[Federal Register Volume 68, Number 95 (Friday, May 16, 2003)]
[Proposed Rules]
[Pages 26758-26783]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-11854]



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Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 409, 413, 440, and 483



Medicare Program; Prospective Payment System and Consolidated Billing 
for Skilled Nursing Facilities--Update; Proposed Rule

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

[[Page 26758]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409, 413, 440, and 483

[CMS-1469-P]
RIN 0938-AL20


Medicare Program; Prospective Payment System and Consolidated 
Billing for Skilled Nursing Facilities--Update

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would update the payment rates used under 
the prospective payment system (PPS) for skilled nursing facilities 
(SNFs), for fiscal year (FY) 2004, as required by statute. Annual 
updates to the PPS rates are required by section 1888(e) of the Social 
Security Act (the Act), as amended by the Medicare, Medicaid, and SCHIP 
Balanced Budget Refinement Act of 1999 (BBRA), and the Medicare, 
Medicaid, and State Children's Health Insurance Program (SCHIP) 
Benefits Improvement and Protection Act of 2000 (BIPA), relating to 
Medicare payments and consolidated billing for SNFs.

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

ADDRESSES: Mail written comments (one original and three copies) to the 
following address: Centers for Medicare & Medicaid Services, Department 
of Health and Human Services, Attention: CMS-1469-P, PO Box 8013, 
Baltimore, MD 21244-8013.
    If you prefer, you may deliver your written comments (one original 
and three copies) to one of the following addresses: Hubert H. Humphrey 
Building, Room 443-G, 200 Independence Avenue, SW., Washington, DC 
20201, or Centers for Medicare & Medicaid Services, Room C5-14-03, 7500 
Security Boulevard, Baltimore, MD 21244-8013.
    Comments mailed to those addresses designated for courier delivery 
may be delayed and could be considered late. Because of staffing and 
resource limitations, we cannot accept comments by facsimile (FAX) 
transmission. Please refer to file code CMS-1469-P on each comment. 
Comments received timely will be available for public inspection as 
they are received, generally beginning approximately 3 weeks after 
publication of this document, in Room C5-12-08 of the Centers for 
Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, 
Maryland, Monday through Friday of each week from 8:30 a.m. to 4 p.m. 
Please call (410) 786-7197 to make an appointment to view comments.

FOR FURTHER INFORMATION CONTACT:
John Davis, (410) 786-0008 (for information related to the Wage Index, 
and for information related to swing-bed providers).
Ellen Gay, (410) 786-4528 (for information related to the case-mix 
classification methodology, and for information related to swing-bed 
providers).
Bill Ullman, (410) 786-5667 (for information related to level of care 
determinations, consolidated billing, and general information).

SUPPLEMENTARY INFORMATION:
    Copies: To order copies of the Federal Register containing this 
document, send your request to: New Orders, Superintendent of 
Documents, PO Box 371954, Pittsburgh, PA 15250-7954. The cost for each 
copy is $9. Please specify the date of the issue requested and enclose 
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You can also view and photocopy the Federal Register document at most 
libraries designated as Federal Depository Libraries and at many other 
public and academic libraries throughout the country that receive the 
Federal Register.
    To assist readers in referencing sections contained in this 
document, we are providing the following Table of Contents.

Table of Contents

I. Background
    A. Current System for Payment of Skilled Nursing Facility 
Services Under Part A of the Medicare Program
    B. Requirements of the Balanced Budget Act of 1997 (the BBA) for 
Updating the Prospective Payment System for Skilled Nursing 
Facilities
    C. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement 
Act of 1999 (the BBRA)
    D. The Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000 (the BIPA)
    E. Skilled Nursing Facility Prospective Payment--General 
Overview
    1. Payment Provisions--Federal Rates
    2. Payment Provisions--Initial Transition Period
    F. Skilled Nursing Facility Market Basket Index
II. Update of Payment Rates Under the Prospective Payment System for 
Skilled Nursing Facilities
    A. Federal Prospective Payment System
    1. Costs and Services Covered by the Federal Rates
    2. Methodology Used for the Calculation of the Federal Rates
    B. Case-Mix Adjustment
    C. Wage Index Adjustment to Federal Rates
    D. Updates to the Federal Rates
    E. Relationship of RUG-III Classification System to Existing 
Skilled Nursing Facility Level-of-Care Criteria
    F. Initial Three-year Transition Period
    G. Example of Computation of Adjusted PPS Rates and SNF Payment
III. The Skilled Nursing Facility Market Basket Index
    A. Use of the Skilled Nursing Facility Market Basket Percentage
    B. Federal Rate Update Factor
IV. Consolidated Billing
V. Application of the SNF PPS to SNF Services Furnished by Swing-Bed 
Hospitals
VI. Distinct Part Definition
    A. Background
    B. Proposed Revision
    VII. Provisions of the Proposed Rule
    VIII. Collection of Information Requirements
    IX. Regulatory Impact Analysis
    A. Overall Impact
    B. Anticipated Effects
    C. Alternatives Considered
    D. Conclusion
Regulation Text
    In addition, because of the many terms to which we refer by 
abbreviation in this proposed rule, we are listing these 
abbreviations and their corresponding terms in alphabetical order 
below:


ADL                                   Activity of Daily Living
AHE                                   Average Hourly Earnings
ARD                                   Assessment Reference Date
BBA                                   Balanced Budget Act of 1997,
                                       Pub.L. 105-33
BBRA                                  Medicare, Medicaid and SCHIP
                                       Balanced Budget Refinement Act of
                                       1999, Pub.L. 106-113
BEA                                    (U.S.) Bureau of Economic
                                       Analysis
BIPA                                  Medicare, Medicaid, and SCHIP
                                       Benefits Improvement and
                                       Protection Act of 2000, Pub.L.
                                       106-554
CAH                                    Critical Access Hospital
CFR                                   Code of Federal Regulations
CMS                                   Centers for Medicare & Medicaid
                                       Services
CPT                                   (Physicians') Current Procedural
                                       Terminology
DRG                                   Diagnosis Related Group
FI                                    Fiscal Intermediary
FR                                    Federal Register
FY                                    Fiscal Year
GAO                                   General Accounting Office
HCPCS                                 Healthcare Common Procedure Coding
                                       System
ICD-9-CM                              International Classification of
                                       Diseases, Ninth Edition, Clinical
                                       Modification

[[Page 26759]]

 
IFC                                   Interim Final Rule with Comment
                                       Period
MDS                                   Minimum Data Set
MEDPAR                                Medicare Provider Analysis and
                                       Review File
MIP                                   Medicare Integrity Program
MSA                                   Metropolitan Statistical Area
NECMA                                 New England County Metropolitan
                                       Area
OIG                                   Office of the Inspector General
OMRA                                  Other Medicare Required Assessment
PCE                                   Personal Care Expenditures
PPI                                   Producer Price Index
PPS                                   Prospective Payment System
PRM                                   Provider Reimbursement Manual
RAI                                   Resident Assessment Instrument
RAP                                   Resident Assessment Protocol
RAVEN                                 Resident Assessment Validation
                                       Entry
RFA                                   Regulatory Flexibility Act, Pub.
                                       L. 96-354
RIA                                   Regulatory Impact Analysis
RUG                                   Resource Utilization Groups
SCHIP                                 State Children's Health Insurance
                                       Program
SNF                                   Skilled Nursing Facility
STM                                   Staff Time Measure
UMRA                                  Unfunded Mandates Reform Act, Pub.
                                       L. 104-4
 

I. Background

    On July 31, 2002, we published a notice in the Federal Register (67 
FR 49798) that set forth updates to the payment rates used under the 
prospective payment system (PPS) for skilled nursing facilities (SNFs), 
for fiscal year (FY) 2003. Annual updates to the PPS rates are required 
by section 1888(e) of the Social Security Act (the Act), as amended by 
the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999 (the BBRA) and the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 (the BIPA), relating to Medicare 
payments and consolidated billing for SNFs.

A. Current System for Payment of Skilled Nursing Facility Services 
Under Part A of the Medicare Program

    Section 4432 of the Balanced Budget Act of 1997 (the BBA) amended 
section 1888 of the Act to provide for the implementation of a per diem 
PPS for SNFs, covering all costs (routine, ancillary, and capital-
related) of covered SNF services furnished to beneficiaries under Part 
A of the Medicare program, effective for cost reporting periods 
beginning on or after July 1, 1998. We propose to update the per diem 
payment rates for SNFs for FY 2004. Major elements of the SNF PPS 
include:
    [sbull] Rates. Per diem Federal rates were established for urban 
and rural areas using allowable costs from FY 1995 cost reports. These 
rates also included an estimate of the cost of services that, before 
July 1, 1998, had been paid under Part B but were furnished to Medicare 
beneficiaries in a SNF during a Part A covered stay. The rates were 
adjusted annually using a SNF market basket index. Rates were case-mix 
adjusted using a classification system (Resource Utilization Groups, 
version III (RUG-III)) based on beneficiary assessments (using the 
Minimum Data Set (MDS) 2.0). The rates were also adjusted by the 
hospital wage index to account for geographic variation in wages. (In 
section II.C of this preamble, we discuss the wage index adjustment in 
detail.) A correction notice was published on December 27, 2002 (67 FR 
79123) that announced corrections to several of the wage factors. 
Additionally, as noted in the July 31, 2002 update notice (67 FR 
49798), section 101 of the BBRA and certain sections of the BIPA also 
affect the payment rate.
    [sbull] Transition. The SNF PPS included an initial 3-year, phased 
transition that blended a facility-specific payment rate with the 
Federal case-mix adjusted rate. For each cost reporting period after a 
facility migrated to the new system, the facility-specific portion of 
the blend decreased and the Federal portion increased in 25 percentage 
point increments. For most facilities, the facility-specific rate was 
based on allowable costs from FY 1995; however, since the last year of 
the transition was FY 2001, all facilities were paid at the full 
Federal rate by the following fiscal year (FY 2002). Therefore, we are 
no longer including adjustment factors related to facility-specific 
rates for the coming fiscal year.
    [sbull] Coverage. The establishment of the SNF PPS did not change 
Medicare's fundamental requirements for SNF coverage. However, because 
RUG-III classification is based, in part, on the beneficiary's need for 
skilled nursing care and therapy, we have attempted, where possible, to 
coordinate claims review procedures involving level of care 
determinations with the outputs of beneficiary assessment and RUG-III 
classifying activities. We discuss this coordination in greater detail 
in section II.E of this preamble. Another SNF benefit requirement is 
that the SNF in which the services are furnished must be certified by 
Medicare as meeting the requirements for program participation 
contained in section 1819 of the Act. This provision of the law defines 
a SNF as ``* * * an institution (or a distinct part of an institution). 
* * *'' In section VI of this preamble, we discuss a clarification that 
we propose to make in defining the term ``distinct part'' with respect 
to SNFs.
    In addition, we are taking this opportunity to make a technical 
correction in a cross-reference that appears in Sec.  409.20(c) of the 
regulations. Section 409.20 provides a general introduction to the 
subsequent sections (Sec.  409.21 through Sec.  409.36) that set forth 
the specific requirements pertaining to the SNF benefit. However, in 
referring to the sections that follow, the cross-reference in Sec.  
409.20(c) concerning terminology inadvertently omits a reference to 
Sec.  409.21, and we would now correct that omission by revising the 
cross-reference to read ``Sec.  409.21 through Sec.  409.36''.
    [sbull] Consolidated Billing. The SNF PPS includes a consolidated 
billing provision (described in greater detail in section IV of this 
proposed rule) that requires a SNF to submit consolidated Medicare 
bills for almost all of the services that its residents receive during 
the course of a covered Part A stay. (In addition, this provision 
places with the SNF the Medicare billing responsibility for physical, 
occupational, and speech-language therapy that the resident receives 
during a noncovered stay.) The statute excludes from the consolidated 
billing provision a small list of services--primarily those of 
physicians and certain other types of practitioners--which remain 
separately billable to Part B by the outside entity that furnishes 
them.
    [sbull] Application of the SNF PPS to SNF services furnished by 
swing-bed hospitals. Section 1883 of the Act permits certain small, 
rural hospitals to enter into a Medicare swing-bed agreement, under 
which the hospital can use its beds to provide either acute or SNF 
care, as needed. For critical access hospitals (CAHs), Part A pays on a 
reasonable cost basis for SNF services furnished under a swing-bed 
agreement. However, in accordance with section 1888(e)(7) of the Act, 
such services furnished by non-CAH rural hospitals are paid under the 
SNF PPS, effective with cost reporting periods beginning on or after 
July 1, 2002. A more detailed discussion of this provision appears in 
section V of this proposed rule.

B. Requirements of the Balanced Budget Act of 1997 (the BBA) for 
Updating the Prospective Payment System for Skilled Nursing Facilities

    Section 1888(e)(4)(H) of the Act requires that we publish in the 
Federal Register:
    1. The unadjusted Federal per diem rates to be applied to days of 
covered SNF services furnished during the FY.

[[Page 26760]]

    2. The case-mix classification system to be applied with respect to 
these services during the FY.
    3. The factors to be applied in making the area wage adjustment 
with respect to these services.
    In the July 30, 1999 final rule (64 FR 41670), we indicated that we 
would announce any changes to the guidelines for Medicare level of care 
determinations related to modifications in the RUG-III classification 
structure (see section II.E of this preamble).
    Along with a number of other revisions discussed later in this 
preamble, this proposed rule provides the annual updates to the Federal 
rates as mandated by the Act.

C. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999 (the BBRA)

    There were several provisions in the BBRA that resulted in 
adjustments to the SNF PPS. These provisions were described in detail 
in the final rule that we published in the Federal Register on July 31, 
2000 (65 FR 46770). In particular, section 101 of the BBRA provided for 
a temporary 20 percent increase in the per diem adjusted payment rates 
for 15 specified RUG-III groups (SE3, SE2, SE1, SSC, SSB, SSA, CC2, 
CC1, CB2, CB1, CA2, CA1, RHC, RMC, and RMB). Under the law, this 
temporary increase remains in effect until the later of October 1, 
2000, or the implementation of case-mix refinements in the PPS. Section 
101 also included a 4 percent across-the-board increase in the adjusted 
Federal per diem payment rates each year for FYs 2001 and 2002, 
exclusive of the 20 percent increase. Accordingly, this 4 percent 
temporary increase has now expired.
    We included further information on all of the provisions of the 
BBRA that affect the SNF PPS in Program Memoranda A-99-53 and A-99-61 
(December 1999), and Program Memorandum AB-00-18 (March 2000). In 
addition, for swing-bed hospitals with more than 49 (but less than 100) 
beds, section 408 of the BBRA provided for the repeal of certain 
statutory restrictions on length of stay and aggregate payment for 
patient days, effective with the end of the SNF PPS transition period 
described in section 1888(e)(2)(E) of the Act. In the July 31, 2001 
final rule (66 FR 39562), we made conforming changes to the regulations 
in Sec.  413.114(d), effective for services furnished in cost reporting 
periods beginning on or after July 1, 2002.

D. The Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000 (the BIPA)

    The BIPA also included several provisions that resulted in 
adjustments to the PPS for SNFs. These provisions were described in 
detail in the final rule that we published in the Federal Register on 
July 31, 2001 (66 FR 39562) as follows:
    [sbull] Section 203 of the BIPA exempted critical access hospital 
(CAH) swing-beds from the SNF PPS; we included further information on 
this provision in Program Memorandum A-01-09 (January 16, 2001).
    [sbull] Section 311 of the BIPA eliminated the one percent 
reduction in the SNF market basket that the statutory update formula 
had previously specified for FY 2001, and changed the one percent 
reduction specified for FYs 2002 and 2003 to a 0.5 percent reduction. 
This section also required us to conduct a study of alternative case-
mix classification systems for the SNF PPS, and to submit a report to 
the Congress by January 1, 2005.
    [sbull] Section 312 of the BIPA provided for a temporary 16.66 
percent increase in the nursing component of the case-mix adjusted 
Federal rate for services furnished on or after April 1, 2001, and 
before October 1, 2002. Accordingly, this temporary increase has now 
expired. This section also required the General Accounting Office (GAO) 
to conduct an audit of SNF nursing staff ratios and submit a report to 
the Congress on whether the temporary increase in the nursing component 
should be continued.
    [sbull] Section 313 of the BIPA repealed the consolidated billing 
requirement for services (other than physical, occupational, and 
speech-language therapy) furnished to SNF residents during noncovered 
stays, effective January 1, 2001.
    [sbull] Section 314 of the BIPA adjusted the payment rates for all 
of the rehabilitation RUGs to correct an anomaly under which the 
existing payment rates for the RHC, RMC, and RMB rehabilitation groups 
were higher than the rates for some other, more intensive 
rehabilitation RUGs.
    [sbull] Section 315 of the BIPA authorized us to establish a 
geographic reclassification procedure that is specific to SNFs, but 
only after collecting the data necessary to establish a SNF wage index 
that is based on wage data from nursing homes.
    We included further information on several of these provisions in 
Program Memorandum A-01-08 (January 16, 2001).

E. Skilled Nursing Facility Prospective Payment--General Overview

    We implemented the Medicare SNF PPS for cost reporting periods 
beginning on or after July 1, 1998. Under the PPS, we pay SNFs through 
prospective, case-mix adjusted per diem payment rates applicable to all 
covered SNF services. These payment rates cover all the costs of 
furnishing covered skilled nursing services (routine, ancillary, and 
capital-related costs) other than costs associated with approved 
educational activities. Covered SNF services include post-hospital 
services for which benefits are provided under Part A and all items and 
services that, before July 1, 1998, had been paid under Part B (other 
than physician and certain other services specifically excluded under 
the BBA) but furnished to Medicare beneficiaries in a SNF during a 
covered Part A stay. A complete discussion of these provisions appears 
in the May 12, 1998 interim final rule (63 FR 26252).
1. Payment Provisions--Federal Rate
    The PPS uses per diem Federal payment rates based on mean SNF costs 
in a base year updated for inflation to the first effective period of 
the PPS. We developed the Federal payment rates using allowable costs 
from hospital-based and freestanding SNF cost reports for reporting 
periods beginning in FY 1995. The data used in developing the Federal 
rates also incorporated an estimate of the amounts that would be 
payable under Part B for covered SNF services furnished to individuals 
during the course of a covered Part A stay in a SNF.
    In developing the rates for the initial period, we updated costs to 
the first effective year of PPS (the 15-month period beginning July 1, 
1998) using a SNF market basket, and then standardized for the costs of 
facility differences in case-mix and for geographic variations in 
wages. Providers that received new provider exemptions from the routine 
cost limits were excluded from the database used to compute the Federal 
payment rates, as well as costs related to payments for exceptions to 
the routine cost limits. In accordance with the formula prescribed in 
the BBA, we set the Federal rates at a level equal to the weighted mean 
of freestanding costs plus 50 percent of the difference between the 
freestanding mean and weighted mean of all SNF costs (hospital-based 
and freestanding) combined. We computed and applied separately the 
payment rates for facilities located in urban and rural areas. In 
addition, we adjusted the

[[Page 26761]]

portion of the Federal rate attributable to wage-related costs by a 
wage index.
    The Federal rate also incorporates adjustments to account for 
facility case-mix, using a classification system that accounts for the 
relative resource utilization of different patient types. This 
classification system, Resource Utilization Groups, version III (RUG-
III), uses beneficiary assessment data from the Minimum Data Set (MDS) 
completed by SNFs to assign beneficiaries to one of 44 RUG-III groups. 
The May 12, 1998 interim final rule (63 FR 26252) included a complete 
and detailed description of the RUG-III classification system, and a 
further discussion appears in section II.B of this preamble.
    The Federal rates in this proposed rule reflect an update to the 
rates that we published in the July 31, 2002 Federal Register (67 FR 
49798) equal to the full change in the SNF market basket index. 
According to section 1888(e)(4)(E)(ii)(IV) of the Act, for FY 2004, we 
would update the rate by adjusting the current rates by the full SNF 
market basket index.
2. Payment Provisions--Initial Transition Period
    The SNF PPS included an initial, phased transition from a facility-
specific rate (which reflected the individual facility's historical 
cost experience) to the Federal case-mix adjusted rate. The transition 
extended through the facility's first three cost reporting periods 
under the PPS, up to, and potentially including, the one that began in 
FY 2001. Furthermore, pursuant to section 102 of BBRA, a facility could 
nonetheless elect to be paid entirely under the Federal rates.
    Accordingly, starting with cost reporting periods beginning in FY 
2002, we base payments entirely on the Federal rates and, as mentioned 
previously in this preamble, we no longer include adjustment factors 
related to facility-specific rates for the coming fiscal year.

F. Skilled Nursing Facility Market Basket Index

    Section 1888(e)(5) of the Act requires us to establish a SNF market 
basket index that reflects changes over time in the prices of an 
appropriate mix of goods and services included in the covered SNF 
services. The SNF market basket index is used to update the Federal 
rates on an annual basis, and is discussed in greater detail in section 
III of this preamble.

II. Update of Payment Rates Under the Prospective Payment System for 
Skilled Nursing Facilities

A. Federal Prospective Payment System

    This proposed rule sets forth a schedule of Federal prospective 
payment rates applicable to Medicare Part A SNF services beginning 
October 1, 2003. The schedule incorporates per diem Federal rates that 
provide Part A payment for all costs of services furnished to a 
beneficiary in a SNF during a Medicare-covered stay.
1. Costs and Services Covered by the Federal Rates
    The Federal rates apply to all costs (routine, ancillary, and 
capital-related costs) of covered SNF services other than costs 
associated with approved educational activities as defined in Sec.  
413.85. Under section 1888(e)(2) of the Act, covered SNF services 
include post-hospital SNF services for which benefits are provided 
under Part A (the hospital insurance program), as well as all items and 
services (other than those services excluded by statute) that, before 
July 1, 1998, were paid under Part B (the supplementary medical 
insurance program) but furnished to Medicare beneficiaries in a SNF 
during a Part A covered stay. (These excluded service categories are 
discussed in greater detail in section V.B.2 of the May 12, 1998 
interim final rule (63 FR 26295-97)).
2. Methodology Used for the Calculation of the Federal Rates
    The proposed FY 2004 rates would reflect an update using the full 
amount of the latest market basket index. The FY 2004 market basket 
increase factor is 2.9 percent. Consistent with previous years, this 
factor may be revised in the final rule when later forecast data are 
available. For a complete description of the multi-step process, see 
the May 12, 1998 interim final rule (63 FR 26252). We note that in 
accordance with section 101(a) of the BBRA and section 314 of the BIPA, 
the existing, temporary increase in the per diem adjusted payment rates 
of 20 percent for certain specified RUGs (and 6.7 percent for certain 
others) remains in effect until the implementation of case-mix 
refinements. As we discuss elsewhere in this proposed rule, while we 
are proceeding with our ongoing research in this area, we are not 
proposing to implement case-mix refinements in this proposed rule.
    We used the SNF market basket to adjust each per diem component of 
the Federal rates forward to reflect cost increases occurring between 
the midpoint of the Federal fiscal year beginning October 1, 2002, and 
ending September 30, 2003, and the midpoint of the Federal fiscal year 
beginning October 1, 2003, and ending September 30, 2004, to which the 
payment rates apply. In accordance with section 1888(e)(4)(E)(ii)(IV) 
of the Act, the payment rates for FY 2004 are updated by a factor equal 
to the market basket index percentage increase to determine the payment 
rates for FY 2004. The rates would be further adjusted by a wage index 
budget neutrality factor, described later in this section. Tables 1 and 
2 reflect the updated components of the unadjusted Federal rates for FY 
2004.

                                Table 1.--Unadjusted Federal Rate Per Diem: Urban
----------------------------------------------------------------------------------------------------------------
                                               Nursing--case-   Therapy--case-   Therapy--non-
               Rate component                       mix              mix            case-mix       Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount.............................         $125.15           $94.27           $12.42           $63.87
----------------------------------------------------------------------------------------------------------------


                                Table 2.--Unadjusted Federal Rate Per Diem: Rural
----------------------------------------------------------------------------------------------------------------
                                               Nursing--case-   Therapy--case-    Therapy-non-
               Rate component                       mix              mix            case-mix       Non-case-mix
----------------------------------------------------------------------------------------------------------------
Per Diem Amount.............................         $119.57          $108.70           $13.26           $65.06
----------------------------------------------------------------------------------------------------------------


[[Page 26762]]

B. Case-Mix Adjustment

    Under the BBA, we must publish the SNF PPS case-mix classification 
methodology applicable for the next Federal FY before August 1 of each 
year. As noted in the following discussion, we are proceeding with our 
ongoing research regarding possible refinements in the existing case-
mix classification system, but we are not proposing to implement the 
refinements in this proposed rule.
    As discussed previously in this preamble, section 101(a) of the 
BBRA provided for a temporary 20 percent increase in the per diem 
adjusted payment rates for 15 specified RUG-III groups. This 
legislation specified that the 20 percent increase would be effective 
for SNF services furnished on or after April 1, 2000, and would 
continue until the later of: (1) October 1, 2000, or (2) implementation 
of a refined case-mix classification system under section 
1888(e)(4)(G)(i) of the Act that would better account for medically 
complex patients.
    In the SNF PPS proposed rule for FY 2001 (65 FR 19190, April 10, 
2000), we proposed making an extensive, comprehensive set of 
refinements to the existing case-mix classification system that 
collectively would have significantly expanded the existing 44-group 
structure. However, when our subsequent validation analyses indicated 
that the refinements would afford only a limited degree of improvement 
in explaining resource utilization relative to the significant increase 
in complexity that they would entail, we decided not to implement them 
at that time (see the FY 2001 final rule published July 31, 2000 (65 FR 
46773)). Nevertheless, since the BBRA provision had demonstrated a 
Congressional interest in improving the ability of the payment system 
to account for the care furnished to medically complex patients in 
SNFs, we continued to conduct research in this area.
    The Congress subsequently enacted section 311(e) of the BIPA, which 
directed us to conduct a study of the different systems for 
categorizing patients in Medicare SNFs in a manner that accounts for 
the relative resource utilization of different patient types, and to 
issue a report with any appropriate recommendations to the Congress by 
January 1, 2005. The lengthy timeframe for conducting the study, and 
its broad mandate to consider various classification systems and the 
full range of patient types, stood in sharp contrast to the BBRA 
language regarding more incremental refinements to the existing case-
mix classification system under section 1888(e)(4)(G)(i) of the Act, 
and made clear that implementing the latter type of refinements to the 
existing system in order to better account for medically complex 
patients need not await the completion of the more comprehensive 
changes envisioned in the BIPA. Accordingly, we considered the 
possibility of including such refinements as part of last year's annual 
update of the SNF payment rates.
    However, in the July 31, 2002 update notice (67 FR 49801), we 
determined that, while the research gives a sound basis for developing 
improvements to the SNF PPS, we need additional time to review and 
analyze the implications. Therefore, we decided not to implement any 
case-mix refinements at that time, leaving the current classification 
system in place. This also left in place the temporary add-on payments 
enacted in section 101(a) of the BBRA.
    Accordingly, the payment rates set forth in this proposed rule 
reflect the continued use of the 44-group RUG-III classification system 
discussed in the May 12, 1998 interim final rule (63 FR 26252). 
Consequently, in this proposed rule, we will also maintain the add-ons 
to the Federal rates for the specified RUG-III groups required by 
section 101(a) of the BBRA and subsequently modified by section 314 of 
the BIPA. The case-mix adjusted payment rates are listed separately for 
urban and rural SNFs in Tables 3 and 4, with the corresponding case-mix 
values. These tables do not reflect the add-ons to the specified RUG-
III groups provided for in the BBRA, which are applied only after all 
other adjustments (wage and case-mix) have been made.
    Meanwhile, we are continuing to explore both short-term and longer-
range revisions to our case-mix classification methodology. In July 
2001, we awarded a contract to the Urban Institute for performance of 
research to aid us in making incremental refinements to the case-mix 
classification system under section 1888(e)(4)(G)(i) of the Act and 
starting the case-mix study mandated by section 311(e) of the BIPA. The 
results of the research in which we are currently engaged will be 
included in the report to the Congress that section 311(e) of the BIPA 
requires us to submit by January 1, 2005. As we noted in the May 10, 
2001 proposed rule (66 FR 23990), this research may also support a 
longer term goal of developing more integrated approaches for the 
payment and delivery system for Medicare post acute services generally. 
This broader, ongoing research project will pursue several avenues in 
studying various case-mix classification systems. We have encouraging 
preliminary results from incorporating comorbidities and complications 
into the classification strategy, and will thoroughly explore and 
evaluate this and other approaches in our ongoing work.

BILLING CODE 4120-01-P

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[[Page 26767]]

C. Wage Index Adjustment to Federal Rates

    Section 1888(e)(4)(G)(ii) of the Act requires that we adjust the 
Federal rates to account for differences in area wage levels, using a 
wage index that we find appropriate. Since the inception of a PPS for 
SNFs, we have used hospital wage data in developing a wage index to be 
applied to SNFs. We propose to continue that practice for FY 2004.
    Section 315 of the BIPA authorizes us to establish a 
reclassification system for SNFs, similar to the hospital methodology. 
This geographic reclassification system cannot be implemented until we 
have collected the data necessary to establish an area wage index for 
SNFs based on their wage data. We presented a comprehensive discussion 
of this wage data in the May 10, 2001 proposed rule (66 FR 23984) and 
the July 31, 2001 final rule (66 FR 39562).
    In the May 10, 2001 proposed rule, we published a wage index 
prototype based on SNF data, along with the wage index based on the 
hospital wage data that was used in the preceding year's final rule 
(July 31, 2000, 65 FR 46770). In addition, we included a discussion of 
the wage index computations for the SNF prototype. We also indicated 
our concern about the reliability of the existing data used in 
establishing a SNF wage index, in view of the significant variations in 
the SNF-specific wage data and the large number of SNFs that are unable 
to provide adequate wage and hourly data. Accordingly, we expressed the 
belief that a wage index based on hospital wage data remains the best 
and most appropriate to use in adjusting payments to SNFs, since both 
hospitals and SNFs compete in the same labor markets.
    In the July 31, 2001 final rule (66 FR 39579), we indicated that we 
had decided not to adopt the SNF-specific wage index prototype from the 
proposed rule, citing concerns such as the significant amount of 
volatility in the data. In addition, while we acknowledged that 
auditing all SNFs would provide more accurate and reliable data, we 
observed that this would place a burden on providers in terms of 
recordkeeping and completion of the cost report worksheet. We also 
noted that adopting such an approach would require a significant 
commitment of resources by us and by our contractors:

    Developing a desk review and audit program similar to that 
required in the hospital setting would require significant 
resources. The fiscal intermediaries (FIs) that are involved in 
preparing the hospital wage data currently spend considerable 
resources to ensure the accuracy of the wage data submitted by 
approximately 6,000 hospitals. This process involves editing, 
reviewing, auditing, and performing desk reviews of the data. 
Requiring FIs to do the same for the approximately 14,000 SNFs would 
nearly triple the FIs' workload and budgets in this area. (66 FR 
39579).

    While we continue to believe that the development of a SNF-specific 
wage index potentially could improve the accuracy of SNF payments, we 
do not regard an undertaking of this magnitude as being feasible within 
the current level of programmatic resources. However, we remain willing 
to consider the adoption of a SNF-specific wage index should sufficient 
staffing and budgetary resources to support it become available in the 
future.
    We also propose to continue use of the FY 2003 wage index to adjust 
SNF PPS payments beginning October 1, 2003. The wage indexes published 
on July 31, 2002 (67 FR 49798) have undergone a number of changes to 
reflect certain changes in the data that were not foreseen prior to 
publication. For example, the Killeen-Temple, Texas Metropolitan 
Statistical Area (MSA) had two changes to its wage index during the 
course of the year. While this is consistent with the regulations 
governing mid-year corrections in the hospital wage index, it results 
in uncertainty for SNFs in knowing the wage index that will be applied 
to their payments at the beginning of the year. Such changes also 
prevent us from calculating the most accurate wage index budget 
neutrality factor, discussed later in this section. It is our intent 
that, for each future year, we will use a wage index based on the most 
recently published final hospital wage index data. In using the most 
recently published final data, we can be assured that the wage index 
published in each year's update will be used throughout the year to 
adjust payments. Therefore, providers and other interested parties who 
use the wage indexes to prepare budget and payment forecasts can be 
assured that the wage index will not change, thus also assuring the 
prospective nature of the SNF payment system. The policy of using the 
most recently published hospital wage index would also conform to the 
approach currently used in Medicare payment systems for other provider 
types, including home health agencies (HHAs) and inpatient 
rehabilitation hospitals.
    The wage index adjustment would be applied to the proposed labor-
related portion of the Federal rate, which is 76.435 percent of the 
total rate. This percentage reflects the labor-related relative 
importance for FY 2004. The labor-related relative importance is 
calculated from the SNF market basket, and approximates the labor-
related portion of the total costs after taking into account historical 
and projected price changes between the base year and FY 2004. The 
price proxies that move the different cost categories in the market 
basket do not necessarily change at the same rate, and the relative 
importance captures these changes. Accordingly, the relative importance 
figure more closely reflects the cost share weights for FY 2004 than 
the base year weights from the SNF market basket.
    We calculate the labor-related relative importance for FY 2004 in 
four steps. First, we compute the FY 2004 price index level for the 
total market basket and each cost category of the market basket. 
Second, we calculate a ratio for each cost category by dividing the FY 
2004 price index level for that cost category by the total market 
basket price index level. Third, we determine the FY 2004 relative 
importance for each cost category by multiplying this ratio by the base 
year (FY 1997) weight. Finally, we sum the FY 2004 relative importance 
for each of the labor-related cost categories (wages and salaries, 
employee benefits, nonmedical professional fees, labor-intensive 
services, and capital-related expenses) to produce the FY 2004 labor-
related relative importance. Tables 5 and 6 show the Federal rates by 
labor-related and non-labor-related components.

  Table 5.--Case-Mix Adjusted Federal Rates for Urban SNFs by Labor and
                           Non-Labor Component
------------------------------------------------------------------------
                                                                   Non-
               RUG III category                 Total    Labor    labor
                                                 rate   portion  portion
------------------------------------------------------------------------
RUC..........................................   438.68   335.31   103.37
RUB..........................................   394.87   301.82    93.05
RUA..........................................   373.60   285.56    88.04
RVC..........................................   338.21   258.51    79.70
RVB..........................................   326.95   249.90    77.05
RVA..........................................   298.16   227.90    70.26
RHC..........................................   310.17   237.08    73.09
RHB..........................................   285.14   217.95    67.19
RHA..........................................   261.36   199.77    61.59
RMC..........................................   305.41   233.44    71.97
RMB..........................................   272.87   208.57    64.30
RMA..........................................   256.60   196.13    60.47
RLB..........................................   243.33   185.99    57.34
RLA..........................................   204.53   156.33    48.20
SE3..........................................   289.05   220.94    68.11
SE2..........................................   250.25   191.28    58.97
SE1..........................................   222.72   170.24    52.48
SSC..........................................   217.71   166.41    51.30
SSB..........................................   207.70   158.76    48.94
SSA..........................................   202.69   154.93    47.76
CC2..........................................   216.46   165.45    51.01

[[Page 26768]]

 
CC1..........................................   200.19   153.02    47.17
CB2..........................................   190.18   145.36    44.82
CB1..........................................   181.42   138.67    42.75
CA2..........................................   180.16   137.71    42.45
CA1..........................................   170.15   130.05    40.10
IB2..........................................   162.64   124.31    38.33
IB1..........................................   160.14   122.40    37.74
IA2..........................................   147.63   112.84    34.79
IA1..........................................   142.62   109.01    33.61
BB2..........................................   161.39   123.36    38.03
BB1..........................................   157.64   120.49    37.15
BA2..........................................   146.37   111.88    34.49
BA1..........................................   136.36   104.23    32.13
PE2..........................................   175.16   133.88    41.28
PE1..........................................   172.66   131.97    40.69
PD2..........................................   166.40   127.19    39.21
PD1..........................................   163.90   125.28    38.62
PC2..........................................   157.64   120.49    37.15
PC1..........................................   156.39   119.54    36.85
PB2..........................................   140.12   107.10    33.02
PB1..........................................   138.87   106.15    32.72
PA2..........................................   137.61   105.18    32.43
PA1..........................................   133.86   102.32    31.54
------------------------------------------------------------------------


  Table 6.--Case-Mix Adjusted Federal Rates for Rural SNFs by Labor and
                           Non-Labor Component
------------------------------------------------------------------------
                                                                   Non-
               RUG III category                 Total    Labor    labor
                                                 rate   portion  portion
------------------------------------------------------------------------
RUC..........................................   465.08   355.48   109.60
RUB..........................................   423.23   323.50    99.73
RUA..........................................   402.90   307.96    94.94
RVC..........................................   353.44   270.15    83.29
RVB..........................................   342.68   261.93    80.75
RVA..........................................   315.18   240.91    74.27
RHC..........................................   317.90   242.99    74.91
RHB..........................................   293.98   224.70    69.28
RHA..........................................   271.27   207.35    63.92
RMC..........................................   310.18   237.09    73.09
RMB..........................................   279.09   213.32    65.77
RMA..........................................   263.55   201.44    62.11
RLB..........................................   244.52   186.90    57.62
RLA..........................................   207.46   158.57    48.89
SE3..........................................   281.59   215.23    66.36
SE2..........................................   244.52   186.90    57.62
SE1..........................................   218.22   166.80    51.42
SSC..........................................   213.43   163.14    50.29
SSB..........................................   203.87   155.83    48.04
SSA..........................................   199.09   152.17    46.92
CC2..........................................   212.24   162.23    50.01
CC1..........................................   196.69   150.34    46.35
CB2..........................................   187.13   143.03    44.10
CB1..........................................   178.76   136.64    42.12
CA2..........................................   177.56   135.72    41.84
CA1..........................................   168.00   128.41    39.59
IB2..........................................   160.82   122.92    37.90
IB1..........................................   158.43   121.10    37.33
IA2..........................................   146.47   111.95    34.52
IA1..........................................   141.69   108.30    33.39
BB2..........................................   159.63   122.01    37.62
BB1..........................................   156.04   119.27    36.77
BA2..........................................   145.28   111.04    34.24
BA1..........................................   135.71   103.73    31.98
PE2..........................................   172.78   132.06    40.72
PE1..........................................   170.39   130.24    40.15
PD2..........................................   164.41   125.67    38.74
PD1..........................................   162.02   123.84    38.18
PC2..........................................   156.04   119.27    36.77
PC1..........................................   154.84   118.35    36.49
PB2..........................................   139.30   106.47    32.83
PB1..........................................   138.11   105.56    32.55
PA2..........................................   136.91   104.65    32.26
PA1..........................................   133.32   101.90    31.42
------------------------------------------------------------------------

    Section 1888(e)(4)(G)(ii) of the Act also requires that we apply 
this wage index in a manner that does not result in aggregate payments 
that are greater or lesser than would otherwise be made in the absence 
of the wage adjustment. In this sixth PPS year (Federal rates effective 
October 1, 2003), we are reapplying, or applying, the wage index 
applicable to SNF payments using the hospital wage data applicable to 
FY 2003 payments (as discussed earlier in this section) and applying an 
adjustment to fulfill the budget neutrality requirement. This 
requirement will be met by multiplying each of the components of the 
unadjusted Federal rates by a factor equal to the ratio of the volume 
weighted mean wage adjustment factor (using the wage index from the 
previous year) to the volume weighted mean wage adjustment factor, 
using the wage index for the FY beginning October 1, 2003. The same 
volume weights are used in both the numerator and denominator and will 
be derived from 1997 Medicare Provider Analysis and Review File 
(MEDPAR) data. The wage adjustment factor used in this calculation is 
defined as the labor share of the rate component multiplied by the wage 
index plus the non-labor share. Because the wage index applicable to FY 
2004 is the same as that for FY 2003 and new data on the distribution 
of days by MSA is not yet available, the proposed budget neutrality 
factor for this year is 1.000. However, this may change in the final 
rule. In order to give the public a sense of the magnitude of this 
adjustment, last year's factor was 0.9997.
    Finally, since we propose to use the FY 2003 wage index, we are 
republishing it in this proposed rule. The wage index applicable to FY 
2004 can be found in Table 7 and Table 8 of this proposed rule. The 
tables reflect the mid-year corrections made to the hospital wage data 
since the publication of the SNF update notice for FY 2003 payments 
(please see our correction notice that was published in the Federal 
Register on December 27, 2002 (67 FR 79123)).

                  Table 7.--Wage Index for Urban Areas
------------------------------------------------------------------------
                                                                  Wage
    Urban area (constituent counties or county 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, PA...........................    0.9735
  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
  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

[[Page 26769]]

 
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..........................................    0.9877
  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, LA
  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........................................    0.8965
  Berrien, MI
0875 Bergen-Passaic, NJ.......................................    1.2150
  Bergen, NJ
  Passaic, NJ
0880 Billings, MT.............................................    0.9022
  Yellowstone, MT
0920 Biloxi-Gulfport-Pascagoula, MS...........................    0.8757
  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-Lowell-Brockton, MA-NH.........    1.1229
  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 Benito, TX.....................    0.8880
  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, SC..........................    0.9235
  Berkeley, SC
  Charleston, SC
  Dorchester, SC
1480 Charleston, WV...........................................    0.8898
  Kanawha, WV
  Putnam, WV
1520 Charlotte-Gastonia-Rock Hill, NC-SC......................    0.9875
  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
  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-KY..........................    0.8406
  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

[[Page 26770]]

 
  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, IA-IL                          0.8835
  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........................................    0.9071
  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-Rogers, AR.......................    0.8100
  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, FL............................    0.9823
  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 Fort Worth-Arlington, TX.................................    0.9446
  Hood, TX
  Johnson, TX
  Parker, TX
  Tarrant, TX
2840 Fresno, CA...............................................    1.0169
  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-Holland, MI........................    0.9525
  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 Point, NC..................    0.9282
  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-Anderson, SC......................    0.9122
  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

[[Page 26771]]

 
3240 Harrisburg-Lebanon-Carlisle, PA..........................    0.9223
  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................................................    0.8317
  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-Bristol, TN-VA....................    0.8268
  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-Battle Creek, 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
  Houston, MN
  La Crosse, WI
3880 Lafayette, LA............................................    0.8452
  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.............................................    0.8323
  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 Rock, 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

[[Page 26772]]

 
  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 Bay, FL........................    1.0253
  Brevard, Fl
4920 Memphis, TN-AR-MS........................................    0.8920
  Crittenden, AR
  De Soto, MS
  Fayette, TN
  Shelby, TN
  Tipton, TN
4940 Merced, CA...............................................    0.9742
  Merced, CA
5000 Miami, FL................................................    0.9802
  Dade, FL
5015 Middlesex-Somerset-Hunterdon, NJ.........................    1.1213
  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-Waterbury-Danbury, CT......    1.2408
  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
  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-Newport News, VA-NC...............    0.8574
  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............................................    0.8610
  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

[[Page 26773]]

 
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, RI.........................    1.0854
  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, NC...........................    0.9990
  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
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
A6960 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............................................    0.9544
  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................................................    1.0500
  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-Paso Robles, CA...............    1.1271
  San Luis Obispo, CA
7480 Santa Barbara-Santa Maria-Lompoc, CA.....................    1.0481
  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-Hazleton, PA.......................    0.8599
  Columbia, PA
  Lackawanna, PA
  Luzerne, PA
  Wyoming, PA
7600 Seattle-Bellevue-Everett, WA.............................    1.1474
  Island, WA
  King, WA
  Snohomish, WA

[[Page 26774]]

 
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-Clearwater, FL.......................    0.9065
  Hernando, FL
  Hillsborough, FL
  Pasco, FL
  Pinellas, FL
8320 Terre Haute, IN..........................................    0.8599
  Clay, IN
  Vermillion, IN
  Vigo, IN
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, NJ.........................    1.0031
  Cumberland, NJ
8780 Visalia-Tulare-Porterville, CA...........................    0.9418
  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
  Culpeper, VA
  Fairfax, VA
  Fairfax City, VA
  Falls Church City, VA
  Fauquier, VA
  Fredericksburg City, VA
  King George, VA
  Loudoun, VA
  Manassas City, VA
  Manassas Park City, VA
  Prince William, VA
  Spotsylvania, VA
  Stafford, VA
  Warren, VA
  Berkeley, WV
  Jefferson, WV
8920 Waterloo-Cedar Falls, IA.................................    0.8069
  Black Hawk, IA
8940 Wausau, WI...............................................    0.9782
  Marathon, WI
8960 West Palm Beach-Boca Raton, FL...........................    0.9939
  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 8.--Wage Index for Rural Areas
------------------------------------------------------------------------
                                                                   Wage
                           Rural area                             index
------------------------------------------------------------------------
Alabama........................................................   0.7660
Alaska.........................................................   1.2293
Arizona........................................................   0.8493
Arkansas.......................................................   0.7666
California.....................................................   0.9899
Colorado.......................................................   0.9015
Connecticut....................................................   1.2394
Delaware.......................................................   0.9128
Florida........................................................   0.8827
Georgia........................................................   0.8230
Guam...........................................................   0.9611
Hawaii.........................................................   1.0255
Idaho..........................................................   0.8747
Illinois.......................................................   0.8204
Indiana........................................................   0.8755
Iowa...........................................................   0.8315
Kansas.........................................................   0.7900
Kentucky.......................................................   0.8079
Louisiana......................................................   0.7580
Maine..........................................................   0.8874
Maryland.......................................................   0.8946
Massachusetts..................................................   1.1288
Michigan.......................................................   0.9009
Minnesota......................................................   0.9151
Mississippi....................................................   0.7680
Missouri.......................................................   0.7881
Montana........................................................   0.8481
Nebraska.......................................................   0.8204
Nevada.........................................................   0.9577
New Hampshire..................................................   0.9839

[[Page 26775]]

 
New Jersey \1\.................................................  .......
New Mexico.....................................................   0.8872
New York.......................................................   0.8542
North Carolina.................................................   0.8669
North Dakota...................................................   0.7788
Ohio...........................................................   0.8613
Oklahoma.......................................................   0.7590
Oregon.........................................................   1.0259
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.

D. Updates to the Federal Rates

    In accordance with section 1888(e)(4)(E) of the Act, the proposed 
payment rates listed here reflect an update equal to the full SNF 
market basket, which equals 2.9 percent. We will continue to publish 
the rates, wage index, and case-mix classification methodology in the 
Federal Register before August 1 preceding the start of each succeeding 
fiscal year We discuss the Federal rate update factor in greater detail 
in section III.B of this preamble.

E. Relationship of RUG-III Classification System to Existing Skilled 
Nursing Facility Level-of-Care Criteria

    As discussed in Sec.  413.345, we include in each update of the 
Federal payment rates in the Federal Register the designation of those 
specific RUGs under the classification system that represent the 
required SNF level of care, as provided in Sec.  40930. This 
designation reflects an administrative presumption under the current 
44-group RUG-III classification system. Our presumption is that any 
beneficiary who is correctly assigned to one of the upper 26 RUG-III 
groups in the initial 5-day, Medicare-required assessment is 
automatically classified as meeting the SNF level of care definition up 
to the assessment reference date for that assessment.
    Any beneficiary assigned to any of the lower 18 groups is not 
automatically classified as either meeting or not meeting the 
definition, but instead receives an individual level of care 
determination using the existing administrative criteria This 
presumption recognizes the strong likelihood that beneficiaries 
assigned to one of the upper 26 groups during the immediate post-
hospital period require a covered level of care, which would be 
significantly less likely for those beneficiaries assigned to one of 
the lower 18 groups.
    In this proposed rule, we are continuing the existing designation 
of the upper 26 RUG-III groups for purposes of this administrative 
presumption Accordingly, we are designating the following RUG-III 
classifications:
    [sbull] All groups within the Ultra High Rehabilitation category;
    [sbull] All groups within the Very High Rehabilitation category;
    [sbull] All groups within the High Rehabilitation category;
    [sbull] All groups within the Medium Rehabilitation category;
    [sbull] All groups within the Low Rehabilitation category;
    [sbull] All groups within the Extensive Services category;
    [sbull] All groups within the Special Care category; and
    [sbull] All groups within the Clinically Complex category.

F. Initial Three-Year Transition Period

    As noted previously, the rates that we now propose are for the 
sixth year of the SNF PPS. As a result, the PPS is no longer operating 
under the initial three-year transition period from facility-specific 
to Federal rates; therefore, payment now equals 100 percent of the 
adjusted Federal per diem rate

G. Example of Computation of Adjusted PPS Rates and SNF Payment

    Using the model SNF (XYZ) described in Table 9, the following shows 
the adjustments made to the Federal per diem rate to compute the 
provider's actual per diem PPS payment. XYZ's 12-month cost reporting 
period begins October 1, 2004. XYZ's total PPS payment would equal 
$20,017. The Labor and Non-labor columns are derived from Table 5. In 
addition, the adjustments for certain specified RUG-III groups enacted 
in section 101(a) of the BBRA (as amended by section 314 of the BIPA) 
remain in effect, and are reflected in Table 9.

                                                     Table 9.--SNF XYZ: Located in State College, PA
                                                                  [Wage Index: 0.8941]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Wage       Adj.                            Percent    Medicare
                           RUG group                               Labor      index      labor    Non-labor  Adj. rate  adjustment     days     Payment
--------------------------------------------------------------------------------------------------------------------------------------------------------
RVC............................................................    $258.51     0.8941    $231.13     $79.70    $310.83         \1\         14     $4,643
                                                                                                                           $331.66
RHA............................................................     199.77     0.8941     178.61      61.59     240.20  \1\ 256.29         16      4,101
SSC............................................................     166.41     0.8941     148.79      51.30     200.09  \2\ 240.11         30      7,203
IA2............................................................     112.84     0.8941     100.89      34.79     135.68      135.68         30      4,070
                                                                                                                                   ---------------------
      Total....................................................  .........  .........  .........  .........  .........  ..........         90    20,017
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Reflects a 6.7 percent adjustment from section 314 of the BIPA.
\2\ Reflects a 20 percent adjustment from section 101(a) of the BBRA.

III. The Skilled Nursing Facility Market Basket Index

    Section 1888(e)(5)(A) of the Act requires us to establish an SNF 
market basket index (input price index) that reflects changes over time 
in the prices of an appropriate mix of goods and services included in 
the SNF PPS. This proposed rule incorporates the latest available 
projections of the SNF market basket index. The final rule will 
incorporate updated projections based on the latest available 
projections at that time. Accordingly, we have developed an SNF market 
basket index that encompasses the most commonly used cost categories 
for SNF routine services, ancillary services, and capital-related 
expenses. In the July 31, 2001 Federal Register (66 FR 39562), we 
included a complete discussion on the rebasing of the SNF market basket 
to FY 1997. There are 21 separate cost categories and respective price 
proxies. These cost

[[Page 26776]]

categories were illustrated in Table 10.A, Table 10.B, and Appendix A, 
along with other relevant information, in the July 31, 2001 Federal 
Register.
    Each year, we calculate a revised labor-related share based on the 
relative importance of labor-related cost categories in the input price 
index. Table 10 summarizes the updated labor-related share for FY 2004. 
The forecasted rates of growth used to compute the proposed SNF market 
basket percentage described in section II.D of this proposed rule are 
shown in Table 11.

                 Table 10.--FY 2004 Labor-Related Share
------------------------------------------------------------------------
                                                    FY 2003     FY 2004
                  Cost category                    relative    relative
                                                  importance  importance
------------------------------------------------------------------------
Wages and Salaries..............................      54.796      55.143
Employee Benefits...............................      11.232      11.269
Nonmedical Professional Fees....................       2.652       2.661
Labor-intensive Services........................       4.124       4.137
Capital-related.................................       3.324       3.226
                                                 -------------
Total...........................................      76.128      76.435
------------------------------------------------------------------------


 Table 11.--SNF Total Cost Market Basket Change FY 1998 Through FY 2004
------------------------------------------------------------------------
                                                                Skilled
                                                                nursing
                                                                facility
               Fiscal years beginning October 1                  total
                                                                  cost
                                                                 market
                                                                 basket
------------------------------------------------------------------------
October 1997, FY 1998........................................        2.8
October 1998, FY 1999........................................        3.0
October 1999, FY 2000........................................        4.0
October 2000, FY 2001........................................        4.9
October 2001, FY 2002........................................        3.4
October 2002, FY 2003........................................        3.1
October 2003, FY 2004........................................       2.9
------------------------------------------------------------------------
Source: (Table 10) Global Insights, Inc., DRI-WEFA, 4th Quarter, 2002.
Source: (Table 11) Global Insights Inc., DRI-WEFA, 4th Quarter, 2002.
@USAMACRO/MODTREND@CISSIM/CNTL25R2.SIM
Released by CMS, OACT, National Health Statistics Group.

A. Use of the Skilled Nursing Facility Market Basket Percentage

    Section 1888(e)(5)(B) of the Act defines the SNF market basket 
percentage as the percentage change in the SNF market basket index, as 
described in the previous section, from the average index level of the 
prior fiscal year to the average index level of the current fiscal 
year. For the Federal rates established in this proposed rule, this 
percentage increase in the SNF market basket index would be used to 
compute the update factor occurring between FY 2003 and FY 2004. We 
used the Global Insights, Inc. (formerly DRI-WEFA), 4th quarter 2002 
forecasted percentage increase in the FY 1997-based SNF market basket 
index for routine, ancillary, and capital-related expenses, described 
in the previous section, to compute the update factor.

B. Federal Rate Update Factor

    Section 1888(e)(4)(E)(ii)(IV) of the Act requires that the update 
factor used to establish the FY 2004 Federal rates be at a level equal 
to the full market basket percentage change. Accordingly, to establish 
the update factor, we determined the total growth from the average 
market basket level for the period of October 1, 2002 through September 
30, 2003 to the average market basket level for the period of October 
1, 2003 through September 30, 2004. Using this process, the update 
factor for FY 2004 SNF Federal rates is 2.9 percent.
    We used this revised update factor to compute the Federal portion 
of the SNF PPS rate shown in Tables 1 and 2.

IV. Consolidated Billing

    As established by section 4432(b) of the BBA, the consolidated 
billing requirement places with the SNF the Medicare billing 
responsibility for virtually all of the services that the SNF's 
residents receive, except for a small number of services that the 
statute specifically identifies as being excluded from this provision. 
Section 103 of the BBRA amended this provision by further excluding a 
number of high-cost, low probability services (identified by Healthcare 
Common Procedure Coding System (HCPCS) codes) within several broader 
categories that otherwise remained subject to the provision. Section 
313 of the BIPA further amended this provision by repealing its Part B 
aspect, that is, its applicability to services furnished to a resident 
during a SNF stay that Medicare does not cover. (However, physical, 
occupational, and speech-language therapy remain subject to 
consolidated billing, regardless of whether the resident who receives 
these services is in a covered Part A stay.)
    To date, the Congress has enacted no further legislation affecting 
the consolidated billing provision. However, as we noted in the 
proposed rule of April 10, 2000 (65 FR 19232), section 
1888(e)(2)(A)(iii) of the Act, as added by section 103 of the BBRA, not 
only identified for exclusion from this provision a number of 
particular service codes within four specified categories (that is, 
chemotherapy items, chemotherapy administration services, radioisotope 
services, and customized prosthetic devices), but `` * * * also gives 
the Secretary the authority to designate additional, individual 
services for exclusion within each of the specified service 
categories.'' In that proposed rule, we also noted that the BBRA 
Conference report (H.R. Conf. Rep. No. 106-479 at 854) characterizes 
the individual services that this legislation targets for exclusion as 
``* * * high-cost, low probability events that could have devastating 
financial impacts because their costs far exceed the payment [SNFs] 
receive under the prospective payment system * * *'' According to the 
conferees, section 103(a) ``is an attempt to exclude from the PPS 
certain services and costly items that are provided infrequently in 
SNFs * * *'' By contrast, we noted that the Congress declined to 
designate for exclusion any of the remaining services within those four 
categories (thus leaving all of those services subject to SNF 
consolidated billing), because they are relatively inexpensive and are 
furnished routinely in SNFs.
    As we further explained in the final rule of July 31, 2000 (65 FR 
46790), any additional service codes that we might designate for 
exclusion under our discretionary authority must meet the same criteria 
that the Congress used in identifying the original codes excluded from 
consolidated billing under section 103(a) of the BBRA: they must fall 
within one of the four service categories specified in the BBRA, and 
they also must meet the same standards of high cost and low probability 
in the SNF setting. Accordingly, we characterized this statutory 
authority to identify additional service codes for exclusion ``* * * as 
essentially affording the flexibility to revise the list of excluded 
codes in response to changes of major significance that may occur over 
time (for example, the development of new medical technologies or other 
advances in the state of medical practice)'' (65 FR 46791). In view of 
the amount of time that has elapsed since we made that statement, we 
believe it is appropriate at this point to invite public comments that 
identify codes in any of these four service categories representing 
recent medical advances that might meet the BBRA criteria for exclusion 
from SNF consolidated billing.
    We note that the original BBRA legislation (as well as the 
implementing regulations) identified a set of excluded services by 
means of specifying HCPCS codes that were in effect as of a particular 
date (that is, July 1, 1999).

[[Page 26777]]

Identifying the excluded services in this manner made it possible for 
us to utilize a Program Memorandum as the vehicle for accomplishing 
routine updates of the excluded codes, in order to reflect any minor 
revisions that might subsequently occur in the coding system itself 
(for example, the assignment of a different code number to the same 
service). Accordingly, for any new services that would actually 
represent a substantive change in the scope of services that are 
excluded from the SNF consolidated billing provision, we would identify 
these additional excluded services by means of the HCPCS codes that are 
in effect as of a specific date (in this case, October 1, 2002). By 
making any new exclusions in this manner, we could similarly accomplish 
routine future updates of these additional codes through the issuance 
of a Program Memorandum.

V. Application of the SNF PPS to SNF Services Furnished by Swing-Bed 
Hospitals

    In the July 31, 2001 final rule (66 FR 39562), we announced the 
conversion of swing-bed hospitals to the SNF PPS, effective with the 
start of the provider's first cost reporting period beginning on or 
after July 1, 2002. We selected this date consistent with the statutory 
provision to integrate swing-bed hospitals into the SNF PPS by the end 
of the SNF transition period, that is, June 30, 2002.
    By July 31, 2003, the SNF PPS will cover all swing-bed hospitals. 
Therefore, all rates and wage indexes outlined in earlier sections of 
this notice for SNF PPS also apply to all swing-bed hospitals. A 
complete discussion of assessment schedules, the MDS and the 
transmission software, Raven-SB for Swing Beds can be found in the July 
31, 2001 final rule (66 FR 39562). The latest changes in the MDS for 
swing-bed hospitals are listed on our SNF PPS Web site, http:/
/.www.cms.hhs.gov/providers/snfpps/default.asp.

VI. Distinct Part Definition

    While some SNFs function as separate, independent entities, we have 
recognized since the inception of the Medicare program that it is also 
possible for a SNF to operate as a component, or ``distinct part,'' of 
a larger organization. As indicated in the discussion below, the 
predominant organizational form for such distinct part SNFs has been 
that of a component of a hospital that furnishes SNF services within 
the larger hospital complex. However, most program requirements that 
address SNF distinct parts have focused on operating and cost reporting 
procedures, without precisely defining what a ``distinct part'' is. The 
definition of a distinct part is particularly meaningful in today's 
environment, since entities other than hospitals are increasingly 
exploring diversification to provide SNF services. In addition, the 
growing frequency of hospital mergers (in which each of the merging 
hospitals brings its own distinct part SNF into the merger) has created 
situations where the newly-merged hospital entity includes the merger 
of components that are furnishing SNF services at two different 
physical locations; that is, the creation of a ``composite'' distinct 
part SNF. Moreover, such a hospital might additionally purchase a 
freestanding SNF for use in placing those of its inpatients who are 
ready for hospital discharge.
    As a result of these changes in facility practices, it has become 
increasingly important to document the assumptions used historically to 
survey and certify distinct part units. The purpose of this portion of 
the proposed rule is to clarify the definition of a ``distinct part,'' 
to provide more precise guidance to providers and State licensure and 
certification agencies. This guidance will assist providers in 
understanding the criteria that govern the financial and organizational 
structure of such entities, which will facilitate the application and 
certification process. In this proposed rule, we also explain how the 
survey and certification requirements are being applied to distinct 
parts in separate physical locations.
    This proposal is not expected to have any adverse financial impact 
on hospitals or other entities exploring or operating distinct part 
SNFs. In fact, clarifying our expectations regarding operating criteria 
could enable providers to identify as duplicative or unnecessary 
certain procedures that they may have adopted before these 
clarifications were available, but that are not actually required by 
our programs. We are also evaluating ways to ensure that the survey and 
certification process includes ongoing monitoring of changes in 
distinct part status, and we invite comments on appropriate ways to 
accomplish this.
    Similarly, we do not anticipate any negative impact on beneficiary 
access to care or on the quality of care furnished in distinct part 
SNFs. Distinct part SNFs already operate under the same benefit, 
eligibility, and coverage regulations as freestanding SNFs, and 
beneficiaries who reside in a distinct part SNF also have the same 
rights and protections as beneficiaries residing in freestanding SNFs. 
In fact, in this proposed rule, we clarify how certain resident rights 
and protections should be administered in composite distinct part SNFs. 
We anticipate that this clarification of our expectations will promote 
improved provider compliance with these program requirements.

A. Background

    As noted in section I.A of this preamble, services are covered 
under the Part A SNF benefit only when furnished in a SNF that Medicare 
has certified as meeting the requirements for program participation 
contained in section 1819 of the Act. This section of the Act defines a 
SNF in terms of being ``* * * an institution (or a distinct part of an 
institution) * * *. '' The committee report that accompanied the 
original Medicare legislation (cited below) contained the following 
explanation of the distinct part concept as applied to ``posthospital 
extended care facilities,'' or SNFs: ``* * * A posthospital extended 
care facility could be an institution, such as a skilled nursing home, 
or a distinct part of an institution, such as a ward or wing of a 
hospital or a section of a facility another part of which might serve 
as an old-age home.'' (Senate Finance Committee Rep. No. 404, 89th 
Cong., 1st Sess. 31-32 (1965)).
    Under the reasonable cost payment methodology that applied to 
covered Part A SNF stays prior to the inception of the SNF PPS, a 
determination that a SNF was a distinct part of a hospital (or 
``hospital-based'') rather than a freestanding facility directly 
affected the amount of the SNF's Medicare payment. This is because that 
payment methodology set higher limits on routine service costs for 
hospital-based SNFs than for freestanding facilities.
    In the Federal Register of September 4, 1980 (45 FR 58701), we 
defined a ``hospital-based SNF'' for this purpose as being an integral 
and subordinate part of a hospital that is operated with other 
departments of the hospital under common licensure, governance, and 
professional supervision, with all services of both the hospital and 
the SNF being fully integrated. In addition, we included the following 
specific criteria:
    [sbull] The SNF and hospital are subject to the bylaws and 
operating decisions of a common governing board;
    [sbull] The SNF and hospital are financially integrated as 
evidenced by the cost report, which must reflect the certified or 
noncertified SNF beds of the hospital, the allocation of hospital 
overhead to the SNF through the required stepdown methodology, and 
common billing for all services of both facilities.

[[Page 26778]]

    [sbull] While colocation is not an essential factor, the distance 
between the two facilities must be reasonable.
    [sbull] The existence of a transfer agreement or a shared service 
agreement between the SNF and the hospital does not determine a SNF to 
be hospital-based and is not considered in determining the status of 
the facility.
    We recognize that the April 7, 2000 final rule for the PPS for 
outpatient hospital services promulgated a set of criteria for use in 
determining whether an entity is ``provider-based'' (65 FR 18504), 
including several criteria that were similar to the 1980 hospital-based 
criteria for SNFs. However, SNFs are not subject to the provider-based 
regulations (see Sec.  413.65(a)(1)(ii)(D)).

B. Proposed Revision

    It has been noted that the regulations at Sec.  413.65 already set 
forth detailed criteria for determining provider-based status in other 
settings, but that no similar regulations exist with regard to SNFs. 
The need to clarify the criteria for identifying distinct parts is 
especially pronounced in the context of survey and certification 
procedures.
    In addition, the concept of a distinct part is actually broader 
than that of a ``hospital-based'' facility, in that the former can 
encompass situations in which a SNF is a part of a larger institution 
that is not a hospital (for example, a domiciliary or ``board and 
care'' facility). Further, the distinct part concept applies to 
Medicaid nursing facilities (NFs) as well as to SNFs, and involves not 
only payment issues, but also the requirements specified in the 
regulations at part 483, subpart B (the requirements for program 
participation for long-term care facilities (that is, SNFs and NFs)). 
Further, while the regulations at Sec.  483.5 (which define a long-term 
care facility in this context) refer to the existence of ``distinct 
part'' SNFs and NFs, they do not currently contain a specific 
definition of this term.
    Accordingly, in this proposed rule, we propose to add a number of 
specific criteria that would serve to determine whether a SNF or NF can 
be designated as a distinct part of a hospital or other entity, in the 
requirements for participation for long-term care facilities in subpart 
B of part 483. These proposed revisions would essentially reflect the 
1980 ``hospital-based'' criteria discussed previously (which focus 
primarily on such elements as common ownership and control, financial 
integration, and location), and would also incorporate existing 
criteria included in the State Operations Manual and in Survey and 
Certification Letters into a single regulation. We also propose to make 
a number of conforming changes elsewhere in subpart B of part 483 of 
the regulations (specifically Sec. Sec.  483.10 and 483.12), as well as 
to other distinct part references that appear in parts 413 and 440.
    At Sec.  483.5, we would define a distinct part as a physically 
identifiable component of an institution (for example, a hospital, or a 
board and care facility) or institutional complex (for example, a 
hospital or continuing care retirement community that includes various 
subprovider units and occupies several buildings) that is certified as 
meeting the applicable statutory requirements for SNFs or NFs in 
sections 1819 or 1919 of the Act, respectively, as well as the 
participation requirements for long-term care facilities set forth in 
subpart B of part 483. A SNF or NF distinct part may be comprised of 
one or more buildings or designated parts of buildings (that is, wings, 
wards, or floors) that are located in the same physical area 
immediately adjacent to the institution's main buildings, other areas 
and structures that are not strictly contiguous to the main buildings 
but are within close proximity of the main buildings, and any other 
areas that we determine, on an individual basis, to be part of the 
institution's campus. A distinct part must include all of the beds 
within the designated area, and cannot consist of a random collection 
of individual rooms or beds that are scattered throughout the physical 
plant.
    In addition, we would set forth a number of specific criteria for 
use in determining whether a SNF or NF can be considered a distinct 
part of a larger institution, as follows:
    [sbull] The SNF or NF must be operated under common ownership and 
control (that is, common governance) by the institution of which it is 
a distinct part, as evidenced by the following:
    (1) The SNF or NF is wholly owned by the institution of which it is 
a distinct part;
    (2) The SNF or NF is subject to the by-laws and operating decisions 
of a common governing body;
    (3) The institution of which the SNF or NF is a distinct part has 
final responsibility for the distinct part's administrative decisions 
and personnel policies, and final approval for the distinct part's 
personnel actions; and
    (4) The SNF or NF functions as an integral and subordinate part of 
the institution to which it is based, with significant common resource 
usage of buildings, equipment, personnel, and services.
    [sbull] The administrator of the SNF or NF reports to and is 
directly accountable to the management of the institution of which the 
SNF or NF is a distinct part.
    [sbull] The SNF or NF must have a designated medical director who 
is responsible for implementing care policies and coordinating medical 
care, and who is directly accountable to the management of the 
institution of which it is a distinct part.
    [sbull] The SNF or NF is financially integrated with the 
institution of which it is a distinct part, as evidenced by the sharing 
of income and expenses with that institution, and the reporting of its 
costs on that institution's cost report.
    [sbull] A single institution can have a maximum of only one 
distinct part SNF and one distinct part NF. (If an institution 
exercises the option to have both a distinct part SNF and a distinct 
part NF, its SNF and NF distinct parts may overlap entirely, partially, 
or not at all. Further, if the SNF and NF distinct parts partially 
overlap, the area of overlap would not represent a separate, dually-
certified ``SNF/NF.'')
    [sbull] An institution cannot designate itself as a SNF or NF 
distinct part, but instead must submit a written request to us to 
determine if it may be considered a distinct part, along with 
documentation that demonstrates that it meets the criteria set forth 
above. The effective date of approval of a distinct part is the date 
that we determine all requirements (including enrollment with the 
fiscal intermediary) are met for approval, and cannot be made 
retroactive. If a distinct part is established without our notification 
and approval, CMS will determine the distinct part has not been 
appropriately designated as such from the date that the entity began 
its operation. CMS must approve all proposed changes in the number of 
beds in the approved distinct part. (Such modifications would be 
subject to the applicable requirements governing changes in bed size or 
location in SNFs and NFs, as set forth in section 2337 of the Provider 
Reimbursement Manual, Part 1 (CMS Pub. 15-1), and in section 3202 of 
the State Operations Manual (CMS Pub. 7).)
    We note that our proposed definition of distinct parts does not 
represent an additional burden on SNFs; rather, it would simply add 
increased clarity and specificity to the process of determining 
distinct part status. We believe that establishing more definitive 
criteria in this area will actually help reduce the existing burden on 
SNFs by adding greater clarity and predictability to the process of 
determining a SNF's distinct part status.

[[Page 26779]]

    Further, we note that the numerous requests that we have received 
for clarification of the distinct part criteria have arisen, in part, 
from a June 4, 1996, memorandum in which we reiterated our longstanding 
interpretation that sections 1819(a) and 1919(a) of the Act allow for a 
maximum of one distinct part SNF (and one distinct part NF) within a 
single institution. We issued this memorandum in response to an 
increasing number of situations involving the merger of two hospitals 
on separate campuses, each of which brings its own distinct part SNF 
into the merger. Under our policy of allowing only one distinct part 
SNF per institution, such a merger would result in the creation of a 
single distinct part SNF consisting of two noncontiguous units in 
different locations (as opposed, for example, to a distinct part 
consisting of noncontiguous wards, wings, or floors that are all 
located within the same building or campus).
    In this proposed rule, we refer to such a configuration as a 
``composite distinct part.'' A composite distinct part could also be 
created when a hospital that already has a distinct part SNF acquires 
an additional nursing home that is not co-located on the hospital's 
campus. This, in turn, has raised a number of questions and concerns 
regarding the treatment of such entities under the survey and 
certification process, which we now propose to address as well.
    Accordingly, we propose to establish certain additional criteria 
that would apply specifically to a composite distinct part SNF or NF of 
a hospital, or of a nonhospital organization such as a continuing care 
retirement community (CCRC). Under these criteria, a composite distinct 
part would be treated as a single distinct part of the institution to 
which it is based and, as such, would have only one provider agreement. 
It should be noted that in establishing criteria specific to composite 
distinct parts, it is not our intent to create a new category of 
nursing homes, but rather, simply to address certain survey and 
certification issues that arise from the use of this particular type of 
configuration. By explicitly recognizing composite distinct parts, we 
can help ensure that survey and other program oversight functions are 
coordinated and uniformly administered. Since the designation of a 
composite distinct part is not designed to supersede or replace 
existing policies, the use of a composite SNF or NF configuration is 
limited to facilities within the same State. Further, in order to 
ensure quality of care and quality of life for all residents, the 
constituent components of a composite distinct part would be required 
to meet all of the participation requirements set forth in subpart B of 
part 483 independently in each location.
    We also wish to take this opportunity to provide clarification 
regarding the logistics of applying the survey and certification 
process to a composite distinct part that consists of components in 
different locations. Specifically, we note that for such facilities, 
surveyors will place particular emphasis on the following requirements, 
which must be met independently in each location of the composite 
distinct part:
    [sbull] Posting of resident's rights (Sec.  483.10(b));
    [sbull] Posting of names, addresses, and telephone numbers of all 
pertinent State client advocacy groups (Sec.  483.10(b)(7)(iii));
    [sbull] Prominently displayed facility information (Sec.  
483.10(b)(10));
    [sbull] Readily available survey results (Sec.  483.10(g));
    [sbull] Organized resident and family groups (Sec.  483.15(c));
    [sbull] Equal access by residents to activities and social services 
(Sec.  483.15(b), Sec.  483.15(f), and Sec.  483.15(g));
    [sbull] Except where waived, the services of a registered nurse for 
at least 8 consecutive hours a day, 7 days a week (Sec.  483.30(b));
    [sbull] Designating a person to serve as director of food services 
who receives frequently scheduled consultation from a qualified 
dietitian, unless a qualified dietitian is employed on a full-time 
basis (Sec.  483.35(a)); and
    [sbull] The physical environment requirements, including life 
safety, and provisions for space and equipment in dining, health 
services, recreation and program areas, to enable staff to provide 
residents with needed services as required by these standards and as 
identified in each resident's plan of care (Sec.  483.15(h) and Sec.  
483.70).
    We also propose to amend the regulations at Sec.  483.12, to 
establish a resident's right to remain in (or return to) the same 
location of the composite distinct part to which he or she was 
originally admitted. To avoid any confusion regarding the distinct part 
criteria applicable to SNFs, we would amend the provider-based 
regulations at Sec.  413.65(a)(1)(ii)(D) to include a cross-reference 
to the new distinct part criteria. Currently, the regulations at Sec.  
413.65(a)(1)(ii)(D) indicate only that provider-based determinations 
under these regulations do not apply to SNFs. We would amend Sec.  
413.65(a)(1)(ii)(D) by adding a parenthetical statement indicating that 
determinations for SNFs are made under the regulations at Sec.  483.5.
    We are also taking this opportunity to correct a typographical 
error that currently appears in the regulations text at Sec.  
483.20(k)(1) (regarding the required comprehensive care plan for long-
term care facility residents), in which the word ``describe'' is 
misspelled as ``describer.''

VII. Provisions of the Proposed Rule

    In this proposed rule, we propose to make the following revisions 
to the existing text of the regulations:
    [sbull] In Sec.  409.20, we would make a technical correction to 
the cross-reference that appears in paragraph (c).
    [sbull] We would revise Sec.  483.5 to include specific definitions 
of the terms ``distinct part'' and ``composite distinct part.'' In 
addition, we would make conforming changes elsewhere in subpart B of 
part 483 of the regulations, as well as in parts 413 and 440, and we 
would correct a typographical error that currently appears in the 
regulations text at Sec.  483.20(k)(1).

VIII. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

IX. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this proposed 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 Act) the 
Unfunded Mandates Reform Act of 1995 (UMRA), (Pub. L. 104-4), and 
Executive Order 13132.
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely assigns responsibility of duties) 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 any 1 year). 
This proposed rule is a major rule, as defined in Title 5, United 
States Code, section 804(2), because we estimate the

[[Page 26780]]

impact of the update will be to increase payments to SNFs by 
approximately $400 million. The update set forth in this proposed rule 
applies to payments in FY 2004. Accordingly, the analysis that follows 
describes the impact of this one fiscal year only. In accordance with 
the requirements of the Act, we will publish a notice for each 
subsequent fiscal year that will provide for an update to the payment 
rates and that will include an associated impact analysis.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most SNFs and most other providers and suppliers are small entities, 
either by their nonprofit status or by having revenues of $11.5 million 
or less in any 1 year. For purposes of the RFA, approximately 53 
percent of SNFs are considered small businesses according to the Small 
Business Administration's latest size standards with total revenues of 
$11.5 million or less in any 1 year (for further information, see 65 FR 
69432, November 17, 2000). Individuals and States are not included in 
the definition of a small entity.
    This proposed rule would update the SNF PPS rates published in the 
July 31, 2002 update notice (67 FR 49798), thereby increasing aggregate 
payments by an estimated $400 million. Accordingly, we certify that 
this proposed rule would not have a significant impact on small 
entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. For a 
proposed rule, 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 and has fewer than 100 beds. Because the 
payment rates set forth in this proposed rule also affect rural 
hospital swing-bed services, we believe that this proposed rule would 
have an impact on small rural hospitals (this impact is discussed later 
in this section). However, because this incremental increase in 
payments for Medicare swing-bed services is relatively minor in 
comparison to overall rural hospital revenues, this notice will not 
have a significant impact on the overall operations of these small 
rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in an expenditure in any 1 year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $110 million or more. This proposed rule would have 
no substantial effect on State, local, or tribal governments. We 
believe the private sector cost of this proposed rule falls below these 
thresholds as well.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. As stated above, this proposed rule would have no 
substantial effect on State and local governments.
    The purpose of this proposed rule is not to initiate significant 
policy changes with regard to the SNF PPS; rather, it is to provide an 
update to the rates for FY 2004 and to address a number of policy 
issues related to the PPS. We believe that the revisions and 
clarifications mentioned elsewhere in the preamble (for example, with 
respect to determining distinct part status) will have, at most, only a 
negligible overall effect upon the regulatory impact estimate specified 
in the rule. As such, these revisions would not represent an additional 
burden to the industry.

B. Anticipated Effects

    This proposed rule sets forth updates of the SNF PPS rates 
contained in the July 31, 2002 update (67 FR 49798). The impact 
analysis of this proposed rule represents the projected effects of the 
changes in the SNF PPS from FY 2003 to FY 2004. We estimate the effects 
by estimating payments while holding all other payment variables 
constant. We use the best data available, but we do not attempt to 
predict behavioral responses to these changes, and we do not make 
adjustments for future changes in such variables as days or case-mix.
    This analysis incorporates the latest estimates of growth in 
service use and payments under the Medicare SNF benefit, based on the 
latest available Medicare claims from 2001. 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, very 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 SNFs. 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 SNF 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 SNFs.
    As mentioned previously, we propose to continue use of the FY 2003 
wage index to adjust SNF PPS payments beginning October 1, 2003, in 
order to assure that the wage index published in each year's update 
will be used throughout the year to adjust payments. Therefore, the 
wage index has not changed and provides no additional impact on payment 
rates.
    In accordance with section 1888(e)(4)(E) of the Act, the payment 
rates for FY 2004 are updated by a factor equal to the market basket 
index percentage increase to determine the payment rates for FY 2004. 
We note that in accordance with section 101(a) of the BBRA and section 
314 of the BIPA, the existing, temporary increase in the per diem 
adjusted payment rates of 20 percent for certain specified RUGs (and 
6.7 percent for certain others) remains in effect until the 
implementation of case-mix refinements. Because there have been no 
other revisions or clarifications affecting the payment rates for this 
proposed rule, the amount of the full market basket update is the only 
impact on facility payment rates. This leads to an increase in payments 
to SNFs of approximately $400 million (including approximately $6.4 
million for swing-bed facilities, as discussed below), which is the 
full impact of this proposed rule with respect to SNFs.
    Since the impact is limited to the 2.9 percentage increase due to 
the market basket update, the impact is the same for every facility 
without regard to Census region, ownership type, or urban/rural 
designation. For this reason, we have not included an impact table as 
we have in previous years.
    With regard to the specific impact on swing-bed providers, in the 
July 31, 2002 update notice (67 FR 49798), we projected payments for 
these providers under the SNF PPS by first using the MEDPAR analog to 
assign 1999 claims records to a RUG-III group, then applying FY 2003 
payment rates to calculate annual estimated payments.
    For the purpose of this proposed rule, we have used the MEDPAR 
analog classification, and estimated current SNF PPS reimbursement as 
if the swing-bed providers were fully phased into the SNF PPS in FY 
2002. Then, using the

[[Page 26781]]

same MEDPAR analog classifications, we applied the FY 2004 changes for 
a fully phased-in swing-bed population. We estimate that the overall 
impact on swing-bed facilities will be an increase in payments of 
approximately 2.9 percent, or $6.4 million.

C. Alternatives Considered

    Section 1888(e) of the Act establishes the SNF PPS for the payment 
of Medicare SNF services for cost reporting periods beginning on or 
after July 1, 1998. This section of the statute prescribes a detailed 
formula for calculating payment rates under the SNF PPS, and does not 
provide for the use of any alternative methodology. It specifies that 
the base year cost data to be used for computing the RUG-III payment 
rates must be from FY 1995 (October 1, 1994, through September 30, 
1995.) In accordance with the statute, we also incorporated a number of 
elements into the SNF PPS, such as case-mix classification methodology, 
the MDS assessment schedule, a market basket index, a wage index, and 
the urban and rural distinction used in the development or adjustment 
of the Federal rates. Further, section 1888(e)(4)(H) of the Act 
specifically requires us to publish the payment rates for each new 
fiscal year in the Federal Register, and to do so prior to the August 1 
that precedes the start of the new fiscal year. Accordingly, based upon 
the prescriptive nature of the statute, we are not pursuing 
alternatives.

D. Conclusion

    For the reasons set forth in the preceding discussion, we are not 
preparing analyses for either the RFA or section 1102(b) of the Act 
because we have determined, and we certify, that this proposed rule 
will not have a significant economic impact on a substantial number of 
small entities or a significant impact on the operations of a 
substantial number of small rural hospitals.
    Finally, in accordance with the provisions of Executive Order 
12866, this regulation was reviewed by the Office of Management and 
Budget.

List of Subjects

42 CFR Part 409

    Health facilities, Medicare.

42 CFR Part 413

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

42 CFR Part 440

    Grants programs--health, Medicaid.

42 CFR Part 483

    Grants programs--health, Health facilities, Health professions, 
Health records, Medicaid, Medicare, Nursing homes, Nutrition, Reporting 
and recordkeeping requirements, Safety.
    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services proposes to amend 42 CFR chapter IV as follows:

PART 409--HOSPITAL INSURANCE BENEFITS

    1. The authority citation for part 409 continues to read as 
follows:

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

Subpart C--Posthospital SNF Care

    2. In Sec.  409.20, the introductory text to paragraph (c) is 
revised to read as follows:


Sec.  409.20  Coverage of services.

* * * * *
    (c) * * *
    In Sec.  409.21 through Sec.  409.36--.
* * * * *

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

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

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

SUBPART E--PAYMENTS TO PROVIDERS

    2. In Sec.  413.65, paragraph (a)(1)(ii)(D) is revised to read as 
follows:


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

    (a) Scope and definitions. (1) Scope.
    (ii) * * *
    (D) Skilled nursing facilities (SNFs) (determinations for SNFs are 
made in accordance with the criteria set forth in Sec.  483.5 of this 
chapter).
* * * * *

PART 440--SERVICES: GENERAL PROVISIONS

    1. The authority citation for part 440 continues to read as 
follows:

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

Subpart A--Definitions

    2. In Sec.  440.40, paragraph (a)(1)(ii)(A) is revised to read as 
follows:


Sec.  440.40  Nursing facility services for individuals age 21 or older 
(other than services in an institution for mental disease), EPSDT, and 
family planning services and supplies.

    (a) * * *
    (1) * * *
    (ii) * * *
    (A) A facility or distinct part (as defined in Sec.  483.5(b) of 
this chapter) that is certified to meet the requirements for 
participation under subpart B of part 483 of this chapter, as evidenced 
by a valid agreement between the Medicaid agency and the facility for 
providing nursing facility services and making payments for services 
under the plan; or
* * * * *
    2. In Sec.  440.155(c), the introductory text is revised to read as 
follows:


Sec.  440.155  Nursing facility services, other than in institutions 
for mental diseases.

* * * * *
    (c) ``Nursing facility services'' may include services provided in 
a distinct part (as defined in Sec.  483.5(b) of this chapter) of a 
facility other than a nursing facility if the distinct part (as defined 
in Sec.  483.5(b) of this chapter)--
* * * * *

PART 483--REQUIREMENTS FOR STATES AND LONG TERM CARE FACILITIES

    1. The authority citation for part 483 continues to read as 
follows:

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

Subpart B--Requirements for Long Term Care Facilities

    2. Section 483.5 is revised to read as follows:


Sec.  483.5  Definitions.

    (a) Facility defined. For purposes of this subpart, facility means 
a skilled nursing facility (SNF) that meets the requirements of 
sections 1819 (a), (b), (c), and (d) of the Act, or a nursing facility 
(NF) that meets the requirements of sections 1919 (a), (b), (c), and 
(d) of the Act. ``Facility'' may include a distinct part of an 
institution (as defined in paragraph (b) of this section and specified 
in Sec.  440.40 and Sec.  440.155 of this chapter), but does not 
include an institution for the mentally retarded or persons with 
related conditions

[[Page 26782]]

described in Sec.  440.150 of this chapter. For Medicare and Medicaid 
purposes (including eligibility, coverage, certification, and payment), 
the ``facility'' is always the entity that participates in the program, 
whether that entity is comprised of all of, or a distinct part of, a 
larger institution. For Medicare, a SNF (see section 1819(a)(1) of the 
Act), and for Medicaid, a NF (see section 1919(a)(1) of the Act) may 
not be an institution for mental diseases as defined in Sec.  435.1009 
of this chapter.
    (b) Distinct part.
    (1) Definition. A distinct part SNF or NF is a physically 
identifiable component of an institution (for example, a hospital) or 
institutional complex (for example, a hospital that includes various 
subprovider units and occupies several buildings) that meets the 
requirements of this paragraph and of paragraph (b)(2) of this section, 
and is certified as meeting the applicable statutory requirements for 
SNFs or NFs in sections 1819 or 1919 of the Act, respectively. A SNF or 
NF distinct part may be comprised of one or more buildings or 
designated parts of buildings (that is, wings, wards, or floors) that 
are: in the same physical area immediately adjacent to the 
institution's main buildings; other areas and structures that are not 
strictly contiguous to the main buildings but are located within close 
proximity of the main buildings; and any other areas that CMS 
determines on an individual basis, to be part of the institution's 
campus. A distinct part must include all of the beds within the 
designated area, and cannot consist of a random collection of 
individual rooms or beds that are scattered throughout the physical 
plant. The term ``distinct part'' also includes a composite distinct 
part that meets the additional requirements of paragraph (c) of this 
section.
    (2) Requirements. In addition to meeting the participation 
requirements for long-term care facilities set forth elsewhere in this 
subpart, a SNF or NF also must meet all of the following requirements 
in order to be designated as a distinct part of an institution for 
payment or other purposes:
    (i) The SNF or NF must be operated under common ownership and 
control (that is, common governance) by the institution of which it is 
a distinct part, as evidenced by the following:
    (A) The SNF or NF is wholly owned by the institution of which it is 
a distinct part.
    (B) The SNF or NF is subject to the by-laws and operating decisions 
of a common governing body.
    (C) The institution of which the SNF or NF is a distinct part has 
final responsibility for the distinct part's administrative decisions 
and personnel policies, and final approval for the distinct part's 
personnel actions.
    (D) The SNF or NF functions as an integral and subordinate part of 
the institution to which it is based, with significant common resource 
usage of buildings, equipment, personnel, and services.
    (ii) The administrator of the SNF or NF reports to and is directly 
accountable to the management of the institution of which the SNF or NF 
is a distinct part.
    (iii) The SNF or NF must have a designated medical director who is 
responsible for implementing care policies and coordinating medical 
care, and who is directly accountable to the management of the 
institution of which it is a distinct part.
    (iv) The SNF or NF is financially integrated with the institution 
of which it is a distinct part, as evidenced by the sharing of income 
and expenses with that institution, and the reporting of its costs on 
that institution's cost report.
    (v) A single institution can have a maximum of only one distinct 
part SNF and one distinct part NF.
    (vi) An institution cannot designate itself as an SNF or NF 
distinct part, but instead must submit a written request to CMS to 
determine if it may be considered a distinct part, along with 
documentation that demonstrates that it meets the criteria set forth 
above. The effective date of approval of a distinct part is the date 
that CMS determines all requirements (including enrollment with the 
fiscal intermediary) are met for approval, and cannot be made 
retroactive. If a distinct part is established without CMS's 
notification and approval, CMS will determine the distinct part has not 
been appropriately designated as such from the date that the entity 
began its operation. CMS must approve all proposed changes in the 
number of beds in the approved distinct part.
    (c) Composite distinct part.
    (1) Definition. A composite distinct part is a distinct part 
consisting of two or more noncontiguous components that are not located 
within the same campus, as defined in Sec.  413.65(a)(2) of this 
chapter.
    (2) Requirements. In addition to meeting the requirements of 
paragraph (b) of this section, a composite distinct part also must meet 
all of the following requirements:
    (i) An SNF or NF that is a composite of more than one location will 
be treated as a single distinct part of the institution to which it is 
based. As such, the composite distinct part will have only one provider 
agreement.
    (ii) If there is a change of ownership of a composite distinct part 
SNF or NF, the assignment of the provider agreement to the new owner 
will apply to all of the approved locations that comprise the composite 
distinct part SNF or NF.
    (iii) If two or more hospitals (each with a distinct part SNF or 
NF) merge, CMS must approve the existing SNFs or NFs as meeting the 
requirements of this paragraph before they can be merged and considered 
a single distinct part of the hospital that survives the merger. In 
making such a determination, CMS will consider whether its approval or 
disapproval of a proposed merger promotes the effective and efficient 
use of public monies without sacrificing the quality of care.
    (iv) To ensure quality of care and quality of life for all 
residents, the various components of a composite distinct part must 
meet all of the requirements for participation independently in each 
location.
    3. In Sec.  483.10, the following new paragraph (b)(12) is added to 
read as follows:


Sec.  483.10  Resident rights.

* * * * *
    (b) * * *
    (12) Admission to a composite distinct part. In its admission 
agreement, a facility that is a composite distinct part (as defined in 
Sec.  483.5(c) of this subpart) must disclose its physical 
configuration, including the various locations that comprise the 
composite distinct part, and must specify the policies that apply to 
room changes between its different locations under Sec.  483.12(a)(8) 
of this subpart.
* * * * *
    4. In Sec.  483.12, the following changes are made:
    A. A new paragraph (a)(8) is added.
    B. A new paragraph (b)(4) is added.
    The additions read as follows:


Sec.  483.12  Admission, transfer, and discharge rights.

    (a) * * *
    (8) Room changes in a composite distinct part. Room changes in a 
facility that is a composite distinct part (as defined in Sec.  
483.5(c) of this subpart) must be limited to moves within the 
particular building in which the resident resides, unless the resident 
voluntarily agrees to move to another of the composite distinct part's 
locations.
* * * * *
    (b) * * *
    (4) Readmission to a composite distinct part. When the nursing 
facility

[[Page 26783]]

to which a resident is readmitted is a composite distinct part (as 
defined in Sec.  483.5(c) of this subpart), the resident must be 
permitted to return to an available bed in the particular location of 
the composite distinct part in which he or she resided previously. If a 
bed is not available in that location at the time of readmission, the 
resident must be given the option to return to that location upon the 
first availability of a bed there.
* * * * *


Sec.  483.20  [Amended]

    3. In Sec.  483.20(k)(1), the word ``describer'' is revised to read 
``describe''.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare-Hospital Insurance Program; and No. 93.774, Medicare-
Supplementary Medical Insurance Program)

    Dated: January 29, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: April 21, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-11854 Filed 5-8-03; 1:10 pm]
BILLING CODE 4120-01-P