[Federal Register Volume 68, Number 148 (Friday, August 1, 2003)]
[Rules and Regulations]
[Pages 45674-45728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-19540]



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Part IV





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 412



Medicare Program; Changes to the Inpatient Rehabilitation Facility 
Prospective Payment System and Fiscal Year 2004 Rates; Final Rule

  Federal Register / Vol. 68, No. 148 / Friday, August 1, 2003 / Rules 
and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1474-F]
RIN 0938-AL95


Medicare Program; Changes to the Inpatient Rehabilitation 
Facility Prospective Payment System and Fiscal Year 2004 Rates

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

ACTION: Final rule.

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SUMMARY: In this final rule, we are establishing the prospective 
payment rates for inpatient hospital services furnished under Medicare 
by inpatient rehabilitation facilities (IRFs) for Federal fiscal year 
(FY) 2004, as required under section 1886(j)(3)(C) of the Social 
Security Act (the Act). As required by law and regulations, we are 
specifying the classification and weighting factors for the IRF case-
mix groups and providing a description of the methodology and data used 
in computing the prospective payment rates for FY 2004. These rates are 
applicable to discharges occurring on or after October 1, 2003 and 
before October 1, 2004.
    In addition, we are revising and clarifying policies governing the 
payment for inpatient hospital services furnished by IRFs under the IRF 
PPS.

DATES: Effective: October 1, 2003. The updated IRF prospective payment 
rates are applicable for discharges on or after October 1, 2003 and on 
or before September 30, 2004 (FY 2004).

FOR FURTHER INFORMATION CONTACT: Robert Kuhl, (410) 786-4597 (General 
information) Pete Diaz (410) 786-1235 (Patient assessment instrument 
and other patient assessment issues); Nora Hoban, (410) 786-0675 
(Payment system, calculation of IRF payment rates, update factors, 
relative weights/case-mix index, and payment adjustments).

SUPPLEMENTARY INFORMATION:

Availability of Copies and Electronic Access

    Copies: To order copies of the Federal Register containing this 
final rule document, send your request to: New Orders, Superintendent 
of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the 
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calling the order desk at (202) 512-1800 (or toll-free at 1-888-293-
6498) or by faxing to (202) 512-2250. The cost for each copy is $10. As 
an alternative, you can view and photocopy the Federal Register 
document at most libraries designated as Federal Depository Libraries 
and at many other public and academic libraries throughout the country 
that receive the Federal Register.
    This Federal Register document is also available from the Federal 
Register online database through GPO Access, a service of the U.S. 
Government Printing Office. The web site address is: http://www.access.gpo.gov/nara/index.html.
    To assist readers in referencing sections contained in this final 
rule document, we are providing the following table of contents.

Table of Contents

I. Background
    A. Overview of the Inpatient Rehabilitation Facility Prospective 
Payment System (IRF PPS)
    B. Requirements for Updating the Prospective Payment Rates Under 
the IRF PPS
    C. Operational Overview of the IRF PPS
    D. Issuance of Proposed Rule on the FY 2004 Updates
II. Requirements and Conditions for Payment Under the IRF PPS
    A. Background
    B. Provisions of the May 16, 2003 Proposed Rule
    C. Classification Criteria for IRFs Subject to the IRF PPS
    1. Relationship to IPPS
    2. IRF Hospital Services Furnished to HMOs and CMP Enrollees
    3. Bed-Number Criteria for Freestanding Satellite IRFs
    4. Technical Changes
III. Research to Support Case-Mix Refinements to the IRF PPS
    A. Research on IRFs
    B. RAND Research Background
    C. Continuing Research
    D. Staff Time Measurement Data
    E. Monitoring
    F. Need to Develop Quality Indicators for IRFs
IV. The IRF PPS Patient Assessment Process
    A. Background
    B. Patient Rights
    C. When the IRF-PAI Must Be Completed
    D. Recording IRF-Data Based on a Patient's Performance
    E. Transmission of IRF-PAI Data
    F. Revision of the Definition of Discharge
    G. Waiver of the Penalty for Late Transmittal of the IRF-PAI 
Data
    H. General Information Regarding the IRF-PAI Assessment Process
V. Patient Classification System for the IRF PPS
VI. Fiscal Year 2004 Federal Prospective Payment
    Rates
    A. Expiration of the IRF PPS Transition Period
    B. Description of the Proposed IRF Standardized Payment Amount
    C. Adjustments to Determine the FY 2004 Standard Payment 
Conversion Factor
    1. IRF Market Basket Index
    2. The Excluded Hospital and the Capital Market Basket
    3. Research and Analysis
    4. Updated Labor-Related Share
    5. Budget Neutral Wage Adjustment Update Methodology
    D. Update of Payment Rates Under the IRF PPS for FY 2004
    E. Examples of Computing the Total Adjusted IRF Prospective 
Payments
    F. Computing Total Payments Under the IRF PPS for the Transition 
Period
    G. IRF-Specific Wage Data
    H. Adjustment for High-Cost Outliers under the IRF PPS
    1. Current Outlier Payment Provision under the IRF PPS
    2. Changes to the IRF Outlier Payment Methodology
    3. Adjustment to IRF Outlier Payments
    4. Change to the Methodology for Calculating the Federal 
Prospective Payment Outlier Payment
I. Miscellaneous Comment
VII. Provisions of the Final Rule
VIII. Collection of Information Requirements
IX. Regulatory Impact Analysis

Regulations Text

Addendum

Table 1--Relative Weights for Case-Mix Groups (CMGs)
Table 2--Fiscal Year 2004 Federal Prospective Payments for Case-Mix 
Groups (CMGs)
Table 3A--Urban Wage Index
Table 3B--Rural Wage Index
Appendix--Inpatient Rehabilitation Facility Patient Privacy Forms

Acronyms

BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Public 
Law 106-113
CMGs Case-mix groups
CMI Case-mix index
CMP Competitive medical plan
CMS Centers for Medicare & Medicaid Services
FY Federal fiscal year
HIPAA Health Insurance Portability and Accountability Act of 1996, 
Pub. L. 104-191
HMO Health maintenance organization
IPPS Acute care hospital inpatient prospective payment system
IRF Inpatient rehabilitation facility
IRF PAI Inpatient rehabilitation patient assessment instrument
IRF PPS Inpatient rehabilitation facility prospective payment system
JCAH Joint Commission on Accreditation of Hospitals
JCAHO Joint Commission on Accreditation of Hospital Organizations
LTCH Long-term care hospital
MedPAR Medicare Provider Analysis and Review File

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PPS Prospective payment system
RIC Rehabilitation impairment category
SNF Skilled nursing facility

I. Background

A. Overview of the Inpatient Rehabilitation Facility Prospective 
Payment System (IRF PPS)

    Section 1886(j) of the Social Security Act (the Act) provides for 
the implementation of a prospective payment system under Medicare for 
inpatient hospital services furnished by a rehabilitation hospital or a 
rehabilitation unit of a hospital (referred to as an inpatient 
rehabilitation facility (IRF)). Sections 1886(d)(1)(B) and 
1886(d)(1)(B)(ii) of the Act give the Secretary of Health and Human 
Services (the Secretary) discretion in defining a rehabilitation 
hospital and rehabilitation unit of a hospital. The regulations at 42 
CFR 412.23(b), 412.25, and 412.29, specify the criteria for a hospital 
to be classified as a rehabilitation hospital or rehabilitation unit. 
Hospitals and units meeting such criteria are eligible to be paid on a 
prospective payment basis as an IRF under the IRF PPS.
    Payments made under the IRF PPS cover inpatient operating and 
capital costs of furnishing covered rehabilitation services (that is, 
routine, ancillary, and capital costs), but not costs of approved 
educational activities, bad debts, and other services or items outside 
the scope of the IRF PPS. Covered rehabilitation services include 
services for which benefits are provided under Medicare Part A 
(Hospital Insurance).
    Payments under the IRF PPS are made on a per discharge basis. A 
patient classification system is used to classify patients in IRFs into 
case-mix groups (CMGs). The IRF PPS uses Federal prospective payment 
rates across distinct CMGs. A majority of the CMGs are constructed 
using rehabilitation impairment categories (RICs), functional status 
(both motor and cognitive), and age (in some cases, cognitive status 
and age may not be a factor in defining a CMG). Special CMGs are 
constructed to account for very short stays, and for patients who 
expire in the IRF.
    For each CMG, we develop relative weighting factors to account for 
a patient's clinical characteristics and expected resource needs. Thus, 
the weighting factors account for the relative difference in resource 
use across all CMGs. Within each CMG, the weighting factors are 
``tiered'' based on the estimated effect that the existence of certain 
comorbidities have on resource use.
    The Federal prospective payment rates are established using a 
standard payment amount (also referred to as the budget neutral 
conversion factor). For each of the tiers within a CMG, the relative 
weighting factors are applied to the budget neutral conversion factor 
to compute the unadjusted Federal prospective payment rates.
    Adjustments that account for geographic variations in wages (wage 
index), for the percentage of low-income patients, and for facilities 
located in a rural area are applied to the unadjusted Federal 
prospective payment rates. In addition, adjustments are made for early 
transfers of patients, interrupted stays, and high-cost outliers (cases 
with unusually high costs).
    (We note that, for cost reporting periods that began on or after 
January 1, 2002 and before October 1, 2002, IRFs either transitioned 
into the prospective payment system and received a ``blended payment,'' 
or elected to be paid 100 percent of the Federal IRF PPS rate. For cost 
reporting periods beginning on or after October 1, 2002 (FY 2003), the 
transition methodology has expired and payments for all IRFs are now 
based on 100 percent of the adjusted Federal prospective payment under 
the IRF PPS.)
    Implementing regulations for the IRF PPS are located in 42 CFR part 
412, subpart P. Regulations governing the requirements for 
classification of hospitals as IRFs are located in 42 CFR 412.22, 
412.23, 412.25 and 412.29.
    A complete discussion of the development of the IRF PPS is included 
in the August 7, 2001 final rule (66 FR 41316). We also have 
established a CMS Web site that contains useful information regarding 
the IRF PPS. The Web site URL is http://www.cms.hhs.gov/providers/irfpps/default.asp and may be accessed to download or view 
publications, software, and other information pertinent to the IRF PPS.

B. Requirements for Updating the Prospective Payment Rates Under the 
IRF PPS

    Section 412.628 of the regulations requires us to publish 
information pertaining to the IRF prospective payment rates in the 
Federal Register, on or before August 1 of the preceding fiscal year. 
We are required to include in the Federal Register document the 
classifications of the IRF case-mix groups (CMGs), the weighting 
factors that are applied to the CMG in determining the payment rate, 
and a description of the methodology and data used to compute the 
prospective payment rates for the applicable fiscal year.
    The initial FY 2002 IRF prospective payment rates were established 
on August 7, 2001 in a final rule entitled ``Medicare Program; 
Prospective Payment System for Inpatient Rehabilitation Facilities 
(CMS-1069-F)'' in the Federal Register (66 FR 41316) and were effective 
for cost reporting periods beginning on or after January 1, 2002. On 
August 1, 2002, we published a notice in the Federal Register (67 FR 
49928) that updated the IRF Federal prospective payment rates from FY 
2002 to FY 2003 using the methodology specified in Sec.  412.624 of the 
regulations. On July 1, 2002, we also published in the Federal Register 
(67 FR 44073) a correcting amendment to the August 1, 2001 final rule. 
Therefore, any reference in this final rule to the August 7, 2001 final 
rule includes the provisions effective in the correcting amendment.
    As discussed in section II of this preamble, on May 16, 2003, we 
issued a proposed rule in the Federal Register (68 FR 26786) to update 
the IRF Federal prospective payment rates from FY 2003 to FY 2004, to 
be effective for discharges occurring on or after October 1, 2003 and 
before October 1, 2004. For the proposed FY 2004 updates, we used the 
same classifications and weighting factors that were used for the IRF 
CMGs set forth in the August 7, 2001 final rule to update the IRF 
Federal prospective payment rates from FY 2002 to FY 2003.

C. Operational Overview of the IRF PPS

    In accordance with existing regulations at Sec.  412.606, upon the 
admission and discharge of a Medicare Part A fee-for-service patient, 
the IRF is required to complete the appropriate sections of a patient 
assessment instrument. CMS has established the Inpatient Rehabilitation 
Facility--Patient Assessment Instrument (IRF-PAI) for this purpose. All 
required data must be electronically encoded into the IRF's PAI 
software product. Generally, the software product includes patient 
grouping programming called the GROUPER software. The GROUPER software 
uses specific PAI data elements to classify (or group) a patient into a 
distinct CMG and account for the existence of any relevant 
comorbidities. The GROUPER software produces a 5-digit CMG number. The 
first digit is an alpha-character that indicates the comorbidity tier. 
The last 4 digits represent the distinct CMG number. (Free downloads of 
the Inpatient Rehabilitation Validation and Entry (IRVEN) software 
product, including the GROUPER software, are available at the CMS Web 
site at http://

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www.cms.hhs.gov/providers/irfpps/default.asp).
    When a patient is discharged, the IRF completes the Medicare claim 
(UB-92 or its equivalent) using the 5-digit CMG number and sends it to 
the appropriate Medicare fiscal intermediary. (Claims submitted to 
Medicare must comply with the electronic claim requirements found at 
http://www.cms.hhs.gov/providers/edi/default.asp. All submitted claims 
must also be in compliance with the Health Insurance Portability and 
Accountability Act (HIPAA) program claim memoranda issued by us and 
also published at that website, and as listed in the addenda to the 
Medicare Intermediary Manual, Part 3, section 3600. Instructions for 
the limited number of claims submitted to Medicare on paper are located 
in Part 3 section 3604 of the Medicare Intermediary Manual.) The 
Medicare fiscal intermediary processes the claim through its software 
system. This software system includes pricing programming called the 
PRICER software. The PRICER software uses the CMG number, along with 
other specific claim data elements and provider-specific data, to 
adjust the IRF's prospective payment for interrupted stays, transfers, 
short stays, and deaths. The PRICER software also applies the 
applicable adjustments to account for the IRF's wage index, percentage 
of low-income patients, rural location, and outlier payments.

D. Issuance of Proposed Rule on the FY 2004 Updates

    On May 16, 2003, we issued in the Federal Register (68 FR 26788) a 
proposed rule in which we proposed to update the Federal prospective 
payments rates under the IRF PPS and to make revisions and clarifying 
changes to the policies governing the implementation of the IRF PPS. A 
summary of our proposal follows:
    We proposed to use FY 1999 acute care hospital wage data to compute 
the IRF wage indices for FY 2004. (For FY 2003, we used FY 1997 acute 
care hospital wage data to compute the IRF wage indices.) We believe 
that the FY 1999 acute care hospital data are the best available 
because they are currently the most recent complete final data. 
However, any adjustments or updates made under section 1886(j)(6) of 
the Act must be made in a budget neutral manner. Therefore, we proposed 
to apply the methodology to update the wage indices for FY 2004, using 
1999 acute care hospital data in a budget neutral manner.
    We also proposed to update the underlying data used to compute the 
IRF market basket index. As explained in Appendix D of the August 7, 
2001 final rule, we used 1992 cost report data as the underlying data 
to develop the excluded hospital with capital market basket that formed 
the basis of the FY 2002 and FY 2003 IRF market basket index. We 
proposed to use 1997 cost report data, which are the most recent data 
available to form the basis of the FY 2004 IRF market basket index.
    We further proposed to modify or clarify certain criteria for a 
hospital or a hospital unit to be classified as an IRF. As stated in 
the August 7, 2001 final rule, we did not change the survey and 
certification procedures applicable to entitled seeking classification 
as an IRF. Currently, to be paid under the IRF PPS, a hospital or unit 
of a hospital must first be deemed excluded from the diagnosis-related 
group (DRG)-based acute care hospital PPS (IPPS) under the general 
requirements in subpart B of part 412 of the regulations. Second, the 
excluded hospital or unit must meet the conditions for payment under 
the IRF PPS at Sec.  412.604 of the regulations.
    Lastly, we proposed to modify or clarify existing provisions of the 
IRF PPS relating to the patient assessment process and the transmission 
of patient data to CMS. However, we note that we did not propose any 
refinements or changes to the FY 2002 case-mix classification system 
(the CMGs and the corresponding relative weights) and the case-level 
and facility-level adjustments, due to the lack of available data to 
make such changes.
    We received more than 6,900 timely items of correspondence 
containing multiple comments on the May 16, 2003 proposed rule. Major 
issues addressed by commenters included the following: enforcement of 
the 75 percent rule (as discussed below); definition of a discharge; 
waiver of the penalty for late transmission of the IRF-PAI; and changes 
to the outlier policies. Summaries of the public comments received and 
our responses to those comments are set forth below under the 
appropriate subject headings.
    Many commenters did not agree with our stated intention to enforce 
the existing regulations at Sec.  412.23(b) whereby at least 75 percent 
of an IRF's patient population must receive intensive rehabilitation 
services for treatment of one or more of ten conditions specified in 
regulations for the facility to be classified as an IRF (also known as 
the 75 percent rule). In addition, on May 19, 2003, we hosted an IRF 
Town Hall meeting in Baltimore, MD where patients, providers, and other 
interested parties presented their views on the May 16, 2003 proposed 
rule. We received numerous suggestions concerning changes to the 75 
percent rule. Based on the level of public interest generated by this 
issue, we have decided to revisit our policies concerning the 75 
percent rule. In the very near future, we will be issuing a proposed 
rule in the Federal Register that will contain a full discussion of our 
proposed changes to the existing 75 percent rule.

II. Requirements and Conditions for Payment Under the IRF PPS

A. Background

    Existing regulations at Sec.  412.604 describe the conditions that 
must be met for an IRF to be paid under the IRF PPS. Section 412.604(a) 
states the general requirements for payment to be made under the IRF 
PPS and the effects on Medicare payment if the conditions described the 
section are not met. Section 412.604(b) states the existing regulatory 
provisions that must be met for a hospital or unit of a hospital to be 
excluded from the IPPS and to be classified as an IRF. Section 
412.604(c) requires an IRF to complete a patient assessment instrument 
for each Medicare Part A fee-for-service patient admitted. Section 
412.604(d) describes the limitations on IRFs for charging beneficiaries 
who receive Medicare covered services. Section 412.604(e) describes the 
requirements associated with furnishing inpatient hospital services 
directly or under arrangement. Section 412.604(f) states the reporting 
and recordkeeping requirements that IRFs must meet.

B. Provisions of the May 16, 2003 Proposed Rule

    In the May 16,2003 proposed rule, we described several proposed 
changes to the conditions or underlying requirements of Sec.  412.604. 
Below we discuss the proposed change to the general conditions and 
requirements. The specific changes relating to classification criteria 
are addressed under section II.C. of this preamble.
    As stated earlier, under Sec.  412.604(a), we specify the general 
conditions for payment to be made under the IRF PPS and the effects on 
Medicare payment if the conditions are not met. We proposed to make a 
change in paragraph (a)(2) relating to the entity that takes the action 
if the IRF fails to comply with the conditions of the section; that is 
to withhold (in full or in part) or reduce Medicare payment to the IRF 
until the facility provides adequate assurances of compliance, or to 
classify the IRF as an inpatient hospital that is subject to the 
conditions of 42 CFR part 412, subpart

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C and is paid under the prospective payment systems specified in Sec.  
412.1(a)(1). We proposed to specify that either CMS or the Medicare 
fiscal intermediary may take such action, as appropriate.
    Comment: We did not receive any comments concerning this proposed 
change.
    Response: We are therefore adopting the proposed change to Sec.  
412.604(a)(2) to indicate that CMS or the Medicare fiscal intermediary 
may take actions if the IRF does not meet the conditions specified in 
the section.

C. Classification Criteria for IRFs Subject to the IRF PPS

    Section 412.604(b) states that, subject to the special payment 
provisions of Sec.  412.22(c), an IRF must meet the general criteria 
set forth in Sec.  412.22 and the criteria to be classified as a 
rehabilitation hospital or rehabilitation unit set forth in Sec.  
412.23(b), Sec.  412.25, and Sec.  412.29 for exclusion from the IPPS 
specified in Sec.  412.1(a)(1). These general criteria are located 
under 42 CFR part 412, subpart B of the regulations. In the August 7, 
2001 final rule implementing the IRF PPS, we did not make any changes 
to the exclusion criteria and requirements to be classified as an IRF 
under subpart B of part 412. Since the implementation of the IRF PPS, a 
number of questions have been raised on the application of some of 
these requirements and the necessity of other criteria.
    Below, we discuss each requirement as it relates to the 
classification of an IRF, the proposed changes, if any, included in the 
May 16, 2003 proposed rule, the public comments received, and the 
provisions of this final rule.
1. Relationship to IPPS
    Section 1886 to the Act established a PPS for acute care inpatient 
hospital services for cost reporting periods beginning on or after 
October 1, 1983. Under section 1886(d)(1)(B) of the Act, several types 
of hospitals and units of hospitals are excluded from the IPPS. 
Sections 1886(d)(1)(B) and 1886(d)(1)(B)(ii) of the Act specify that 
rehabilitation hospitals and units (as defined by the Secretary) are 
excluded from the IPPS. The Secretary has defined rehabilitation 
hospitals and units in regulations at 42 CFR part 412 subpart B.
    Extensive discussion and public comments on developing the criteria 
under which a hospital or unit of a hospital can be excluded from the 
IPPS as an IRF began with the September 1, 1983 publication of the 
interim final rule with comment period in the Federal Register (48 FR 
39752). (That interim final rule discussed the provisions necessary to 
implement section 1886 of the Act.) On January 3, 1984, we published in 
the Federal Register a final rule (49 FR 234) that responded to public 
comments on the provisions of the September 1, 1983 interim final rule 
and established the initial set of criteria that must be met by a 
hospital or unit of a hospital seeking exclusion from the IPPS as an 
IRF. Since the publication of these earlier rules, the criteria to be 
an IRF have been revised and codified at 42 CFR part 412, subpart B of 
the existing Medicare regulations.
2. IRF Hospital Services Furnished to HMOs or CMP Enrollees
    Section 412.20(b) of the existing regulations state that covered 
inpatient hospital services furnished to Medicare beneficiaries by a 
rehabilitation hospital or rehabilitation unit that meet the conditions 
of Sec.  412.604 are paid under the IRF PPS described in subpart P of 
42 CFR part 412.
    In the May 16, 2003 proposed rule, we proposed to redesignate 
existing Sec.  412.20(b) as Sec.  412.20(b)(1) and add Sec.  
412.20(b)(2) to ensure that inpatient hospital services will not be 
paid under the IRF PPS if the services are paid by a health maintenance 
organization (HMO) or competitive medical plan (CMP) that elects not to 
have CMS make payments to an IRF for services, which are inpatient 
hospital services, furnished to the HMO's or CMP's Medicare enrollees 
under 42 CFR Part 417. This provision is similar to the provision at 
Sec.  412.20(d)(3) that prohibits payments under the IPPS for similar 
HMO or CMP services.
    Comment: We did not receive any comments concerning this proposed 
change.
    Response: Therefore, we are adopting the proposed redesignation of 
existing Sec.  412.20(b) as Sec.  412.20(b)(1) and add Sec.  
412.20(b)(2) to ensure that inpatient hospital services will not be 
paid under the IRF PPS if the services are paid by a HMO or CMP that 
elects not to have CMS make payments to an IRF for services, which are 
inpatient hospital services, furnished to the HMO's or CMP's Medicare 
enrollees under 42 CFR part 417.
3. Bed-Number Criteria for Freestanding Satellite IRFs
    Section 412.22(h) describes the requirements to be a satellite 
facility of a hospital that is excluded from the IPPS. The following 
describes our proposed changes in the May 16, 2003 proposed rule to 
eliminate the provision that limits the bed size of a satellite IRF.
    In the July 30, 1999 Federal Register (64 FR 41540), we revised 
Sec.  412.22(h) to require that in order to be excluded from the acute 
care hospital inpatient PPS, a satellite of a hospital: (1) Effective 
for cost reporting periods beginning on or after October 1, 2002, is 
not under the control of the governing body or chief executive officer 
of the hospital in which it is located, and furnishes inpatient care 
through the use of medical personnel who are not under the control of 
the medical staff or chief medical officer of the hospital in which it 
is located; (2) must maintain admission and discharge records that are 
separately identified from those of the hospital in which it is located 
and are readily available; (3) cannot commingle beds with beds of the 
hospital in which it is located; (4) must be serviced by the same FI as 
the hospital of which it is a part; (5) must be treated as a separate 
cost center of the hospital of which it is a part; (6) for cost 
reporting and apportionment purposes, must use an accounting system 
that properly allocates costs and maintains adequate data to support 
the basis of allocation; and (7) must report costs in the cost report 
of the hospital of which it is a part, covering the same fiscal period 
and using the same method of apportionment as the hospital of which it 
is a part. In addition, the satellite facility must independently 
comply with the qualifying criteria for exclusion from the IPPS. 
Lastly, the total number of State-licensed and Medicare-certified beds 
(including those of the satellite facility) for a hospital (other than 
a children's hospital) that was excluded from the IPPS for the most 
recent cost reporting period beginning before October 1, 1997, may not 
exceed the hospital's number of beds on the last day of that cost 
reporting period.
    In Sec.  412.22(h)(1), we define a satellite as ``a part of a 
hospital that provides inpatient services in a building also used by 
another hospital, or in one or more entire buildings located on the 
same campus as buildings used by another hospital.'' Satellite 
arrangements exist when an existing hospital that is excluded from the 
IPPS and that is either a freestanding hospital or a hospital-within-a-
hospital under Sec.  412.22(e) shares space in a building or on a 
campus occupied by another hospital in order to establish an additional 
location for the excluded hospital. The July 30, 1999 IPPS final rule 
(64 FR 41532-41534) includes a detailed discussion of our policies 
regarding Medicare payments for satellite facilities of hospitals 
excluded from the IPPS.

[[Page 45678]]

    In accordance with section 1886(b) of the Act, as amended by 
sections 4414 and 4416 of Pub. L. 105-33, we established two different 
target limits on payments to excluded hospitals, depending upon when 
the IRF was established. The target amount limit for an IRF with a cost 
reporting period beginning before October 1, 1997 was set at the 75th 
percentile of the target amounts of IRFs, as specified in Sec.  
413.40(c)(4)(iii), updated to the applicable cost reporting period. For 
IRFs with a cost reporting period beginning on or after October 1, 
1997, under section 4416 of Pub. L. 105-33, the payment amount for the 
hospital's first two 12-month cost reporting periods, as specified at 
Sec.  413.40(f)(2)(ii)(A) and (B), could not exceed 110 percent of the 
national median of target amounts of IRFs for cost reporting periods 
ending during FY 1996, updated by the hospital market basket increase 
percentage to the first cost reporting period in which the IRF receives 
payment.
    Because we were concerned that a number of pre-1997 excluded 
hospitals (including IRFs), governed by Sec.  413.40(c)(4)(iii), would 
seek to create satellite arrangements in order to avoid the effect of 
the lower payment caps that would apply to new hospitals under Sec.  
413.40(f)(2)(ii), we established rules regarding the exclusion of and 
payments to satellites of existing facilities. If the number of beds in 
the hospital or unit (including both the base hospital or unit and the 
satellite location) exceeds the number of State-licensed and Medicare-
certified beds in the hospital or unit on the last day of the 
hospital's or unit's last cost reporting period beginning before 
October 1, 1997, the facility would be paid under the IPPS. Therefore, 
while an excluded hospital or unit could ``transfer'' bed capacity from 
a base facility to a satellite, if it increased total bed capacity 
beyond the level it had in the most recent cost reporting period before 
October 1, 1997 (see 64 FR 41532-41533, July 30, 1999), the hospital 
will not be paid as a hospital excluded from the IPPS. However, no 
similar limitation was imposed with respect to the number of total beds 
in excluded hospitals and units and satellite facilities of those 
excluded hospitals and units established after October 1, 1997, since 
those excluded hospitals and units were subject to the lower payment 
limits of section 4416 of Pub. L. 105-33, and would, therefore, not 
benefit from the higher payment cap on target amounts under Sec.  
413.40(c)(4) by creating a satellite facility.
    On March 22, 2002, we published a proposed rule in the Federal 
Register (67 FR 13416) that set forth the proposed Medicare PPS for 
long-term care hospitals (LTCHs). Discussion of the comments received 
on that LTCH proposed rule and our responses were published in a final 
rule on August 30, 2002 Federal Register (67 FR 55954). Specific 
comments received were discussed on page 56013 of the LTCH final rule 
that urged us to eliminate the bed-number criteria in Sec.  
412.22(h)(2)(i) for pre-1997 IRFs since the applicable PPS is fully 
phased in. The rationale for the bed-number criteria provision at Sec.  
412.22(h)(2)(i) was the potential for circumventing the PPS by creating 
a satellite location that could have their payment based on a higher 
TEFRA target amount cap. However, once an IRF's payment under the IRF 
PPS does not include a TEFRA-based payment (referred to as the 
facility-specific payment under the transition period described in 
Sec.  412.626) and is based on 100 percent of the Federal prospective 
payment rate, we believe that the need for the bed-number criteria does 
not exist because IRF prospective payments will be the same regardless 
of when the IRF was established. Because all IRFs now will be paid 100 
percent of the Federal prospective payment rates, in the May 16, 2003 
proposed rule, we proposed to eliminate the bed-number criteria by 
revising Sec.  412.22(h) relating to freestanding satellite IRFs. We 
also proposed to eliminate the bed-number criteria for IRF satellite 
units of a hospital by revising Sec.  412.25(e) to conform to the 
proposed change in Sec.  412.22(h).
    Comment: We received a number of comments in support of the 
proposed elimination of the bed-number criteria. However, one commenter 
was concerned with the increase in paperwork burden.
    Response: We are adopting the proposed elimination of the bed-
number criteria by revising Sec.  412.22(h) for freestanding IRFs and 
Sec.  412.25(e) for IRF units. The commenter was not specific on how 
this change would increase paperwork burden. We believe that this 
change makes the policy of creating a satellite IRF less restrictive 
and less burdensome to verify that the bed-number criteria were met. 
Accordingly, we do not believe that this change increases paperwork 
burden and, thus, we did not include an estimate of time associated 
with eliminating the bed-number criteria in the Collection of 
Information section of the May 16, 2003 proposed rule.
4. Technical Changes
    a. Excluded Rehabilitation Units: Additional Requirements:
    Under Sec.  412.29(a), an IRF unit must have met either the 
requirements for new units or converted units under Sec.  412.30. 
Section 412.29(a)(2) contains an incorrect reference to the 
requirements for converted units as ``Sec.  412.30(b).'' The correct 
reference to the requirements for converted units is Sec.  412.30(c). 
Accordingly, we proposed to make a technical correction by changing the 
reference in Sec.  412.29(a)(2) to state ``Converted units under Sec.  
412.30(c).''
    Comment: We did not receive any comments concerning this proposed 
technical correction.
    Response: We are adopting the proposed technical correction to 
Sec.  412.29(a)(2) to state ``Converted units under Sec.  412.30(c).''
    b. Exclusion of New Rehabilitation Units and Expansion of Units 
Already Excluded:
    Under Sec.  412.30(b)(2), a hospital that seeks exclusion of a new 
IRF unit may provide written certification that the inpatient 
population the hospital intends the unit to serve meets the 
requirements of Sec.  412.23(b)(2). Section 412.30(b)(3) contains an 
incorrect reference to the required written certification described in 
``paragraph (a)(2)'' of this section. The correct reference to the 
written certification is described in paragraph (2) of Sec.  412.30(b). 
Accordingly, we proposed to make a technical correction by changing the 
current reference to Sec.  412.30(a)(2) in Sec.  412.30(b)(3) to state 
``The written certification described in paragraph (b)(2) * * * .'' In 
the proposed rule, we incorrectly stated that the reference to Sec.  
412.23(a)(2) was in Sec.  412.23(b)(3). It should have read that the 
reference to Sec.  412.30(a)(2) was in Sec.  412.30(b)(3).
    Comment: We did not receive any comments concerning this proposed 
technical correction.
    Response: We are adopting the proposed technical correction to 
Sec.  412.30(b)(3) to state ``The written certification described in 
paragraph (b)(2) * * * .''
    Section 412.30(d)(1) defines new bed capacity for the purposes of 
expanding an existing excluded IRF unit. Section Sec.  412.30(d)(2)(i) 
contains an incorrect reference to the definition of new bed capacity 
under ``paragraph (c)(1)'' of this section. The correct reference to 
the definition of new bed capacity is paragraph (d)(1). Accordingly, we 
proposed a technical correction to change the current reference to

[[Page 45679]]

paragraph (c)(1) under paragraph (d)(2)(i) to state ``under paragraph 
(d)(1) of this section.''
    Comment: We did not receive any comments concerning this proposed 
technical correction.
    Response: We are adopting the proposed technical correction to 
change the current reference to paragraph (c)(1) under paragraph 
(d)(2)(i) to state ``under paragraph (d)(1) of this section.''

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

A. Research on IRFs

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

B. RAND Research Background

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

C. Continuing Research

    RAND's data efforts over the past year were concentrated on 
archiving data from the first phase of the project, constructing the 
analytic files for monitoring special studies, and preparing for post-
IRF PPS data that will be used for monitoring and for refinement. 
RAND's monitoring effort seeks to measure changes in IRF care, post-IRF 
care, and postacute care following implementation of the IRF PPS. The 
refinement effort necessitates that the methods used to create the 
initial set of CMGs weights and facility adjustments be applied to more 
recent IRF data.
    Section 125(b) of the Medicare, Medicaid, and SCHIP [State 
Children's Health Insurance Program] Balanced Budget Refinement Act 
(BBRA), Pub. L. 106-113, provides that the Secretary shall conduct a 
study of the impact on utilization and beneficiary access to services 
of the implementation of the IRF prospective payment system. A report 
on the study must be submitted to the Congress not later than 3 years 
after the date the IRF prospective payment system is first implemented. 
Accordingly, to continue RAND's research, data from other health care 
settings are needed to assess the impact on utilization and beneficiary 
access to services because the IRF PPS can have an impact among other 
settings that deliver rehabilitative services. If we only analyzed data 
from IRFs, our assessment of utilization and access would not be 
complete. In addition to the data obtained from the IRF Medicare 
claims, functional measures from the IRF PAI, and cost reports, other 
data are required to show the utilization and access of rehabilitative 
services delivered in other settings, such as SNFs, LTCHs, home health 
agencies, and outpatient rehabilitation facilities. Analysis of these 
data may show changes in utilization of inpatient rehabilitation 
services and if the types or severity of patients treated in IRFs 
differs significantly from the data used to create the CMGs, case-mix 
refinements may be needed.
    In the next phase of their research, RAND will be developing and 
testing possible improvements to the payment system using existing 
data. This analysis will focus on potential improvements to the methods 
used to establish the CMGs, facility adjustments (such as, teaching, 
rural, and low-income adjustments), and comorbidities.
    In constructing the CMGs for the IRF PPS, one of our primary goals 
was to develop a payment methodology that would match payment to 
resource use as closely as possible. It is important to continue to 
examine the IRF PPS to ensure that the system remains a good predictor 
of resource use over time. Further, more complete data will be 
available in which we can assess the reliability and validity of the 
IRF PPS. We also expect improvements with certain data elements. For 
example, prior to implementation of the IRF PPS, IRFs were not required 
to code comorbidities. As a result of implementing the IRF PPS, we 
expect that IRFs will improve coding comorbidities because collection 
of this information may affect their payment amount. These improved 
data will allow us to determine the effects various conditions have on 
the cost of a case.
    RAND will use post-IRF PPS data when they become available, as well 
as existing data to support their research. RAND research includes: 
analyses of methodological improvements in the creation of CMGs, 
methodological improvements to the statistical approaches used to 
derive payment adjustments and characterizing IRFs into groups based on 
their case-mix. Currently, RAND does not have enough post-IRF PPS data 
to analyze potential modifications to the classification and payment 
systems. Further, we will need a sufficient amount of these data to be 
able to determine if future refinements are needed. Because IRFs began 
to be paid under the IRF PPS based on their cost report start date that 
occurred on or after January 1, 2002, sufficient data will not be 
available for those facilities

[[Page 45680]]

whose cost report start date occurs later in the calendar year. 
Therefore, in this final rule, we are not changing the CMG 
classification system or the facility-level and case-level adjustments, 
other than the wage adjustment. The adopted changes for the wage 
adjustment are discussed in detail in section VI. of this final rule.

D. Staff Time Measurement Data

    As described in the August 7, 2001 final rule, we contracted with 
Aspen Systems Corporation (ASPEN) to collect actual resource use or 
staff time measurement (STM) data in a sample of IRFs. Data were 
collected using the MDS-PAC patient assessment instrument. FIM data 
were collected at the same time. We believe that these data, which 
measure actual nursing and therapy time spent on patient care, may be 
used to enhance our ability to refine the CMGs.
    RAND received ASPEN's analytical database in early spring 2002. 
After a brief period of working with the data, RAND discovered that 
their study required details that were not in this summary database. 
Specifically, about half of the cases within the analytic database had 
data for only the first part of the patient's stay. RAND needed to have 
explicit data that tracked how staff time usage changed throughout a 
patient's stay and the analytic database contained only the averages of 
the observed portions of the patient's stay. RAND also needed data on 
patients during the second part of their stay.
    In late July 2002, RAND received the backup data, but did not 
assess it until late August 2002. Further technical questions about the 
data still exist and must be answered before the modeling of the data 
can occur.

E. Monitoring

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

F. Need To Develop Quality Indicators for IRFs

    The IRF PAI is the data collection instrument for IRFs. It contains 
a blend of FIM items and quality and medical needs questions. The 
quality and medical needs questions (which are currently collected on a 
voluntary basis) may need to be modified to encapsulate those data 
necessary for calculation of a quality indicator in the future. One of 
the primary tasks of the RAND contract is to identify quality 
indicators pertinent to the inpatient rehabilitation setting and 
determine what information is necessary to calculate those quality 
indicators. These tasks include reviewing literature and other sources 
for existing rehabilitation quality indicators. It also involves 
identifying organizations involved in measuring or monitoring quality 
of care in the inpatient rehabilitation setting. RAND will convene a 
technical expert panel to identify a series of quality indicators that 
can be measured using the IRF-PAI. In addition, quality indicators and 
data elements must be developed for calculation as well as the 
independent testing of the developed indicators.
    We note that the National Library of Medicine, which is part of the 
National Institutes of Health within the Department of Health and Human 
Services, has entered into an agreement with the College of American 
Pathologists to license the Systematized Nomenclature of Medicine--
Clinical Terms (SNOMED CT). SNOMED CT provides a common language that 
enables a consistent way of capturing, sharing, and aggregating health 
care data across specialties and sites of care. If in the future, CMS 
makes changes to the IRF PAI, we will consider whether SNOMED CT 
includes IRF PAI data terminology and we will consider including SNOMED 
CT terms. For further information, please visit SNOMED's Web site at 
http://www.snomed.org or the National Library of Medicine Web site at 
http://www.nlm.hih.gov.

IV. The IRF PPS Patient Assessment Process

A. Background

    In the August 7, 2001 IRF PPS final rule (66 FR 41316), we 
described how an IRF would use the IRF Patient Assessment Instrument 
(PAI) to assess an IRF patient. Training on the IRF-PAI assessment 
process was conducted in Baltimore, Maryland, Chicago, Illinois, San 
Francisco, California, and Atlanta, Georgia during the fall of 2001. We 
also created videotapes of the training that we made available to IRFs 
free of charge. IFRs were instructed to go to the CMS IRF PPS website 
to request copies of the videotapes and to access electronic copies of 
the IRF-PAI manual, which contained detailed instructions regarding the 
completion of the IRF-PAI.

B. Patient Rights

    Section 412.608 of the existing regulations specifies that prior to 
performing the IRF-PAI assessment, and in order to receive payment from 
Medicare, the IRF must inform the patient of the rights contained in 
this section. These rights are as follows:
    (1) The right to be informed of the purpose of the patient 
assessment data collection;
    (2) The right to have the patient assessment information collected 
kept confidential and secure;
    (3) The right to be informed that the patient assessment 
information will not be disclosed to others, except for legitimate 
purposes allowed by the Federal Privacy Act and Federal and State 
regulations;
    (4) The right to refuse to answer patient assessment questions; and
    (5) The right to see, review, and request changes on the patient 
assessment instrument.
    In addition to the rights specified in Sec.  412.608, a patient has 
privacy rights under the Privacy Act of 1974 (5 U.S.C 552a(e)(3)), and 
45 CFR 5b.4(a)(3). We have elaborated on these privacy rights in this 
Preamble statement in order to avoid any confusion. The Privacy Act and 
45 CFR 5b.4(a)(3) require that an individual be informed of the 
following: the authority by which individually identifiable information 
is being collected by a Federal agency and maintained in a system of 
records; whether providing the information is voluntary or mandatory; 
the principal purpose for collecting the information; the routine uses 
for release of the information; and the effect refusal to provide 
requested information may have on the individual. The Federal agency 
should be identified, as well as the location of the system of records. 
In order to ensure compliance with the Privacy Act of 1974 and 45 CFR 
5b.4(a)(3), in the May 16, 2003 proposed rule, we proposed to revise 
Sec.  412.608 to specify that, prior to performing the IRF-PAI 
assessment, an IRF clinician must give each Medicare inpatient specific 
privacy information forms.
    We published these proposed privacy forms in Appendix B of the May 
16, 2003 proposed rule (and are including them under the Appendix of 
this final rule). The first proposed form, entitled ``Privacy Act 
Statement--Health Care Records,'' is a detailed description of the 
patient's privacy rights under the Privacy Act of 1974. The second 
proposed form, entitled ``Data

[[Page 45681]]

Collection Information Summary for Patients in Inpatient Rehabilitation 
Facilities'' is the simplified plain language summary of the Privacy 
Act Statement--Health Care Records. We proposed to require that both of 
these forms be given to a patient before beginning the IRF-PAI 
assessment. These actions on the part of an IRF would fulfill the 
requirement that the patient be informed of the five rights specified 
in Sec.  412.608. In addition, in this final rule, we have made 
technical changes to the proposed Sec.  412.608. We have deleted 
proposed Sec.  412.608(c) because it was redundant of proposed Sec.  
412.608(a)(2), and have redesignated proposed Sec.  412.608(d) as Sec.  
412.608(c) and proposed Sec.  412.608(e) as Sec.  412.608(d). We note 
that when an IRF clinician gives a patient the forms entitled ``Data 
Collection Information Summary for Patients in Inpatient Rehabilitation 
Facilities'' and the ``Privacy Act Statement-Health Care Records'' 
prior to performing an assessment, these forms do not satisfy the 
privacy provisions contained in the HIPAA Privacy Rule (65 FR 82462 as 
modified by 67 FR 53182). For example, these forms do not meet the 
privacy notice requirements of the HIPAA Privacy Rule (see 45 CFR 
164.520).
    Health plans and health care providers must meet the notice 
requirements of the HIPAA Privacy Rule by giving a Notice of Privacy 
Practices to their patients. The Notice of Privacy Practices describes 
a health plan or health care provider's uses and disclosures of 
protected health information and the individual rights that patients 
have with respect to their protected health information.
    Comment: One commenter suggested adding the text, ``simplified 
plain language,'' to the subtitle of the form entitled ``Data 
Collection Information Summary for Patients in Inpatient Rehabilitation 
Facilities.''
    Response: We agree with the commenter and have revised the title of 
the ``Data Collection Information Summary for Patients in Inpatient 
Rehabilitation Facilities'' to include the phrase ``Simplified Plain 
Language'' as a subtitle.
    Comment: One commenter requested that the two patient rights forms 
be posted on the IRF PPS website and that they also be made available 
in Spanish.
    Response: We agree with the commenter and will post the two privacy 
forms on the IRF PPS website and make them available in Spanish.
    Comment: We received one comment concerning patients' rights. The 
commenter supported the proposed change, however, several members of 
the commenter's organization have raised concerns about an additional 
paperwork burden.
    Response: We disagree with the commenter and estimate that it will 
take no more than one minute to document the fact that the IRF has 
given a patient a copy of his or her rights, even assuming that the 
rights statement is the only handout. We anticipate that the rights 
statement will be one of several handouts that a patient would receive 
and that as a matter of prudent business and medical procedures, 
facilities have a mechanism in place to document that patients have 
been given all the necessary paperwork.

C. When the IRF-PAI Must Be Completed

    Under existing Sec.  412.606(b), an IRF must use the IRF-PAI to 
assess Medicare Part A fee-for-service inpatients. Section 
412.610(c)(1)(i)(A) specifies that the admission assessment covers the 
first 3 calendar days of the inpatient's current IRF Medicare Part A 
fee-for-service hospitalization. Section 412.610(c)(1)(i)(B) specifies 
that the admission assessment reference date is the third day of the 3-
day admission assessment time period. Section 412.610(c)(1)(i)(C) 
specifies that the IRF-PAI for the admission assessment must be 
completed on the calendar day that follows the admission assessment 
reference day.
    We are concerned that IRFs are interpreting Sec.  
412.610(c)(1)(i)(C) to mean that they may not start to record data on 
the IRF-PAI before the calendar day that follows the admission 
assessment reference day. This interpretation is not our intent. The 
``completion requirement'' of the IRF-PAI indicates the date that the 
IRF's staff must have completed its recording on the IRF-PAI of the 
assessment data that the IRF's clinical staff obtained during an 
assessment of the inpatient that was performed during the admission 
assessment time period. In other words, the date when the IRF-PAI must 
be completed is the deadline date when the process of recording data on 
the IRF-PAI must be finished. The IRF's staff is permitted to enter 
assessment data on the IRF-PAI prior to the deadline date.

D. Recording IRF-Data Based on a Patient's Performance

    How data are recorded on the IRF-PAI is specified in the IRF-PAI 
item-by-item guide, entitled the ``IRF-PAI Training Manual Revised 01/
16/02.'' The instructions contained in the IRF-PAI item-by-item guide 
are, when possible, very similar to the rules for coding the patient 
assessment instrument that we used as the model for the IRF-PAI. The 
model for the IRF-PAI was the patient assessment instrument published 
by Uniform Data System for Medical Rehabilitation (UDSmr).
    The UDSmr rules for coding their assessment instrument specify that 
an item's score should reflect an inpatient's lowest level of 
functioning. Consequently, in order to be consistent with how an 
inpatient's functional performance was scored on the UDSmr patient 
assessment instrument, the IRF-PAI item-by-item guide, likewise, 
specifies that a patient's assessment must indicate the patient's 
lowest level of functioning.
    During the admission assessment, an IRF clinician records different 
types of data on the IRF-PAI. We believe that the sources of the data 
recorded in the categories of the IRF-PAI entitled ``Identification 
Information,'' ``Admission Information,'' and ``Payer Information'' 
allows an IRF to quickly obtain and record these data. For these 
categories of data, the source of the data may be the patient, the 
patient's medical record, other patient documents, the patient's 
family, or a person that has personal knowledge of the patient.
    In order to complete the data for the IRF-PAI categories entitled 
``Function Modifiers'' and ``FIMTM Instrument,'' the 
clinician observes the patient's functional performance over the 
admission assessment time period, and makes clinical judgments 
regarding the patient's performance. Consequently, due to how the data 
for the Function Modifiers and FIMTM categories are 
obtained, we believe it is the time span that it takes to assess the 
patient's functional performance that will usually determine how long 
it takes to complete the admission assessment.
    Page III-3 of the IRF-PAI manual states that when determining the 
level of a patient's functional performance, the clinician is to 
``record the lowest (most dependent) score.'' We believe that the 
patient's functional performance improves in the time span between the 
patient's admission and discharge from the IRF. We also believe that on 
the patient's admission day and for the following next few days, a 
patient's functional performance is poor in comparison to functional 
performance on subsequent days of the patient's current IRF 
hospitalization. Therefore, during the part of the admission assessment 
that is the first or second day of the patient's current IRF 
hospitalization, we believe that a patient's functional performance 
will usually be scored as indicating the most

[[Page 45682]]

dependence or the lowest level of functioning.
    As stated previously, the IRF's clinical staff is permitted to 
record assessment data on the IRF-PAI at any time during the admission 
assessment process. Also, as stated previously, we believe it is the 
scoring of a patient's functional performance that will determine how 
long it takes to complete the admission assessment. The combination of: 
(1) Being able to record assessment data at any time during the 
admission assessment, (2) the requirement that the lowest level of 
functional performance be recorded, and (3) the lowest level of 
functional performance that will usually occur on the first or second 
day of the admission assessment, makes it possible to finish obtaining 
and recording all the assessment data before the day that follows the 
admission assessment reference date. However, in accordance with Sec.  
412.610(c)(1)(i)(C), an IRF has until the day following the admission 
assessment reference day to complete the IRF-PAI.
    In order to clarify that Sec.  412.610(c)(1)(i)(C) does not 
prohibit the IRF from recording any or all of the data on the IRF-PAI 
before the day that follows the admission assessment reference day, in 
the May 16, 2003 proposed rule we proposed to revise Sec.  
412.610(c)(1)(i)(C) to indicate that the IRF-PAI must be completed by 
the calendar day that follows the admission assessment reference day.
    Comment: A commenter expressed agreement with the proposed change.
    Response: We are adopting the proposed change as final without 
modification.

E. Transmission of IRF-PAI Data

    As specified in Sec.  412.606(b), ``Patient assessment 
instrument,'' an IRF must use the IRF-PAI to assess Medicare Part A 
fee-for-service inpatients. There are nine categories of IRF-PAI 
assessment data. The nine categories are entitled ``identification 
information, admission information, payer information, medical 
information, medical needs, function modifiers, the FIMTM 
instrument, discharge information, and quality indicators''. The data 
from some of these categories are used to classify a patient into a 
CMG.
    It is the CMG classification code, not the IRF-PAI raw data itself, 
that is part of the claim data the IRF submits to its fiscal 
intermediary when the IRF submits data in order to be paid for the 
services it furnished to the inpatient. We believe that an IRF's 
clinical staff will initially use the paper version of the IRF-PAI to 
record its assessment data. In accordance with Sec.  412.610(d), the 
IRF would use the data that it recorded on the paper version of the 
IRF-PAI to enter the IRF-PAI data into an electronic version of the 
document. The electronic version of the IRF-PAI uses the patient 
assessment data to classify a patient into a CMG. Under the IRF PPS, it 
is the CMG payment code, along with other information that the IRF 
submits to the fiscal intermediary that will determine the payment the 
IRF receives for the services the IRF furnished to a Medicare Part A 
fee-for-service beneficiary.
    Section 412.614 specifies that an IRF must transmit to us the IRF-
PAI assessment data for each Medicare Part A fee-for-service inpatient. 
It is the electronic version of the IRF-PAI that enables an IRF to 
transmit the IRF-PAI data to us. We require that IRFs transmit IRF-PAI 
data so that we have the IRF-PAI data that are associated with the CMG 
payment code that the IRF submitted to its fiscal intermediary.
    In most cases, an IRF will submit claims data, including the 
patient's CMG, to the fiscal intermediary in order to be paid for the 
services it furnished to a Medicare Part A fee-for-service inpatient. 
However, there are situations when the IRF would submit claims data to 
its fiscal intermediary, but the submission of the claims data is not 
for the purpose of being paid for any of the services the IRF furnished 
to a Medicare Part A fee-for-service inpatient.
    In these situations, Medicare operational procedures that were in 
effect before implementation of the IRF PPS require an IRF to send 
claims data to the FI. The purpose of the IRF sending claims data to 
the FI in these situations is to enable Medicare to monitor a 
beneficiary's period of entitlement. For instance, an IRF must still 
send the fiscal intermediary claims data even if the inpatient's non-
Medicare primary payer paid for all of the IRF services that the IRF 
furnished to the Medicare Part A fee-for-service inpatient. Another 
instance when the IRF must still send the FI claims data is when an 
inpatient's non-Medicare primary payer does not pay for any of the 
services, and these services also do not qualify for payment under the 
IRF PPS.
    We want to relieve the IRF of the burden of transmitting IRF-PAI 
data to us when the IRF is not requesting that Medicare pay for any of 
the services the IRF furnished to a Medicare Part A fee-for-service 
inpatient. Accordingly, in the May 16, 2003 proposed rule, we proposed 
to revise Sec.  412.614 to specify that paragraph (a) is a general 
rule.
    We also proposed to further revise Sec.  412.614 by adding a new 
Sec.  412.614(a)(3) to specify that the IRF is not required to, but 
may, transmit the IRF-PAI data for a Medicare Part A fee-for-service 
inpatient when Medicare will not be paying the IRF for any of the 
services the IRF furnished to that inpatient.
    Comment: We received one public comment supporting the proposed 
change.
    Response: We are adopting the proposed change as final without 
modification.

F. Revision of the Definition of Discharge

    Existing Sec.  412.602 specifies that a discharge has occurred when 
the patient has been formally released from the hospital, or has died 
in the hospital, or when the patient stops receiving Medicare-covered 
Part A inpatient rehabilitation services. Our intention in specifying 
this definition of when a discharge has occurred under the IRF PPS was 
to try to ensure that Medicare paid an IRF only for furnishing an IRF 
level of services to the Medicare Part A fee-for-service inpatient. 
However, in contrast to when a patient is formally released from the 
IRF or dies, the time when a patient stops receiving Medicare-covered 
Part A IRF services may be subject to different interpretations, 
resulting in different determinations of when a discharge has occurred.
    Various determinations of when a discharge has occurred can lead to 
inconsistencies in determining the discharge date. In these situations, 
IRFs furnishing the same services for the same period of time may be 
paid differently, because the discharge date determines a patient's 
length-of-stay. The patient's length-of-stay is one of the factors that 
determines the amount of the CMG payment. For example, under Sec.  
412.624(f), a patient's length-of-stay as determined by the inpatient's 
discharge date may affect the amount of the IRF's CMG payment when a 
patient is transferred from an IRF to another site of care.
    In addition, there may be cases when an IRF believes an inpatient 
no longer has a medical need for Medicare-covered Part A inpatient 
rehabilitation services, but the IRF believes that the inpatient has a 
medical need for an SNF level of services. However, due to 
circumstances beyond the IRF's control, the IRF is unable to formally 
release the patient, because the IRF cannot place the patient in an SNF 
setting. In that situation, according to section 1861(v)(1)(G)(i) of 
the Act and

[[Page 45683]]

Sec.  424.13(b), a physician may certify or recertify that the patient 
needs to continue to be hospitalized in the IRF. The effect of the 
physician's certification or recertification is that under Medicare the 
patient is not considered discharged until the patient is formally 
released from the IRF.
    In consideration of what can occur when discharge is defined as 
being when the inpatient stops receiving Medicare-covered Part A 
inpatient rehabilitation services, in the May 16, 2003 proposed rule, 
we proposed to revise the definition of ``discharge'' under Sec.  
412.602 by removing the phrase ``(2) The patient stops receiving 
Medicare-covered Part A inpatient rehabilitation services, unless the 
patient qualifies for continued hospitalization under Sec.  424.13(b) 
of this chapter; or''. Under the proposed revised definition, discharge 
would mean a Medicare patient in an inpatient rehabilitation facility 
is considered discharged when (1) the patient is formally released from 
the inpatient rehabilitation facility; or (2) the patient dies in the 
inpatient rehabilitation facility.
    Comment: We received a comment requesting that CMS not revise the 
definition of discharge as specified in Sec.  412.503 that applies to 
patients in an LTCH similar to how we are revising the definition of a 
discharge from an IRF.
    Response: The commenter's concern did not relate to our proposed 
change to the definition of discharge in the IRF context and we are 
adopting the proposed change without modification.

G. Waiver of the Penalty for Late Transmittal of the IRF-PAI Data

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

                      Chart 1-2.--Example of Applying the Patient Assessment Instrument Discharge Assessment and Transmission Dates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                          Date when IRF-
                                                                            Assessment        IRF-PAI         IRF-PAI      IRF-PAI data      PAI data
                     Assessment type                      Discharge date  reference date   completed by     encoded by    transmitted by   transmission
                                                                                                                                              is late
--------------------------------------------------------------------------------------------------------------------------------------------------------
Discharge Assessment....................................        10/16/03        10/16/03        10/20/03        10/26/03        11/01/03      11/12/03*
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Or any day after 11/12/03.

    If IRF-PAI data are transmitted later than 10 calendar days from 
the transmission date specified in Sec.  412.614(c), Sec.  
412.614(d)(2) specifies that we will assess a penalty by deducting 25 
percent from the CMG payment that is associated with the IRF-PAI data 
that were transmitted late. However, we believe that an IRF may 
encounter an extraordinary situation, which is beyond its control, and 
that extraordinary situation could render the IRF unable to comply with 
Sec.  412.614(c). The IRF must fully describe in the appropriate 
inpatient's clinical record, or by use of another documentation method 
as selected by the IRF, the extraordinary situation which the IRF 
encountered that resulted in the IRF being unable to comply with Sec.  
412.614(c). Although an IRF may believe that the facility has 
encountered an extraordinary situation, the IRF's belief does not mean 
that CMS is obligated to also automatically determine that the 
situation was of an extraordinary nature.
    CMS has the discretion to determine whether the situation described 
by the IRF is extraordinary. An extraordinary situation may be, but 
does not have to be, due to the occurrence of an unusual event. 
Examples of unusual events include, but are not limited to, fire, 
flood, earthquake, or other similar incidents that inflict extensive 
damage to an IRF.
    Another example of an extraordinary situation is the inability of 
an IRF to transmit any IRF-PAI data for an extended time period, 
because during that entire time period there was a problem with the 
data transmission system that was beyond the control of the IRF. An 
example of a data transmission system problem that is beyond the 
control of the IRF is the inability of an IRF to transmit its IRF-PAI 
data because the computer used by CMS to receive and process the data 
is malfunctioning.
    A further example of a data transmission system problem that is 
beyond the control of the IRF is the existence of a flaw in the 
software that was distributed by CMS to IRFs, or a flaw in the software 
specifications made available by CMS to vendors that prevent the IRF 
from transmitting its IRF-PAI data. In addition, an extraordinary 
situation may include a situation in which a facility has correctly 
followed CMS policies and procedures in order to be classified as an 
IRF and obtain an IRF provider number, but has experienced a delay in 
attaining an IRF provider number.
    In light of these possibilities, in the May 16, 2003 proposed rule, 
we proposed to add a new Sec.  412.614(e) to specify that CMS may waive 
the penalty specified in Sec.  412.614(d) when, due to an extraordinary 
situation that is beyond the control of an inpatient rehabilitation 
facility, the inpatient rehabilitation facility is unable to transmit 
the patient assessment data in accordance with Sec.  412.614(c).
    We also proposed that ``only CMS can determine if a situation 
encountered by an IRF is extraordinary and qualifies as a situation for 
waiver of the penalty specified in Sec.  412.614(d)(2) of this

[[Page 45684]]

section. An extraordinary situation may be due to, but is not limited 
to, fires, floods, earthquakes, or similar unusual events that inflict 
extensive damage to an inpatient rehabilitation facility. An 
extraordinary situation may be one that produces a data transmission 
problem that is beyond the control of the inpatient rehabilitation 
facility, as well as other situations determined by CMS to be beyond 
the control of the inpatient rehabilitation facility.''
    Lastly, we proposed that ``an extraordinary situation must be fully 
documented by the inpatient rehabilitation facility.''
    Comment: The comments we received supported the proposed revision.
    Response: We are adopting the proposed change as final without 
modification.

H. General Information Regarding the IRF-PAI Assessment Process

    We have received many questions regarding the IRF-PAI assessment 
process policies. We have posted the answers to most of these questions 
on the IRF PPS Web site.
1. The IRF PPS Web Site Address
    The current Internet address for the IRF PPS Web site is http://www.cms.hhs.gov/providers/irfpps/. Due to changes in CMS' Internet 
policies during 2002, the current website address is different from the 
one we published in the August 7, 2001 final rule.
2. Exceptions to the IRF-PAI Admission and Discharge Assessment Time 
Period General Rules
    Section 412.610(c)(1)(i) states the general rule that the time span 
covered during the admission assessment is calendar days 1 through 3 of 
the patient's current Medicare Part A fee-for-service IRF 
hospitalization. Section 412.610(c)(2)(i) states the general rule that 
the discharge assessment time period is a span of time that covers 3 
calendar days, which includes the inpatient's discharge date, which is 
the same date as the discharge assessment reference date, and the 2 
calendar days before the discharge date. We want to remind IRFs that, 
as specified in Sec.  412.610(c)(1)(ii) and Sec.  412.610(c)(2)(iii), 
we may use the IRF-PAI item-by-item guide and other instructions to 
identify items that have a different admission or discharge assessment 
time period. We may specify different admission and discharge 
assessment time periods in order to capture patient information for 
payment and quality of care monitoring objectives appropriately.
    Miscellaneous Comments: We received several comments regarding IRF 
PPS implementation operational issues. For example, some commenters 
requested that we post on the IRF PPS website the questions asked of 
the IRF PAI Help Desk and the associated answers. Some commenters 
requested that we revise the instructions in the IRF-PAI manual 
regarding the coding of the patient during the discharge assessment. 
Some commenters requested that CMS publish a list of all the ICD-9-CM 
codes associated with every impairment group. Some commenters requested 
that we synchronize the discharge codes used in IRF-PAI with the 
patient status codes used in the claim data. Some commenters requested 
that we synchronize the methodology used to determine the IRF-PAI 
etiologic diagnosis code with the methodology used to determine the 
principal or admitting diagnosis on the claim.
    Response: These comments are related to functions that are 
administrative and operational and are not specifically related to our 
proposed changes to the IRF PPS. We will take these comments into 
consideration as we continue to refine implementation of the IRF PPS.

V. Patient Classification System for the IRF PPS

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

VI. Fiscal Year 2004 Federal Prospective Payment Rates

A. Expiration of the IRF PPS Transition Period

    Section 1886(j)(1) of the Act and Sec.  412.626 of the regulations 
provides that the transition period for IRFs expires for cost reporting 
periods beginning on or after October 1, 2002 (FY 2003 and beyond). 
Accordingly, the payment for discharges during FY 2004 will be based 
entirely on the adjusted FY 2004 IRF Federal PPS rates in this final 
rule.

B. Description of the IRF Standardized Payment Amount

    In the August 7, 2001 final rule, we established a standard payment 
amount referred to as the budget neutral conversion factor under Sec.  
412.624(c). In accordance with the methodology described in Sec.  
412.624(c)(3)(i), the budget neutral conversion factor for FY 2002, as 
published in the August 7,2001 final rule, was $11,838.00. Under Sec.  
412.624(c)(3)(i), this amount reflects, as appropriate, any adjustments 
for outlier payments, budget neutrality, and coding and classification 
changes as described in Sec.  412.624(d).
    The budget neutral conversion factor is a standardized payment 
amount and the amount reflects the budget neutrality adjustment for FY 
2002, as described in Sec.  412.624(d)(2). The statute requires a 
budget neutrality adjustment only for FYs 2001 and 2002. Accordingly, 
we believe it is more consistent with the statute to refer to the 
standardized payment as the standardized payment conversion factor, 
rather than refer to it as a budget neutral conversion factor.
    As we proposed in the May 16, 2003 proposed rule, after careful 
consideration, in this final rule we are changing all references to the 
budget neutral conversion factor in Sec. Sec.  412.624(c) and 
412.624(d) to the

[[Page 45685]]

``standard payment conversion factor.'' We believe that the standard 
payment conversion factor better describes the standardized payment 
amount especially in those fiscal years where a budget neutrality 
adjustment is not made.
    Under Sec.  412.624(c)(3)(i), the standard payment conversion 
factor for FY 2002 of $11,838.00 reflected the budget neutrality 
adjustment described in Sec.  412.624(d)(2). Under the then existing 
Sec.  412.624(c)(3)(ii), we updated the FY 2002 standard payment 
conversion factor ($11,838.00) to FY 2003 by applying an increase 
factor (the IRF market basket index) of 3.0 percent, as described in 
the update notice published in the August 1, 2002 Federal Register (67 
FR 49931). This yielded the FY 2003 standard payment conversion factor 
of $12,193.00 that was published in the August 1, 2002 update notice 
(67 FR 49931). The FY 2003 standard payment conversion factor is the 
basis of the updated FY 2004 standard payment conversion factor that 
also reflects the adjustments described below.

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

1. IRF Market Basket Index
    Section 1886(j)(3)(C) of the Act requires the Secretary to 
establish an increase factor that reflects changes over time in the 
prices of an appropriate mix of goods and services included in IRF 
services paid for under the IRF PPS, which is referred to as the IRF 
market basket index. Accordingly, in updating the FY 2004 payment rates 
set forth in this final rule, we will apply an appropriate increase 
factor, that is equal to the IRF market basket, to the FY 2003 IRF 
standardized payment amount.
    Beginning with the implementation of the IRF PPS in FY 2002 and 
with the FY 2003 IRF PPS update, the 1992-based excluded hospital with 
capital market basket has been used to determine the IRF market basket 
factor for updating payments to rehabilitation facilities. The 1992-
based market basket reflected the distribution of costs in 1992 for 
Medicare-participating freestanding rehabilitation, long-term care, 
psychiatric, cancer, and children's hospitals. This information was 
derived from the 1992 Medicare cost reports. A full discussion of the 
methodology and data sources used to construct the 1992-based excluded 
hospital with capital market basket is available in Appendix D of the 
IRF PPS final rule published in the August 7, 2001 Federal Register (66 
FR 41427).
2. The Excluded Hospital and the Capital Market Basket
    In this final rule, we are revising and rebasing the excluded 
hospital with capital market basket to a 1997 base year. We believe 
that using 1997 data, rather than 1992 data, to construct the IRF 
market basket allows us to more appropriately estimate increases in the 
costs of IRF goods and services from year to year. We believe the use 
of more recent data will ensure that our estimates more closely 
approximate the current costs of goods and services provided in IRFs.
    The operating portion of the 1997-based excluded hospital with 
capital market basket is derived from the 1997-based excluded hospital 
market basket. The methodology used to develop the excluded hospital 
market basket operating portion was described in the August 1, 2002 
Federal Register (67 FR 50042-50044). In brief, the operating cost 
category weights in the 1997-based excluded market basket added to 
100.0. These weights were determined from the Medicare cost reports, 
the 1997 Business Expenditure Survey from the Bureau of the Census, and 
the 1997 Annual Input-Output data from the Bureau of Economic Analysis. 
In using the 1997 data, we made two methodological revisions to the 
1997-based excluded hospital market basket: (1) Changing the wage and 
benefit price proxies to use the Employment Cost Index (ECI) wage and 
benefit data for hospital workers, and (2) adding a cost category for 
blood and blood products.
    Previously we used a combination of several occupational ECIs in 
the 1992-based index such as the professional and technical workers, 
service workers, etc. We believe the ECI for hospital workers better 
represents the movement of hospital wages, salaries, and benefits and 
it is more reflective of current labor market conditions. For the 1992-
based market baskets we were unable to find an adequate data source for 
the blood cost category.
    For the 1997-based excluded hospital market basket, we were able to 
obtain these data from Medicare cost reports. As discussed in the IPPS 
August 1, 2002 final rule (67 FR 50035), BIPA required that we 
adequately reflect the price of blood and blood products in the 
hospital market basket when it was rebased and revised, which was done 
for the FY 2003 IPPS payment rates. We believe this revision is also 
appropriate for the excluded hospital with capital market basket 
because it results in a more precise measure of the cost category for 
blood and blood products.
    When we add the weight for capital costs to the excluded hospital 
market basket, the sum of the operating and capital weights must still 
equal 100.0. Because capital costs account for 8.968 percent of total 
costs for excluded hospitals in 1997, it holds that operating costs 
must account for 91.032 percent. Each operating cost category weight 
from the August 1, 2002 Federal Register (67 FR 50442-50444) was 
rebased to the 1997-based excluded hospital with capital market basket 
by multiplying by 0.91032 to determine its weight in the 1997-based 
excluded hospital with capital market basket.
    The aggregate capital component of the 1997-based excluded hospital 
market basket (8.968 percent) was determined from the same set of 
Medicare cost reports used to derive the operating component. The 
detailed capital cost categories of depreciation, interest, and other 
capital expenses were also determined using the Medicare cost reports. 
As explained below, two sets of weights for the capital portion of the 
revised and rebased market basket needed to be determined. The first 
set of weights identifies the proportion of capital expenditures 
attributable to each capital cost category, while the second set 
represents relative vintage weights for depreciation and interest. The 
vintage weights identify the proportion of capital expenditures that is 
attributable to each year over the useful life of capital assets within 
a cost category (see IPPS final rule published in the August 1, 2002 
Federal Register (67 FR 50046-50047) for a discussion of how vintage 
weights are determined).
    The cost categories, price proxies, and base-year FY 1992 and FY 
1997 weights for the excluded hospital with capital market basket are 
presented in Chart 3 ``Excluded Hospital With Capital Input Price Index 
(FY 1992 and FY 1997) Structure and Weights.'' Chart 4 ``Excluded 
Hospital with Capital Input Price Index (FY 1997) Vintage Weights'' 
presents the vintage weights for the 1997-based excluded hospital with 
capital market basket.

[[Page 45686]]



 Chart 3.--Excluded Hospital With Capital Input Price Index (FY 1992 and FY 1997) Structure and Weights \1,\ \2\
----------------------------------------------------------------------------------------------------------------
                                                                                    Weights (%)     Weights (%)
               Cost category                         Price wage variable          base-year 1992  base-year 1997
----------------------------------------------------------------------------------------------------------------
      Total................................  ...................................         100.000         100.000
Compensation...............................  ...................................          57.935          57.579
    Wages and Salaries.....................  ECI--Wages and Salaries, Civilian            47.417          47.335
                                              Hospital Workers.
    Employee Benefits......................  ECI--Benefits, Civilian Hospital             10.519          10.244
                                              Workers.
Professional fees: Non-Medical.............  ECI--Compensation: Prof. &                    1.908           4.423
                                              Technical.
Utilities..................................  ...................................           1.524           1.180
    Electricity............................  WPI--Commercial Electric Power.....           0.916           0.726
    Fuel Oil, Coal, etc....................  WPI--Commercial Natural Gas........           0.365           0.248
    Water and Sewerage.....................  CPI-U--Water & Sewage..............           0.243           0.206
Professional Liability Insurance...........  HCFA--Professional Liability                  0.983           0.733
                                              Premiums.
All Other Products and Services............  ...................................          28.571          27.117
    All Other Products.....................  ...................................          22.027          17.914
Pharmaceuticals............................  WPI--Prescription Drugs............           2.791           6.318
    Food: Direct Purchase..................  WPI--Processed Foods...............           2.155           1.122
    Food: Contract Service.................  CPI-U--Food Away from Home.........           0.998           1.043
Chemicals..................................  WPI--Industrial Chemicals..........           3.413           2.133
Blood and Blood Products...................  WPI--Blood and Derivatives.........  ..............           0.748
Medical Instruments........................  WPI--Med. Inst. & Equipment........           2.868           1.795
Photographic Supplies......................  WPI--Photo Supplies................           0.364           0.167
Rubber and Plastics........................  WPI--Rubber & Plastic Products.....           4.423           1.366
Paper Products.............................  WPI--Convert. Paper and Paperboard.           1.984           1.110
Apparel....................................  WPI--Apparel.......................           0.809           0.478
Machinery and Equipment....................  WPI--Machinery & Equipment.........           0.193           0.852
Miscellaneous Products.....................  WPI--Finished Goods excluding Food            2.029           0.783
                                              and Energy.
All Other Services.........................  ...................................           6.544           9.203
Telephone..................................  CPI-U--Telephone Services..........           0.574           0.348
Postage....................................  CPI-U--Postage.....................           0.268           0.702
All Other: Labor...........................  ECI--Compensation: Service Workers.           4.945           4.453
All Other: Non-Labor Intensive.............  CPI-U--All Items (Urban)...........           0.757           3.700
Capital-Related Costs......................  ...................................           9.080           8.968
Depreciation...............................  ...................................           5.611           5.586
Fixed Assets...............................  Boeckh-Institutional Construction:            3.570           3.503
                                              23 Year Useful Life.
Movable Equipment..........................  WPI--Machinery & Equipment: 11 Year           2.041           2.083
                                              Useful Life.
Interest Costs.............................  ...................................           3.212           2.682
Non-profit.................................  Avg. Yield Municipal Bonds: 23 Year           2.730           2.280
                                              Useful Life.
For-profit.................................  Avg. Yield AAA Bonds: 23 Year                 0.482           0.402
                                              Useful Life.
Other Capital-Related Costs................  CPI-U--Residential Rent............           0.257          0.699
----------------------------------------------------------------------------------------------------------------
\1\ The operating cost category weights in the excluded hospital market basket described in the August 1, 2002
  Federal Register (67 FR 50442 through 50444) add to 100.0.
\2\ Due to rounding, weights sum to 1.000.

    When we add an additional set of cost category weights (total 
capital weight = 8.968 percent) to this original group, the sum of the 
weights in the new index must still add to 100.0. Because capital costs 
account for 8.968 percent of the market basket, then operating costs 
account for 91.032 percent. Each weight in the 1997-based excluded 
hospital market basket from the IPPS final rule published in the August 
1, 2002 Federal Register (67 FR 50442-50444) was multiplied by 0.91032 
to determine its weight in the 1997-based excluded hospital with 
capital market basket.

              Chart 4.--Excluded Hospital With Capital Input Price Index (FY 1997) Vintage Weights
----------------------------------------------------------------------------------------------------------------
                                                                                                     Interest:
                                                                   Fixed assets   Movable assets     capital-
            Year from farthest to most to most recent                (23-year         (11-year     related  (23-
                                                                     weights)        weights)      year weights)
----------------------------------------------------------------------------------------------------------------
1...............................................................          0.018           0.063           0.007
2...............................................................          0.021           0.068           0.009
3...............................................................          0.023           0.074           0.011
4...............................................................          0.025           0.080           0.012
5...............................................................          0.026           0.085           0.014
6...............................................................          0.028           0.091           0.016
7...............................................................          0.030           0.096           0.019
8...............................................................          0.032           0.101           0.022
9...............................................................          0.035           0.108           0.026
10..............................................................          0.039           0.114           0.030
11..............................................................          0.042           0.119           0.035
12..............................................................          0.044   ..............          0.039
13..............................................................          0.047   ..............          0.045

[[Page 45687]]

 
14..............................................................          0.049   ..............          0.049
15..............................................................          0.051   ..............          0.053
16..............................................................          0.053   ..............          0.059
17..............................................................          0.057   ..............          0.065
18..............................................................          0.060   ..............          0.072
19..............................................................          0.062   ..............          0.077
20..............................................................          0.063   ..............          0.081
21..............................................................          0.065   ..............          0.085
22..............................................................          0.064   ..............          0.087
23..............................................................          0.065   ..............          0.090
                                                                 =================
----------------------------------------------------------------------------------------------------------------
*Due to rounding, weights sum to 1.000.

    Comment: One commenter asked about the derivation of the 
professional liability cost weight. The commenter believed the 
reduction in the professional liability weight (shown in Chart 3) from 
the 1992-based excluded with capital market basket (.983) to the 1997-
based excluded with capital market basket (.733) was inconsistent with 
the trends in professional liability insurance.
    Response: Recent trends show professional liability insurance 
growing faster than our market basket but in the post 1997 period. This 
growth is reflected in the movement of the professional liability 
insurance price proxy.
    The professional liability cost weight used in the 1997-based 
excluded with capital market basket was derived from a survey conducted 
by ANASYS under contract to CMS (Contract Number 500-98-005). This 
survey attempted to estimate hospital malpractice insurance costs over 
time at the national level for years 1996 and 1997 using a statistical 
sample. The statistical sample was drawn from a population universe of 
non-Federal short-term, acute care prospective payment system 
hospitals. CMS applied the results--more specifically the relationship 
between professional liability and other hospital costs--to the 
excluded hospital with capital market basket. (More results about this 
survey are published in the May 9, 2002 IPPS Hospital Proposed Rule (90 
FR 31440)).
    We believe the reduction in the professional liability insurance 
weight from 1992 to 1997 does reflect the actual conditions facing 
hospitals at that time. The relevant professional liability insurance 
price proxy shows a decline in prices from 1990 to 1998 while the 
overall market basket shows an increase. In the most recent five years, 
the professional liability insurance price proxy has been accelerating, 
resulting in an increasing relative importance of its weight in the 
market basket. This is consistent with recent trends.
    Chart 5 ``Percent Changes in the 1992-based and 1997-based Excluded 
Hospital with Capital Market Baskets, FY 1999-2004'' compares the 1992-
based excluded hospital with capital market basket to the 1997-based 
excluded hospital with capital market basket. As is shown, the rebased 
and revised market basket grows slightly faster over the 1999-2001 
period than the 1992-based market basket. The major reason for this was 
the switching of the previous wage and benefit proxies to the ECI for 
hospital workers from the previous occupational blend. We believe that 
the ECI is the best most appropriate price proxy for measuring changes 
in wage data facing IRFs. This wage series reflects actual wage data 
reported by civilian hospitals to the Bureau of Labor Statistics that 
is more reflective of current trends in hospitals than is the blended 
wage previously used. The ECIs are fixed-weight indexes and strictly 
measure the change in wage rates and employee benefits per hour. They 
are appropriately not affected by shifts in skill mix. This differs 
from the proxy used in the FY 1992-based index in which a blended 
occupational wage index was used. The blended occupational wage proxy 
used in the FY 1992-based index and the ECI for wages and salaries for 
hospitals both reflect a fixed distribution of occupations within a 
hospital. The major difference between the two proxies is in the 
treatment of professional and technical wages (legal, accounting, 
management, and consulting services from outside the facility). In the 
blended occupational wage proxy, the professional and technical 
category was blended evenly between the ECI for wages and salaries for 
hospitals and the ECI for wages and salaries for professional and 
technical occupations in the overall economy. The ECI for hospitals 
reflects, instead of hospital-specific occupations as reflected in the 
ECI for hospitals. This revision had a similar impact on the hospital 
PPS and excluded market baskets, as described in the IPPS final rule 
published in the August 1, 2001 Federal Register. The FY 2004 increase 
in the 1997-based excluded hospital with capital market basket is 3.2 
percent.

   Chart 5.--Percent Changes in the 1992-Based and 1997-Based Excluded
           Hospital With Capital Market Baskets, FY 1999-2004
------------------------------------------------------------------------
                                              Percent         Percent
                                            change, FY      change, FY
               Fiscal year                  1992-based      1997-based
                                           market basket   market basket
------------------------------------------------------------------------
               Actual Historical % Increase (FY 1999-2002)
------------------------------------------------------------------------
1999....................................             2.3             2.7

[[Page 45688]]

 
2000....................................             3.4             3.1
2001....................................             3.9             4.0
2002....................................             2.7             3.6
Average historical......................             3.1             3.4
-----------------------------------------
                        Forecasts (FY 2003-2004)
------------------------------------------------------------------------
2003....................................             3.4             3.8
2004....................................             2.9             3.2
Average forecast........................             3.2             3.5
------------------------------------------------------------------------

    Section 1886(j)(3)(c) requires that the increase in the IRF PPS 
payment rate be based on an ``appropriate percentage increase in a 
market basket of goods and services comprising services for which 
payment is made under this subsection, which may be the market basket 
percentage increase described in subsection (b)(3)(B)(iii).'' To date, 
we have used a market basket based on the cost structure of all 
excluded hospitals to satisfy this requirement, and have discussed in 
prior IRF rules why we feel this market basket provides a reasonable 
measure of the price changes facing exempt hospitals.
3. Research and Analysis
    In its March 2002 Report, the Medicare Payment Advisory Commission 
(MedPAC) recommended the development of a market basket specific to IRF 
services. As we mentioned in the August 7, 2001 final rule, we 
researched the feasibility of developing such a market basket. This 
research included analyzing data sources for cost category weights, 
specifically the Medicare cost reports, and investigating other data 
sources on cost, expenditure, and price information specific to IRFs. 
As described in greater detail below, based on this research, we are 
not developing a market basket specific to IRF services at this time.
    Our analysis of the Medicare cost reports indicates that the 
distribution of costs among major cost report categories (wages, 
pharmaceuticals, capital) for IRFs is not substantially different from 
the 1997-based excluded hospital with capital market basket we have 
used. In addition, the only data available to us were for these cost 
categories (wages, pharmaceuticals, and capital) presenting a potential 
problem since no other major cost category would be based on IRF data.
    We conducted a sensitivity analysis of annual percent changes in 
the market basket when the IRF weights for wages, pharmaceuticals, and 
capital were substituted into the excluded hospital with capital market 
basket. Other cost categories were recalibrated using ratios available 
from the inpatient PPS hospital market basket. On average, between the 
years 1995 through 2002, the excluded hospital with capital market 
basket increased at essentially the same average annual rate (2.9 
percent) as the market basket with IRF weights for wages, 
pharmaceuticals, and capital (2.8 percent). In addition, in almost any 
individual year the difference was 0.1 percentage point or less, which 
is less than the 0.25 percentage point criterion that is used under the 
IPPS update framework to determine whether a forecast error adjustment 
is warranted.
    The 0.25 percentage point criterion that determines whether a 
forecast error adjustment is warranted has been used in the IPPS update 
framework since the implementation of the IPPS. It serves as a 
guideline for the level of forecast accuracy, since any forecast is 
likely to contain enough imprecision that differences of one tenth or 
two-tenths of a percentage point are not thought to be significant. 
Thus, in this case if the forecast error is not at least greater than 
two-tenths of a percentage point, it is thought to be similar enough to 
the actual data as not to warrant an adjustment.
    Based on the analysis described above, we continue to believe that 
the excluded hospital with capital market basket is doing an adequate 
job of reflecting the price changes facing IRFs. As additional cost 
data are being collected under the IRF PPS we hope that we will 
eventually be able to develop a market basket derived specifically from 
IRF data.
    As shown in Chart 5, for the payment rates set forth in this final 
rule, the FY 2004 IRF market basket increase factor using 1997 data is 
3.2 percent. Thus, we apply the 3.2 percent increase, in addition to 
the budget neutral wage adjustment factor described below, to the FY 
2003 standard payment conversion factor ($12,193.00) to determine the 
2004 standard payment conversion factor.
4. Updated Labor-Related Share
    In implementing the FY 2002 and FY 2003 IRF PPS, we used the 1992 
market basket data to determine the labor-related share (72.395 
percent). As stated above, we are updating the 1992 market basket data 
to 1997. Doing so allows us to use the 1997-based excluded hospital 
market basket with capital costs to determine the FY 2004 labor-related 
share.
    We calculated the FY 2004 labor-related share as the sum of the 
weights for those cost categories contained in the 1997-based excluded 
hospital with capital market basket that are influenced by local labor 
markets. These cost categories include wages and salaries, employee 
benefits, professional fees, labor-intensive services and a 46 percent 
share of capital-related expenses. The labor-related share for FY 2004 
is the sum of the FY 2004 relative importance of each labor-related 
cost category, and reflects the different rates of price change for 
these cost categories between the base year (FY 1997) and FY 2004. The 
sum of the relative importance for FY 2004 for operating costs (wages 
and salaries, employee benefits, professional fees, and labor-intensive 
services) is 69.028 percent, as shown in Chart 6 ``FY 2004 Labor-
Related Share Relative Importance.'' The portion of capital that is 
influenced by local labor markets is estimated to be 46 percent. 
Because the relative importance of capital is 7.604 percent of the 
1997-based excluded hospital with capital market basket in FY 2004, we 
take 46 percent of 7.604 percent to

[[Page 45689]]

determine the labor-related share of capital for FY 2004. The result is 
3.498 percent, which we then add to the 69.028 percent calculated for 
operating costs to determine the total labor-related relative 
importance for FY 2004. The resulting labor-related share that we are 
using for IRFs in FY 2004 is 72.526 percent.

        Chart 6.--FY 2004 Labor-Related Share Relative Importance
------------------------------------------------------------------------
                                             Relative        Relative
                                            importance      importance
              Cost category                 1992-based      1997-based
                                           market basket   market basket
                                              FY 2004         FY 2004
------------------------------------------------------------------------
Wages and salaries......................          50.180          48.906
Employee benefits.......................          11.980          11.081
Professional fees.......................           2.041           4.500
Postage.................................           0.257  ..............
All other labor intensive services......           5.214           4.541
                                         -----------------
    Subtotal............................          69.672          69.028
                                         =================
Labor-related share of capital..........           3.370           3.498
                                         -----------------
        Total...........................          73.042          72.526
------------------------------------------------------------------------

    Chart 6 above shows that rebasing the excluded hospital with 
capital market basket lowers the increase in labor share that we used 
in FY 2004 relative to what it would have been had we not rebased the 
excluded hospital with capital market basket. As we previously stated, 
we are using a labor-related share of 72.526 percent for the FY 2004 
IRF PPS payment rates set forth in this final rule.
5. Budget Neutral Wage Adjustment Update Methodology
    As stated above, for FY 2004, we are updating the FY 2003 IRF wage 
indices by using FY 1999 acute care hospital wage data and updating the 
labor-related share by using the 1997 market basket data. Because any 
adjustment or updates to the IRF wage index made under section 
1886(j)(6) of the Act must be made in a budget neutral manner as 
required by statute, we are amending the regulation at Sec.  
412.624(e)(1), as proposed, to reflect this requirement. We also 
determined a budget neutral wage adjustment factor based on an 
adjustment or update to the wage data to apply to the standard payment 
conversion factor.
    In addition, as we proposed in the May 16, 2003 proposed rule, we 
use the following steps to ensure that the FY 2004 IRF standard payment 
conversion factor reflects the update to the wage indices and to the 
labor-related share in a budget neutral manner:
    Step 1. We determine the total amount of the FY 2003 IRF PPS rates 
using the FY 2003 standardized payment amount and the labor-related 
share and the wage indices from FY 2003 (as published in the August 1, 
2002 notice).
    Step 2. We then calculate the total amount of IRF PPS payments 
using the FY 2003 standardized payment amount and the updated FY 2004 
labor-related share and wage indices described above.
    Step 3. We divide the amount calculated in step 1 by the amount 
calculated in step 2, which equals the FY 2004 budget neutral wage 
adjustment factor of 0.9954.
    Step 4. We then apply the FY 2004 budget neutral wage adjustment 
factor from step 3 to the FY 2003 IRF PPS standard payment conversion 
factor after the application of the market basket update, described 
above, to determine the FY 2004 standardized payment amount.
    Comment: A commenter noted that the update factor used to develop 
the FY 2003 IRF PPS payment rates should have been higher than 3 
percent.
    Response: In order to update the IRF PPS payment rates, section 
1886(j)(3)(C) of the Act requires the Secretary to establish an 
increase factor that reflects changes over time in the prices of an 
appropriate mix of goods and services included in the covered IRF 
services, which is referred to as a market basket index.
    Accordingly, in the November 2, 2000 proposed rule we described our 
proposed methodology for constructing an appropriate IRF market basket, 
the 1992-based excluded hospital with capital market basket. We invited 
comments on the proposed construction of this market basket and 
eventually adopted the proposed methodology in the August 7, 2001 final 
rule. At the time we proposed this methodology, we used the best data 
that were available. Further, in finalizing this method we also used 
the best data available at the time we developed the August 7, 2001 
final rule.
    In updating the FY 2003 IRF PPS payment rates, we issued a notice 
in the Federal Register using the methodology finalized in the August 
7, 2001 final rule. Therefore, we used an appropriate update factor for 
the FY 2003 IRF PPS payment rates based on the best data available at 
the time the August 1, 2002 update notice was developed.

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

    Once we calculate the IRF market basket increase factor and 
determine the budget neutral wage adjustment factor, this calculation 
enables us to determine the updated Federal prospective payments for FY 
2004. In this final rule, we apply the IRF market basket increase 
factor of 3.2 percent to the standard payment conversion factor for FY 
2003 ($12,193) that equals $12,583. Then, we apply the budget neutral 
wage adjustment of 0.9954 to $12,583, which resulted in a final updated 
standard payment conversion factor for FY 2004 of $12,525.
    Consistent with the proposed rule, this final rule provides that 
the FY 2004 standard payment conversion factor is applied to each CMG 
weight shown in Table 1 to compute the unadjusted IRF prospective 
payment rates for FY 2004 shown in Table 2.
    Table 2.--FY 2004 Federal Prospective Payments for Case-Mix Groups 
(CMGs) for FY 2004 displays the CMGs, the comorbidity tiers, and the 
corresponding unadjusted IRF prospective payment rates for FY 2004.

E. Examples of Computing the Total Adjusted IRF Prospective Payments

    In general, under Sec.  412.624(e), we adjust the Federal 
prospective payment amount associated with a CMG, shown

[[Page 45690]]

in Table 2, to account for an IRF's geographic wage variation, low-
income patients and, if applicable, location in a rural area.
    The adjustment for an IRF's geographic wage variation includes the 
FY 2004 labor-related share adjustment of 72.526 percent and the FY 
2004 IRF urban or rural wage indices in Tables 3A and 3B of the 
Addendum of this final rule, respectively.
    The adjustment for low-income patients is based on the formula used 
to account for the cost of furnishing care to low-income patients as 
discussed in the August 7, 2001 IRF PPS final rule (67 FR 41360). The 
formula to calculate the low-income patient or LIP adjustment is as 
follows:
[GRAPHIC] [TIFF OMITTED] TR01AU03.000

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

   Chart 7.--Example of Computing an IRF's Federal Prospective Payment
------------------------------------------------------------------------
                                         Facility A        Facility B
------------------------------------------------------------------------
Federal Prospective Payment.........        $25,068.79        $25,068.79
Labor Share.........................          x0.72526          x0.72526
Labor Portion of Federal Payment....         18,181.39         18,181.39
Wage Index (shown in Tables 3A or              x0.8946           x1.4414
 3B)................................
Wage-Adjusted Amount................       =$16,265.07       =$26,206.65
Nonlabor Amount.....................        +$6,887.40        +$6,887.40
Wage-Adjusted Federal Payment.......       =$23,152.47       =$33,094.05
Rural Adjustment....................           x1.1914           x1.0000
    Subtotal........................       =$27,583.85       =$33,094.05
LIP Adjustment......................           x1.0239           x1.0700
        Total FY 2004 Adjusted             =$28,243.11       =$35,410.64
         Federal Prospective Payment
------------------------------------------------------------------------

    Thus, the adjusted payment for facility A will be $28,243.11, and 
the adjusted payment for facility B will be $35,410.64.

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

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

G. IRF-Specific Wage Data

    On page 41358 of the August 7, 2001 IRF PPS final rule, we 
responded to comments regarding the development of a separate wage 
index for IRFs. Our response indicated that we were unable to develop a 
separate wage index for rehabilitation facilities. Specifically, we 
responded to these comments as follows:
    ``At this time, we are unable to develop a separate wage index for 
rehabilitation facilities. There is a lack of specific IRF wage and 
staffing data necessary to develop a separate IRF wage index 
accurately. Further, in order to accumulate the data needed for such an 
effort, we would need to make modifications to the cost report. In the 
future, we will continue to research a wage index specific to IRF 
facilities. Because we do not have an IRF specific wage index that we 
can compare to the hospital wage index, we are unable to determine at 
this time the degree to which the acute care hospital data fully 
represent IRF wages. However, we believe that a wage index based on 
acute care hospital wage data is the best and most appropriate wage 
index to use in adjusting payments to IRFs, since both acute care 
hospitals and IRFs compete in the same labor markets.''
    At the current time, we still do not have any IRF-specific wage 
data to determine the feasibility of developing an IRF-specific wage 
index or of developing an adjustment to refine the acute care hospital 
wage data to reflect inpatient rehabilitation services. We continue to 
look into alternative ways to collect, analyze, develop, and audit IRF-
specific wage data that would reflect the

[[Page 45691]]

wages and wage-related costs attributable to rehabilitation facilities.
    We believe that the best source to collect IRF-specific wage data 
is the Medicare cost report--the same source for the acute care 
hospital wage data. These data must be accurate and reliable; thus, 
collecting these data would increase the recordkeeping and reporting 
burden on IRFs. Initially, this burden would be imposed to collect data 
just to determine the feasibility of developing an IRF-specific wage 
index or development of an adjustment to the current IRF wage index.
    In addition, as stated earlier in this section of this final rule, 
any adjustment or update to the wage index must be made in a budget 
neutral manner in accordance with section 1886(j)(6) of the Act. Thus, 
the PPS rates for any one IRF could be affected in a positive or 
negative direction, due to the application of the updates to the labor-
related share and wage indices in a budget neutral manner. Accordingly, 
given the current trend of reducing the Medicare cost reporting burden 
of collecting data and given that any change to the wage index be 
budget neutral, in the May 16, 2003 proposed rule, we did not propose 
to require facilities to record additional information at this time, 
however we solicited comments on possible ways to adjust or refine the 
current IRF wage index, given those restraints.
    Comment: One commenter offered to meet with us to discuss the 
feasibility and effort involved with developing an IRF-based wage 
index.
    Response: We appreciate the commenter's willingness to meet and we 
will contact them to arrange a meeting in the future.
    In this final rule, we are not imposing the burden of collecting 
these data and we will continue to explore options to adjust or refine 
the current IRF wage index, given the restraints previously discussed.
    Since IRFs and hospitals compete in the same labor markets, we will 
continue to use the acute care hospital wage data to develop the IRF 
wage index as described earlier in this section of this final rule.
    Comment: One commenter requested that we reconsider the decision in 
the August 7, 2001 final rule to use pre-reclassification wage data to 
determine a facilities wage adjustment and suggested the use of the 
post-reclassification wage index. The commenter asserted that using the 
pre-reclassification wage index disadvantages IRFs because they must 
compete in the same labor market as their affiliated acute care 
hospital for the same pool of highly trained personnel.
    Response: In the November 2, 2000 proposed rule, we proposed to use 
the pre-reclassification wage index. In the August 7, 2001 final rule, 
we addressed comments that we received regarding the use of the post-
reclassification wage index. In the August 7, 2001 final rule we stated 
that we believe the actual location of an IRF as opposed to the 
location of affiliated providers is most appropriate for determining 
the wage adjustment because the data support the premise that the 
prevailing wages in the area in which the facility is located influence 
the cost of a case. We also stated that IRFs provide services that are 
considered part of the post-acute continuum of care and in order to be 
consistent with the area wage adjustments made to other post-acute care 
providers (that is, under the existing SNF and HHA prospective payment 
systems), we are using the inpatient acute care hospital wage data 
without regard to any approved geographic reclassifications under 
section 1886(d)(8) or 1886(d)(10) of the Act. Therefore, for all of the 
reasons stated above, we will continue to use the pre-reclassification 
wage index to adjust an IRF's PPS payments and base this payment 
adjustment on the facility's actual location.
    We would also like to point out that on June 6, 2003, the Office of 
Management and Budget (OMB) issued ``OMB Bulletin No.03-04,'' 
announcing revised definitions of Metropolitan Statistical Areas, and 
new definitions of Micropolitan Statistical Areas and Combined 
Statistical Areas. A copy of the Bulletin may be obtained at the 
following Internet address: http://www.whitehouse.gov/omb/bulletins/b03-04.html. These new definitions will not be applied to the FY 2004 
IRF wage index. However, we will be studying the new definitions and 
their impact and, if warranted, may adopt them at a later point in time 
using the appropriate administrative processes. To the extent these 
definitions are used, the concerns expressed by many for the use of a 
geographical reclassification system may be mitigated.

H. Adjustment for High-Cost Outliers Under the IRF PPS

    In the May 16, 2003 proposed rule, we proposed changes to the 
methodology for determining IRF payments for high-cost outliers. The 
intent of the proposed changes was to ensure that outlier payments are 
paid only for truly high-cost cases. Further, we indicated that these 
proposed changes would allow us to create policies that are consistent 
among the various Medicare prospective payment systems when 
appropriate.
    We have become aware that under the IPPS, some hospitals have taken 
advantage of two features in the IPPS outlier policy to maximize their 
outlier payments. The first is the time lag between the current charges 
on a submitted bill and the cost-to-charge ratio taken from the most 
recent settled cost report. Second, statewide average cost-to-charge 
ratios are used in those instances in which an acute care hospital's 
operating or capital cost-to-charge ratios fall outside reasonable 
parameters. We set forth these parameters and the statewide cost-to-
charge ratios in the annual notices of prospective payment rates that 
are published by August 1 of each year in accordance with Sec.  
412.8(b). Currently, these parameters represent 3.0 standard deviations 
(plus or minus) from the geometric mean of cost-to-charge ratios for 
all hospitals. In some cases, hospitals may increase their charges so 
far above costs that their cost-to-charge ratios fall below 3 standard 
deviations from the geometric mean of the cost-to-charge ratio and a 
higher statewide average cost-to-charge ratio is applied to determine 
if the acute care hospital should receive an outlier payment. This 
disparity results in their cost-to-charge ratios being set too high, 
which in turn results in an overestimation of their current costs per 
case.
    We believe the Congress intended that outlier payments under both 
the IPPS and the IRF PPS would be made only in situations where the 
cost of care is extraordinarily high in relation to the average cost of 
treating comparable conditions or illnesses. Under the IPPS outlier 
methodology, if hospitals' charges are not sufficiently comparable in 
magnitude to their costs, the legislative purpose underlying the 
outlier regulations is thwarted. Thus, on March 4, 2003, we published 
in the Federal Register a proposed rule ``Proposed Changes in 
Methodology for Determining Payment for Extraordinarily High-Cost Cases 
(Cost Outliers) Under the Acute Care Hospital Inpatient Prospective 
Payment System'' (68 FR 10420-10429) with an extensive discussion 
proposing new regulations to ensure outlier payments are paid for truly 
high-cost cases under the IPPS. This policy was finalized in a final 
regulation on June 9, 2003 (68 FR 34494), effective August 8, 2003.
    We believe the use of these parameters is appropriate in 
determining cost-to-charge ratios to ensure these values are reasonable 
and outlier payments can be made in the most equitable manner possible.

[[Page 45692]]

Further, we believe the methodology of computing IRF outlier payments 
is susceptible to the same payment enhancement practices identified 
under the IPPS and, therefore, merit similar revisions. Accordingly, as 
discussed below, in this final rule we are making revisions as proposed 
in the May 16, 2003 proposed rule, to the IRF outlier payment 
methodology to be effective for discharges on or after October 1, 2003.
1. Current Outlier Payment Provision Under the IRF PPS
    Section 1886(j)(4) of the Act provides the Secretary with the 
authority to make payments in addition to the basic IRF prospective 
payments for cases incurring extraordinarily high costs. In the August 
7, 2001 IRF PPS final rule, we codified at Sec.  412.624(e)(4) of the 
regulations the provision to make an adjustment for additional payments 
for outlier cases that have extraordinarily high costs relative to the 
costs of most discharges. Providing additional payments for outliers 
strongly improves the accuracy of the IRF PPS in determining resource 
costs at the patient and facility level. These additional payments 
reduce the financial losses that would otherwise be caused by treating 
patients who require more costly care and, therefore, reduce the 
incentives to underserve these patients.
    Under Sec.  412.624(e)(4), we make outlier payments for any 
discharges if the estimated cost of a case exceeds the adjusted IRF PPS 
payment for the CMG plus the adjusted threshold amount ($11,211 which 
is then adjusted for each IRF by the facilities wage adjustment, its 
low-income patient adjustment, and its rural adjustment, if 
applicable). We calculate the estimated cost of a case by multiplying 
the IRF's overall cost-to-charge ratio by the Medicare allowable 
covered charge. In accordance with Sec.  412.624(e)(4), we pay outlier 
cases 80 percent of the difference between the estimated cost of the 
case and the outlier threshold (the sum of the adjusted IRF PPS payment 
for the CMG and the adjusted threshold amount).
    On November 1, 2001, we published a Program Memorandum (Transmittal 
A-01-131) with detailed intermediary instructions for calculating the 
cost-to-charge ratios for the purposes of determining outlier payments 
under the IRF PPS. We stated the following:
    ``Intermediaries will use the latest available settled cost report 
and associated data in determining a facility's overall Medicare cost-
to-charge ratio specific to freestanding IRFs and for IRFs that are 
distinct part units of acute care hospitals. Intermediaries will 
calculate updated ratios each time a subsequent cost report settlement 
is made. Further, retrospective adjustments to the data used in 
determining outlier payments will not be made. If the overall Medicare 
cost-to-charge ratio appears to be substantially out-of-line with 
similar facilities, the intermediary should ensure that the underlying 
costs and charges are properly reported. We are evaluating the use of 
upper and lower cost-to-charge ratio thresholds (similar with the 
outlier policy for acute care hospitals) in the future to ensure that 
the distribution of outlier payments remains equitable.''
    In the May 16, 2003 proposed rule, we proposed to continue to use 
the $11,211 threshold amount.
    Comment: A commenter asserted that CMS should consider dropping the 
outlier threshold similar to the IPPS.
    Response: As we stated in the May 16, 2003 proposed rule, the 
threshold amount was used in the FY 2003 IRF PPS payment rates and we 
believe that the threshold amount of $11,211 that was used remains 
appropriate because the data that was used to calculate this amount was 
not comprised of data that were inappropriately influenced by the 
incentives the current IRF PPS may create.
    Specifically we used the IRF cost and charge data from the previous 
cost-based reimbursement system to establish the outlier threshold. 
These data were not inappropriately influenced by incentives to inflate 
charges that are created with the existence of an outlier policy. There 
is no need to inflate charges under cost-based reimbursement because a 
provider is paid their costs subject to certain applicable limits. This 
is unlike the outlier situation in IPPS, which used post-PPS data to 
update its annual threshold amount. The IPPS data reflected the 
practices that we believe erroneously created inappropriate outlier 
payments. Namely, that hospitals take advantage of the time lag between 
current charges on a submitted bill and the cost-to-charge ratio taken 
from the most recent settled cost report. Specifically, using 
historical cost-to-charge ratios may not reflect actual charges in the 
cost reporting period when the discharge occurred. This can result in 
an over-estimation of costs that in turn may result in inappropriate 
outlier payments. In addition to the time lag vulnerability, some 
hospitals increase their charges so far above costs that their cost-to-
charge ratios fall below a floor resulting in an over-estimation of a 
hospital's cost per case. Again, this over-estimation of costs can 
possibly result in inappropriate outlier payments. As discussed in the 
November 3, 2000 proposed rule, the outlier threshold amount of $11,211 
was calculated by simulating aggregate payments with and without an 
outlier policy, and applying an iterative process to determine a 
threshold that would result in outlier payments being projected to 
equal 3 percent of total payments under the simulation. Once we have 
adequate post-IRF PPS data, we will be able to examine whether the 
threshold amount needs to be updated. Specifically, we will assess the 
extent to which total estimated outlier payment approximates 3 percent 
of total payments and whether the threshold amount needs to be updated. 
As we previously stated, the data used to develop the IRF PPS outlier 
threshold amount were not inappropriately influenced by these 
incentives, therefore, we are adopting as final the continued use of 
the $11,211 threshold amount.
    We will also continue to make outlier payments for any discharges 
if the estimated cost of a case exceeds the adjusted IRF PPS payment 
for the CMG plus the adjusted threshold amount ($11,211 which is then 
adjusted for each IRF by the facility's wage adjustment, its low-income 
patient adjustment, and its rural adjustment, if applicable). We will 
calculate the estimated cost of a case by multiplying an IRF's overall 
cost-to-charge ratio by the Medicare allowable covered charge. However, 
we are applying a ceiling to an IRF's cost-to-charge ratios, which is 
discussed below. In accordance with Sec.  412.624(e)(4), we will 
continue to pay outlier cases at 80 percent of the difference between 
the estimated cost of the case and the outlier threshold (the sum of 
the adjusted IRF PPS payment for the CMG and the adjusted threshold 
amount). In addition, under the existing methodology described in the 
preamble to the August 7, 2001 IRF PPS final rule (66 FR 41363), we 
will continue to assign the applicable national average for new IRFs.
2. Changes to the IRF Outlier Payment Methodology
    Statistical accuracy of cost-to-charge ratios. We believe that 
there is a need to ensure that the cost-to-charge ratio used to compute 
an IRF's estimated costs should be subject to a statistical measure of 
accuracy. Removing aberrant data from the calculation of outlier 
payments will allow us to enhance the extent to which outlier payments 
are equitably distributed and continue to reduce incentives for IRFs to 
underserve patients who require more costly care. Further, we stated in 
the May 16, 2003 IRF proposed rule that using a statistical

[[Page 45693]]

measure of accuracy to address aberrant cost-to-charge ratios would 
also allow us to be consistent with the proposed outlier policy changes 
for the acute care hospital IPPS discussed in the March 4, 2003 Cost 
Outlier proposed rule, (68 FR 10420). In the May 16, 2003 proposed 
rule, we proposed the following:
    (1) To apply a ceiling to IRF's cost-to-charge ratio if a 
facility's cost-to-charge ratio is above a ceiling. We would calculate 
two national ceilings, one for IRFs located in rural areas and one for 
facilities located in urban areas. We proposed to compute this ceiling 
by first calculating the national average and the standard deviation of 
the cost-to-charge ratio for both urban and rural IRFs. (Because of the 
small number of IRF's compared to the number of acute care hospitals, 
we believe that statewide averages for IRFs, as proposed and adopted as 
final under the IPPS, would not be statistically valid. Thus, we 
proposed to use national average cost-to-charge ratios in place of 
statewide averages.)
    However, we believe that using only a national average may not 
adequately address the differences among the various types of IRFs, 
like the use of statewide averages would under the IPPS. Therefore, we 
believe using two national ceilings, one for IRFs in urban areas and 
one for IRFs in rural areas would be more appropriate than just using 
one national ceiling for IRFs. In the August 7, 2001 final rule, we 
discussed our policy to adjust IRF PPS payments to IRFs located in 
rural areas, in large part, because IRFs in rural areas have 
significantly higher costs than other facilities. Similarly, we believe 
using an average cost-to-charge ratio specifically targeted for rural 
facilities will allow us to more accurately estimate costs that are 
used to determine outlier payments for IRFs in rural areas. Therefore, 
we are adopting as final the use of two national ceilings, one for IRFs 
in urban areas and one for IRFs in rural areas.
    To determine the rural and urban ceiling, we proposed to multiply 
each of the standard deviations by 3 and add the result to the 
appropriate national cost-to-charge ratio average (rural and urban). We 
believe this method results in statistically valid ceilings. If an 
IRF's cost-to-charge ratio is above the applicable ceiling it would be 
considered to be statistically inaccurate and we would assign the 
national (either rural or urban) average cost-to-charge ratio to the 
IRF. Cost-to-charge ratios above this ceiling are probably due to 
faulty data reporting or entry, and, therefore, should not be used to 
identify and make payments for outlier cases because such data are most 
likely erroneous and therefore should not be relied upon. We proposed 
to update the ceiling and averages using this methodology every year 
and indicated that we would publish these amounts in future program 
memoranda.
    Comment: We received no comments on this proposal.
    Response: We are adopting this proposed policy as final.
    (2) Not assign the applicable national average cost-to-charge ratio 
when an IRF's cost-to-charge ratio falls below a floor. We proposed 
this policy because, as is the case for acute care hospitals, we 
believe IRFs could arbitrarily increase their charges in order to 
maximize outlier payments. Even though this arbitrary increase in 
charges should result in a lower cost-to-charge ratio in the future 
(due to the lag time in cost report settlement), if we use a floor, the 
IRF's cost-to-charge ratio would be raised to the applicable national 
average. This application of the national average could result in 
inappropriately higher outlier payments. Accordingly, we proposed to 
apply the IRF's actual cost-to-charge ratio to determine the cost of 
the case rather than creating and applying a floor. Applying an IRF's 
actual cost-to-charge ratio to charges in the future to determine the 
cost of a case will result in more appropriate outlier payments because 
it does not overstate the actual cost-to-charge ratio.
    Comment: Some commenters disagreed with the proposal to assign a 
national ceiling and not a national floor when an IRF's own ratio falls 
below the floor. A commenter asserted that this did not seem equitable.
    Response: We disagree with the commenters and believe the 
elimination of a floor while maintaining a ceiling is fair and 
appropriate. The proposed policy not to use a floor under the IRF PPS 
is appropriate because use of a floor results in cost-to-charge ratios 
being set too high relative to an IRF's own cost-to-charge ratio, which 
in turn results in an over-estimation of an IRF's current costs per 
case. We also note that not using a floor is consistent with the IPPS 
finalized outlier policies as discussed in the June 9, 2003 final rule. 
This policy was established in response to a specific problem 
associated with hospitals under the IPPS, with some hospitals 
intentionally taking advantage of our policy to assign cost-to-charge 
ratios when a hospital's own ratio fell below the floor. We are 
finalizing our decision not to use a floor in our outlier policy as it 
would aid in appropriately identifying those cases that warrant outlier 
payments. In addition, the proposed policy to maintain a ceiling under 
IRF PPS is fair because we believe that if an IRF has a cost-to-charge 
ratio above 3 standard deviations from the mean, then the cost-to-
charge ratio is probably due to faulty data reporting or entry and 
should not be used to identify and pay for outliers.
3. Adjustment of IRF Outlier Payments
    Under the existing methodology for computing IRF outlier payments 
as described in the preamble of the August 7, 2001 IRF PPS final rule 
(66 FR 41363) and in the November 1, 2001 Program Memorandum discussed 
above, we specify that the cost-to-charge ratio used to compute 
estimated costs are obtained from the most recent settled Medicare cost 
report. Further, we provided for no retroactive adjustment to the 
outlier payments to account for differences between the cost-to-charge 
ratio from the latest settled cost report and the actual cost-to-charge 
ratio for the cost reporting period in which the outlier payment is 
made. This policy is consistent with the existing outlier payment 
policy for acute care hospitals under the IPPS. However, as discussed 
in the IPPS March 4, 2003 Cost Outlier proposed rule (68 FR 10423), we 
proposed to revise the methodology for determining cost-to-charge 
ratios for acute care hospitals under the IPPS because we became aware 
that payment vulnerabilities exist in the current IPPS outlier policy. 
Because we believe the IRF outlier payment methodology is likewise 
susceptible to the same payment vulnerabilities, we proposed the 
following:
    (1) As proposed for acute care hospitals under the IPPS at proposed 
Sec.  412.84(i) in the March 4, 2003 proposed rule (68 FR 10420), we 
proposed under Sec.  412.624(e)(4), by cross-referencing proposed Sec.  
412.84(i), that fiscal intermediaries would use more recent data when 
determining an IRF's cost-to-charge ratio. Specifically, under Sec.  
412.84(i), we proposed that fiscal intermediaries would use either the 
most recent settled IRF cost report or the most recent tentative 
settled IRF cost report (whichever is later) to obtain the applicable 
IRF cost-to-charge ratio. In addition, as proposed under Sec.  
412.84(i), any reconciliation of outlier payments would be based on a 
ratio of costs to charges computed from the relevant cost report and 
charge data determined at the time the cost report coinciding with the 
discharge is settled.
    (2) As proposed for acute care hospitals under the IPPS at proposed 
Sec.  412.84(m) in the March 4, 2003 proposed rule (68 FR 10420), we 
proposed under Sec.  412.624(e)(4), by

[[Page 45694]]

cross-referencing proposed Sec.  412.84(m), that IRF outlier payments 
may be adjusted to account for the time value of money which is the 
value of money during the time period it was inappropriately held by 
the IRF as an ``overpayment.'' We also proposed to adjust outlier 
payments for the time value of money for cases that are ``underpaid'' 
to the IRF. In these cases, the adjustment would result in additional 
payments to the IRF. We proposed that any adjustment would be based 
upon a widely available index to be established in advance by the 
Secretary, and would be applied from the midpoint of the cost reporting 
period to the date of reconciliation.
    Comment: A few commenters disagreed with the proposed policy to 
adjust outlier payments to account for the time value of money.
    Response: Outlier payments are extremely susceptible to 
manipulation because hospitals set their own level of charges and are 
able to change their charges without notification to, or review by, 
their fiscal intermediary. Such changes by a hospital directly affect 
its level of outlier payments. Therefore, even though money may be 
recouped if the outlier payments are reconciled, the hospital would 
essentially be able to unilaterally increase its charges and acquire an 
interest-free loan in the meantime. For that reason, we believe it is 
appropriate and we are finalizing our policy to apply an adjustment for 
the time value of ``overpayments'' or ``underpayments'' identified at 
the cost report reconciliation.
    Comment: Some commenters believe that the adjustment for the time 
value of money should be set at a point other than the midpoint of the 
cost reporting period
    Response: We believe using the midpoint of the cost reporting year 
is an appropriate point to base an adjustment, as proposed, and results 
in an average ``overpayment'' or ``underpayment'' that would be fair to 
use as part of the adjustment calculation. Specifically, using the 
midpoint of the cost reporting period as the point to base an 
adjustment for all discharges that occur during a given cost reporting 
period is appropriate given that the midpoint is the median of the time 
period for all discharges. As we stated in the proposed rule, we 
proposed that IRF outlier payments may be adjusted to account for the 
time value of money which is the value of money during the time period 
it was inappropriately held by the IRF as an ``overpayment.'' We also 
stated that we may adjust outlier payments for the time value of money 
for cases that are ``underpaid'' to the IRF. In these ``underpayment'' 
cases, the adjustment will result in additional payments to the IRF. 
Because this adjustment will be applicable to IRFs that were 
``overpaid,'' as well as those IRFs that were ``underpaid,'' we believe 
applying adjustments from the midpoint of the cost reporting period to 
the date of reconciliation is reasonable. Further, this policy is 
consistent with the final outlier policy stated in the June 9, 2003 
IPPS outlier final rule.
    We proposed to add a provision to our regulations to provide that 
outlier payments would become subject to reconciliation when hospitals' 
cost reports are settled. Under this policy, outlier payments would be 
processed throughout the year using facility cost-to-charge ratios 
based on the best information available at that time. We proposed that 
when the cost report is settled, any reconciliation of outlier payments 
by fiscal intermediaries would be based on facility cost-to-charge 
ratios calculated on a ratio of costs to charges computed from the cost 
report and charge data determined at the time the cost report 
coinciding with the discharge is settled.
    This process would require some degree of recalculating outlier 
payments for individual claims. It is not possible to distinguish, on 
an aggregate basis, how much a hospital's outlier payments would change 
due to a change in its cost-to-charge ratios. This is because, in the 
event of a decline in a cost-to-charge ratio, some cases may no longer 
qualify for any outlier payments while other cases may qualify for 
lower outlier payments. Therefore, the only way to determine accurately 
the net effect of a decrease in cost-to-charge ratios on a hospital's 
total outlier payments is to assess the impact on a claim-by-claim 
basis. Because under our proposal, outlier payments would be based on 
the relationship between the hospital's costs and charges at the time a 
discharge occurred, the proposed methodology would ensure that when the 
final outlier payments were made, they would reflect an accurate 
assessment of the actual costs the hospital incurred. Therefore, we are 
adopting this proposal as final.
4. Change to the Methodology for Calculating the Federal Prospective 
Payment Outlier Payment
    Under Sec.  412.624(e)(4), we provide for an additional payment to 
a facility if its estimated costs for a patient exceeds a fixed dollar 
amount (adjusted for area wage levels and factors to account for 
treating low-income patients and for rural locations) as specified by 
CMS. The additional payment equals 80 percent of the difference between 
the estimated cost of the patient and the sum of the adjusted Federal 
prospective payment computed under this section and the adjusted fixed 
dollar amount. Effective for discharges on or after October 1, 2003, 
additional payments made under this section will be subject to the 
adjustments at Sec.  412.84(i) except that national averages will be 
used instead of statewide averages. Also effective for discharges on or 
after October 1, 2003, additional payments made under this section will 
also be subject to adjustments at Sec.  412.84(m).
    Comment: A commenter was concerned about the discretion given to 
the fiscal intermediaries that would allow them to reconcile a 
provider's outlier payments if they believe the outlier payments are 
significantly inaccurate.
    Response: Although CMS understands the commenter's concerns about 
discretion given to the fiscal intermediaries, we believe that it is 
important for CMS to have the flexibility to respond appropriately in 
the future if unforeseen evidence of manipulation of other prospective 
payments similar to that of IPPS comes to light. Therefore, we will 
provide guidance to the fiscal intermediaries with respect to their 
scope of discretion, as well as, provide them with instructions to 
implement all revisions to the outlier policy contained in this final 
rule.

I. Miscellaneous Comment

    Comment: We received a comment expressing a concern that some 
providers believe that recreational therapy services are not covered by 
Medicare and that the costs of providing recreational therapy services 
are not included in the IRF PPS rates.
    Response: This comment is not specifically related to our proposed 
changes to the IRF PPS. We responded to similar comments in the IPPS 
January 3, 1984 final rule (49 FR 242) by stating that ``Neither the 
implementation of the prospective payment system nor the criteria for 
excluding certain hospitals and units from it will prohibit the 
provision of recreational therapy services to hospital inpatients. In 
particular, the absence of these services from the list of 
rehabilitative services in rehabilitation hospitals and units does not 
indicate that Medicare will no longer pay for them in those hospitals 
and units that provide them. On the contrary, these services will 
continue to be covered to the same extent they always have been under 
the existing Medicare policies.'' Since the publication of the January 
3, 1984 final

[[Page 45695]]

rule, we have not made any changes to our policies that would preclude 
recreational therapy services from those covered by Medicare. In 
particular the introduction of the IRF PPS does not change this fact. 
Accordingly, since recreational therapy services were provided in the 
IRF base period, the costs of providing these covered services are 
included in standardized payment amount upon which the IRF PPS rates 
are based.

VII. Provisions of the Final Rule

    The provisions of this final rule reflect the provisions of the May 
16, 2003 proposed rule, except as noted elsewhere in this preamble. 
Following is a summary of the major changes that we have made in this 
final rule, either in consideration of public comments received or to 
more effectively implement the FY 2004 IRF PPS.
    [sbull] In the proposed rule we proposed a market basket increase 
factor of 3.3 percent for FY 2004 IRF 1997 data. In this final rule, 
the payment rates set forth for the FY 2004 IRF market basket increase 
factor is 3.2 percent using 1997 data.
    [sbull] As indicated in the May 16, 2003 proposed rule, in this 
final rule we are using updated FY 2004 IRF market basket index data 
from 1992 through 1997 and an updated FY 2004 IRF labor-related share 
and wage indices to update the IRF PPS rates to FY 2004. Because any 
adjustment or updates to the IRF wage index made under section 
1886(j)(6) of the Act must be made in a budget neutral manner as 
required by statute, we amend our regulation at Sec.  412.624(e)(1).
    [sbull] As indicated in the May 16, 2003 proposed rule, we finalize 
changes to the methodology for determining IRF payments for high-cost 
outliers to conform our policies to other Medicare prospective payment 
systems as appropriate. In this final rule we revise the IRF outlier 
payment methodology effective for discharges on or after October 1, 
2003 and adopt as final the continued use of the $11,211 threshold 
amount. However, a ceiling will be applied to an IRF's cost-to-charge 
ratios in accordance with Sec.  412.624(e)(4). We will continue to pay 
outlier cases at 80 percent of the difference between the estimated 
cost of the case and the outlier threshold and assign the applicable 
national average for new IRFs.
    [sbull] Under Sec.  412.624(e)(4), we provide for an additional 
payment to a facility if its estimated costs for a patient exceeds a 
fixed dollar amount (adjusted for area wage levels and factors to 
account for treating low-income patients and for rural locations) as 
specified by us. Effective for discharges on or after October 1, 2003, 
additional payments made under this section will be subject to the 
adjustments at Sec.  412.84(i) except that national averages will be 
used instead of statewide averages. Also effective for discharges on or 
after October 1, 2003, additional payments made under this section will 
also be subject to adjustments at Sec.  412.84(m).

VIII. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), agencies are 
required to provide a 30-day notice in the Federal Register and solicit 
public comment when a collection of information requirement is 
submitted to the Office of Management and Budget (OMB) for review and 
approval. To fairly evaluate whether an information collection should 
be approved by OMB, section 3506(c)(2)(A) of the PRA requires that we 
solicit comments on the following issues:
    [sbull] Whether the information collection is necessary and useful 
to carry out the proper functions of the agency;
    [sbull] The accuracy of the agency's estimate of the information 
collection burden;
    [sbull] The quality, utility, and clarity of the information to be 
collected; and
    [sbull] Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are therefore soliciting public comment on each of these issues 
for the proposed information collection requirements discussed below.

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

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

Section 412.614 Transmission of Patient Assessment Data

    1. The inpatient rehabilitation facility must encode and transmit 
data for each Medicare Part A fee-for-service inpatient.
    These information collection requirements associated with the IRF 
PPS are currently approved by OMB through July 31, 2005 under OMB 
number 0938-0842.
    2. Under paragraph (e), Exemption to being assessed a penalty for 
transmitting the IRF-PAI data late, CMS may waive the penalty specified 
in paragraph (d) of this section. To assist CMS in determining if a 
waiver is appropriate the inpatient rehabilitation facility must fully 
document the circumstances surrounding the occurrence.
    Given that it is estimated that fewer than 10 instances will occur 
on an annual basis to necessitate a waiver, this requirement is not 
subject to the PRA as stipulated under 5 CFR 1320.3(c).
    We have submitted a copy of this final rule to OMB for its review 
of the information collection requirements in Sec.  412.608 and Sec.  
412.614. These requirements are not effective until they have been 
approved by OMB.
    If you have any comments on any of these information collection and 
record keeping requirements, please mail the original and 3 copies to 
CMS within 30 days of this publication date directly to the following:

Centers for Medicare & Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs, Office of Regulations Development 
and Issuances, Reports Clearance Officer, 7500 Security Boulevard, 
Baltimore, MD 21244-1850. Attn: Julie Brown, CMS-1474-P; and
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Brenda Aguilar, CMS Desk Officer.

Comments submitted to OMB may also be emailed to the following address: 
E-mail: [email protected]; or faxed to OMB at (202) 395-6974.

IX. Regulatory Impact Analysis

A. Introduction

    The August 7, 2001 IRF PPS final rule (66 FR 41316) established the 
IRF PPS for the payment of inpatient hospital services furnished by a 
rehabilitation

[[Page 45696]]

hospital or rehabilitation unit of a hospital with cost reporting 
periods beginning on or after January 1, 2002. We incorporated a number 
of elements into the IRF PPS, such as case-level adjustments, a wage 
adjustment, an adjustment for the percentage of low-income patients, a 
rural adjustment, and outlier payments. The August 1, 2002 IRF PPS 
notice (67 FR 49928) set forth updates of the IRF PPS rates contained 
in the August 7, 2001 IRF PPS final rule. The purpose of the August 1, 
2002 IRF PPS notice was only to provide an update to the IRF payment 
rates for discharges during FY 2003. This final rule provides updated 
IRF PPS rates for discharges that occur during FY 2004 as well as makes 
policy changes in the IRF PPS system.
    In constructing these impacts, we do not attempt to predict 
behavioral responses, and we do not make adjustments for future changes 
in such variables as discharges or case-mix. We note that certain 
events may combine to limit the scope or accuracy of our impact 
analysis, because such an analysis is future-oriented and, thus, 
susceptible to forecasting errors due to other changes in the 
forecasted impact time period. Some examples of such possible events 
are newly legislated general Medicare program funding changes by the 
Congress, or changes specifically related to IRFs. In addition, changes 
to the Medicare program may continue to be made as a result of new 
statutory provisions. Although these changes may not be specific to the 
IRF PPS, the nature of the Medicare program is such that the changes 
may interact, and the complexity of the interaction of these changes 
could make it difficult to predict accurately the full scope of the 
impact upon IRFs.
    We have examined the impacts of this final rule as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA), (September 16, 1980, Pub. L. 96-
354), section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.

B. Executive Order 12866

    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more).
    In this final rule, we are using an updated FY 2004 IRF market 
basket index and an updated FY 2004 IRF labor-related share and wage 
indices to update the IRF PPS rates to FY 2004, as described in section 
VII. of this final rule. By updating the IRF PPS rates to FY 2004, we 
estimate that the overall cost to the Medicare program for IRF services 
in FY 2004 will increase by $187.3 million over FY 2003 levels. The 
updates to the IRF labor-related share and wage indices are made in a 
budget neutral manner. Thus, updating the IRF labor-related share and 
the wage indices to FY 2004 have no overall effect on estimated costs 
to the Medicare program. Therefore, this estimated cost to the Medicare 
program is due to the application of the updated IRF market basket of 
3.2 percent. Because the combined distributional effects and the cost 
to the Medicare program are greater than $100 million, this final rule 
is considered a major rule as defined above.

C. Regulatory Flexibility Act (RFA) and Impact on Small Hospitals

    The RFA requires agencies to analyze the economic impact of our 
regulations on small entities. If we determine that the regulation will 
impose a significant burden on a substantial number of small entities, 
we must examine options for reducing the burden. For purposes of the 
RFA, small entities include small businesses, nonprofit organizations, 
and governmental agencies. Most hospitals are considered small 
entities, either by nonprofit status or by having receipts of $6 
million to $29 million in any 1 year. (For details, see the Small 
Business Administration's regulation at 65 FR 69432 that set forth size 
standards for health care industries.) Because we lack data on 
individual hospital receipts, we cannot determine the number of small 
proprietary IRFs. Therefore, we assume that all IRFs are considered 
small entities for the purpose of the analysis that follows. Medicare 
fiscal intermediaries and carriers are not considered to be small 
entities. Individuals and States are not included in the definition of 
a small entity.
    The provisions of this final rule represent a 3.2 percent increase 
to the Federal PPS rates. We do not expect an incremental increase of 
3.2 percent to the Medicare Federal rates to have a significant effect 
on the overall revenues of IRFs. Most IRFs are units of hospitals that 
provide many different types of services (for example, acute care, 
outpatient services) and the rehabilitation component of their business 
is relatively minor in comparison. In addition, IRFs provide services 
to (and generate revenues from) patients other than Medicare 
beneficiaries. Accordingly, we certify that this final rule will not 
have a significant impact on small entities.
    Section 1102(b) of the Act requires us to prepare a regulatory 
impact analysis for any final rule that will have a significant impact 
on the operations of a substantial number of small rural hospitals. 
This analysis must conform to the provisions of section 603 of the RFA. 
For purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area (MSA) and has fewer than 100 beds.
    This final rule will not have a significant impact on the 
operations of small rural hospitals. As indicated above, the provisions 
of this final rule represent a 3.2 percent increase to the Federal PPS 
rates. In addition, we do not expect an incremental increase of 3.2 
percent to the Federal rates to have a significant effect on overall 
revenues or operations since most rural hospitals provide many 
different types of services (for example, acute care, outpatient 
services) and the rehabilitation component of their business is 
relatively minor in comparison. Accordingly, we certify that this final 
rule will not have a significant impact on the operations of small 
rural hospitals.

D. Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in an expenditure in any 1 year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of at least $110 million. This final rule will not have 
a substantial effect on the governments mentioned nor will it affect 
private sector costs.

E. Executive Order 13132

    We examined this final rule in accordance with Executive Order 
13132 and determined that it will not have a substantial impact on the 
rights, roles, or responsibilities of State, local, or tribal 
governments.

F. Overall Impact

    For the reasons stated above, we have not prepared an analysis 
under the RFA and section 1102(b) of the Act because we have determined 
that this final rule will not have a significant impact on small 
entities or the operations of small rural hospitals.

[[Page 45697]]

G. Anticipated Effects of the Final Rule

    We discuss below the impacts of this final rule on the Federal 
budget and on IRFs.
1. Budgetary Impact
    Section 1886(j)(3)(C) of the Act requires annual updates to the IRF 
PPS payment rates. Section 1886(j)(6) of the Act requires the Secretary 
to adjust or update the labor-related share and the wage indices or the 
labor-related share and the wage indices applicable to IRFs not later 
than October 1, 2001 and at least every 36 months thereafter. We 
project that updating the IRF PPS for discharges occurring on or after 
October 1, 2003 and before October 1, 2004, will cost the Medicare 
program $187.3 million. The updates to the IRF labor-related share and 
wage indices are made in a budget neutral manner. Thus, updating the 
IRF labor-related share and the wage indices to FY 2004 will have no 
overall effect on estimated costs to the Medicare program. Therefore, 
this estimated cost to the Medicare program is due to the application 
of the updated IRF market basket of 3.2 percent.
2. Impact on Providers
    For the impact analyses shown in the August 7, 2001 IRF PPS final 
rule, we simulated payments for 1,024 facilities. To construct the 
impact analyses set forth in this final rule, we use the latest 
available data. For the most part, we used 1998 and 1999 Medicare 
claims and FIM data for the same facilities that were used in 
constructing the impact analyses provided in the August 7, 2001 IRF PPS 
final rule (66 FR 41364 through 41365, and 41372) which was effective 
for cost reporting periods beginning on or after January 1, 2002. We do 
not have enough post-IRF PPS data to develop the distributional impact 
on providers. Further, we will need a sufficient amount of these data 
to be able to rely on them as the basis for the impact analysis. 
Because IRFs began to be paid under the IRF PPS based on their cost 
report start date that occurred on or after January 1, 2002, sufficient 
Medicare claims data will not be available for those facilities whose 
cost report start date occurs later in the calendar year. The estimated 
distributional impacts among the various classifications of IRFs for 
discharges occurring on or after October 1, 2003 and before October 1, 
2004 is reflected in Chart 8.--Projected Impact of FY 2004 Update--of 
this final rule. These impacts reflect the updated IRF wage adjustment 
and the application of the 3.2 percent IRF market basket increase.
3. Calculation of the Estimated FY 2003 IRF Prospective Payments
    To estimate payments under the IRF PPS for FY 2003, we multiplied 
each facility's case-mix index by the facility's number of Medicare 
discharges, the FY 2003 standardized payment amount, the applicable FY 
2003 labor-related share and wage indices, a low-income patient 
adjustment, and a rural adjustment (if applicable). The adjustments 
include the following:
    The wage adjustment, calculated as follows:

(.27605 + (.72395 x FY 2003 Wage Index)).
    The disproportionate share adjustment, calculated as follows:

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

    The rural adjustment, if applicable, calculated by multiplying 
payments by 1.1914.
4. Calculation of the Proposed Estimated FY 2004 IRF Prospective 
Payments
    To calculate FY 2004 payments, we use the payment rates described 
in this final rule that reflect the 3.2 percent market basket increase 
factor using the FY 2004 labor-related share and wage indices, a low-
income patient adjustment, and a rural adjustment (if applicable). The 
adjustments include the following:
    The wage adjustment, calculated as follows:

(.27474 + (.72526 x FY 2004 Wage Index)).

    The disproportionate share adjustment, calculated as follows:

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

    The rural adjustment, if applicable, calculated by multiplying 
payments by 1.1914.
    Chart 8.--Projected Impact of FY 2004 Update illustrates the 
aggregate impact of the estimated FY 2004 updated payments among the 
various classifications of facilities compared to the estimated IRF PPS 
payment rates applicable for FY 2003. The first column, Facility 
Classification, identifies the type of facility. The second column 
identifies the number of facilities for each classification type, and 
the third column lists the number of cases. The fourth column indicates 
the impact of the budget neutral wage adjustment. The last column 
reflects the combined changes including the update to the FY 2003 
payment rates by 3.2 percent and the budget neutral wage adjustment 
(including the FY 2004 labor-related share and the FY 2004 wage 
indices).

                                  Chart 8.--Projected Impact of FY 2004 Update
----------------------------------------------------------------------------------------------------------------
                                                                                  Budget neutral
                                                     Number of       Number of         wage        Total change
             Facility classification                facilities         cases        adjustment     (in percent)
                                                                                   (in percent)
----------------------------------------------------------------------------------------------------------------
                                                      Total
----------------------------------------------------------------------------------------------------------------
                                                           1,024         347,809             0.0             3.2
Urban unit......................................             725         206,926            -0.5             2.7
Rural unit......................................             131          26,507             0.2             3.4
Urban hospital..................................             156         109,691             0.9             4.2
Rural hospital..................................              12           4,685            -1.3             1.8
Total urban.....................................             881         316,617             0.0             3.2
Total rural.....................................             143          31,192             0.0             3.1
-------------------------------------------------
                                                 Urban by Region
----------------------------------------------------------------------------------------------------------------
New England.....................................              32          15,039             0.1             3.3
Middle Atlantic.................................             133          64,042            -1.5             1.6
South Atlantic..................................             112          52,980             0.5             3.7
East North Central..............................             171          55,071            -0.5             2.6
East South Central..............................              41          23,434             0.9             4.1

[[Page 45698]]

 
West North Central..............................              70          18,087             0.6             3.8
West South Central..............................             154          52,346             1.5             4.7
Mountain........................................              56          14,655             1.1             4.3
Pacific.........................................             112          20,963            -0.7             2.5
-------------------------------------------------
                                                 Rural by Region
----------------------------------------------------------------------------------------------------------------
New England.....................................               4             829            -0.2             3.0
Middle Atlantic.................................              10           2,424            -1.3             1.8
South Atlantic..................................              20           6,192            -0.8             2.4
East North Central..............................              29           5,152            -0.5             2.7
East South Central..............................              10           3,590             0.2             3.4
West North Central..............................              22           3,820             1.7             4.9
West South Central..............................              32           7,317             0.6             3.8
Mountain........................................               9           1,042            -0.3             2.9
Pacific.........................................               7             826            -1.2             2.0
----------------------------------------------------------------------------------------------------------------

    As Chart 8 illustrates, all IRFs are expected to benefit from the 
3.2 percent market basket increase that will be applied to FY 2003 IRF 
PPS payment rates to develop the FY 2004 rates. However, there may be 
distributional impacts among various IRFs due to the application of the 
updates to the labor-related share and wage indices in a budget neutral 
manner.
    To summarize, this final rule provides that all facilities will 
receive a 3.2 percent increase in their unadjusted IRF PPS payments. 
The estimated positive impact among all IRFs reflected in Chart 8 are 
due to the effect of the update to the IRF market basket index.
    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget (OMB).

List of Subjects in 42 CFR Part 412

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

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR chapter IV, part 412 as set forth 
below:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
1. The authority citation for part 412 continues to read as follows:

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

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

0
2. In Sec.  412.20, the following changes are made:
0
A. Redesignate paragraph (b) as paragraph (b)(1).
0
B. Add paragraph (b)(2) to read as follows:


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

* * * * *
    (b) * * *
    (2) CMS will not pay for services under Subpart P of this part if 
the services are paid for by a health maintenance organization (HMO) or 
competitive medical plan (CMP) that elects not to have CMS make 
payments to an inpatient rehabilitation facility for services, which 
are inpatient hospital services, furnished to the HMO's or CMP's 
Medicare enrollees, as provided under part 417 of this chapter.
* * * * *

0
3. In Sec.  412.22, the following changes are made:
0
A. Revise paragraph (h)(2) introductory text.
0
B. Remove and reserve paragraph (h)(6).
0
C. Add paragraph (h)(7).
    The revisions and addition read as follows:


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

* * * * *
    (h) * * *
    (2) Except as provided in paragraphs (h)(3), (h)(6), and (h)(7) of 
this section, effective for cost reporting periods beginning on or 
after October 1, 1999, a hospital that has a satellite facility must 
meet the following criteria in order to be excluded from the acute care 
hospital inpatient prospective payment systems for any period:
* * * * *
    (6) [Reserved]
    (7) The provisions of paragraph (h)(2)(i) of this section do not 
apply to any inpatient rehabilitation facility that is subject to the 
inpatient rehabilitation facility prospective payment system under 
subpart P of this part, effective for cost reporting periods beginning 
on or after October 1, 2003.

0
4. In Sec.  412.25, the following changes are made:
0
A. Revise paragraph (e)(2) introductory text.
0
B. Add paragraph (e)(5).
    The revision and addition read as follows:


Sec.  412.25  Excluded hospital units: Common requirements.

* * * * *
    (e) * * *
    (2) Except as provided in paragraphs (e)(3) and (e)(5) of this 
section, effective for cost reporting periods beginning on or after 
October 1, 1999, a hospital that has a satellite facility must meet the 
following criteria in order to be excluded from the acute care hospital 
inpatient prospective payment systems for any period:
* * * * *
    (5) The provisions of paragraph (e)(2)(i) of this section do not 
apply to any inpatient rehabilitation facility that is subject to the 
inpatient rehabilitation facility prospective payment system under 
subpart P of this part, effective for

[[Page 45699]]

cost reporting periods beginning on or after October 1, 2003.
* * * * *

0
5. In Sec.  412.29, revise paragraph (a)(2) to read as follows:


Sec.  412.29  Excluded rehabilitation units: Additional requirements.

    (a) * * *
    (2) Converted units under Sec.  412.30(c).
* * * * *

0
6. In Sec.  412.30, the following changes are made:
0
A. Revise paragraph (b)(3).
0
B. Revise paragraph (d)(2)(i).


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

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

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

0
7. In Sec.  412.602, republish the introductory text and revise the 
definition of ``Discharge'' to read as follows:


Sec.  412.602  Definitions.

    As used in this subpart--
* * * * *
    Discharge. A Medicare patient in an inpatient rehabilitation 
facility is considered discharged when--
    (1) The patient is formally released from the inpatient 
rehabilitation facility; or
    (2) The patient dies in the inpatient rehabilitation facility.
* * * * *

0
8. In Sec.  412.604(a)(2), revise the introductory text to read as 
follows:


Sec.  412.604  General requirements.

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

0
9. Section 412.608 is revised to read as follows:


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

    (a) Before performing an assessment using the inpatient 
rehabilitation facility patient assessment instrument, a clinician of 
the inpatient rehabilitation facility must give a Medicare inpatient--
    (1) The form entitled ``Privacy Act Statement--Health Care 
Records''; and
    (2) The simplified plain language description of the Privacy Act 
Statement--Health Care Records which is a form entitled ``Data 
Collection Information Summary for Patients in Inpatient Rehabilitation 
Facilities.''
    (b) The inpatient rehabilitation facility must document in the 
Medicare inpatient's clinical record that the Medicare inpatient has 
been given the documents specified in paragraph (a) of this section.
    (c) By giving the Medicare inpatient the forms specified in 
paragraph (a) of this section the inpatient rehabilitation facility 
will inform the Medicare patient of--
    (1) Their privacy rights under the Privacy Act of 1974 and 45 CFR 
5b.4(a)(3); and
    (2) The following rights:
    (i) The right to be informed of the purpose of the collection of 
the patient assessment data;
    (ii) The right to have the patient assessment information collected 
be kept confidential and secure;
    (iii) The right to be informed that the patient assessment 
information will not be disclosed to others, except for legitimate 
purposes allowed by the Federal Privacy Act and Federal and State 
regulations;
    (iv) The right to refuse to answer patient assessment questions; 
and
    (v) The right to see, review, and request changes on his or her 
patient assessment.
    (d) The patient rights specified in this section are in addition to 
the patient rights specified in Sec.  82.13 of this chapter.

0
10. In Sec.  412.610, revise paragraph (c)(1)(i)(C) to read as follows:


Sec.  412.610  Assessment schedule.

* * * * *
    (c) * * *
    (1) * * *
    (i) * * *
    (C) Must be completed by the calendar day that follows the 
admission assessment reference day.
* * * * *

0
11. In Sec.  412.614, the following changes are made:
0
A. Revise the introductory text to paragraph (a).
0
B. Add a new paragraph (a)(3).
0
C. Add a new paragraph (e).
    The revision and additions read as follows:


Sec.  412.614  Transmission of patient assessment data.

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

0
12. In Sec.  412.624, the following changes are made:
0
A. Revise paragraph (c).
0
B. Revise paragraph (d).
0
C. Revise paragraph (e)(1).
0
D. Revise paragraph (e)(4).
    The revisions read as follows:

[[Page 45700]]

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

* * * * *
    (c) Determining the Federal prospective payment rates. (1) General. 
The Federal prospective payment rates will be established using a 
standard payment amount referred to as the standard payment conversion 
factor. The standard payment conversion factor is a standardized 
payment amount based on average costs from a base year that reflects 
the combined aggregate effects of the weighting factors, various 
facility and case level adjustments, and other adjustments.
    (2) Update the cost per discharge. CMS applies the increase factor 
described in paragraph (a)(3) of this section to the facility's cost 
per discharge determined under paragraph (b) of this section to compute 
the cost per discharge for fiscal year 2002. Based on the updated cost 
per discharge, CMS estimates the payments that would have been made to 
the facility for fiscal year 2002 under part 413 of this chapter 
without regard to the prospective payment system implemented under this 
subpart.
    (3) Computation of the standard payment conversion factor. The 
standard payment conversion factor is computed as follows:
    (i) For fiscal year 2002. Based on the updated costs per discharge 
and estimated payments for fiscal year 2002 determined in paragraph 
(c)(2) of this section, CMS computes a standard payment conversion 
factor for fiscal year 2002, as specified by CMS, that reflects, as 
appropriate, the adjustments described in paragraph (d) of this 
section.
    (ii) For fiscal years after 2002. The standard payment conversion 
factor for fiscal years after 2002 will be the standardized payments 
for the previous fiscal year updated by the increase factor described 
in paragraph (a)(3) of this section, including adjustments described in 
paragraph (d) of this section as appropriate.
    (4) Determining the Federal prospective payment rate for each case-
mix group. The Federal prospective payment rates for each case-mix 
group is the product of the weighting factors described in Sec.  
412.620(b) and the standard payment conversion factor described in 
paragraph (c)(3) of this section.
    (d) Adjustments to the standard payment conversion factor. The 
standard payment conversion factor described in paragraph (c)(3) of 
this section will be adjusted for the following:
    (1) Outlier payments. CMS determines a reduction factor equal to 
the estimated proportion of additional outlier payments described in 
paragraph (e)(4) of this section.
    (2) Budget neutrality. CMS adjusts the Federal prospective payment 
rates for fiscal year 2002 so that aggregate payments under the 
prospective payment system, excluding any additional payments 
associated with elections not to be paid under the transition period 
methodology under Sec.  412.626(b), are estimated to equal the amount 
that would have been made to inpatient rehabilitation facilities under 
part 413 of this chapter without regard to the prospective payment 
system implemented under this subpart.
    (3) Coding and classification changes. CMS adjusts the standard 
payment conversion factor for a given year if CMS determines that 
revisions in case-mix classifications or weighting factors for a 
previous fiscal year (or estimates that those revisions for a future 
fiscal year) did result in (or would otherwise result in) a change in 
aggregate payments that are a result of changes in the coding or 
classification of patients that do not reflect real changes in case-
mix.
    (e) Calculation of the adjusted Federal prospective payment.
    (1) Adjustment for area wage levels. The labor portion of a 
facility's Federal prospective payment is adjusted to account for 
geographical differences in the area wage levels using an appropriate 
wage index. The application of the wage index is made on the basis of 
the location of the facility in an urban or rural area as defined in 
Sec.  412.602. Adjustments or updates to the wage data used to adjust a 
facility's Federal prospective payment rate under paragraph (e)(1) of 
this section will be made in a budget neutral manner. CMS determines a 
budget neutral wage adjustment factor, based on any adjustment or 
update to the wage data, to apply to the standard payment conversion 
factor.
* * * * *
    (4) Adjustment for high-cost outliers. CMS provides for an 
additional payment to an inpatient rehabilitation facility if its 
estimated costs for a patient exceeds a fixed dollar amount (adjusted 
for area wage levels and factors to account for treating low-income 
patients and for rural locations) as specified by CMS. The additional 
payment equals 80 percent of the difference between the estimated cost 
of the patient and the sum of the adjusted Federal prospective payment 
computed under this section and the adjusted fixed dollar amount. 
Effective for discharges occurring on or after October 1, 2003, 
additional payments made under this section will be subject to the 
adjustments at Sec.  412.84(i), except that national averages will be 
used instead of statewide averages. Effective for discharges occurring 
on or after October 1, 2003, additional payments made under this 
section will also be subject to adjustments at Sec.  412.84(m).

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

    Dated: July 16, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: July 22, 2003.
Tommy G. Thompson,
Secretary.
BILLING CODE 4120-01-P

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[[Page 45711]]



                       Table 3A.--Urban Wage Index
------------------------------------------------------------------------
                       Urban area  (constituent counties or       Wage
        MSA                     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
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

[[Page 45712]]

 
                    Gwinnett, GA
                    Henry, GA
                    Newton, GA
                    Paulding, GA
                    Pickens, GA
                    Rockdale, GA
                    Spalding, GA
                    Walton, GA
0560..............  Atlantic City-Cape May, NJ................    1.1017
                    Atlantic City, NJ
                    Cape May, NJ
0580..............  Auburn-Opelika, AL........................    0.8325
                    Lee, AL
0600..............  Augusta-Aiken, GA-SC......................    1.0264
                    Columbia, GA
                    McDuffie, GA
                    Richmond, GA
                    Aiken, SC
                    Edgefield, SC
0640..............  Austin-San Marcos, TX.....................    0.9637
                    Bastrop, TX
                    Caldwell, TX
                    Hays, TX
                    Travis, TX
                    Williamson, TX
0680..............  Bakersfield, CA...........................    0.9899
                    Kern, CA
0720..............  Baltimore, MD.............................    0.9929
                    Anne Arundel, MD
                    Baltimore, MD
                    Baltimore City, MD
                    Carroll, MD
                    Harford, MD
                    Howard, MD
                    Queen Annes, MD
0733..............  Bangor, ME................................    0.9664
                    Penobscot, ME
0743..............  Barnstable-Yarmouth, MA...................    1.3202
                    Barnstable, MA
0760..............  Baton Rouge, LA...........................    0.8294
                    Ascension, LA
                    East Baton Rouge
                    Livingston, LA
                    West Baton Rouge, LA
0840..............  Beaumont-Port Arthur, TX..................    0.8324
                    Hardin, TX
                    Jefferson, TX
                    Orange, TX
0860..............  Bellingham, WA............................    1.2282
                    Whatcom, WA
0870..............  Benton Harbor, MI.........................    0.9042
                    Berrien, MI
0875..............  Bergen Passaic, NJ........................    1.2150
                    Bergen, NJ
                    Passaic, NJ
0880..............  Billings, MT..............................    0.9022
                    Yellowstone, MT
0920..............  Biloxi-Gulfport-Pascagoula, 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

[[Page 45713]]

 
                    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,    1.1235
                     MA-NH.
                    Bristol, MA
                    Essex, MA
                    Middlesex, MA
                    Norfolk, MA
                    Plymouth, MA
                    Suffolk, MA
                    Worcester, MA
                    Hillsborough, NH
                    Merrimack, NH
                    Rockingham, NH
                    Strafford, NH
1125..............  Boulder-Longmont, CO......................    0.9689
                    Boulder, CO
1145..............  Brazoria, TX..............................    0.8535
                    Brazoria, TX
1150..............  Bremerton, WA.............................    1.0944
                    Kitsap, WA
1240..............  Brownsville-Harlingen-San 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-RockHill, NC-SC........    0.9850
                    Cabarrus, NC
                    Gaston, NC
                    Lincoln, NC
                    Mecklenburg, NC
                    Rowan, NC
                    Stanly, NC
                    Union, NC
                    York, SC
1540..............  Charlottesville, VA.......................    1.0438

[[Page 45714]]

 
                    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
                    DeKalb, IL
                    DuPage, 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
                    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

[[Page 45715]]

 
                    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.........................    0.9062
                    Flagler, FL
                    Volusia, FL
2030..............  Decatur, AL...............................    0.8973
                    Lawrence, AL
                    Morgan, AL
2040..............  Decatur, IL...............................    0.8055
                    Macon, IL
2080..............  Denver, CO................................    1.0601
                    Adams, CO
                    Arapahoe, CO
                    Broomfield, CO
                    Denver, CO
                    Douglas, CO
                    Jefferson, CO
2120..............  Des Moines, IA............................    0.8791
                    Dallas, IA
                    Polk, IA
                    Warren, IA
2160..............  Detroit, MI...............................    1.0448
                    Lapeer, MI
                    Macomb, MI
                    Monroe, MI
                    Oakland, MI
                    St. Clair, MI
                    Wayne, MI
2180..............  Dothan, AL................................    0.8137
                    Dale, AL
                    Houston, AL
2190..............  Dover, DE.................................    0.9356
                    Kent, DE
2200..............  Dubuque, IA...............................    0.8795
                    Dubuque, IA
2240..............  Duluth-Superior, MN-WI....................    1.0368
                    St. Louis, MN
                    Douglas, WI
2281..............  Dutchess County, NY.......................    1.0684
                    Dutchess, NY
2290..............  Eau Claire, WI............................    0.8952
                    Chippewa, WI
                    Eau Claire, WI
2320..............  El Paso, TX...............................    0.9265
                    El Paso, TX
2330..............  Elkhart-Goshen, IN........................    0.9722
                    Elkhart, IN

[[Page 45716]]

 
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
                    DeKalb, IN
                    Huntington, IN
                    Wells, IN
                    Whitley, IN
2800..............  Forth Worth-Arlington, TX.................    0.9446
                    Hood, TX
                    Johnson, TX
                    Parker, TX
                    Tarrant, TX
2840..............  Fresno, CA................................    1.0216
                    Fresno, CA
                    Madera, CA
2880..............  Gadsden, AL...............................    0.8505
                    Etowah, AL
2900..............  Gainesville, FL...........................    0.9871
                    Alachua, FL
2920..............  Galveston-Texas City, TX..................    0.9465
                    Galveston, TX
2960..............  Gary, IN..................................    0.9584
                    Lake, IN
                    Porter, IN

[[Page 45717]]

 
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
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.................................    0.8385
                    Lafourche, LA
                    Terrebonne, LA
3360..............  Houston, TX...............................    0.9892
                    Chambers, TX
                    Fort Bend, TX
                    Harris, TX
                    Liberty, TX

[[Page 45718]]

 
                    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-Battlecreek, MI.................    1.0595
                    Calhoun, MI
                    Kalamazoo, MI
                    Van Buren, MI
3740..............  Kankakee, IL..............................    1.0790
                    Kankakee, IL
3760..............  Kansas City, KS-MO........................    0.9736

[[Page 45719]]

 
                    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.............................    0.8475
                    Acadia, LA
                    Lafayette, LA
                    St. Landry, LA
                    St. Martin, LA
3920..............  Lafayette, IN.............................    0.9278
                    Clinton, IN
                    Tippecanoe, IN
3960..............  Lake Charles, LA..........................    0.7965
                    Calcasieu, LA
3980..............  Lakeland-Winter Haven, FL.................    0.9357
                    Polk, FL
4000..............  Lancaster, PA.............................    0.9078
                    Lancaster, PA
4040..............  Lansing-East Lansing, MI..................    0.9726
                    Clinton, MI
                    Eaton, MI
                    Ingham, MI
4080..............  Laredo, TX................................    0.8472
                    Webb, TX
4100..............  Las Cruces, NM............................    0.8745
                    Dona Ana, NM
4120..............  Las Vegas, NV-AZ..........................    1.1521
                    Mohave, AZ
                    Clark, NV
                    Nye, NV
4150..............  Lawrence, KS..............................    0.7923
                    Douglas, KS
4200..............  Lawton, OK................................    0.8315
                    Comanche, OK
4243..............  Lewiston-Auburn, ME.......................    0.9179
                    Androscoggin, ME
4280..............  Lexington, KY.............................    0.8581
                    Bourbon, KY
                    Clark, KY
                    Fayette, KY
                    Jessamine, KY
                    Madison, KY
                    Scott, KY
                    Woodford, KY
4320..............  Lima, OH..................................    0.9483

[[Page 45720]]

 
                    Allen, OH
                    Auglaize, OH
4360..............  Lincoln, NE...............................    0.9892
                    Lancaster, NE
4400..............  Little Rock-North Little, AR..............    0.9097
                    Faulkner, AR
                    Lonoke, AR
                    Pulaski, AR
                    Saline, AR
4420..............  Longview-Marshall, TX.....................    0.8629
                    Gregg, TX
                    Harrison, TX
                    Upshur, TX
4480..............  Los Angeles-Long Beach, CA................    1.2001
                    Los Angeles, CA
4520..............  Louisville, KY-IN.........................    0.9276
                    Clark, IN
                    Floyd, IN
                    Harrison, IN
                    Scott, IN
                    Bullitt, KY
                    Jefferson, KY
                    Oldham, KY
4600..............  Lubbock, TX...............................    0.9646
                    Lubbock, TX
4640..............  Lynchburg, VA.............................    0.9219
                    Amherst, VA
                    Bedford City, VA
                    Bedford, VA
                    Campbell, VA
                    Lynchburg City, VA
4680..............  Macon, GA.................................    0.9204
                    Bibb, GA
                    Houston, GA
                    Jones, GA
                    Peach, GA
                    Twiggs, GA
4720..............  Madison, WI...............................    1.0467
                    Dane, WI
4800..............  Mansfield, OH.............................    0.8900
                    Crawford, OH
                    Richland, OH
4840..............  Mayaguez, PR..............................    0.4914
                    Anasco, PR
                    Cabo Rojo, PR
                    Hormigueros, PR
                    Mayaguez, PR
                    Sabana Grande, PR
                    San German, PR
4880..............  McAllen-Edinburg-Mission, TX..............    0.8428
                    Hidalgo, TX
4890..............  Medford-Ashland, OR.......................    1.0498
                    Jackson, OR
4900..............  Melbourne-Titusville-Palm 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................................    0.9837
                    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

[[Page 45721]]

 
                    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-      1.2408
                     Danbury, CT.
                    Fairfield, CT
                    New Haven, CT
5523..............  New London-Norwich, CT....................    1.1767
                    New London, CT
5560..............  New Orleans, LA...........................    0.9046
                    Jefferson, LA
                    Orleans, LA
                    Plaquemines, LA
                    St. Bernard, LA
                    St. Charles, LA
                    St. James, LA
                    St. John The Baptist, LA
                    St. Tammany, LA
5600..............  New York, NY..............................    1.4414
                    Bronx, NY
                    Kings, NY
                    New York, NY

[[Page 45722]]

 
                    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, VANC.    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.............................    0.8645
                    Escambia, FL
                    Santa Rosa, FL

[[Page 45723]]

 
6120..............  Peoria-Pekin, IL..........................    0.8739
                    Peoria, IL
                    Tazewell, IL
                    Woodford, IL
6160..............  Philadelphia, PA-NJ.......................    1.0713
                    Burlington, NJ
                    Camden, NJ
                    Gloucester, NJ
                    Salem, NJ
                    Bucks, PA
                    Chester, PA
                    Delaware, PA
                    Montgomery, PA
                    Philadelphia, PA
6200..............  Phoenix-Mesa, AZ..........................    0.9820
                    Maricopa, AZ
                    Pinal, AZ
6240..............  Pine Bluff, AR............................    0.7962
                    Jefferson, AR
6280..............  Pittsburgh, PA............................    0.9365
                    Allegheny, PA
                    Beaver, PA
                    Butler, PA
                    Fayette, PA
                    Washington, PA
                    Westmoreland, PA
6323..............  Pittsfield, MA............................    1.0235
                    Berkshire, MA
6340..............  Pocatello, ID.............................    0.9372
                    Bannock, ID
6360..............  Ponce, PR.................................    0.5169
                    Guayanilla, PR
                    Juana Diaz, PR
                    Penuelas, PR
                    Ponce, PR
                    Villalba, PR
                    Yauco, PR
6403..............  Portland, ME..............................    0.9794
                    Cumberland, ME
                    Sagadahoc, ME
                    York, ME
6440..............  Portland-Vancouver, OR-WA.................    1.0667
                    Clackamas, OR
                    Columbia, OR
                    Multnomah, OR
                    Washington, OR
                    Yamhill, OR
                    Clark, WA
6483..............  Providence-Warwick-Pawtucket, 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

[[Page 45724]]

 
                    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
6960..............  Saginaw-Bay City-Midland, MI..............    0.9650
                    Bay, MI
                    Midland, MI
                    Saginaw, MI
6980..............  St. Cloud, MN.............................    0.9700
                    Benton, MN
                    Stearns, MN
7000..............  St. Joseph, MO............................    0.8021
                    Andrews, MO
                    Buchanan, MO
7040..............  St. Louis, MO-IL..........................    0.8855
                    Clinton, IL
                    Jersey, IL
                    Madison, IL
                    Monroe, IL
                    St. Clair, IL
                    Franklin, MO
                    Jefferson, MO

[[Page 45725]]

 
                    Lincoln, MO
                    St. Charles, MO
                    St. Louis, MO
                    St. Louis City, MO
                    Warren, MO
                    Sullivan City, MO
7080..............  Salem, OR.................................    1.0367
                    Marion, OR
                    Polk, OR
7120..............  Salinas, CA...............................    1.4623
                    Monterey, CA
7160..............  Salt Lake City-Ogden, UT..................    0.9945
                    Davis, UT
                    Salt Lake, UT
                    Weber, UT
7200..............  San Angelo, TX............................    0.8374
                    Tom Green, TX
7240..............  San Antonio, TX...........................    0.8753
                    Bexar, TX
                    Comal, TX
                    Guadalupe, TX
                    Wilson, TX
7320..............  San Diego, CA.............................    1.1131
                    San Diego, CA /
7360..............  San Francisco, CA.........................    1.4142
                    Marin, CA
                    San Francisco, CA
                    San Mateo, CA
7400..............  San Jose, CA..............................    1.4145
                    Santa Clara, CA
7440..............  San Juan-Bayamon, PR......................    0.4741
                    Aguas Buenas, PR
                    Barceloneta, PR
                    Bayamon, PR
                    Canovanas, PR
                    Carolina, PR
                    Catano, PR
                    Ceiba, PR
                    Comerio, PR
                    Corozal, PR
                    Dorado, PR
                    Fajardo, PR
                    Florida, PR
                    Guaynabo, PR
                    Humacao, PR
                    Juncos, PR
                    Los Piedras, PR
                    Loiza, PR
                    Luguillo, PR
                    Manati, PR
                    Morovis, PR
                    Naguabo, PR
                    Naranjito, PR
                    Rio Grande, PR
                    San Juan, PR
                    Toa Alta, PR
                    Toa Baja, PR
                    Trujillo Alto, PR
                    Vega Alta, PR
                    Vega Baja, PR
                    Yabucoa, PR
7460..............  San Luis Obispo-Atascadero-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

[[Page 45726]]

 
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
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

[[Page 45727]]

 
                    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............    0.9429
                    Tulare, CA
8800..............  Waco, TX..................................    0.8073
                    McLennan, TX
8840..............  Washington, DC-MD-VA-WV...................    1.0851
                    District of Columbia, DC
                    Calvert, MD
                    Charles, MD
                    Frederick, MD
                    Montgomery, MD
                    Prince Georges, MD
                    Alexandria City, VA
                    Arlington, VA
                    Clarke, VA
                    Culpepper, VA
                    Fairfax, VA
                    Fairfax City, VA
                    Falls Church City, VA
                    Fauquier, VA
                    Fredericksburg City, VA
                    King George, VA
                    Loudoun, VA
                    Manassas City, VA
                    Manassas Park City, VA
                    Prince William, VA
                    Spotsylvania, VA
                    Stafford, VA
                    Warren, VA

[[Page 45728]]

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

[FR Doc. 03-19540 Filed 7-31-03; 8:45 am]
BILLING CODE 4120-01-P