treatment of professional and technical wages (legal, accounting, 
management, and consulting services from outside the facility). In the 
blended occupational wage proxy, the professional and technical 
category was blended evenly between the ECI for wages and salaries for 
hospitals and the ECI for wages and salaries for professional and 
technical occupations in the overall economy. The ECI for hospitals 
reflects hospital-specific occupations. This revision had a similar 
impact on the hospital PPS and excluded market baskets, as described in 
the IPPS final rule published in the August 1, 2001 Federal Register. 
The proposed FY 2004 increase in the 1997-based excluded hospital with 
capital market basket is 3.3 percent.

    Chart 5.--Percent Changes in the 1992-Based and Proposed 1997-Based Excluded Hospital With Capital Market
                                              Baskets, FY 1999-2004
----------------------------------------------------------------------------------------------------------------
                                                                                                Percent Change,
                                                                             Percent Change,   Proposed FY 1997-
                                Fiscal Year                                   FY 1992-based       based Market
                                                                              Market Basket          Basket
----------------------------------------------------------------------------------------------------------------
                                   Actual Historical % Increase (FY 1999-2001)
----------------------------------------------------------------------------------------------------------------
1999......................................................................                2.3                2.7
2000......................................................................                3.4                3.1
2001......................................................................                3.9                4.0
                                                                           --------------------
    Average historical....................................................                3.2                3.3
---------------------------------------------------------------------------
                                            Forecasts (FY 2002-2004)
----------------------------------------------------------------------------------------------------------------
2002......................................................................                2.7                3.6
2003......................................................................                3.0                3.5
2004......................................................................                3.0                3.3
                                                                           --------------------
    Average forecast......................................................                2.9                3.5
----------------------------------------------------------------------------------------------------------------

    Section 1886(j)(3)(c) requires that the increase in the IRF PPS 
payment rate be based on an ``appropriate percentage increase in a 
market basket of goods and services comprising services for which 
payment is made under this subsection, which may be the market basket 
percentage increase described in subsection (b)(3)(B)(iii).'' To date, 
we have used a market basket based on the cost structure of all 
excluded hospitals to satisfy this requirement, and have discussed in 
prior rules why we feel this market basket provides a reasonable 
measure of the price changes facing exempt hospitals.
    In its March 2002 Report, the Medicare Payment Advisory Commission 
(MedPAC) recommended the development of a market basket specific to IRF 
services. As we mentioned in last year's final rule, we have been 
researching the feasibility of developing such a market basket. This 
research 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 IRFs. 
As described in greater detail below, based on this research, we are 
not proposing at this time to develop a market basket specific to IRF 
services.
    Our analysis of the Medicare cost reports indicates that the 
distribution of costs among major cost report categories (wages, 
pharmaceuticals, capital) for IRFs is not substantially different from 
the 1997-based excluded hospital with capital market basket we propose 
to use. In addition, the only data available to us was for these cost 
categories (wages, pharmaceuticals, and capital) presenting a potential 
problem since no other major cost category would be based on IRF data.
    We conducted a sensitivity analysis of annual percent changes in 
the market basket when the IRF weights for wages, pharmaceuticals, and 
capital were substituted into the excluded hospital with capital market 
basket. Other cost categories were recalibrated using ratios available 
from the inpatient PPS hospital market basket. On average, between the 
years 1995 through 2002, the excluded hospital with capital market 
basket increased at essentially the same average annual rate (2.9 
percent) as the market basket with IRF weights for wages, 
pharmaceuticals, and capital (2.8 percent). In addition, in almost any 
individual year the difference was 0.1 percentage point or less, which 
is less than the 0.25 percentage point criterion that is used under the 
IPPS update framework to determine whether a forecast error adjustment 
is warranted.
    The 0.25 percentage point criterion that determines whether a 
forecast error adjustment is warranted has been used in the IPPS update 
framework since the implementation of the IPPS. It serves as a 
guideline for the level of forecast accuracy, since any forecast is 
likely to contain enough imprecision that differences of one tenth or 
two-tenths of a percentage point are not thought to be significant. 
Thus, in this case if the forecast error is not at least greater than 
two-tenths of a percentage point, it is thought to be similar enough to 
the actual data as not to warrant an adjustment.
    Based on the above, we continue to believe that the excluded 
hospital with capital market basket is doing an adequate job of 
reflecting the price changes facing IRFs. We will continue to solicit 
comments about issues particular to IRFs that should be considered in 
our development of the proposed 1997-based excluded hospital with 
capital market basket, as well as encourage suggestions for additional 
data sources that may be available. Our hope is that the additional 
cost data being collected under the IRF PPS will eventually allow for 
the development of a market basket derived specifically from IRF data.
    As shown in Chart 4, for the payment rates set forth in this 
proposed rule, the proposed FY 2004 IRF market basket increase factor 
using 1997 data is 3.3 percent. Thus, we propose to apply the 3.3 
percent increase, in addition to the proposed budget neutral wage 
adjustment factor described below, to the FY 2003 standard payment

[[Page 26805]]

conversion factor ($12,193.00) to determine the proposed 2004 standard 
payment conversion factor.
2. Proposed Area Wage Adjustment
    Section 1886(j)(6) of the Act requires the Secretary to adjust the 
proportion (as estimated by the Secretary from time to time) of 
rehabilitation facilities' costs that are attributable to wages and 
wage-related costs for area differences in wage levels by a factor 
(established by the Secretary) reflecting the relative hospital wage 
level in a geographic area of a rehabilitation facility compared to the 
national average wage level for such facilities. The statute requires 
the Secretary to update this wage index adjustment at least every 36 
months. The Secretary is required to update this adjustment on the 
basis of information available to the Secretary (and updated as 
appropriate) of the wages and wage-related costs incurred in furnishing 
rehabilitation services. Any adjustments or updates made under section 
1886(j)(6) of the Act shall be made in a budget neutral manner.
3. Updated Wage Data
    For the FY 2004 IRF PPS rates proposed in this proposed rule, we 
are updating the IRF wage index. In implementing the FY 2002 and FY 
2003 IRF PPS, we used FY 1997 acute care hospital wage data to develop 
the IRF wage indices. We believe that the FY 1999 acute care hospital 
data are the best available because they are currently the most recent 
complete final data. Accordingly, we are proposing to update from the 
FY 1997 acute care hospital wage data to the FY 1999 acute care 
hospital wage data to develop the proposed wage indices contained in 
this proposed rule. Tables 3A and 3B contain the proposed FY 2004 wage 
indices for urban and rural areas respectively.
4. Proposed Updated Labor-Related Share
    In implementing the FY 2002 and FY 2003 IRF PPS, we used the 1992 
market basket data to determine the labor-related share (72.395 
percent). As stated above, we are proposing to update the 1992 market 
basket data to 1997. Doing so allows us to propose to use the 1997-
based excluded hospital market basket with capital costs to determine 
the FY 2004 labor-related share.
    We propose to calculate the FY 2004 labor-related share as the sum 
of the weights for those cost categories contained in the proposed 
1997-based excluded hospital with capital market basket that are 
influenced by local labor markets. These cost categories include wages 
and salaries, employee benefits, professional fees, labor-intensive 
services and a 46 percent share of capital-related expenses. The 
proposed labor-related share for FY 2004 is the sum of the FY 2004 
relative importance of each labor-related cost category, and reflects 
the different rates of price change for these cost categories between 
the base year (FY 1997) and FY 2004. The proposed sum of the relative 
importance for FY 2004 for operating costs (wages and salaries, 
employee benefits, professional fees, and labor-intensive services) is 
69.163 percent, as shown in Chart 6 ``FY 2004 Labor-Related Share 
Relative Importance.'' The portion of capital that is influenced by 
local labor markets is estimated to be 46 percent. Because the relative 
importance of capital is 7.653 percent of the 1997-based excluded 
hospital with capital market basket in FY 2004, we take 46 percent of 
7.653 percent to determine the labor-related share of capital for FY 
2004. The result is 3.520 percent, which we then add to the 69.163 
percent calculated for operating costs to determine the total labor-
related relative importance for FY 2004. The resulting labor-related 
share that we propose to use for IRFs in FY 2004 is 72.683 percent.

   Chart 6.--Proposed FY 2004 Labor-Related Share Relative Importance
------------------------------------------------------------------------
                                                     Relative importance
                               Relative importance   proposed 1997-based
        Cost category           1992-based market     market basket FY
                                 basket FY 2004             2004
------------------------------------------------------------------------
Wages and salaries..........                50.625                49.032
Employee benefits...........                11.903                11.050
Professional fees...........                 2.055                 4.523
Postage.....................                 0.252  ....................
All other labor intensive                    5.242                 4.558
 services...................
                             -----------------------
    Subtotal................                70.077                69.163
                             =======================
Labor-related share of                       3.394                 3.520
 capital costs..............
                             -----------------------
    Total...................                73.471                72.683
------------------------------------------------------------------------

    Chart 6 above shows that rebasing the excluded hospital with 
capital market basket lowers the increase in labor share that we are 
proposing to use in FY 2004 relative to what it would have been had we 
not rebased the excluded hospital with capital market basket. The 
proposed labor-related share for FY 2004 of 72.683 percent reflects an 
increase of 0.29 percent from the FY 2003 labor-related share of 72.395 
percent. If we did not rebase the excluded hospital with capital market 
basket, the labor-related share would have increased from 72.395 
percent for FY 2003 to 73.471 percent for FY 2004 by approximately 1.1 
percent, rather than the proposed increase of 0.29 percent. As we 
previously stated, we are proposing a labor-related share of 72.683 
percent for the FY 2004 IRF PPS payment rates set forth in the proposed 
rule.
5. Proposed Budget Neutral Wage Adjustment Update Methodology
    As stated above, for FY 2004, we are proposing to update the FY 
2003 IRF wage indices by using FY 1999 acute care hospital wage data 
and update the labor-related share by using the 1997 market basket 
data. Since any adjustment or updates to the IRF wage index made under 
section 1886(j)(6) of the Act shall be made in a budget neutral manner 
as required by statute, we are proposing to amend the regulation at 
Sec.  412.624(e)(1) to reflect this requirement. We are also proposing 
to determine a budget neutral wage adjustment factor based on an 
adjustment or update to the wage data to apply to the standard payment 
conversion factor.

[[Page 26806]]

    We propose to use the following steps to ensure that the FY 2004 
IRF standard payment conversion factor reflects the update to the wage 
indices and to the labor-related share in a budget neutral manner:
    Step 1. We determine the total amount of the FY 2003 IRF PPS rates 
using the FY 2003 standardized payment amount and the labor-related 
share and the wage indices from FY 2003 (as published in the August 1, 
2002 notice).
    Step 2. We then calculate the total amount of IRF PPS payments 
using the FY 2003 standardized payment amount and the proposed updated 
FY 2004 labor-related share and wage indices described above.
    Step 3. We divide the amount calculated in step 1 by the amount 
calculated in step 2, which equals the proposed FY 2004 budget neutral 
wage adjustment factor of 0.9954.
    Step 4. We then apply the FY 2004 budget neutral wage adjustment 
factor from step 3 to the FY 2003 IRF PPS standard payment conversion 
factor after the application of the market basket update, described 
above, to determine the proposed FY 2004 standardized payment amount.

D. Proposed Update of Payment Rates Under the IRF PPS for FY 2004

    Once we calculate the proposed IRF market basket increase factor 
and determine the proposed budget neutral wage adjustment factor, we 
can determine the proposed updated Federal prospective payments for FY 
2004. In accordance with proposed revised Sec.  412.624(c)(3)(i), we 
apply the proposed IRF market basket increase factor of 3.3 percent to 
the proposed standard payment conversion factor for FY 2003 ($12,193) 
which equals $12,595. Then, we apply the proposed budget neutral wage 
adjustment of .9954 to $12,595, which results in an updated proposed 
standard payment conversion factor for FY 2004 of $12,537. The proposed 
FY 2004 standard payment conversion factor is applied to each proposed 
CMG weight shown in Table 1 to compute the proposed unadjusted IRF 
prospective payment rates for FY 2004 shown in Table 2.
    Table 2, Proposed FY 2004 Federal Prospective Payments for Case-Mix 
Groups (CMGs) for FY 2004, displays the proposed CMGs, the proposed 
comorbidity tiers, and the corresponding proposed unadjusted IRF 
prospective payment rates for FY 2004.

E. Examples of Computing the Total Proposed Adjusted IRF Prospective 
Payments

    In general, under Sec.  412.624(e), we will adjust the Federal 
prospective payment amount associated with a CMG, shown in Table 2, to 
account an IRF's geographic wage variation, low-income patients and, if 
applicable, location in a rural area.
    The adjustment for an IRF's geographic wage variation includes the 
proposed FY 2004 labor-related share adjustment of 72.683 percent and 
the proposed FY 2004 IRF urban or rural wage indices in Tables 3A and 
3B, respectively.
    The adjustment for low-income patients is based on the formula to 
account for the cost of furnishing care to low-income patients as 
discussed in the August 7, 2001 IRF PPS final rule (67 FR 41360). The 
formula to calculate the low-income patient or LIP adjustment is as 
follows:
    (1 + DSH) raised to the power of (.4838)

Where:

[GRAPHIC][TIFF OMITTED]TP16MY03.020

    The adjustment for IRFs located in rural areas is an increase to 
the Federal prospective payment amount of 19.14 percent. This 
percentage increase is the same as the one described in the August 7, 
2002 IRF PPS final rule (67 FR 41359).
    To illustrate the proposed methodology that we will use for 
adjusting the Federal prospective payments, we provide the following 
example in Chart 7 below. One beneficiary is in Facility A, an IRF 
located in rural Maryland, and another beneficiary is in Facility B, an 
IRF located in the New York City metropolitan statistical area (MSA).
    Facility A's disproportionate share hospital (DSH) adjustment is 5 
percent, with a low-income patient (LIP) adjustment of (1.0239) and a 
wage index of (0.8946), and the rural area adjustment (19.14 percent) 
applies. Facility B's DSH is 15 percent, with a LIP adjustment of 
(1.0700) and a wage index of (1.4414).
    Both Medicare beneficiaries are classified to CMG 0112 (without 
comorbidities). To calculate each IRF's total proposed adjusted Federal 
prospective payment, we compute the wage-adjusted Federal prospective 
payment and multiply the result by the appropriate LIP adjustment and 
the rural adjustment (if applicable). The following chart illustrates 
the components of the proposed adjusted payment calculation.

  Chart 7.--Examples of Computing an IRF's Proposed Federal Prospective
                                 Payment
------------------------------------------------------------------------
                                   Facility A            Facility B
------------------------------------------------------------------------
Federal Prospective Payment.            $25,092.93            $25,092.93
Labor Share.................             x 0.72683             x 0.72683
Labor Portion of Federal               x 18,238.29           x 18,238.29
 Payment....................
Wage Index--(shown in Tables              x 0.8946              x 1.4414
 3A or 3B)..................
Wage-Adjusted Amount........           = 16,315.98           = 26,288.67
Non-Labor Amount............            + 6,854.15            + 6,854.15
Wage-Adjusted Federal                    23,170.13             33,142.82
 Payment....................
Rural Adjustment............              x 1.1914              x 1.0000
=============================
=============================
 
------------------------------------------------------------------------


[[Page 26807]]

    Thus, the proposed adjusted payment for facility A will be 
$28,264.65, and the proposed adjusted payment for facility B will be 
$35,462.82.

F. Computing Total Payments Under the IRF PPS for the Transition Period

    Under section 1886(j)(1) of the Act and Sec.  412.626, payment for 
all IRFs with cost reporting periods beginning on or after October 1, 
2002 will consist of 100 percent of the proposed FY 2004 adjusted 
Federal prospective payment (plus any applicable outlier payments under 
Sec.  412.624(e)(4)) and there will not be any blended payments. 
Accordingly, the proposed FY 2004 IRF PPS rates set forth in this 
proposed rule would apply to all discharges on or after October 1, 2003 
and before October 1, 2004.

G. IRF-Specific Wage Data

    On page 41358 of the August 7, 2001 IRF PPS final rule, we 
responded to comments regarding the development of a separate wage 
index for IRFs. Specifically, we responded to these comments as 
follows:
    ``At this time, we are unable to develop a separate wage index for 
rehabilitation facilities. There is a lack of specific IRF wage and 
staffing data necessary to develop a separate IRF wage index 
accurately. Further, in order to accumulate the data needed for such an 
effort, we would need to make modifications to the cost report. In the 
future, we will continue to research a wage index specific to IRF 
facilities. Because we do not have an IRF specific wage index that we 
can compare to the hospital wage index, we are unable to determine at 
this time the degree to which the acute care hospital data fully 
represent IRF wages. However, we believe that a wage index based on 
acute care hospital wage data is the best and most appropriate wage 
index to use in adjusting payments to IRFs, since both acute care 
hospitals and IRFs compete in the same labor markets.''
    We still do not have any IRF-specific wage data to determine the 
feasibility of developing an IRF-specific wage index or of developing 
an adjustment to refine the acute care hospital wage data to reflect 
inpatient rehabilitation services. We continue to look into alternative 
ways to collect, analyze, develop, and audit IRF-specific wage data 
that would reflect the wages and wage-related costs attributable to 
rehabilitation facilities. We believe that the best source to collect 
IRF-specific wage data is the Medicare cost report--the same source for 
the acute care hospital wage data. These data must be accurate and 
reliable, thus collecting these data would increase the recordkeeping 
and reporting burden on IRFs. Initially, this burden would be imposed 
to collect data just to determine the feasibility of developing an IRF-
specific wage index or development of an adjustment to the current IRF 
wage index.
    In addition, as stated earlier in this section of this proposed 
rule, any adjustment or update to the wage index must be made in a 
budget neutral manner in accordance with Sec.  1886(j)(6) of the Act. 
Thus, the PPS rates for any one IRF could be affected in a positive or 
negative direction, due to the application of the proposed updates to 
the labor-related share and wage indices in a budget neutral manner. 
Accordingly, given the current trend of reducing the Medicare cost 
reporting burden of collecting data and given that any change to the 
wage index be budget neutral, we are soliciting comments on possible 
ways to adjust or refine the current IRF wage index, given those 
restraints.
    Since IRFs and hospitals compete in the same labor markets, we 
propose to continue to use the acute care hospital wage data to develop 
the IRF wage index as described earlier in this section of this 
proposed rule.

H. Proposed Adjustment for High-Cost Outliers Under the IRF Prospective 
Payment System

    In this proposed rule, we are proposing changes to the methodology 
for determining IRF payments for high-cost outliers. The intent of 
these proposed changes is to ensure outlier payments are paid only for 
truly high-cost cases. Further, these proposed changes will allow us to 
create policies that are consistent among the various Medicare 
prospective payment systems when appropriate.
    We have become aware that under the existing acute care hospital 
inpatient prospective payment system (IPPS), that some hospitals have 
taken advantage of two system features in the IPPS outlier policy to 
maximize their outlier payments. The first is the time lag between the 
current charges on a submitted bill and the cost-to-charge ratio taken 
from the most recent settled cost report. Second, statewide average 
cost-to-charge ratios are used in those instances in which an acute 
care hospital's operating or capital cost-to-charge ratios fall outside 
reasonable parameters. We set forth these parameters and the statewide 
cost-to-charge ratios in the annual notices of prospective payment 
rates that are published by August 1 of each year in accordance with 
Sec.  412.8(b). Currently, these parameters represent 3.0 standard 
deviations (plus or minus) from the geometric mean of cost-to-charge 
ratios for all hospitals. In some cases, hospitals may increase their 
charges so far above costs that their cost-to-charge ratios fall below 
3 standard deviations from the geometric mean of the cost-to-charge 
ratio and a higher statewide average cost-to-charge ratio is applied to 
determine if the acute care hospital should receive an outlier payment. 
This disparity results in their cost-to-charge ratios being set too 
high, which in turn results in an overestimation of their current costs 
per case.
    We believe the Congress intended that outlier payments under both 
the IPPS and the IRF PPS would be made only in situations where the 
cost of care is extraordinarily high in relation to the average cost of 
treating comparable conditions or illnesses. Under the existing IPPS 
outlier methodology, if hospitals' charges are not sufficiently 
comparable in magnitude to their costs, the legislative purpose 
underlying the outlier regulations is thwarted. Thus, on March 4, 2003, 
we published a proposed rule (68 FR 10420-10429) ``Proposed Changes in 
Methodology for Determining Payment for Extraordinarily High-Cost Cases 
(Cost Outliers) Under the Acute Care Hospital Inpatient Prospective 
Payment System,'' with an extensive discussion proposing new 
regulations to ensure outlier payments are paid for truly high-cost 
cases under the IPPS.
    We believe the use of parameters is appropriate for determining 
cost-to-charge ratios to ensure these values are reasonable and outlier 
payments can be made in the most equitable manner possible. Further, we 
believe the methodology of computing IRF outlier payments is 
susceptible to the same payment enhancement practices identified under 
the IPPS and, therefore, merit similar proposed revisions. Accordingly, 
as discussed below, we are proposing in this proposed rule to make 
revisions to the IRF outlier payment methodology.
1. Current Outlier Payment Provision Under the IRF PPS
    Section 1886(j)(4) of the Act provides the Secretary with the 
authority to make payments in addition to the basic IRF prospective 
payments for cases incurring extraordinarily high costs. In the August 
7, 2001 IRF PPS final rule, we codified at Sec.  412.624(e)(4) of the 
regulations the provision to 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 IRF PPS in

[[Page 26808]]

determining resource costs at the patient and facility 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.
    Under Sec.  412.624(e)(4), we make outlier payments for any 
discharges if the estimated cost of a case exceeds the adjusted IRF PPS 
payment for the CMG plus the adjusted threshold amount ($11,211 which 
is then adjusted for each IRF by the facilities wage adjustment, its 
LIP adjustment, and its rural adjustment, if applicable). We calculate 
the estimated cost of a case by multiplying the IRF's overall cost-to-
charge ratio by the Medicare allowable covered charge. In accordance 
with Sec.  412.624(e)(4), we pay outlier cases 80 percent of the 
difference between the estimated cost of the case and the outlier 
threshold (the sum of the adjusted IRF PPS payment for the CMG and the 
adjusted threshold amount).
    On November 1, 2001, we published a Program Memorandum (Transmittal 
A-01-131) with detailed intermediary instructions for calculating the 
cost-to-charge ratios for the purposes of determining outlier payments 
under the IRF PPS. We stated the following:
    ``Intermediaries will use the latest available settled cost report 
and associated data in determining a facility's overall Medicare cost-
to-charge ratio specific to freestanding IRFs and for IRFs that are 
distinct part units of acute care hospitals. Intermediaries will 
calculate updated ratios each time a subsequent cost report settlement 
is made. Further, retrospective adjustments to the data used in 
determining outlier payments will not be made. If the overall Medicare 
cost-to-charge ratio appears to be substantially out-of-line with 
similar facilities, the intermediary should ensure that the underlying 
costs and charges are properly reported. We are evaluating the use of 
upper and lower cost-to-charge ratio thresholds (similar with the 
outlier policy for acute care hospitals) in the future to ensure that 
the distribution of outlier payments remains equitable.''
    For this proposed rule, we are proposing to continue to use the 
$11,211 threshold amount. This threshold amount was used in the FY 2003 
IRF PPS payment rates and we believe it remains appropriate because the 
data should not contain any of the inappropriate payment enhancement 
practices that would result with the implementation of an outlier 
policy. The data used to construct the existing IRF-PPS outlier 
threshold consists of cost and charge data that was not influenced by 
the incentives the current IRF PPS outlier policy may create. 
Specifically, we used the IRF cost and charge data from the previous 
cost-based reimbursement system to establish the outlier threshold. 
These data were not inappropriately influenced by incentives to inflate 
charges that are created with the existence of an outlier policy; there 
is not a need for an outlier policy cost-based reimbursement because 
IRFs, with some limits, would be paid their costs. This is unlike the 
outlier situation in IPPS, which used post-PPS data to update its 
annual threshold amount. The IPPS data reflected the practices that we 
believe erroneously created inappropriate outlier payments.
    We propose to continue to make outlier payments for any discharges 
if the estimated cost of a case exceeds the adjusted IRF PPS payment 
for the CMG plus the adjusted threshold amount ($11,211 which is then 
adjusted for each IRF by the facility's wage adjustment, its LIP 
adjustment, and its rural adjustment, if applicable). We propose to 
continue to calculate the estimated cost of a case by multiplying an 
IRF's overall cost-to-charge ratio by the Medicare allowable covered 
charge. However, we are proposing to apply a ceiling to an IRF's cost-
to-charge ratios which is discussed below. In accordance with Sec.  
412.624(e)(4), we will continue to pay outlier cases 80 percent of the 
difference between the estimated cost of the case and the outlier 
threshold (the sum of the adjusted IRF PPS payment for the CMG and the 
adjusted threshold amount). In addition, under the existing methodology 
described in the preamble to the August 7, 2001 IRF PPS final rule (66 
FR 41363), we will continue to assign the applicable national average 
for new IRFs.
2. Proposed Changes to the IRF Outlier Payment Methodology

Statistical Accuracy of Cost-to-Charge ratios

    We believe that there is a need to ensure that the cost-to-charge 
ratio used to compute an IRF's estimated costs should be subject to a 
statistical measure of accuracy. Removing aberrant data from the 
calculation of outlier payments will allow us to enhance the extent to 
which outlier payments are equitably distributed and continue to reduce 
incentives for IRFs to underserve patients who require more costly 
care. Further, using a statistical measure of accuracy to address 
aberrant cost-to-charge ratios will also allow us to be consistent with 
the proposed outlier policy changes for the acute care hospital IPPS 
discussed in the March 4, 2003 Cost Outlier proposed rule, (68 FR 
10420). Therefore in this proposed rule, we are proposing the 
following:
    (1) To apply a ceiling to IRF's cost-to-charge ratio if a 
facility's cost-to-charge ratio is above a ceiling. We will calculate 
two national ceilings, one for IRFs located in rural areas and one for 
facilities located in urban areas. We propose to compute this ceiling 
by first calculating the national average and the standard deviation of 
the cost-to-charge ratio for both urban and rural IRFs. (Because of the 
small number of IRF's compared to the number of acute care hospitals, 
we believe that statewide averages for IRFs, as proposed under the 
IPPS, would not be statistically valid. Thus, we propose to use 
national average cost-to-charge ratios in place of statewide averages.) 
To determine the rural and urban ceiling, we propose to multiply each 
of the standard deviations by 3 and add the result to the appropriate 
national cost-to-charge ratio average (rural and urban). We believe 
this method results in statistically valid ceilings. If an IRF's cost-
to-charge ratio is above the applicable ceiling it is considered to be 
statistically inaccurate and we propose to assign the national (either 
rural or urban) average cost-to-charge ratio to the IRF. Cost-to-charge 
ratios above this ceiling 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 most likely erroneous and 
therefore should not be relied upon. We propose to update the ceiling 
and averages using this methodology every year and we will publish 
these amounts in future program memoranda;
    (2) Not assign the applicable national average cost-to-charge ratio 
when an IRF's cost-to-charge ratio falls below a floor. We are 
proposing this policy because, as is the case for acute care hospitals, 
we believe IRFs 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), if we propose the use 
of a floor, the IRF's cost-to-charge ratio would be raised to the 
applicable national average. This application of the national average 
could result in inappropriately higher outlier payments. Accordingly, 
we are proposing to apply the IRF's actual cost-to-charge ratio to 
determine the cost of the case rather than creating and applying a 
floor. Applying an IRF's actual cost-to-charge ratio to charges in the 
future to determine the cost of a case

[[Page 26809]]

will result in more appropriate outlier payments because it does not 
overstate the actual cost-to-charge ratio. Therefore, consistent with 
the proposed policy change for acute care hospitals under the IPPS, we 
are proposing that to use an IRF's actual cost-to-charge ratio no 
matter how low their ratio fall.
3. Proposed Adjustment of IRF Outlier Payments
    Under the existing methodology for computing IRF outlier payments 
as described in the preamble of the August 7, 2001 IRF PPS final rule 
(66 FR 41363) and in the November 1, 2001 Program Memorandum discussed 
above, we specify that the cost-to-charge ratio used to compute 
estimated costs are obtained from the most recent settled Medicare cost 
report. Further, we provided for no retroactive adjustment to the 
outlier payments to account for differences between the cost-to-charge 
ratio from the latest settled cost report and the actual cost-to-charge 
ratio for the cost reporting period in which the outlier payment is 
made. This policy is consistent with the existing outlier payment 
policy for acute care hospitals under the IPPS. However, as discussed 
in the IPPS March 4, 2003 Cost Outlier proposed rule (68 FR 10423), we 
proposed to revise the methodology for determining cost-to-charge 
ratios for acute care hospitals under the IPPS because we became aware 
that payment vulnerabilities exist in the current IPPS outlier policy. 
Because we believe the IRF outlier payment methodology is likewise 
susceptible to the same payment vulnerabilities, we are proposing the 
following:
    (1) As proposed for acute care hospitals under the IPPS at proposed 
Sec.  412.84(i) in the March 4, 2003 proposed rule (68 FR 10420), we 
are proposing under Sec.  412.624(e)(4), by cross-referencing proposed 
Sec.  412.84(i), that fiscal intermediaries would use more recent data 
when determining an IRF's cost-to-charge ratio. Specifically, under 
proposed Sec.  412.84(i), we are proposing that fiscal intermediaries 
would use either the most recent settled IRF cost report or the most 
recent tentative settled IRF cost report, whichever is later to obtain 
the applicable IRF cost-to-charge ratio. In addition, as proposed under 
Sec.  412.84(i), any reconciliation of outlier payments will be based 
on a ratio of costs to charges computed from the relevant cost report 
and charge data determined at the time the cost report coinciding with 
the discharge is settled. 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.
    (2) As proposed for acute care hospitals under the IPPS at proposed 
Sec.  412.84(m) in the March 4, 2003 proposed rule (68 FR 10420), we 
are proposing under Sec.  412.624(e)(4), by cross-referencing proposed 
Sec.  412.84(m), that IRF outlier payments may be adjusted to account 
for the time value of money which is the value of money during the time 
period it was inappropriately held by the IRF as an ``overpayment.'' We 
also may adjust outlier payments for the time value of money for cases 
that are ``underpaid'' to the IRF. In these cases, the adjustment will 
result in additional payments to the IRF. We are proposing that any 
adjustment will be based upon a widely available index to be 
established in advance by the Secretary, and will be applied from the 
midpoint of the cost reporting period to the date of reconciliation.
4. Proposed Change to the Methodology for Calculating the Federal 
Prospective Payment Rates

Section 412.624(e)(4) Adjustment for high-cost outliers

    We provide for an additional payment to a facility if its estimated 
costs for a patient exceeds a fixed dollar amount (adjusted for area 
wage levels and factors to account for treating low-income patients and 
for rural locations) as specified by CMS. The additional payment equals 
80 percent of the difference between the estimated cost of the patient 
and the sum of the adjusted Federal prospective payment computed under 
this section and the adjusted fixed dollar amount. Additional payments 
made under this section will be subject to the adjustments at Sec.  
412.84(i) except that national averages will be used instead of 
statewide averages. Additional payments made under this section will 
also be subject to adjustments at Sec.  412.84(m).

VII. Provisions of the Proposed Rule

    Overall, in this proposed rule, we are proposing to update the IRF 
Federal prospective payment rates from FY 2003 to FY 2004 using the 
methodology described in Sec.  412.624 of the regulations. Our proposed 
FY 2004 Federal prospective payment rates would be effective for 
discharges on or after October 1, 2003 and before October 1, 2004.
    We are proposing to update the IRF wage indices for FY 2004 by 
using FY 1999 acute care hospital data. However, any adjustments or 
updates made under section 1886(j)(6) of the Act must be made in a 
budget neutral manner. Therefore, we are proposing a methodology to 
update the wage indices for FY 2004 using 1999 acute care hospital data 
in a budget neutral manner.
    We are also proposing to modify certain criteria for a hospital or 
a hospital unit to be classified as an IRF.

Section 412.20 Hospital services subject to the prospective payment 
systems

    We are proposing to redesignate current Sec.  412.20(b) and add a 
new paragraph (b)(2) that states inpatient hospital services will not 
be paid for under the IRF PPS if the services are paid by a health 
maintenance organization (HMO) or competitive medical plan (CMP) that 
elects not to have CMS make payments to an IRF for services, which are 
inpatient hospital services, furnished to the HMO's or CMP's Medicare 
enrollees under part 417.

Section 412.22 Excluded hospitals and hospital units: General rules

    We are proposing to eliminate application of the bed-number 
criteria in Sec.  412.22(h)(2)(i) for freestanding satellite IRFs by 
revising Sec.  412.22(h)(2) and by adding Sec.  412.22(h)(7).

Section 412.25 Excluded hospital units: Common requirements

    We are also proposing to eliminate application of the bed-number 
criteria for IRF satellite units of a hospital in Sec.  412.25(e)(2)(i) 
by revising Sec.  412.25(e)(2) and by adding Sec.  412.25(e)(5) to 
conform with the proposed change in Sec.  412.22(h)(2)(i).

Section 412.29 Excluded rehabilitation units: Additional requirements

    Under Sec.  412.29(a), an IRF unit must have met either the 
requirements for new units or converted units under Sec.  412.30 in 
order to be excluded from the inpatient acute care PPS. Section 
412.29(a)(2) contains an incorrect reference to the requirements for 
converted units under ``Sec.  412.30(b).'' The correct reference to the 
requirements for converted units is Sec.  412.30(c). Accordingly, we 
are proposing to make a technical correction by changing the reference 
in Sec.  412.29(a)(2) to state ``Converted units under Sec.  
412.30(c).''

Section 412.30 Exclusion of new rehabilitation units and expansion of 
units already excluded

    Section 412.30(b)(3) contains an incorrect reference to the 
required written certification described in

[[Page 26810]]

paragraph ``(a)(2)'' of this section. The correct reference to the 
written certification is described in paragraph (2) of Sec.  412.30(b). 
Accordingly, we are proposing to make a technical correction by 
changing the current reference to paragraph (a)(2) in paragraph (b)(3) 
to state ``The written certification described in paragraph (b)(2) * * 
*''.
    Section 412.30(d)(2)(i) contains an incorrect reference to the 
definition of new bed capacity under paragraph ``(c)(1)'' of this 
section. The correct reference to the definition of new bed capacity is 
paragraph (d)(1). Accordingly, we are proposing a technical correction 
to change the current reference to paragraph (c)(1) in paragraph 
(d)(2)(i) to state ``* * * under paragraph (d)(1) of this section.''

Revision of the Definition of Discharge in Sec.  412.602

    According to Sec.  412.602, a discharge has occurred when the 
patient has been formally released from the hospital, or has died in 
the hospital, or when the patient stops receiving Medicare--covered 
Part A inpatient rehabilitation services. We are proposing to amend 
Sec.  412.602 by revising the definition of ``Discharge.'' Accordingly, 
the revised definition would read as follows:
    Discharge. A Medicare patient in an inpatient rehabilitation 
facility is considered discharged when--
    (1) The patient is formally released from the inpatient 
rehabilitation facility; or
    (2) The patient dies in the inpatient rehabilitation facility.

General Requirements for Payment Under the Prospective Payment System 
for Inpatient Rehabilitation Facilities in Sec.  412.604

    In Sec.  412.604, ``General requirements,'' in paragraph (a)(2) 
introductory text, we are proposing to change the word ``we'' to ``CMS 
or its Medicare fiscal intermediary'' to read as follows:
    ``If an inpatient rehabilitation facility fails to comply fully 
with these conditions with respect to inpatient hospital services 
furnished to one or more Medicare Part A fee-for-service beneficiaries, 
CMS or its Medicare fiscal intermediary may, as appropriate--''

Addition of Requirement To Give Patient the Privacy Act Statement in 
Sec.  412.608

    Section 412.608 specifies that before performing the IRF-PAI 
assessment, the IRF must inform the patient of the rights contained in 
this section. The rights specified in Sec.  412.608 are--
    (1) The right to be informed of the purpose of the collection of 
the patient assessment data;
    (2) The right to have the patient assessment information collected 
be kept confidential and secure;
    (3) The right to be informed that the patient assessment 
information will not be disclosed to others, except for legitimate 
purposes allowed by the Federal Privacy Act and Federal and State 
regulations;
    (4) The right to refuse to answer patient assessment questions; and
    (5) The right to see, review, and request changes on his or her 
patient assessment.
    In addition to the rights specified in Sec.  412.608, a patient has 
privacy rights under the Privacy Act of 1974 (5 U.S.C. Sec.  
552a(e)(3)), and 45 CFR 5b.4(a)(3). The Privacy Act and 45 CFR 
5b.4(a)(3) require that an individual be informed under what authority, 
and for what purpose, individually identifiable information is being 
collected by a Federal agency and maintained in a system of records. In 
order to ensure that an IRF complies with the Privacy Act of 1974, and 
45 CFR 5b.4(a)(3), we are proposing that before performing the IRF-PAI 
assessment, an IRF clinician must give each Medicare inpatient two 
forms. We have published these forms in Appendix B ``Inpatient 
Rehabilitation Facility Patient Privacy Forms'' of this proposed rule. 
In addition, we are proposing that the form entitled ``Privacy Act 
Statement--Health Care Records'' is a detailed description of patient 
privacy rights under the Privacy Act of 1974. Also, we are proposing 
that the form entitled ``Inpatient Rehabilitation Facility Patient 
Assessment Instrument (IRF-PAI) Data Collection Information Summary for 
Patients in Inpatient Rehabilitation Facilities'' is the plain language 
equivalent of the Privacy Act Statement--Health Care Records. 
Additionally, we are proposing that by giving both of these forms to a 
patient before starting the IRF-PAI assessment, the IRF would fulfill 
the requirement that the patient be informed of the five rights 
specified in Sec.  412.608. Accordingly, we are proposing to amend 
Sec.  412.608 to read as follows:

Section 412.608 Patients Rights Regarding the Collection of Patient 
Assessment Data

    (a) Before performing an assessment using the patient assessment 
instrument, a clinician of the inpatient rehabilitation facility must 
give a Medicare inpatient each of these forms--
    (1) The Privacy Act Statement--Health Care Records; and
    (2) The Inpatient Rehabilitation Facility Patient Assessment 
Instrument (IRF-PAI) Privacy Act Statement--Health Care Records.
    (b) The Inpatient Rehabilitation Facility Patient Assessment 
Instrument (IRF-PAI) Data Collection Information Summary for Patients 
in Inpatient Rehabilitation Facilities is the plain language equivalent 
of the Privacy Act Statement--Health Care Records.
    (c) By giving the Medicare inpatient the forms specified in 
paragraph (a) of this section the inpatient rehabilitation facility has 
informed the Medicare patient of--
    (1) His or her privacy rights under the Privacy Act of 1974 and 45 
CFR 5b.4(a)(3); and
    (2) The following rights:
    (i) The right to be informed of the purpose of the collection of 
the patient assessment data.
    (ii) The right to have the patient assessment information collected 
be kept confidential and secure.
    (iii) The right to be informed that the patient assessment 
information will not be disclosed to others, except for legitimate 
purposes allowed by the Federal Privacy Act and Federal and State 
regulations.
    (iv) The right to refuse to answer patient assessment questions.
    (v) The right to see, review, and request changes on his or her 
patient assessment.
    (d) The patient rights specified in this section are in addition to 
the patient rights specified in Sec.  482.13 of this chapter.
    By complying with the requirements specified in revised Sec.  
412.608 the IRF has not met the separate requirement in 45 CFR 164.520 
entitled ``Notice of privacy practices for protected health 
information.'' Section 164.520 requires that a health plan or health 
care provider give patients a Notice of Privacy Practices that must 
describe the health plan's or health care provider's own uses and 
disclosures of protected health information, and the individual rights 
that patients have with respect to their protected health information.

When the IRF-PAI Must Be Completed (Sec.  412.610)

    According to Sec.  412.606(b), an IRF must use the IRF-PAI to 
assess Medicare Part A fee-for-service inpatients. Section 
412.610(c)(1)(i)(C) specifies that the IRF-PAI for the admission 
assessment ``Must be completed on the calendar day that follows the 
admission assessment reference day.'' In order to clarify that

[[Page 26811]]

Sec.  412.610(c)(1)(i)(C) does not prohibit the IRF from recording any 
or all of the data on the IRF-PAI before the day that follows the 
admission assessment reference day, we are proposing to amend Sec.  
412.610(c)(1)(i)(C) to read as follows: Must be completed by the 
calendar day that follows the admission assessment reference day.

Transmission of IRF-PAI Data (Sec.  412.614)

    As specified in Sec.  412.606(b), ``Patient assessment 
instrument,'' an IRF must use the IRF-PAI to assess Medicare Part A 
fee-for-service inpatients.
    Section 412.614, ``Transmission of patient assessment data,'' 
specifies that an IRF must transmit to us the IRF-PAI assessment data 
for each Medicare Part A fee-for-service inpatient. It is the 
electronic version of the IRF-PAI that enables an IRF to transmit the 
IRF-PAI data to us. We require that IRFs transmit IRF-PAI data so that 
we have the IRF-PAI data that are associated with the CMG payment code 
that the IRF submitted to its FI. We are proposing to amend Sec.  
412.614 by specifying that Sec.  412.614(a) is a general rule that 
would read as follows:
    (a) Data format. General rule. The IRF must encode and transmit 
data for each Medicare Part A fee-for-service inpatient--
    We are proposing to amend Sec.  412.614 by adding a new Sec.  
412.614(a)(3), which would relieve the IRF of having to transmit the 
IRF-PAI data for a Medicare Part A fee-for-service inpatient when 
Medicare will not be paying the IRF for any of the services the IRF 
furnished to that inpatient. New Sec.  412.614(a)(3) would read as 
follows:
    Exception to the general rule. When the inpatient rehabilitation 
facility does not submit claims data to Medicare in order to be paid 
for any of the services it furnished to a Medicare Part A fee-for-
service inpatient, the inpatient rehabilitation facility is not 
required, but may, transmit to Medicare the inpatient rehabilitation 
facility patient assessment data associated with the services furnished 
to that same Medicare Part A fee-for-service inpatient.
    We are proposing a new Sec.  412.614(e) to read as follows: 
``Exemption to being assessed a penalty for transmitting the IRF-PAI 
data late. CMS may waive the penalty specified in paragraph (d) of this 
section when, due to an extraordinary situation that is beyond the 
control of an inpatient rehabilitation facility, the inpatient 
rehabilitation facility is unable to transmit the patient assessment 
data in accordance with paragraph (c) of this section. Only CMS can 
determine if a situation encountered by an inpatient rehabilitation 
facility is extraordinary and qualifies as a situation for waiver of 
the penalty specified in paragraph (d)(2) of this section. An 
extraordinary situation may be, but is not limited to, fires, floods, 
earthquakes, or similar unusual events that inflict extensive damage to 
an inpatient rehabilitation facility. An extraordinary situation may be 
one that produces a data transmission problem that is beyond the 
control of the inpatient rehabilitation facility, as well as other 
situations determined by CMS to be beyond the control of the inpatient 
rehabilitation facility. An extraordinary situation must be fully 
documented by the inpatient rehabilitation facility.''

Proposed Update of Area Wage Data

    In Sec.  412.624(e), ``Calculation of the adjusted Federal 
prospective payment,'' in paragraph (1), ``Adjustment for area wage 
levels,'' we are proposing that adjustments or updates to the wage data 
used to adjust a facility's Federal prospective payment rate under 
paragraph (e)(1) of this section will be made in a budget neutral 
manner. We are also proposing to determine a budget neutral wage 
adjustment factor, based on any adjustment or update to the wage data, 
to apply to the standard payment conversion factor.

Proposed Adjustment for High-Cost Outliers Under the IRF Prospective 
Payment System (Sec.  412.624)

    As proposed for acute care hospitals under the IPPS at proposed 
Sec.  412.84(i) in the March 4, 2003 proposed rule (68 FR 10420), we 
are proposing under Sec.  412.624(e)(4), by cross-referencing proposed 
Sec.  412.84(i), that fiscal intermediaries would use more recent data 
when determining an IRF's cost-to-charge ratio. Specifically, under 
proposed Sec.  412.84(i), we are proposing that fiscal intermediaries 
would use either the most recent settled IRF cost report or the most 
recent tentative settled IRF cost report, whichever is later, to obtain 
the applicable IRF cost-to-charge ratio. In addition, as proposed under 
Sec.  412.84(i), any reconciliation of outlier payments will be based 
on a ratio of costs to charges computed from the relevant cost report 
and charge data determined at the time the cost report coinciding with 
the discharge is settled. (Because of the small number of IRFs compared 
to the number of acute care hospitals, we believe that statewide 
averages for IRFs, as proposed under the IPPS, would not be 
statistically valid. Thus, we are proposing to use national average 
cost-to-charge ratios in place of statewide averages.) 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.
    As proposed for acute care hospitals under the IPPS at proposed 
Sec.  412.84(m) in the March 4, 2003 proposed rule (68 FR 10420), we 
are proposing under Sec.  412.624(e)(4), by cross-referencing proposed 
Sec.  412.84(m), that IRF outlier payments may be adjusted to account 
for the time value of money which is the value of money during the time 
period it was inappropriately held by the IRF as an ``overpayment.'' We 
also may adjust outlier payments for the time value of money for cases 
that ``underpaid'' to the IRF. In these cases, the adjustment will 
result in additional payments to the IRF. We are proposing that any 
adjustment will be based upon a widely available index to be 
established in advance by the Secretary, and will be applied from the 
midpoint of the cost reporting period to the date of reconciliation.

VIII. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), agencies are 
required to provide a 60-day notice in the Federal Register and solicit 
public comment when a collection of information requirement is 
submitted to the Office of Management and Budget (OMB) for review and 
approval. To fairly evaluate whether an information collection should 
be approved by OMB, section 3506(c)(2)(A) of the PRA requires that we 
solicit comments on the following issues:
    [sbull] Whether the information collection is necessary and useful 
to carry out the proper functions of the agency;
    [sbull] The accuracy of the agency's estimate of the information 
collection burden;
    [sbull] The quality, utility, and clarity of the information to be 
collected; and
    [sbull] Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are therefore soliciting public comment on each of these issues 
for the proposed information collection requirements discussed below.

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

    Under this section, before performing an assessment using the 
inpatient rehabilitation facility patient assessment instrument, a 
clinician of the inpatient rehabilitation facility must give a Medicare 
inpatient the form entitled

[[Page 26812]]

``Privacy Act Statement--Health Care Records'' and the simplified plain 
language description of the Privacy Act Statement--Health Care Records, 
which is a form entitled ``Data Collection Information Summary for 
Patients in Inpatient Rehabilitation Facilities;'' the inpatient 
rehabilitation facility must document in the Medicare inpatient's 
clinical record that the Medicare inpatient has been given the 
documents specified in the section.
    The burden associated with this section is the time it will take to 
document that the patient has been given the requisite forms. We 
estimate that it will take no more than a minute per patient. There 
will be an estimated 390,000 admissions per year, for a total of 6,500 
hours per year.

Section 412.614 Transmission of Patient Assessment Data

    1. The inpatient rehabilitation facility must encode and transmit 
data for each Medicare Part A fee-for-service inpatient.
    These information collection requirements associated with the IRF 
PPS are currently approved by OMB through July 31, 2005 under OMB 
number 0938-0842.
    2. Under paragraph (e), Exemption to being assessed a penalty for 
transmitting the IRF-PAI data late, CMS may waive the penalty specified 
in paragraph (d) of this section. To assist CMS in determining if a 
waiver is appropriate the inpatient rehabilitation facility must fully 
document the circumstances surrounding the occurrence.
    Given that it is estimated that fewer than 10 instances will occur 
on an annual basis to necessitate a waiver, this requirement is not 
subject to the PRA as stipulated under 5 CFR 1320.3(c).
    We have submitted a copy of this proposed rule to OMB for its 
review of the information collection requirements in Sec.  412.604, 
Sec.  412.608 and Sec.  412.614. These requirements are not effective 
until they have been approved by OMB.
    If you have any comments on any of these information collection and 
record keeping requirements, please mail the original and 3 copies to 
CMS within 60 days of this publication date directly to the following: 
Centers for Medicare & Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs, Office of Regulations Development 
and Issuances, Reports Clearance Officer, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    Attn: Julie Brown, CMS-1474-P; and Office of Information and 
Regulatory Affairs, Office of Management and Budget, Room 10235, New 
Executive Office Building, Washington, DC 20503, Attn: Brenda Aguilar, 
CMS Desk Officer.
    Comments submitted to OMB may also be emailed to the following 
address: e-mail: [email protected]; or faxed to OMB at (202) 395-
6974.

IX. Response to Comments

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

X. Regulatory Impact Analysis

A. Introduction

    The August 7, 2001 IRS PPS final rule (66 FR 41316) established the 
IRF PPS for the payment of inpatient hospital services furnished by a 
rehabilitation hospital or rehabilitation unit of a hospital with cost 
reporting periods beginning on or after January 1, 2002. We 
incorporated a number of elements into the IRF PPS, such as case-level 
adjustments, a wage adjustment, an adjustment for the percentage of 
low-income patients, a rural adjustment, and outlier payments. The 
August 1, 2002 IRF PPS notice (67 FR 49928) set forth updates of the 
IRF PPS rates contained in the August 7, 2001 IRF PPS final rule. The 
purpose of the updates set forth in the August 1, 2002 IRF PPS notice 
was to provide an update to the IRF payment rates for discharges during 
FY 2003. This proposed rule proposes updated IRF PPS rates for 
discharges that occur during FY 2004.
    In constructing these impacts, we do not attempt to predict 
behavioral responses, and we do not make adjustments for future changes 
in such variables as discharges or case-mix. We note that certain 
events may combine to limit the scope or accuracy of our impact 
analysis, because such an analysis is future-oriented and, thus, 
susceptible to forecasting errors due to other changes in the 
forecasted impact time period. Some examples of such possible events 
are newly legislated general Medicare program funding changes by the 
Congress, or changes specifically related to IRFs. In addition, changes 
to the Medicare program may continue to be made as a result of the BBA, 
the BBRA, the BIPA, or new statutory provisions. Although these changes 
may not be specific to the IRF PPS, the nature of the Medicare program 
is such that the changes may interact, and the complexity of the 
interaction of these changes could make it difficult to predict 
accurately the full scope of the impact upon IRFs.
    We have examined the impacts of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
1. Executive Order 12866
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more).
    In this proposed rule, we are proposing to use an updated FY 2004 
IRF market basket index and an updated FY 2004 IRF labor-related share 
and wage indices to update the IRF PPS rates to FY 2004, as described 
in section VI of this proposed rule. By updating the IRF PPS rates to 
FY 2004, as proposed in this proposed rule, we estimate that the 
overall cost to the Medicare program for IRF services in FY 2004 will 
increase by $204.2 million over FY 2003 levels. The updates to the IRF 
labor-related share and wage indices are made in a budget neutral 
manner. Thus, updating the IRF labor-related share and the wage indices 
to FY 2004 have no overall effect on estimated costs to the Medicare 
program. Therefore, this estimated cost to the Medicare program is due 
to the application of the proposed updated IRF market basket of 3.3 
percent. Because the cost to the Medicare program is greater than $100 
million, this proposed rule is considered a major rule as defined 
above.
2. Regulatory Flexibility Act (RFA) and Impact on Small Hospitals
    The RFA requires agencies to analyze the economic impact of our 
regulations on small entities. If we determine that the regulation will 
impose a significant burden on a substantial number of small entities, 
we must examine options for reducing the burden. For purposes of the 
RFA, small entities include small businesses, nonprofit organizations, 
and governmental agencies. Most hospitals

[[Page 26813]]

are considered small entities, either by nonprofit status or by having 
receipts of $6 million to $29 million in any 1 year. (For details, see 
the Small Business Administration's regulation that set forth size 
standards for health care industries at 65 FR 69432.) Because we lack 
data on individual hospital receipts, we cannot determine the number of 
small proprietary IRFs. Therefore, we assume that all IRFs are 
considered small entities for the purpose of the analysis that follows. 
Medicare fiscal intermediaries and carriers are not considered to be 
small entities. Individuals and States are not included in the 
definition of a small entity.
    This proposed rule proposes a 3.3 percent increase to the Federal 
PPS rates. We do not expect an incremental increase of 3.3 percent to 
the Medicare Federal rates to have a significant effect on the overall 
revenues of IRFs. Most IRFs are units of hospitals that provide many 
different types of services (for example, acute care, outpatient 
services) and the rehabilitation component of their business is 
relatively minor in comparison. In addition, IRFs provide services to 
(and generate revenues from) patients other than Medicare 
beneficiaries. Accordingly, we certify that this proposed rule will not 
have a significant impact on small entities.
    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis for any proposed rule that will have a significant 
impact on the operations of a substantial number of small rural 
hospitals. This analysis must conform to the provisions of section 603 
of the RFA. For purposes of section 1102(b) of the Act, we define a 
small rural hospital as a hospital that is located outside of a 
Metropolitan Statistical Area (MSA) and has fewer than 100 beds.
    This proposed rule will not have a significant impact on the 
operations of small rural hospitals. As indicated above, this proposed 
rule proposes a 3.3 percent increase to the Federal PPS rates. In 
addition, we do not expect an incremental increase of 3.3 percent to 
the Federal rates to have a significant effect on overall revenues or 
operations since most rural hospitals provide many different types of 
services (for example, acute care, outpatient services) and the 
rehabilitation component of their business is relatively minor in 
comparison. Accordingly, we certify that this proposed rule will not 
have a significant impact on the operations of small rural hospitals.
3. Unfunded Mandates Reform Act
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in an expenditure in any 1 year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of at least $110 million. This proposed rule will not 
have a substantial effect on the governments mentioned nor will it 
affect private sector costs.
4. Executive Order 13132
    We examined this proposed rule in accordance with Executive Order 
13132 and determined that it will not have a substantial impact on the 
rights, roles, or responsibilities of State, local, or tribal 
governments.
5. Overall Impact
    For the reasons stated above, we have not prepared an analysis 
under the RFA and section 1102(b) of the Act because we have determined 
that this proposed rule will not have a significant impact on small 
entities or the operations of small rural hospitals.

B. Anticipated Effects of the Proposed Rule

    We discuss below the impacts of this proposed rule on the Federal 
budget and on IRFs.
1. Budgetary Impact
    Section 1886(j)(3)(C) of the Act requires annual updates to the IRF 
PPS payment rates. Section 1886 (j)(6) of the Act requires the 
Secretary to adjust or update the labor-related share and the wage 
indices or the labor-related share and the wage indices the applicable 
to IRFs not later than October 1, 2001 and at least every 36 months 
thereafter. We project that updating the IRF PPS for discharges 
occurring on or after October 1, 2003 and before October 1, 2004 will 
cost the Medicare program $204.2 million. The proposed update to the 
IRF labor-related share and wage indices if finalized will be made in a 
budget neutral manner. Thus, updating the IRF labor-related share and 
the wage indices to FY 2004 would have no overall effect on estimated 
costs to the Medicare program. Therefore, this estimated cost to the 
Medicare program is due to the application of the proposed updated IRF 
market basket of 3.3 percent.
2. Impact on Providers
    For the impact analyses shown in the August 7, 2001 IRF PPS final 
rule, we simulated payments for 1,024 facilities. To construct the 
impact analyses set forth in this proposed rule, we use the latest 
available data. These data include the same facilities that were used 
in constructing the impact analyses displayed in the August 7, 2001 IRF 
PPS final rule (66 FR 41364-41365, and 41372). We do not have enough 
post-IRF PPS data to develop the overall budgetary impact and the 
impact on providers. Further, we will need a sufficient amount of these 
data to be able to rely on them as the basis for the impact analysis. 
Because IRFs began to be paid under the IRF PPS based on their cost 
report start date that occurred on or after January 1, 2002, sufficient 
Medicare claims data will not be available for those facilities whose 
cost report start date occurs later in the calendar year. We do not 
have enough post-IRF PPS data to develop the overall budgetary impact 
and the impact on providers. Further, we will need a sufficient amount 
of these data to be able to rely on them as the basis for the impact 
analysis. Because IRFs began to be paid under the IRF PPS based on 
their cost report start date that occurred on or after January 1, 2002, 
sufficient Medicare claims data will not be available for those 
facilities whose cost report start date occurs later in the calendar 
year. The estimated monetary changes among the various classifications 
of IRFs for discharges occurring on or after October 1, 2003 and before 
October 1, 2004 is reflected in Chart 8 ``Projected Impact of Proposed 
FY 2004 Update'' of this proposed rule.
3. Calculation of the Estimated FY 2003 IRF Prospective Payments
    To estimate payments under the IRF PPS for FY 2003, we multiplied 
each facility's case-mix index by the facility's number of Medicare 
discharges, the FY 2003 standardized payment amount, the applicable FY 
2003 labor-related share and wage indices, a low-income patient 
adjustment, and a rural adjustment (if applicable). The adjustments 
include the following:
    The wage adjustment, calculated as follows: (.27605 + (.72395 x FY 
2003 Wage Index)).
    The disproportionate share adjustment, calculated as follows:
    (1 + Disproportionate Share Percentage) raised to the power of 
.4838).
    The rural adjustment, if applicable, calculated by multiplying 
payments by 1.1914.
4. Calculation of the Proposed Estimated FY 2004 IRF Prospective 
Payments
    To calculate proposed FY 2004 payments, we use the payment rates 
described in this proposed rule that reflect the proposed 3.3 percent 
market basket increase factor using the proposed FY 2004 labor-related 
share

[[Page 26814]]

and wage indices, a low-income patient adjustment, and a rural 
adjustment (if applicable). The proposed adjustments include the 
following:
    The proposed wage adjustment, calculated as follows: (.27605 + 
(.72683 x FY 2004 Wage Index)).
    The proposed disproportionate share adjustment, calculated as 
follows: (1 + Disproportionate Share Percentage) raised to the power of 
.4838).
    The proposed rural adjustment, if applicable, calculated by 
multiplying payments by 1.1914.
    Chart 8 ``Projected Impact of Proposed FY 2004 Update'' illustrates 
the aggregate impact of the proposed estimated FY 2004 updated payments 
among the various classifications of facilities compared to the 
estimated IRF PPS payment rates applicable for FY 2003.
    The first column, Facility Classification, identifies the type of 
facility. The second column identifies the number of facilities for 
each classification type, and the third column lists the number of 
cases. The fourth column indicates the impact of the proposed budget 
neutral wage adjustment. The last column reflects the combined changes 
including the proposed update to the FY 2003 payment rates by proposed 
3.3 percent and the proposed budget neutral wage adjustment (including 
the proposed FY 2004 labor-related share and the proposed FY 2004 wage 
indices).

                                                  Chart 8.--Projected Impact of Proposed FY 2004 Update
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 Proposed budget
                     Facility classification                      Number of facilities     Number of cases        neutral wage         Proposed total
                                                                                                                   adjustment              change
--------------------------------------------------------------------------------------------------------------------------------------------------------
                              Total
                                                                                 1,024               347,809                  0.0%                  3.3%
Urban unit......................................................                   725               206,926                  -0.5                   2.8
Rural unit......................................................                   131                26,507                   0.2                   3.5
Urban hospital..................................................                   156               109,691                   0.9                   4.3
Rural hospital..................................................                    12                 4,685                  -1.3                   1.9
Total urban.....................................................                   881               316,617                   0.0                   3.3
Total rural.....................................................                   143                31,192                   0.0                   3.2
                         Urban by Region
New England.....................................................                    32                15,039                   0.1                   3.5
Middle Atlantic.................................................                   133                64,042                  -1.5                   1.8
South Atlantic..................................................                   112                52,980                   0.5                   3.8
East North Central..............................................                   171                55,071                  -0.5                   2.7
East South Central..............................................                    41                23,434                   0.9                   4.2
West North Central..............................................                    70                18,087                   0.6                   3.9
West South Central..............................................                   154                52,346                   1.5                   4.8
Mountain........................................................                    56                14,655                   1.1                   4.4
Pacific.........................................................                   112                20,963                  -0.7                   2.6
                         Rural by Region
New England.....................................................                     4                   829                  -0.2                   3.1
Middle Atlantic.................................................                    10                 2,424                  -1.3                   1.9
South Atlantic..................................................                    20                 6,192                  -0.8                   2.5
East North Central..............................................                    29                 5,152                  -0.5                   2.8
East South Central..............................................                    10                 3,590                   0.2                   3.5
West North Central..............................................                    22                 3,820                   1.7                   4.9
West South Central..............................................                    32                 7,317                   0.6                   3.9
Mountain........................................................                     9                 1,042                  -0.3                   3.0
Pacific.........................................................                     7                   826                  -1.2                   2.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As Chart 8 illustrates, all IRFs are expected to benefit from the 
proposed 3.3 percent market basket increase that would be applied to FY 
2003 IRF PPS payment rates to develop the proposed FY 2004 rates. 
However, there may be distributional impacts among various IRFs due to 
the application of the proposed updates to the labor-related share and 
proposed wage indices in a budget neutral manner.
    To summarize, we have proposed that all facilities would receive a 
3.3 percent increase in their unadjusted IRF PPS payments. The 
estimated positive impact among all IRFs reflected in Chart 8 are due 
to the effect of the proposed update to the IRF market basket index. We 
also note that, while no changes in the regulations are being proposed, 
we discuss the potential effects of improved compliance with the 75 
percent rule in section II of this proposed rule.
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget 
(OMB).

List of Subjects in 42 CFR Part 412

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

    For the reasons set forth in the 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).

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

    2. In Sec.  412.20, the following changes are made:
    A. Redesignate paragraph (b) as paragraph (b)(1).
    B. Add paragraph (b)(2) to read as follows:

[[Page 26815]]

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

* * * * *
    (b) * * *
    (2) CMS will not pay for services under Subpart P of this part if 
the services are paid for by a health maintenance organization (HMO) or 
competitive medical plan (CMP) that elects not to have CMS make 
payments to an inpatient rehabilitation facility for services, which 
are inpatient hospital services, furnished to the HMO's or CMP's 
Medicare enrollees, as provided under part 417 of this chapter.
* * * * *
    3. In Sec.  412.22, the following changes are made:
    A. Revise paragraph (h)(2) introductory text.
    B. Add and reserve paragraph (h)(6).
    C. Add paragraph (h)(7).
    The revisions and addition read as follows:


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

* * * * *
    (h) * * *
    (2) Except as provided in paragraphs (h)(3) and (h)(7) 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 acute care hospital 
inpatient prospective payment systems for any period:
* * * * *
    (6) [Reserved]
    (7) The provisions of paragraph (h)(2)(i) of this section do not 
apply to any inpatient rehabilitation facility that is subject to the 
inpatient rehabilitation facility prospective payment system under 
subpart P of this part, effective for cost reporting periods beginning 
on or after October 1, 2003.
    4. In Sec.  412.25, the following changes are made:
    A. Revise paragraph (e)(2) introductory text.
    B. Add paragraph (e)(5).
    The revision and addition read as follows:


Sec.  412.25  Excluded hospital units: Common requirements.

* * * * *
    (e) * * *
    (2) Except as provided in paragraphs (e)(3) and (e)(5) 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 acute care hospital 
inpatient prospective payment systems for any period:
* * * * *
    (5) The provisions of paragraph (e)(2)(i) of this section do not 
apply to any inpatient rehabilitation facility that is subject to the 
inpatient rehabilitation facility prospective payment system under 
subpart P of this part, effective for cost reporting periods beginning 
on or after October 1, 2003.
* * * * *
    5. In Sec.  412.29, revise paragraph (a)(2) to read as follows:


Sec.  412.29  Excluded rehabilitation units: Additional requirements.

    (a) * * *
    (2) Converted units under Sec.  412.30(c).
* * * * *
    6. In Sec.  412.30, the following changes are made:
    A. Revise paragraph (b)(3).
    B. Revise paragraph (d)(2)(i).


Sec.  412.30  Exclusion of new rehabilitation units and expansion of 
units already excluded.

    (b) * * *
    (3) The written certification described in paragraph (b)(2) of this 
section is effective for the first full cost reporting period during 
which the unit is used to provide hospital inpatient care.
* * * * *
    (d) * * *
    (2) Conversion of existing bed capacity. (i) Bed capacity is 
considered to be existing bed capacity if it does not meet the 
definition of new bed capacity under paragraph (d)(1) of this section.
* * * * *

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

    7. In Sec.  412.602, republish the introductory text and revise the 
definition of ``Discharge'' to read as follows:


Sec.  412.602  Definitions.

    As used in this subpart--
* * * * *
    Discharge. A Medicare patient in an inpatient rehabilitation 
facility is considered discharged when--
    (1) The patient is formally released from the inpatient 
rehabilitation facility; or
    (2) The patient dies in the inpatient rehabilitation facility.
* * * * *
    8. In Sec.  412.604, revise paragraph (a)(2) introductory text to 
read as follows:


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

    (a) * * *
    (2) If an inpatient rehabilitation facility fails to comply fully 
with these conditions with respect to inpatient hospital services 
furnished to one or more Medicare Part A fee-for-service beneficiaries, 
CMS or its Medicare fiscal intermediary may, as appropriate--
* * * * *
    9. Section 412.608 is revised to read as follows:


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

    (a) Before performing an assessment using the inpatient 
rehabilitation facility patient assessment instrument, a clinician of 
the inpatient rehabilitation facility must give a Medicare inpatient 
each of these forms--
    (1) The form entitled ``Privacy Act Statement--Health Care 
Records;'' and
    (2) The simplified plain language description of the Privacy Act 
Statement--Health Care Records which is a form entitled ``Data 
Collection Information Summary for Patients in Inpatient Rehabilitation 
Facilities.''
    (b) The inpatient rehabilitation facility must document in the 
Medicare inpatient's clinical record that the Medicare inpatient has 
been given the documents specified in paragraph (a) of this section.
    (c) The Data Collection Information Summary for Patients in 
Inpatient Rehabilitation Facilities is the simplified plain language 
description of the Privacy Act Statement--Health Care Records.
    (d) By giving the Medicare inpatient the forms specified in 
paragraph (a) of this section the inpatient rehabilitation facility 
will inform the Medicare patient of--
    (1) Their privacy rights under the Privacy Act of 1974 and 45 CFR 
5b.4(a)(3); and
    (2) The following rights:
    (i) The right to be informed of the purpose of the collection of 
the patient assessment data;
    (ii) The right to have the patient assessment information collected 
be kept confidential and secure;
    (iii) The right to be informed that the patient assessment 
information will not be disclosed to others, except for legitimate 
purposes allowed by the Federal Privacy Act and Federal and State 
regulations;
    (iv) The right to refuse to answer patient assessment questions; 
and
    (v) The right to see, review, and request changes on his or her 
patient assessment.
    (e) The patient rights specified in this section are in addition to 
the patient rights specified in Sec.  482.13 of this chapter.
    10. In Sec.  412.610, revise paragraph (c)(1)(i)(C) to read as 
follows:

[[Page 26816]]

Sec.  412.610  Assessment schedule.

* * * * *
    (c) * * *
    (1) * * *
    (i) * * *
    (C) Must be completed by the calendar day that follows the 
admission assessment reference day.
* * * * *
    11. In Sec.  412.614, the following changes are made:
    A. Redesignate paragraphs (a)(1) and (a)(2) as (a)(1)(i) and 
(a)(1)(ii), respectively.
    B. Redesignate the introductory text to paragraph (a) as (a)(1) and 
add a heading to newly designated paragraph (a)(1).
    C. Add a new paragraph (a)(2).
    D. Add a new paragraph (e).
    The revision and additions read as follows:


Sec.  412.614  Transmission of patient assessment data.

    (a) Data format. (1) General rule. The inpatient rehabilitation 
facility must encode and transmit data for each Medicare Part A fee-
for-service inpatient--
* * * * *
    (2) Exception to the general rule. When the inpatient 
rehabilitation facility does not submit claim data to Medicare in order 
to be paid for any of the services it furnished to a Medicare Part A 
fee-for-service inpatient, the inpatient rehabilitation facility is not 
required to, but may, transmit to Medicare the inpatient rehabilitation 
facility patient assessment data associated with the services furnished 
to that same Medicare Part A fee-for-service inpatient.
* * * * *
    (e) Exemption to being assessed a penalty for transmitting the IRF-
PAI data late. CMS may waive the penalty specified in paragraph (d) of 
this section when, due to an extraordinary situation that is beyond the 
control of an inpatient rehabilitation facility, the inpatient 
rehabilitation facility is unable to transmit the patient assessment 
data in accordance with paragraph (c) of this section. Only CMS can 
determine if a situation encountered by an inpatient rehabilitation 
facility is extraordinary and qualifies as a situation for waiver of 
the penalty specified in paragraph (d)(2) of this section. An 
extraordinary situation may be due to, but is not limited to, fires, 
floods, earthquakes, or similar unusual events that inflict extensive 
damage to an inpatient rehabilitation facility. An extraordinary 
situation may be one that produces a data transmission problem that is 
beyond the control of the inpatient rehabilitation facility, as well as 
other situations determined by CMS to be beyond the control of the 
inpatient rehabilitation facility. An extraordinary situation must be 
fully documented by the inpatient rehabilitation facility.
    12. In Sec.  412.624, the following changes are made:
    A. Revise paragraph (c).
    B. Revise paragraph (d).
    C. Revise paragraph (e)(1).
    D. Revise paragraph (e)(4).
    The revisions read as follows:


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

* * * * *
    (c) Determining the Federal prospective payment rates. (1) General. 
The Federal prospective payment rates will be established using a 
standard payment amount referred to as the standard payment conversion 
factor. The standard payment conversion factor is a standardized 
payment amount based on average costs from a base year that reflects 
the combined aggregate effects of the weighting factors, various 
facility and case level adjustments, and other adjustments.
    (2) Update the cost per discharge. CMS applies the increase factor 
described in paragraph (a)(3) of this section to the facility's cost 
per discharge determined under paragraph (b) of this section to compute 
the cost per discharge for fiscal year 2002. Based on the updated cost 
per discharge, CMS estimates the payments that would have been made to 
the facility for fiscal year 2002 under part 413 of this chapter 
without regard to the prospective payment system implemented under this 
subpart.
    (3) Computation of the standard payment conversion factor. The 
standard payment conversion factor is computed as follows:
    (i) For fiscal year 2002. Based on the updated costs per discharge 
and estimated payments for fiscal year 2002 determined in paragraph 
(c)(2) of this section, CMS computes a standard payment conversion 
factor for fiscal year 2002, as specified by CMS, that reflects, as 
appropriate, the adjustments described in paragraph (d) of this 
section.
    (ii) For fiscal years after 2002. The standard payment conversion 
factor for fiscal years after 2002 will be the standardized payments 
for the previous fiscal year updated by the increase factor described 
in paragraph (a)(3) of this section, including adjustments described in 
paragraph (d) of this section as appropriate.
    (4) Determining the Federal prospective payment rate for each case-
mix group. The Federal prospective payment rates for each case-mix 
group is the product of the weighting factors described in Sec.  
412.620(b) and the standard payment conversion factor described in 
paragraph (c)(3) of this section.
    (d) Adjustments to the standard payment conversion factor. The 
standard payment conversion factor described in paragraph (c)(3) of 
this section will be adjusted for the following:
    (1) Outlier payments. CMS determines a reduction factor equal to 
the estimated proportion of additional outlier payments described in 
paragraph (e)(4) of this section.
    (2) Budget neutrality. CMS adjusts the Federal prospective payment 
rates for fiscal year 2002 so that aggregate payments under the 
prospective payment system, excluding any additional payments 
associated with elections not to be paid under the transition period 
methodology under Sec.  412.626(b), are estimated to equal the amount 
that would have been made to inpatient rehabilitation facilities under 
part 413 of this chapter without regard to the prospective payment 
system implemented under this subpart.
    (3) Coding and classification changes. CMS adjusts the standard 
payment conversion factor for a given year if CMS determines that 
revisions in case-mix classifications or weighting factors for a 
previous fiscal year (or estimates that those revisions for a future 
fiscal year) did result in (or would otherwise result in) a change in 
aggregate payments that are a result of changes in the coding or 
classification of patients that do not reflect real changes in case-
mix.
    (e) * * *
    (1) Adjustment for area wage levels. The labor portion of a 
facility's Federal prospective payment is adjusted to account for 
geographical differences in the area wage levels using an appropriate 
wage index. The application of the wage index is made on the basis of 
the location of the facility in an urban or rural area as defined in 
Sec.  412.602. Adjustments or updates to the wage data used to adjust a 
facility's Federal prospective payment rate under this paragraph will 
be made in a budget neutral manner. CMS determines a budget neutral 
wage adjustment factor, based on any adjustment or update to the wage 
data, to apply to the standard payment conversion factor.
* * * * *
    (4) Adjustment for high-cost outliers. CMS provides for an 
additional payment to an inpatient rehabilitation

[[Page 26817]]

facility if its estimated costs for a patient exceeds a fixed dollar 
amount (adjusted for area wage levels and factors to account for 
treating low-income patients and for rural locations) as specified by 
CMS. The additional payment equals 80 percent of the difference between 
the estimated cost of the patient and the sum of the adjusted Federal 
prospective payment computed under this section and the adjusted fixed 
dollar amount. Additional payments made under this section will be 
subject to the adjustments at Sec.  412.84(i) and at Sec.  412.84(m), 
except that national averages will be used instead of statewide 
averages. Additional payments made under this section will also be 
subject to adjustments at Sec.  412.84(m).
* * * * *

    Dated: March 18, 2003.
Thomas A Scully,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: May 6, 2003.
Tommy G. Thompson,
Secretary.

    Note: The following appendices will not appear in the Code of 
Federal Regulations:

Appendix A--Methodology to Determine Compliance with the 75 Percent 
Rule

    Section 412.23(b)(2) specifies that during the most recent cost 
reporting period 75 percent of an IRF's inpatient population must have 
had a medical condition that can be matched to one of ten medical 
conditions specified in this section. This requirement is commonly 
termed the ``75 percent rule.''
    CMS used the IRF-PAI database to estimate the percentage of IRFs 
that submitted IRF-PAI data during the first eight months of calendar 
year 2002 that met the 75 percent rule. Under the existing IRF PPS 
regulations, an IRF must send CMS an IRF-PAI data record that contains 
data about each Medicare Part A fee-for-service inpatient admitted to 
the IRF. The IRF-PAI is submitted by the IRF after the inpatient has 
been discharged.
    Section II of the preamble contains Chart 1 ``Estimates of 
Compliance with the 75 Percent Rule.'' Chart 1 illustrates the 
estimated percentage of IRFs whose Medicare inpatient populations had 
medical conditions considered to be consistent with one or more of the 
medical conditions in Sec.  412.23(b)(2). In addition, Chart 1 also 
shows the estimated percentage of IRFs that met lower thresholds.
    For example, in the ``65% rule'' column of Chart 1 shows the 
percentage of IRFs that submitted IRF-PAI data during the first eight 
months of calendar year 2002 that had 65 percent of their Medicare 
inpatient population included in at least one of the ten medical 
conditions specified in Sec.  412.23(b)(2).
    An IRF-PAI data record was counted as meeting one of the ten 
medical conditions specified in Sec.  412.23(b)(2) if its impairment 
group code given in IRF-PAI item 21 is listed in one of the codes 
listed in Table 4 ``Acceptable Impairment Group Codes'' below, or if 
any of its diagnoses (IRF-PAI items 22 and 24a through 24j) are listed 
in Table 5 ``Acceptable ICD-9-CM Codes'' below. (This list may not be 
all inclusive, but represents a conservative list of diagnoses more 
likely to be consistent with the ten diagnoses.)
    Table 4 illustrates that the pairing of some impairment group codes 
with specific etiologic diagnosis ICD-9-CM codes within the same IRF-
PAI data record resulted in that data record not being counted as 
meeting one of the ten medical conditions specified in Sec.  
412.23(b)(2). For example, if an IRF-PAI data record specified both the 
impairment group code 02.1 (non-traumatic brain injury) and the 
etiologic diagnosis ICD-9-CM code 215.0 (other benign neoplasms of 
connective and other soft tissue of head and neck) then that admission 
was not counted as meeting one of the medical conditions specified in 
Sec.  412.23(b)(2). However, regardless of the impairment group code 
specified in an IRF-PAI data record the data record for the admission 
was counted as meeting one of the ten medical conditions specified in 
Sec.  412.23(b)(2) if IRF-PAI items 22 and 24a through 24j contained an 
ICD-9-CM code as specified in Table 5 ``Acceptable ICD-9-CM Codes'' 
below. The data analyzed represents 8 months of IRF-PAI data records.

Appendix B--Inpatient Rehabilitation Facility Patient Privacy Forms

BILLING CODE 4120-01-P

[[Page 26818]]

[GRAPHIC][TIFF OMITTED]TP16MY03.008


[[Page 26819]]


[GRAPHIC][TIFF OMITTED]TP16MY03.009


[[Page 26820]]


[GRAPHIC][TIFF OMITTED]TP16MY03.010


[[Page 26821]]


[GRAPHIC][TIFF OMITTED]TP16MY03.011


[[Page 26822]]


[GRAPHIC][TIFF OMITTED]TP16MY03.012


[[Page 26823]]


[GRAPHIC][TIFF OMITTED]TP16MY03.013


[[Page 26824]]


[GRAPHIC][TIFF OMITTED]TP16MY03.014


[[Page 26825]]


[GRAPHIC][TIFF OMITTED]TP16MY03.015


                               Table 2.--Proposed Fiscal Year 2004 Federal Prospective Payments for Case-Mix Groups (CMGs)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                       Payment rate no
                               CMG                                 Payment rate tier 1   Payment rate tier 2   Payment rate tier 3      comorbidities
--------------------------------------------------------------------------------------------------------------------------------------------------------
0101............................................................             $5,990.21             $5,364.61             $5,112.61             $4,838.05
0102............................................................              8,156.61              7,305.34              6,961.83              6,588.23
0103............................................................             10,400.74              9,315.04              8,876.24              8,399.83
0104............................................................             11,292.13             10,113.65              9,637.24              9,120.71
0105............................................................             14,215.77             12,731.38             12,132.11             11,481.44
0106............................................................             17,490.45             15,663.80             14,925.37             14,125.51
0107............................................................             20,258.64             18,143.63             17,288.61             16,360.86
0108............................................................             21,911.02             19,624.26             18,699.02             17,696.06
0109............................................................             23,696.30             21,222.74             20,222.28             19,137.82
0110............................................................             25,418.89             22,766.05             21,692.87             20,529.44
0111............................................................             26,188.66             23,455.59             22,349.82             21,151.27
0112............................................................             31,069.34             27,826.00             26,514.63             25,092.93
0113............................................................             28,051.67             25,124.27             23,939.52             22,655.72
0114............................................................             34,228.68             30,655.62             29,211.35             27,644.22
0201............................................................              9,639.75              9,121.96              8,429.92              7,735.37
0202............................................................             14,017.69             13,265.46             12,258.74             11,249.50
0203............................................................             16,394.71             15,514.61             14,337.38             13,157.64
0204............................................................             20,728.78             19,615.48             18,127.34             16,635.42
0205............................................................             31,468.02             29,778.02             27,517.59             25,253.40
0301............................................................             12,104.53             10,329.28              9,898.01              9,020.41
0302............................................................             17,148.19             14,633.26             14,021.45             12,780.28
0303............................................................             23,509.49             20,061.80             19,224.33             17,521.80
0304............................................................             34,992.19             29,859.52             28,614.59             26,078.34
0401............................................................             11,636.90             10,927.30             10,307.97              8,660.60
0402............................................................             17,816.42             16,729.45             15,781.65             13,259.19
0403............................................................             29,443.29             27,646.72             26,079.59             21,912.27
0404............................................................             44,164.30             41,470.09             39,119.39             32,867.16
0501............................................................              9,515.63              8,744.60              7,810.59              6,723.63
0502............................................................             11,857.55             10,895.96              9,732.52              8,378.52
0503............................................................             14,559.29             13,379.55             11,951.58             10,287.91
0504............................................................             21,010.86             19,307.07             17,247.23             14,846.39
0505............................................................             31,736.31             29,162.46             26,049.50             22,425.04
0601............................................................             11,025.09              8,462.52              8,285.74              7,458.30
0602............................................................             15,018.14             11,527.83             11,287.12             10,161.29
0603............................................................             19,266.95             14,788.72             14,480.30             13,034.78
0604............................................................             25,130.54             19,289.52             18,887.08             17,001.51
0701............................................................              8,794.75              8,783.46              8,412.37              7,472.09
0702............................................................             11,614.33             11,598.03             11,109.09              9,866.67
0703............................................................             13,761.93             13,743.13             13,163.91             11,692.06
0704............................................................             15,656.28             15,634.97             14,975.52             13,300.57
0705............................................................             18,504.70             18,479.63             17,701.08             15,721.47
0801............................................................              6,154.44              5,887.40              5,664.24              4,876.92
0802............................................................              7,104.75              6,796.34              6,539.33              5,629.14
0803............................................................              8,720.78              8,342.16              8,026.23              6,909.17
0804............................................................             11,639.41             11,134.16             10,712.92              9,222.26
0805............................................................             12,570.91             12,026.80             11,570.45              9,960.69
0806............................................................             17,151.95             16,408.50             15,786.67             13,590.17
0901............................................................              8,760.90              8,011.18              7,553.58              6,535.57
0902............................................................             11,905.19             10,887.18             10,264.09              8,881.25
0903............................................................             15,028.17             13,741.87             12,955.80             11,210.64
0904............................................................             20,400.30             18,655.15             17,588.24             15,217.48
1001............................................................              9,805.23              9,805.23              8,967.76              8,177.92
1002............................................................             12,534.55             12,534.55             11,463.89             10,454.65
1003............................................................             15,331.57             15,331.57             14,022.70             12,787.80
1004............................................................             17,882.86             17,882.86             16,355.85             14,915.34
1005............................................................             22,050.18             22,050.18             20,167.11             18,391.87
1101............................................................             15,823.02              9,632.22              8,962.74              8,313.32

[[Page 26826]]

 
1102............................................................             24,489.89             14,909.07             13,871.00             12,866.78
1103............................................................             33,277.12             20,258.64             18,848.22             17,482.93
1201............................................................              9,050.50              6,806.37              6,397.66              5,762.03
1202............................................................             11,639.41              8,754.63              8,228.07              7,410.66
1203............................................................             13,503.67             10,156.27              9,545.72              8,597.92
1204............................................................             17,489.20             13,153.88             12,362.79             11,135.42
1205............................................................             22,408.74             16,853.57             15,839.32             14,267.17
1301............................................................              9,677.36              8,176.67              8,066.34              6,978.13
1302............................................................             12,389.12             10,467.19             10,326.78              8,933.91
1303............................................................             16,463.67             13,909.87             13,721.81             11,871.34
1304............................................................             23,396.66             19,768.44             19,501.40             16,871.12
1401............................................................              9,014.15              8,065.09              7,173.71              6,464.11
1402............................................................             12,414.20             11,105.33              9,879.20              8,902.57
1403............................................................             16,266.84             14,553.02             12,944.51             11,665.73
1404............................................................             22,583.01             20,203.47             17,971.88             16,195.37
1501............................................................             10,069.77              9,569.54              8,683.17              8,293.27
1502............................................................             12,873.05             12,233.66             11,101.57             10,602.59
1503............................................................             16,601.57             15,776.64             14,316.07             13,672.92
1504............................................................             25,823.84             24,541.29             22,269.58             21,269.12
1601............................................................             10,916.02             10,439.61              9,886.73              8,278.22
1602............................................................             16,699.36             15,970.96             15,127.22             12,666.19
1701............................................................             12,532.05             11,310.94             10,202.66              9,032.95
1702............................................................             18,498.43             16,695.60             15,058.26             13,331.91
1703............................................................             26,791.70             24,181.48             21,809.47             19,309.58
1801............................................................              9,333.84              9,333.84              8,602.93              7,875.78
1802............................................................             13,382.06             13,382.06             12,333.96             11,292.13
1803............................................................             20,498.09             20,498.09             18,892.10             17,297.38
1804............................................................             36,532.99             36,532.99             33,672.04             30,827.38
1901............................................................             14,524.18             12,539.57             12,262.50             11,127.89
1902............................................................             27,007.33             23,316.42             22,802.40             20,692.42
1903............................................................             39,289.89             33,920.27             33,171.81             30,102.73
2001............................................................             10,494.77              9,020.41              8,406.10              7,558.59
2002............................................................             13,860.97             11,912.71             11,101.57              9,982.01
2003............................................................             18,353.00             15,772.88             14,699.70             13,217.82
2004............................................................             21,904.75             18,826.90             17,544.36             15,775.38
2005............................................................             26,075.83             22,411.25             20,885.49             18,779.26
2101............................................................             12,984.63             11,816.18             10,514.83             10,514.83
2102............................................................             28,218.41             25,678.41             22,850.05             22,850.05
5001............................................................  ....................  ....................  ....................              2,069.87
5101............................................................  ....................  ....................  ....................              5,364.61
5102............................................................  ....................  ....................  ....................             15,533.42
5103............................................................  ....................  ....................  ....................              6,815.15
5104............................................................  ....................  ....................  ....................             21,438.37
--------------------------------------------------------------------------------------------------------------------------------------------------------


                  Table 3A.--Proposed Urban Wage Index
------------------------------------------------------------------------
                                    Urban area (constituent
              MSA                      counties or county         Wage
                                          equivalents)            index
------------------------------------------------------------------------
0040...........................  Abilene, TX..................    0.7792
                                 Taylor, TX
0060...........................  Aguadilla, PR................    0.4587
                                 Aguada, PR
                                 Aguadilla, PR
                                 Moca, PR
0080...........................  Akron, OH....................    0.9600
                                 Portage, OH
                                 Summit, OH
0120...........................  Albany, GA...................    1.0594
                                 Dougherty, GA
                                 Lee, GA
0160...........................  Albany-Schenectady-Troy, NY..    0.8384
                                 Albany, NY
                                 Montgomery, NY
                                 Rensselaer, NY
                                 Saratoga, NY
                                 Schenectady, NY
                                 Schoharie, NY
0200...........................  Albuquerque, NM..............    0.9315
                                 Bernalillo, NM
                                 Sandoval, NM
                                 Valencia, NM
0220...........................  Alexandria, LA...............    0.7859
                                 Rapides, LA
0240...........................  Allentown-Bethlehem-Easton,      0.9735
                                  PA.
                                 Carbon, PA
                                 Lehigh, PA
                                 Northampton, PA
0280...........................  Altoona, PA..................    0.9225
                                 Blair, PA
0320...........................  Amarillo, TX.................    0.9034
                                 Potter, TX
                                 Randall, TX
0380...........................  Anchorage, AK................    1.2358
                                 Anchorage, AK
0440...........................  Ann Arbor, MI................    1.1103
                                 Lenawee, MI
                                 Livingston, MI
                                 Washtenaw, MI
0450...........................  Anniston,AL..................    0.8044
                                 Calhoun, AL
0460...........................  Appleton-Oshkosh-Neenah, WI..    0.8997
                                 Calumet, WI
                                 Outagamie, WI
                                 Winnebago, WI
0470...........................  Arecibo, PR..................    0.4337

[[Page 26827]]

 
                                 Arecibo, PR
                                 Camuy, PR
                                 Hatillo, PR
0480...........................  Asheville, NC................    0.9876
                                 Buncombe, NC
                                 Madison, NC
0500...........................  Athens, GA...................    1.0211
                                 Clarke, GA
                                 Madison, GA
                                 Oconee, GA
0520...........................  Atlanta, GA..................    0.9991
                                 Barrow, GA
                                 Bartow, GA
                                 Carroll, GA
                                 Cherokee, GA
                                 Clayton, GA
                                 Cobb, GA
                                 Coweta, GA
                                 De Kalb, GA
                                 Douglas, GA
                                 Fayette, GA
                                 Forsyth, GA
                                 Fulton, GA
                                 Gwinnett, GA
                                 Henry, GA
                                 Newton, GA
                                 Paulding, GA
                                 Pickens, GA
                                 Rockdale, GA
                                 Spalding, GA
                                 Walton, GA
0560...........................  Atlantic City-Cape May, NJ...    1.1017
                                 Atlantic City, NJ
                                 Cape May, NJ
0580...........................  Auburn-Opelika, AL...........    0.8325
                                 Lee, AL
0600...........................  Augusta-Aiken, GA-SC.........    1.0264
                                 Columbia, GA
                                 McDuffie, GA
                                 Richmond, GA
                                 Aiken, SC
                                 Edgefield, SC
0640...........................  Austin-San Marcos, TX........    0.9637
                                 Bastrop, TX
                                 Caldwell, TX
                                 Hays, TX
                                 Travis, TX
                                 Williamson, TX
0680...........................  Bakersfield, CA..............    0.9899
                                 Kern, CA
0720...........................  Baltimore, MD................    0.9929
                                 Anne Arundel, MD
                                 Baltimore, MD
                                 Baltimore City, MD
                                 Carroll, MD
                                 Harford, MD
                                 Howard, MD
                                 Queen Annes, MD
0733...........................  Bangor, ME...................    0.9664
                                 Penobscot, ME
0743...........................  Barnstable-Yarmouth, MA......    1.3202
                                 Barnstable, MA
0760...........................  Baton Rouge, LA..............    0.8294
                                 Ascension, LA
                                 East Baton Rouge
                                 Livingston, LA
                                 West Baton Rouge, LA
0840...........................  Beaumont-Port Arthur, TX.....    0.8324
                                 Hardin, TX
                                 Jefferson, TX
                                 Orange, TX
0860...........................  Bellingham, WA...............    1.2282
                                 Whatcom, WA
0870...........................  Benton Harbor, MI............    0.9042
                                 Berrien, MI
0875...........................  Bergen-Passaic, NJ...........    1.2150
                                 Bergen, NJ
                                 Passaic, NJ
0880...........................  Billings, MT.................    0.9022
                                 Yellowstone, MT
0920...........................  Biloxi-Gulfport-Pascagoula,      0.8757
                                  MS.
                                 Hancock, MS
                                 Harrison, MS
                                 Jackson, MS
0960...........................  Binghamton, NY...............    0.8341
                                 Broome, NY
                                 Tioga, NY
1000...........................  Birmingham, AL...............    0.9222
                                 Blount, AL
                                 Jefferson, AL
                                 St. Clair, AL
                                 Shelby, AL
1010...........................  Bismarck, ND.................    0.7972
                                 Burleigh, ND
                                 Morton, ND
1020...........................  Bloomington, IN..............    0.8907
                                 Monroe, IN
1040...........................  Bloomington-Normal, IL.......    0.9109
                                 McLean, IL
1080...........................  Boise City, ID...............    0.9310
                                 Ada, ID
                                 Canyon, ID
1123...........................  Boston-Worcester-Lawrence-       1.1235
                                  Lowell-Brockton, MA-NH.
                                 Bristol, MA
                                 Essex, MA
                                 Middlesex, MA
                                 Norfolk, MA
                                 Plymouth, MA
                                 Suffolk, MA
                                 Worcester, MA
                                 Hillsborough, NH
                                 Merrimack, NH
                                 Rockingham, NH
                                 Strafford, NH
1125...........................  Boulder-Longmont, CO.........    0.9689
                                 Boulder, CO
1145...........................  Brazoria, TX.................    0.8535
                                 Brazoria, TX
1150...........................  Bremerton, WA................    1.0944
                                 Kitsap, WA
1240...........................  Brownsville-Harlingen-San        0.8880
                                  Benito, TX.
                                 Cameron, TX
1260...........................  Bryan-College Station, TX....    0.8821
                                 Brazos, TX
1280...........................  Buffalo-Niagara Falls, NY....    0.9365
                                 Erie, NY
                                 Niagara, NY
1303...........................  Burlington, VT...............    1.0052
                                 Chittenden, VT
                                 Franklin, VT
                                 Grand Isle, VT
1310...........................  Caguas, PR...................    0.4371
                                 Caguas, PR
                                 Cayey, PR
                                 Cidra, PR
                                 Gurabo, PR
                                 San Lorenzo, PR
1320...........................  Canton-Massillon, OH.........    0.8932
                                 Carroll, OH
                                 Stark, OH
1350...........................  Casper, WY...................    0.9690
                                 Natrona, WY
1360...........................  Cedar Rapids, IA.............    0.9056
                                 Linn, IA
1400...........................  Champaign-Urbana, IL.            1.0635
                                 Champaign, IL
1440...........................  Charleston-North Charleston,     0.9235
                                  SC.
                                 Berkeley, SC
                                 Charleston, SC
                                 Dorchester, SC
1480...........................  Charleston, WV...............    0.8898
                                 Kanawha, WV
                                 Putnam, WV
1520...........................  Charlotte-Gastonia-Rock Hill,    0.9850
                                  NC-SC.
                                 Cabarrus, NC
                                 Gaston, NC
                                 Lincoln, NC
                                 Mecklenburg, NC
                                 Rowan, NC
                                 Stanly, NC
                                 Union, NC
                                 York, SC
1540...........................  Charlottesville, VA..........    1.0438
                                 Albemarle, VA
                                 Charlottesville City, VA
                                 Fluvanna, VA
                                 Greene, VA
1560...........................  Chattanooga, TN-GA...........    0.8976
                                 Catoosa, GA
                                 Dade, GA
                                 Walker, GA
                                 Hamilton, TN
                                 Marion, TN
1580...........................  Cheyenne, WY.................    0.8628
                                 Laramie, WY
1600...........................  Chicago, IL..................    1.1044
                                 Cook, IL

[[Page 26828]]

 
                                 De Kalb, IL
                                 Du Page, IL
                                 Grundy, IL
                                 Kane, IL
                                 Kendall, IL
                                 Lake, IL
                                 McHenry, IL
                                 Will, IL
1620...........................  Chico-Paradise, CA...........    0.9745
                                 Butte, CA
1640...........................  Cincinnati, OH-KY-IN.........    0.9381
                                 Dearborn, IN
                                 Ohio, IN
                                 Boone, KY
                                 Campbell, KY
                                 Gallatin, KY
                                 Grant, KY
                                 Kenton, KY
                                 Pendleton, KY
                                 Brown, OH
                                 Clermont, OH
                                 Hamilton, OH
                                 Warren, OH
1660...........................  Clarksville-Hopkinsville, TN-    0.8406
                                  KY.
                                 Christian, KY
                                 Montgomery, TN
1680...........................  Cleveland-Lorain-Elyria, OH..    0.9670
                                 Ashtabula, OH
                                 Geauga, OH
                                 Cuyahoga, OH
                                 Lake, OH
                                 Lorain, OH
                                 Medina, OH
1720...........................  Colorado Springs, CO.........    0.9916
                                 El Paso, CO
1740...........................  Columbia, MO.................    0.8496
                                 Boone, MO
1760...........................  Columbia, SC.................    0.9307
                                 Lexington, SC
                                 Richland, SC
1800...........................  Columbus, GA-AL..............    0.8374
                                 Russell, AL
                                 Chattanoochee, GA
                                 Harris, GA
                                 Muscogee, GA
1840...........................  Columbus, OH.................    0.9751
                                 Delaware, OH
                                 Fairfield, OH
                                 Franklin, OH
                                 Licking, OH
                                 Madison, OH
                                 Pickaway, OH
1880...........................  Corpus Christi, TX...........    0.8729
                                 Nueces, TX
                                 San Patricio, TX
1890...........................  Corvallis, OR................    1.1453
                                 Benton, OR
1900...........................  Cumberland, MD-WV............    0.7847
                                 Allegany, MD
                                 Mineral, WV
1920...........................  Dallas, TX...................    0.9998
                                 Collin, TX
                                 Dallas, TX
                                 Denton, TX
                                 Ellis, TX
                                 Henderson, TX
                                 Hunt, TX
                                 Kaufman, TX
                                 Rockwall, TX
1950...........................  Danville, VA.................    0.8859
                                 Danville City, VA
                                 Pittsylvania, VA
1960...........................  Davenport-Moline-Rock Island,    0.8835
                                  IA-IL.
                                 Scott, IA
                                 Henry, IL
                                 Rock Island, IL
2000...........................  Dayton-Springfield, OH.......    0.9282
                                 Clark, OH
                                 Greene, OH
                                 Miami, OH
                                 Montgomery, OH
2020...........................  Daytona Beach, FL............    0.9062
                                 Flagler, FL
                                 Volusia, FL
2030...........................  Decatur, AL..................    0.8973
                                 Lawrence, AL
                                 Morgan, AL
2040...........................  Decatur, IL..................    0.8055
                                 Macon, IL
2080...........................  Denver, CO...................    1.0601
                                 Adams, CO
                                 Arapahoe, CO
                                 Broomfield, CO
                                 Denver, CO
                                 Douglas, CO
                                 Jefferson, CO
2120...........................  Des Moines, IA...............    0.8791
                                 Dallas, IA
                                 Polk, IA
                                 Warren, IA
2160...........................  Detroit, MI..................    1.0448
                                 Lapeer, MI
                                 Macomb, MI
                                 Monroe, MI
                                 Oakland, MI
                                 St. Clair, MI
                                 Wayne, MI
2180...........................  Dothan, AL...................    0.8137
                                 Dale, AL
                                 Houston, AL
2190...........................  Dover, DE....................    0.9356
                                 Kent, DE
2200...........................  Dubuque, IA..................    0.8795
                                 Dubuque, IA
2240...........................  Duluth-Superior, MN-WI.......    1.0368
                                 St. Louis, MN
                                 Douglas, WI
2281...........................  Dutchess County, NY..........    1.0684
                                 Dutchess, NY
2290...........................  Eau Claire, WI...............    0.8952
                                 Chippewa, WI
                                 Eau Claire, WI
2320...........................  El Paso, TX..................    0.9265
                                 El Paso, TX
2330...........................  Elkhart-Goshen, IN...........    0.9722
                                 Elkhart, IN
2335...........................  Elmira, NY...................    0.8416
                                 Chemung, NY
2340...........................  Enid, OK.....................    0.8376
                                 Garfield, OK
2360...........................  Erie, PA.....................    0.8925
                                 Erie, PA
2400...........................  Eugene-Springfield, OR.......    1.0944
                                 Lane, OR
2440...........................  Evansville-Henderson, IN-KY..    0.8177
                                 Posey, IN
                                 Vanderburgh, IN
                                 Warrick, IN
                                 Henderson, KY
2520...........................  Fargo-Moorhead, ND-MN........    0.9684
                                 Clay, MN
                                 Cass, ND
2560...........................  Fayetteville, NC.............    0.8889
                                 Cumberland, NC
2580...........................  Fayetteville-Springdale-         0.8100
                                  Rogers, AR.
                                 Benton, AR
                                 Washington, AR
2620...........................  Flagstaff, AZ-UT.............    1.0682
                                 Coconino, AZ
                                 Kane, UT
2640...........................  Flint, MI....................    1.1135
                                 Genesee, MI
2650...........................  Florence, AL.................    0.7792
                                 Colbert, AL
                                 Lauderdale, AL
2655...........................  Florence, SC.................    0.8780
                                 Florence, SC
2670...........................  Fort Collins-Loveland, CO....    1.0066
                                 Larimer, CO
2680...........................  Ft. Lauderdale, FL...........    1.0297
                                 Broward, FL
2700...........................  Fort Myers-Cape Coral, FL....    0.9680
                                 Lee, FL
2710...........................  Fort Pierce-Port St. Lucie,      0.9823
                                  FL.
                                 Martin, FL
                                 St. Lucie, FL
2720...........................  Fort Smith, AR-OK............    0.7895
                                 Crawford, AR
                                 Sebastian, AR
                                 Sequoyah, OK
2750...........................  Fort Walton Beach, FL........    0.9693
                                 Okaloosa, FL
2760...........................  Fort Wayne, IN...............    0.9457
                                 Adams, IN
                                 Allen, IN
                                 De Kalb, IN
                                 Huntington, IN
                                 Wells, IN
                                 Whitley, IN
2800...........................  Forth Worth-Arlington, TX....    0.9446

[[Page 26829]]

 
                                 Hood, TX
                                 Johnson, TX
                                 Parker, TX
                                 Tarrant, TX
2840...........................  Fresno, CA...................    1.0216
                                 Fresno, CA
                                 Madera, CA
2880...........................  Gadsden, AL..................    0.8505
                                 Etowah, AL
2900...........................  Gainesville, FL..............    0.9871
                                 Alachua, FL
2920...........................  Galveston-Texas City, TX.....    0.9465
                                 Galveston, TX
2960...........................  Gary, IN.....................    0.9584
                                 Lake, IN
                                 Porter, IN
2975...........................  Glens Falls, NY..............    0.8281
                                 Warren, NY
                                 Washington, NY
2980...........................  Goldsboro, NC................    0.8892
                                 Wayne, NC
2985...........................  Grand Forks, ND-MN...........    0.8897
                                 Polk, MN
                                 Grand Forks, ND
2995...........................  Grand Junction, CO...........    0.9456
                                 Mesa, CO
3000...........................  Grand Rapids-Muskegon-           0.9525
                                  Holland, MI.
                                 Allegan, MI
                                 Kent, MI
                                 Muskegon, MI
                                 Ottawa, MI
3040...........................  Great Falls, MT..............    0.8950
                                 Cascade, MT
3060...........................  Greeley, CO..................    0.9237
                                 Weld, CO
3080...........................  Green Bay, WI................    0.9502
                                 Brown, WI
3120...........................  Greensboro-Winston-Salem-High    0.9282
                                  Point, NC.
                                 Alamance, NC
                                 Davidson, NC
                                 Davie, NC
                                 Forsyth, NC
                                 Guilford, NC
                                 Randolph, NC
                                 Stokes, NC
                                 Yadkin, NC
3150...........................  Greenville, NC...............    0.9100
                                 Pitt, NC
3160...........................  Greenville-Spartanburg-          0.9122
                                  Anderson, SC.
                                 Anderson, SC
                                 Cherokee, SC
                                 Greenville, SC
                                 Pickens, SC
                                 Spartanburg, SC
3180...........................  Hagerstown, MD...............    0.9268
                                 Washington, MD
3200...........................  Hamilton-Middletown, OH......    0.9418
                                 Butler, OH
3240...........................  Harrisburg-Lebanon-Carlisle,     0.9223
                                  PA.
                                 Cumberland, PA
                                 Dauphin, PA
                                 Lebanon, PA
                                 Perry, PA
3283...........................  Hartford, CT.................    1.1549
                                 Hartford, CT
                                 Litchfield, CT
                                 Middlesex, CT
                                 Tolland, CT
3285...........................  Hattiesburg, MS..............    0.7659
                                 Forrest, MS
                                 Lamar, MS
3290...........................  Hickory-Morganton-Lenoir, NC.    0.9028
                                 Alexander, NC
                                 Burke, NC
                                 Caldwell, NC
                                 Catawba, NC
3320...........................  Honolulu, HI.................    1.1457
                                 Honolulu, HI
3350...........................  Houma, LA....................    0.8385
                                 Lafourche, LA
                                 Terrebonne, LA
3360...........................  Houston, TX..................    0.9892
                                 Chambers, TX
                                 Fort Bend, TX
                                 Harris, TX
                                 Liberty, TX
                                 Montgomery, TX
                                 Waller, TX
3400...........................  Huntington-Ashland, WV-KY-OH.    0.9636
                                 Boyd, KY
                                 Carter, KY
                                 Greenup, KY
                                 Lawrence, OH
                                 Cabell, WV
                                 Wayne, WV
3440...........................  Huntsville, AL...............    0.8903
                                 Limestone, AL
                                 Madison, AL
3480...........................  Indianapolis, IN.............    0.9717
                                 Boone, IN
                                 Hamilton, IN
                                 Hancock, IN
                                 Hendricks, IN
                                 Johnson, IN
                                 Madison, IN
                                 Marion, IN
                                 Morgan, IN
                                 Shelby, IN
3500...........................  Iowa City, IA................    0.9587
                                 Johnson, IA
3520...........................  Jackson, MI..................    0.9532
                                 Jackson, MI
3560...........................  Jackson, MS..................    0.8607
                                 Hinds, MS
                                 Madison, MS
                                 Rankin, MS
3580...........................  Jackson, TN..................    0.9275
                                 Chester, TN
                                 Madison, TN
3600...........................  Jacksonville, FL.............    0.9381
                                 Clay, FL
                                 Duval, FL
                                 Nassau, FL
                                 St. Johns, FL
3605...........................  Jacksonville, NC.............    0.8239
                                 Onslow, NC
3610...........................  Jamestown, NY................    0.7976
                                 Chautaqua, NY
3620...........................  Janesville-Beloit, WI........    0.9849
                                 Rock, WI
3640...........................  Jersey City, NJ..............    1.1190
                                 Hudson, NJ
3660...........................  Johnson City-Kingsport-          0.8268
                                  Bristol, TN-VA.
                                 Carter, TN
                                 Hawkins, TN
                                 Sullivan, TN
                                 Unicoi, TN
                                 Washington, TN
                                 Bristol City, VA
                                 Scott, VA
                                 Washington, VA
3680...........................  Johnstown, PA................    0.8329
                                 Cambria, PA
                                 Somerset, PA
3700...........................  Jonesboro, AR................    0.7749
                                 Craighead, AR
3710...........................  Joplin, MO...................    0.8613
                                 Jasper, MO
                                 Newton, MO
3720...........................  Kalamazoo-Battlecreek, MI....    1.0595
                                 Calhoun, MI
                                 Kalamazoo, MI
                                 Van Buren, MI
3740...........................  Kankakee, IL.................    1.0790
                                 Kankakee, IL
3760...........................  Kansas City, KS-MO...........    0.9736
                                 Johnson, KS
                                 Leavenworth, KS
                                 Miami, KS
                                 Wyandotte, KS
                                 Cass, MO
                                 Clay, MO
                                 Clinton, MO
                                 Jackson, MO
                                 Lafayette, MO
                                 Platte, MO
                                 Ray, MO
3800...........................  Kenosha, WI..................    0.9686
                                 Kenosha, WI
3810...........................  Killeen-Temple, TX...........    1.0399
                                 Bell, TX
                                 Coryell, TX
3840...........................  Knoxville, TN................    0.8970
                                 Anderson, TN
                                 Blount, TN
                                 Knox, TN
                                 Loudon, TN
                                 Sevier, TN
                                 Union, TN
3850...........................  Kokomo, IN...................    0.8971
                                 Howard, IN
                                 Tipton, IN
3870...........................  La Crosse, WI-MN.............    0.9400

[[Page 26830]]

 
                                 Houston, MN
                                 La Crosse, WI
3880...........................  Lafayette, LA................    0.8475
                                 Acadia, LA
                                 Lafayette, LA
                                 St. Landry, LA
                                 St. Martin, LA
3920...........................  Lafayette, IN................    0.9278
                                 Clinton, IN
                                 Tippecanoe, IN
3960...........................  Lake Charles, LA.............    0.7965
                                 Calcasieu, LA
3980...........................  Lakeland-Winter Haven, FL....    0.9357
                                 Polk, FL
4000...........................  Lancaster, PA................    0.9078
                                 Lancaster, PA
4040...........................  Lansing-East Lansing, MI.....    0.9726
                                 Clinton, MI
                                 Eaton, MI
                                 Ingham, MI
4080...........................  Laredo, TX...................    0.8472
                                 Webb, TX
4100...........................  Las Cruces, NM...............    0.8745
                                 Dona Ana, NM
4120...........................  Las Vegas, NV-AZ.............    1.1521
                                 Mohave, AZ
                                 Clark, NV
                                 Nye, NV
4150...........................  Lawrence, KS.................    0.7923
                                 Douglas, KS
4200...........................  Lawton, OK...................    0.8315
                                 Comanche, OK
4243...........................  Lewiston-Auburn, ME..........    0.9179
                                 Androscoggin, ME
4280...........................  Lexington, KY................    0.8581
                                 Bourbon, KY
                                 Clark, KY
                                 Fayette, KY
                                 Jessamine, KY
                                 Madison, KY
                                 Scott, KY
                                 Woodford, KY
4320...........................  Lima, OH.....................    0.9483
                                 Allen, OH
                                 Auglaize, OH
4360...........................  Lincoln, NE..................    0.9892
                                 Lancaster, NE
4400...........................  Little Rock-North Little, AR.    0.9097
                                 Faulkner, AR
                                 Lonoke, AR
                                 Pulaski, AR
                                 Saline, AR
4420...........................  Longview-Marshall, TX........    0.8629
                                 Gregg, TX
                                 Harrison, TX
                                 Upshur, TX
4480...........................  Los Angeles-Long Beach, CA...    1.2001
                                 Los Angeles, CA
4520...........................  Louisville, KY-IN............    0.9276
                                 Clark, IN
                                 Floyd, IN
                                 Harrison, IN
                                 Scott, IN
                                 Bullitt, KY
                                 Jefferson, KY
                                 Oldham, KY
4600...........................  Lubbock, TX..................    0.9646
                                 Lubbock, TX
4640...........................  Lynchburg, VA................    0.9219
                                 Amherst, VA
                                 Bedford City, VA
                                 Bedford, VA
                                 Campbell, VA
                                 Lynchburg City, VA
4680...........................  Macon, GA....................    0.9204
                                 Bibb, GA
                                 Houston, GA
                                 Jones, GA
                                 Peach, GA
                                 Twiggs, GA
4720...........................  Madison, WI..................    1.0467
                                 Dane, WI
4800...........................  Mansfield, OH................    0.8900
                                 Crawford, OH
                                 Richland, OH
4840...........................  Mayaguez, PR.................    0.4914
                                 Anasco, PR
                                 Cabo Rojo, PR
                                 Hormigueros, PR
                                 Mayaguez, PR
                                 Sabana Grande, PR
                                 San German, PR
4880...........................  McAllen-Edinburg-Mission, TX.    0.8428
                                 Hidalgo, TX
4890...........................  Medford-Ashland, OR..........    1.0498
                                 Jackson, OR
4900...........................  Melbourne-Titusville-Palm        1.0253
                                  Bay, FL.
                                 Brevard, FL
4920...........................  Memphis, TN-AR-MS............    0.8920
                                 Crittenden, AR
                                 De Soto, MS
                                 Fayette, TN
                                 Shelby, TN
                                 Tipton, TN
4940...........................  Merced, CA...................    0.9837
                                 Merced, CA
5000...........................  Miami, FL....................    0.9802
                                 Dade, FL
5015...........................  Middlesex-Somerset-Hunterdon,    1.1213
                                  NJ.
                                 Hunterdon, NJ
                                 Middlesex, NJ
                                 Somerset, NJ
5080...........................  Milwaukee-Waukesha, WI.......    0.9893
                                 Milwaukee, WI
                                 Ozaukee, WI
                                 Washington, WI
                                 Waukesha, WI
5120...........................  Minneapolis-St. Paul, MN-WI..    1.0903
                                 Anoka, MN
                                 Carver, MN
                                 Chisago, MN
                                 Dakota, MN
                                 Hennepin, MN
                                 Isanti, MN
                                 Ramsey, MN
                                 Scott, MN
                                 Sherburne, MN
                                 Washington, MN
                                 Wright, MN
                                 Pierce, WI
                                 St. Croix, WI
5140...........................  Missoula, MT.................    0.9157
                                 Missoula, MT
5160...........................  Mobile, AL...................    0.8108
                                 Baldwin, AL
                                 Mobile, AL
5170...........................  Modesto, CA..................    1.0498
                                 Stanislaus, CA
5190...........................  Monmouth-Ocean, NJ...........    1.0674
                                 Monmouth, NJ
                                 Ocean, NJ
5200...........................  Monroe, LA...................    0.8137
                                 Ouachita, LA
5240...........................  Montgomery, AL...............    0.7734
                                 Autauga, AL
                                 Elmore, AL
                                 Montgomery, AL
5280...........................  Muncie, IN...................    0.9284
                                 Delaware, IN
5330...........................  Myrtle Beach, SC.............    0.8976
                                 Horry, SC
5345...........................  Naples, FL...................    0.9754
                                 Collier, FL
5360...........................  Nashville, TN................    0.9578
                                 Cheatham, TN
                                 Davidson, TN
                                 Dickson, TN
                                 Robertson, TN
                                 Rutherford, TN
                                 Sumner, TN
                                 Williamson, TN
                                 Wilson, TN
5380...........................  Nassau-Suffolk, NY...........    1.3357
                                 Nassau, NY
                                 Suffolk, NY
5483...........................  New Haven-Bridgeport-Stamford-   1.2408
                                  Waterbury-Danbury, CT.
                                 Fairfield, CT
                                 New Haven, CT
5523...........................  New London-Norwich, CT.......    1.1767
                                 New London, CT
5560...........................  New Orleans, LA..............    0.9046
                                 Jefferson, LA
                                 Orleans, LA
                                 Plaquemines, LA
                                 St. Bernard, LA
                                 St. Charles, LA
                                 St. James, LA
                                 St. John The Baptist, LA

[[Page 26831]]

 
                                 St. Tammany, LA
5600...........................  New York, NY.................    1.4414
                                 Bronx, NY
                                 Kings, NY
                                 New York, NY
                                 Putnam, NY
                                 Queens, NY
                                 Richmond, NY
                                 Rockland, NY
                                 Westchester, NY
5640...........................  Newark, NJ...................    1.1381
                                 Essex, NJ
                                 Morris, NJ
                                 Sussex, NJ
                                 Union, NJ
                                 Warren, NJ
5660...........................  Newburgh, NY-PA..............    1.1387
                                 Orange, NY
                                 Pike, PA
5720...........................  Norfolk-Virginia Beach-          0.8574
                                  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
5775...........................  Oakland, CA..................    1.5072
                                 Alameda, CA
                                 Contra Costa, CA
5790...........................  Ocala, FL....................    0.9402
                                 Marion, FL
5800...........................  Odessa-Midland, TX...........    0.9397
                                 Ector, TX
                                 Midland, TX
5880...........................  Oklahoma City, OK............    0.8900
                                 Canadian, OK
                                 Cleveland, OK
                                 Logan, OK
                                 McClain, OK
                                 Oklahoma, OK
                                 Pottawatomie, OK
5910...........................  Olympia, WA..................    1.0960
                                 Thurston, WA
5920...........................  Omaha, NE-IA.................    0.9978
                                 Pottawattamie, IA
                                 Cass, NE
                                 Douglas, NE
                                 Sarpy, NE
                                 Washington, NE
5945...........................  Orange County, CA............    1.1474
                                 Orange, CA
5960...........................  Orlando, FL..................    0.9640
                                 Lake, FL
                                 Orange, FL
                                 Osceola, FL
                                 Seminole, FL
5990...........................  Owensboro, KY................    0.8344
                                 Daviess, KY
6015...........................  Panama City, FL..............    0.8865
                                 Bay, FL
6020...........................  Parkersburg-Marietta, WV-OH..    0.8127
                                 Washington, OH
                                 Wood, WV
6080...........................  Pensacola, FL................    0.8645
                                 Escambia, FL
                                 Santa Rosa, FL
6120...........................  Peoria-Pekin, IL.............    0.8739
                                 Peoria, IL
                                 Tazewell, IL
                                 Woodford, IL
6160...........................  Philadelphia, PA-NJ..........    1.0713
                                 Burlington, NJ
                                 Camden, NJ
                                 Gloucester, NJ
                                 Salem, NJ
                                 Bucks, PA
                                 Chester, PA
                                 Delaware, PA
                                 Montgomery, PA
                                 Philadelphia, PA
6200...........................  Phoenix-Mesa, AZ.............    0.9820
                                 Maricopa, AZ
                                 Pinal, AZ
6240...........................  Pine Bluff, AR...............    0.7962
                                 Jefferson, AR
6280...........................  Pittsburgh, PA...............    0.9365
                                 Allegheny, PA
                                 Beaver, PA
                                 Butler, PA
                                 Fayette, PA
                                 Washington, PA
                                 Westmoreland, PA
6323...........................  Pittsfield, MA...............    1.0235
                                 Berkshire, MA
6340...........................  Pocatello, ID................    0.9372
                                 Bannock, ID
6360...........................  Ponce, PR....................    0.5169
                                 Guayanilla, PR
                                 Juana Diaz, PR
                                 Penuelas, PR
                                 Ponce, PR
                                 Villalba, PR
                                 Yauco, PR
6403...........................  Portland, ME.................    0.9794
                                 Cumberland, ME
                                 Sagadahoc, ME
                                 York, ME
6440...........................  Portland-Vancouver, OR-WA....    1.0667
                                 Clackamas, OR
                                 Columbia, OR
                                 Multnomah, OR
                                 Washington, OR
                                 Yamhill, OR
                                 Clark, WA
6483...........................  Providence-Warwick-Pawtucket,    1.0854
                                  RI.
                                 Bristol, RI
                                 Kent, RI
                                 Newport, RI
                                 Providence, RI
                                 Washington, RI
6520...........................  Provo-Orem, UT...............    0.9984
                                 Utah, UT
6560...........................  Pueblo, CO...................    0.8820
                                 Pueblo, CO
6580...........................  Punta Gorda, FL..............    0.9218
                                 Charlotte, FL
6600...........................  Racine, WI...................    0.9334
                                 Racine, WI
6640...........................  Raleigh-Durham-Chapel Hill,      0.9990
                                  NC.
                                 Chatham, NC
                                 Durham, NC
                                 Franklin, NC
                                 Johnston, NC
                                 Orange, NC
                                 Wake, NC
6660...........................  Rapid City, SD...............    0.8846
                                 Pennington, SD
6680...........................  Reading, PA..................    0.9295
                                 Berks, PA
6690...........................  Redding, CA..................    1.1135
                                 Shasta, CA
6720...........................  Reno, NV.....................    1.0648
                                 Washoe, NV
6740...........................  Richland-Kennewick-Pasco, WA.    1.1491
                                 Benton, WA
                                 Franklin, WA
6760...........................  Richmond-Petersburg, VA......    0.9477
                                 Charles City County, VA
                                 Chesterfield, VA
                                 Colonial Heights City, VA
                                 Dinwiddie, VA
                                 Goochland, VA
                                 Hanover, VA
                                 Henrico, VA
                                 Hopewell City, VA
                                 New Kent, VA
                                 Petersburg City, VA
                                 Powhatan, VA
                                 Prince George, VA
                                 Richmond City, VA
6780...........................  Riverside-San Bernardino, CA.    1.1365
                                 Riverside, CA
                                 San Bernardino, CA
6800...........................  Roanoke, VA..................    0.8614
                                 Botetourt, VA
                                 Roanoke, VA
                                 Roanoke City, VA
                                 Salem City, VA
6820...........................  Rochester, MN................    1.2139
                                 Olmsted, MN

[[Page 26832]]

 
6840...........................  Rochester, NY................    0.9194
                                 Genesee, NY
                                 Livingston, NY
                                 Monroe, NY
                                 Ontario, NY
                                 Orleans, NY
                                 Wayne, NY
6880...........................  Rockford, IL.................    0.9625
                                 Boone, IL
                                 Ogle, IL
                                 Winnebago, IL
6895...........................  Rocky Mount, NC..............    0.9228
                                 Edgecombe, NC
                                 Nash, NC
6920...........................  Sacramento, CA...............    1.1500
                                 El Dorado, CA
                                 Placer, CA
                                 Sacramento, CA
6960...........................  Saginaw-Bay City-Midland, MI.    0.9650
                                 Bay, MI
                                 Midland, MI
                                 Saginaw, MI
6980...........................  St. Cloud, MN................    0.9700
                                 Benton, MN
                                 Stearns, MN
7000...........................  St. Joseph, MO...............    0.8021
                                 Andrews, MO
                                 Buchanan, MO
7040...........................  St. Louis, MO-IL.............    0.8855
                                 Clinton, IL
                                 Jersey, IL
                                 Madison, IL
                                 Monroe, IL
                                 St. Clair, IL
                                 Franklin, MO
                                 Jefferson, MO
                                 Lincoln, MO
                                 St. Charles, MO
                                 St. Louis, MO
                                 St. Louis City, MO
                                 Warren, MO
                                 Sullivan City, MO
7080...........................  Salem, OR....................    1.0367
                                 Marion, OR
                                 Polk, OR
7120...........................  Salinas, CA..................    1.4623
                                 Monterey, CA
7160...........................  Salt Lake City-Ogden, UT.....    0.9945
                                 Davis, UT
                                 Salt Lake, UT
                                 Weber, UT
7200...........................  San Angelo, TX...............    0.8374
                                 Tom Green, TX
7240...........................  San Antonio, TX..............    0.8753
                                 Bexar, TX
                                 Comal, TX
                                 Guadalupe, TX
                                 Wilson, TX
7320...........................  San Diego, CA................    1.1131
                                 San Diego, CA
7360...........................  San Francisco, CA............    1.4142
                                 Marin, CA
                                 San Francisco, CA
                                 San Mateo, CA
7400...........................  San Jose, CA.................    1.4145
                                 Santa Clara, CA
7440...........................  San Juan-Bayamon, PR.........    0.4741
                                 Aguas Buenas, PR
                                 Barceloneta, PR
                                 Bayamon, PR
                                 Canovanas, PR
                                 Carolina, PR
                                 Catano, PR
                                 Ceiba, PR
                                 Comerio, PR
                                 Corozal, PR
                                 Dorado, PR
                                 Fajardo, PR
                                 Florida, PR
                                 Guaynabo, PR
                                 Humacao, PR
                                 Juncos, PR
                                 Los Piedras, PR
                                 Loiza, PR
                                 Luguillo, PR
                                 Manati, PR
                                 Morovis, PR
                                 Naguabo, PR
                                 Naranjito, PR
                                 Rio Grande, PR
                                 San Juan, PR
                                 Toa Alta, PR
                                 Toa Baja, PR
                                 Trujillo Alto, PR
                                 Vega Alta, PR
                                 Vega Baja, PR
                                 Yabucoa, PR
7460...........................  San Luis Obispo-Atascadero-      1.1271
                                  Paso Robles, CA.
                                 San Luis Obispo, CA
7480...........................  Santa Barbara-Santa Maria-       1.0481
                                  Lompoc, CA.
                                 Santa Barbara, CA
7485...........................  Santa Cruz-Watsonville, CA...    1.3646
                                 Santa Cruz, CA
7490...........................  Santa Fe, NM.................    1.0712
                                 Los Alamos, NM
                                 Santa Fe, NM
7500...........................  Santa Rosa, CA...............    1.3046
                                 Sonoma, CA
7510...........................  Sarasota-Bradenton, FL.......    0.9425
                                 Manatee, FL
                                 Sarasota, FL
7520...........................  Savannah, GA.................    0.9376
                                 Bryan, GA
                                 Chatham, GA
                                 Effingham, GA
7560...........................  Scranton-Wilkes-Barre-           0.8599
                                  Hazleton, PA.
                                 Columbia, PA
                                 Lackawanna, PA
                                 Luzerne, PA
                                 Wyoming, PA
7600...........................  Seattle-Bellevue-Everett, WA.    1.1474
                                 Island, WA
                                 King, WA
                                 Snohomish, WA
7610...........................  Sharon, PA...................    0.7869
                                 Mercer, PA
7620...........................  Sheboygan, WI................    0.8697
                                 Sheboygan, WI
7640...........................  Sherman-Denison, TX..........    0.9255
                                 Grayson, TX
7680...........................  Shreveport-Bossier City, LA..    0.8987
                                 Bossier, LA
                                 Caddo, LA
                                 Webster, LA
7720...........................  Sioux City, IA-NE............    0.9046
                                 Woodbury, IA
                                 Dakota, NE
7760...........................  Sioux Falls, SD..............    0.9257
                                 Lincoln, SD
                                 Minnehaha, SD
7800...........................  South Bend, IN...............    0.9802
                                 St. Joseph, IN
7840...........................  Spokane, WA..................    1.0852
                                 Spokane, WA
7880...........................  Springfield, IL..............    0.8659
                                 Menard, IL
                                 Sangamon, IL
7920...........................  Springfield, MO..............    0.8424
                                 Christian, MO
                                 Greene, MO
                                 Webster, MO
8003...........................  Springfield, MA..............    1.0927
                                 Hampden, MA
                                 Hampshire, MA
8050...........................  State College, PA............    0.8941
                                 Centre, PA
8080...........................  Steubenville-Weirton, OH-WV..    0.8804
                                 Jefferson, OH
                                 Brooke, WV
                                 Hancock, WV
8120...........................  Stockton-Lodi, CA............    1.0506
                                 San Joaquin, CA
8140...........................  Sumter, SC...................    0.8273
                                 Sumter, SC
8160...........................  Syracuse, NY.................    0.9714
                                 Cayuga, NY
                                 Madison, NY
                                 Onondaga, NY
                                 Oswego, NY
8200...........................  Tacoma, WA...................    1.0940
                                 Pierce, WA
8240...........................  Tallahassee, FL..............    0.8504
                                 Gadsden, FL
                                 Leon, FL
8280...........................  Tampa-St. Petersburg-            0.9065
                                  Clearwater, FL.
                                 Hernando, FL
                                 Hillsborough, FL
                                 Pasco, FL
                                 Pinellas, FL
8320...........................  Terre Haute, IN..............    0.8599
                                 Clay, IN
                                 Vermillion, IN
                                 Vigo, IN

[[Page 26833]]

 
8360...........................  Texarkana, AR-Texarkana, TX..    0.8088
                                 Miller, AR
                                 Bowie, TX
8400...........................  Toledo, OH...................    0.9810
                                 Fulton, OH
                                 Lucas, OH
                                 Wood, OH
8440...........................  Topeka, KS...................    0.9199
                                 Shawnee, KS
8480...........................  Trenton, NJ..................    1.0432
                                 Mercer, NJ
8520...........................  Tucson, AZ...................    0.8911
                                 Pima, AZ
8560...........................  Tulsa, OK....................    0.8332
                                 Creek, OK
                                 Osage, OK
                                 Rogers, OK
                                 Tulsa, OK
                                 Wagoner, OK
8600...........................  Tuscaloosa, AL...............    0.8130
                                 Tuscaloosa, AL
8640...........................  Tyler, TX....................    0.9521
                                 Smith, TX
8680...........................  Utica-Rome, NY...............    0.8465
                                 Herkimer, NY
                                 Oneida, NY
8720...........................  Vallejo-Fairfield-Napa, CA...    1.3354
                                 Napa, CA
                                 Solano, CA
8735...........................  Ventura, CA..................    1.1096
                                 Ventura, CA
8750...........................  Victoria, TX.................    0.8756
                                 Victoria, TX
8760...........................  Vineland-Millville-Bridgeton,    1.0031
                                  NJ.
                                 Cumberland, NJ
8780...........................  Visalia-Tulare-Porterville,      0.9429
                                  CA.
                                 Tulare, CA
8800...........................  Waco, TX.....................    0.8073
                                 McLennan, TX
8840...........................  Washington, DC-MD-VA-WV......    1.0851
                                 District of Columbia, DC
                                 Calvert, MD
                                 Charles, MD
                                 Frederick, MD
                                 Montgomery, MD
                                 Prince Georges, MD
                                 Alexandria City, VA
                                 Arlington, VA
                                 Clarke, VA
                                 Culpepper, VA
                                 Fairfax, VA
                                 Fairfax City, VA
                                 Falls Church City, VA
                                 Fauquier, VA
                                 Fredericksburg City, VA
                                 King George, VA
                                 Loudoun, VA
                                 Manassas City, VA
                                 Manassas Park City, VA
                                 Prince William, VA
                                 Spotsylvania, VA
                                 Stafford, VA
                                 Warren, VA
                                 Berkeley, WV
                                 Jefferson, WV
8920...........................  Waterloo-Cedar Falls, IA.....    0.8069
                                 Black Hawk, IA
8940...........................  Wausau, WI...................    0.9782
                                 Marathon, WI
8960...........................  West Palm Beach-Boca Raton,      0.9939
                                  FL.
                                 Palm Beach, FL
9000...........................  Wheeling, OH-WV..............    0.7670
                                 Belmont, OH
                                 Marshall, WV
                                 Ohio, WV
9040...........................  Wichita, KS..................    0.9520
                                 Butler, KS
                                 Harvey, KS
                                 Sedgwick, KS
9080...........................  Wichita Falls, TX............    0.8498
                                 Archer, TX
                                 Wichita, TX
9140...........................  Williamsport, PA.............    0.8544
                                 Lycoming, PA
9160...........................  Wilmington-Newark, DE-MD.....    1.1173
                                 New Castle, DE
                                 Cecil, MD
9200...........................  Wilmington, NC...............    0.9640
                                 New Hanover, NC
                                 Brunswick, NC
9260...........................  Yakima, WA...................    1.0569
                                 Yakima, WA
9270...........................  Yolo, CA.....................    0.9434
                                 Yolo, CA
9280...........................  York, PA.....................    0.9026
                                 York, PA
9320...........................  Youngstown-Warren, OH........    0.9358
                                 Columbiana, OH
                                 Mahoning, OH
                                 Trumbull, OH
9340...........................  Yuba City, CA................    1.0276
                                 Sutter, CA
                                 Yuba, CA
9360...........................  Yuma, AZ.....................    0.8589
                                 Yuma, AZ
------------------------------------------------------------------------


                  Table 3B.--Proposed Rural Wage Index
------------------------------------------------------------------------
                                                                  Wage
                         Nonurban area                            index
------------------------------------------------------------------------
Alabama.......................................................    0.7660
Alaska........................................................    1.2293
Arizona.......................................................    0.8493
Arkansas......................................................    0.7666
California....................................................    0.9840
Colorado......................................................    0.9015
Connecticut...................................................    1.2394
Delaware......................................................    0.9128
Florida.......................................................    0.8814
Georgia.......................................................    0.8230
Guam..........................................................    0.9611
Hawaii........................................................    1.0255
Idaho.........................................................    0.8747
Illinois......................................................    0.8204
Indiana.......................................................    0.8755
Iowa..........................................................    0.8315
Kansas........................................................    0.7923
Kentucky......................................................    0.8079
Louisiana.....................................................    0.7567
Maine.........................................................    0.8874
Maryland......................................................    0.8946
Massachusetts.................................................    1.1288
Michigan......................................................    0.9000
Minnesota.....................................................    0.9151
Mississippi...................................................    0.7680
Missouri......................................................    0.8021
Montana.......................................................    0.8481
Nebraska......................................................    0.8204
Nevada........................................................    0.9577
New Hampshire.................................................    0.9796
New Jersey \1\................................................  ........
New Mexico....................................................    0.8872
New York......................................................    0.8542
North Carolina................................................    0.8666
North Dakota..................................................    0.7788
Ohio..........................................................    0.8613
Oklahoma......................................................    0.7590
Oregon........................................................    1.0303
Pennsylvania..................................................    0.8462
Puerto Rico...................................................    0.4356
Rhode Island \1\..............................................  ........
South Carolina................................................    0.8607
South Dakota..................................................    0.7815
Tennessee.....................................................    0.7877
Texas.........................................................    0.7821
Utah..........................................................    0.9312
Vermont.......................................................    0.9345
Virginia......................................................    0.8504
Virgin Islands................................................    0.7845
Washington....................................................    1.0179
West Virginia.................................................    0.7975
Wisconsin.....................................................    0.9162
Wyoming.......................................................   0.9007
------------------------------------------------------------------------
\1\ All counties within the State are classified urban.


               Table 4.--Acceptable Impairment Group Codes
------------------------------------------------------------------------
                                                            Associated
                                 Excluded etiological     rehabilitation
    Impairment group codes             diagnoses            impairment
                                                             category
------------------------------------------------------------------------
01.1 Left body involvement     None....................  01 Stroke.
 (right brain).

[[Page 26834]]

 
01.2 Right body involvement    None....................  ...............
 (left brain).
01.3 Bilateral Involvement...  None....................  ...............
01.4 No Paresis..............  None....................  ...............
01.9 Other Stroke............  None....................  ...............
02.21 Open Injury............  None....................  02 Traumatic
                                                          brain injury.
02.22 Closed Injury..........  None....................  ...............
02.1 Non-traumatic...........  331.0...................  03 Nontraumatic
                               331.2...................   brain injury.
                               215.0...................
02.9 Other Brain.............  None....................  ...............
04.210 Paraplegia,             None....................  04 Traumatic
 Unspecified.                                             spinal cord
                                                          injury.
04.211 Paraplegia, Incomplete  None....................  ...............
04.212 Paraplegia, Complete..  None....................  ...............
04.220 Quadriplegia,           None....................  ...............
 Unspecified.
04.2211 Quadriplegia,          None....................  ...............
 Incomplete C1-4.
04.2212 Quadriplegia,          None....................  ...............
 Incomplete C5-8.
04.2221 Quadriplegia,          None....................  ...............
 Complete C1-4.
04.2222 Quadriplegia,          None....................  ...............
 Complete C5-8.
04.230 Other traumatic spinal  None....................  ...............
 cord dysfunction.
04.110 Paraplegia,             None....................  05 Nontraumatic
 unspecified.                                             spinal cord
                                                          injury.
04.111 Paraplegia, incomplete  None....................  ...............
04.112 Paraplegia, complete..  None....................  ...............
04.120 Quadriplegia,           None....................  ...............
 unspecified.
04.1211 Quadriplegia,          None....................  ...............
 Incomplete C1-4.
04.1212 Quadriplegia,          None....................  ...............
 Incomplete C5-8.
04.1221 Quadriplegia,          None....................  ...............
 Complete C1-4.
04.1222 Quadriplegia,          None....................  ...............
 Complete C5-8.
04.130 Other non-traumatic     None....................  ...............
 spinal cord dysfunction.
03.1 Multiple Sclerosis......  None....................  06
                                                          Neurological.
03.2 Parkinsonism............  None....................  ...............
03.3 Polyneuropathy..........  None....................  ...............
03.5 Cerebral Palsy..........  None....................  ...............
03.8 Neuromuscular Disorders.  None....................  ...............
03.9 Other Neurologic........  None....................  ...............
08.11 Status post unilateral   None....................  07 Fracture of
 hip fracture.                                            lower
                                                          extremity.
08.12 Status post bilateral    None....................  ...............
 hip fractures.
08.3 Status post pelvic        None....................  ...............
 fracture.
05.3 Unilateral lower          None....................  10 Amputation,
 extremity above the knee                                 lower
 (AK).                                                    extremity.
05.4 Unilateral lower          None....................  ...............
 extremity below the knee
 (BK).
05.5 Bilateral lower           None....................  ...............
 extremity above the knee (AK/
 AK).
05.6 Bilateral lower           None....................  ...............
 extremity above/below the
 knee (AK/BK).
05.7 Bilateral lower           None....................  ...............
 extremity below the knee (BK/
 BK).
05.1 Unilateral upper          None....................  11 Amputation,
 extremity above the elbow                                other.
 (AE).
05.2 Unilateral upper          None....................  ...............
 extremity below the elbow
 (BE).
05.9 Other amputation........  None....................  ...............
06.1 Rheumatoid Arthritis....  701.1...................  13 Rheumatoid,
                               710.1...................   other
                                                          arthritis.
06.9 Other arthritis.........  701.1...................  ...............
                               710.1...................
08.4 Status post major         None....................  17 Major
 multiple fractures.                                      multiple
                                                          trauma, no
                                                          brain injury
                                                          or spinal cord
                                                          injury.
14.9 Other multiple trauma...  None....................  ...............
14.1 Brain and spinal cord     None....................  18 Major
 injury.                                                  multiple
                                                          trauma, with
                                                          brain or
                                                          spinal cord
                                                          injury.
14.2 Brain and multiple        None....................  ...............
 fractures/amputation.
14.3 Spinal cord and multiple  None....................  ...............
 fractures/amputation.
3.4 Guillian Barre...........  None....................  19 Guillian
                                                          Barre.
12.1 Spina Bifida............  None....................  20
                                                          Miscellaneous.
12.9 Other congenital........  None....................  ...............
11 Burns.....................  None....................  21 Burns.
------------------------------------------------------------------------


                   Table 5.--Acceptable ICD-9-CM Codes
------------------------------------------------------------------------
               Code                                 Label
------------------------------------------------------------------------
036.0                               MENINGOCOCCALMENINGITIS
047.8                               VIRAL MENINGITIS NEC
047.9                               VIRAL MENINGITIS NOS
049.0                               LYMPHOCYTICCHORIOMENING
049.9                               VIRAL ENCEPHALITIS NOS
052.0                               POSTVARICELLAENCEPHALIT
053.0                               HERPES ZOSTER MENINGITIS
054.3                               HERPETICENCEPHALITIS

[[Page 26835]]

 
054.5                               HERPETICSEPTICEMIA
054.72                              H SIMPLEX MENINGITIS
055.0                               POSTMEASLESENCEPHALITIS
072.1                               MUMPSMENINGITIS
072.2                               MUMPSENCEPHALITIS
094.2                               SYPHILITICMENINGITIS
112.83                              CANDIDALMENINGITIS
114.2                               COCCIDIOIDALMENINGITIS
115.01                              HISTOPLASM CAPSUL MENING
115.11                              HISTOPLASM DUBOIS MENING
115.91                              HISTOPLASMOSISMENINGIT
130.0                               TOXOPLASMMENINGOENCEPH
139.0                               LATE EFF VIRAL ENCEPHAL
320.0                               HEMOPHILUSMENINGITIS
320.1                               PNEUMOCOCCALMENINGITIS
320.2                               STREPTOCOCCALMENINGITIS
320.3                               STAPHYLOCOCCMENINGITIS
320.7                               MENING IN OTH BACT DIS
320.81                              ANAEROBICMENINGITIS
320.82                              MNINGTS GRAM-NEG BCT NEC
320.89                              MENINGITIS OTH SPCF BACT
320.9                               BACTERIAL MENINGITIS NOS
321.0                               CRYPTOCOCCALMENINGITIS
321.1                               MENING IN OTH FUNGAL DIS
321.2                               MENING IN OTH VIRAL DIS
321.3                               TRYPANOSOMIASISMENINGIT
321.4                               MENINGIT D/T SARCOIDOSIS
321.8                               MENING IN OTH NONBAC DIS
322.0                               NONPYOGENICMENINGITIS
322.2                               CHRONICMENINGITIS
322.9                               MENINGITISNOS
323.0                               ENCEPHALIT IN VIRAL DIS
323.6                               POSTINFECTENCEPHALITIS
323.8                               ENCEPHALITISNEC
323.9                               ENCEPHALITISNOS
324.0                               INTRACRANIALABSCESS
324.1                               INTRASPINALABSCESS
324.9                               CNS ABSCESS NOS
334.0                               FRIEDREICHSATAXIA
334.1                               HERED SPASTIC PARAPLEGIA
334.2                               PRIMARY CEREBELLAR DEGEN
334.3                               CEREBELLAR ATAXIA NEC
334.4                               CEREBEL ATAX IN OTH DIS
334.8                               SPINOCEREBELLAR DIS NEC
334.9                               SPINOCEREBELLAR DIS NOS
335.0                               WERDNIG-HOFFMANNDISEASE
335.10                              SPINAL MUSCL ATROPHY NOS
335.11                              KUGELBERG-WELANDERDIS
335.19                              SPINAL MUSCL ATROPHY NEC
335.20                              AMYOTROPHICSCLEROSIS
335.21                              PROG MUSCULAR ATROPHY
335.22                              PROGRESSIVE BULBAR PALSY
335.23                              PSEUDOBULBARPALSY
335.24                              PRIM LATERAL SCLEROSIS
335.29                              MOTOR NEURON DISEASE NEC
335.8                               ANT HORN CELL DIS NEC
335.9                               ANT HORN CELL DIS NOS
336.0                               SYRINGOMYELIA
336.1                               VASCULARMYELOPATHIES
336.2                               COMB DEG CORD IN OTH DIS
336.3                               MYELOPATHY IN OTH DIS
336.8                               MYELOPATHYNEC
336.9                               SPINAL CORD DISEASE NOS
342.01                              FLCCD HMIPLGA DOMNT SIDE
342.02                              FLCCD HMIPLG NONDMNT SDE
342.10                              SPSTC HMIPLGA UNSPF SIDE
342.11                              SPSTC HMIPLGA DOMNT SIDE
342.12                              SPSTC HMIPLG NONDMNT SDE
342.80                              OT SP HMIPLGA UNSPF SIDE
342.81                              OT SP HMIPLGA DOMNT SIDE
342.82                              OT SP HMIPLG NONDMNT SDE
342.90                              UNSP HEMIPLGA UNSPF SIDE
342.91                              UNSP HEMIPLGA DOMNT SIDE
342.92                              UNSP HMIPLGA NONDMNT SDE
343.0                               CONGENITALDIPLEGIA
343.1                               CONGENITALHEMIPLEGIA
343.2                               CONGENITALQUADRIPLEGIA
343.3                               CONGENITALMONOPLEGIA
343.4                               INFANTILEHEMIPLEGIA
343.8                               CEREBRAL PALSY NEC
343.9                               CEREBRAL PALSY NOS
344.00                              QUADRIPLEGIA, UNSPECIFD
344.01                              QUADRPLG C1-C4, COMPLETE
344.02                              QUADRPLG C1-C4, INCOMPLT
344.03                              QUADRPLG C5-C7, COMPLETE
344.04                              QUADRPLG C5-C7, INCOMPLT
344.09                              OTHERQUADRIPLEGIA
344.1                               PARAPLEGIANOS
344.2                               DIPLEGIA OF UPPER LIMBS
344.30                              MONPLGA LWR LMB UNSP SDE
344.31                              MONPLGA LWR LMB DMNT SDE
344.32                              MNPLG LWR LMB NONDMNT SD
344.40                              MONPLGA UPR LMB UNSP SDE
344.41                              MONPLGA UPR LMB DMNT SDE
344.42                              MNPLG UPR LMB NONDMNT SD
344.5                               MONOPLEGIANOS
344.60                              CAUDA EQUINA SYND NOS
344.61                              NEUROGENICBLADDER
344.81                              LOCKED-INSTATE
344.89                              OTH SPCF PARALYTIC SYND
344.9                               PARALYSISNOS
348.1                               ANOXIC BRAIN DAMAGE
348.4                               COMPRESSION OF BRAIN
356.1                               PERONEAL MUSCLE ATROPHY
356.2                               HERED SENSORY NEUROPATHY
356.4                               IDIO PROG POLYNEUROPATHY
359.0                               CONG HERED MUSC DYSTRPHY
359.1                               HERED PROG MUSC DYSTRPHY
359.5                               MYOPATHY IN ENDOCRIN DIS
359.6                               INFL MYOPATHY IN OTH DIS
359.8\*\                            MYOPATHY NEC
359.9                               MYOPATHYNOS
430                                 SUBARACHNOIDHEMORRHAGE
431                                 INTRACEREBRALHEMORRHAGE
432.0                               NONTRAUM EXTRADURAL HEM
432.1                               SUBDURALHEMORRHAGE
432.9                               INTRACRANIAL HEMORR NOS
433.01                              OCL BSLR ART W INFRCT
433.11                              OCL CRTD ART W INFRCT
433.21                              OCL VRTB ART W INFRCT
433.31                              OCL MLT BI ART W INFRCT
433.81                              OCL SPCF ART W INFRCT
433.91                              OCL ART NOS W INFRCT
434.01                              CRBL THRMBS W INFRCT
434.11                              CRBL EMBLSM W INFRCT
434.91                              CRBL ART OCL NOS W INFRC
438.11                              LATE EFF CV DIS-APHASIA
438.20                              LATE EF-HEMPLGA SIDE NOS
438.21                              LATE EF-HEMPLGA DOM SIDE
438.22                              LATE EF-HEMIPLGA NON-DOM
438.30                              LATE EF-MPLGA UP LMB NOS
438.31                              LATE EF-MPLGA UP LMB DOM
438.32                              LT EF-MPLGA UPLMB NONDOM
438.40                              LTE EF-MPLGA LOW LMB NOS
438.41                              LTE EF-MPLGA LOW LMB DOM
438.42                              LT EF-MPLGA LOWLMB NONDM
438.50                              LT EF OTH PARAL SIDE NOS
438.51                              LT EF OTH PARAL DOM SIDE
438.52                              LT EF OTH PARALS NON-DOM
438.53                              LT EF OTH PARALS-BILAT
710.0                               SYST LUPUS ERYTHEMATOSUS
710.4                               POLYMYOSITIS
714.0                               RHEUMATOIDARTHRITIS
714.1                               FELTYSSYNDROME
714.2                               SYST RHEUM ARTHRITIS NEC
714.30                              JUV RHEUM ARTHRITIS NOS
714.31                              POLYART JUV RHEUM ARTHR
714.4                               CHR POSTRHEUM ARTHRITIS
716.29                              ALLERGARTHRITIS-MULT
720.0                               ANKYLOSINGSPONDYLITIS
806.00                              C1-C4 FX-CL/CORD INJ NOS
806.01                              C1-C4 FX-CL/COM CORD LES
806.02                              C1-C4 FX-CL/ANT CORD SYN
806.03                              C1-C4 FX-CL/CEN CORD SYN
806.04                              C1-C4 FX-CL/CORD INJ NEC
806.05                              C5-C7 FX-CL/CORD INJ NOS
806.06                              C5-C7 FX-CL/COM CORD LES
806.07                              C5-C7 FX-CL/ANT CORD SYN
806.08                              C5-C7 FX-CL/CEN CORD SYN
806.09                              C5-C7 FX-CL/CORD INJ NEC
806.10                              C1-C4 FX-OP/CORD INJ NOS
806.11                              C1-C4 FX-OP/COM CORD LES
806.12                              C1-C4 FX-OP/ANT CORD SYN
806.13                              C1-C4 FX-OP/CEN CORD SYN
806.14                              C1-C4 FX-OP/CORD INJ NEC
806.15                              C5-C7 FX-OP/CORD INJ NOS
806.16                              C5-C7 FX-OP/COM CORD LES

[[Page 26836]]

 
806.17                              C5-C7 FX-OP/ANT CORD SYN
806.18                              C5-C7 FX-OP/CEN CORD SYN
806.19                              C5-C7 FX-OP/CORD INJ NEC
806.20                              T1-T6 FX-CL/CORD INJ NOS
806.21                              T1-T6 FX-CL/COM CORD LES
806.22                              T1-T6 FX-CL/ANT CORD SYN
806.23                              T1-T6 FX-CL/CEN CORD SYN
806.24                              T1-T6 FX-CL/CORD INJ NEC
806.25                              T7-T12 FX-CL/CRD INJ NOS
806.26                              T7-T12 FX-CL/COM CRD LES
806.27                              T7-T12 FX-CL/ANT CRD SYN
806.28                              T7-T12 FX-CL/CEN CRD SYN
806.29                              T7-T12 FX-CL/CRD INJ NEC
806.30                              T1-T6 FX-OP/CORD INJ NOS
806.31                              T1-T6 FX-OP/COM CORD LES
806.32                              T1-T6 FX-OP/ANT CORD SYN
806.33                              T1-T6 FX-OP/CEN CORD SYN
806.34                              T1-T6 FX-OP/CORD INJ NEC
806.35                              T7-T12 FX-OP/CRD INJ NOS
806.36                              T7-T12 FX-OP/COM CRD LES
806.37                              T7-T12 FX-OP/ANT CRD SYN
806.38                              T7-T12 FX-OP/CEN CRD SYN
806.39                              T7-T12 FX-OP/CRD INJ NEC
806.4                               CL LUMBAR FX W CORD INJ
806.5                               OPN LUMBAR FX W CORD INJ
806.60                              FX SACRUM-CL/CRD INJ NOS
806.61                              FX SACR-CL/CAUDA EQU LES
806.62                              FX SACR-CL/CAUDA INJ NEC
806.69                              FX SACRUM-CL/CRD INJ NEC
806.70                              FX SACRUM-OP/CRD INJ NOS
806.71                              FX SACR-OP/CAUDA EQU LES
806.72                              FX SACR-OP/CAUDA INJ NEC
806.79                              FX SACRUM-OP/CRD INJ NEC
806.8                               VERT FX NOS-CL W CRD INJ
806.9                               VERT FX NOS-OP W CRD INJ
850.2                               CONCUSSION-MODERATECOMA
850.3                               CONCUSSION-PROLONGCOMA
850.4                               CONCUSSION-DEEPCOMA
851.02                              CORTEX CONTUS-BRIEF COMA
851.03                              CORTEX CONTUS-MOD COMA
851.04                              CORTX CONTUS-PROLNG COMA
851.05                              CORTEX CONTUS-DEEP COMA
851.12                              OPN CORT CONTUS-BRF COMA
851.13                              OPN CORT CONTUS-MOD COMA
851.14                              OPN CORT CONTU-PROL COMA
851.15                              OPN CORT CONTU-DEEP COMA
851.22                              CORTEX LACERA-BRIEF COMA
851.23                              CORTEX LACERAT-MOD COMA
851.24                              CORTEX LACERAT-PROL COMA
851.25                              CORTEX LACERAT-DEEP COMA
851.32                              OPN CORTX LAC-BRIEF COMA
851.33                              OPN CORTX LACER-MOD COMA
851.34                              OPN CORTX LAC-PROLN COMA
851.35                              OPN CORTEX LAC-DEEP COMA
851.42                              CEREBELL CONTUS-BRF COMA
851.43                              CEREBELL CONTUS-MOD COMA
851.44                              CEREBEL CONTUS-PROL COMA
851.45                              CEREBEL CONTUS-DEEP COMA
851.52                              OPN CEREBE CONT-BRF COMA
851.53                              OPN CEREBE CONT-MOD COMA
851.54                              OPN CEREBE CONT-PROL COM
851.55                              OPN CEREBE CONT-DEEP COM
851.62                              CEREBEL LACER-BRIEF COMA
851.63                              CEREBEL LACERAT-MOD COMA
851.64                              CEREBEL LACER-PROLN COMA
851.65                              CEREBELL LACER-DEEP COMA
851.72                              OPN CEREBEL LAC-BRF COMA
851.73                              OPN CEREBEL LAC-MOD COMA
851.74                              OPN CEREBE LAC-PROL COMA
851.75                              OPN CEREBE LAC-DEEP COMA
851.82                              BRAIN LAC NEC-BRIEF COMA
851.83                              BRAIN LACER NEC-MOD COMA
851.84                              BRAIN LAC NEC-PROLN COMA
851.85                              BRAIN LAC NEC-DEEP COMA
851.92                              OPN BRAIN LAC-BRIEF COMA
851.93                              OPN BRAIN LACER-MOD COMA
851.94                              OPN BRAIN LAC-PROLN COMA
851.95                              OPEN BRAIN LAC-DEEP COMA
852.03                              SUBARACH HEM-MOD COMA
852.04                              SUBARACH HEM-PROLNG COMA
852.05                              SUBARACH HEM-DEEP COMA
852.06                              SUBARACH HEM-COMA NOS
852.13                              OP SUBARACH HEM-MOD COMA
852.14                              OP SUBARACH HEM-PROL COM
852.15                              OP SUBARACH HEM-DEEP COM
852.23                              SUBDURAL HEMORR-MOD COMA
852.24                              SUBDURAL HEM-PROLNG COMA
852.25                              SUBDURAL HEM-DEEP COMA
852.26                              SUBDURAL HEMORR-COMA NOS
852.33                              OPN SUBDUR HEM-MOD COMA
852.34                              OPN SUBDUR HEM-PROL COMA
852.35                              OPN SUBDUR HEM-DEEP COMA
852.43                              EXTRADURAL HEM-MOD COMA
852.44                              EXTRADUR HEM-PROLN COMA
852.45                              EXTRADURAL HEM-DEEP COMA
852.53                              EXTRADURAL HEM-MOD COMA
852.54                              EXTRADUR HEM-PROLN COMA
852.55                              EXTRADUR HEM-DEEP COMA
853.03                              BRAIN HEM NEC-MOD COMA
853.04                              BRAIN HEM NEC-PROLN COMA
853.05                              BRAIN HEM NEC-DEEP COMA
853.06                              BRAIN HEM NEC-COMA NOS
853.13                              BRAIN HEM OPEN-MOD COMA
853.14                              BRAIN HEM OPN-PROLN COMA
853.15                              BRAIN HEM OPEN-DEEP COMA
854.03                              BRAIN INJ NEC-MOD COMA
854.04                              BRAIN INJ NEC-PROLN COMA
854.05                              BRAIN INJ NEC-DEEP COMA
854.06                              BRAIN INJ NEC-COMA NOS
854.13                              OPN BRAIN INJ-MOD COMA
854.14                              OPN BRAIN INJ-PROLN COMA
854.15                              OPN BRAIN INJ-DEEP COMA
887.0                               AMPUT BELOW ELB, UNILAT
887.1                               AMP BELOW ELB, UNIL-COMP
887.3                               AMPUT ABV ELB, UNIL-COMP
887.4                               AMPUTAT ARM, UNILAT NOS
887.5                               AMPUT ARM, UNIL NOS-COMP
887.6                               AMPUTATION ARM, BILAT
887.7                               AMPUTAT ARM, BILAT-COMPL
897.0                               AMPUT BELOW KNEE, UNILAT
897.1                               AMPUTAT BK, UNILAT-COMPL
897.2                               AMPUT ABOVE KNEE, UNILAT
897.3                               AMPUT ABV KN, UNIL-COMPL
897.4                               AMPUTAT LEG, UNILAT NOS
897.5                               AMPUT LEG, UNIL NOS-COMP
897.6                               AMPUTATION LEG, BILAT
897.7                               AMPUTAT LEG, BILAT-COMPL
905.9                               LATE EFF TRAUMAT AMPUTAT
907.0                               LT EFF INTRACRANIAL INJ
907.2                               LATE EFF SPINAL CORD INJ
952.00                              C1-C4 SPIN CORD INJ NOS
952.01                              COMPLETE LES CORD/C1-C4
952.02                              ANTERIOR CORD SYND/C1-C4
952.03                              CENTRAL CORD SYND/C1-C4
952.04                              C1-C4 SPIN CORD INJ NEC
952.05                              C5-C7 SPIN CORD INJ NOS
952.06                              COMPLETE LES CORD/C5-C7
952.07                              ANTERIOR CORD SYND/C5-C7
952.08                              CENTRAL CORD SYND/C5-C7
952.09                              C5-C7 SPIN CORD INJ NEC
952.10                              T1-T6 SPIN CORD INJ NOS
952.11                              COMPLETE LES CORD/T1-T6
952.12                              ANTERIOR CORD SYND/T1-T6
952.13                              CENTRAL CORD SYND/T1-T6
952.14                              T1-T6 SPIN CORD INJ NEC
952.15                              T7-T12 SPIN CORD INJ NOS
952.16                              COMPLETE LES CORD/T7-T12
952.17                              ANTERIOR CORD SYN/T7-T12
952.18                              CENTRAL CORD SYN/T7-T12

[[Page 26837]]

 
952.19                              T7-T12 SPIN CORD INJ NEC
952.2                               LUMBAR SPINAL CORD INJUR
952.3                               SACRAL SPINAL CORD INJUR
952.4                               CAUDA EQUINA INJURY
952.8                               SPIN CORD INJ-MULT SITE
952.9                               SPINAL CORD INJURY NOS
997.60                              AMPUTAT STUMP COMPL NOS
997.61                              NEUROMA AMPUTATION STUMP
997.62                              INFECTION AMPUTAT STUMP
997.69                              AMPUTAT STUMP COMPL NEC
V49.63                              STATUS AMPUT HAND
V49.64                              STATUS AMPUT WRIST
V49.65                              STATUS AMPUT BELOW ELBOW
V49.66                              STATUS AMPUT ABOVE ELBOW
V49.67                              STATUS AMPUT SHOULDER
V49.75                              STATUS AMPUT BELOW KNEE
V49.76                              STATUS AMPUT ABOVE KNEE
V49.77                              STATUS AMPUT HIP
------------------------------------------------------------------------
\*\ Note code 359.8 has been replaced by 359.81 and 359.89

[FR Doc. 03-11829 Filed 5-8-03; 3:15 pm]
BILLING CODE 4120-01-P