[Federal Register Volume 69, Number 3 (Tuesday, January 6, 2004)]
[Notices]
[Pages 661-665]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-32337]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1373-N]
RIN 0938-AN00


Medicare Program; Notice of One-Time Appeal Process for Hospital 
Wage Index Classification

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

ACTION: Notice.

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SUMMARY: In accordance with section 508(a) of the Medicare Prescription 
Drug, Improvement and Modernization Act of 2003, this notice 
establishes a one-time appeal process by which a hospital may appeal 
the wage index classification otherwise applicable to the hospital.

DATES: Effective Date: This notice is effective January 1, 2004.
    Deadline for Submission of Appeal Requests: Appeal requests will be 
considered if the Medicare Geographic Classification Review Board 
receives them, at the appropriate address, no later than 5 p.m. EDT on 
February 15, 2004.
    Applicability: Geographic redesignations granted under this process 
are applicable to discharges occurring during the 3-year period 
beginning with discharges on or after April 1, 2004 and before April 1, 
2007.

FOR FURTHER INFORMATION CONTACT: Stephen Phillips, (410) 786-4548.

SUPPLEMENTARY INFORMATION: 

I. Background

    Under section 1886(d)(10) of the Act, the Medicare Geographic 
Classification Review Board (MGCRB) considers applications by hospitals 
for geographic reclassification for purposes of payment under the 
inpatient prospective payment system (IPPS). Hospitals can elect to 
reclassify for the wage index or the standardized amount, or both, and 
as individual hospitals or as groups. Generally, hospitals must be 
proximate to the labor market area to which they are seeking 
reclassification and must demonstrate characteristics similar to 
hospitals located in that area. Hospitals must apply for 
reclassification to the MGCRB. The MGCRB issues its decisions by the 
end of February for reclassifications to become effective for the 
following fiscal year (beginning October 1). The regulations applicable 
to reclassifications by the MGCRB are located in Sec. Sec.  412.230 
through 412.280.
    Section 1886(d)(10)(D)(v) of the Act provides that, beginning with 
FY 2001, an MGCRB decision on a hospital reclassification for purposes 
of the wage index is effective for 3 fiscal years, unless the hospital 
elects to terminate the reclassification. Section 1886(d)(10)(D)(vi) of 
the Act provides that the MGCRB must use the 3 most recent years' 
average hourly wage data in evaluating a hospital's reclassification 
application for FY 2003 and any succeeding fiscal year.
    Section 304(b) of Public Law (Pub. L.) 106-554 provides that the 
Secretary must establish a mechanism under which a statewide entity may 
apply to have all of the geographic areas in the State treated as a 
single geographic area for purposes of computing and applying a single 
wage index, for reclassifications beginning in FY 2003. The 
implementing regulations for this provision are located at Sec.  
412.235.
    Section 1886(d)(8)(B) of the Act permits a hospital located in a 
rural county adjacent to one or more urban areas to be designated as 
being located in the Metropolitan Statistical Areas (MSA) to which the 
greatest number of workers in the county commute if--(1) the rural 
county would otherwise be considered part of an urban area under the 
standards published in the Federal Register for designating MSAs (and 
for designating New England County Metropolitan Areas (NECMAs)), and 
(2) if the commuting rates used in determining outlying counties (or, 
for New England, similarly recognized areas) were determined on the 
basis of the aggregate number of resident workers who commute to (and, 
if applicable under the standards, from) the central county or counties 
of all contiguous MSAs (or NECMAs). Hospitals that meet these criteria 
are deemed urban for purposes of the standardized amounts and for 
purposes of assigning the wage index.
    On June 6, 2003, the Office of Management and Budget (OMB) issued 
OMB Bulletin No. 03-04, announcing revised definitions of MSAs and new 
definitions of Micropolitan Statistical Areas and Combined Statistical 
Areas. The new definitions recognize 49 new Metropolitan Statistical 
Areas and 565 new Micropolitan Statistical Areas, as well as 
extensively revising the construct of many of the existing Metropolitan 
Areas. We are in the process of evaluating these new MSA

[[Page 662]]

definitions. At this time, however, we have not adopted these revised 
MSA definitions for purposes of the wage index. Therefore, references 
to MSAs (and, by inference, NECMAs) in this notice refer to the MSAs 
currently used for the wage index, those in place prior to the new 
definitions announced in June 2003 by OMB.

II. Provisions of the Notice

    Section 508(a) of the Medicare Prescription Drug, Improvement and 
Modernization Act of 2003 (MPDIMA) (Pub. L. 108-173) provides that, by 
January 1, 2004, the Secretary must establish by instruction or 
otherwise, a process for hospitals to appeal their wage index 
classification. This notice establishes that process.

A. One-Time Appeal Process Requirements

    Under this process, a qualifying hospital may appeal the wage index 
classification otherwise applicable to the hospital and apply for 
reclassification to another area of the State in which the hospital is 
located (or, at the discretion of the Secretary, to an area within a 
contiguous State). Such reclassifications are applicable to discharges 
occurring during the 3-year period beginning April 1, 2004 and ending 
March 31, 2007.
    The process requirements under section 508(a)(2) and (a)(3) of Pub. 
L. 108-173 are as follows:
    [sbull] A hospital must file an appeal request no later than 
February 15, 2004.
    [sbull] The MGCRB will consider the request of any qualifying 
hospital to change its geographic classification for purposes of 
determining the hospital's area wage index. The MGCRB will issue a 
decision on the requests. There shall be no further administrative 
review or judicial appeal of the MGCRB's decision.
    [sbull] If the MGCRB determines that the hospital is a qualifying 
hospital, the hospital shall be reclassified to the selected area 
within the State where the hospital is located (or, at the discretion 
of the Secretary, to an area within a contiguous State). The approved 
reclassification will be effective for 3 years beginning with 
discharges occurring on April 1, 2004.
    Under section 508(c) of Pub. L. 108-173, a ``qualifying hospital'' 
is defined as a subsection (d) hospital (as defined in section 
1886(d)(1)(B) of the Act) that--
    [sbull] Does not qualify for a change in wage index classification 
under paragraphs (8) or (10) of section 1886(d) of the Act on the basis 
of requirements relating to distance or commuting. Current distance and 
commuting criteria for individual hospitals seeking reclassification 
are set forth in Sec.  412.230(b) of the regulations. Rural referral 
center and sole community hospital distance requirements are at Sec.  
412.230(a)(3)(ii). Generally, hospitals must demonstrate a close 
proximity to the labor market area to which they are seeking 
reclassification. The proximity criteria are met if--(1) for an urban 
hospital the distance from the hospital to the area to which the 
hospital is reclassifying is no more than 15 miles; and (2) for a rural 
hospital, the distance from the hospital to the area to which the 
hospital is reclassifying is no more than 35 miles (Sec.  
412.230(b)(1)) or; at least 50 percent of the hospital's employees 
reside in the area (Sec.  412.230(b)(2)). Rural referral centers and 
sole community hospitals are required to reclassify to the urban or 
another rural area closest to the hospital. (Sec.  412.230(a)(3)(ii)); 
and,
    [sbull] Meets such other criteria, such as quality, as the 
Secretary may specify by instruction or otherwise.
    Section 508(b) specifies that approved requests under this process 
must not affect the wage index computation for any area or any other 
hospital and shall not be budget neutral. The provisions of this 
section shall not affect payment for discharges occurring after the end 
of the 3-year period, which ends March 31, 2007. Finally, as specified, 
the total additional expenditures of this section shall not exceed $900 
million.
    Under Sec.  412.273(b), a hospital may terminate an approved 3-year 
reclassification for purposes of the wage index within 45 days of 
publication of CMS's annual notice of proposed rulemaking concerning 
changes and updates to the IPPS for the fiscal year for which the 
termination is to apply. That is, a hospital may terminate its wage 
index reclassification during either the first, second, or third year 
of that reclassification. In order to terminate a reclassification 
under this one-time process, a hospital should follow the process at 
Sec.  412.273(b). Terminations will be effective with discharges during 
the following Federal fiscal year (beginning October 1). Hospitals 
whose applications under the one-time process are approved will not be 
able to terminate such a reclassification prior to October 1, 2004.

B. One-Time Appeal Process Criteria

    All hospitals seeking reclassification under this one-time process 
must submit an application consistent with the process described in 
section II.D. of this notice. Hospitals that have submitted an 
application under the routine MGCRB application process must still 
submit a separate application for consideration by the MGCRB under this 
process. The MGCRB must approve a request, from any subsection (d) 
hospital, for geographic reclassification for purposes of wage index 
under this process if both of the following criteria are met (see 
section II.C. of this notice for a discussion of the rationale for the 
criteria). For purposes of applying these criteria, average hourly 
wages (AHW) refers to the 3-year average AHWs published in the August 
1, 2003 final rule (68 FR 45345) for hospitals (Table 2) and MSAs and 
rural areas (Tables 3A and 3B, respectively), as corrected in the 
October 6, 2003 Federal Register (68 FR 57732). As noted above, 
references to MSAs refer to the MSA definitions currently employed for 
the wage index, those in place prior to OMB's announcement of revised 
MSAs in June 2003. Note that both of the following criteria must be met 
in all reclassifications under this process:
    1. A hospital meets neither the distance requirement set forth in 
Sec.  412.230(b)(1) nor the commuting requirement set forth in Sec.  
412.230(b)(2) (or fails to meet Sec.  412.230(a)(3)(ii) in the case of 
a rural referral center or sole community hospital) to be reclassified 
into the MSA for which the request under the process established by 
this notice is submitted.
    2. The hospital does not otherwise qualify for reclassification 
effective for discharges on or after October 1, 2004 (except in the 
case of criteria 2(b) and 2(g) below), under the reclassification 
process at 42 CFR part 412 subpart L, and one of the following criteria 
is met:
    a. The hospital is an urban hospital located in a State with fewer 
than 10 people per square mile. The hospital may only reclassify under 
the process established by this notice to another MSA within its State 
(Based on the 2000 Census data, only urban hospitals in the States of 
Montana, North Dakota, South Dakota, and Wyoming meet this criteria.)
    b. The hospital is currently (for FY 2004) reclassified into 
another MSA and the hospital's 3-year AHW is at least 108 percent of 
the AHW of the hospitals geographically located in the MSA to which the 
hospital is currently reclassified. The hospital may only reclassify 
under this process to an MSA within the hospital's State that has an 
area AHW nearest to, but not less than, the hospital's AHW. If there is 
no such MSA, the hospital will receive a wage index calculated based 
upon its own AHW. If a hospital that otherwise would be reclassified 
effective for discharges on or after October 1, 2004 is approved

[[Page 663]]

for reclassification under this one-time appeal process based upon this 
criterion, any other reclassifications shall be considered to have been 
terminated effective for discharges on or after April 1, 2004.
    c. The hospital is currently (for FY 2004) reclassified by the 
MGCRB to another MSA but, upon applying to the MGCRB for FY 2005, is 
ineligible for reclassification because its AHW is now less than 84 
percent (but greater than 82 percent) of the AHW of the hospitals 
geographically located in the MSA to which the hospital applied for 
reclassification for FY 2005. The hospital may only reclassify under 
this process to an MSA within its State with an FY 2004 wage index 
value that is nearest to the FY 2004 wage index the hospital currently 
receives.
    d. The hospital was part of an urban county group reclassification 
application to the MGCRB for FY 2004 or FY 2005 in accordance with 
Sec.  412.234, but the application did not meet the standardized amount 
criteria set forth in Sec.  412.234(c). Individual hospitals that were 
part of the urban county group reclassification application may 
reclassify under this process only to the MSA specified in the group 
application.
    e. The hospital is located in an MSA that experiences at least a 6 
percent decrease in its FY 2004 wage index compared to its FY 2003 wage 
index; and a hospital with an AHW at least 10 percent higher than the 
MSA's AHW that reclassified into the MSA during FY 2003 has 
reclassified elsewhere for FY 2004. The hospital may only reclassify 
under this process to an MSA within its State with an FY 2004 area wage 
index value that is nearest to what it would have received if the 
hospital that previously reclassified into the MSA had continued to 
reclassify into the MSA for FY 2004.
    f. One of the following criteria are met:
    (1) The hospital is located in an MSA that is adjacent to an MSA 
(or urban county) that was reclassified under section 152 of the 
Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999, 
Pub. L. 106-113 and the hospital's FY 2004 wage index is at least 10 
percent less than the FY 2004 wage index of the adjacent MSA (or urban 
county) that was reclassified under section 152 of Pub. L. 106-113.
    (2) The hospital is located in an MSA that is adjacent to an MSA 
identified in sections 153 or 154(a) of Pub. L. 106-113, and the 
hospitals' FY 2004 wage index is at least 10 percent less than the FY 
2004 wage index of the adjacent MSA identified in section 153 or 154(a) 
of Pub. L. 106-113.
    In both cases, the hospital may only reclassify under this process 
to the adjacent MSA (or urban county) identified in the applicable 
section of Pub. L. 106-113.
    g. The hospital received reclassification by act of Congress that 
expired on September 30, 2003. The hospital may only reclassify under 
this process to the MSA to which it was reclassified by act of 
Congress, unless it would not qualify to reclassify under this process 
into such MSA because it fails to meet criterion 1 above. If the later 
situation applies, the hospital may reclassify to another MSA in its 
State, where it would meet criterion 1 above, with a FY 2004 wage index 
that most closely approximates the FY 2004 wage index of the area to 
which the hospital was reclassified by statute. Nothing in this 
criterion shall be viewed as superseding the reclassifications extended 
by section 508(f) of Pub. L. 108-173.
    h. After decisions by the MGCRB based on hospitals meeting criteria 
2(a) through 2(g) above, as well as our implementation of section 
508(f) of Pub. L. 108-173, the MGCRB may approve a hospital to be 
reclassified if the hospital's 3-year AHW is at least 106 percent of 
the 3-year AHW of the hospitals geographically located in the area in 
which the hospital is located. The MGCRB will reclassify a hospital 
under this process to the MSA within the hospital's State (in the case 
of a rural hospital, or the nearest Statewide rural area of a 
contiguous State) that has an area 3-year AHW nearest to the hospital's 
3-year AHW. However, to be classified to that area, the hospital's 3-
year AHW must be at least 82 percent of the 3-year AHW of the area to 
which it would be reclassified. The requests submitted under this 
criterion will be considered and approved by the MGCRB in rank order. 
Ranking will be based on the percentage difference between the 
hospital's 3-year AHW and the 3-year AHW of the area where the hospital 
is geographically located. A hospital application received under 
criterion 2(h) will receive a 2.5 percentage point increase in its 
ranking for each of the following two criteria that are met--
    (1) The hospital has either:
    [sbull] By January 23, 2004, submitted performance data on any of 
the 10 measures that were in the National Voluntary Hospital Reporting 
Initiative on November 15, 2003 meeting the sample size specifications 
of either the Joint Commission on Accreditation of Healthcare 
Organizations or CMS, or
    [sbull] Pledged in a form dated before December 15, 2003 to submit 
such data; or
    (2) The hospital is a rural hospital.
    For example, an urban hospital with a 3-year AHW that is 110 
percent higher than the 3-year AHW for the area where it is located 
would be ranked as though its 3-year AHW were 112.5 percent if that 
hospital had submitted quality data by January 23, 2004. If the 
hospital were a rural hospital, it would be ranked as though its 3-year 
AHW were 115 percent of its area's 3-year AHW. Hospitals applying in 
accordance with criterion 2(h) will only be approved after the MGCRB 
decides upon all applications meeting the criteria specified in 2(a) 
through 2(g) and section 508(f) of Pub. L. 108-173.

C. Rationale for Criteria

    Criteria 2(a) through 2(g) above are designed to assist categories 
of hospitals that fall just beyond the current reclassification 
criteria. Although we generally believe our current reclassification 
process appropriately balances the requirement at section 1886(d)(3)(E) 
of the Act to adjust payments to reflect the ``relative hospital wage 
level in the geographic area of the hospital compared to the national 
average hospital wage level'' and the provisions for geographic 
reclassification at section 1886(d)(8) and (10) of the Act, section 508 
of Pub. L. 108-173 was intended to address, on a one-time basis, 
situations that do not meet the established criteria. Specific 
rationale for each criterion follows:
    a. In States with low population densities, employees are likely to 
commute greater distances to work. Dispersed urban areas are therefore 
more likely to compete for employees than are urban areas in more 
densely populated States. We established the population density and 
number of MSAs based on our analysis indicating these criteria best 
captured such a Statewide urban labor market situation. We did not 
include rural hospitals under this criterion because we already employ 
Statewide rural labor markets.
    b. This criterion recognizes that some reclassified hospitals have 
an AHW much higher even than a nearby MSA into they have already 
reclassified. We believe it is appropriate to provide some relief for 
these situations under this one-time appeals process. Because, in some 
cases, the AHW of hospitals meeting this criterion are likely to exceed 
those of any labor market area within the State, we are providing under 
this one-time appeal process that a hospital qualifying under this 
criterion may receive a wage index based on its own

[[Page 664]]

AHW if there is no MSA AHW at least equal to the hospital's AHW.
    c. This criterion recognizes anomalous situations where previously 
reclassified urban hospitals would meet the lower criterion for rural 
hospitals to reclassify, but, for FY 2005, fail to meet the urban 
hospital wage comparability criterion.
    d. This criterion recognizes situations where hospitals have been 
denied reclassification because they failed to meet the standardized 
amount criterion, even though the hospital would have received no 
benefit from a standardized amount reclassification because section 501 
of Pub. L. 108-173 eliminated the differential in the standardized 
amounts.
    e. This criterion would protect hospitals from the negative impact 
on an MSA's wage index resulting from a hospital with a significantly 
higher AHW that no longer reclassifies into the MSA. The wage index 
decrease standard and the AHW difference standard are designed to focus 
this criterion upon situations where the reclassification elsewhere of 
a particular hospital has a truly negative impact on the MSA's wage 
index.
    f. This criterion would alleviate large disparities in wage indexes 
resulting from statutory reclassifications. It is limited to adjacent 
MSAs because these are the labor market areas most impacted by the 
statutory reclassifications (that is, rather than Statewide rural labor 
market areas).
    g. These statutory reclassifications would have expired on 
September 30, 2003 but were extended by section 508(f) of Pub. L. 108-
173 and would otherwise expire on September 30, 2004. Because of the 
special circumstances of these hospitals as recognized by Congress, we 
believe it is appropriate to allow them to reclassify under this one-
time appeal process. However, like other hospitals, these hospitals 
must meet criterion 1 in order to be considered qualifying hospitals 
under the statute. Therefore, if a hospital would not meet criterion 1 
with regard to the MSA to which Congress reclassified it, then the 
hospital must reclassify to another MSA in its State where it would 
meet criterion 1 and with a FY 2004 wage index that most closely 
approximates the FY 2004 wage index of the area to which Congress 
reclassified it.
    h. This criterion would permit other hospitals that are not 
currently reclassified to be reclassified based upon the relationship 
between their AHW and the AHW of the area where they are geographically 
located. We believe it is appropriate to give priority to hospitals 
whose AHW exceeds the area's AHW by the largest percentage and 
demonstrate a significant disparity (that is at least 106 percent of 
the AHW of the area in which they are located) between the hospital's 
current AHW and the area AHW. Furthermore, rural hospitals tend to have 
lower AHWs in general than urban hospitals. Therefore, we believe it is 
appropriate to provide a bonus under this criterion to rural hospitals. 
Finally, we believe in light of Congress' mention of the submission of 
quality data in section 508(c)(2), and the importance for the future of 
health care quality to have performance measures that allow the 
Government to evaluate quality, it is appropriate to give preferential 
treatment to hospitals that have submitted these data.

D. One-Time Appeal Request Procedure

    We are providing that a hospital seeking reclassification under 
section 508 of Pub. L. 108-173 must submit a request in writing by 
February 15, 2004, to the MGCRB, with a copy to CMS. The request must 
be mailed. Facsimile or other electronic means are not acceptable.
    The request must contain the following information:
    [sbull] The hospital's name and street address.
    [sbull] The hospital's Medicare provider number.
    [sbull] For all communications regarding the appeals request, 
provide the name, title, and telephone number of a contact person.
    [sbull] Name of the area/county (include the MSA/identification 
number) where the hospital is located.
    [sbull] Name of the area/county (refer to the criteria) where the 
hospital wishes to be reclassified.
    [sbull] A statement of which criterion is applicable.
    A hospital's appeal request must be received by the MGCRB no later 
than 5 p.m. EDT on February 15, 2004. The request must be typed or 
clearly printed in ink.
    Hospitals must mail or deliver an original copy of their appeal 
request to the MGCRB's at the following address: Medicare Geographic 
Classification Review Board, 2520 Lord Baltimore Drive, Suite L, 
Baltimore, Maryland 21244-2670.
    Hospitals must simultaneously send an informational copy of their 
completed appeal request to the following address: Centers for Medicare 
and Medicaid Services, Center for Medicare Management, Hospital and 
Ambulatory Policy Group, Division of Acute Care, Attention: One-Time 
Appeals Process, Mail Stop C4-08-06, 7500 Security Boulevard, 
Baltimore, Maryland 21244-1850.
    Hospitals may want to send their application by a delivery method 
that guarantees a signed receipt, which indicates delivery and date of 
delivery of their appeal request to the MGCRB. The MGCRB and CMS 
addresses listed above are applicable for both United States mail and 
courier service delivery.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
    [sbull] The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
    [sbull] The accuracy of our estimate of the information collection 
burden.
    [sbull] The quality, utility, and clarity of the information to be 
collected.
    [sbull] Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    However, the collection requirements associated with section II.B. 
of this notice are currently approved under OMB PRA approval number 
0938-0573, ``Medicare Geographic Classification Review Board,'' with a 
current expiration date of October 31, 2005. In addition, we believe 
that any information collected subsequent to an administrative action, 
such as an appeal of a geographic classification, are exempt from the 
PRA as stipulated under 5 CFR 1320.4(a)(2).
    Consequently, this document does not impose any new information 
collection and recordkeeping requirements that would require a review 
by the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 35).

IV. Waiver of the Delay in Effective Date

    Section 903 of Pub. L. 108-173 amended section 1871(e)(1) of the 
Act to specify that a substantive change shall not become effective 
before the end of the 30-day period that begins on the date that the 
Secretary has issued or published the substantive change. Section 903 
of Pub. L. 108-173 also states the substantive change can take

[[Page 665]]

effect on a date that precedes the 30-day period if the Secretary finds 
that waiver of this period is necessary to comply with statutory 
requirements, or is contrary to the public interest. In addition, it 
specifies that the issuance or publication must include a brief 
statement of the reasons for such finding.
    This notice meets the waiver criteria described in section 
1871(e)(1)(B)(ii) of the Act, since section 508 of Pub. L. 108-173 
requires the Secretary to establish a one-time appeal process by 
January 1, 2004 and directs that the appeals be ``filed as soon as 
possible after the date of enactment of the Act.'' In order for the 
process to be established and for appeals to be filed as soon as 
possible, the process must be in effect, and there can be no delay in 
the effective date.

V. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), and 
Executive Order 13132.
    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 any 1 year). This notice 
would increase payments to hospitals by up to $900 million, and thus is 
considered a major rule.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. Since this notice does not impose any costs on State or 
local governments, the requirements of E.O. 13132 are not applicable.
    We estimate the impact of this provision will be to increase 
payments to hospitals by up to $900 million. As noted above, section 
508 of Pub. L. 108-173 specifies that the aggregate amount of 
additional expenditures resulting from the application of this section 
shall not exceed $900 million. Section 508(f) requires that hospitals 
previously reclassified by an act of Congress, but such 
reclassification expired effective with discharges on or after October 
1, 2003, shall have their reclassifications reinstated effective April 
1, 2004 through September 30, 2004. The extra payments for these 
reclassification extensions under section 508(f) are also subject to 
the $900 million limit.
    We estimate the increased payments under section 508(f) will total 
approximately $33 million. The higher payments associated with 
reclassifications under this one-time appeals process are not expected 
to exceed a total of $867 million (during the 3-year period covered by 
the provision).
    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

    Authority: Section 508(a) of the Public Law 108-173.

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

    Dated: December 19, 2003.
Dennis G. Smith,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: December 29, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-32337 Filed 12-31-03; 2:18 pm]
BILLING CODE 4120-01-P