[Federal Register Volume 69, Number 20 (Friday, January 30, 2004)]
[Proposed Rules]
[Pages 4754-4817]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-1886]



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Part V





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 412



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

  Federal Register / Vol. 69, No. 20 / Friday, January 30, 2004 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1263-P]
RIN 0938-AM84


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

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

ACTION: Proposed rule.

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SUMMARY: This rule proposes an update to the annual payment rates for 
the Medicare prospective payment system (PPS) for inpatient hospital 
services provided by long-term care hospitals (LTCHs). The payment 
amounts and factors used to determine the proposed updated Federal 
rates that are described in this proposed rule have been determined 
based on the LTCH PPS rate year. The annual update of the long-term 
care diagnosis-related groups (LTC-DRG) classifications and relative 
weights remains linked to the annual adjustments of the acute care 
hospital inpatient diagnosis-related group system, and will continue to 
be effective each October 1. The proposed outlier threshold for July 1, 
2004, through June 30, 2005, would also be derived from the LTCH PPS 
rate year calculations. In this proposed rule, we also are proposing to 
make clarifications to the existing policy regarding the designation of 
a satellite of a LTCH as an independent LTCH. In addition, we are 
proposing to expand the existing interrupted stay policy and proposing 
a change in the procedure for counting days in the average length of 
stay calculation for Medicare patients for hospitals qualifying as 
LTCHs.

DATES: We will consider comments if we receive them at the appropriate 
address, as provided below, no later than 5 p.m. on March 23, 2004.

ADDRESSES: In commenting, please refer to file code CMS-1263-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Submit electronic comments to http://www.accessdata.fda.gov/scripts/oc/dockets/comments/commentdocket.cfm?AGENCY=CMS or to http://www.regulations.gov. Mail written comments (one original and two 
copies) to the following address only: Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Attention: CMS-1263-
P, P.O. Box 8010, Baltimore, MD 21244-1850.

    If you prefer, you may deliver, by hand or courier, your written 
comments (an original and three copies) to one of the following 
addresses:

Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201, or
Room C5-14-03, Central Building, 7500 Security Boulevard, Baltimore, MD 
21244-1850.
    (Because access to the interior of the Humphrey Building is not 
readily available to persons without Federal government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for commenters who wish to retain proof of filing by stamping 
in and keeping an extra copy of the comments being filed.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and could be considered late.
    All comments received before the close of the comment period are 
available for viewing by the public, including any personally 
identifiable or confidential business information that is included in a 
comment. After the close of the comment period, CMS posts all 
electronic comments received before the close of the comment period on 
its public Web site.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 

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

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this rule to assist us in fully considering issues 
and developing policies. You can assist us by referencing the file code 
CMS-1263-P and the specific ``issue identifier'' that precedes the 
section on which you choose to comment.
    Inspection of Public Comments: Comments received timely will be 
available for public inspection as they are processed, generally 
beginning approximately 4 weeks after publication of a document, in 
Room C5-12-08 of the Centers for Medicare & Medicaid Services, 7500 
Security Blvd., Baltimore, MD, on Monday through Friday of each week 
from 8:30 a.m. to 5 p.m. Please call (410) 786-7197 to schedule an 
appointment to view public comments.

Availability of Copies and Electronic Access

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

Table of Contents

I. Background
    A. Legislative and Regulatory Authority
    B. Criteria for Classification as a LTCH
    1. Classification as a LTCH
    2. Hospitals Excluded from the LTCH PPS
    C. Transition Period for Implementation of the LTCH PPS
    D. Limitation on Charges to Beneficiaries
    E. Health Insurance Portability and Accountability Act 
Compliance

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II. Summary of Major Contents of This Proposed Rule
III. Long-Term Care Diagnosis-Related Group (LTC-DRG) 
Classifications and Relative Weights
    A. Background
    B. Patient Classifications into DRGs
    C. Organization of DRGs
    D. Update of LTC-DRGs
    E. ICD-9-CM Coding System
    1. Uniform Hospital Discharge Data Set (UHDDS) Definitions
    2. Maintenance of the ICD-9-CM Coding System
    3. Coding Rules and Use of ICD-9-CM Codes in LTCHs
    F. The Method for Updating the LTC-DRG Relative Weights
IV. Proposed Changes to the LTCH PPS Rates and Proposed Changes in 
Policy for the 2005 LTCH PPS Rate Year
    A. Overview of the Development of the Payment Rates
    B. Proposed Update to the Standard Federal Rate for the 2005 
LTCH PPS Rate Year
    1. Proposed Standard Federal Rate Update
    a. Description of the Market Basket for the Proposed 2005 LTCH 
PPS Rate Year
    b. Proposed LTCH Market Basket Increase for the 2005 LTCH PPS 
Rate Year
    2. Proposed Standard Federal Rate for the 2005 LTCH PPS rate 
year
    C. Calculation of Proposed LTCH Prospective Payments for the 
2005 LTCH PPS rate year
    1. Proposed Adjustment for Area Wage Levels
    a. Background
    b. Wage Index Data
    c. Proposed Labor-Related Share
    2. Proposed Adjustment for Cost-Of-Living in Alaska and Hawaii
    3. Proposed Adjustment for High-Cost Outliers
    a. Background
    b. Establishment of the Proposed Fixed-Loss Amount
    c. Reconciliation of Outlier Payments Upon Cost Report 
Settlement
    d. Application of Outlier Policy to Short-Stay Outlier Cases
    4. Proposed Adjustments for Special Cases
    a. General
    b. Adjustment for Short-Stay Outlier Cases
    c. Proposed Extension of the Interrupted Stay Policy
    d. Onsite Discharges and Readmittances
    5. Other Payment Adjustments
    6. Proposed Budget Neutrality Offset to Account for the 
Transition Methodology
    7. Proposed Changes in the Procedure for Counting Days in the 
Average Length of Stay Calculation
    8. Clarification of the Requirements for a Satellite Facility or 
a Remote Location to Qualify as a LTCH and Proposed Changes to the 
Requirements for Certain Satellite Facilities and Remote Locations
V. Computing the Proposed Adjusted Federal Prospective Payments for 
the 2005 LTCH PPS Rate Year
VI. Transition Period
VII. Payments to New LTCHs
VIII. Method of Payment
IX. Monitoring
X. Collection of Information Requirements
XI. Regulatory Impact Analysis
    A. Introduction
    1. Executive Order 12866
    2. Regulatory Flexibility Act (RFA)
    3. Impact on Rural Hospitals
    4. Unfunded Mandates
    5. Federalism
    B. Anticipated Effects of Proposed Payment Rate Changes
    1. Budgetary Impact
    2. Impact on Providers
    3. Calculation of Prospective Payments
    4. Results
    5. Effect on the Medicare Program
    6. Effect on Medicare Beneficiaries
    C. Impact of Proposed Policy Changes
    1. Clarification of the Requirements for Satellite Facilities 
and Remote Locations of Hospitals to Qualify as Long-Term Care 
Hospitals
    a. Proposed Policy Change for Certain Satellite Facilities and 
Remote Locations of a Hospital
    b. Technical Correction
    2. Proposed Change in Interruption of a Stay in a LTCH Policy
    3. Proposed Change in Procedure for Counting Covered and 
Noncovered Days in a Stay that Crosses Two Consecutive Cost 
Reporting Periods
    D. Executive Order 12866
Regulations Text
Addendum--Tables

Acronyms

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

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

I. Background

(If you choose to comment on issues in this section, please include the 
caption ``BACKGROUND'' at the beginning of your comments.)

A. Legislative and Regulatory Authority

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

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Pub. L. 106-554. This system uses information from LTCH patient records 
to classify patients into distinct long-term care diagnosis-related 
groups (LTC-DRGs) based on clinical characteristics and expected 
resource needs. Payments are calculated for each LTC-DRG and provisions 
are made for appropriate payment adjustments. Payment rates under the 
LTCH PPS are updated annually and published in the Federal Register.
    The LTCH PPS replaced the reasonable cost-based payment system 
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), 
Pub. L. 97-248, for payments for inpatient services provided by a LTCH 
with a cost reporting period beginning on or after October 1, 2002. 
(The regulations implementing the TEFRA (reasonable cost-based) payment 
provisions are located at 42 CFR part 413.) With the implementation of 
the prospective payment system for acute care hospitals authorized by 
the Social Security Amendments of 1983 (Pub. L. 98-21), which added 
section 1886(d) to the Act, certain hospitals, including LTCHs, were 
excluded from the PPS for acute care hospitals and were paid their 
reasonable costs for inpatient services subject to a per discharge 
limitation or target amount under the TEFRA system. For each cost 
reporting period, a hospital-specific ceiling on payments was 
determined by multiplying the hospital's updated target amount by the 
number of total current year Medicare discharges. The August 30, 2002, 
final rule further details payment policy under the TEFRA system (67 FR 
55954).
    In the August 30, 2002, final rule, we presented an in-depth 
discussion of the LTCH PPS, including the patient classification 
system, relative weights, payment rates, additional payments, and the 
budget neutrality requirements mandated by section 123 of Pub. L. 106-
113. The same final rule, that established regulations for the LTCH PPS 
under 42 CFR part 412, subpart O, also contained provisions related to 
covered inpatient services, limitation on charges to beneficiaries, 
medical review requirements, furnishing of inpatient hospital services 
directly or under arrangement, and reporting and recordkeeping 
requirements.
    We refer readers to the August 30, 2002, final (67 FR 55954) rule 
for a comprehensive discussion of the research and data that supported 
the establishment of the LTCH PPS.
    On June 6, 2003, we published a final rule in the Federal Register 
(68 FR 34122) that set forth the annual update of the payment rates for 
the Medicare PPS for inpatient hospital services furnished by LTCHs. It 
also changed the annual period for which the payment rates are 
effective. The annual updated rates are now effective from July 1 to 
June 30 instead of from October 1 through September 30. We refer to 
this time period as a ``long-term care hospital rate year'' (LTCH PPS 
rate year). In addition, we changed the publication schedule for these 
updates to allow for an effective date of July 1. The payment amounts 
and factors used to determine the annual update of the Federal rates 
are based on a LTCH PPS rate year. The annual update of the LTC-DRG 
classifications and relative weights are linked to the annual 
adjustments of the acute care hospital inpatient diagnosis-related 
groups and are effective each October 1.

B. Criteria for Classification as a LTCH

1. Classification as a LTCH
    Under the existing regulations at Sec.Sec. 412.23(e)(1) and (2)(i), 
which implement section 1886(d)(1)(B)(iv)(I) of the Act, to qualify to 
be paid under the LTCH PPS, a hospital must have a provider agreement 
with Medicare and must have an average Medicare inpatient length of 
stay of greater than 25 days. Alternatively, for cost reporting periods 
beginning on or after August 5, 1997, a hospital that was first 
excluded from the PPS in 1986, and can demonstrate that at least 80 
percent of its annual Medicare inpatient discharges in the 12-month 
cost reporting period ending in FY 1997 have a principal diagnosis that 
reflects a finding of neoplastic disease must have an average inpatient 
length of stay for all patients, including both Medicare and non-
Medicare inpatients, of greater than 20 days (Sec. 412.23(e)(2)(ii)).
    Existing Sec. 412.23(e)(3) provides that the average Medicare 
inpatient length of stay is determined based on all covered and 
noncovered days of stay of Medicare patients as calculated by dividing 
the total number of covered and noncovered days of stay of Medicare 
inpatients (less leave or pass days) by the number of total Medicare 
discharges for the hospital's most recent complete cost reporting 
period. Fiscal intermediaries verify that LTCHs meet the average length 
of stay requirements. We note that the inpatient days of a patient who 
is admitted to a LTCH without any remaining Medicare days of coverage, 
regardless of the fact that the patient is a Medicare beneficiary, will 
not be included in the above calculation. Because Medicare would not be 
paying for any of the patient's treatment, the patient is not a 
``Medicare inpatient'' and data on the patient's stay would not be 
included in the Medicare claims processing systems. In order for both 
covered and noncovered days of a LTCH hospitalization to be included, 
for purposes of the average length of stay calculation, a patient 
admitted to the LTCH must have at least one remaining benefit day as 
described in Sec. 409.61.
    The fiscal intermediary's determination of whether or not a 
hospital qualifies as an LTCH is based on the hospital's discharge data 
from its most recent cost reporting period and is effective at the 
start of the hospital's next cost reporting period (Sec. 412.22(d)). If 
a hospital does not meet the length of stay requirement, the hospital 
may provide the intermediary with data indicating a change in the 
hospital's average length of stay by the same method for the period of 
at least 5 months of the immediately preceding 6-month period (Sec. 
412.23(e)(3)(ii)). (See 68 FR 45464, August 1, 2003.) Requirements for 
hospitals seeking classification as LTCHs that have undergone a change 
in ownership, as described in Sec. 489.18, are set forth in Sec. 
412.23(e)(3)(iii).
    LTCHs that exist as hospitals-within-hospitals or satellite 
facilities of LTCHs must also meet the criteria set forth in Sec. 
412.22(e) or Sec. 412.22(h), respectively, for the LTCH to be excluded 
from the acute care hospital inpatient prospective payment system 
(IPPS) and paid under the LTCH PPS.
2. Hospitals Excluded From the LTCH PPS
    The following hospitals are paid under special payment provisions, 
as described in Sec. 412.22(c) and, therefore, are not subject to the 
LTCH PPS rules:
     Veterans Administration hospitals.
     Hospitals that are reimbursed under State cost 
control systems approved under 42 CFR part 403.
     Hospitals that are reimbursed in accordance with 
demonstration projects authorized under section 402(a) of Public Law 
90-248 (42 U.S.C. 1395b-1) or section 222(a) of Public Law 92-603 (42 
U.S.C. 1395b-1 (note)) (statewide all-payer systems, subject to the 
rate-of-increase test at section 1814(b) of the Act).
     Nonparticipating hospitals furnishing emergency 
services to Medicare beneficiaries.

C. Transition Period for Implementation of the LTCH PPS

    In the August 30, 2002, final rule, we provided for a 5-year 
transition period from reasonable cost-based reimbursement to fully 
Federal prospective payment for LTCHs (67 FR 56038). During the 5-year 
period, two

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payment percentages are to be used to determine a LTCH's total payment 
under the PPS. The blend percentages are as follows:

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

D. Limitation on Charges to Beneficiaries

    In the August 30, 2002, final rule, we presented an in-depth 
discussion of beneficiary liability under the LTCH prospective payment 
system (67 FR 55974-55975). Under Sec. 412.507, as consistent with 
other established hospital prospective payment systems, a LTCH may not 
bill a Medicare beneficiary for more than the deductible and 
coinsurance amounts as specified under Sec.Sec. 409.82, 409.83, and 
409.87 and for items and services as specified under Sec. 489.30(a), if 
the Medicare payment to the LTCH is the full LTC-DRG payment amount. 
However, under the LTCH PPS, Medicare will only pay for days for which 
the beneficiary has coverage until the short-stay outlier threshold is 
exceeded. (See section IV.C.4.b.) Therefore, if the Medicare payment 
was for a short-stay outlier case (Sec. 412.529) that was less than the 
full LTC-DRG payment amount because the beneficiary had insufficient 
remaining Medicare days, the LTCH could also charge the beneficiary for 
services delivered on those uncovered days. (Sec. 412.507).
    Since the origin of the Medicare system, the intent of our 
regulations has been to set limits on beneficiary liability and to 
clearly establish the circumstances under which the beneficiary would 
be required to assume responsibility for payment, that is, upon 
exhausting benefits described in 42 CFR part 409, subpart F. The 
discussion in the August 30, 2002, final rule was not meant to 
establish rates or payments for, or define, Medicare-eligible expenses. 
While we regulate beneficiary liability for coinsurance and deductibles 
for hospital stays that are covered by Medicare, payments from Medigap 
insurers to providers for inpatient hospital coverage after Medicare 
benefits are exhausted are not regulated by us. Furthermore, 
regulations beginning at Sec. 403.200 and the 1991 National Association 
of Insurance Commissioners (NAIC) Model Regulation for Medicare 
Supplemental Insurance, which was incorporated by reference into 
section 1882 of the Act, govern the relationship between Medigap 
insurers and beneficiaries.

E. Health Insurance Portability and Accountability Act Compliance

    We note that as of October 16, 2002, a LTCH that was required to 
comply with the Administrative Simplification Standards under the 
Health Insurance Portability and Accountability Act (HIPAA) (Pub. L. 
104-191) and that had not obtained an extension in compliance with the 
Administrative Compliance Act (Pub. L. 107-105) is obligated to comply 
with the standards for submitting claim forms to the LTCH's Medicare 
fiscal intermediary (45 CFR 162.1002 and 45 CFR 162.1102). Beginning 
October 16, 2003, LTCHs that obtained an extension and that are 
required to comply with the HIPAA Administrative Simplification 
Standards must start submitting electronic claims in compliance with 
the HIPAA regulations cited above, among others.

II. Summary of Major Contents of This Proposed Rule

    We are proposing an annual update of the payment rates for the 
Medicare PPS for inpatient hospital services provided by LTCHs for the 
2005 LTCH PPS rate year. (The annual update of the LTC-DRG 
classifications and relative weights for FY 2005 remains linked to the 
annual adjustments of the acute care hospital inpatient DRG system and 
will be effective October 1, 2004.)
    We are proposing an outlier threshold for July 1, 2004, through 
June 30, 2005, derived from the LTCH PPS rate year calculations.
    As discussed in section I.B.2. of this preamble, we are proposing a 
change in the procedure for counting the days in the inpatient average 
length of stay for hospitals to qualify as LTCHs.
    In section I.B.3. of this preamble, we discuss and clarify existing 
policies regarding the classification of a satellite facility, or a 
remote location, of a LTCH as an independent LTCH and propose new 
policies for certain satellite facilities and remote locations.
    In section IV.C.4.c. of this preamble, we are proposing to revise 
existing interrupted stay policy applicable under the LTCH PPS.

III. Long-Term Care Diagnosis-Related Group (LTC-DRG) Classifications 
and Relative Weights

(If you choose to comment on issues in this section, please include the 
caption ``LTC-DRG CLASSIFICATIONS AND RELATIVE WEIGHTS'' at the 
beginning of your comments.)

A. Background

    Section 123 of Pub. L. 106-113 specifically requires that the PPS 
for LTCHs be a per discharge system with a DRG-based patient 
classification system reflecting the differences in patient resources 
and costs in LTCHs while maintaining budget neutrality. Section 
307(b)(1) of Pub. L. 106-554 modified the requirements of section 123 
of Pub. L. 106-113 by specifically requiring that the Secretary examine 
``the feasibility and the impact of basing payment under such a system 
[the LTCH PPS] on the use of existing (or refined) hospital DRGs that 
have been modified to account for different resource use of LTCH 
patients as well as the use of the most recently available hospital 
discharge data.''
    In accordance with section 307(b)(1) of Pub. L. 106-554 and Sec. 
412.515 of our existing regulations, the LTCH PPS uses information from 
LTCH patient records to classify patient cases into distinct LTC-DRGs 
based on clinical characteristics and expected resource needs. The LTC-
DRGs used as the patient classification component of the LTCH PPS 
correspond to the hospital inpatient DRGs in the IPPS. We apply weights 
to the existing hospital inpatient DRGs to account for the difference 
in resource use by patients exhibiting the case complexity and multiple 
medical problems characteristic of LTCHs.
    In a departure from the IPPS, we use low volume LTC-DRGs (less than 
25

[[Page 4758]]

LTCH cases) in determining the LTC-DRG weights, since LTCHs do not 
typically treat the full range of diagnoses as do acute care hospitals. 
In order to deal with the large number of low volume DRGs (all DRGs 
with fewer than 25 cases), we group low volume DRGs into 5 quintiles 
based on average charge per discharge. (A listing of the composition of 
low volume quintiles appears in the August 30, 2002, LTCH PPS final 
rule at 67 FR 55986.) We also take into account adjustments to payments 
for cases in which the stay at the LTCH is five-sixths of the geometric 
average length of stay and classify these cases as short-stay outlier 
cases. (A detailed discussion of the application of the Lewin Group 
model that was used to develop the LTC-DRGs appears in the August 30, 
2002 LTCH PPS final rule at 67 FR 55978.)

B. Patient Classifications Into DRGs

    Generally, under the LTCH PPS, Medicare payment is made at a 
predetermined specific rate for each discharge; that payment varies by 
the LTC-DRG to which a beneficiary's stay is assigned. Cases are 
classified into LTC-DRGs for payment based on the following six data 
elements:
    (1) Principal diagnosis.
    (2) Up to eight additional diagnoses.
    (3) Up to six procedures performed.
    (4) Age.
    (5) Sex.
    (6) Discharge status of the patient.
    Upon the discharge of the patient from a LTCH, the LTCH must assign 
appropriate diagnosis and procedure codes from the International 
Classification of Diseases, Ninth Revision, Clinical Modification (ICD-
9-CM). As of October 16, 2002, a LTCH that was required to comply with 
the HIPAA Administrative Simplification Standards and that had not 
obtained an extension in compliance with the Administrative Compliance 
Act (Pub. L. 107-105) is obligated to comply with the standards at 45 
CFR 162.1002 and 45 CFR 162.1102. Completed claim forms are to be 
submitted to the LTCH's Medicare fiscal intermediary.
    Medicare fiscal intermediaries enter the clinical and demographic 
information into their claims processing systems and subject this 
information to a series of automated screening processes called the 
Medicare Code Editor (MCE). These screens are designed to identify 
cases that require further review before assignment into a DRG can be 
made. During this process, the following types of cases are selected 
for further development:
     Cases that are improperly coded. (For example, 
diagnoses are shown that are inappropriate, given the sex of the 
patient. Code 68.6, Radical abdominal hysterectomy, would be an 
inappropriate code for a male.)
     Cases including surgical procedures not covered 
under Medicare. (For example, organ transplant in a nonapproved 
transplant center.)
     Cases requiring more information. (For example, 
ICD-9-CM codes are required to be entered at their highest level of 
specificity. There are valid 3-digit, 4-digit, and 5-digit codes. That 
is, code 136.3, Pneumocystosis, contains all appropriate digits, but if 
it is reported with either fewer or more than 4 digits, the claim will 
be rejected by the MCE as invalid.)
     Cases with principal diagnoses that do not 
usually justify admission to the hospital. (For example, code 437.9, 
Unspecified cerebrovascular disease. While this code is valid according 
to the ICD-9-CM coding scheme, a more precise code should be used for 
the principal diagnosis.)
    After screening through the MCE, each claim will be classified into 
the appropriate LTC-DRG by the Medicare LTCH GROUPER. The LTCH GROUPER 
is specialized computer software based on the same GROUPER used by the 
IPPS. The GROUPER software was developed as a means of classifying each 
case into a DRG on the basis of diagnosis and procedure codes and other 
demographic information (age, sex, and discharge status). Following the 
LTC-DRG assignment, the Medicare fiscal intermediary will determine the 
prospective payment by using the Medicare PRICER program, which 
accounts for hospital-specific adjustments. As provided for under the 
IPPS, we provide an opportunity for the LTCH to review the LTC-DRG 
assignments made by the fiscal intermediary and to submit additional 
information within a specified timeframe (Sec. 412.513(c)).
    The GROUPER is used both to classify past cases in order to measure 
relative hospital resource consumption to establish the DRG weights and 
to classify current cases for purposes of determining payment. The 
records for all Medicare hospital inpatient discharges are maintained 
in the MedPAR file. The data in this file are used to evaluate possible 
DRG classification changes and to recalibrate the DRG weights during 
our annual update. DRG weights are based on data for the population of 
LTCH discharges, reflecting the fact that LTCH patients represent a 
different patient-mix than patients in short-term acute care hospitals.

C. Organization of DRGs

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

[[Page 4759]]

of comorbidities and complications could be incorporated into the 
existing DRG structure. It is also possible a more comprehensive 
severity adjusted structure may be created if a new code set is 
adopted. That is, if ICD-9-CM is replaced by ICD-10-CM (for diagnostic 
coding) and ICD-10-PCS (for procedure coding) or by other code sets, a 
severity concept may be built into the resulting DRG assignments. Of 
course any change to the code set would be adopted through the process 
established in the HIPAA Administrative Simplification Standards 
provisions.

D. Update of LTC-DRGs

    For FY 2004, the LTC-DRG patient classification system was based on 
LTCH data from the FY 2002 MedPAR file, which contained hospital bills 
data from the December 2002 update. The patient classification system 
consisted of 518 DRGs that formed the basis of the FY 2004 LTCH PPS 
GROUPER. The 518 LTC-DRGs included two ``error DRGs''. As in the IPPS, 
we included two error DRGs in which cases that cannot be assigned to 
valid DRGs will be grouped. These two error DRGs are DRG 469 (Principal 
Diagnosis Invalid as a Discharge Diagnosis) and DRG 470 (Ungroupable). 
(See the August 1, 2001, Medicare Program final rule, Changes to the 
Hospital Inpatient Prospective Payment Systems and Rates and Costs of 
Graduate Medical Education; Fiscal Year 2002 Rates (66 FR 40062).) The 
other 516 LTC-DRGs are the same DRGs used in the IPPS GROUPER for FY 
2004 (Version 21.0).
    In the health care industry, annual changes to the ICD-9-CM codes 
are effective for discharges occurring on or after October 1 each year. 
Thus, the manual and electronic versions of the GROUPER software, which 
are based on the ICD-9-CM codes, are also revised annually and 
effective for discharges occurring on or after October 1 each year. As 
discussed earlier, the patient classification system for the LTCH PPS 
(LTC-DRGs) is based on the IPPS patient classification system (CMS-
DRGs), which is updated annually and effective for discharges occurring 
on or after October 1 through September 30 each year. The updated DRGs 
and GROUPER software are based on the latest revision to the ICD-9-CM 
codes, which are published annually in the IPPS proposed rule and final 
rule. The new or revised ICD-9-CM codes are not used by the industry 
for either the IPPS or the LTCH PPS until the beginning of the next 
Federal fiscal year (effective for discharges occurring on or after 
October 1 through September 30). (The use of the ICD-9-CM codes in this 
manner is consistent with current usage and the HIPAA regulations.) 
October 1 is also when the changes to the CMS-DRGs and the next version 
of the GROUPER software becomes effective.
    As indicated in the June 3, 2002, LTCH PPS and the August 1, 2003, 
IPPS final rules (68 FR 34122 and 68 FR 45374), we make the annual 
update to the LTCH PPS effective from July 1 through June 30 each year. 
As a result, the LTCH PPS uses two GROUPERS during the course of a 12-
month period: one GROUPER for 3 months (from July 1 through September 
30); and an updated GROUPER for 9 months (from October 1 through June 
30). The need to use two GROUPERs is based upon the October 1 effective 
date of the updated ICD-9-CM coding system. As previously discussed, 
new ICD-9-CM codes may result in changes to the structure of the DRGs. 
In order for the industry to be on the same schedule (for both the IPPS 
and the LTCH PPS) for the use of the most current ICD-9-CM codes, it is 
necessary for us to apply two GROUPER programs to the LTCH PPS. LTCHs 
will continue to code diagnosis and procedures using the most current 
version of the ICD-9-CM coding system.
    Currently, for Federal FY 2004, we are using Version 21.0 of the 
GROUPER software for both the IPPS and the LTCH PPS. Discharges 
beginning on October 1, 2003, and before October 1, 2004 (Federal FY 
2004), will use Version 21.0 of the GROUPER software for both the IPPS 
and the LTCH PPS. Thus, changes to the CMS-DRGs (the DRGs on which the 
LTC-DRGs are based) and their relative weights, as well as the LTC-DRGs 
and their relative weights, that will be effective for October 1, 2004, 
through September 30, 2005, will be presented in the IPPS FY 2005 
proposed rule that will be published in the Federal Register in the 
spring of 2004 and finalized in a final rule to be published by August 
1, 2004. Accordingly, we will notify LTCHs of any revised LTC-DRG 
relative weights based on the final DRGs and the applicable GROUPER 
version for the IPPS that will be effective October 1, 2004.

E. ICD-9-CM Coding System

1. Uniform Hospital Discharge Data Set (UHDDS) Definitions
    Because the assignment of a case to a particular LTC-DRG will help 
determine the amount that will be paid for the case, it is important 
that the coding is accurate. Classifications and terminology used in 
the LTCH PPS are consistent with the ICD-9-CM and the UHDDS, as 
recommended to the Secretary by the National Committee on Vital and 
Health Statistics (``Uniform Hospital Discharge Data: Minimum Data Set, 
National Center for Health Statistics, April 1980'') and as revised in 
1984 by the Health Information Policy Council (HIPC) of the U.S. 
Department of Health and Human Services.
    We point out that the ICD-9-CM coding terminology and the 
definitions of principal and other diagnoses of the UHDDS are 
consistent with the requirements of the HIPAA Administrative 
Simplification Act of 1996 (45 CFR Part 162). Furthermore, the UHDDS 
has been used as a standard for the development of policies and 
programs related to hospital discharge statistics by both governmental 
and nongovernmental sectors for over 30 years. In addition, the 
following definitions (as described in the 1984 Revision of the UHDDS, 
approved by the Secretary of Health and Human Services for use starting 
January 1986) are requirements of the ICD-9-CM coding system, and have 
been used as a standard for the development of the CMS-DRGs:
     Diagnoses include all diagnoses that affect the 
current hospital stay.
     Principal diagnosis is defined as the condition 
established after study to be chiefly responsible for occasioning the 
admission of the patient to the hospital for care.
     Other diagnoses (also called secondary diagnoses 
or additional diagnoses) are defined as all conditions that coexist at 
the time of admission, that develop subsequently, or that affect the 
treatment received or the length of stay or both. Diagnoses that relate 
to an earlier episode of care that have no bearing on the current 
hospital stay are excluded.
     All procedures performed will be reported. This 
includes those that are surgical in nature, carry a procedural risk, 
carry an anesthetic risk, or require specialized training.
    We provide LTCHs with a 60-day window after the date of the notice 
of the initial LTC-DRG assignment to request review of that assignment. 
Additional information may be provided by the LTCH to the fiscal 
intermediary as part of that review.
2. Maintenance of the ICD-9-CM Coding System
    The ICD-9-CM Coordination and Maintenance (C&M) Committee is a 
Federal interdepartmental committee, co-chaired by the National Center 
for Health Statistics (NCHS) and CMS, that is charged with maintaining 
and updating the ICD-9-CM system. The C&M Committee is jointly 
responsible

[[Page 4760]]

for approving coding changes, and developing errata, addenda, and other 
modifications to the ICD-9-CM to reflect newly developed procedures and 
technologies and newly identified diseases. The C&M Committee is also 
responsible for promoting the use of Federal and non-Federal 
educational programs and other communication techniques with a view 
toward standardizing coding applications and upgrading the quality of 
the classification system.
    The NCHS has lead responsibility for the ICD-9-CM diagnosis codes 
included in the Tabular List and Alphabetic Index for Diseases, while 
CMS has lead responsibility for the ICD-9-CM procedure codes included 
in the Tabular List and Alphabetic Index for Procedures.
    The C&M Committee encourages participation by health-related 
organizations in the above process and holds public meetings for 
discussion of educational issues and proposed coding changes twice a 
year at the CMS Central Office located in Baltimore, Maryland. The 
agenda and dates of the meetings can be accessed on the CMS Web site 
at: http://www.cms.gov/paymentsystems/icd9.
    All changes to the ICD-9-CM coding system affecting DRG assignment 
are addressed annually in the IPPS proposed and final rules. Because 
the DRG-based patient classification system for the LTCH PPS is based 
on the IPPS DRGs, these changes will also affect the LTCH PPS LTC-DRG 
patient classification system.
    As discussed above, the ICD-9-CM coding changes that have been 
adopted by the C&M Committee become effective at the beginning of each 
Federal fiscal year, October 1. Regardless of the annual update of the 
LTCH PPS on July 1 of each year, coders will use the most current 
updated ICD-9-CM coding book, which is effective from October 1 through 
September 30 of each year. This means that coders and LTCHs that use 
the updated ICD-9-CM coding system will be on the same schedule 
(effective October 1) as the rest of the health care industry. The 
newest version of ICD-9-CM is not available for use until October 1 of 
each year, which is 5 months after the date that we publish the LTCH 
annual payment rate update final rule. The new codes on which the LTC-
DRGs are based will go into effect and be available for use for 
discharges occurring on or after October 1 through September 30 of each 
year. This annual schedule of the revision to the ICD-9-CM coding 
system and the change of the ICD-9-CM coding books or electronic coding 
programs has been in effect since the adoption of Revision 9 of the ICD 
in 1979.
    Of particular note to LTCHs will be the invalid diagnosis codes 
(Table 6C) and the invalid procedure codes (Table 6D) located in the 
annual proposed and final rules for the IPPS. Claims with invalid codes 
will not be processed by the Medicare claims processing system.
3. Coding Rules and Use of ICD-9-CM Codes in LTCHs
    We emphasize the need for proper coding by LTCHs. Inappropriate 
coding of cases can adversely affect the uniformity of cases in each 
LTC-DRG and produce inappropriate weighting factors at recalibration. 
We continue to urge LTCHs to focus on improved coding practices. 
Because of concerns raised by LTCHs concerning correct coding, we have 
asked the American Hospital Association (AHA) to provide additional 
clarification or instruction on proper coding in the LTCH setting. The 
AHA will provide this instruction via their established process of 
addressing questions through their publication ``Coding Clinic for ICD-
9-CM''. Written questions or requests for clarification may be 
addressed to the Central Office on ICD-9-CM, American Hospital 
Association, One North Franklin, Chicago, IL 60606. A form for the 
question(s) is available to be downloaded and mailed on AHA's Web site 
at: http://www.ahacentraloffice.org. In addition, current coding 
guidelines are available at the National Center for Health Statistics 
(NCHS) Web site: www.cdc.gov/nchs.icd9.htm.
    In conjunction with the cooperating parties (AHA, the American 
Health Information Management Association (AHIMA), and NCHS), we have 
reviewed actual medical records and are concerned about the quality of 
the documentation under the LTCH PPS, as was the case at the beginning 
of the IPPS. We fully believe that, with experience, the quality of the 
documentation and coding will improve, just as it did for the IPPS. As 
noted above, the cooperating parties have plans to assist their members 
with improvement in documentation and coding issues for the LTCHs 
through specific questions and coding guidelines. The importance of 
good documentation is emphasized in the revised ICD-9-CM Official 
Guidelines for Coding and Reporting (October 1, 2002): ``A joint effort 
between the attending physician and coder is essential to achieve 
complete and accurate documentation, code assignment, and reporting of 
diagnoses and procedures. The importance of consistent, complete 
documentation in the medical record cannot be overemphasized. Without 
such documentation, the application of all coding guidelines is a 
difficult, if not impossible, task. (Coding Clinic for ICD-9-CM, Fourth 
Quarter 2002, page 115)
    To improve medical record documentation, LTCHs should be aware that 
if the patient is being admitted for continuation of treatment of an 
acute or chronic condition, guidelines at Section I.B.10 of the Coding 
Clinic for ICD-9-CM, Fourth Quarter 2002 (page 129) are applicable 
concerning selection of principal diagnosis. To clarify coding advice 
issued in the August 30, 2002, final rule (67 FR 55979-55981), we would 
like to point out that at Guideline I.B.12, Late Effects, a late effect 
is considered to be the residual effect (condition produced) after the 
acute phase of an illness or injury has terminated (Coding Clinic for 
ICD-9-CM, Fourth Quarter 2002, page 129). Regarding whether a LTCH 
should report the ICD-9-CM code(s) for an unresolved acute condition 
instead of the code(s) for late effect of rehabilitation, we emphasize 
that each case must be evaluated on its unique circumstances and coded 
appropriately. Depending on the documentation in the medical record, 
either a code reflecting the acute condition or rehabilitation could be 
appropriate in a LTCH.
    Since implementation of the LTCH PPS, our Medicare fiscal 
intermediaries have been conducting training and providing assistance 
to LTCHs in correct coding. We have also issued manuals containing 
procedures as well as coding instructions to LTCHs and fiscal 
intermediaries. We will continue to conduct such training and provide 
guidance on an as-needed basis. We also refer readers to the detailed 
discussion on correct coding practices in the August 30, 2002, LTCH PPS 
final rule (67 FR 55979-55981). Additional coding instructions and 
examples will be published in Coding Clinic for ICD-9-CM.

F. The Method for Updating the LTC-DRG Relative Weights

    As discussed in the June 6, 2003, LTCH PPS final rule (68 FR 
34131), under the LTCH PPS each LTCH will receive a payment that 
represents an appropriate amount for the efficient delivery of care to 
Medicare patients. The system must be able to account adequately for 
each LTCH's case-mix in order to ensure both fair distribution of 
Medicare payments and access to adequate care for those Medicare 
patients whose care is more costly. Therefore, in accordance with 
section

[[Page 4761]]

412.523(c), we adjust the standard Federal PPS rate by the LTC-DRG 
relative weights in determining payment to LTCHs for each case.
    Under this payment system, relative weights for each LTC-DRG are a 
primary element used to account for the variations in cost per 
discharge and resource utilization among the payment groups (section 
412.515). To ensure that Medicare patients who are classified to each 
LTC-DRG have access to an appropriate level of services and to 
encourage efficiency, we calculate a relative weight for each LTC-DRG 
that represents the resources needed by an average inpatient LTCH case 
in that LTC-DRG. For example, cases in a LTC-DRG with a relative weight 
of 2 will, on average, cost twice as much as cases in a LTC-DRG with a 
weight of 1.
    As we discussed in the August 1, 2003, IPPS final rule (68 FR 
45374-45384), the LTC-DRG relative weights effective under the LTCH PPS 
for Federal FY 2004 were calculated using the December 2002 update of 
FY 2002 MedPAR data and Version 21.0 of the CMS GROUPER software. We 
use total days and total charges in the calculation of the LTC-DRG 
relative weights.
    By nature, LTCHs often specialize in certain areas, such as 
ventilator-dependent patients and rehabilitation and wound care. Some 
case types (DRGs) may be treated, to a large extent, in hospitals that 
have, from a perspective of charges, relatively high (or low) charges. 
Such distribution of cases with relatively high (or low) charges in 
specific LTC-DRGs has the potential to inappropriately distort the 
measure of average charges. To account for the fact that cases may not 
be randomly distributed across LTCHs, we use a hospital-specific 
relative value method to calculate relative weights. We believe this 
method removes this hospital-specific source of bias in measuring 
average charges. Specifically, we reduce the impact of the variation in 
charges across providers on any particular LTC-DRG relative weight by 
converting each LTCH's charge for a case to a relative value based on 
that LTCH's average charge. (See the August 1, 2003, IPPS final rule 
(68 FR 45376) for further information on the hospital-specific relative 
value methodology.)
    In order to account for LTC-DRGs with low volume (that is, with 
fewer than 25 LTCH cases), we grouped those low volume LTC-DRGs into 
one of five categories (quintiles) based on average charges, for the 
purposes of determining relative weights. For FY 2004 based on the FY 
2002 MedPAR data, we identified 173 LTC-DRGs that contained between 1 
and 24 cases. This list of low volume LTC-DRGs was then divided into 
one of the five low volume quintiles, each containing a minimum of 34 
LTC-DRGs (173/5 = 34 with 1 LTC-DRG as a remainder). Each of the low 
volume LTC-DRGs grouped to a specific quintile received the same 
relative weight and average length of stay using the formula applied to 
the regular LTC-DRGs (25 or more cases), as described below. (See the 
August 1, 2003, final rule (68 FR 45376-45380) for further explanation 
of the development and composition of each of the five low volume 
quintiles for FY 2004.)
    After grouping the cases in the appropriate LTC-DRG, we calculate 
the relative weights by first removing statistical outliers and cases 
with a length of stay of 7 days or less. Next, we adjust the number of 
cases in each LTC-DRG for the effect of short-stay outlier cases under 
Sec. 412.529. The short-stay adjusted discharges and corresponding 
charges were used to calculate ``relative adjusted weights'' in each 
LTC-DRG using the hospital-specific relative value method described 
above. (See August 1, 2003, final rule (68 FR 45376-45385) for further 
details on the steps for calculating the LTC-DRG relative weights.)
    We also adjust the LTC-DRG relative weights to account for 
nonmonotonically increasing relative weights. That is, we make an 
adjustment if cases classified to the LTC-DRG ``with comorbidities 
(CCs)'' of a ``with CC''/``without CC'' pair had a lower average charge 
than the corresponding LTC-DRG ``without CCs'' by assigning the same 
weight to both LTC-DRGs in the ``with CC''/``without CC'' pair. (See 
August 1, 2003, final rule, 68 FR 45381-45382.) In addition, of the 518 
LTC-DRGs in the LTCH PPS for FY 2004, based on the FY 2002 MedPAR data, 
we identified 167 LTC-DRGs for which there were no LTCH cases in the 
database. That is, no patients who would have been classified to those 
DRGs were treated in LTCHs during FY 2002 and, therefore, no charge 
data were reported for those DRGs. Thus, in the process of determining 
the relative weights of LTC-DRGs, we were unable to determine weights 
for these 167 LTC-DRGs using the method described above. However, since 
patients with a number of the diagnoses under these LTC-DRGs may be 
treated at LTCHs beginning in FY 2004, we assigned relative weights to 
each of the 167 ``no volume'' LTC-DRGs based on clinical similarity and 
relative costliness to one of the remaining 351 (518 - 167 = 351) LTC-
DRGs for which we were able to determine relative weights, based on the 
FY 2002 claims data. (A list of the no volume LTC-DRGs and further 
explanation of their relative weight assignment can be found in the 
August 1, 2003, IPPS final rule (68 FR 45374-45385).)
    Furthermore, for FY 2004 we established LTC-DRG relative weights of 
0.0000 for heart, kidney, liver, lung, pancreas, and simultaneous 
pancreas/kidney transplants (LTC-DRGs 103, 302, 480, 495, 512 and 513, 
respectively) because Medicare will only cover these procedures if they 
are performed at a hospital that has been certified for the specific 
procedures by Medicare and presently no LTCH has been so certified. If 
in the future, however, a LTCH applies for certification as a Medicare-
approved transplant center, we believe that the application and 
approval procedure would allow sufficient time for us to propose 
appropriate weights for the LTC-DRGs effected. At the present time, 
though, we include these six transplant LTC-DRGs in the GROUPER program 
for administrative purposes. As the LTCH PPS uses the same GROUPER 
program for LTCHs as is used under the IPPS, removing these DRGs would 
be administratively burdensome.
    As we stated in the August 1, 2003, IPPS final rule, we will 
continue to use the same LTC-DRGs and relative weights for FY 2004 
until October 1, 2004. Accordingly, Table 3 in the Addendum to this 
proposed rule lists the LTC-DRGs and their respective relative weights 
and arithmetic mean length of stay that we will continue to use for the 
period of July 1, 2004, through September 30, 2004. (This table is the 
same as Table 3 of the Addendum to the August 1, 2003, IPPS final rule 
(68 FR 45650-45658), except that it includes the proposed five-sixth of 
the average length of stay for short-stay outliers under Sec. 412.529.) 
As we noted earlier, the final DRGs and GROUPER for FY 2005 that will 
be used for the IPPS and the LTCH PPS, effective October 1, 2004, will 
be presented in the IPPS FY 2005 proposed and final rule in the Federal 
Register.
    Accordingly, we will notify LTCHs of the revised LTC-DRG relative 
weights for use in determining payments for discharges occurring 
between October 1, 2004, and September 30, 2005, based on the final 
DRGs and the applicable GROUPER version that will be published in the 
IPPS rule by August 1, 2004.

IV. Proposed Changes to the LTCH PPS Rates and Proposed Changes in 
Policy for the 2005 LTCH PPS Rate Year

(If you choose to comment on issues in this section, please include the 
caption

[[Page 4762]]

``PROPOSED CHANGES TO LTCH PPS RATES AND POLICY FOR THE 2005 LTCH PPS 
RATE YEAR'' at the beginning of your comments.)

A. Overview of the Development of the Payment Rates

    The LTCH PPS was effective for a LTCH's first cost reporting period 
beginning on or after October 1, 2002. Effective with that cost 
reporting period, LTCHs are paid, during a 5-year transition period, on 
the basis of an increasing proportion of the LTCH PPS Federal rate and 
a decreasing proportion of a hospital's payment under reasonable cost-
based payment system, unless the hospital makes a one-time election to 
receive payment based on 100 percent of the Federal rate (see Sec. 
412.533). New LTCHs (as defined at Sec. 412.23(e)(4)) are paid based on 
100 percent of the Federal rate, with no phase-in transition payments.
    The basic methodology for determining LTCH PPS Federal prospective 
payment rates is set forth in the regulations at Sec.Sec. 412.515 
through 412.532. Below we discuss the proposed factors used to update 
the LTCH PPS standard Federal rate for the 2005 LTCH PPS rate year that 
will be effective for LTCHs discharges occurring on or after July 1, 
2004, through June 30, 2005.
    When we implemented the LTCH PPS in the August 30, 2002, final rule 
(67 FR 56029-56031), we computed the LTCH PPS standard Federal payment 
rate for FY 2003 by updating the best available (FY 1998 or FY 1999) 
Medicare inpatient operating and capital costs per case data, using the 
excluded hospital market basket.
    Section 123(a)(1) of Pub. L. 106-113 requires that the PPS 
developed for LTCHs be budget neutral. Therefore, in calculating the 
standard Federal rate under Sec. 412.523(d)(2), we set total estimated 
PPS payments equal to estimated payments that would have been made 
under the reasonable cost-based payment methodology had the PPS for 
LTCHs not been implemented. Section 307(a) of Pub. L. 106-554 specified 
that the increases to the hospital-specific target amounts and cap on 
the target amounts for LTCHs for FY 2002 provided for by section 
307(a)(1) of Pub. L. 106-554 shall not be taken into account in the 
development and implementation of the LTCH PPS. In addition, the 
statute as amended by section 122 of Pub. L. 106-113 provides for 
enhanced bonus payments for LTCHs for 2 years, FY 2001 and FY 2002. 
Furthermore, as specified at Sec. 412.523(d)(1), the standard Federal 
rate is reduced by an adjustment factor to account for the estimated 
proportion of outlier payments under the LTCH PPS to total LTCH PPS 
payments (8 percent). For further details on the development of the FY 
2003 standard Federal rate, see the August 30, 2002, final rule (67 FR 
56027-56037) and for the 2004 LTCH PPS rate year rate, see the June 6, 
2003, final rule (68 FR 34122-34190).
    Under the existing regulations at Sec. 412.523(c)(3)(ii), we update 
the standard Federal rate annually to adjust for the most recent 
estimate of the projected increases in prices for LTCH inpatient 
hospital services.

B. Proposed Update to the Standard Federal Rate for the 2005 LTCH PPS 
Rate Year

    As established in the June 6, 2003, final rule (68 FR 34122), based 
on the most recent estimate of the excluded hospital with capital 
market basket, adjusted to account for the change in the LTCH PPS rate 
year update cycle, the LTCH PPS standard Federal rate effective from 
July 1, 2003, through June 30, 2004, (the 2004 LTCH PPS rate year), is 
$35,726.18.
    In the discussion that follows, we explain how we developed the 
proposed standard Federal rate for the 2005 LTCH PPS rate year. The 
proposed standard Federal rate for the 2005 LTCH PPS rate year would be 
calculated based on the proposed update factor of 1.029. Thus, we 
estimate that the proposed standard Federal rate for the 2005 LTCH PPS 
rate year would increase 2.9 percent compared to the 2004 LTCH PPS rate 
year standard Federal rate.
1. Proposed Standard Federal Rate Update
    Under Sec. 412.523, the annual update to the LTCH PPS standard 
Federal rate must be equal to the percentage change in the excluded 
hospital with capital market basket (described in further detail 
below). As we discussed in the August 30, 2002, final rule (67 FR 
56087), in the future we may propose to develop a framework to update 
payments to LTCHs that would account for other appropriate factors that 
affect the efficient delivery of services and care provided to Medicare 
patients. As we discussed in the June 6, 2003, final rule (68 FR 
34122), because the LTCH PPS has only been implemented for less than 2 
years (for cost reporting periods beginning on or after October 1, 
2002), we have not yet collected sufficient data to allow for the 
analysis and development of an update framework under the LTCH PPS. 
Therefore, we are not proposing an update framework for the 2005 LTCH 
PPS rate year in this proposed rule. However, we noted that a 
conceptual basis for the proposal of developing an update framework in 
the future can be found in Appendix B of the August 30, 2002, final 
rule (67 FR 56086-56090).
a. Description of the Proposed Market Basket for LTCHs for the 2005 
LTCH PPS Rate Year
    A market basket has historically been used in the Medicare program 
to account for price increases of the services furnished by providers. 
The market basket used for the LTCH PPS includes both operating and 
capital-related costs of LTCHs because the LTCH PPS uses a single 
payment rate for both operating and capital-related costs. The 
development of the LTCH PPS standard Federal rate is discussed in 
further detail in the August 30, 2002, final rule (67 FR 56027-56037).
    Under the reasonable cost-based payment system, the excluded 
hospital market basket was used to update the hospital-specific limits 
on payment for operating costs of LTCHs. The excluded hospital market 
basket is based on operating costs from FY 1992 cost report data and 
includes data from Medicare-participating long-term care, 
rehabilitation, psychiatric, cancer, and children's hospitals. Since 
LTCHs' costs are included in the excluded hospital market basket, this 
market basket index, in part, also reflects the costs of LTCHs. 
However, in order to capture the total costs (operating and capital-
related) of LTCHs, we added a capital component to the excluded 
hospital market basket for use under the LTCH PPS. We refer to this 
index as the excluded hospital with capital market basket.
    As we discussed in the August 30, 2002, final rule (67 FR 56016 and 
56086), beginning with the implementation of the LTCH PPS in FY 2003, 
the excluded hospital with capital market basket based on FY 1992 
Medicare cost report data has been used for updating payments to LTCHs. 
In the June 6, 2003, final rule (68 FR 34137), we revised and rebased 
the excluded hospital with capital market basket, using more recent 
data, that is, using FY 1997 base year data beginning with the 2004 
LTCH PPS rate year. (For further details on the development of the FY 
1997-based LTCH PPS market basket, see the June 6, 2003, final rule (68 
FR 34134-34137).
    In the August 30, 2002, LTCH PPS final rule (67 FR 56016 and 56085-
56086), we discussed why we believe the excluded hospital with capital 
market basket provides a reasonable measure of the price changes facing 
LTCHs. However, as we discussed in the June 6, 2003, final rule (68 FR 
34137),

[[Page 4763]]

we have been researching the feasibility of developing a market basket 
specific to LTCH services. This research has included analyzing data 
sources for cost category weights, specifically the Medicare cost 
reports, and investigating other data sources on cost, expenditure, and 
price information specific to LTCHs. Based on this research, we did not 
develop a market basket specific to LTCH services.
    As we also discussed in the June 6, 2003, final rule (68 FR 34137), 
our analysis of the Medicare cost reports indicates that the 
distribution of costs among major cost report categories (wages, 
pharmaceuticals, capital) for LTCHs is not substantially different from 
the 1997-based excluded hospital with capital market basket. Data on 
other major cost categories (benefits, blood, contract labor) that we 
would like to analyze were excluded by many LTCHs in their Medicare 
cost reports. An analysis based on only the data available to us for 
these cost categories presented a potential problem since no other 
major cost category weight would be based on LTCH data.
    Furthermore, as we also discussed in that same final rule (68 FR 
34137), we conducted a sensitivity analysis of annual percent changes 
in the market basket when the weights for wages, pharmaceuticals, and 
capital in LTCHs were substituted into the excluded hospital with 
capital market basket. Other cost categories were recalibrated using 
ratios available from the IPPS market basket. On average between FY 
1995 and FY 2002, the excluded hospital with capital market basket 
shows increases at nearly the same average annual rate (2.9 percent) as 
the market basket with LTCH weights for wages, pharmaceuticals, and 
capital (2.8 percent). This difference is less than the 0.25 percentage 
point criterion that determines whether a forecast error adjustment is 
warranted under the IPPS update framework.
    We continue to believe that an excluded hospital with capital 
market basket adequately reflects the price changes facing LTCHs. We 
continue to solicit comments about issues particular to LTCHs that 
should be considered in relation to the FY 1997-based excluded hospital 
with capital market basket and to encourage suggestions for additional 
data sources that may be available. Accordingly, in this proposed rule, 
we are proposing to use the FY 1997-based excluded hospital with 
capital market basket as the LTCH PPS market basket for determining the 
proposed update to the LTCH PPS standard Federal rate for the 2005 LTCH 
PPS rate year.
b. Proposed LTCH Market Basket Increase for the 2005 LTCH Rate Year
    As we discussed in the June 6, 2003, final rule (68 FR 34137), for 
LTCHs paid under the LTCH PPS, we stated that the 2004 rate year update 
would apply to discharges occurring from July 1, 2003, through June 30, 
2004. Because we changed the timeframe of the LTCH PPS standard Federal 
rate annual update from October 1 to July 1, as we explained in that 
same final rule, we calculated an update factor that reflected that 
change in the update cycle. For the update to the 2004 LTCH PPS rate 
year, we calculated the estimated increase between FY 2003 and the 2004 
LTCH PPS rate year (July 1, 2003, through June 30, 2004). Accordingly, 
based on Global Insight's forecast of the revised and rebased FY 1997-
based excluded hospital with capital market basket using data from the 
fourth quarter of 2002, we used a market basket update of 2.5 percent 
for the 2004 LTCH PPS rate year (68 FR 34138).
    Consistent with our historical practice of estimating market basket 
increases based on Global Insight's forecast of the FY 1997-based 
excluded hospital with capital market basket using more recent data 
from the third quarter of 2003, we are proposing a 2.9 percent update 
to the Federal rate for the 2005 LTCH PPS rate year.
    In accordance with Sec. 412.523, this update represents the most 
recent estimate of the increase in the excluded hospital with capital 
market basket for the 2005 LTCH PPS rate year.
2. Proposed Standard Federal Rate for the 2005 LTCH PPS Rate Year
    In the June 6, 2003, final rule (68 FR 34140), we established a 
standard Federal rate of $35,726.18 for the 2004 LTCH PPS rate year. 
For the 2005 LTCH PPS rate year, we are proposing a standard Federal 
rate of $36,762.24. Since the proposed 2005 LTCH PPS rate year standard 
Federal rate has already been adjusted for differences in case-mix, 
wages, cost-of-living, and high-cost outlier payments, we are not 
proposing to make any additional adjustments in the proposed standard 
Federal rate for these factors.

C. Calculation of Proposed LTCH Prospective Payments for the 2005 LTCH 
PPS Rate Year

    The basic methodology for determining prospective payment rates for 
LTCH inpatient operating and capital-related costs is set forth in Sec. 
412.515 through Sec. 412.532. In accordance with Sec. 412.515, we 
assign appropriate weighting factors to each LTC-DRG to reflect the 
estimated relative cost of hospital resources used for discharges 
within that group as compared to discharges classified within other 
groups. The amount of the prospective payment is based on the standard 
Federal rate, established under Sec. 412.523, and adjusted for the LTC-
DRG relative weights, differences in area wage levels, cost-of-living 
in Alaska and Hawaii, high-cost outliers, and other special payment 
provisions (short-stay outliers under Sec. 412.529 and interrupted 
stays under Sec. 412.531).
    In accordance with Sec. 412.533, during the 5-year transition 
period, payment is based on the applicable transition blend percentage 
of the adjusted Federal rate and the reasonable cost-based payment rate 
unless the LTCH makes a one-time election to receive payment based on 
100 percent of the Federal rate. A LTCH defined as ``new'' under Sec. 
412.23(e)(4) is paid based on 100 percent of the Federal rate with no 
blended transition payments (Sec. 412.533(d)). As discussed in the 
August 30, 2002 final rule (67 FR 56038) and in accordance with Sec. 
412.533(a), the applicable transition blends are as follows:

------------------------------------------------------------------------
                                                              Reasonable
                                                    Federal   cost-based
  Cost reporting periods beginning on or after       rate       payment
                                                  percentage     rate
                                                              percentage
------------------------------------------------------------------------
October 1, 2002.................................          20          80
October 1, 2003.................................          40          60
October 1, 2004.................................          60          40
October 1, 2005.................................          80          20
October 1, 2006.................................         100           0
------------------------------------------------------------------------

    Accordingly, for cost reporting periods beginning during FY 2004 
(that is, on or after October 1, 2003, and before September 30, 2004), 
blended payments under the transition methodology are based on 60 
percent of the LTCH's reasonable cost-based payment rate and 40 percent 
of the adjusted LTCH PPS Federal rate. For cost reporting periods that 
begin during FY 2005 (that is, on or after October 1, 2004, and before 
September 30, 2005), blended payments under the transition methodology 
will be based on 40 percent of the LTCH's reasonable cost-based payment 
rate and 60 percent of the adjusted LTCH PPS Federal rate.
1. Adjustment for Area Wage Levels
a. Background
    Under the authority of section 307(b) of Pub. L. 106-554, we 
established an adjustment to account for differences in LTCH area wage 
levels under Sec. 412.525(c) using the labor-related

[[Page 4764]]

share estimated by the excluded hospital market basket with capital and 
wage indices that were computed using wage data from inpatient acute 
care hospitals without regard to reclassification under section 
1886(d)(8) or section 1886(d)(10) of the Act. Furthermore, as we 
discussed in the August 30, 2002, final rule (67 FR 56015-56019), we 
established a 5-year transition to the full wage adjustment. The 
applicable wage index phase-in percentages are based on the start of a 
LTCH's cost reporting period as shown in the following table:

------------------------------------------------------------------------
  Cost reporting periods beginning on or     Phase-in percentage of the
                   after                           full wage index
------------------------------------------------------------------------
October 1, 2002...........................  \1/5\ths (20 percent).
October 1, 2003...........................  \2/5\ths (40 percent).
October 1, 2004...........................  \3/5\ths (60 percent).
October 1, 2005...........................  \4/5\ths (80 percent).
October 1, 2006...........................  \5/5\ths (100 percent).
------------------------------------------------------------------------

    For example, for cost reporting periods beginning on or after 
October 1, 2004, and before September 30, 2005 (FY 2005), the 
applicable LTCH wage index value would be three-fifths of the 
applicable full wage index value without taking into account geographic 
reclassification under sections 1886(d)(8) and (d)(10) of the Act.
    In that same final rule (67 FR 56018), we stated that we would 
continue to reevaluate LTCH data as they become available and would 
propose to adjust the phase-in if subsequent data support a change. As 
we discussed in the June 6, 2003, final rule (68 FR 34140), because the 
LTCH PPS has only been implemented for less than 2 years, sufficient 
new data have not been generated that would enable us to conduct a 
comprehensive reevaluation of the appropriateness of adjusting the 
phase-in. However, in that same final rule, we explained that we had 
reviewed the most recent data available at that time and did not find 
any evidence to support a change in the 5-year phase-in of the wage 
index.
    Because of the recent implementation of the LTCH PPS and the lag 
time in availability of cost report data, we still do not yet have 
sufficient new data to allow us to conduct a comprehensive reevaluation 
of the appropriateness of the phase-in of the wage index adjustment. 
Again, we have reviewed the most recent data available and did not find 
any evidence to support a change in the 5-year phase-in of the wage 
index. Therefore, at this time, we are not proposing to adjust the 
phase-in of the wage index adjustment in this proposed rule.
b. Wage Index Data
    In the June 6, 2003, final rule (68 FR 34142), for the 2004 LTCH 
PPS rate year, we established that we would use the same data that was 
used to compute the FY 2003 acute care hospital inpatient wage index 
without taking into account geographic reclassifications under sections 
1886(d)(8) and (d)(10) of the Act because that was the best available 
data at that time. The acute care hospital inpatient wage index data is 
also used in the inpatient rehabilitation PPS (IRF PPS), the home 
health agency PPS (HHA PPS), and the skilled nursing facility PPS (SNF 
PPS). As we discussed in the August 30, 2002, final rule (67 FR 56019), 
since hospitals that are excluded from the IPPS are not required to 
provide wage-related information on the Medicare cost report and we 
would need to establish instructions for the collection of such LTCH 
data in order to establish a geographic reclassification adjustment 
under the LTCH PPS, the wage adjustment established under the LTCH PPS 
is based on a LTCH's actual location without regard to the urban or 
rural designation of any related or affiliated provider.
    In this proposed rule, we are proposing that for the 2005 LTCH PPS 
rate year, the same data used to compute the FY 2004 acute care 
hospital inpatient wage index without taking into account geographic 
reclassifications under sections 1886(d)(8) and (d)(10) of the Act 
would be used to determine the applicable wage index values under the 
LTCH PPS, because these are the most recent available complete data. 
These data are the same wage data that were used to compute the FY 2003 
wage indices currently used under the IPPS and SNF PPS. The proposed 
LTCH wage index values that would be used for discharges occurring on 
or after July 1, 2004, through June 30, 2005, are shown in Table 1 (for 
urban areas) and Table 2 (for rural areas) in the Addendum to this 
proposed rule.
    As noted above, the applicable wage index phase-in percentages are 
based on the start of a LTCH's cost reporting period beginning on or 
after October 1st of each year during the 5-year transition period. For 
cost reporting periods beginning on or after October 1, 2003, and 
before September 30, 2004 (FY 2004), the labor portion of the proposed 
standard Federal rate would be adjusted by two-fifths of the applicable 
LTCH wage index value. Specifically, for a LTCH's cost reporting period 
beginning during FY 2004, for discharges occurring on or after July 1, 
2004, through June 30, 2005, the applicable wage index value would be 
two-fifths of the full FY 2004 acute care hospital inpatient wage index 
data, without taking into account geographic reclassifications under 
sections 1886(d)(8) and (d)(10) of the Act) as shown in Tables 1 and 2 
in the Addendum to this proposed rule. Similarly, for cost reporting 
periods beginning on or after October 1, 2004, and before October 1, 
2005 (FY 2005), the labor portion of the proposed standard Federal rate 
would be adjusted by three-fifths of the applicable LTCH wage index 
value. Specifically, for a LTCH's cost reporting period beginning 
during FY 2005, for discharges occurring on or after July 1, 2004, 
through June 30, 2005, the applicable wage index value would be three-
fifths of the full FY 2005 acute care hospital inpatient wage index 
data, without taking into account geographic reclassification under 
sections 1886(d)(8) and (d)(10) of the Act as shown in Tables 1 and 2 
in the addendum to this proposed rule.
    Because the phase-in of the wage index does not coincide with the 
LTCH PPS rate year (July 1st through June 30th), most LTCHs will 
experience a change in the wage index phase-in percentages during the 
LTCH PPS rate year. For example, during the 2005 LTCH PPS rate year, 
for a LTCH with a January 1st fiscal year, the two-fifths wage index 
would be applicable for the first 6 months of the 2005 LTCH PPS rate 
year (July 1, 2004, through December 31, 2004) and the three-fifths 
wage index would be applicable for the second 6 months of the 2005 LTCH 
PPS rate year (January 1, 2005, through June 30, 2005). We also note 
that some providers will still be in the first year of the 5-year 
phase-in of the LTCH wage index (that is, those LTCHs with cost 
reporting periods that began during FY 2003 and are ending during the 
first 3 months of the 2005 LTCH PPS rate year (July 1, 2004, through 
September 30, 2004). For the remainder of those LTCHs' FY 2003 cost 
reporting periods, for discharges occurring on or after July 1, 2004, 
through June 30, 2005, the applicable wage index value would be one-
fifth of the full FY 2005 acute care hospital inpatient wage index 
data, without taking into account geographic reclassification under 
sections 1886(d)(8) and (d)(10) of the Act as shown in Tables 1 and 2 
in the Addendum to this proposed rule.
c. Labor-Related Share
    In the August 30, 2002, final rule (67 FR 56016), we established a 
labor-related share of 72.885 percent based on the relative importance 
of the labor-

[[Page 4765]]

related share of operating and capital costs of the excluded hospital 
with capital market basket based on FY 1992 data. In the June 6, 2003, 
final rule (68 FR 34142), in conjunction with our revision and rebasing 
of the excluded hospital with capital market basket from an FY 1992 to 
an FY 1997 base year, we used a labor-related share that is determined 
based on the relative importance of the labor-related share of 
operating costs (wages and salaries, employee benefits, professional 
fees, postal services, and all other labor-intensive services) and 
capital costs of the excluded hospital with capital market basket based 
on FY 1997 data. While we adopted the revised and rebased FY 1997-based 
LTCH PPS market basket as the LTCH PPS update factor for the 2004 LTCH 
PPS rate year, we decided not to update the labor-related share under 
the LTCH PPS pending further analysis. Accordingly, the labor-share for 
the 2004 LTCH PPS rate year was 72.885 percent.
    In the August 1, 2003, IPPS final rule (68 FR 50041-50042), we did 
not use a revised labor-related share for FY 2004 because we had not 
yet completed our research into the appropriateness of this updated 
measure. In that rule, we discussed two methods that we were reviewing 
for establishing the labor-related share--(1) updating the regression 
analysis that was done when the IPPS was originally developed and (2) 
reevaluating the methodology we currently use for determining the 
labor-related share using the hospital market basket. We also explained 
that we would continue to explore all options for alternative data and 
a methodology for determining the labor-related share, and would 
propose to update the IPPS and excluded hospital labor-related shares, 
if necessary, once our research is complete.
    As we explained in the August 30, 2002, final rule, which 
implemented the LTCH PPS, the June 6, 2003, LTCH PPS final rule, and 
the June 9, 2003, high-cost outlier final rule, the LTCH PPS was 
modeled after the IPPS for short-term, acute care hospitals. 
Specifically, the LTCH PPS uses the same patient classification system 
(CMS-DRGs) as the IPPS, and many of the case-level and facility-level 
adjustments explored or adopted for the LTCH PPS are payment 
adjustments under the IPPS (that is, wage index, high-cost outliers, 
and the evaluation of adjustments for indirect teaching costs and the 
treatment of a disproportionate share of low-income patients).
    Furthermore, as discussed in greater detail in the August 30, 2002, 
LTCH PPS final rule (67 FR 55960), LTCHs are certified as acute care 
hospitals that meet the criteria set forth in section 1861(e) of the 
Act to participate as a hospital in the Medicare program, and in 
general, hospitals qualify for payment under the LTCH PPS instead of 
the IPPS solely because their inpatient average length of stay is 
greater than 25 days in accordance with section 1886(d)(1)(B)(iv)(I) of 
the Act, implemented in Sec. 412.23(e). In the June 6, 2003, LTCH PPS 
final rule (68 FR 34144), we explained that prior to qualifying as a 
LTCH under Sec. 412.23(e)(2)(i), hospitals generally are paid as acute 
care hospitals under the IPPS during the period in which they 
demonstrate that they have an average Medicare inpatient length of stay 
of greater than 25 days.
    The primary reason that we did not update the LTCH PPS labor-
related share for the 2004 LTCH PPS rate year was due to the same 
reason that we explained for not updating the labor-related share under 
the IPPS for FY 2004 in the August 1, 2003, IPPS (68 FR 27226) which 
are equally applicable to the LTCH PPS. We did not revise the labor-
related share under the IPPS based on the revised and rebased FY 1997 
hospital market basket and the excluded hospital market basket because 
of data and methodological concerns. We indicated that we would conduct 
further analysis to determine the most appropriate methodology and data 
for determining the labor-related share. Section 403 of the Medicare 
Prescription Drug and Modernization Act of 2003 (enacted December 8, 
2003, Pub. L. 108-173) amends section 1886(d) of the Act to provide 
that for discharges occurring on or after October 1, 2004, the labor-
related share under the IPPS is reduced to 62 percent if such a change 
would result in higher total payments to the hospital. While the 
statute provides the option to hospitals of using an alternative to the 
current IPPS labor-related share (71 percent), the statute does not 
address updating the current IPPS labor-related share. We intend to 
discuss the details of implementing this provision in the IPPS proposed 
rule for FY 2005.
    Although section 403 of Pub. L. 108-173 provides for an alternative 
labor share percentage, this alternative only applies to hospitals paid 
under the IPPS and not to LTCHs. Consequently, since we have not yet 
implemented a change in the labor-share methodology used under the 
IPPS, and the alternative provided at section 403 does not apply to 
LTCHs, we are not proposing to change the LTCH PPS labor-share at this 
time.
    Accordingly, we are not proposing to update the labor-related share 
for the 2005 LTCH PPS rate year; it would remain at 72.885 percent. As 
is the case under the IPPS, once our research on the labor-related 
share is complete, any future revisions to the LTCH PPS labor-related 
share will be proposed and subject to public comment.
2. Proposed Adjustment for Cost-of-Living in Alaska and Hawaii
    Under Sec. 412.525(b), we make a cost-of-living adjustment (COLA) 
for LTCHs located in Alaska and Hawaii to account for the higher costs 
incurred in those States. For the 2005 LTCH PPS rate year, we are 
proposing to make a COLA to payments for LTCHs located in Alaska and 
Hawaii by multiplying the standard Federal payment rate by the 
appropriate factor listed in Table I. below. These factors are obtained 
from the U.S. Office of Personnel Management (OPM) and are currently 
used under the IPPS. In addition, in this proposed rule, we are 
proposing that if OPM releases revised COLA factors before March 1, 
2004, we would use them for the development of payments and publish 
them in the LTCH PPS final rule.

   Table I.--Proposed Cost-of-Living Adjustment Factors for Alaska and
            Hawaii Hospitals for the 2005 LTCH PPS Rate Year
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Alaska: All areas                                                1.25
Hawaii:
  Honolulu County..............................................  1.25
  Hawaii County................................................  1.165
  Kauai County.................................................  1.2325
  Maui County..................................................  1.2375
  Kalawao County...............................................  1.2375
------------------------------------------------------------------------

3. Proposed Adjustment for High-Cost Outliers
a. Background
    Under Sec. 412.525(a), we make an adjustment for additional 
payments for outlier cases that have extraordinarily high costs 
relative to the costs of most discharges. Providing additional payments 
for outliers strongly improves the accuracy of the LTCH PPS in 
determining resource costs at the patient and hospital level. These 
additional payments reduce the financial losses that would otherwise be 
caused by treating patients who require more costly care and, 
therefore, reduce the incentives to underserve these patients. We set 
the outlier threshold before the beginning of the applicable rate year 
so that total outlier payments are projected to equal 8 percent of 
total payments under the LTCH PPS. Outlier payments

[[Page 4766]]

under the LTCH PPS are determined consistent with the IPPS outlier 
policy.
    Under section 412.525(a), we make outlier payments for any 
discharges if the estimated cost of a case exceeds the adjusted LTCH 
PPS payment for the LTC-DRG plus a fixed-loss amount. The fixed-loss 
amount is the amount used to limit the loss that a hospital will incur 
under an outlier policy. This results in Medicare and the LTCH sharing 
financial risk in the treatment of extraordinarily costly cases. The 
LTCH's loss is limited to the fixed-loss amount and the percentage of 
costs above the marginal cost factor. We calculate the estimated cost 
of a case by multiplying the overall hospital cost-to-charge ratio by 
the Medicare allowable covered charge. In accordance with section 
412.525(a), we pay outlier cases 80 percent of the difference between 
the estimated cost of the patient case and the outlier threshold (the 
sum of the adjusted Federal prospective payment for the LTC-DRG and the 
fixed-loss amount).
    We determine a fixed-loss amount, that is, the maximum loss that a 
LTCH can incur under the LTCH PPS for a case with unusually high costs 
before the LTCH will receive any additional payments. We calculate the 
fixed-loss amount by simulating aggregate payments with and without an 
outlier policy. The fixed-loss amount would result in estimated total 
outlier payments being projected to be equal to 8 percent of projected 
total LTCH PPS payments.
    Currently, under both the LTCH PPS and the IPPS, only a maximum 
cost-to-charge ratio threshold (ceiling) is applied to a hospital's 
cost-to-charge ratio and, as discussed in the June 9, 2003, high-cost 
outlier final rule (68 FR 34506-34507) for discharges occurring on or 
after August 8, 2003, a minimum cost-to-charge ratio threshold (floor) 
is no longer applicable. Thus, if a LTCH's cost-to-charge ratio is 
above the ceiling, the applicable statewide average cost-to-charge 
ratio is assigned to the LTCH. In addition, for LTCHs for which we are 
unable to compute a cost-to-charge ratio, we also assign the applicable 
statewide average cost-to-charge ratio. Currently, MedPAR claims data 
and cost-to-charge ratios based on the latest available cost report 
data from Hospital Cost Report Information System (HCRIS) and 
corresponding MedPAR claims data are used to establish a fixed-loss 
threshold amount under the LTCH PPS.
    In the June 9, 2003, high-cost outlier final rule (68 FR 34507), 
consistent with the outlier policy changes for acute care hospitals 
under the IPPS discussed in that same final rule, we no longer assign 
the applicable statewide average cost-to-charge ratio when a LTCH's 
cost-to-charge ratio falls below the minimum cost-to-charge ratio 
threshold (floor). We made this policy change because, as is the case 
for acute care hospitals, we believe LTCHs could arbitrarily increase 
their charges in order to maximize outlier payments. Even though this 
arbitrary increase in charges should result in a lower cost-to-charge 
ratio in the future (due to the lag time in cost report settlement), 
previously when a LTCH's actual cost-to-charge ratio fell below the 
floor, the LTCH's cost-to-charge ratio was raised to the applicable 
statewide average cost-to-charge ratio. This application of the 
statewide average resulted in inappropriately higher outlier payments. 
Accordingly, for LTCH PPS discharges occurring on or after August 8, 
2003, in making outlier payments under Sec. 412.525 (and short-stay 
outlier payments under Sec. 412.529), we apply the LTCH's actual cost-
to-charge ratio to determine the cost of the case, even where the 
LTCH's actual cost-to-charge ratio falls below the floor.
    Also, in the June 9, 2003, high-cost outlier final rule (68 FR 
34507), consistent with the policy change for acute care hospitals 
under the IPPS, under Sec. 412.525(a)(4), by cross-referencing Sec. 
412.84(i), we established that we will continue to apply the applicable 
statewide average cost-to-charge ratio when a LTCH's cost-to-charge 
ratio exceeds the maximum cost-to-charge ratio threshold (ceiling) by 
adopting the policy at Sec. 412.84(i)(3)(ii). As we explained in that 
same final rule, cost-to-charge ratios above this range are probably 
due to faulty data reporting or entry. Therefore, these cost-to-charge 
ratios should not be used to identify and make payments for outlier 
cases because such data are clearly errors and should not be relied 
upon. In addition, we made a similar change to the short-stay outlier 
policy at Sec. 412.529. Since cost-to-charge ratios are also used in 
determining short-stay outlier payments, the rationale for that change 
mirrors that for high-cost outliers.
b. Establishment of the Proposed Fixed-Loss Amount
    In the June 6, 2003, final rule (68 FR 34144), for the 2004 LTCH 
PPS rate year, we used the March 2002 update of the FY 2001 MedPAR 
claims data to determine a fixed-loss threshold that would result in 
outlier payments projected to be equal to 8 percent of total payments, 
based on the policies described in that final rule, because these data 
were the best data available. We calculated cost-to-charge ratios for 
determining the fixed-loss amount based on the latest available cost 
report data in HCRIS and corresponding MedPAR claims data from FYs 
1998, 1999, and 2000.
    In that same final rule, in determining the fixed-loss amount for 
the 2004 LTCH PPS rate year (using the outlier policy under Sec. 
412.525(a) in effect on July 1, 2003), we used the current combined 
operating and capital cost-to-charge ratio floor and ceiling under the 
IPPS of 0.206 and 1.421, respectively (as explained in the IPPS final 
rule (67 FR 50125, August 1, 2002)). As we discussed in the June 9, 
2003, high-cost outlier final rule (68 FR 34508), we concluded that it 
was not necessary to recalculate a new fixed-loss amount once the 
changes to the outlier policy discussed in that final rule became 
effective because the difference between the fixed-loss amount 
determined with or without the application of the floor would be 
negligible.
    If a LTCH's cost-to-charge ratio was below this floor or above this 
ceiling, we assigned the applicable IPPS statewide average cost-to-
charge ratio. We also assigned the applicable statewide average for 
LTCHs for which we are unable to compute a cost-to-charge ratio, such 
as for new LTCHs. Therefore, based on the methodology and data 
described above, in the June 6, 2003, final rule (68 FR 34144), for the 
2004 LTCH PPS rate year, we established a fixed-loss amount of $19,590. 
Thus, during the 2004 LTCH PPS rate year, we pay an outlier case 80 
percent of the difference between the estimated cost of the case and 
the outlier threshold (the sum of the adjusted Federal LTCH payment for 
the LTC-DRG and the fixed-loss amount of $19,590).
    Also, in the June 6, 2003, final rule (68 FR 34145), we established 
that beginning with the 2004 LTCH PPS rate year, we will calculate a 
single fixed-loss amount for each LTCH PPS rate year based on the 
version of the GROUPER that is in effect as of the beginning of the 
LTCH PPS rate year (that is, July 1, 2003, for the 2004 LTCH PPS rate 
year). Therefore, for the 2004 LTCH PPS rate year, we established a 
single fixed-loss amount based on the Version 20.0 of the GROUPER, 
which was in effect at the start of the 2004 LTCH PPS rate year (July 
1, 2003). As we noted above, the fixed-loss amount for the 2004 LTCH 
PPS rate year is $19,590.
    In calculating the proposed fixed-loss amount for the 2005 LTCH PPS 
rate year, we applied the current outlier policy under Sec. 412.525(a); 
that is, we assigned the applicable statewide average cost-to-charge 
ratio only to

[[Page 4767]]

LTCHs whose cost-to-charge ratios exceeded the ceiling (and not when 
they fell below the floor). Accordingly, we used the current IPPS 
combined operating and capital cost-to-charge ratio ceiling of 1.366 
(as explained in the IPPS final rule (68 FR 45478, August 1, 2003)). We 
believed that using the current combined IPPS operating and capital 
cost-to-charge ratio ceiling for LTCHs is appropriate for the same 
reasons we stated above regarding the use of the current combined 
operating and capital cost-to-charge ratio ceiling under the IPPS.
    In this proposed rule, for the 2005 LTCH PPS rate year, we used the 
December 2002 update of the FY 2002 MedPAR claims data to determine a 
proposed fixed-loss amount that would result in outlier payments 
projected to be equal to 8 percent of total payments, based on the 
policies described in this proposed rule, because these data are the 
best LTCH data available. We considered using claims data from the 
September 2003 update of the FY 2003 MedPAR to determine the proposed 
fixed-loss amount (and the budget neutrality offset discussed below in 
section IV.C.6.) for the 2005 LTCH PPS rate year. However, initial 
analysis has shown that the FY 2003 MedPAR data contain coding errors. 
As in the case with the FY 2002 MedPAR, we have learned that a large 
hospital chain of LTCHs has continued to consistently code diagnoses 
inaccurately on the claims it submitted, and these coding errors are 
reflected in the FY 2003 MedPAR data. The coding inaccuracies in the 
MedPAR claims data can cause significant skewing of the fixed-loss 
amount and would impact the determination of the budget neutrality 
offset. While we have corrected the coding inaccuracies in the FY 2002 
MedPAR, we were unable to correct the coding errors in the FY 2003 
MedPAR in time for publication of this proposed rule since the 
correction process requires extensive programming work. Accordingly, we 
are using the December 2002 update of the FY 2002 MedPAR claims data to 
determine a proposed fixed-loss amount for the 2005 LTCH PPS rate year 
for this proposed rule. We expect to be able to use the corrected FY 
2003 MedPAR to calculate a revised fixed-loss amount for the final 
rule. Furthermore, as noted above, we determined the proposed fixed-
loss amount based on the version of the GROUPER that would be in effect 
as of the beginning of the 2005 LTCH PPS rate year (July 1, 2004), that 
is, Version 21.0 of the LTCH PPS GROUPER (68 FR 45374-45385). We also 
computed cost-to-charge ratios for determining the proposed fixed-loss 
amount for the 2005 LTCH PPS rate year based on the latest available 
cost report data in HCRIS and corresponding MedPAR claims data from FYs 
1999, 2000, and 2001. As we explained above, the current applicable 
IPPS statewide average cost-to-charge ratios were applied when a LTCH's 
cost-to-charge ratio exceeded the ceiling (1.366). In addition, we 
assigned the applicable statewide average to LTCHs for which we were 
unable to compute a cost-to-charge ratio. (Currently, the applicable 
IPPS statewide averages can be found in Tables 8A and 8B of the August 
1, 2003, IPPS final rule (68 FR 45637-45638).)
    Accordingly, based on the data and policies described above, we are 
proposing a fixed-loss amount of $21,864 for the 2005 LTCH PPS rate 
year. Thus, we would pay an outlier case 80 percent of the difference 
between the estimated cost of the case and the proposed outlier 
threshold (the sum of the adjusted proposed Federal LTCH payment for 
the LTC-DRG and the proposed fixed-loss amount of $21,864).
c. Reconciliation of Outlier Payments Upon Cost Report Settlement
    In the June 9, 2003, high-cost outlier final rule (68 FR 34508-
34512), we made changes to the LTCH outlier policy consistent with 
those made for acute care hospitals under the IPPS because, as we 
discussed in that same final rule, we became aware that payment 
vulnerabilities existed in the previous IPPS outlier policy. Because 
the LTCH PPS high-cost outlier and short-stay policies are modeled 
after the outlier policy in the IPPS, we believe they were susceptible 
to the same payment vulnerabilities and, therefore, also merited 
revision. Consistent with the change made for acute care hospitals 
under the IPPS at Sec. 412.84(m), we established under Sec. 
412.525(a)(4)(ii), by cross-referencing Sec. 412.84(m), that effective 
for LTCH PPS discharges occurring on or after August 8, 2003, any 
reconciliation of outlier payments may be made upon cost report 
settlement to account for differences between the actual cost-to-charge 
ratio and the estimated cost-to-charge ratio for the period during 
which the discharge occurs. As is the case with the changes made to the 
outlier policy for acute care hospitals under the IPPS, the 
instructions for implementing these regulations are discussed in 
further detail in Program Memorandum Transmittal A-03-058. In addition, 
in that same final rule (68 FR 34513), we established a similar change 
to the short-stay outlier policy at Sec. 412.529(c)(5)(ii).
    We also discussed in the June 9, 2003, IPPS high-cost outlier final 
rule (68 FR 34507-34512) that only using cost-to-charge ratios based on 
the latest settled cost report does not reflect any dramatic increases 
in charges during the payment year when making outlier payments. 
Because a LTCH has the ability to increase its outlier payments through 
a dramatic increase in charges and because of the lag time in the data 
used to calculate cost-to-charge ratios, in that same final rule (68 FR 
34494-34515), consistent with the policy change for acute care 
hospitals under the IPPS at Sec. 412.84(i)(2), we established that, for 
LTCH PPS discharges occurring on or after October 1, 2003, fiscal 
intermediaries will use more recent data when determining a LTCH's 
cost-to-charge ratio. Therefore, by cross-referencing Sec. 412.84(i)(2) 
under Sec. 412.525(a)(4)(iii), we established that fiscal 
intermediaries will use either the most recent settled cost report or 
the most recent tentative settled cost report, whichever is from the 
later period. In addition, in that same final rule, we established a 
similar change to the short-stay outlier policy at Sec. 
412.529(c)(5)(iii).
d. Application of Outlier Policy to Short-Stay Outlier Cases
    As we discussed in the August 30, 2002, final rule (67 FR 56026), 
under some rare circumstances, a LTCH discharge could qualify as a 
short-stay outlier case (as defined under Sec. 412.529 and discussed in 
section IV.B.4.b. of this preamble) and also as a high-cost outlier 
case. In such a scenario, a patient could be hospitalized for less than 
five-sixths of the geometric average length of stay for the specific 
LTC-DRG, and yet incur extraordinarily high treatment costs. If the 
costs exceeded the outlier threshold (that is, the short-stay outlier 
payment plus the fixed-loss amount), the discharge would be eligible 
for payment as a high-cost outlier. Thus, for a short-stay outlier case 
in the 2005 LTCH PPS rate year, the high-cost outlier payment would be 
80 percent of the difference between the estimated cost of the case and 
the outlier threshold (the sum of the proposed fixed-loss amount of 
$21,864 and the amount paid under the short-stay outlier policy).
4. Proposed Adjustments for Special Cases
a. General
    As discussed in the August 30, 2002, final rule (67 FR 55995), 
under section 123 of Pub. L. 106-113, the Secretary

[[Page 4768]]

generally has broad authority in developing the PPS for LTCHs, 
including whether (and how) to provide for adjustments to reflect 
variations in the necessary costs of treatment among LTCHs.
    Generally, LTCHs, as described in section 1886(d)(1)(B)(iv) of the 
Act, are distinguished from other inpatient hospital settings by 
maintaining an average inpatient length of stay of greater than 25 
days. However, LTCHs may have cases that have stays of considerably 
less than the average length of stay and that receive significantly 
less than the full course of treatment for a specific LTC-DRG. As we 
explained in the August 30, 2002, final rule (67 FR 55995), such cases 
would be paid inappropriately if the hospital were to receive the full 
LTC-DRG payment. Below we discuss the payment methodology for these 
special cases as implemented in the August 30, 2002, final rule (67 FR 
55955-56010).
b. Proposed Adjustment for Short-Stay Outlier Cases
    A short-stay outlier case may occur when a beneficiary receives 
less than the full course of treatment at the LTCH before being 
discharged. These patients may be discharged to another site of care or 
they may be discharged and not readmitted because they no longer 
require treatment. Furthermore, patients may expire early in their LTCH 
stay.
    As noted above, generally LTCHs are defined by statute as having an 
average inpatient length of stay of greater than 25 days. We believe 
that a payment adjustment for short-stay outlier cases results in more 
appropriate payments, because these cases most likely would not receive 
a full course of treatment in such a short period of time and a full 
LTC-DRG payment may not always be appropriate. Payment-to-cost ratios 
simulated for LTCHs, for the cases described above, show that if LTCHs 
receive a full LTC-DRG payment for those cases, they would be 
significantly ``overpaid'' for the resources they have actually 
expended.
    Under Sec. 412.529, in general, we adjust the per discharge payment 
to the least of 120 percent of the cost of the case, 120 percent of the 
LTC-DRG specific per diem amount multiplied by the length of stay of 
that discharge, or the full LTC-DRG payment, for all cases with a 
length of stay up to and including five-sixths of the geometric average 
length of stay of the LTC-DRG.
    As we noted in section IV.C.3. of this preamble, in the June 9, 
2003, high-cost outlier final rule (68 FR 34494-34515), we revised the 
methodology for determining cost-to-charge ratios for acute care 
hospitals under the IPPS because we became aware that payment 
vulnerabilities existed in the previous IPPS outlier policy. As we also 
explained in that same final rule, because the LTCH PPS high-cost 
outlier and short-stay outlier policies are modeled after the outlier 
policy in the IPPS, we believe they were susceptible to the same 
payment vulnerabilities and, therefore, merited revision. Consistent 
with the policy established for acute care hospitals under the IPPS at 
Sec. 412.84(i) and (m) in the June 9, 2003, high-cost outlier final 
rule (68 FR 34515), and similar to the policy change described above 
for LTCH PPS high-cost outlier payments at Sec. 412.525(a)(4)(ii), we 
established under Sec. 412.529(c)(5)(ii) that for discharges on or 
after August 8, 2003, short-stay outlier payments are subject to the 
provisions in the regulations at Sec. 412.84(i)(1), (i)(3) and (i)(4), 
and (m). In addition, short-stay outlier payments are subject to the 
provisions in the regulations at Sec. 412.84(i)(2) for discharges on or 
after October 1, 2003, in accordance with Sec. 412.529(c)(5)(iii). 
Therefore, in the June 9, 2003, high-cost outlier final rule (68 FR 
34548-34513), under Sec. 412.529(c)(5)(ii), by cross-referencing 
proposed Sec. 412.84(i)(2), we established that fiscal intermediaries 
will use either the most recent settled cost report or the most recent 
tentative settled cost report, whichever is from the later period, in 
determining a LTCH's cost-to-charge ratio.
    In addition, by cross-referencing Sec. 412.84(i), we established 
that the applicable statewide average cost-to-charge ratio is only 
applied when a LTCH's cost-to-charge ratio exceeds the ceiling. Thus, 
the applicable statewide average cost-to-charge ratio is no longer 
applied when a LTCH's cost-to-charge ratio falls below the floor. 
Furthermore, by cross-referencing Sec. 412.84(i)(4), we established 
that any reconciliation of payments for short-stay outliers may be made 
upon cost report settlement to account for differences between the 
estimated cost-to-charge ratio and the actual cost-to-charge ratio for 
the period during which the discharge occurs. As noted above, in the 
discussion of the high-cost outlier policy in section IV.C.3. of this 
preamble, the instructions for implementing these regulations are 
discussed in further detail in Program Memorandum Transmittal A-03-058. 
In the June 6, 2003, final rule (68 FR 34146-34148), for certain 
hospitals that qualify as LTCHs under section 1886(d)(1)(B)(iv)(II) of 
the Act (``subclause (II)'' LTCHs) as added by section 4417(b) of Pub. 
L. 105-33, and implemented in Sec. 412.23(e)(2)(ii), we established a 
temporary adjustment to the short-stay outlier policy during the 5-year 
transition period. Under Sec. 412.529(c)(4), effective for discharges 
from a ``subclause (II)'' LTCH occurring on or after July 1, 2003, the 
short-stay outlier percentage is 195 percent during the first year of 
the hospital's 5-year transition. For the second cost reporting period, 
the short-stay outlier percentage is 193 percent; for the third cost 
reporting period, the percentage is 165 percent; for the fourth cost 
reporting period, the percentage is 136 percent; and for the final cost 
reporting period of the 5-year transition (and future cost reporting 
periods), the short-stay outlier percentage is 120 percent, that is, 
the same as it is for all other LTCHs under the LTCH PPS.
    As we discussed in the June 6, 2003, final rule (68 FR 34147), we 
established this formula with the expectation that an adjustment to 
short-stay outlier payments during the transition will result in 
reducing the difference between payments and costs for a ``subclause 
(II)'' LTCH for the period of July 1, 2003, through the end of the 
transition period, when the LTCH PPS will be fully phased-in.
    As we stated in that same final rule, we also expect that during 
this 5-year period, ``subclause (II)'' LTCHs will make every attempt to 
adopt the type of efficiency enhancing policies that generally result 
from the implementation of prospective payment systems in other health 
care settings. We are not proposing any changes to the short-stay 
outlier policy in this proposed rule.
c. Proposed Extension of the Interrupted Stay Policy
    At existing Sec. 412.531(a), we define an ``interruption of a 
stay'' as a stay at a LTCH during which a Medicare inpatient is 
transferred upon discharge to an acute care hospital, an IRF, or a SNF 
for treatment or services that are not available in the LTCH and 
returns to the same LTCH within applicable fixed-day periods. (We also 
include transfers to swing beds under this interrupted stay policy for 
LTCH payment policy determinations, consistent with the SNF PPS payment 
policy. That is, a readmission to a LTCH from post-hospital SNF care 
being provided in a swing bed that is located either in the LTCH itself 
or in another onsite Medicare provider has the same policy consequence 
as a readmission to the LTCH from an onsite SNF (June 6, 2003, 68 FR 
34149).)
    As defined above, an interrupted stay is treated as one discharge 
from the

[[Page 4769]]

LTCH. The day-count of the applicable fixed-day period of an 
interrupted stay begins on the day of discharge from the LTCH (which is 
also the day of admission to the other site of care). For a discharge 
to an acute care hospital, the applicable fixed-day period is 9 days, 
for an IRF, 27 days, and for a SNF 45 days. The counting of the days 
begins on the day of discharge from the LTCH and ends on the 9th, 27th, 
or 45th day for an acute care hospital, an IRF, or a SNF, respectively, 
after the discharge.
    If the patient is readmitted to the LTCH within the fixed-day 
threshold, return to the LTCH is considered part of the first admission 
and only a single LTCH PPS payment will be made. For example, if a LTCH 
patient is discharged to an acute hospital and is readmitted to the 
LTCH on any day up to and including the 9th day following the original 
day of discharge from the LTCH, one LTC-DRG payment will be made. If 
the patient is readmitted to the LTCH from the acute care hospital on 
the 10th day after the original discharge or later, Medicare will pay 
for the second admission as a separate stay with an additional LTC-DRG 
assignment. In implementing this policy, we provide that, in the event 
a Medicare inpatient is discharged from a LTCH and is readmitted and 
the stay qualifies as an interrupted stay, the provider should cancel 
the claim generated by the original stay in the LTCH and submit one 
claim for the entire stay. (For further details, see Medicare Program 
Memorandum Transmittal A-02-093, September 2002.)
    On the other hand, if the patient stay exceeds the total fixed-day 
threshold outside of the LTCH at another facility before being 
readmitted, two separate payments would be made. One would be based on 
the principal diagnosis and length of stay for the first admission and 
the other based on the principal diagnosis and length of stay for the 
second admission. Depending upon their lengths of stay, both stays 
could result in payments as a short-stay outlier (Sec. 412.529), a full 
LTC-DRG, or even a high-cost outlier. Further, if the principal 
diagnosis is the same for both admissions, the hospital could receive 
two similar payments.
    When we introduced the interrupted stay policy for LTCHs in the 
August 30, 2002, final rule (67 FR 56002-56006), we noted that we would 
consider expanding or revising the policy based on information received 
from the provider community or information gained from our ongoing 
monitoring activities. During the first year of the LTCH PPS, it has 
come to our attention, from both of these sources, that certain LTCHs 
are discharging patients during the course of their treatment for the 
sole purpose of receiving specific tests or procedures from another 
facility (that should have been furnished under arrangements by the 
LTCHs), and then readmitting the patient to the LTCH following the 
administration of the test or procedure. In other words, these patients 
do not stop receiving medical care that should be considered LTCH 
inpatient services during the period between their discharge from and 
readmission to the LTCH. On the contrary, they continue to receive 
care, often of a highly specialized type, from the other facility 
before being readmitted for further inpatient care at the LTCH. This 
sequence of care suggests that the original discharge from the LTCH may 
be motivated by financial considerations rather than by clinical 
judgment and, therefore, would be inappropriate.
    Existing regulations at Sec. 412.509(c) require a LTCH to furnish 
all necessary covered services for a Medicare beneficiary who is an 
inpatient of the hospital either directly or under arrangements (as 
defined in Sec. 409.3). Under Sec. 409.3, when services are furnished 
under arrangements, Medicare payments made to the provider that 
arranged for the services discharges the liability of the beneficiary 
or any other person to pay for those services. The ``under 
arrangements'' policy set forth in Sec. 412.509 for LTCHs derives from 
the regulations at Sec. 411.15(m), which implement section 1862(a)(14) 
of the Act. Section 1862(a) of the Act specifies the services for which 
no payment may be made under Medicare Part A and Part B. Section 
1862(a)(14) of the Act specifies the exception for certain services to 
be furnished ``under arrangements'' by providers.
    If a LTCH obtains, from another facility ``under arrangements,'' a 
specific test or procedure for one of its inpatients that is not 
available on the LTCH's premises, as contemplated by Sec. 412.509, a 
discharge and a subsequent readmission would be unnecessary and 
inappropriate. This is true even if it is necessary to transport the 
patient to another facility to receive the arranged-for service. 
Furthermore, no additional claim should be submitted to Medicare by the 
other entity that actually furnished the test or procedure because, 
under Sec. 412.509(c), the LTCH must furnish all necessary covered 
services to the Medicare beneficiary who is an inpatient of the 
hospital either directly or under arrangements. In such a situation, 
generally, the LTCH would include the medically necessary test or 
procedure on its patient claim to Medicare (which could have an effect 
on the assignment of the LTC-DRG and thus the Medicare payment to the 
LTCH) and the LTCH would be responsible for paying the provider 
directly for the test or procedure.
    Patient discharges from the LTCH for tests or procedures that 
should have been provided under arrangements, followed by LTCH 
readmission, result in an inappropriate increase in Medicare costs in 
three ways:
    First, the Medicare payment associated with the LTC-DRG that would 
be assigned to the patient's stay will typically already include the 
costs of the test or procedure. (The August 30, 2002, LTCH PPS final 
rule (67 FR 55977-55985), includes an in-depth description of the 
derivation of LTC-DRGs from ICD-9-CM codes on Medicare claims and a 
discussion of the development and calculation of LTC-DRG relative 
weights.) Second, the intervening provider will bill Medicare 
separately for the test or procedure. Thus, if services that should 
have been furnished directly or under arrangements by the LTCH are 
instead unbundled and billed separately, Medicare would pay the other 
provider for the service that should have been paid for ``under 
arrangements'' by the LTCH under Sec. 412.509.
    Third, a discharge for outpatient services and a subsequent 
readmission to the LTCH is not currently covered under the interrupted 
stay policy at existing Sec. 412.531. Section 412.531(a) only includes 
discharges from a LTCH to an acute care hospital, an IRF, and a SNF for 
treatment or services not available in the LTCH and subsequent 
readmission to the same LTCH. If a patient is discharged and readmitted 
to the LTCH following an outpatient test or procedure, under current 
policy, after making a LTCH PPS payment for the first discharge, there 
would be a second Medicare payment to the LTCH when the patient is 
finally discharged.
    In order to address these concerns, we are proposing to revise the 
definition of an interruption of a stay under Sec. 412.531 to add 
situations in which a patient is discharged from the LTCH and 
readmitted to the same LTCH within 3 days of the discharge (proposed 
revised Sec. 412.531(a)(1)). We believe that if a patient is discharged 
from a LTCH for any reason and is then readmitted within 3 days, in 
general, the patient's original admitting diagnoses would not change 
significantly during those 3 days. Therefore, such a readmission would 
not constitute a new episode of care. We question whether a patient

[[Page 4770]]

who was discharged and then returned to the same LTCH within 3 days 
should have been discharged in the first place. Since LTCHs are 
designed to treat patients with a high level of acuity and 
multicomorbidities, we believe that a 3-day period is a reasonable 
window during which necessary offsite medical care might be delivered, 
under arrangements, as contemplated under Sec. 412.509, without an 
appreciable change in the original admitting diagnoses. Moreover, this 
3-day period is consistent with the interrupted stay policy under the 
IRF PPS under which the maximum period of time that a patient could be 
away from the IRF is 3 days before a new patient assessment is 
required. Therefore, under our proposal, if a patient were discharged 
on Monday, and readmitted either on that Monday (the first day), 
Tuesday (the second day), or Wednesday (the third day), the subsequent 
readmission would not be considered a new admission and Medicare would 
pay the LTCH for only one discharge based on the combined length of 
stay for the period prior to and after the absence from the LTCH.
    We are further proposing that, under the proposed revision of the 
interruption of stay policy for LTCHs, any treatment or medical 
services furnished to the individual during the 3-day (or less) absence 
from the LTCH could not be billed separately to the Medicare program or 
to the beneficiary, but would be paid as ``under arrangements'' 
services to the LTCH. We calculate payments under the LTCH PPS using 
base year costs that include the numerous tests and procedures typical 
of the complicated medical conditions that characterize LTCH patients, 
including those furnished by other providers. Therefore, we believe 
that a readmission to the LTCH that triggers the proposed 3-day 
interrupted stay policy should be treated as a continuation of the 
episode of care that occasioned the first admission. Further, we 
believe that the readmission to the LTCH within 3 days establishes the 
presumption that any treatment or services furnished during the 
intervening 3 (or less) days should have been provided by the LTCH 
``either directly or under arrangements'' (Sec. 412.509(b)). The entire 
stay would generate one LTC-DRG payment under the LTCH PPS, which would 
be ``payment in full for all inpatient hospital services, as defined in 
Sec. 409.10.'' (Sec. 412.509(a)) Under Sec. 409.10(a) inpatient 
hospital services means the following services furnished to an 
inpatient of a qualified hospital: (1) Bed and board; (2) nursing 
services and other related services; (3) use of hospital or CAH 
facilities; (4) medical social services; (5) drugs, biologicals, 
supplies, appliances, and equipment; (6) certain other diagnostic or 
therapeutic services; (7) medical or surgical services provided by 
certain interns or residents-in-training; and (8) transportation 
services, including transport by ambulance.
    As explained above, we are proposing that a readmittance to the 
LTCH within 3 days after a discharge will result in one LTC-DRG payment 
for the entire stay. Since we are treating both parts of the stay as 
one episode of care, we are proposing that treatment or care provided 
during the ``interruption'' be considered to have occurred during that 
episode of care and that payment for such services are included in the 
LTC-DRG payment. We are also proposing to include the days of the 3-day 
interruption of stay in counting LTCH days to determine the total 
length of stay of the patient at the LTCH if medical treatment or care 
were provided during the 3 days because these services will be 
considered to have been paid for as part of the total LTCH stay 
(proposed Sec. 412.531(b)(1)(iii)). We are further proposing that if a 
patient is discharged home, and within a 3-day period received no 
additional medical treatment or service, but is readmitted to the LTCH, 
the days away from the LTCH would not be included in the length of stay 
calculation. This is presently the day count methodology that we use in 
the existing interrupted stay policy at Sec. 412.531(b)(1) as applied 
to acute care hospitals, IRFs, and SNFs.
    We are proposing that this policy be applicable to all services or 
procedures provided to the patient either under Medicare Part A, or 
Part B, except for the services which are expressly excluded from 
bundling under section 1886(a)(1)(H)(i) of the Act and Sec. 411.15(m), 
such as services furnished by physicians under Sec. 415.102(a) and 
other specific health professionals. Failure to comply with this 
bundling requirement could lead to sanctions such as termination of the 
LTCH's Medicare provider agreement or civil money penalties (under 
section 1866(a)(1)(H)(i) of the Act).
    Although we understand that, in good faith, a patient could be 
discharged from a LTCH, return home for a day or two, experience a 
setback, and then be readmitted to the LTCH, we believe that such a 
readmission to the LTCH should be considered an extension of the 
original hospitalization and that Medicare should not pay for two 
claims for what was, in effect, one episode of care. The proposed 3-day 
interrupted stay policy takes into account the profile of most LTCH 
patients, as typically very sick individuals with multicomorbidities. 
We believe that it is reasonable to presume that, should this type of 
patient be discharged and then readmitted to a LTCH with 3 days the 
readmission signifies a continuation of the original hospital stay and 
not a new episode of care. Furthermore, we are concerned about reports 
of LTCHs discharging and readmitting patients who are still undergoing 
active treatment rather than obtaining services for these patients 
``under arrangements'' in accordance with section 1862(a)(14) of the 
Act and the regulations at Sec. 412.509.
    If the policy is finalized, we intend to collect data on any 
Medicare claims for outpatient services as well as inpatient services 
furnished during the time that the patients are away from the LTCH 
under the proposed 3-day interrupted stay policy. We would review data 
to determine whether we should expand the 3-day time period and we will 
consider proposing such a change in a future rule. Further, if it 
appears that additional patients are being discharged for the purpose 
of receiving tests or procedures at other Medicare settings, and then 
readmitted to the LTCH, in order for the LTCH to avoid paying for the 
procedure ``under arrangements,'' we may find it appropriate for our 
Quality Improvement Organizations (QIO) to evaluate the medical basis 
for the original discharge. A patient discharge that is not clinically 
justifiable could constitute potential violation of the LTCH's 
conditions of participation in the Medicare program for inadequate 
discharge planning or an inappropriate discharge from the LTCH under 
Sec. 482.43. Moreover, as noted above, if a separate bill is submitted 
by an entity other than the LTCH for services furnished during this 
period, this could also be a violation of the LTCH's provider agreement 
obligation regarding bundled services.
    In proposing this policy, we are not attempting to restrict a LTCH 
from pursuing necessary or more appropriate clinical care from another 
facility. As we designed the PPS for LTCHs, the original interrupted 
stay policy was created for situations where sound clinical judgment 
could suggest a different treatment setting for LTCH patients: a 
patient requiring emergency surgery at an acute care hospital; a 
patient who would appear to benefit from a specific therapy regimen at 
an IRF; or a patient who had improved and, therefore, could be 
appropriately cared for at a SNF. The policy accounted for

[[Page 4771]]

a readmission to the LTCH after the emergency care or in the event of a 
change in the patient's condition, that is, for sound clinical reasons. 
Fundamentally, the interrupted stay policy resulted from our 
determination to allow considerable latitude to medical personnel in 
this regard without untoward payment consequences for the Medicare 
program.
    We are proposing a revision to the existing interrupted stay policy 
because we believe that 3 days in most instances represents an 
appropriate interval for establishing whether or not the reason for the 
patient's readmission is directly connected to the original episode of 
care and whether or not Medicare-covered services were obtained during 
the interruption that should have otherwise been provided ``under 
arrangements'' by the LTCH.
    All inpatient services, under Medicare, fall within the purview of 
the requirement of section 1862(a)(14) of the Act, and, therefore, what 
we have proposed is not a departure from existing policy. Under section 
1862(a)(14) of the Act, notwithstanding any other provision of this 
title, ``no payment may be made under Part A or Part B for any expenses 
incurred for items or services which are other than physicians' 
services (as defined in regulations promulgated specifically for 
purposes of this paragraph), services described by section 
1861(s)(2)(K) of the Act (certified nurse-midwife services, qualified 
psychologist services, and services of a certified registered nurse 
anesthetist) and which are furnished to an individual who is a patient 
of a hospital or critical access hospital by an entity other than the 
hospital or critical access hospital unless the services are furnished 
under arrangements (as defined in section 1861(w)(1) of the Act with 
the entity made by the hospital or critical access hospital.'' Section 
1861(w)(1) of the Act states that ``[t]he term `arrangements' is 
limited to arrangements under which receipt of payment by the hospital, 
critical access hospital, skilled nursing facility, home health agency, 
or hospice program (whether in its own right or as agent), with respect 
to services for which an individual is entitled to have payment made 
under this title, discharges the liability of such individual or any 
other person to pay for the services.'' We believe the objective of 
these statutory provisions, which were implemented for inpatient acute 
care hospitals in regulations at Sec. 411.15(m) and subsequently at 
Sec. 412.509 for LTCHs, was to discharge financial liability for 
inpatients who may have received additional care off-premises and to 
assign payment responsibility for such care to the hospital that is 
being paid for that beneficiary's total care for that spell of illness. 
The total care delivered by the hospital may be provided ``directly'' 
or ``under arrangements'' with other facilities (Sec. 412.509(c)) and 
was included in Medicare's payment to the hospital. Over the years, we 
have often referred to this as the ``prohibition against unbundling'' 
for purposes of emphasizing that if a Medicare provider ``unbundles'' 
specific components of a beneficiary's total inpatient care (provided 
either ``directly'' or ``under arrangements'') and sends separate 
claims to Medicare for those tests or treatments, the provider would be 
acting in violation of the statute and applicable regulations. Since 
LTCHs treat patients with multicomorbidities who are often in need of a 
wide range of diagnostic and treatment modalities and lengthy 
hospitalizations, we believe that in this particular setting, this 
statutory requirement is particularly vulnerable to gaming. For that 
reason, we are taking this opportunity to clarify the existing general 
unbundling prohibition and to propose specific language on the 
unbundling prohibition as it applies to the interrupted stay policy 
under the LTCH PPS and are proposing to codify it in regulations. As 
noted above, we are concerned that LTCH patients, under active 
treatment, are being inappropriately discharged to other treatment 
sites, receiving tests or procedures related to one of the diagnoses 
for which the patient is being hospitalized and which otherwise should 
have been provided at the LTCH either directly or under arrangements 
under Sec. 412.509 and then readmitted to the LTCH. Another claim is 
also being submitted to Medicare by the other treatment site for those 
tests or procedures. As stated earlier, under the LTCH PPS, payments 
associated with specific LTC-DRGs include all costs associated with 
rendering care to the type of patients treated in LTCHs and, therefore, 
additional Medicare payments for such services would be inappropriate.
    We understand that during a particular hospitalization, a typical 
LTCH patient, with multicomorbidities, could suddenly require emergency 
care at an acute care hospital. This would be the case, for example, if 
a patient who was admitted to the LTCH with a principal diagnosis of 
chronic obstructive pulmonary disease and respirator dependence, with 
secondary diagnoses of hypertension, Type II diabetes mellitus, history 
of coronary artery disease, and history of bladder cancer suddenly 
exhibits symptoms consistent with a pneumothorax (lung collapse) and 
requires treatment that is beyond the scope of the LTCH. Services 
obtained at an acute care hospital, under the proposed policy would be 
considered related to the original diagnoses and submission of a 
separate claim by the acute hospital should be considered a violation 
of the unbundling requirement established by section 1862(a)(14) of the 
Act. Payment to the acute hospital for any services delivered would be 
the responsibility of the LTCH since the critical episode was directly 
related to the hospitalization at the LTCH. Conversely, if the same 
patient had instead suddenly suffered a myocardial infarction (heart 
attack) that requires a cardiac workup, evaluation, and possible 
implantation of a cardiac stent, it may be appropriate to discharge 
this patient for admission to an acute care facility for appropriate 
evaluation and the invasive cardiac procedure. Under these 
circumstances, the admission to the acute hospital was totally 
unrelated to the patient's diagnoses in the LTCH and arguably there may 
be no need to bundle the services. A discharge from the LTCH and a 
readmission following the procedure at the acute hospital in order to 
resume the treatment provided by the LTCH, for which the patient was 
originally hospitalized, could be entirely appropriate. 
(Notwithstanding the necessity of the discharge, under the proposed 3-
day interrupted stay policy, there would be no additional LTC-DRG 
payment generated to the LTCH if the patient returns to the LTCH within 
the 3-day period.) It could be argued that in this type of a subsequent 
admission to the acute hospital, the acute care hospital should be able 
to submit a claim to Medicare for the procedure. (This payment to the 
acute hospital may be subject to the postacute care policy at Sec. 
412.4, depending upon the DRG to which it is assigned (68 FR 45404 and 
45412, August 1, 2003).)
    We are aware that there may be exceptions, and that in the example 
cited above, sound medical judgment could have dictated that the 
patient who needed the cardiac stent should first be discharged to the 
acute hospital and then readmitted to the LTCH within 3-days in order 
to continue necessary treatment at the LTCH. In such a case, 
notwithstanding our proposed 3-day interrupted stay policy, it is 
arguable that the implantation of the cardiac stent does not fall 
within the category of services that should be paid for by the LTCH 
under arrangements, and that the

[[Page 4772]]

acute hospital should be able to submit a claim to Medicare.
    Accordingly, while, arguably, it may be appropriate to attempt to 
limit the proposed unbundling requirement that services be provided 
under arrangement to those that are ``related'' to the admitting 
diagnoses of the LTCH patient, we have not been able to develop a 
methodology that would be administratively feasible and not subject to 
gaming, given the multiple comorbidities typical of LTCH patients. The 
prospective payment system for this particular setting was designed to 
capture all costs associated with treating these highly complicated 
cases and we believe that it will difficult to distinguish whether a 
particular critical episode can been seen as arising from one of the 
patient's many medical conditions for which the patient is presently at 
the LTCH. We are soliciting comments and suggestions that are 
consistent with the stated policy goals described above and that would 
be administratively feasible.
    We understand that any policy that is adopted in the final 
regulation would need to be issued with detailed instructions to fiscal 
intermediaries on implementation procedures to ensure a correct and 
consistent interpretation of our policy objectives.
d. Onsite Discharges and Readmittances
    Under Sec. 412.532, generally, if more than 5 percent of all 
Medicare discharges during a cost reporting period are patients who are 
discharged to an onsite SNF, IRF, or psychiatric facility, or to an 
onsite acute care hospital and who are then directly readmitted to the 
LTCH, only one LTC-DRG payment will be made to the LTCH for these type 
of discharges and readmittances during the LTCH's cost reporting 
period. Therefore, payment for the entire stay will be paid either as 
one full LTC-DRG payment or a short-stay outlier, depending on the 
duration of the entire LTCH stay.
    In applying the 5-percent threshold, we apply one threshold for 
discharges and readmittances with a co-located acute care hospital. 
There is also a separate 5-percent threshold for all discharges and 
readmittances with co-located SNFs, IRFs, and psychiatric facilities. 
In the case of a LTCH that is co-located with an acute care hospital, 
an IRF, or a SNF, the interrupted stay policy at Sec. 412.531 applies 
until the 5-percent threshold is reached. However, once the applicable 
threshold is reached, all such discharges and readmittances to the 
applicable site(s) for that cost reporting period are paid as one 
discharge pursuant to Sec. 412.532. This means that even if a 
discharged LTCH Medicare patient was readmitted to the LTCH following a 
stay in an acute care hospital of greater than 9 days, if the 
facilities share a common location and the 5-percent threshold were 
exceeded, the subsequent discharge from the LTCH will not represent a 
separate hospitalization for payment purposes. Only one LTC-DRG payment 
will be made for all such discharges during a cost reporting period to 
the acute care hospital, regardless of the length of stay at the acute 
care hospital, that are followed by readmittances to the onsite LTCH.
    Similarly, if the LTCH has exceeded its 5-percent threshold for all 
discharges to an onsite IRF, SNF, or psychiatric hospital or unit, with 
readmittances to the LTCH, the subsequent LTCH discharge for patients 
from any of those sites for the entire cost reporting period will not 
be treated as a separate discharge for Medicare payment purposes. (As 
under the interrupted stay policy, payment to an acute care hospital 
under the IPPS, to an IRF under the IRF PPS, and to a SNF under the SNF 
PPS, will not be affected. Payments to the psychiatric facility also 
will not be affected.)
5. Other Payment Adjustments
    As indicated earlier, we have broad authority under section 123 of 
Public Law 106-113, including whether (and how) to provide for 
adjustments to reflect variations in the necessary costs of treatment 
among LTCHs. Thus, in the August 30, 2002, final rule (67 FR 56014-
56027), we discussed our extensive data analysis and rationale for not 
implementing an adjustment for geographic reclassification, rural 
location, treating a disproportionate share of low-income patients 
(DSH), or indirect medical education (IME) costs. In that same final 
rule, we stated that we would collect data and reevaluate the 
appropriateness of these adjustments in the future once more LTCH data 
become available after the LTCH PPS is implemented. Because the LTCH 
PPS has only been implemented for less than 2 years and the lag-time in 
data availability, sufficient new data have still not yet been 
generated that would enable us to conduct a comprehensive reevaluation 
of these payment adjustments. Nonetheless, we have reviewed the limited 
data that are available and found no evidence to support additional 
proposed policy changes. Therefore, in this proposed rule, we are not 
proposing an adjustment for geographic reclassification, rural 
location, DSH, or IME at this time. However, we will continue to 
collect and interpret new data as they become available in the future 
to determine if these data support proposing any additional payment 
adjustments.
6. Proposed Budget Neutrality Offset To Account for the Transition 
Methodology
    Under Sec. 412.533, we implemented a 5-year transition period from 
reasonable cost-based payment to prospective payment, during which a 
LTCH will be paid an increasing percentage of the LTCH PPS rate and a 
decreasing percentage of its payments under the reasonable cost-based 
payment methodology for each discharge. Furthermore, we allow a LTCH to 
elect to be paid based on 100 percent of the standard Federal rate in 
lieu of the blended methodology.
    The standard Federal rate was determined as if all LTCHs will be 
paid based on 100 percent of the standard Federal rate. As stated 
earlier, we provide for a 5-year transition period that allows LTCHs to 
receive payments based partially on the reasonable cost-based 
methodology. In order to maintain budget neutrality as required by 
section 123(a)(1) of the Pub. L. 106-113 and Sec. 412.523(d)(2) during 
the 5-year transition period, we reduce all LTCH Medicare payments 
(whether a LTCH elects payment based on 100 percent of the Federal rate 
or whether a LTCH is being paid under the transition blend 
methodology). Specifically, we reduce all LTCH Medicare payments during 
the 5-year transition by a factor that is equal to 1 minus the ratio of 
the estimated TEFRA reasonable cost-based payments that would have been 
made if the LTCH PPS had not been implemented, to the projected total 
Medicare program PPS payments (that is, payments made under the 
transition methodology and the option to elect payment based on 100 
percent of the Federal rate).
    In the June 6, 2003, final rule (68 FR 34512), based on the best 
available data, we projected that a certain percentage of LTCHs would 
elect to be paid based on 100 percent of the standard Federal rate 
rather than receive payment based on the transition blend methodology. 
As discussed in that same final rule, using the same methodology 
established in the August 30, 2002, final rule (67 FR 56034), this 
projection was based on our estimate that either: (1) a LTCH has 
already elected payment based on 100 percent of the Federal rate prior 
to the beginning of the 2004 LTCH PPS rate year (July 1, 2003); or (2) 
a LTCH will receive higher payments based on 100 percent of the 
standard Federal rate compared to the payments they would receive under 
the transition blend

[[Page 4773]]

methodology. Similarly, we projected that the remaining LTCHs would 
choose to be paid based on the transition blend methodology at Sec. 
412.533 because those payments would be higher than if they were paid 
based on 100 percent of the standard Federal rate.
    In the June 6, 2003, final rule (68 FR 34513), we projected that 
the full effect of the remaining 4 years of the transition period, 
including the election option, will result in a cost to the Medicare 
program of $310 million. Specifically, for the 2005 LTCH PPS rate year, 
we estimated that the cost of the transition would be $100 million. 
This cost would have necessitated an estimated budget neutrality offset 
of 4.6 percent (0.954) for payments to LTCHs in the 2005 rate year. 
Furthermore, in order to maintain budget neutrality, we indicated that, 
in the future, we would propose a budget neutrality offset for each of 
the remaining years of the transition period to account for the 
estimated payments for the respective fiscal year.
    For the proposed 2005 LTCH PPS rate year, based on the best 
available data, we are projecting that approximately 69 percent of 
LTCHs would be paid based on 100 percent of the proposed standard 
Federal rate rather than receive payment under the transition blend 
methodology. Using the same methodology described in the August 30, 
2002, final rule (67 FR 56034), this projection, which uses updated 
data and inflation factors, is based on our estimate that either--(1) a 
LTCH has already elected payment based on 100 percent of the Federal 
rate prior to the start of the 2005 LTCH PPS rate year (July 1, 2004); 
or (2) a LTCH would receive higher payments based on 100 percent of the 
proposed 2005 LTCH PPS rate year standard Federal rate compared to the 
payments it would receive under the transition blend methodology. 
Similarly, we are projecting that the remaining 31 percent of LTCHs 
would choose to be paid based on the applicable transition blend 
methodology (as set forth under Sec. 412.533(a)) because they would 
receive higher payments than if they were paid based on 100 percent of 
the proposed 2005 LTCH PPS rate year standard Federal rate. The 
applicable transition blend percentage is applicable for a LTCH's 
entire cost reporting period beginning on or after October 1 (unless 
the LTCH elects payment based on 100 percent of the Federal rate).
    In this proposed rule, based on the best available data and the 
proposed policy revisions described above, we project that the full 
effect of the remaining 4 years of the transition period (including the 
election option) would result in a cost to the Medicare program of $170 
million as follows:

------------------------------------------------------------------------
                                                         Estimated cost
                  LTCH PPS rate year                      (in millions)
------------------------------------------------------------------------
2005..................................................               $80
2006..................................................                50
2007..................................................                30
2008..................................................                10
------------------------------------------------------------------------

    We note that although the transition period will have ended for 
most LTCHs by the 2008 LTCH PPS rate year, a small cost is projected 
for the 2008 LTCH PPS rate year (July 1, 2007, through June 30, 2008) 
because the applicable transition period percentages are based on a 
LTCH's individual cost reporting period and not the LTCH PPS rate year 
(July 1 through June 30). Specifically, LTCHs with cost reporting 
periods beginning July 1, 2006, through October 1, 2006 (during the 4th 
year of the transition period), where the applicable transition blend 
percentages are 20 percent based on reasonable cost and 80 percent 
based on the Federal rate (see Sec. 412.533), will end during the first 
3 months of the 2008 LTCH PPS rate year (July 1, 2007, through 
September 30, 2007). Therefore, a small cost is projected for the 2008 
LTCH PPS rate year to account for those LTCHs that will still be 
receiving blended transition payments for a portion of the 2008 LTCH 
PPS rate year.
    Accordingly, using the methodology established in the August 30, 
2002, final rule (67 FR 56034) based on updated data and the proposed 
policies and rates discussed in this proposed rule, we are proposing a 
3.0 percent reduction (0.970) to all LTCHs' payments for discharges 
occurring on or after July 1, 2004, and through June 30, 2005, to 
account for the estimated cost of the transition period methodology 
(including the option to elect payment based on 100 percent of the 
Federal rate) of the $80 million for the 2005 LTCH PPS rate year.
    This offset of 3.0 percent has decreased relative to the estimate 
of 4.6 percent for several reasons. For this proposed rule, we have 
used data from more recent cost reports and were able to obtain data 
from more LTCHs (211 LTCHs as compared to 194 LTCHs in the June 6, 
2003, final rule). In addition, in projecting the percentage of 
hospitals that would elect to be paid based on 100 percent of the 
proposed 2005 LTCH PPS rate year standard Federal rate, we used the 
Provider Specific File (PSF) in which LTCHs indicated whether they 
opted to be paid based on 100 percent of standard Federal rate or the 
transition blend methodology for the FY 2003 LTCH PPS payment year. 
However, based on information obtained from the PSF, we learned that, 
for those LTCHs that we projected would choose payment for FY 2003 
based on 100 percent of the standard Federal rate (where payment based 
on the full Federal rate would be expected to be higher for those LTCHs 
than payment under the transition blend methodology), a significant 
number of those LTCHs chose to be paid under the transition blend 
methodology that is projected to result in payment lower than that 
using 100 percent of the standard Federal rate.
    Similarly, a significant number of those LTCHs that we expected 
would choose payment under the transition blend methodology (where 
payment under the transition blend for those LTCHs would be expected to 
be higher than payment based on 100 percent of the standard Federal 
rate) chose to be paid using 100 percent of the standard Federal rate, 
which is projected to result in payment lower than that under the 
transition blend methodology. Since a number of LTCHs opted to be paid 
based on a methodology in which they would receive lower payments, we 
assume that the overall cost of $100 million to the Medicare program of 
the transition period would be less than what was projected in the June 
6, 2003, final rule for the proposed 2005 LTCH PPS rate year. Thus, in 
the June 6, 2003, final rule, in estimating the $100 million cost to 
the transition, which would have necessitated a 4.6 percent reduction 
to all LTCHs' payments for the 2005 LTCH PPS rate year, we overstated 
our assumptions of the cost of the transition period. Accordingly, to 
account for the projected lower cost of the transition period due to 
those LTCHs that chose to be paid based on a methodology in which they 
would receive lower payments in FY 2003, for this proposed rule, we are 
proposing a 3.0 percent (0.970) reduction to all LTCHs' payments during 
the 2005 LTCH PPS rate year. We note that the proposed 0.970 transition 
period budget neutrality factor for the 2005 LTCH PPS rate year is 3 
percentage points lower than the transition period budget neutrality 
factor for the 2004 LTCH PPS rate year (0.940). This smaller budget 
neutrality offset contributes to greater LTCH payment increases between 
the 2004 and 2005 LTCH PPS rate years compared to the increases seen 
between FY 2003 and the 2004 LTCH PPS rate year. We do not expect to 
see these large payment per discharge increases in future years as the 
majority of LTCHs will have transitioned fully to the LTCH PPS and, 
therefore, the transition period

[[Page 4774]]

budget neutrality factor should remain more stable.
    As noted above, in order to maintain budget neutrality, we 
indicated that we would propose a budget neutrality offset for each of 
the remaining years of the transition period to account for the 
estimated costs for the respective LTCH PPS rate years. In this 
proposed rule, based on the best available data, we are proposing the 
following budget neutrality offsets to the LTCH PPS during the 
remaining years of the transition period: 2.2 percent (0.978) for the 
2006 LTCH PPS rate year, 1.1 percent (0.989) for the 2007 LTCH PPS rate 
year, and 0.1 percent (0.990) for the 2008 LTCH PPS rate year. As noted 
above, the small offset in the 2008 LTCH PPS rate year accounts for 
those LTCHs whose blended transition period payments will be concluding 
in the first 3 months of the 2008 LTCH PPS rate year (that is, July 1, 
2007, through September 30, 2007).
    As we discussed in the August 30, 2002, final rule (67 FR 56036), 
consistent with the statutory requirement for budget neutrality in 
section 123(a)(1) of Public Law 106-113, we intended for estimated 
aggregate payments under the LTCH PPS to equal the estimated aggregate 
payments that would be made if the LTCH PPS was not implemented. Our 
methodology for estimating payments for purposes of the budget 
neutrality calculations use the best available data at that time and 
necessarily reflect assumptions. As the LTCH PPS progresses, we are 
monitoring payment data and will evaluate the ultimate accuracy of the 
assumptions used in the budget neutrality calculations (for example, 
inflation factors, intensity of services provided, or behavioral 
response to the implementation of the LTCH PPS) described in the August 
30, 2002, final rule (67 FR 56027-56037). To the extent these 
assumptions significantly differ from actual experience, the aggregate 
amount of actual payments may turn out to be significantly higher or 
lower than the estimates on which the budget neutrality calculations 
were based.
    Section 123 of Pub. L. 106-113 and section 307 of Pub. L. 106-554 
provide broad authority to the Secretary in developing the LTCH PPS, 
including the authority for appropriate adjustments. Under this broad 
authority, as implemented in the regulations at Sec. 412.523(d)(3), we 
have provided for the possibility of making a one-time prospective 
adjustment to the LTCH PPS rates by October 1, 2006, so that the effect 
of any significant difference between actual payments and estimated 
payments for the first year of the LTCH PPS would not be perpetuated in 
the LTCH PPS rates for future years.
    In the June 6, 2003, final rule (67 FR 34153), we estimated that 
total Medicare program payments for LTCH services over the next 5 LTCH 
PPS rate years would be $2.17 billion for the 2004 LTCH PPS rate year; 
$2.29 billion for the 2005 LTCH PPS rate year; $2.42 billion for the 
2006 LTCH PPS rate year; $2.56 billion for the 2007 LTCH PPS rate year; 
and $2.71 billion for the 2008 LTCH PPS rate year.
    Consistent with the methodology discussed in the June 6, 2003, 
final rule (68 FR 34138), in this proposed rule, based on the most 
recent available data, we estimate that total Medicare program payments 
for LTCH services for the next 5 LTCH PPS rate years would be as 
follows:

------------------------------------------------------------------------
                                                            Estimated
                  LTCH PPS rate year                     payments  ($ in
                                                            billions)
------------------------------------------------------------------------
2005..................................................             $2.33
2006..................................................              2.48
2007..................................................              2.64
2008..................................................              2.79
2009..................................................              2.96
------------------------------------------------------------------------

    As noted above, in accordance with the methodology established in 
the August 30, 2002, final rule (67 FR 56037), these estimates are 
based on the projection that 69 percent of LTCHs would elect to be paid 
based on 100 percent of the proposed 2005 LTCH PPS rate year standard 
Federal rate rather than the applicable transition blend, and our 
estimate of 2005 LTCH PPS rate year payments to LTCHs using our Office 
of the Actuary's most recent estimate of the excluded hospital with 
capital market basket of 2.9 percent for the 2005 LTCH PPS rate year, 
3.2 percent for the 2006 LTCH PPS rate year, 3.1 percent for the 2007 
LTCH PPS rate year, 3.0 percent for the 2008 LTCH PPS rate year, and 
3.2 percent for the 2009 LTCH PPS rate year. We also took into account 
our Office of the Actuary's projection that there would be an increase 
in Medicare beneficiary enrollment of 2.1 percent in the 2005 LTCH PPS 
rate year, 2.4 percent in the 2006 LTCH PPS rate year, 2.1 percent in 
the 2007 LTCH PPS rate year, 2.0 percent in the 2008 LTCH PPS rate 
year, and 2.1 percent in the 2009 LTCH PPS rate year.
    Because the LTCH PPS has only been implemented for less than 2 
years, sufficient new data have not been generated that would enable us 
to conduct a comprehensive reevaluation of our budget neutrality 
calculations. Therefore, in this proposed rule, we are not proposing to 
make a one-time adjustment under Sec. 412.523(d)(3) so that the effect 
of any significant difference between actual payments and estimated 
payments for the first year of the LTCH PPS is not perpetuated in the 
PPS rates for future years. However, we will continue to collect and 
interpret new data as the data become available in the future to 
determine if such an adjustment should be proposed.
7. Proposed Changes in the Procedure for Counting Days in the Average 
Length of Stay Calculation
    Prior to the implementation of the PPS for LTCHs, Medicare paid 
LTCHs under the reasonable cost methodology subject to limitations on 
payments. Both the BBRA and BIPA required the development and 
implementation of a per discharge PPS for LTCHs based on DRGs for cost 
reporting periods beginning on or after October 1, 2002 (67 FR 55954, 
August 30, 2002).
    Under the reasonable cost-based reimbursement system, the number of 
patient days that occurred during a cost reporting period and the costs 
associated with those days were reported on the hospital's cost report 
(Hospital and Hospital Health Care Complex Cost Report, CMS Form 2552-
96), as were the number of patient discharges that occurred during that 
same period. This method of reporting and reimbursement did not require 
that all of the days of care to a patient be counted as occurring in 
the cost reporting period during which the patient was discharged. 
Under this method of reporting and reimbursement the days of care to a 
patient are counted in the cost reporting period in which it occurred.
    With the FY 2003 implementation of the LTCH PPS, as in other 
discharge-based PPS'', such as those for acute care hospitals and for 
IRFs, all days of the patient's stay, even those occurring prior to the 
cost reporting period in which the discharge occurs are counted for 
payment purposes as occurring in the cost reporting period of the 
patient's discharge. An example of this distinction is as follows: A 
LTCH has a January 1 through December 31 cost reporting period; a 
Medicare patient is admitted on December 15 and discharged on February 
5, 2004. Prior to the LTCH PPS, under the reasonable cost-based 
reimbursement system, costs and patient days occurring in December 2003 
would be included in the January 1 through December 31, 2003, cost 
reporting period, even though the patient was not discharged until 
February of the next cost reporting period that began January 1, 2004. 
Those patient days occurring in January

[[Page 4775]]

and February would be counted in the next cost reporting period (2004) 
in which the discharge occurred. Since the implementation of the LTCH 
PPS, for payment purposes, all patient days for this stay would be 
reported in the cost reporting period in which the discharge occurred. 
In the above example, therefore, all of the patient stay would be 
counted in the next cost reporting period which is the 2004 cost 
reporting period. Even if a LTCH is transitioning into fully Federal 
payments and a percentage of its payments is based upon what would have 
been paid under the former reasonable cost-based reimbursement system, 
under Sec.Sec. 412.500 and 412.533, payment policy is governed by the 
LTCH PPS. At cost report settlement, payment is discharge-based. 
Therefore, once a LTCH is subject to the LTCH PPS, that is, for its 
first cost reporting period starting on or after October 1, 2002, the 
``days follow the discharge,'' which means that both days and costs are 
linked to the patient's discharge, even when the days occurred in a 
previous cost reporting period.
    In the August 30, 2002, final rule (67 FR 55972), which established 
the policies of the LTCH PPS, we stated that ``[t]he procedure by which 
a LTCH will be evaluated by its fiscal intermediary to determine 
whether it will qualify as a LTCH * * * is the same procedure currently 
employed under the TEFRA system.'' Currently, for determining whether a 
hospital meets the greater than 25 day average Medicare inpatient 
length of stay criterion, in the case of a Medicare patient who was 
admitted during one cost reporting period, but was discharged in a 
following cost reporting period, both covered and uncovered days are 
counted in the cost reporting period in which they occurred and not 
linked to the cost reporting period in which the patient is discharged.
    Therefore, presently, for a LTCH with a January 1 through December 
31 cost reporting period, if a patient was admitted on December 1, 
2002, and discharged on January 15, 2003, patient days would be counted 
one way for payment purposes and another way for purposes of counting 
the average length of stay. For payment purposes, all 46 days of the 
stay and the costs associated with them would be reported during the 
cost reporting period that the discharge occurred, that is, January 1, 
2003, through December 31, 2003. For purposes of determining whether a 
hospital meets the greater than 25 day length of stay criterion, under 
Sec. 412.23(e)(2)(i), however, for the same patient, the 31 days in 
December would be counted as occurring during the January 1, 2002, to 
December 31, 2002, cost reporting period and the 15 days in January 
2003 would be counted, along with the discharge, during the January 1, 
2003, through December 31, 2003, cost reporting period.
    We have received numerous inquiries from providers and fiscal 
intermediaries indicating that our two different ways of counting days 
under the LTCH PPS for payment and for average length of stay 
calculations have created considerable confusion. Therefore, in 
response to these inquiries and consistent with the payment system 
already in place for LTCHs as discussed above, in this proposed rule, 
we are proposing to revise Sec. 412.23(e)(3)(i) of the regulations to 
specify that if a patient's stay includes days of care furnished during 
two or more separate consecutive cost reporting periods, the total days 
of a patient's stay would be reported in the cost reporting period 
during which the patient is discharged in calculating the average 
length of stay for hospitals that qualify as LTCHs under both Sec. 
412.23(e)(2)(i) and (ii). We are not proposing any changes to the 
formula of dividing the number of total days for Medicare patients by 
discharges for LTCHs in order to determine whether a hospital qualifies 
as a LTCH under Sec. 412.23(e)(2)(i) or in the formula of dividing 
total days for all patients by discharges for LTCHs to qualify under 
Sec. 412.23(e)(2)(ii).
    In the August 1, 2003, final rule for the IPPS (68 FR 45464), we 
discussed the inability of the present cost report (Hospital and 
Hospital Health Care Complex Cost Report, CMS Form 2552-96) to capture 
total days for Medicare patients as required under Sec.Sec. 
412.23(e)(2) and (e)(3) for hospitals qualifying under Sec. 
412.23(e)(2)(i) and our present use of census data gathered from the 
Medicare provider analysis and review (MedPAR) files for this purpose. 
Prior to the October 1, 2002, implementation of the LTCH PPS, we relied 
on data from the most recently submitted hospital cost report in order 
to determine whether or not a hospital qualified as a LTCH. We would 
continue to utilize patient days and discharge data from MedPAR files 
for the qualification calculation under the proposed revised Sec. 
412.23(e)(3)(i) until the cost reporting form is revised to capture 
total days for Medicare inpatients.
    As discussed earlier, for a hospital to qualify as a LTCH under 
Sec. 412.23(e)(2)(i), it must demonstrate that the Medicare inpatients 
require care for an average Medicare inpatient length of stay of 
greater than 25 days for the hospital's most recent cost reporting 
period. Alternatively, for cost reporting periods beginning on or after 
August 5, 1997, a hospital that was first excluded from the PPS in 
1986, and can demonstrate that at least 80 percent of its annual 
Medicare inpatient discharges in the 12-month cost reporting period 
ending in FY 1997 have a principal diagnosis that reflects a finding of 
neoplastic disease must have an average inpatient length of stay for 
all patients, including both Medicare and non-Medicare inpatients, of 
greater than 20 days (Sec. 412.23(e)(2)(ii)). As described above, under 
the previous reasonable cost-based reimbursement system to determine 
whether or not a hospital met this requirement, total days for all 
patients were divided by the total number of discharges that occurred 
during a cost reporting period. When we implemented the LTCH PPS on 
October 1, 2002, we limited this calculation to only Medicare patients 
for hospitals to qualify under Sec. 412.23(e)(2)(i), but did not change 
the calculation for hospitals to qualify under Sec. 412.23(e)(2)(ii). 
As we noted in the August 30, 2002, final rule, ``[w]e believe that 
excluding non-Medicare patients in determining the average inpatient 
length of stay for purposes of subclause (I) would be more appropriate 
in identifying the hospitals that warrant exclusion under the general 
definition of LTCH in subclause (I). However in enacting subclause 
(II), the Congress provided an exception to the general definition of 
LTCH under subclause (I), and we have no reason to believe that the 
change in methodology for determining the average inpatient length of 
stay would better identify the hospitals that the Congress intended to 
exclude under subclause (II) (67 FR 55974). These hospitals will 
continue to have their greater than 20 days average length of stay 
calculated based on all days for all patients, whether Medicare or non-
Medicare patients, and will continue to be determined based on the days 
of care provided during the cost reporting period and not based solely 
on the count of days for the patients discharged during the cost 
reporting period.
8. Clarification of the Requirements for a Satellite Facility or a 
Remote Location To Qualify as a LTCH and Proposed Changes to the 
Requirements for Certain Satellite Facilities and Remote Locations
a. Proposed Policy Change
    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

[[Page 4776]]

same campus as buildings used by another hospital.'' Satellite 
arrangements exist when a IPPS excluded hospital is either a 
freestanding hospital or a hospital-within-a-hospital under Sec. 
412.22(e) that establishes an additional location by sharing space 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. A detailed discussion of our policies regarding Medicare 
payments for satellite facilities of hospitals excluded from the IPPS 
was set forth in the IPPS final rules published on July 30, 1999 (64 FR 
41532-41534), and August 1, 2003 (67 FR 49982).
    We established Medicare regulations regarding satellite facilities 
for several reasons. First, we believe that whenever a facility that is 
co-located with an acute care hospital is presented as part of another 
IPPS-excluded hospital, it is necessary to ensure that the facility is, 
in fact, organized and operated as part of the IPPS-excluded hospital 
and is not simply a unit of the acute hospital with which it is co-
located. Although we recognize that the co-location of Medicare 
providers, in the form of satellite facilities, hospitals-within-
hospitals, and excluded units, may have some legitimate advantages from 
the standpoint of clinical care as well as medical efficiency, we 
continue to believe that the physical proximity inherent in such 
arrangements also has considerable potential for Medicare program 
payment abuse in that it may facilitate patient shifting for reasons 
related to payment rather than clinical benefits. In existing 
regulations at Sec. 412.22(e) for hospitals-within-hospitals (59 FR 
45330, September 1, 1994), at Sec. 412.23(h) for hospital satellites 
(64 FR 41532-41534, July 30, 1999, and 67 FR 49982, August 1, 2002), 
and Sec. 412.25(e) for satellite facilities, we promulgated 
``separateness and control'' requirements governing the relationships 
between these facilities and their host hospitals.
    Research by the Urban Institute on the universe of LTCHs that was 
used in developing the LTCH PPS pointed to the considerable growth of 
new LTCHs (or LTCH beds, as in the case of satellite facilities) that 
were co-located with other Medicare providers. Our more recent data 
confirm that this trend has continued. Even though our existing 
regulations governing hospitals-within-hospitals and satellite 
facilities established certain functional boundaries between these 
entities and their hosts, we instituted a policy under the LTCH 
regulations at Sec. 412.532 to discourage inappropriate patient 
discharges and readmissions among co-located Medicare providers (67 FR 
56007-56010, August 30, 2002). Furthermore, in the June 6, 2003, LTCH 
PPS final rule (68 FR 34157), we noted that we are monitoring the 
movement of patients among onsite providers for the purpose of 
determining whether we should consider proposing further changes to 
LTCH coverage and payment policy.
    LTCH hospitals-within-hospitals and LTCH satellite facilities are 
similar in that both are located on the same campus or in the same 
building as another hospital, and many of the same separateness and 
control regulations exist for both types of facilities. However, there 
is an important distinction between them. A LTCH that is co-located 
with another Medicare hospital (generally an acute care hospital) is 
itself a distinct hospital (Sec. 412.22(e)). Section 412.23(e)(1) 
requires a LTCH to have a provider agreement as described under 42 CFR 
Part 489 to participate as a hospital. A satellite facility of a LTCH, 
like all satellite facilities of hospitals excluded from the IPPS (Sec. 
412.22(h)), is not itself a separate hospital, but a ``part of a 
hospital that provides inpatient services in a building also used by 
another hospital * * *'' Consistent with its status as another 
hospital, a hospital-within-a-hospital has its own Medicare provider 
number. A satellite facility shares the provider number of the parent 
hospital.
    Because a satellite facility is not considered a separate hospital 
under Medicare, if a LTCH with a satellite facility is interested in 
``spinning off'' the satellite facility and establishing the previous 
satellite facility as an independent LTCH, the satellite must first be 
separately licensed by the State. The facility must further demonstrate 
compliance with the Medicare conditions of participation (COPS) under 
part 482 and other requirements for establishing a provider agreement 
under parts 482 and 489 to participate under Medicare as a hospital 
(Sec. 412.23(e)(1)). (Compliance with the COPS may be either 
demonstrated by a State agency survey or based on accreditation as a 
hospital by the Joint Commission on Accreditation of Healthcare 
Organizations (JCAHO or the American Osteopathic Association (AOA) 
(section 1865 of the Act).) Second, if the newly established hospital 
meets the provider agreement requirements under 42 CFR part 489, it 
must demonstrate that it has an average Medicare inpatient length of 
stay of greater than 25 days (Sec. 412.23(e)(2)(i)) by providing data 
of a period of at least 5 months of the preceding 6-month period (Sec. 
412.22(e)(3)(ii) and (iii)). The data used by the fiscal intermediary 
to calculate the average length of stay would be from discharges from 
the newly established hospital and not from discharges attributable to 
stays at the previous satellite facility for the period prior to its 
participation as a separate hospital.
    Although we believe that these requirements, under existing Sec. 
412.23(e)(1) and (2), are clear and unambiguous, we have been informed 
that due to misinterpretation, in some circumstances, application of 
this policy has been inconsistent. Therefore, some facilities operating 
as LTCH satellite facilities have been inappropriately granted 
autonomous status that has resulted in the assignment of their own 
Medicare provider numbers as LTCHs without first obtaining provider 
agreements to participate in Medicare as hospitals, under Sec. 
412.23(e)(1). Apparently, in these cases, the satellite facilities were 
able to demonstrate that as satellite facilities of LTCHs, Medicare 
patients at their location had an average length of stay of greater 
than 25 days, in compliance with Sec. 412.22(h)(2)(ii) which required 
satellite facilities of hospitals excluded from the IPPS to comply with 
specific requirements for their provider category. In other situations, 
we understand that fiscal intermediaries correctly refused to accept 
data from LTCH satellite facilities for purposes of qualification as an 
autonomous LTCH and instead required the satellites to satisfy criteria 
for designation as a hospital, under Sec. 412.23(e)(1). In these cases, 
the fiscal intermediary evaluated average length of stay data dating 
from that hospital designation forward, as required by Sec. 
412.23(e)(2).
    We believe consistency in the application of this policy is needed, 
in compliance with existing regulations at Sec. 412.23(e)(1) and 
(e)(2). We are emphasizing that a LTCH satellite facility that is ``a 
part of a hospital that provides inpatient services in a building also 
used by another hospital * * *'' that is seeking to become an 
independent LTCH, must comply with the requirements set forth in the 
definition of a new LTCH in existing Sec. 412.23(e)(4). Therefore, we 
are proposing to revise Sec. 412.23(e)(4) to include a new paragraph 
(e)(4)(ii) that specifies that only data reflecting the average length 
of stay for Medicare patients in the newly established hospital will be 
utilized in the qualifying calculation at Sec. 412.23(e)(2). Thus, we 
are proposing clarifying language that emphasizes that if a

[[Page 4777]]

satellite facility is reorganized as a separately participating 
hospital under Medicare with or without a concurrent change of 
ownership, the new hospital cannot be paid under Medicare as a LTCH 
until it demonstrates that it has an average Medicare inpatient length 
of stay in excess of 25 days based on discharges occurring on or after 
its effective date of participation as a hospital and not based on 
discharges at the satellite facility site when it was part of another 
hospital (proposed Sec. 412.23(e)(4)(ii)).
    This proposed policy clarification would also be applicable to 
remote locations of LTCHs that are being voluntarily separated from the 
parent LTCHs or sold and are seeking status as independent LTCHs. A 
remote location of a hospital (as defined at Sec. 413.65(a)(2)) is 
similar to a satellite facility because it does not participate in 
Medicare as a separate hospital, but only as an integral and 
subordinate part of another hospital. However, unlike a satellite 
facility, a remote location is not one that is in the same building or 
on the same campus as another hospital. (Because a remote location has 
no ``host'' hospital, it is not required to meet the separateness 
criteria as hospitals-within-hospitals in Sec. 412.22(e) that would 
arise for satellite facilities that become independent LTCHs, as 
discussed above.) Since the hospital would not be a LTCH until the 
fiscal intermediary reviews its documentation and determines that it 
qualifies, during those initial months, the hospital would be paid 
under the IPPS.
    We emphasize that notwithstanding the fact that satellite 
facilities of LTCHs are required to independently meet the average 
Medicare inpatient length of stay requirement of greater than 25 days 
under Sec. 412.22(h)(2)(ii)(D), we are proposing to evaluate length of 
stay data only from discharges occurring after the facility has become 
a hospital. This is the case as the prerequisite to designation as a 
LTCH is a provider agreement under part 489 of chapter IV to 
participate as a hospital in the Medicare program (Sec. 412.23(e)(1)). 
The requirement that a satellite facility independently meets the 
length of stay criterion was never intended as an alternative method of 
qualifying as a separate excluded hospital. Under Sec. 
412.23(h)(2)(ii), satellite facilities of psychiatric, rehabilitation, 
and children's hospitals, as well as LTCHs, are required to meet 
specific requirements for their provider category because we believed 
that it was essential to ensure that satellite facilities of excluded 
hospitals actually delivered the specialized care for which Medicare 
was paying (Sec. 412.23(h)(2)(ii)). Furthermore, those regulations were 
designed to ensure that there is both an appropriate financial and 
administrative linkage between the satellite facility and the parent 
hospital, and a clear separation of the satellite facility from the 
host hospital. These policies are set forth in the July 30, 1999, IPPS 
final rule (64 FR 41534). In the case of a LTCH, we believe that our 
existing requirement that a satellite facility independently meet the 
greater than 25-day average Medicare inpatient length of stay 
requirement is consistent with the guiding principles of the LTCH PPS. 
We do not believe patients who do not require long-term hospital-level 
care should be admitted to either a LTCH or its satellite facility. In 
addition, we were concerned that, without requiring separate 
compliance, shorter lengths of stay at either the LTCH or its satellite 
facility could be balanced by longer stays at the other. By 
establishing these distinct standards for satellite facilities of 
excluded hospitals, we also wanted to safeguard against the possibility 
of these facilities functioning as a part of an acute care hospital. In 
the case of a LTCH, that result would be inconsistent with section 
1886(d)(1)(B) of the Act, which provides for excluded rehabilitation 
and psychiatric units to be established in acute care hospitals, but 
not long-term care units.
    There is another situation that must be distinguished from the 
scenario discussed above in which a LTCH is voluntarily separating from 
or selling its satellite facility or remote location with the intent of 
the satellite facility or remote location converting into an 
independent hospital and eventually a LTCH. Our recent provider-based 
regulations under Sec. 413.65 require a remote location of a hospital 
that fails to meet certain requirements at Sec. 413.65(e)(3) to seek 
status as a separate hospital if it is to continue functioning and 
being paid by Medicare. Satellite facilities of excluded hospitals, 
such as LTCHs, may also be affected by these new provider-based 
requirements and, in those cases, the following procedure would also be 
applicable.
    Under the provider-based regulations, which became effective for 
the main providers as defined in Sec. 413.65(a)(2), for cost reporting 
periods beginning on or after July 1, 2003, certain facilities that 
were formerly treated for payment purposes by Medicare as remote 
locations or satellite facilities of hospitals, are now precluded from 
continuing in that status because they do not meet the ``common service 
area'' location requirement for provider-based facilities under Sec. 
413.65(e)(3) (67 FR 50078, August 1, 2002). It has come to our 
attention that certain satellite facilities and remote locations of 
LTCHs are being affected by this preclusion. Due to the compulsory 
nature of this separation requirement, we are proposing an exception 
for these affected satellite facilities and remote locations of LTCHs 
that will allow them to utilize length of stay data from the 5 months 
of the previous 6 months prior to when they were compelled to separate 
from their main provider under Sec. 413.65(e)(3) (proposed Sec. 
412.23(e)(4)(iii)).
    We want to emphasize that the only distinction that we are 
proposing between requirements proposed under Sec. 412.23(e)(4)(ii), 
for satellite facilities and remote locations that voluntarily separate 
from their parent LTCHs and requirements in proposed Sec. 
412.23(e)(4)(iii) that apply to satellite facilities and remote 
locations compelled by provider-based location requirements at Sec. 
413.65(e)(3) to terminate their link to their main providers, is that 
we are proposing to allow the latter group to utilize data gathered 
prior to establishing themselves as distinct hospitals. Furthermore, 
this distinction only exists for satellite facilities and remote 
locations of LTCHs that are affected by (Sec. 413.65(e)(3)) and which 
were in existence prior to the effective date of the provider-based 
location requirements (July 1, 2003). Under the regulations at Sec. 
413.65(e)(3), we would not permit these entities to be established more 
than 35 miles from the main providers after June 30, 2003. We would 
assign new Medicare provider numbers to former remote locations of LTCH 
hospitals or satellite facilities that fail the new location 
requirement in Sec. 413.65(e)(3), but want to become new LTCHs, if the 
following conditions are satisfied in proposed Sec. 412.23(e)(4)(iii):
     The facility meets all Medicare COPs in 42 CFR 
Part 482 and other participation requirements set forth in 42 CFR Part 
489.
     The facility provides data to its fiscal 
intermediary indicating that during 5 of the immediate 6 months 
preceding its separation from the main hospital, it has independently 
met the greater than 25-day average length of stay requirement for its 
Medicare patients (Sec. 412.23(e)(3)).
b. Technical Correction
    In the August 30, 2002, LTCH PPS final rule (67 FR 56053), we 
issued regulations at Sec. 412.532(i) that require a LTCH or a 
satellite of a LTCH to notify its fiscal intermediary and CMS in 
writing of its co-location and any

[[Page 4778]]

changes in co-location status. In Sec. 412.532(i), we include a cross-
reference to the Medicare regulations that contain the requirements for 
a satellite facility to be paid under Medicare. We made an 
unintentional error in specifying this cross-reference as paragraphs 
(h)(1) through (h)(4) of Sec. 412.532. The correct cross-reference to 
the requirements for satellite facilities is Sec. 412.22(h)(1) through 
(h)(4). Therefore, we are proposing to revise Sec. 412.532(i) to 
include the correct cross-reference to Sec. 412.22(h)(1) through 
(h)(4).

V. Computing the Proposed Adjusted Federal Prospective Payments for the 
2005 LTCH PPS Rate Year

    (If you choose to comment on issues in this section, please include 
the caption ``COMPUTING THE PROPOSED ADJUSTED FEDERAL PROSPECTIVE 
PAYMENTS'' at the beginning of your comments.)
    In accordance with Sec. 412.525 and as discussed in section IV.C. 
of this proposed rule, the proposed standard Federal rate is adjusted 
to account for differences in area wages by multiplying the labor-
related share of the proposed standard Federal rate by the appropriate 
proposed LTCH PPS wage index (as shown in Tables 1 and 2 of the 
Addendum to this proposed rule). The proposed standard Federal rate is 
also adjusted to account for the higher costs of hospitals in Alaska 
and Hawaii by multiplying the nonlabor-related share of the proposed 
standard Federal rate by the appropriate proposed cost-of-living factor 
(shown in Table I in section IV.C.2. of this preamble). In this 
proposed rule, as discussed in section IV.B. of this preamble, we are 
proposing a standard Federal rate of $36,762.24 for the 2005 LTCH PPS 
rate year. We illustrate the methodology used to adjust the proposed 
Federal prospective payments in the following example:
    During the 2005 LTCH PPS rate year, a Medicare patient is in a LTCH 
located in Chicago, Illinois (MSA 1600) with a proposed two-fifths wage 
index value of 1.0357 (see Table 1 in the Addendum to this proposed 
rule). The Medicare patient is classified into LTC-DRG 9 (Spinal 
Disorders and Injuries), which has a relative weight of 1.5025 (see 
Table 3 of the Addendum to this proposed rule). To calculate the LTCH's 
total adjusted proposed Federal prospective payment for this Medicare 
patient, we compute the wage-adjusted proposed Federal prospective 
payment amount by multiplying the unadjusted proposed standard Federal 
rate ($36,762.24) by the labor-related share (72.885 percent) and the 
proposed wage index value (1.0357). (We note that the LTCH in this 
example is in the second year of the wage index phase-in, thus, the 
two-fifths wage index value is applicable.) This wage-adjusted amount 
is then added to the nonlabor-related portion of the unadjusted 
proposed standard Federal rate (27.115 percent; adjusted for cost of 
living, if applicable) to determine the adjusted proposed Federal rate, 
which is then multiplied by the LTC-DRG relative weight (1.5025) to 
calculate the total adjusted proposed Federal prospective payment for 
the 2005 LTCH PPS rate year ($56,672.48). In addition, as discussed in 
section IV.C.6. of this preamble, for the 2005 LTCH PPS rate year, we 
are proposing to reduce the LTCH PPS payment by 3.0 percent for the 
budget neutrality offset to account for the costs of the transition 
methodology. The following illustrates the components of the 
calculations in this example:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Unadjusted Proposed Standard Federal Prospective Payment      $36,762.24
 Rate...................................................
Labor-Related Share.....................................        x0.72885
                                                         ---------------
Labor-Related Portion of the Proposed Federal Rate......     =$26,794.16
Proposed \2/5\th Wage Index (MSA 1600)..................         x1.0357
                                                         ---------------
Wage-Adjusted Labor Share of Proposed Federal Rate......     =$27,750.71
  Nonlabor-Related Portion of the Proposed Federal Rate      +$ 9,968.08
   ($36,762.24 x 0.27115)...............................
Adjusted Proposed Federal Rate Amount...................     =$37,718.79
LTC-DRG 4 Relative Weight...............................         x1.5025
Total Adjusted Proposed Federal Prospective Payment          =$56,672.48
 (Before the Proposed Budget Neutrality Offset).........
Proposed Budget Neutrality Offset.......................          x0.970
                                                         ---------------
Total Proposed Federal Prospective Payment (Including        =$54,972.31
 the Proposed Budget Neutrality Offset).................
------------------------------------------------------------------------

VI. Transition Period

    (If you choose to comment on issues in this section, please include 
the caption ``TRANSITION PERIOD'' at the beginning of your comments.)
    To provide a stable fiscal base for LTCHs, under Sec. 412.533, we 
implemented a 5-year transition period from reasonable cost-based 
reimbursement under the TEFRA system to a prospective payment based on 
industry-wide average operating and capital-related costs. Under the 
average pricing system, payment is not based on the experience of an 
individual hospital. As discussed in the August 30, 2002 final rule (67 
FR 56038), we believe that a 5-year phase-in provides LTCHs time to 
adjust their operations and capital financing to the LTCH PPS, which is 
based on prospectively determined Federal payment rates. Furthermore, 
we believe that the 5-year phase-in of the LTCH PPS also allows LTCH 
personnel to develop proficiency with the LTC-DRG coding system, which 
will result in improvement in the quality of the data used for 
generating our annual determination of relative weights and payment 
rates.
    In accordance with Sec. 412.533, the transition period for all 
hospitals subject to the LTCH PPS begins with the hospital's first cost 
reporting period beginning on or after October 1, 2002, and extends 
through the hospital's last cost reporting period beginning before 
October 1, 2006. During the 5-year transition period, a LTCH's total 
payment under the LTCH PPS is based on two payment percentages--one 
based on reasonable cost-based (TEFRA) payments and the other based on 
the standard Federal prospective payment rate. The percentage of 
payment based on the LTCH PPS Federal rate increases by 20 percentage 
points each year, while the reasonable cost-based payment rate 
percentage decreases by 20 percentage points each year, for the next 3 
fiscal years. For cost reporting periods beginning on or after October 
1, 2006, Medicare payment to LTCHs will be determined entirely under 
the Federal PPS methodology. The blend percentages as set forth in Sec. 
412.533(a) are as follows:

[[Page 4779]]



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

    For cost reporting periods that begin on or after October 1, 2003, 
and before October 1, 2004 (FY 2004), the total payment for a LTCH is 
60 percent of the amount calculated under reasonable cost principles 
for that specific LTCH and 40 percent of the Federal prospective 
payment amount. For cost reporting periods that begin on or after 
October 1, 2004, and before October 1, 2005 (FY 2005), the total 
payment for a LTCH will be 40 percent of the amount calculated under 
reasonable cost principles for that specific LTCH and 60 percent of the 
Federal prospective payment amount. As we noted in the June 6, 2003, 
final rule (68 FR 34155), the change in the effective date of the 
annual LTCH PPS rate update from October 1 to July 1 has no effect on 
the LTCH PPS transition period as set forth in Sec. 412.533(a). That 
is, LTCHs paid under the transition blend under Sec. 412.533(a) will 
receive those blend percentages for the entire 5-year transition period 
(unless they elect payments based on 100 percent of the Federal rate). 
Furthermore, LTCHs paid under the transition blend will receive the 
appropriate blend percentages of the Federal and reasonable cost-based 
rate for their entire cost reporting period as prescribed in Sec. 
412.533(a)(1) through (a)(5).
    The reasonable cost-based rate percentage is a LTCH specific amount 
that is based on the amount that the LTCH would have been paid (under 
TEFRA) if the PPS were not implemented. Medicare fiscal intermediaries 
will continue to compute the LTCH reasonable cost-based payment amount 
according to Sec. 412.22(b) of the regulations and sections 1886(d) and 
(g) of the Act.
    In implementing the PPS for LTCHs, one of our goals is to 
transition hospitals to full prospective payments as soon as 
appropriate. Therefore, under Sec. 412.533(c), we allow a LTCH, which 
is subject to a blended rate, to elect payment based on 100 percent of 
the Federal rate at the start of any of its cost reporting periods 
during the 5-year transition period rather than incrementally shifting 
from reasonable cost-based payments to prospective payments. Once a 
LTCH elects to be paid based on 100 percent of the Federal rate, it 
will not be able to revert to the transition blend. For cost reporting 
periods that began on or after December 1, 2002, and for the remainder 
of the 5-year transition period, a LTCH must notify its fiscal 
intermediary in writing of its election on or before the 30th day prior 
to the start of the LTCH's next cost reporting period. For example, a 
LTCH with a cost reporting period that begins on May 1, 2004, must 
notify its fiscal intermediary in writing of an election before April 
1, 2004.
    Under Sec. 412.533(c)(2)(i), the notification by the LTCH to make 
the election must be made in writing to the Medicare fiscal 
intermediary. Under Sec.Sec. 412.533(c)(2)(ii) and (c)(2)(iii), the 
intermediary must receive the request on or before the specified date 
(that is, on or before the 30th day before the applicable cost 
reporting period begins for cost reporting periods beginning on or 
after December 1, 2002 through September 30, 2006), regardless of any 
postmarks or anticipated delivery dates.
    Notifications received, postmarked, or delivered by other means 
after the specified date will not be accepted. If the specified date 
falls on a day that the postal service or other delivery sources are 
not open for business, the LTCH will be responsible for allowing 
sufficient time for the delivery of the request before the deadline. If 
a LTCH's notification is not received timely, payment will be based on 
the transition period blend percentages.

VII. Payments to New LTCHs

(If you choose to comment on issues in this section, please include the 
caption ``PAYMENTS TO NEW LTCHs'' at the beginning of your comments.)
    Under Sec. 412.23(e)(4), for purposes of Medicare payment under the 
LTCH PPS, we define a new LTCH as a provider of inpatient hospital 
services that otherwise meets the qualifying criteria for LTCHs, set 
forth in Sec. 412.23(e)(1) and (e)(2), under present or previous 
ownership (or both), and its first cost reporting period as a LTCH 
begins on or after October 1, 2002. We also specify in Sec. 412.500 
that the LTCH PPS is applicable to hospitals with a cost reporting 
period that began on or after October 1, 2002. (In section I.B.3. of 
this proposed rule, we clarify existing policy for the time frame for 
calculating the average length of stay of a new LTCH as it relates to a 
satellite facility or remote location of a LTCH that voluntarily seeks 
to become a separate LTCH. We are also proposing a policy for the time 
frame for calculating the average length of stay as it relates to a 
remote location of a hospital that fails to meet certain requirements 
at Sec. 413.65 and is required to seek status as a separate LTCH.)
    As we discussed in the August 30, 2002, final rule (67 FR 56040), 
this definition of new LTCHs should not be confused with those LTCHs 
first paid under the TEFRA payment system for discharges occurring on 
or after October 1, 1997, described in section 1886(b)(7)(A) of the 
Act, as added by section 4416 of Public Law 105-33. As stated in Sec. 
413.40(f)(2)(ii), for cost reporting periods beginning on or after 
October 1, 1997, the payment amount for a ``new'' (post-FY 1998) LTCH 
is the lower of the hospital's net inpatient operating cost per case or 
110 percent of the national median target amount payment limit for 
hospitals in the same class for cost reporting periods ending during FY 
1996, updated to the applicable cost reporting period (see 62 FR 46019, 
August 29, 1997). Under the LTCH PPS, those ``new'' LTCHs that meet the 
definition of ``new'' under Sec. 413.40(f)(2)(ii) and that have their 
first cost reporting period as a LTCH beginning prior to October 1, 
2002, will be paid under the transition methodology described in Sec. 
412.533.
    As noted above and in accordance with Sec. 412.533(d), new LTCHs 
will not participate in the 5-year transition from reasonable cost-
based reimbursement to prospective payment. As we discussed in the 
August 30, 2002, final rule (67 FR 56040), the transition period is 
intended to provide existing LTCHs time to adjust to payment under the 
new system. Since these new LTCHs with cost reporting periods beginning 
on or after October 1, 2002, would not have received payment under 
reasonable cost-based reimbursement for the delivery of LTCH services 
prior to the effective date of the LTCH PPS, we do not believe that 
those new LTCHs require a transition period

[[Page 4780]]

in order to make adjustments to their operations and capital financing, 
as will LTCHs that have been paid under the reasonable cost-based 
methodology.

VIII. Method of Payment

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

IX. Monitoring

    (If you choose to comment on issues in this section, please include 
the caption ``MONITORING'' at the beginning of your comments.)
    In the August 30, 2002, final rule (67 FR 56014), we discussed our 
intent to develop a monitoring system that will assist us in evaluating 
the LTCH PPS. Specifically, we discussed the monitoring of the various 
policies that we believe would provide equitable payment for stays that 
reflect less than the full course of treatment and reduce the 
incentives for inappropriate admissions, transfers, or premature 
discharges of patients that are present in a discharge-based 
prospective payment system. We also stated our intent to collect and 
interpret data on changes in average lengths of stay under the LTCH PPS 
for specific LTC-DRGs and the impact of these changes on the Medicare 
program. We stated that if our data indicates that changes might be 
warranted, we may revisit these issues and consider proposing revisions 
to these policies in the future. To this end, we have designed system 
features utilizing MedPAR data that will enable CMS and the fiscal 
intermediary to track beneficiary movement to and from a LTCH and to 
and from another Medicare provider. As we discussed in the June 6, 
2003, final rule (68 FR 34157), the MedPAC has endorsed this monitoring 
activity and is pursuing an independent research initiative that will 
evaluate all aspects of LTCHs, including the accuracy of data 
reporting, provision of equivalent services by other providers, growth 
in the number of LTCHs, and clinical outcomes. We are particularly 
concerned with the recent significant growth in the number of LTCHs. 
Since the implementation of LTCH PPS we have observed a growth of 
nearly 50 percent in the number of LTCHs, and that growth is almost 
exclusively in the number of LTCH that are hospitals within hospitals. 
We intend to focus our monitoring on this growth and the potential for 
gaming the IPPS by the co-located acute care hospital and the LTCH PPS 
by the LTC hospital within a hospital. Based on the outcome of that 
monitoring activity we may need to address either the criteria for 
qualifying for LTCH PPS payments for hospitals within hospitals, the 
payment rates for patients that are discharged from acute care 
hospitals and admitted to a co-located LTCH or other policy issues that 
may arise as a result of our monitoring activity.
    Also, in the June 6, 2003, final rule (68 FR 34157), we explained 
that, given that the only unique requirement that distinguishes a LTCH 
from other acute care hospitals is an average inpatient length of stay 
of greater than 25 days, we continue to be concerned about the extent 
to which LTCH services and patients differ from those services and 
patients treated in other Medicare covered settings (for example, SNFs 
and IRFs) and how the LTCH PPS will affect the access, quality, and 
costs across the health care continuum. Thus, we will monitor trends in 
the supply and utilization of LTCHs and Medicare's costs in LTCHs 
relative to other Medicare providers. For example, we may conduct 
medical record reviews of Medicare patients to monitor changes in 
service use (for example, ventilator use) over a LTCH episode of care 
and to assess patterns in the average length of stay at the facility 
level.
    We also are collecting data on patients staying for periods of 6 
months or longer in LTCHs and may involve QIOs in evaluating whether or 
not such extensive stays may be indicative of LTCH patients who could 
be more appropriately served at a SNF.
    Existing policy at Sec. 412.509(c) provides that the LTCH must 
``furnish all necessary covered services to the Medicare beneficiary 
who is an inpatient of the hospital either directly or under 
arrangements.'' In this proposed rule we are proposing to expand our 
interrupted stay policy, at Sec. 412.531, to include LTCH discharges

[[Page 4781]]

and readmissions within a period of 3 days.
    We believe that such behavior by certain LTCHs may constitute 
gaming of the Medicare system, circumventing existing Medicare policy, 
and generating unnecessary Medicare payments. Therefore, we are 
proposing an expansion of our interrupted stay policy at Sec. 412.531 
to address this situation. (See section IV.C.4.c. of this proposed rule 
for additional information regarding the proposed expansion of our 
interrupted stay policy.)

X. Collection of Information Requirements

    (If you choose to comment on issues in this section, please include 
the caption ``COLLECTION OF INFORMATION REQUIREMENTS'' at the beginning 
of your comments.)
    Under the Paperwork Reduction Act (PRA) 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 PRA of 1995 requires that 
we solicit comment on the following issues:
     The need for the information collection and its 
usefulness in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information 
collection burden.
     The quality, utility, and clarity of the 
information to be collected.
     Recommendations to minimize the information 
collection burden on the affected public, including automated 
collection techniques.
    Therefore, we are soliciting public comments on each of these 
issues for the information collection requirements discussed below.
    The following information collection requirements and associated 
burdens are subject to the PRA:

Sec. 412.23 Excluded Hospitals: Classifications

    Section 412.23(e)(3) proposes revisions to the procedure for 
calculating the average length of stay for purposes of qualifying as a 
LTCH, so that the ``days follow discharge.'' Therefore, the total 
number of inpatient days for Medicare patients under paragraph 
(e)(2)(i), and the total number of days for all patients (both Medicare 
and non-Medicare) under paragraph (e)(2)(ii), would be divided by the 
discharges for the hospital's most recent cost reporting period. If the 
days of a stay involve admission during one cost reporting period and 
discharge in a second consecutive cost reporting period, the total days 
of the stay are considered to have occurred in the cost reporting 
period during which the patient was discharged. Since this data was not 
captured on the cost reporting form, for cost reporting periods 
beginning on or after October 1, 2002, CMS retrieved data for the 
average length of stay calculation from MedPAR files for use by the 
fiscal intermediaries. If the days-follow-the-discharge policy is 
finalized, it may be possible to revise the cost reporting form and, 
thus, enable fiscal intermediaries to use the Medicare cost report for 
this calculation, as they did prior to the implementation of the LTCH 
PPS. We are presently analyzing whether use of the MedPAR for this 
purpose or revising the cost reporting form to capture all inpatient 
days for Medicare patients would be more appropriate. If we revert to 
using the cost report for this purpose, the task would require one 
calculation annually by fiscal intermediaries for each hospital: the 
division of the number of days by the number of discharges. We estimate 
that it would take approximately 5 minutes for each of the fiscal 
intermediaries to evaluate whether each of the 300 facilities meet the 
average length of stay requirement for a total one-time burden of 25 
hours.
    Section 412.23(e)(4)(ii) states that except as specified in 
paragraph (e)(4)(iii) of this section, a satellite facility (as defined 
in Sec. 412.22(h)) or a remote location of a hospital (as defined in 
Sec. 412.65(a)(2)) that voluntarily reorganizes as a separate Medicare 
participating hospital, with or without a concurrent change in 
ownership, and that seeks to qualify as a new long-term care hospital 
for Medicare payment purposes must demonstrate through documentation 
that it meets the average length of stay requirement specified under 
paragraphs (e)(2)(i) or (e)(2)(ii) of this section.
    The burden associated with this requirement is the time required to 
maintain documentation to demonstrate that a satellite facility or a 
remote location of a hospital has an average length of stay as 
specified by this section. Since this requirement is a voluntary 
decision that is made by each facility, we do not know the number of 
facilities and remote locations that will seek to become new LTCHs. 
However, the information to be documented is currently being collected 
and maintained on each facility's cost report; therefore, this 
information collection requirement is currently approved under OMB 
control number 0938-0050.
    Section 412.23(e)(4)(iii) states that satellite facilities and 
remote locations of hospitals that became subject to the provider-based 
status rules under Sec. 412.65 as of July 1, 2003, that become 
separately participating hospitals, and that seek to qualify as long-
term care hospitals for Medicare payment purposes may submit to the 
fiscal intermediary discharge data gathered during 5 months of the 
immediate 6 months preceding the facility's separation from the main 
hospital for calculation of the greater than 25-day average Medicare 
inpatient length of stay requirement specified under paragraph (e)(2) 
of this section.
    The burden associated with this requirement is the time required of 
the satellite facilities and remote locations of hospitals that became 
subject to the provider-based status rules under as of July 1, 2003, to 
submit discharge data to the fiscal intermediary. We estimate that it 
will take approximately 5 minutes for each of the 300 facilities to 
submit the required information for a total one-time burden of 25 
hours.
    We have submitted a copy of this proposed rule to OMB for its 
review of the information collection requirements described above. 
These requirements are not effective until they have been approved by 
OMB.
    If you comment on any of these information collection and record 
keeping requirements, please mail copies directly to the following:

Centers for Medicare & Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs, Regulations Development and 
Issuances Group, Attn: Dawn Willinghan, CMS-1263-P, Room C5-14-03, 7500 
Security Boulevard, Baltimore, MD 21244-1850; 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: email: [email protected]; or faxed to OMB at (202) 395-
6974.

XI. Regulatory Impact Analysis

(If you choose to comment on issues in this section, please include the 
caption ``REGULATORY IMPACT ANALYSIS'' at the beginning of your 
comments.)

A. Introduction

    We have examined the impact of this proposed rule as required by 
Executive

[[Page 4782]]

Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act (the Act), the Unfunded 
Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4), and Executive Order 
13132.
1. Executive Order 12866
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely assigns responsibility of duties) directs agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any one 
year). In this proposed rule, we are using the most recent estimate of 
the LTCH PPS market basket and updated wage index values to estimate 
proposed payments for the 2005 LTCH PPS rate year. Based on the best 
available data for 211 LTCHs, we estimate that the proposed 2.9 percent 
increase in the standard Federal rate for the 2005 LTCH PPS rate year, 
in conjunction with the proposed decrease in the budget neutrality 
offset to account for the transition methodology (discussed in section 
IV.C.6. of this preamble), would result in an increase in payments from 
the 2004 LTCH PPS rate year of $118 million for the 211 LTCHs. (Section 
IV.C.6. of this preamble includes an estimate of Medicare program 
payments for LTCH services.) Because the combined distributional 
effects and costs to the Medicare program are greater than $100 
million, this proposed rule is considered a major economic rule, as 
defined above.
2. Regulatory Flexibility Act (RFA)
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospitals and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $26 
million or less in any 1 year. For purposes of the RFA, all hospitals 
are considered small entities according to the Small Business 
Administration's latest size standards with total revenues of $26 
million or less in any 1 year (for further information, see the Small 
Business Administration's regulation at 65 FR 69432, November 17, 
2000). Because we lack data on individual hospital receipts, we cannot 
determine the number of small proprietary LTCHs. Therefore, we assume 
that all LTCHs are considered small entities for the purpose of the 
analysis that follows. Medicare fiscal intermediaries are not 
considered to be small entities. Individuals and States are not 
included in the definition of a small entity.
    The provisions of this proposed rule represent a 5.4 percent 
increase in estimated payments in the 2005 LTCH PPS rate year (as shown 
in Table II below). We do not expect an incremental increase of 5.4 
percent to the Medicare payment rates to have a significant effect on 
the overall revenues of most LTCHs. In addition, LTCHs also provide 
services to (and generate revenue from) patients other than Medicare 
beneficiaries. Accordingly, we certify that this proposed rule would 
not have a significant impact on a substantial number of small 
entities, in accordance with RFA.
3. Impact on Rural Hospitals
    Section 1102(b) of the Social Security Act requires us to prepare a 
regulatory impact analysis if a proposed or final rule may have a 
significant impact on the operations of a substantial number of small 
rural hospitals. This analysis must conform to the provisions of 
section 604 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a Metropolitan Statistical Area and has fewer than 100 beds. As 
discussed in detail below, the rates and policies set forth in this 
proposed rule would not have a substantial impact on the 8 rural 
hospitals for which data were available that have fewer than 100 beds 
and that are located in rural areas.
4. Unfunded Mandates
    Section 202 of the UMRA requires that agencies assess anticipated 
costs and benefits before issuing any rule that may result in 
expenditure in any one year by State, local, or tribal governments, in 
the aggregate, or by the private sector, of $110 million or more. This 
proposed rule would not mandate any requirements for State, local, or 
tribal governments, nor would it result in expenditures by the private 
sector of $110 million or more in any one year.
5. Federalism
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications.
    We have examined this proposed rule under the criteria set forth in 
Executive Order 13132 and have determined that, based on the 20 State 
and local LTCHs in our database, this proposed rule would not have any 
significant impact on the rights, roles, and responsibilities of State, 
local, or tribal governments or preempt State law.

B. Anticipated Effects of Proposed Payment Rate Changes

    We discuss the impact of the proposed payment rate changes in this 
proposed rule below in terms of their fiscal impact on the Medicare 
budget and on LTCHs.
1. Budgetary Impact
    Section 123(a)(1) of Medicare, Medicaid and State Child Health 
Insurance Program (SCHIP) Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113) requires us to set the proposed payment rates 
contained in this proposed rule such that total payments under the LTCH 
PPS are projected to equal the amount that would have been paid if this 
PPS had not been implemented. However, as discussed in greater detail 
in the August 30, 2002, final rule (67 FR 56033-56036), the FY 2003 
standard Federal rate ($34,956.15) was calculated as though all LTCHs 
will be paid based on 100 percent of the standard Federal rate in FY 
2003. As discussed in section IV.C.6. of this proposed rule, we would 
apply a proposed budget neutrality offset to payments to account for 
the monetary effect of the 5-year transition period and the policy to 
permit LTCHs to elect to be paid based on 100 percent of the proposed 
standard Federal rate rather than a blend of proposed Federal 
prospective payments and reasonable cost-based payments during the 
transition. The amount of the proposed offset is equal to 1 minus the 
ratio of the estimated reasonable cost-based payments that would have 
been made if the LTCH PPS had not been implemented, to the projected 
total Medicare program payments that would be made under the transition 
methodology and the option to elect payment based on 100 percent of the 
Federal prospective payment rate.
2. Impact on Providers
    The basic methodology for determining a LTCH PPS payment is set 
forth in the regulations at Sec. 412.515 through Sec. 412.525. In 
addition to the basic LTC-DRG payment (standard Federal rate x LTC-DRG 
relative

[[Page 4783]]

weight), we make adjustments for differences in area wage levels, cost-
of-living adjustment for Alaska and Hawaii, and short-stay outliers. In 
addition, LTCHs may also receive high-cost outlier payments for those 
cases that qualify under the threshold established each rate year. 
Section 412.533 provides for a 5-year transition to fully prospective 
payments from payment based on reasonable cost-based methodology. 
During the 5-year transition period, payments to LTCHs are based on an 
increasing percentage of the LTCH PPS Federal rate and a decreasing 
percentage of payment based on reasonable cost-based methodology. 
Section 412.533(c) provides for a one-time opportunity for LTCHs to 
elect payments based on 100 percent of the LTCH PPS Federal rate.
    In order to understand the impact of the changes to the LTCH PPS 
discussed in this proposed rule on different categories of LTCHs for 
the 2005 LTCH PPS rate year, it is necessary to estimate payments per 
discharge under the LTCH PPS rates and factors for the 2004 LTCH PPS 
rate year (see the June 6, 2003, final rule; 68 FR 34122-34190) and 
payments per discharge that would be made under the LTCH PPS rates and 
factors for the 2005 LTCH PPS rate year as discussed in the preamble of 
this proposed rule. We also evaluated the percent change in payments 
per discharge of estimated 2004 LTCH PPS rate year payments to 
estimated 2005 LTCH PPS rate year payments for each category of LTCHs.
    Hospital groups were based on characteristics provided in the 
Online Survey Certification and Reporting (System) (OSCAR) data and FYs 
1999 through 2001 cost report data. Hospitals with incomplete 
characteristics were grouped into the ``unknown'' category. Hospital 
groups include:
     Location: Large Urban/Other Urban/Rural;
     Participation Date;
     Ownership Control;
     Census Region;
     Bed Size.
    To estimate the impacts among the various categories of providers 
during the transition period, it is imperative that reasonable cost-
based methodology payments and prospective payments contain similar 
inputs. More specifically, in the impact analysis showing the impact 
reflecting the applicable transition blend percentages of proposed 
prospective payments and reasonable cost-based methodology payments and 
the option to elect payment based on 100 percent of the proposed 
Federal rate (Table III below), we estimated payments only for those 
providers for whom we are able to calculate payments based on 
reasonable cost-based methodology. For example, if we did not have at 
least 2 years of historical cost data for a LTCH, we were unable to 
determine an update to the LTCH's target amount to estimate payment 
under reasonable cost-based methodology.
    Using LTCH cases from the FY 2002 MedPAR file and cost data from 
FYs 1996 through 2001 to estimate payments under the current reasonable 
cost-based principles, we have both case-mix and cost data for 211 
LTCHs. Thus, for the impact analyses reflecting the applicable 
transition blend percentages of proposed prospective payments and 
reasonable cost-based methodology payments and the option to elect 
payment based on 100 percent of the proposed Federal rate (see Table II 
below), we used data from 211 LTCHs. While currently there are 
approximately 300 LTCHs, the most recent growth is predominantly in 
for-profit LTCHs that provide respiratory and ventilator-dependent 
patient care. We believe that the discharges from the MedPAR data for 
the 211 LTCHs in our database provide sufficient representation in the 
LTC-DRGs containing discharges for patients who received respiratory 
and ventilator-dependent care. However, using cases from the FY 2002 
MedPAR file, we had case-mix data for 272 LTCHs. Cost data to determine 
current payments under reasonable cost-based methodology payments are 
not needed to simulate payments based on 100 percent of the proposed 
Federal rate. Therefore, for the impact analyses reflecting fully 
phased-in prospective payments (see Table III below), we used data from 
272 LTCHs.
    These impacts reflect the estimated ``losses'' or ``gains'' among 
the various classifications of providers for the 2004 LTCH PPS rate 
year (July 1, 2003, through June 30, 2004) compared to the 2005 LTCH 
PPS rate year (July 1, 2004, through June 30, 2005). Prospective 
payments for the 2004 LTCH rate year were based on the standard Federal 
rate of $35,726.18 and the hospital's estimated case-mix based on FY 
2002 claims data. Prospective payments for the 2005 LTCH PPS rate year 
were based on the proposed standard Federal rate of $36,762.24 and the 
same FY 2002 claims data.
3. Calculation of Prospective Payments
    To estimate payments under the LTCH PPS, we simulated payments on a 
case-by-case basis by applying the existing payment policy for short-
stay outliers (as described in section IV.C.4.b. of this proposed rule) 
and the existing adjustments for area wage differences (as described in 
section IV.C.1. of this proposed rule) and for the cost-of-living for 
Alaska and Hawaii (as described in section IV.C.2. of this proposed 
rule). Additional payments would also be made for high-cost outlier 
cases (as described in section IV.C.3. of this proposed rule). As noted 
in section IV.C.5. of this proposed rule, we are not making adjustments 
for rural location, geographic reclassification, indirect medical 
education costs, or a disproportionate share of low-income patients.
    We adjusted for area wage differences for estimated 2004 LTCH PPS 
rate year payments by computing a weighted average of a LTCH's 
applicable wage index during the period from July 1, 2003, through June 
30, 2004, because some providers may experience a change in the wage 
index phase-in percentage during that period. For cost reporting 
periods beginning on or after October 1, 2002, and before September 30, 
2003, the labor portion of the Federal rate is adjusted by one-fifth of 
the applicable ``LTCH PPS wage index'' (that is, the FY 2004 IPPS wage 
index data without geographic reclassification, under sections 
1886(d)(8) and (d)(10)) of the Act. For cost reporting periods 
beginning on or after October 1, 2003, and before September 30, 2004, 
the labor portion of the Federal rate is adjusted by two-fifths of the 
applicable LTCH PPS wage index. Therefore, a provider with a cost 
reporting period that began October 1, 2003, will have 3 months of 
payments under the one-fifth wage index value and 9 months of payment 
under the two-fifths wage index value. For this provider, we computed a 
blended wage index of 25 percent (3 months/12 months) of the one-fifth 
wage index value and 75 percent (9 months/12 months) of the two-fifths 
wage index value. Similarly, we adjusted for area wage differences for 
estimated 2005 LTCH PPS rate year payments by computing a weighted 
average of a LTCH's applicable wage index during the period from July 
1, 2004, through June 30, 2005, because some providers may experience a 
change in the wage index phase-in percentage during that period. For 
cost reporting periods beginning on or after October 1, 2003, and 
before September 30, 2004, the labor portion of the Federal rate is 
adjusted by two-fifths of the applicable LTCH PPS wage index. For cost 
reporting periods beginning on or after October 1, 2004, and before 
September 30, 2005, the labor portion of the Federal rate is adjusted 
by three-fifths of the applicable LTCH PPS wage index. The applicable 
proposed LTCH

[[Page 4784]]

PPS wage index values for the 2005 LTCH PPS rate year are shown in 
Tables 1 and 2 of the Addendum to this proposed rule.
    We also calculated payments using the applicable transition blend 
percentages. During the 2004 LTCH PPS rate year, based on the 
transition blend percentages set forth in Sec. 412.533(a), some 
providers may experience a change in the transition blend percentage 
during the period from July 1, 2003, through June 30, 2004. That is, 
during the period from July 1, 2003, through June 30, 2004, a provider 
with a cost reporting period beginning on October 1, 2002 (which is 
paid under the 80/20 transition blend (80 percent of payments based on 
reasonable cost-based methodology and 20 percent of payments under the 
LTCH PPS), beginning October 1, 2002) had 3 months (July 1, 2003, 
through September 30, 2003) under the 80/20 blend and 9 months (October 
1, 2003, through June 30, 2004) of payment under the 60/40-transition 
blend (60 percent of payments based on reasonable cost-based 
methodology and 40 percent of payments under the LTCH PPS). (The 60 
percent/40 percent blend would continue until the provider's cost 
reporting period beginning on October 1, 2004.)
    Similarly, during the 2005 LTCH PPS rate year, based on the 
transition blend percentages set forth in Sec. 412.533(a), some 
providers may experience a change in the transition blend percentage 
during the period from July 1, 2004, through June 30, 2005. That is, 
during the period from July 1, 2004, through June 30, 2005, a provider 
with a cost reporting period beginning on October 1, 2003 (which is 
paid under the 60/40 transition blend), had 3 months (July 1, 2004, 
through September 30, 2004) under the 60/40 blend and 9 months (October 
1, 2004, through June 30, 2005) of payment under the 40/60-transition 
blend (40 percent of payments based on reasonable cost-based 
methodology and 60 percent of payments under the LTCH PPS). (The 40 
percent/60 percent blend would continue until the provider's cost 
reporting period beginning on October 1, 2005.)
    In estimating blended transition payments, we estimated payments 
based on reasonable cost-based methodology in accordance with the 
methodology in section 1886(b) of the Act. We compared the estimated 
blended transition payment to the LTCH's estimated payment if it would 
elect payment based on 100 percent of the Federal rate. If we estimated 
that a LTCH would be paid more based on 100 percent of the Federal 
rate, we assumed that it would elect to bypass the transition 
methodology and to receive immediate prospective payments.
    Then we applied the 6.0 percent budget neutrality reduction to 
payments to account for the effect of the 5-year transition methodology 
and election of payment based on 100 percent of the Federal rate on 
Medicare program payments established in the June 6, 2003, final rule 
(68 FR 34153) to each LTCH's estimated payments under the LTCH PPS for 
the 2004 LTCH PPS rate year. Similarly, we applied the proposed 3.0 
percent budget neutrality reduction to payment to account for the 
effect of the 5-year transition methodology and election of payment 
based on 100 percent of the proposed Federal rate on Medicare program 
payments (see section IV.C.6. of this proposed rule) to each LTCH's 
estimated payments under the LTCH PPS for the 2005 LTCH PPS rate year. 
The impact based on our projection of whether a LTCH would be paid 
based on the transition blend methodology or would elect payment based 
on 100 percent of the Federal rate is shown below in Table II.
    In Table III below, we also show the impact if the LTCH PPS were 
fully implemented; that is, as if there were an immediate transition to 
fully Federal prospective payments under the LTCH PPS for the 2004 LTCH 
PPS rate year and the 2005 LTCH PPS rate year. Accordingly, the 6.0 
percent budget neutrality reduction to account for the 5-year 
transition methodology on LTCHs' Medicare program payments for the 2004 
LTCH PPS rate year and the proposed 3.0 percent budget neutrality 
reduction to account for the 5-year transition methodology on LTCHs' 
Medicare program payments established for the 2005 LTCH PPS rate year 
were not applied to LTCHs' estimated payments under the PPS.
    Tables II and III below illustrate the aggregate impact of the 
payment system among various classifications of LTCHs.
     The first column, LTCH Classification, 
identifies the type of LTCH.
     The second column lists the number of LTCHs of 
each classification type.
     The third column identifies the number of long-
term care cases.
     The fourth column shows the estimated payment 
per discharge for the 2004 LTCH PPS rate year.
     The fifth column shows the estimated payment per 
discharge for the 2005 LTCH PPS rate year.
     The sixth column shows the percent change of 
2004 LTCH PPS rate year compared to the 2005 LTCH PPS rate year.

 Table II.--Projected Impact Reflecting Applicable Transition Blend Percentages of Proposed Prospective Payments
 and Reasonable Cost-Based (TEFRA) Payments and Option To Elect Payment Based on 100 Percent of the Federal Rate
                                                        1
     [2004 LTCH PPS Rate Year Payments Compared to Proposed 2005 LTCH Prospective Payment System Rate Year]
----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                                                                                   proposed 2005
                                                                   Average 2004        LTCH
                                     Number of    Number of LTCH   LTCH PPS rate    prospective
       LTCH classification             LTCHs           cases       year payment   payment system  Percent change
                                                                    per case 2       rate year
                                                                                    payment per
                                                                                      case 3
----------------------------------------------------------------------------------------------------------------
All Providers...................             211          81,431       26,672.42       28,120.97             5.4
By location:
    Rural.......................               8           2,476       21,055.14       22,167.94             5.3
    Urban.......................             203          78,955       26,848.58       28,307.66             5.4
        Large...................             108          45,078       27,001.83       28,594.50             5.9
        Other...................              95          33,877       26,644.66       27,925.98             4.8
By Participation Date:
    After October 1993..........             148          52,146       27,162.64       28,566.47             5.2
    Before October 1983.........              16           7,985       20,472.43       22,910.93            11.9

[[Page 4785]]

 
    October 1983--September 1993              45          20,824       27,561.37       28,734.45             4.3
    Unknown.....................               2             476       38,085.50       39,877.49             4.7
By Ownership Control:
    Voluntary...................              54          21,723       24,589.76       26,297.41             6.9
    Proprietary.................             149          57,690       27,484.50       28,863.61             5.0
    Government..................               8           2,018       25,876.08       26,520.63             2.5
By Census Region:
    New England.................              12           9,603       20,505.41          23,280            13.5
    Middle Atlantic.............              11           4,253       27,252.20       28,405.28             4.2
    South Atlantic..............              22           7,439       31,663.08       32,403.26             2.3
    East North Central..........              40          10,781       29,094.38       30,485.73             4.8
    East South Central..........              12           3,678       28,447.45       29,194.17             2.6
    West North Central..........              14           3,653       27,235.20       29,108.58             6.9
    West South Central..........              71          32,839       25,375.16       26,629.22             4.9
    Mountain....................              17           3,610       27,193.75       28,510.11             4.8
    Pacific.....................              12           5,575       31,274.04       33,135.55             6.0
By Bed Size:
    Beds: 0-24..................              18           2,342       27,880.61       29,462.25             5.7
    Beds: 25-49.................              97          24,920       27,199.38       28,666.55             5.4
    Beds: 50-74.................              33          11,778       27,470.38       28,694.19             4.5
    Beds: 75-124................              32          13,657       27,374.27       28,554.40             4.3
    Beds: 125-199...............              22          19,130       25,168.06       26,784.95             6.4
    Beds: 200+..................               9           9,604       26,030.39       27,720.14             6.5
    Unknown.....................               0               0               0               0            0.0
----------------------------------------------------------------------------------------------------------------
1 These calculations take into account that some providers may experience a change in the blend percentage
  changes during the 2004 and 2005 LTCH PPS rate years. For example, during the period of July 1, 2003, through
  June 30, 2004, a provider with a cost reporting period beginning October 1 would have 3 months (July 1, 2003,
  through September 30, 2003) of payments under the 80/20 blend and 9 months (October 1, 2003, through June 30,
  2004) of payment under the 60/40 blend.
2 Average payment per case for the 12-month period of July 1, 2003, through June 30, 2004.
3 Average payment per case for the 12-month period of July 1, 2004, through June 30, 2005.


            Table III.--Projected Impact Reflecting the Fully Phased-In Proposed Prospective Payments
 [2004 LTCH PPS Rate Year Payments Compared to Proposed 2005 LTCH Prospective Payment System Rate Year Payments]
----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                                                                                   proposed 2005
                                                                   Average 2004        LTCH
                                     Number of    Number of LTCH   LTCH PPS rate    prospective
       LTCH classification             LTCHs           cases       year payment   payment system  Percent change
                                                                    per case 1       rate year
                                                                                    payment per
                                                                                      case 2
----------------------------------------------------------------------------------------------------------------
All Providers...................             272          96,104       26,955.97       27,499.11             2.0
By Location:
    Rural.......................              20           7,114       21,361.01       21,774.57             1.9
    Urban.......................             252          88,990       27,403.24       27,956.74             2.0
        Large...................             129          49,215       27,624.32       28,325.67             2.5
        Other...................             123          39,775       27,129.69       27,500.24             1.4
By Participation Date:
    After October 1993..........             200          64,968       27,376.79       27,878.10             1.8
    Before October 1983.........              17           8,038       21,542.46       23,435.89             8.8
    October 1983--September 1993              48          21,622       27,615.27       27,797.35             0.7
    Unknown.....................               7           1,476       28,255.89       28,575.78             1.1
By Ownership Control:
    Voluntary...................              62          23,427       25,183.86       26,444.67             5.0
    Proprietary.................             169          62,914       27,937.26       28,371.37             1.6
    Government..................              20           6,998       25,497.90       24,712.39            -3.1
By Census Region:
    New England.................              14           9,835       21,856.33       24,089.72            10.2
    Middle Atlantic.............              18           5,454       26,816.54       27,386.99             2.1
    South Atlantic..............              27           8,028       32,480.27       31,363.84            -3.4

[[Page 4786]]

 
    East North Central..........              53          13,354       29,429.54       29,810.95             1.3
    East South Central..........              15           4,169       30,028.46       29,916.90            -0.4
    West North Central..........              17           4,355       28,596.20       29,832.89             4.3
    West South Central..........              94          40,775       25,234.32       25,781.35             2.2
    Mountain....................              21           4,335       26,659.53       27,096.15             1.6
    Pacific.....................              13           5,799       31,278.68       31,601.47             1.0
By Bed Size:
    Beds: 0-24..................              23           3,105       27,760.33       28,478.85             2.6
    Beds: 25-49.................             115          29,060       28,131.57       28,808.02             2.4
    Beds: 50-74.................              33          11,778       27,599.01       28,175.22             2.1
    Beds: 75-124................              34          14,270       28,116.29       27,657.35            -1.6
    Beds: 125-199...............              24          19,451       25,851.29       26,930.75             4.2
    Beds: 200+..................              10           9,657       26,826.41       27,405.20             2.2
    Unknown.....................              33           8,783       22,623.37       23,020.17            1.8
----------------------------------------------------------------------------------------------------------------
1 Average payment per case for the 12-month period of July 1, 2003, through June 30, 2004.
2 Average payment per case for the 12-month period of July 1, 2004, through June 30, 2005.

4. Results
    We have prepared the following summary of the impact (as shown in 
Table II) of the LTCH PPS set forth in this proposed rule.
a. Location
    The majority of LTCHs are in urban areas. Approximately 4 percent 
of the LTCHs are identified as being located in a rural area, and 
approximately 3 percent of all LTCH cases are treated in these rural 
hospitals. Impact analysis in Table II shows that the percent change in 
estimated payments per discharge for the 2004 LTCH PPS rate year 
compared to the 2005 LTCH PPS rate year for rural LTCHs would be 5.3 
percent, and would be 5.4 percent for urban LTCHs. Large urban LTCHs 
are projected to experience a 5.9 percent increase in payments per 
discharge from the 2004 LTCH PPS rate year compared to the 2005 LTCH 
PPS rate year, while other urban LTCHs projected to experience a 4.8 
percent increase in payments per discharge from the 2004 LTCH PPS rate 
year compared to the 2005 LTCH PPS rate year. (See Table II.)
b. Participation Date
    LTCHs are grouped by participation date into three categories: (1) 
Before October 1983; (2) between October 1983 and September 1993; and 
(3) after October 1993. We did not have sufficient OSCAR data on two 
LTCHs, which we labeled as an ``Unknown'' category. The majority, 
approximately 64 percent, of the LTCH cases are in hospitals that began 
participating after October 1993 and are projected to experience a 5.2 
percent increase in payments per discharge from the 2004 LTCH PPS rate 
year compared to the 2005 LTCH PPS rate year. Approximately 10 percent 
of the cases are in LTCHs that began participating in Medicare before 
October 1983 and are projected to experience a 11.9 percent increase in 
payments per discharge from the 2004 LTCH PPS rate year compared to the 
2005 LTCH PPS rate year. This relatively large increase in payments for 
the 2005 LTCH PPS rate year may be attributable to the fact that many 
of these LTCHs that began participating in Medicare prior to October 
1983 are located in the New England census region (as explained below). 
In addition to the update in the standard Federal rate, these LTCHs are 
experiencing increases in payments because of an increasing wage index 
adjustment, which is two-fifths of the applicable LTCH PPS wage index 
for cost reporting periods beginning on or after October 1, 2003, and 
three-fifths of the applicable wage index for cost reporting periods 
beginning on or after October 1, 2004. In addition, as we discuss in 
section IV.C.6. of the preamble of this proposed rule, we are proposing 
a 3.0 percent budget neutrality reduction (0.970) to payments in the 
2005 LTCH PPS rate year to account for the effect of the 5-year 
transition methodology. The proposed 0.970 transition period budget 
neutrality factor for the 2005 LTCH PPS rate year is 3 percentage 
points lower than the transition period budget neutrality factor for 
the 2004 LTCH PPS rate year (0.940). This smaller budget neutrality 
offset contributes to greater LTCH payment increases between the 2004 
and 2005 LTCH PPS rate years compared to the increases seen between FY 
2003 and the 2004 LTCH PPS rate year. We do not expect to see these 
large payment per discharge increases in future years as the majority 
of LTCHs will have transitioned fully to the LTCH PPS and, therefore, 
the transition period budget neutrality factor should remain more 
stable.
    LTCHs that began participating between October 1983 and September 
1993 are projected to experience a 4.3 percent increase in payments per 
discharge from the 2004 LTCH PPS rate year compared to the 2005 LTCH 
PPS rate year. (See Table II.)
c. Ownership Control
    LTCHs are grouped into three categories based on ownership control 
type--(1) voluntary; (2) proprietary; and (3) government.
    Approximately 4 percent of LTCHs are government run and we expect 
that they would ``gain'' from the changes based on our projection that 
they would experience a 2.5 percent increase in payments per discharge 
from the 2004 LTCH PPS rate year compared to the 2005 LTCH PPS rate 
year. Voluntary and proprietary LTCHs are projected to experience a 6.9 
percent and 5.0 percent increase in payments per discharge from the 
2004 LTCH PPS rate year compared to the 2005 LTCH PPS rate year, 
respectively. (See Table II.)

[[Page 4787]]

d. Census Region
    LTCHs located in all regions are expected to experience an increase 
in payments per discharge from the 2004 LTCH PPS rate year compared to 
the 2005 LTCH PPS rate year. Specifically, of the nine census regions, 
we expect that LTCHs in the New England region would experience the 
largest percent increase in payments per discharge from the 2004 LTCH 
PPS rate year compared to the 2005 LTCH PPS rate year (13.5 percent). 
As explained above, under section B.4.b. (Participation Date), this 
relatively large increase in payments for the 2005 LTCH PPS rate year 
may be attributable to the update in the standard Federal rate, and the 
fact that these LTCHs are experiencing increases in payments because of 
an increasing wage index adjustment, which is two-fifths of the 
applicable LTCH PPS wage index for cost reporting periods beginning on 
or after October 1, 2003, and three-fifths of the applicable wage index 
for cost reporting periods beginning on or after October 1, 2004. In 
addition, as we discuss in section IV.C.6. of the preamble of this 
proposed rule, we are proposing a 3.0 percent budget neutrality 
reduction (0.970) to payments in the 2005 LTCH PPS rate year to account 
for the effect of the 5-year transition methodology. The proposed 0.970 
transition period budget neutrality factor for the 2005 LTCH PPS rate 
year is 3 percentage points lower than the transition period budget 
neutrality factor for the 2004 LTCH PPS rate year (0.940). This smaller 
budget neutrality offset contributes to greater LTCH payment increases 
between the 2004 and 2005 LTCH PPS rate years compared to the increases 
seen between FY 2003 and the 2004 LTCH PPS rate year. We do not expect 
to see these large payment per discharge increases in future years as 
the majority of LTCHs will have transitioned fully to the LTCH PPS and, 
therefore, the transition period budget neutrality factor should remain 
more stable.
    We expect LTCHs in the South Atlantic region would experience the 
smallest percent increase in payments per discharge from the 2004 LTCH 
PPS rate year compared to the 2005 LTCH PPS rate year (2.3 percent). 
(See Table II.)
e. Bed Size
    LTCHs were grouped into six categories based on bed size--0-24 
beds, 25-49 beds, 50-74 beds, 75-124 beds, 125-199 beds, and 200+ beds.
    The percent increase in payments per discharge from the 2004 LTCH 
PPS rate year compared to the 2005 LTCH PPS rate year are projected to 
increase for all bed size categories.
    Most LTCHs were in bed size categories where the percent increase 
in payments per discharge from the 2004 LTCH PPS rate year compared to 
the 2005 LTCH PPS rate year is estimated to be greater than 5.4 
percent. LTCHs with 200 or more beds have the highest estimated percent 
change in payments per discharge from the 2004 LTCH PPS rate year 
compared to the 2005 LTCH PPS rate year (6.5 percent), while LTCHs with 
75-124 beds have the lowest projected increase in the percent change in 
payments per discharge from the 2004 LTCH PPS rate year compared to the 
2005 LTCH PPS rate year (4.3 percent). (See Table II.)
5. Effect on the Medicare Program
    Based on actuarial projections, we estimate that Medicare spending 
(total Medicare program payments) for LTCH services over the next 5 
years will be as follows:

------------------------------------------------------------------------
                                                            Estimated
                  LTCH PPS rate year                     payments  ($ in
                                                            billions)
------------------------------------------------------------------------
2005..................................................             $2.33
2006..................................................              2.48
2007..................................................              2.64
2008..................................................              2.79
2009..................................................              2.96
------------------------------------------------------------------------

    These estimates are based on the current estimate of increase in 
the excluded hospital with capital market basket of 2.9 percent for the 
2005 LTCH PPS rate year, 3.2 percent for the 2006 LTCH PPS rate year, 
3.1 percent for the 2007 LTCH PPS rate year, 3.0 percent for the 2008 
LTCH PPS rate year, and 3.2 percent for the 2009 LTCH PPS rate year. We 
estimate that there would be an increase in Medicare beneficiary 
enrollment of 2.1 percent in the 2005 LTCH PPS rate year, 2.4 percent 
in the 2006 LTCH PPS rate year, 2.1 percent in 2007 LTCH PPS rate year, 
2.0 percent in the 2008 LTCH PPS rate year, 2.1 percent in the 2009 
LTCH PPS rate year, and an estimated increase in the total number of 
LTCHs.
    Consistent with the statutory requirement for budget neutrality, we 
intend for estimated aggregate payments under the LTCH PPS in FY 2003 
to equal the estimated aggregate payments that will be made if the LTCH 
PPS were not implemented. Our methodology for estimating payments for 
purposes of the budget neutrality calculations uses the best available 
data and necessarily reflects assumptions. As we collect data from 
LTCHs, we will monitor payments and evaluate the ultimate accuracy of 
the assumptions used to calculate the budget neutrality calculations 
(that is, inflation factors, intensity of services provided, or 
behavioral response to the implementation of the LTCH PPS).
    Section 123 of BBRA and section 307 of BIPA provide the Secretary 
with extremely broad authority in developing the LTCH PPS, including 
the authority for appropriate adjustments. In accordance with this 
broad authority, we may discuss in a future proposed rule a possible 
one-time prospective adjustment to the LTCH PPS rates to maintain 
budget neutrality so that the effect of the difference between actual 
payments and estimated payments for the first year of LTCH PPS is not 
perpetuated in the PPS rates for future years. Because the LTCH PPS was 
only recently implemented, we do not yet have sufficient complete data 
to determine whether such an adjustment is warranted.
6. Effect on Medicare Beneficiaries
    Under the LTCH PPS, hospitals receive payment based on the average 
resources consumed by patients for each diagnosis. We do not expect any 
changes in the quality of care or access to services for Medicare 
beneficiaries under the LTCH PPS, but we expect that paying 
prospectively for LTCH services will enhance the efficiency of the 
Medicare program.

C. Impact of Proposed Policy Changes

1. Proposed Requirements for Satellite Facilities and Remote Locations 
of Hospitals To Qualify as Long-Term Care Hospitals
    Under section I.B.3. of the preamble of this proposed rule, we 
discuss our proposal to clarify the procedures under which a satellite 
facility or a remote location of a hospital must meet the statutory and 
regulatory requirements to qualify as a distinct LTCH. Specifically, we 
are proposing to present in regulations the procedure for determining 
the period from which the fiscal intermediaries will use discharge data 
in calculating the average Medicare inpatient length of stay 
requirement for a new, separately participating hospital that seeks 
classification as a LTCH.
    In this proposed rule, we are restating in regulations our existing 
policy that a satellite facility or remote location of a hospital 
(except for those that are subject to the location requirement under 
the provider-based rules at Sec. 413.65) that voluntarily reorganizes 
itself as a separate hospital and meets the provider agreement 
requirements of 42 CFR part 489 and the Medicare conditions of 
participation under 42 CFR part 482 would have its average

[[Page 4788]]

Medicare inpatient length of stay calculated based on discharges that 
occur after the satellite facility or remote location is established as 
a separate participating hospital.
    The policy that we are proposing to incorporate in the regulations 
is already in existence. Therefore, complying with the proposed 
regulation amendments would pose no additional burden on LTCHs.
    We are proposing to incorporate in regulations that govern 
requirements for LTCHs a provision that the average Medicare inpatient 
length of stay for satellite facilities and remote locations of 
hospitals that became subject to the revised location-based provider-
based requirements on July 1, 2003, that reorganize as separate 
participating hospitals, and that seek classification as LTCHs, would 
continue to be based on discharge data during the 5 months of the 
immediate 6 months preceding the facility's separation from the main 
hospital. This proposed amendment to the regulation text would 
incorporate procedures that are already established under the 
regulations governing provider-based entities, but whose implementation 
applicable to LTCH classifications were not expounded in the specific 
regulations governing LTCHs. The proposed regulations apply only to 
those facilities or locations that became subject to the revised 
provider-based location rules on July 1, 2003, and that seek 
classification as LTCHs for Medicare payment purposes. Therefore, we 
are unable to quantify how many or when a facility or location would 
seek LTCH classification.
    These proposed amendments to the regulations would not impose any 
additional requirements on providers. The data used in the calculation 
of the average length of stay are already being collected. The existing 
procedure for application of the discharge data in calculating the 
average length of stay in both circumstances is consistent with 
existing statutory and regulatory requirements.
2. Proposed Change in Policy on Interruption of a Stay in a LTCH
    Under section IV.C.4.c. of the preamble of this proposed rule, we 
are proposing to expand the definition of an interruption of a stay to 
include an interruption in which the patient is discharged from the 
LTCH, and returns to the LTCH within 3 days of the original discharge. 
We have found, through monitoring activities and other sources, that 
certain LTCHs are discharging patients during the course of their 
treatment for the sole purpose of the patient receiving specific tests 
or procedures and then readmitting the patient following the 
administration of the test or procedure. We believe these situations 
are resulting in improper increases in Medicare costs through separate 
billings for services that are already included in the LTC-DRG payment 
made to the LTCH. The proposed regulation change would prevent these 
inappropriate Medicare payments. However, we do not have sufficient 
data at this time to quantify either the number of providers that would 
be affected by the proposed change nor the savings to the Medicare 
program.
3. Proposed Change in Procedure for Counting Covered and Noncovered 
Days in a Stay That Crosses Two Consecutive Cost Reporting Periods
    Under section I.B.2. of the preamble to this proposed rule, we are 
proposing to specify the procedure for calculating a hospital's 
inpatient average length of stay for purposes of classification as a 
LTCH when covered and noncovered days of the stay involve admission in 
one cost reporting period and discharge in a second consecutive cost 
reporting period. Under this circumstance, we are proposing to count 
the total number of days of the stay in the cost reporting period 
during which the inpatient was discharged. We are proposing this 
revised procedure to make it consistent with reporting and payment 
procedures already in place for discharge-based payment systems that 
link patient days to discharges.
    The proposed regulation imposes no additional requirements on 
providers. The discharge data are already being collected and the 
proposed revision would merely change the procedure for reporting it.

D. Executive Order 12866

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

List of Subjects in 42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and recordkeeping requirements.
    In accordance with the discussion in this preamble, the Centers for 
Medicare & Medicaid Services is proposing to amend 42 CFR chapter IV, 
part 412, as set forth below:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

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

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

    2. Section 412.23 is amended by--
    A. Revising paragraphs (e)(3)(i) and (e)(3)(ii).
    B. In paragraph (e)(3)(iii), removing the phrase ``required 
Medicare average length of stay,'' and adding in its place the phrase 
``required average length of stay,''.
    C. Revising paragraph (e)(4).
    The revisions and additions read as follows:


Sec. 412.23  Excluded hospitals: classifications.

* * * * *
    (e) Long-term care hospitals. * * *
    (3) Calculation of average length of stay. (i) Subject to the 
provisions of paragraphs (e)(3)(ii) and (e)(3)(iii) of this section, 
the average Medicare inpatient length of stay specified under paragraph 
(e)(2)(i) of this section is calculated by dividing the total number of 
covered and noncovered days of stay of Medicare inpatients (less leave 
or pass days) by the number of total Medicare discharges for the 
hospital's most recent complete cost reporting period. The average 
inpatient length of stay specified under paragraph (e)(2)(ii) of this 
section is calculated by dividing the total number of days for all 
patients, including both Medicare and non-Medicare inpatients (less 
leave or pass days) by the number of total discharges for the 
hospital's most recent complete cost reporting period. If the days of a 
stay of an inpatient involve an admission during one cost reporting 
period and a discharge in a second consecutive cost reporting period, 
the total number of days of the stay are considered to have occurred in 
the cost reporting period during which the inpatient was discharged.
    (ii) If a change in a hospital's average length of stay specified 
under paragraph (e)(2)(i) or paragraph (e)(2)(ii) of this section is 
indicated, the calculation is made by the same method for the period of 
at least 5 months of the immediately preceding 6-month period.
* * * * *
    (4) Rules applicable to new long-term care hospitals--(i) 
Definition. For purposes of payment under the long-term care hospital 
prospective payment system under subpart O of this part, a new long-
term care hospital is a provider of inpatient hospital services that 
meets the qualifying criteria in paragraphs (e)(1) and (e)(2) of this 
section and, under present or previous ownership (or both), its first 
cost reporting period as a LTCH begins on or after October 1, 2002.

[[Page 4789]]

    (ii) Satellite facilities and remote locations of hospitals seeking 
to become new long-term care hospitals. Except as specified in 
paragraph (e)(4)(iii) of this section, a satellite facility (as defined 
in Sec. 412.22(h)) or a remote location of a hospital (as defined in 
Sec. 413.65(a)(2)) that voluntarily reorganizes as a separate Medicare 
participating hospital, with or without a concurrent change in 
ownership, and that seeks to qualify as a new long-term care hospital 
for Medicare payment purposes must demonstrate through documentation 
that it meets the average length of stay requirement as specified under 
paragraphs (e)(2)(i) or (e)(2)(ii) of this section based on discharges 
that occur on or after the effective date of its participation under 
Medicare as a separate hospital.
    (iii) Provider-based facility or organization identified as a 
satellite facility and remote location of a hospital prior to July l, 
2003. Satellite facilities and remote locations of hospitals that 
became subject to the provider-based status rules under Sec. 413.65 as 
of July l, 2003, that become separately participating hospitals, and 
that seek to qualify as long-term care hospitals for Medicare payment 
purposes may submit to the fiscal intermediary discharge data gathered 
during 5 months of the immediate 6 months preceding the facility's 
separation from the main hospital for calculation of the average length 
of stay specified under paragraph (e)(2)(i) or paragraph (e)(2)(ii) of 
this section.
* * * * *
    3. Section 412.531 is amended by--
    A. Revising paragraph (a).
    B. Revising paragraph (b)(1).
    The revisions and additions read as follows:


Sec. 412.531  Special payment provisions when an interruption of a stay 
occurs in a long-term care hospital.

    (a) Interruption of a stay defined. ``Interruption of a stay'' 
means--
    (1) A stay at a long-term care hospital during which a Medicare 
inpatient is discharged from the long-term care hospital and returns to 
the same long-term care hospital within 3 consecutive days under 
conditions other than those specified in paragraph (a)(2)(i) through 
(a)(2)(iii) of this section. The duration of the interruption of the 
stay of 3 consecutive days begins with the date of discharge from the 
long-term care hospital and ends at midnight of the third day.
    (2) A stay in a long-term care hospital during which a Medicare 
inpatient is discharged from the long-term care hospital to an acute 
care hospital, an IRF, or a SNF and returns to the same long-term care 
hospital within the applicable fixed day period specified in paragraphs 
(a)(2)(i) through (a)(2)(iii) of this section.
    (i) For a discharge to an acute care hospital, the applicable fixed 
day period is 9 days. The counting of the days begins on the date of 
discharge from the long-term care hospital and ends on the 9th date 
after the discharge.
    (ii) For a discharge to an IRF, the applicable fixed day period is 
27 days. The counting of the days begins on the day of discharge from 
the long-term care hospital and ends on the 27th day after discharge.
    (iii) For a discharge to a SNF, the applicable fixed day period is 
45 days. The counting of the days begins on the day of discharge from 
the long-term care hospital and ends on the 45th day after the 
discharge.
    (b) Methods of determining payments. (1) In determining payments, 
the following provisions apply:
    (i) For purposes of determining a Federal prospective payment, any 
stay in a long-term care hospital that involves an interruption of the 
stay will be paid as a single discharge from the long-term care 
hospital. CMS will make only one LTC-DRG payment for all portions of a 
long-term care stay that involves an interruption of stay.
    (ii) Except as specified in paragraph (b)(1)(iii) of this section, 
the number of days that a beneficiary spends away from the long-term 
care hospital during a 3-day interruption of stay, as defined in 
paragraph (a)(1) of this section, is not included in determining the 
length of stay of the patient at the long-term care hospital when there 
is no medical care or treatment that is considered a covered service 
delivered to the beneficiary.
    (iii) The number of days that a beneficiary spends away from a 
long-term care hospital during an interruption of stay defined under 
paragraph (a)(1) of this section during which the beneficiary receives 
medical care or treatment that is considered a covered service and 
returns to the long-term care hospital within 3 consecutive days or 
less after a discharge is counted in determining the length of stay of 
the patient at the long-term care hospital.
    (iv) In accordance with Sec. 412.509, CMS will not make any payment 
other than the LTC-DRG payment as specified under paragraph (b)(1)(i) 
of this section for covered services that should have been furnished by 
the long-term care hospital during a 3-day interruption of stay, as 
defined in paragraph (a)(1) of this section.
    (v) In accordance with Sec. 412.513(b), payment will be based on 
the patient's LTC-DRG that would be determined by the principal 
diagnosis, which is the condition established after study to be chiefly 
responsible for occasioning the first admission of the patient to the 
hospital for care.
* * * * *


Sec. 412.532  [Amended]

    4. In Sec. 412.532(i), the reference ``paragraphs (h)(1) through 
(h)(4) of this section'' is revised to read ``Sec. 412.22(h)(1) through 
(h)(4)''.

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

    Dated: December 14, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: January 21, 2004.
Tommy G. Thompson,
Secretary.

Addendum

    This addendum contains the tables referred to throughout the 
preamble to this proposed rule. The tables presented below are as 
follows:
    Table 1.--Long-Term Care Hospital Proposed Wage Index for Urban 
Areas for Discharges Occurring from July 1, 2004 through June 30, 
2005;
    Table 2.--Long-Term Care Hospital Proposed Wage Index for Rural 
Areas for Discharges Occurring from July 1, 2004 through June 30, 
2005;
    Table 3.--FY 2004 LTC-DRG Relative Weights, Geometric Mean 
Length of Stay, and Short-Stay Five-Sixths Average Length of Stay 
for Discharges Occurring from July 1, 2004 through September 30, 
2004.

    (Note: This is the same information provided in Table 11 of the 
August 1, 2003, IPPS final rule (68 FR 45650-45658), which has been 
reprinted here for convenience.)

[[Page 4790]]



Table 1.--Long-Term Care Hospital Proposed Wage Index for Urban Areas for Discharges Occurring From July 1, 2004
                                              Through June 30, 2005
----------------------------------------------------------------------------------------------------------------
                      Urban area (constituent        Full wage      1/5th wage      2/5ths wage     3/5ths wage
       MSA                   counties)               index \1\       index \2\       index \3\       index \4\
----------------------------------------------------------------------------------------------------------------
0040............  Abilene, TX...................          0.7627          0.9525          0.9051          0.8576
                  Taylor, TX
0060............  Aguadilla, PR.................          0.4306          0.8861          0.7722          0.6584
                  Aguada, PR
                  Aguadilla, PR
                  Moca, PR
0080............  Akron, OH.....................          0.9246          0.9849          0.9698          0.9548
                  Portage, OH
                  Summit, OH
0120............  Albany, GA....................          1.0863          1.0173          1.0345          1.0518
                  Dougherty, GA
                  Lee, GA
0160............  Albany-Schenectady-Troy, NY...          0.8489          0.9698          0.9396          0.9093
                  Albany, NY
                  Montgomery, NY
                  Rensselaer, NY
                  Saratoga, NY
                  Schenectady, NY
                  Schoharie, NY
0200............  Albuquerque, NM...............          0.9300          0.9860          0.9720          0.9580
                  Bernalillo, NM
                  Sandoval, NM
                  Valencia, NM
0220............  Alexandria, LA................          0.8019          0.9604          0.9208          0.8811
                  Rapides, LA
0240............  Allentown-Bethlehem-Easton, PA          0.9721          0.9944          0.9888          0.9833
                  Carbon, PA
                  Lehigh, PA
                  Northampton, PA
0280............  Altoona, PA...................          0.8806          0.9761          0.9522          0.9284
                  Blair, PA
0320............  Amarillo, TX..................          0.8986          0.9797          0.9594          0.9392
                   Potter, TX
                  Randall, TX
0380............  Anchorage, AK.................          1.2216          1.0443          1.0886          1.1330
                  Anchorage, AK
0440............  Ann Arbor, MI.................          1.1074          1.0215          1.0430          1.0644
                  Lenawee, MI
                  Livingston, MI
                  Washtenaw, MI
0450............  Anniston, AL..................          0.8090          0.9618          0.9236          0.8854
                  Calhoun, AL
0460............  Appleton-Oshkosh-Neenah, WI...          0.9035          0.9807          0.9614          0.9421
                  Calumet, WI
                  Outagamie, WI
                  Winnebago, WI
0470............  Arecibo, PR...................          0.4155          0.8831          0.7662          0.6493
                  Arecibo, PR
                  Camuy, PR
                  Hatillo, PR
0480............  Asheville, NC.................          0.9720          0.9944          0.9888          0.9832
                  Buncombe, NC
                  Madison, NC
0500............  Athens, GA....................          0.9818          0.9964          0.9927          0.9891
                  Clarke, GA
                  Madison, GA
                  Oconee, GA
0520............  Atlanta, GA...................          1.0130          1.0026          1.0052          1.0078
                  Barrow, GA
                  Bartow, GA
                  Carroll, GA
                  Cherokee, GA
                  Clayton, GA
                  Cobb, GA
                  Coweta, GA
                  DeKalb, GA
                  Douglas, GA
                  Fayette, GA
                  Forsyth, GA
                  Fulton, GA

[[Page 4791]]

 
                  Gwinnett, GA
                  Henry, GA
                  Newton, GA
                  Paulding, GA
                  Pickens, GA
                  Rockdale, GA
                  Spalding, GA
                  Walton, GA
0560............  Atlantic-Cape May, NJ.........          1.0795          1.0159          1.0318          1.0477
                  Atlantic, NJ
                  Cape May, NJ
0580............  Auburn-Opelika, AL............          0.8494          0.9699          0.9398          0.9096
                  Lee, AL
0600............  Augusta-Aiken, GA-SC..........          0.9625          0.9925          0.9850          0.9775
                  Columbia, GA
                  McDuffie, GA
                  Richmond, GA
                  Aiken, SC
                  Edgefield, SC
0640............  Austin-San Marcos, TX.........          0.9609          0.9922          0.9844          0.9765
                  Bastrop, TX
                  Caldwell, TX
                  Hays, TX
                  Travis, TX
                  Williamson, TX
0680............  Bakersfield, CA...............          0.9810          0.9962          0.9924          0.9886
                  Kern, CA
0720............  Baltimore, MD.................          0.9919          0.9984          0.9968          0.9951
                  Anne Arundel, MD
                  Baltimore, MD
                  Baltimore City, MD
                  Carroll, MD
                  Harford, MD
                  Howard, MD
                  Queen Anne's, MD
0733............  Bangor, ME....................          0.9904          0.9981          0.9962          0.9942
                  Penobscot, ME
0743............  Barnstable-Yarmouth, MA.......          1.2956          1.0591          1.1182          1.1774
                  Barnstable, MA
0760............  Baton Rouge, LA...............          0.8406          0.9681          0.9362          0.9044
                  Ascension, LA
                  East Baton Rouge, LA
                  Livingston, LA
                  West Baton Rouge, LA
0840............  Beaumont-Port Arthur, TX......          0.8424          0.9685          0.9370          0.9054
                  Hardin, TX
                  Jefferson, TX
                  Orange, TX
0860............  Bellingham, WA................          1.1757          1.0351          1.0703          1.1054
                  Whatcom, WA
0870............  Benton Harbor, MI.............          0.8871          0.9774          0.9548          0.9323
                  Berrien, MI
0875............  Bergen-Passaic, NJ............          1.1692          1.0338          1.0677          1.1015
                  Bergen, NJ
                  Passaic, NJ
0880............  Billings, MT..................          0.8961          0.9792          0.9584          0.9377
                  Yellowstone, MT
0920............  Biloxi-Gulfport-Pascagoula, MS          0.9029          0.9806          0.9612          0.9417
                  Hancock, MS
                  Harrison, MS
                  Jackson, MS
0960............  Binghamton, NY................          0.8428          0.9686          0.9371          0.9057
                  Broome, NY
                  Tioga, NY
1000............  Birmingham, AL................          0.9212          0.9842          0.9685          0.9527
                  Blount, AL
                  Jefferson, AL
                  St. Clair, AL
                  Shelby, AL
1010............  Bismarck, ND..................          0.7965          0.9593          0.9186          0.8779

[[Page 4792]]

 
                  Burleigh, ND
                  Morton, ND
1020............  Bloomington, IN...............          0.8662          0.9732          0.9465          0.9197
                  Monroe, IN
1040............  Bloomington-Normal, IL........          0.8832          0.9766          0.9533          0.9299
                  McLean, IL
1080............  Boise City, ID................          0.9209          0.9842          0.9684          0.9525
                  Ada, ID
                  Canyon, ID
1123............  Boston-Worcester-Lawrence-              1.1233          1.0247          1.0493          1.0740
                   Lowell-Brockton, MA-NH (NH
                   Hospitals).
                  Bristol, MA
                  Essex, MA
                  Middlesex, MA
                  Norfolk, MA
                  Plymouth, MA
                  Suffolk, MA
                  Worcester, MA
                  Hillsborough, NH
                  Merrimack, NH
                  Rockingham, NH
                  Strafford, NH
1125............  Boulder-Longmont, CO..........          1.0049          1.0010          1.0020          1.0029
                  Boulder, CO
1145............  Brazoria, TX..................          0.8137          0.9627          0.9255          0.8882
                  Brazoria, TX
1150............  Bremerton, WA.................          1.0580          1.0116          1.0232          1.0348
                  Kitsap, WA
1240............  Brownsville-Harlingen-San               1.0303          1.0061          1.0121          1.0182
                   Benito, TX.
                  Cameron, TX
1260............  Bryan-College Station, TX.....          0.9019          0.9804          0.9608          0.9411
                  Brazos, TX
1280............  Buffalo-Niagara Falls, NY.....          0.9604          0.9921          0.9842          0.9762
                  Erie, NY
                  Niagara, NY
1303............  Burlington, VT................          0.9704          0.9941          0.9882          0.9822
                  Chittenden, VT
                  Franklin, VT
                  Grand Isle, VT
1310............  Caguas, PR....................          0.4158          0.8832          0.7663          0.6495
                  Caguas, PR
                  Cayey, PR
                  Cidra, PR
                  Gurabo, PR
                  San Lorenzo, PR
1320............  Canton-Massillon, OH..........          0.9071          0.9814          0.9628          0.9443
                  Carroll, OH
                  Stark, OH
1350............  Casper, WY....................          0.9095          0.9819          0.9638          0.9457
                  Natrona, WY
1360............  Cedar Rapids, IA..............          0.8874          0.9775          0.9550          0.9324
                  Linn, IA
1400............  Champaign-Urbana, IL..........          0.9907          0.9981          0.9963          0.9944
                  Champaign, IL
1440............  Charleston-North Charleston,            0.9332          0.9866          0.9733          0.9599
                   SC.
                  Berkeley, SC
                  Charleston, SC
                  Dorchester, SC
1480............  Charleston, WV................          0.8880          0.9776          0.9552          0.9328
                  Kanawha, WV
                  Putnam, WV
1520............  Charlotte-Gastonia-Rock Hill,           0.9760          0.9952          0.9904          0.9856
                   NC-SC.
                  Cabarrus, NC
                  Gaston, NC
                  Lincoln, NC
                  Mecklenburg, NC
                  Rowan, NC
                  Stanly, NC
                  Union, NC
                  York, SC

[[Page 4793]]

 
1540............  Charlottesville, VA...........          1.0025          1.0005          1.0010          1.0015
                  Albemarle, VA
                  Charlottesville City, VA
                  Fluvanna, VA
                  Greene, VA
1560............  Chattanooga, TN-GA............          0.9086          0.9817          0.9634          0.9452
                  Catoosa, GA
                  Dade, GA
                  Walker, GA
                  Hamilton, TN
                  Marion, TN
1580............  Cheyenne, WY..................          0.8796          0.9759          0.9518          0.9278
                  Laramie, WY
1600............  Chicago, IL...................          1.0892          1.0178          1.0357          1.0535
                  Cook, IL
                  DeKalb, IL
                  DuPage, IL
                  Grundy, IL
                  Kane, IL
                  Kendall, IL
                  Lake, IL
                  McHenry, IL
                  Will, IL
1620............  Chico-Paradise, CA............          1.0193          1.0039          1.0077          1.0116
                  Butte, CA
1640............  Cincinnati, OH-KY-IN..........          0.9413          0.9883          0.9765          0.9648
                  Dearborn, IN
                  Ohio, IN
                  Boone, KY
                  Campbell, KY
                  Gallatin, KY
                  Grant, KY
                  Kenton, KY
                  Pendleton, KY
                  Brown, OH
                  Clermont, OH
                  Hamilton, OH
                  Warren, OH
1660............  Clarksville-Hopkinsville, TN-           0.8244          0.9649          0.9298          0.8946
                   KY.
                  Christian, KY
                  Montgomery, TN
1680............  Cleveland-Lorain-Elyria, OH...          0.9671          0.9934          0.9868          0.9803
                  Ashtabula, OH
                  Cuyahoga, OH
                  Geauga, OH
                  Lake, OH
                  Lorain, OH
                  Medina, OH
1720............  Colorado Springs, CO..........          0.9833          0.9967          0.9933          0.9900
                  El Paso, CO
1740............  Columbia, MO..................          0.8695          0.9739          0.9478          0.9217
                  Boone, MO
1760............  Columbia, SC..................          0.8902          0.9780          0.9561          0.9341
                  Lexington, SC
                  Richland, SC
1800............  Columbus, GA-AL...............          0.8694          0.9739          0.9478          0.9216
                  Russell, AL
                  Chattahoochee, GA
                  Harris, GA
                  Muscogee, GA
1840............  Columbus, OH..................          0.9648          0.9930          0.9859          0.9789
                  Delaware, OH
                  Fairfield, OH
                  Franklin, OH
                  Licking, OH
                  Madison, OH
                  Pickaway, OH
1880............  Corpus Christi, TX............          0.8521          0.9704          0.9408          0.9113
                  Nueces, TX
                  San Patricio, TX

[[Page 4794]]

 
1890............  Corvallis, OR.................          1.1516          1.0303          1.0606          1.0910
                  Benton, OR
1900............  Cumberland, MD-WV (WV                   0.8200          0.9640          0.9280          0.8920
                   Hospital).
                  Allegany, MD
                  Mineral, WV
1920............  Dallas, TX....................          0.9974          0.9995          0.9990          0.9984
                  Collin, TX
                  Dallas, TX
                  Denton, TX
                  Ellis, TX
                  Henderson, TX
                  Hunt, TX
                  Kaufman, TX
                  Rockwall, TX
1950............  Danville, VA..................          0.9035          0.9807          0.9614          0.9421
                  Danville City, VA
                  Pittsylvania, VA
1960............  Davenport-Moline-Rock Island,           0.8985          0.9797          0.9594          0.9391
                   IA-IL.
                  Scott, IA
                  Henry, IL
                  Rock Island, IL
2000............  Dayton-Springfield, OH........          0.9518          0.9904          0.9807          0.9711
                  Clark, OH
                  Greene, OH
                  Miami, OH
                  Montgomery, OH
2020............  Daytona Beach, FL.............          0.9078          0.9816          0.9631          0.9447
                  Flagler, FL
                  Volusia, FL
2030............  Decatur, AL...................          0.8828          0.9766          0.9531          0.9297
                  Lawrence, AL
                  Morgan, AL
2040............  Decatur, IL...................          0.8161          0.9632          0.9264          0.8897
                  Macon, IL
2080............  Denver, CO....................          1.0837          1.0167          1.0335          1.0502
                  Adams, CO
                  Arapahoe, CO
                  Denver, CO
                  Douglas, CO
                  Jefferson, CO
2120............  Des Moines, IA................          0.9106          0.9821          0.9642          0.9464
                  Dallas, IA
                  Polk, IA
                  Warren, IA
2160............  Detroit, MI...................          1.0101          1.0020          1.0040          1.0061
                  Lapeer, MI
                  Macomb, MI
                  Monroe, MI
                  Oakland, MI
                  St. Clair, MI
                  Wayne, MI
2180............  Dothan, AL....................          0.7741          0.9548          0.9096          0.8645
                  Dale, AL
                  Houston, AL
2190............  Dover, DE.....................          0.9805          0.9961          0.9922          0.9883
                  Kent, DE
2200............  Dubuque, IA...................          0.8886          0.9777          0.9554          0.9332
                  Dubuque, IA
2240............  Duluth-Superior, MN-WI........          1.0171          1.0034          1.0068          1.0103
                  St. Louis, MN
                  Douglas, WI
2281............  Dutchess County, NY...........          1.0934          1.0187          1.0374          1.0560
                  Dutchess, NY
2290............  Eau Claire, WI................          0.9064          0.9813          0.9626          0.9438
                  Chippewa, WI
                  Eau Claire, WI
2320............  El Paso, TX...................          0.9196          0.9839          0.9678          0.9518
                  El Paso, TX
2330............  Elkhart-Goshen, IN............          0.9783          0.9957          0.9913          0.9870
                  Elkhart, IN

[[Page 4795]]

 
2335............  Elmira, NY....................          0.8377          0.9675          0.9351          0.9026
                  Chemung, NY
2340............  Enid, OK......................          0.8559          0.9712          0.9424          0.9135
                  Garfield, OK
2360............  Erie, PA......................          0.8601          0.9720          0.9440          0.9161
                  Erie, PA
2400............  Eugene-Springfield, OR........          1.1456          1.0291          1.0582          1.0874
                  Lane, OR
2440............  Evansville-Henderson, IN-KY             0.8429          0.9686          0.9372          0.9057
                   (in hospitals).
                  Posey, IN
                  Vanderburgh, IN
                  Warrick, IN
                  Henderson, KY
2520............  Fargo-Moorhead, ND-MN.........          0.9797          0.9959          0.9919          0.9878
                  Clay, MN
                  Cass, ND
2560............  Fayetteville, NC..............          0.8986          0.9797          0.9594          0.9392
                  Cumberland, NC
2580............  Fayetteville-Springdale-                0.8396          0.9679          0.9358          0.9038
                   Rogers, AR.
                  Benton, AR
                  Washington, AR
2620............  Flagstaff, AZ-UT..............          1.1333          1.0267          1.0533          1.0800
                  Coconino, AZ
                  Kane, UT
2640............  Flint, MI.....................          1.0858          1.0172          1.0343          1.0515
                  Genesee, MI
2650............  Florence, AL..................          0.7747          0.9549          0.9099          0.8648
                  Colbert, AL
                  Lauderdale, AL
2655............  Florence, SC..................          0.8709          0.9742          0.9484          0.9225
                  Florence, SC
2670............  Fort Collins-Loveland, CO.....          1.0108          1.0022          1.0043          1.0065
                  Larimer, CO
2680............  Ft. Lauderdale, FL............          1.0163          1.0033          1.0065          1.0098
                  Broward, FL
2700............  Fort Myers-Cape Coral, FL.....          0.9816          0.9963          0.9926          0.9890
                  Lee, FL
2710............  Fort Pierce-Port St. Lucie, FL          1.0008          1.0002          1.0003          1.0005
                  Martin, FL
                  St. Lucie, FL
2720............  Fort Smith, AR-OK.............          0.8424          0.9685          0.9370          0.9054
                  Crawford, AR
                  Sebastian, AR
                  Sequoyah, OK
2750............  Fort Walton Beach, FL.........          0.8966          0.9793          0.9586          0.9380
                  Okaloosa, FL
2760............  Fort Wayne, IN................          0.9585          0.9917          0.9834          0.9751
                  Adams, IN
                  Allen, IN
                  De Kalb, IN
                  Huntington, IN
                  Wells, IN
                  Whitley, IN
2800............  Forth Worth-Arlington, TX.....          0.9359          0.9872          0.9744          0.9615
                  Hood, TX
                  Johnson, TX
                  Parker, TX
                  Tarrant, TX
2840............  Fresno, CA....................          1.0094          1.0019          1.0038          1.0056
                  Fresno, CA
                  Madera, CA
2880............  Gadsden, AL...................          0.8206          0.9641          0.9282          0.8924
                  Etowah, AL
2900............  Gainesville, FL...............          0.9693          0.9939          0.9877          0.9816
                  Alachua, FL
2920............  Galveston-Texas City, TX......          0.9279          0.9856          0.9712          0.9567
                  Galveston, TX
2960............  Gary, IN......................          0.9410          0.9882          0.9764          0.9646
                  Lake, IN
                  Porter, IN

[[Page 4796]]

 
2975............  Glens Falls, NY...............          0.8475          0.9695          0.9390          0.9085
                  Warren, NY
                  Washington, NY
2980............  Goldsboro, NC.................          0.8622          0.9724          0.9449          0.9173
                  Wayne, NC
2985............  Grand Forks, ND-MN............          0.8636          0.9727          0.9454          0.9182
                  Polk, MN
                  Grand Forks, ND
2995............  Grand Junction, CO............          0.9633          0.9927          0.9853          0.9780
                  Mesa, CO
3000............  Grand Rapids-Muskegon-Holland,          0.9469          0.9894          0.9788          0.9681
                   MI.
                  Allegan, MI
                  Kent, MI
                  Muskegon, MI
                  Ottawa, MI
3040............  Great Falls, MT...............          0.8809          0.9762          0.9524          0.9285
                  Cascade, MT
3060............  Greeley, CO...................          0.9372          0.9874          0.9749          0.9623
                  Weld, CO
3080............  Green Bay, WI.................          0.9461          0.9892          0.9784          0.9677
                  Brown, WI
3120............  Greensboro-Winston-Salem-High           0.9166          0.9833          0.9666          0.9500
                   Point, NC.
                  Alamance, NC
                  Davidson, NC
                  Davie, NC
                  Forsyth, NC
                  Guilford, NC
                  Randolph, NC
                  Stokes, NC
                  Yadkin, NC
3150............  Greenville, NC................          0.9098          0.9820          0.9639          0.9459
                  Pitt, NC
3160............  Greenville-Spartanburg-                 0.9335          0.9867          0.9734          0.9601
                   Anderson, SC.
                  Anderson, SC
                  Cherokee, SC
                  Greenville, SC
                  Pickens, SC
                  Spartanburg, SC
3180............  Hagerstown, MD................          0.9172          0.9834          0.9669          0.9503
                  Washington, MD
3200............  Hamilton-Middletown, OH.......          0.9214          0.9843          0.9686          0.9528
                  Butler, OH
3240............  Harrisburg-Lebanon-Carlisle,            0.9164          0.9833          0.9666          0.9498
                   PA.
                  Cumberland, PA
                  Dauphin, PA
                  Lebanon, PA
                  Perry, PA
3283............  Hartford, CT..................          1.1555          1.0311          1.0622          1.0933
                  Litchfield, CT
                  Middlesex, CT
                  Tolland, CT
3285............  Hattiesburg, MS...............          0.7307          0.9461          0.8923          0.8384
                  Forrest, MS
                  Lamar, MS
3290............  Hickory-Morganton-Lenoir, NC..          0.9242          0.9848          0.9697          0.9545
                  Alexander, NC
                  Burke, NC
                  Caldwell, NC
                  Catawba, NC
3320............  Honolulu, HI..................          1.1098          1.0220          1.0439          1.0659
                  Honolulu, HI
3350............  Houma, LA.....................          0.7748          0.9550          0.9099          0.8649
                  Lafourche, LA
                  Terrebonne, LA
3360............  Houston, TX...................          0.9834          0.9967          0.9934          0.9900
                  Chambers, TX
                  Fort Bend, TX
                  Harris, TX
                  Liberty, TX
                  Montgomery, TX

[[Page 4797]]

 
                  Waller, TX
3400............  Huntington-Ashland, WV-KY-OH..          0.9595          0.9919          0.9838          0.9757
                  Boyd, KY
                  Carter, KY
                  Greenup, KY
                  Lawrence, OH
                  Cabell, WV
                  Wayne, WV
3440............  Huntsville, AL................          0.9245          0.9849          0.9698          0.9547
                  Limestone, AL
                  Madison, AL
3480............  Indianapolis, IN..............          0.9916          0.9983          0.9966          0.9950
                  Boone, IN
                  Hamilton, IN
                  Hancock, IN
                  Henricks, IN
                  Johnson, IN
                  Madison, IN
                  Marion, IN
                  Morgan, IN
                  Shelby, IN
3500............  Iowa City, IA.................          0.9548          0.9910          0.9819          0.9729
                  Johnson, IA
3520............  Jackson, MI...................          0.8986          0.9797          0.9594          0.9392
3560............  Jackson, MS...................          0.8357          0.9671          0.9343          0.9014
                  Hinds, MS
                  Madison, MS
                  Rankin, MS
3580............  Jackson, TN...................          0.8984          0.9797          0.9594          0.9390
                  Madison, TN
                  Chester, TN
3600............  Jacksonville, FL..............          0.9529          0.9906          0.9812          0.9717
                  Clay, FL
                  Duval, FL
                  Nasssau, FL
                  St. Johns, FL
3605............  Jacksonville, NC..............          0.8544          0.9709          0.9418          0.9126
                  Onslow, NC
3610............  Jamestown, NY.................          0.7762          0.9552          0.9105          0.8657
                  Chautauqua, NY
3620............  Janesville-Beloit, WI.........          0.9282          0.9856          0.9713          0.9569
                  Rock, WI
3640............  Jersey City, NJ...............          1.1115          1.0223          1.0446          1.0669
                  Hudson, NJ
3660............  Johnson City-Kingsport-                 0.8253          0.9651          0.9301          0.8952
                   Bristol, TN-VA.
                  Carter, TN
                  Hawkins, TN
                  Sullivan, TN
                  Unicoi, TN
                  Washington, TN
                  Bristol City, VA
                  Scott, VA
                  Washington, VA
3680............  Johnstown, PA.................          0.8158          0.9632          0.9263          0.8895
                  Cambria, PA
                  Somerset, PA
3700............  Jonesboro, AR.................          0.7794          0.9559          0.9118          0.8676
                  Craighead, AR
3710............  Joplin, MO....................          0.8681          0.9736          0.9472          0.9209
                  Jasper, MO
                  Newton, MO
3720............  Kalamazoo-Battlecreek, MI.....          1.0500          1.0100          1.0200          1.0300
                  Calhoun, MI
                  Kalamazoo, MI
                  Van Buren, MI
3740............  Kankakee, IL..................          1.0419          1.0084          1.0168          1.0251
                  Kankakee, IL
3760............  Kansas City, KS-MO............          0.9715          0.9943          0.9886          0.9829
                  Johnson, KS
                  Leavenworth, KS

[[Page 4798]]

 
                  Miami, KS
                  Wyandotte, KS
                  Cass, MO
                  Clay, MO
                  Clinton, MO
                  Jackson, MO
                  Lafayette, MO
                  Platte, MO
                  Ray, MO
3800............  Kenosha, WI...................          0.9761          0.9952          0.9904          0.9857
                  Kenosha, WI
3810............  Killeen-Temple, TX............          0.9159          0.9832          0.9664          0.9495
                  Bell, TX
                  Coryell, TX
3840............  Knoxville, TN.................          0.8820          0.9764          0.9528          0.9292
                  Anderson, TN
                  Blount, TN
                  Knox, TN
                  Loudon, TN
                  Sevier, TN
                  Union, TN
3850............  Kokomo, In....................          0.9045          0.9809          0.9618          0.9427
                  Howard, IN
                  Tipton, IN
3870............  La Crosse, WI-MN..............          0.9247          0.9849          0.9699          0.9548
                  Houston, MN
                  La Crosse, WI
3880............  Lafayette, LA.................          0.8189          0.9638          0.9276          0.8913
                  Acadia, LA
                  Lafayette, LA
                  St. Landry, LA
                  St. Martin, LA
3920............  Lafayette, IN.................          0.8584          0.9717          0.9434          0.9150
                  Clinton, IN
                  Tippecanoe, IN
3960............  Lake Charles, LA..............          0.7841          0.9568          0.9136          0.8705
                  Calcasieu, LA
3980............  Lakeland-Winter Haven, FL.....          0.8811          0.9762          0.9524          0.9287
                  Polk, FL
4000............  Lancaster, PA.................          0.9282          0.9856          0.9713          0.9569
                  Lancaster, PA
4040............  Lansing-East Lansing, MI......          0.9714          0.9943          0.9886          0.9828
                  Clinton, MI
                  Eaton, MI
                  Ingham, MI
4080............  Laredo, TX....................          0.8091          0.9618          0.9236          0.8855
                  Webb, TX
4100............  Las Cruces, NM................          0.8688          0.9738          0.9475          0.9213
                  Dona Ana, NM
4120............  Las Vegas, NV-AZ..............          1.1528          1.0306          1.0611          1.0917
                  Mohave, AZ
                  Clark, NV
                  Nye, NV
4150............  Lawrence, KS..................          0.8677          0.9735          0.9471          0.9206
                  Douglas, KS
4200............  Lawton, OK....................          0.8267          0.9653          0.9307          0.8960
                  Comanche, OK
4243............  Lewiston-Auburn, ME...........          0.9383          0.9877          0.9753          0.9630
                  Androscoggin, ME
4280............  Lexington, KY.................          0.8685          0.9737          0.9474          0.9211
                  Bourbon, KY
                  Clark, KY
                  Fayette, KY
                  Jessamine, KY
                  Madison, KY
                  Scott, KY
                  Woodford, KY
4320............  Lima, OH......................          0.9522          0.9904          0.9809          0.9713
                  Allen, OH
                  Auglaize, OH

[[Page 4799]]

 
4360............  Lincoln, NE...................          1.0033          1.0007          1.0013          1.0020
                  Lancaster, NE
4400............  Little Rock-North Little Rock,          0.8923          0.9785          0.9569          0.9354
                   AR.
                  Faulkner, AR
                  Lonoke, AR
                  Pulaski, AR
                  Saline, AR
4420............  Longview-Marshall, TX.........          0.9113          0.9823          0.9645          0.9468
                  Gregg, TX
                  Harrison, TX
                  Upshur, TX
4480............  Los Angeles-Long Beach, CA....          1.1795          1.0359          1.0718          1.1077
                  Los Angeles, CA
4520............  Louisville, KY-IN\1\..........          0.9242          0.9848          0.9697          0.9545
                  Clark, IN
                  Floyd, IN
                  Harrison, IN
                  Scott, IN
                  Bullitt, KY
                  Jefferson, KY
                  Oldham, KY
4600............  Lubbock, TX...................          0.8272          0.9654          0.9309          0.8963
                  Lubbock, TX
4640............  Lynchburg, VA.................          0.9134          0.9827          0.9654          0.9480
                  Amherst, VA
                  Bedford, VA
                  Bedford City, VA
                  Campbell, VA
                  Lynchburg City, VA
4680............  Macon, GA.....................          0.8953          0.9791          0.9581          0.9372
                  Bibb, GA
                  Houston, GA
                  Jones, GA
                  Peach, GA
                  Twiggs, GA
4720............  Madison, WI...................          1.0264          1.0053          1.0106          1.0158
                  Dane, WI
4800............  Mansfield, OH.................          0.9180          0.9836          0.9672          0.9508
                  Crawford, OH
                  Richland, OH
4840............  Mayaguez, PR..................          0.4795          0.8959          0.7918          0.6877
                  Anasco, PR
                  Cabo Rojo, PR
                  Hormigueros, PR
                  Mayaguez, PR
                  Sabana Grande, PR
                  San German, PR
4880............  McAllen-Edinburg-Mission, TX..          0.8381          0.9676          0.9352          0.9029
                  Hidalgo, TX
4890............  Medford-Ashland, OR...........          1.0772          1.0154          1.0309          1.0463
                  Jackson, OR
4900............  Melbourne-Titusville-Palm Bay,          0.9776          0.9955          0.9910          0.9866
                   FL.
                  Brevard, FL
4920............  Memphis, TN-AR-MS.............          0.9009          0.9802          0.9604          0.9405
                  Crittenden, AR
                  DeSoto, MS
                  Fayette, TN
                  Shelby, TN
                  Tipton, TN
4940............  Merced, CA....................          0.9690          0.9938          0.9876          0.9814
                  Merced, CA
5000............  Miami, FL.....................          0.9894          0.9979          0.9958          0.9936
                  Dade, FL
5015............  Middlesex-Somerset-Hunterdon,           1.1366          1.0273          1.0546          1.0820
                   NJ.
                  Hunterdon, NJ
                  Middlesex, NJ
                  Somerset, NJ
5080............  Milwaukee-Waukesha, WI........          0.9988          0.9998          0.9995          0.9993
                  Milwaukee, WI
                  Ozaukee, WI

[[Page 4800]]

 
                  Washington, WI
                  Waukesha, WI
5120............  Minneapolis-St. Paul, MN-WI...          1.1001          1.0200          1.0400          1.0601
                  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..................          0.8718          0.9744          0.9487          0.9231
                  Missoula, MT
5160............  Mobile, AL....................          0.7994          0.9599          0.9198          0.8796
                  Baldwin, AL
                  Mobile, AL
5170............  Modesto, CA...................          1.1275          1.0255          1.0510          1.0765
                  Stanislaus, CA
5190............  Monmouth-Ocean, NJ............          1.0956          1.0191          1.0382          1.0574
                  Monmouth, NJ
                  Ocean, NJ
5200............  Monroe, LA....................          0.7922          0.9584          0.9169          0.8753
                  Ouachita, LA
5240............  Montgomery, AL................          0.7907          0.9581          0.9163          0.8744
                  Autauga, AL
                  Elmore, AL
                  Montgomery, AL
5280............  Muncie, IN....................          0.8775          0.9755          0.9510          0.9265
                  Delaware, IN
5330............  Myrtle Beach, SC..............          0.9112          0.9822          0.9645          0.9467
                  Horry, SC
5345............  Naples, FL....................          0.9790          0.9958          0.9916          0.9874
                  Collier, FL
5360............  Nashville, TN.................          0.9855          0.9971          0.9942          0.9913
                  Cheatham, TN
                  Davidson, TN
                  Dickson, TN
                  Robertson, TN
                  Rutherford TN
                  Sumner, TN
                  Williamson, TN
                  Wilson, TN
5380............  Nassau-Suffolk, NY............          1.3140          1.0628          1.1256          1.1884
                  Nassau, NY
                  Suffolk, NY
5483............  New Haven-Bridgeport-Stamford-          1.2385          1.0477          1.0954          1.1431
                   Waterbury, CT.
                  Danbury, CT
                  Fairfield, CT
                  New Haven, CT
5523............  New London-Norwich, CT........          1.1631          1.0326          1.0652          1.0979
                  New London, CT
5560............  New Orleans, LA...............          0.9174          0.9835          0.9670          0.9504
                  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..................          1.4018          1.0804          1.1607          1.2411
                  Bronx, NY
                  Kings, NY
                  New York, NY
                  Putnam, NY

[[Page 4801]]

 
                  Queens, NY
                  Richmond, NY
                  Rockland, NY
                  Westchester, NY
5640............  Newark, NJ....................          1.1518          1.0304          1.0607          1.0911
                  Essex, NJ
                  Morris, NJ
                  Sussex, NJ
                  Union, NJ
                  Warren, NJ
5660............  Newburgh, NY-PA...............          1.1509          1.0302          1.0604          1.0905
                  Orange, NY
                  Pike, PA
5720............  Norfolk-Virginia Beach-Newport          0.8619          0.9724          0.9448          0.9171
                   News, VA-NC.
                  Currituck, NC
                  Chesapeake City, VA
                  Gloucester, VA
                  Hampton City, VA
                  Isle of Wight, VA
                  James City, VA
                  Mathews, VA
                  Newport News City, VA
                  Norfolk City, VA
                  Poquoson City, VA
                  Portsmouth City, VA
                  Suffolk City, VA
                  Virginia Beach City, VA
                  Williamsburg City, VA
                  York, VA
5775............  Oakland, CA...................          1.4921          1.0984          1.1968          1.2953
                  Alameda, CA
                  Contra Costa, CA
5790............  Ocala, FL.....................          0.9728          0.9946          0.9891          0.9837
                  Marion, FL
5800............  Odessa-Midland, TX............          0.9327          0.9865          0.9731          0.9596
                  Ector, TX
                  Midland, TX
5880............  Oklahoma City, OK.............          0.8984          0.9797          0.9594          0.9390
                  Canadian, OK
                  Cleveland, OK
                  Logan, OK
                  McClain, OK
                  Oklahoma, OK
                  Pottawatomie, OK
5910............  Olympia, WA...................          1.0963          1.0193          1.0385          1.0578
                  Thurston, WA
5920............  Omaha, NE-IA..................          0.9745          0.9949          0.9898          0.9847
                  Pottawattamie, IA
                  Cass, NE
                  Douglas, NE
                  Sarpy, NE
                  Washington, NE
5945............  Orange County, CA.............          1.1372          1.0274          1.0549          1.0823
                  Orange, CA
5960............  Orlando, FL...................          0.9654          0.9931          0.9862          0.9792
                  Lake, FL
                  Orange, FL
                  Osceola, FL
                  Seminole, FL
5990............  Owensboro, KY.................          0.8374          0.9675          0.9350          0.9024
                  Daviess, KY
6015............  Panama City, FL...............          0.8202          0.9640          0.9281          0.8921
                  Bay, FL
6020............  Parkersburg-Marietta, WV-OH...          0.8039          0.9608          0.9216          0.8823
                  Washington, OH
                  Wood, WV
6080............  Pensacola, FL.................          0.8707          0.9741          0.9483          0.9224
                  Escambia, FL
                  Santa Rosa, FL
6120............  Peoria-Pekin, IL..............          0.8734          0.9747          0.9494          0.9240

[[Page 4802]]

 
                  Peoria, IL
                  Tazewell, IL
                  Woodford, IL
6160............  Philadelphia, PA-NJ...........          1.0883          1.0177          1.0353          1.0530
                  Burlington, NJ
                  Camden, NJ
                  Gloucester, NJ
                  Salem, NJ
                  Bucks, PA
                  Chester, PA
                  Delaware, PA
                  Montgomery, PA
                  Philadelphia, PA
6200............  Phoenix-Mesa, AZ..............          1.0129          1.0026          1.0052          1.0077
                  Maricopa, AZ
                  Pinal, AZ
6240............  Pine Bluff, AR................          0.7865          0.9573          0.9146          0.8719
                  Jefferson, AR
6280............  Pittsburgh, PA................          0.8901          0.9780          0.9560          0.9341
                  Allegheny, PA
                  Beaver, PA
                  Butler, PA
                  Fayette, PA
                  Washington, PA
                  Westmoreland, PA
6323............  Pittsfield, MA................          1.0276          1.0055          1.0110          1.0166
                  Berkshire, MA
6340............  Pocatello, ID.................          0.9042          0.9808          0.9617          0.9425
                  Bannock, ID
6360............  Ponce, PR.....................          0.4708          0.8942          0.7883          0.6825
                  Guayanilla, PR
                  Juana Diaz, PR
                  Penuelas, PR
                  Ponce, PR
                  Villalba, PR
                  Yauco, PR
6403............  Portland, ME..................          0.9949          0.9990          0.9980          0.9969
                  Cumberland, ME
                  Sagadahoc, ME
                  York, ME
6440............  Portland-Vancouver, OR-WA.....          1.1213          1.0243          1.0485          1.0728
                  Clackamas, OR
                  Columbia, OR
                  Multnomah, OR
                  Washington, OR
                  Yamhill, OR
                  Clark, WA
6483............  Providence-Warwick-Pawtucket,           1.0977          1.0195          1.0391          1.0586
                   RI.
                  Bristol, RI
                  Kent, RI
                  Newport, RI
                  Providence, RI
                  Washington, RI
6520............  Provo-Orem, UT................          0.9976          0.9995          0.9990          0.9986
                  Utah, UT
6560............  Pueblo, CO....................          0.8778          0.9756          0.9511          0.9267
                  Pueblo, CO
6580............  Punta Gorda, FL...............          0.9510          0.9902          0.9804          0.9706
                  Charlotte, FL
6600............  Racine, WI....................          0.8814          0.9763          0.9526          0.9288
                  Racine, WI
6640............  Raleigh-Durham-Chapel Hill, NC          0.9959          0.9992          0.9984          0.9975
                  Chatham, NC
                  Durham, NC
                  Franklin, NC
                  Johnston, NC
                  Orange, NC
                  Wake, NC
6660............  Rapid City, SD................          0.8806          0.9761          0.9522          0.9284
                  Pennington, SD

[[Page 4803]]

 
6680............  Reading, PA...................          0.9133          0.9827          0.9653          0.9480
                  Berks, PA
6690............  Redding, CA...................          1.1352          1.0270          1.0541          1.0811
                  Shasta, CA
6720............  Reno, NV......................          1.0682          1.0136          1.0273          1.0409
                  Washoe, NV
6740............  Richland-Kennewick-Pasco, WA..          1.0609          1.0122          1.0244          1.0365
                  Benton, WA
                  Franklin, WA
6760............  Richmond-Petersburg, VA.......          0.9349          0.9870          0.9740          0.9609
                  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..          1.1341          1.0268          1.0536          1.0805
                  Riverside, CA
                  San Bernardino, CA
6800............  Roanoke, VA...................          0.8700          0.9740          0.9480          0.9220
                  Botetourt, VA
                  Roanoke, VA
                  Roanoke City, VA
                  Salem City, VA
6820............  Rochester, MN.................          1.1739          1.0348          1.0696          1.1043
                  Olmsted, MN
6840............  Rochester, NY.................          0.9430          0.9886          0.9772          0.9658
                  Genesee, NY
                  Livingston, NY
                  Monroe, NY
                  Ontario, NY
                  Orleans, NY
                  Wayne, NY
6880............  Rockford, IL..................          0.9666          0.9933          0.9866          0.9800
                  Boone, IL
                  Ogle, IL
                  Winnebago, IL
6895............  Rocky Mount, NC...............          0.9076          0.9815          0.9630          0.9446
                  Edgecombe, NC
                  Nash, NC
6920............  Sacramento, CA................          1.1845          1.0369          1.0738          1.1107
                  El Dorado, CA
                  Placer, CA
                  Sacramento, CA
6960............  Saginaw-Bay City-Midland, MI..          1.0032          1.0006          1.0013          1.0019
                  Bay, MI
                  Midland, MI
                  Saginaw, MI
6980............  St. Cloud, MN.................          0.9506          0.9901          0.9802          0.9704
                  Benton, MN
                  Stearns, MN
7000............  St. Joseph, MO................          0.9757          0.9951          0.9903          0.9854
                  Andrew, MO
                  Buchanan, MO
7040............  St. Louis, MO-IL..............          0.9033          0.9807          0.9613          0.9420
                  Clinton, IL
                  Jersey, IL
                  Madison, IL
                  Monroe, IL
                  St. Clair, IL
                  Franklin, MO
                  Jefferson, MO
                  Lincoln, MO

[[Page 4804]]

 
                  St. Charles, MO
                  St. Louis, MO
                  St. Louis City, MO
                  Warren, MO
7080............  Salem, OR.....................          1.0482          1.0096          1.0193          1.0289
                  Marion, OR
                  Polk, OR
7120............  Salinas, CA...................          1.4339          1.0868          1.1736          1.2603
                  Monterey, CA
7160............  Salt Lake City-Ogden, UT......          0.9913          0.9983          0.9965          0.9948
                  Davis, UT
                  Salt Lake, UT
                  Weber, UT
7200............  San Angelo, TX................          0.8535          0.9707          0.9414          0.9121
                  Tom Green, TX
7240............  San Antonio, TX...............          0.8870          0.9774          0.9548          0.9322
                  Bexar, TX
                  Comal, TX
                  Guadalupe, TX
                  Wilson, TX
7320............  San Diego, CA.................          1.1147          1.0229          1.0459          1.0688
                  San Diego, CA
7360............  San Francisco, CA.............          1.4514          1.0903          1.1806          1.2708
                  Marin, CA
                  San Francisco, CA
                  San Mateo, CA
7400............  San Jose, CA..................          1.4626          1.0925          1.1850          1.2776
                  Santa Clara, CA
7440............  San Juan-Bayamon, PR..........          0.4909          0.8982          0.7964          0.6945
                  Aguas Buenas, PR
                  Barceloneta, PR
                  Bayamon, PR
                  Canovanas, PR
                  Carolina, PR
                  Catano, PR
                  Ceiba, PR
                  Comerio, PR
                  Corozal, PR
                  Dorado, PR
                  Fajardo, PR
                  Florida, PR
                  Guaynabo, PR
                  Humacao, PR
                  Juncos, PR
                  Los Piedras, PR
                  Loiza, PR
                  Luguillo, PR
                  Manati, PR
                  Morovis, PR
                  Naguabo, PR
                  Naranjito, PR
                  Rio Grande, PR
                  San Juan, PR
                  Toa Alta, PR
                  Toa Baja, PR
                  Trujillo Alto, PR
                  Vega Alta, PR
                  Vega Baja, PR
                  Yabucoa, PR
7460............  San Luis Obispo-Atascadero-             1.1429          1.0286          1.0572          1.0857
                   Paso Robles, CA.
                  San Luis Obispo, CA
7480............  Santa Barbara-Santa Maria-              1.0441          1.0088          1.0176          1.0265
                   Lompoc, CA.
                  Santa Barbara, CA
7485............  Santa Cruz-Watsonville, CA....          1.2942          1.0588          1.1177          1.1765
                  Santa Cruz, CA
7490............  Santa Fe, NM..................          1.0653          1.0131          1.0261          1.0392
                  Los Alamos, NM
                  Santa Fe, NM
7500............  Santa Rosa, CA................          1.2877          1.0575          1.1151          1.1726
                  Sonoma, CA

[[Page 4805]]

 
7510............  Sarasota-Bradenton, FL........          0.9964          0.9993          0.9986          0.9978
                  Manatee, FL
                  Sarasota, FL
7520............  Savannah, GA..................          0.9472          0.9894          0.9789          0.9683
                  Bryan, GA
                  Chatham, GA
                  Effingham, GA
7560............  Scranton-Wilkes-Barre-                  0.8412          0.9682          0.9365          0.9047
                   Hazleton, PA.
                  Columbia, PA
                  Lackawanna, PA
                  Luzerne, PA
                  Wyoming, PA
7600............  Seattle-Bellevue-Everett, WA..          1.1562          1.0312          1.0625          1.0937
                  Island, WA
                  King, WA
                  Snohomish, WA
7610............  Sharon, PA....................          0.7751          0.9550          0.9100          0.8651
                  Mercer, PA
7620............  Sheboygan, WI.................          0.8624          0.9725          0.9450          0.9174
                  Sheboygan, WI
7640............  Sherman-Denison, TX...........          0.9700          0.9940          0.9880          0.9820
                  Grayson, TX
7680............  Shreveport-Bossier City, LA...          0.9083          0.9817          0.9633          0.9450
                  Bossier, LA
                  Caddo, LA
                  Webster, LA
7720............  Sioux City, IA-NE.............          0.8993          0.9799          0.9597          0.9396
                  Woodbury, IA
                  Dakota, NE
7760............  Sioux Falls, SD...............          0.9309          0.9862          0.9724          0.9585
                  Lincoln, SD
                  Minnehaha, SD
7800............  South Bend, IN................          0.9821          0.9964          0.9928          0.9893
                  St. Joseph, IN
7840............  Spokane, WA...................          1.0901          1.0180          1.0360          1.0541
                  Spokane, WA
7880............  Springfield, IL...............          0.8944          0.9789          0.9578          0.9366
                  Menard, IL
                  Sangamon, IL
7920............  Springfield, MO...............          0.8457          0.9691          0.9383          0.9074
                  Christian, MO
                  Greene, MO
                  Webster, MO
8003............  Springfield, MA...............          1.0543          1.0109          1.0217          1.0326
                  Hampden, MA
                  Hampshire, MA
8050............  State College, PA.............          0.8740          0.9748          0.9496          0.9244
                  Centre, PA
8080............  Steubenville-Weirton, OH-WV             0.8398          0.9680          0.9359          0.9039
                   (WV Hospitals).
                  Jefferson, OH
                  Brooke, WV
                  Hancock, WV
8120............  Stockton-Lodi, CA.............          1.0404          1.0081          1.0162          1.0242
                  San Joaquin, CA
8140............  Sumter, SC....................          0.8243          0.9649          0.9297          0.8946
                  Sumter, SC
8160............  Syracuse, NY..................          0.9412          0.9882          0.9765          0.9647
                  Cayuga, NY
                  Madison, NY
                  Onondaga, NY
                  Oswego, NY
8200............  Tacoma, WA....................          1.1116          1.0223          1.0446          1.0670
                  Pierce, WA
8240............  Tallahassee, FL...............          0.8520          0.9704          0.9408          0.9112
                  Gadsden, FL
                  Leon, FL
8280............  Tampa-St. Petersburg-                   0.9103          0.9821          0.9641          0.9462
                   Clearwater, FL.
                  Hernando, FL
                  Hillsborough, FL
                  Pasco, FL

[[Page 4806]]

 
                  Pinellas, FL
8320............  Terre Haute, IN...............          0.8325          0.9665          0.9330          0.8995
                  Clay, IN
                  Vermillion, IN
                  Vigo, IN
8360............  Texarkana, AR-Texarkana, TX...          0.8150          0.9630          0.9260          0.8890
                  Miller, AR
                  Bowie, TX
8400............  Toledo, OH....................          0.9381          0.9876          0.9752          0.9629
                  Fulton, OH
                  Lucas, OH
                  Wood, OH
8440............  Topeka, KS....................          0.9108          0.9822          0.9643          0.9465
                  Shawnee, KS
8480............  Trenton, NJ...................          1.0517          1.0103          1.0207          1.0310
                  Mercer, NJ
8520............  Tucson, AZ....................          0.8981          0.9796          0.9592          0.9389
                  Pima, AZ
8560............  Tulsa, OK.....................          0.9185          0.9837          0.9674          0.9511
                  Creek, OK
                  Osage, OK
                  Rogers, OK
                  Tulsa, OK
                  Wagoner, OK
8600............  Tuscaloosa, AL................          0.8212          0.9642          0.9285          0.8927
                  Tuscaloosa, AL
8640............  Tyler, TX.....................          0.9404          0.9881          0.9762          0.9642
                  Smith, TX
8680............  Utica-Rome, NY................          0.8403          0.9681          0.9361          0.9042
                  Herkimer, NY
                  Oneida, NY
8720............  Vallejo-Fairfield-Napa, CA....          1.3377          1.0675          1.1351          1.2026
                  Napa, CA
                  Solano, CA
8735............  Ventura, CA...................          1.1064          1.0213          1.0426          1.0638
                  Ventura, CA
8750............  Victoria, TX..................          0.8184          0.9637          0.9274          0.8910
                  Victoria, TX
8760............  Vineland-Millville-Bridgeton,           1.0405          1.0081          1.0162          1.0243
                   NJ.
                  Cumberland, NJ
8780............  Visalia-Tulare-Porterville, CA          0.9794          0.9959          0.9918          0.9876
                  Tulare, CA
8800............  Waco, TX......................          0.8394          0.9679          0.9358          0.9036
                  McLennan, TX
8840............  Washington, DC-MD-VA-WV.......          1.0904          1.0181          1.0362          1.0542
                  District of Columbia, DC
                  Calvert, MD
                  Charles, MD
                  Frederick, MD
                  Montgomery, MD
                  Prince Georges, MD
                  Alexandria City, VA
                  Arlington, VA
                  Clarke, VA
                  Culpeper, VA
                  Fairfax, VA
                  Fairfax City, VA
                  Falls Church City, VA
                  Fauquier, VA
                  Fredericksburg City, VA
                  King George, VA
                  Loudoun, VA
                  Manassas City, VA
                  Manassas Park City, VA
                  Prince William, VA
                  Spotsylvania, VA
                  Stafford, VA
                  Warren, VA
                  Berkeley, WV
                  Jefferson, WV

[[Page 4807]]

 
8920............  Waterloo-Cedar Falls, IA......          0.8366          0.9673          0.9346          0.9020
                  Black Hawk, IA
8940............  Wausau, WI....................          0.9692          0.9938          0.9877          0.9815
                  Marathon, WI
8960............  West Palm Beach-Boca Raton, FL          0.9798          0.9960          0.9919          0.9879
                  Palm Beach, FL
9000............  Wheeling, WV-OH...............          0.7494          0.9499          0.8998          0.8496
                  Belmont, OH
                  Marshall, WV
                  Ohio, WV
9040............  Wichita, KS...................          0.9238          0.9848          0.9695          0.9543
                  Butler, KS
                  Harvey, KS
                  Sedgwick, KS
9080............  Wichita Falls, TX.............          0.8341          0.9668          0.9336          0.9005
                  Archer, TX
                  Wichita, TX
9140............  Williamsport, PA..............          0.8158          0.9632          0.9263          0.8895
                  Lycoming, PA
9160............  Wilmington-Newark, DE-MD......          1.0882          1.0176          1.0353          1.0529
                  New Castle, DE
                  Cecil, MD
9200............  Wilmington, NC................          0.9563          0.9913          0.9825          0.9738
                  New Hanover, NC
                  Brunswick, NC
9260............  Yakima, WA....................          1.0372          1.0074          1.0149          1.0223
                  Yakima, WA
9270............  Yolo, CA......................          0.9204          0.9841          0.9682          0.9522
                  Yolo, CA
9280............  York, PA......................          0.9119          0.9824          0.9648          0.9471
                  York, PA
9320............  Youngstown-Warren, OH.........          0.9214          0.9843          0.9686          0.9528
                  Columbiana, OH
                  Mahoning, OH
                  Trumbull, OH
9340............  Yuba City, CA.................          1.0196          1.0039          1.0078          1.0118
                  Sutter, CA
                  Yuba, CA
9360............  Yuma, AZ......................          0.8895          0.9779          0.9558          0.9337
                  Yuma, AZ
----------------------------------------------------------------------------------------------------------------
\1\ Wage index calculated using the same wage data used to compute the wage index used by acute care hospitals
  under the IPPS for Federal FY 2004 (that is, fiscal year 2000 audited acute care hospital inpatient wage data)
  without regard to reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act.
\2\ One-fifth of the proposed full wage index value, applicable for a LTCH's cost reporting period beginning on
  or after October 1, 2002 through September 30, 2003 (Federal FY 2203). That is, for a LTCH's cost reporting
  period that began during Federal FY 2003 and located in Chicago, Illinois (MSA 1600), the proposed 1/5th wage
  index value is computed as (1.0892 + 4)/5 = 1.0178. For further details on the 5-year phase-in of the wage
  index, see section IV.C.1.of this proposed rule.
\3\ Two-fifths of the proposed full wage index value, applicable for a LTCH's cost reporting period beginning on
  or after October 1, 2003 through September 30, 2004 (Federal FY 2004). That is, for a LTCH's cost reporting
  period that begins during Federal FY 2004 and located in Chicago, Illinois (MSA 1600), the proposed 2/5ths
  wage index value is computed as ((2*1.0892) + 3))/5 = 1.0357. For further details on the 5-year phase-in of
  the wage index, see section IV.C.1. of this proposed rule.
\4\ Three-fifths of the proposed full wage index value, applicable for a LTCH's cost reporting period beginning
  on or after October 1, 2004 through September 30, 2005 (Federal FY 2005). That is, for a LTCH's cost reporting
  period that begins during Federal FY 2004 and located in Chicago, Illinois (MSA 1600), the proposed 3/5ths
  wage index value is computed as ((3*1.0892) + 2))/5 = 1.0535. For further details on the 5-year phase-in of
  the wage index, see section IV.C.1. of this proposed rule.


Table 2.--Long-Term Care Hospital Proposed Wage Index for Rural Areas for Discharges Occurring From July 1, 2004
                                              Through June 30, 2005
----------------------------------------------------------------------------------------------------------------
                                                                             \1/5\th      \2/5\ths     \3/5\ths
                        Nonurban area                          Full wage    wage index   wage index   wage index
                                                               index \1\       \2\          \3\          \4\
----------------------------------------------------------------------------------------------------------------
Alabama.....................................................       0.7492       0.9498       0.8997       0.8495
Alaska......................................................       1.1886       1.0377       1.0754       1.1132
Arizona.....................................................       0.9270       0.9854       0.9708       0.9562
Arkansas....................................................       0.7734       0.9547       0.9094       0.8640
California..................................................       1.0027       1.0005       1.0011       1.0016
Colorado....................................................       0.9328       0.9866       0.9731       0.9597
Connecticut.................................................       1.2183       1.0437       1.0873       1.1310
Delaware....................................................       0.9557       0.9911       0.9823       0.9734

[[Page 4808]]

 
Florida.....................................................       0.8870       0.9774       0.9548       0.9322
Georgia.....................................................       0.8595       0.9719       0.9438       0.9157
Hawaii......................................................       0.9958       0.9992       0.9983       0.9975
Idaho.......................................................       0.8974       0.9795       0.9590       0.9384
Illinois....................................................       0.8254       0.9651       0.9302       0.8952
Indiana.....................................................       0.8824       0.9765       0.9530       0.9294
Iowa........................................................       0.8416       0.9683       0.9366       0.9050
Kansas......................................................       0.8034       0.9607       0.9214       0.8820
Kentucky....................................................       0.7973       0.9595       0.9189       0.8784
Louisiana...................................................       0.7458       0.9492       0.8983       0.8475
Maine.......................................................       0.8812       0.9762       0.9525       0.9287
Maryland....................................................       0.9125       0.9825       0.9650       0.9475
Massachusetts...............................................       1.0432       1.0086       1.0173       1.0259
Michigan....................................................       0.8884       0.9777       0.9554       0.9330
Minnesota...................................................       0.9330       0.9866       0.9732       0.9598
Mississippi.................................................       0.7778       0.9556       0.9111       0.8667
Missouri....................................................       0.7892       0.9578       0.9157       0.8735
Montana.....................................................       0.8800       0.9760       0.9520       0.9280
Nebraska....................................................       0.8822       0.9764       0.9529       0.9293
Nevada......................................................       0.9806       0.9961       0.9922       0.9884
New Hampshire...............................................       1.0030       1.0006       1.0012       1.0018
New Jersey \5\..............................................  ...........  ...........  ...........  ...........
New Mexico..................................................       0.8270       0.9654       0.9308       0.8962
New York....................................................       0.8526       0.9705       0.9410       0.9116
North Carolina..............................................       0.8458       0.9692       0.9383       0.9075
North Dakota................................................       0.7778       0.9556       0.9111       0.8667
Ohio........................................................       0.8820       0.9764       0.9528       0.9292
Oklahoma....................................................       0.7537       0.9507       0.9015       0.8522
Oregon......................................................       0.9994       0.9999       0.9998       0.9996
Pennsylvania................................................       0.8378       0.9676       0.9351       0.9027
Puerto Rico.................................................       0.4018       0.8804       0.7607       0.6411
Rhode Island \5\............................................  ...........  ...........  ...........  ...........
South Carolina..............................................       0.8498       0.9700       0.9399       0.9099
South Dakota................................................       0.8195       0.9639       0.9278       0.8917
Tennessee...................................................       0.7886       0.9577       0.9154       0.8732
Texas.......................................................       0.7780       0.9556       0.9112       0.8668
Utah........................................................       0.8974       0.9795       0.9590       0.9384
Vermont.....................................................       0.9307       0.9861       0.9723       0.9584
Virginia....................................................       0.8498       0.9700       0.9399       0.9099
Washington..................................................       1.0388       1.0078       1.0155       1.0233
West Virginia...............................................       0.8018       0.9604       0.9207       0.8811
Wisconsin...................................................       0.9304       0.9861       0.9722       0.9582
Wyoming.....................................................       0.9110       0.9822       0.9644       0.9466
----------------------------------------------------------------------------------------------------------------
\1\ Wage index calculated using the same wage data used to compute the wage index used by acute care hospitals
  under the IPPS for Federal FY 2004 (that is, fiscal year 2000 audited acute care hospital inpatient wage data)
  without regard to reclassification under section 1886(d)(8) or section 1886(d)(10) of the Act.
\2\ One-fifth of the proposed full wage index value, applicable for a LTCH's cost reporting period beginning on
  or after October 1, 2002 through September 30, 2003 (Federal FY 2203). That is, for a LTCH's cost reporting
  period that began during Federal FY 2003 and located in rural Illinois, the proposed \1/5\th wage index value
  is computed as (0.8254 + 4)/5 = 0.9651. For further details on the 5-year phase-in of the wage index, see
  section IV.C.1. of this proposed rule.
\3\ Two-fifths of the proposed full wage index value, applicable for a LTCH's cost reporting period beginning on
  or after October 1, 2003 through September 30, 2004 (Federal FY 2004). That is, for a LTCH's cost reporting
  period that begins during Federal FY 2004 and located in rural Illinois, the proposed \2/5\th wage index value
  is computed as ((2*0.8254) + 3))/5 = 0.9302. For further details on the 5-year phase-in of the wage index, see
  section IV.C.1. of this proposed rule.
\4\ Three-fifths of the proposed full wage index value, applicable for a LTCH's cost reporting period beginning
  on or after October 1, 2004 through September 30, 2005 (Federal FY 2005). That is, for a LTCH's cost reporting
  period that begins during Federal FY 2004 and located in rural Illinois, the proposed \3/5\ths wage index
  value is computed as ((3*0.8254) + 2))/5 = 0.8952. For further details on the 5-year phase-in of the wage
  index, see section IV.C.1. of this proposed rule.
\5\ All counties within the State are classified as urban.


 Table 3.--Proposed Federal FY 2004 LTC-DRG Relative Weights, Geometric Mean Length of Stay, and Short-Stays of
   Five-Sixths Average Length of Stay for Discharges Occurring From October 1, 2003 Through September 30, 2004
----------------------------------------------------------------------------------------------------------------
                                                                                         Geometric     5/6th of
                                                                             Relative     average    the average
                 LTC-DRG                            Description               weight     length of    length of
                                                                                            stay         stay
----------------------------------------------------------------------------------------------------------------
1.......................................  CRANIOTOMY AGE 17 W        2.0841         40.0         33.3
                                           CC \5\.

[[Page 4809]]

 
2.......................................  CRANIOTOMY AGE  17 W/      2.0841         40.0         33.3
                                           O CC \8\.
3.......................................  CRANIOTOMY AGE 0-17 \8\........       2.0841         40.0         33.3
6.......................................  CARPAL TUNNEL RELEASE \8\......       0.4964         18.5         15.4
7.......................................  PERIPH & CRANIAL NERVE & OTHER        1.5754         41.0         34.1
                                           NERV SYST PROC W CC \7\.
8.......................................  PERIPH & CRANIAL NERVE & OTHER        1.5754         41.0         34.1
                                           NERV SYST PROC W/O CC \7\.
9.......................................  SPINAL DISORDERS & INJURIES....       1.5025         32.9         27.4
10......................................  NERVOUS SYSTEM NEOPLASMS W CC..       0.7549         23.4         19.5
11......................................  NERVOUS SYSTEM NEOPLASMS W/O CC       0.7281         22.0         18.3
12......................................  DEGENERATIVE NERVOUS SYSTEM           0.7485         25.8         21.5
                                           DISORDERS.
13......................................  MULTIPLE SCLEROSIS & CEREBELLAR       0.7530         25.9         21.5
                                           ATAXIA.
14......................................  INTERCRANIAL HEMORRHAGE &             0.9196         27.4         22.8
                                           STROKE W INFARCT.
15......................................  NONSPECIFIC CVA & PRECEREBRAL         0.8714         28.8         24.0
                                           OCCULUSION W/O INFARCT.
16......................................  NONSPECIFIC CEREBROVASCULAR           0.9125         23.9         19.9
                                           DISORDERS W CC.
17......................................  NONSPECIFIC CEREBROVASCULAR           0.5262         20.4         17.0
                                           DISORDERS W/O CC.
18......................................  CRANIAL & PERIPHERAL NERVE            0.8225         23.9         19.9
                                           DISORDERS W CC.
19......................................  CRANIAL & PERIPHERAL NERVE            0.6236         22.7         18.9
                                           DISORDERS W/O CC.
20......................................  NERVOUS SYSTEM INFECTION EXCEPT       1.0097         24.8         20.6
                                           VIRAL MENINGITIS.
21......................................  VIRAL MENINGITIS \2\...........       0.7372         23.5         19.5
22......................................  HYPERTENSIVE ENCEPHALOPATHY \2\       0.7372         23.5         19.5
23......................................  NONTRAUMATIC STUPOR & COMA.....       0.9033         28.8         24.0
24......................................  SEIZURE & HEADACHE AGE 17 W CC.
25......................................  SEIZURE & HEADACHE AGE 17 W/O CC.
26......................................  SEIZURE & HEADACHE AGE 0-17 \8\       0.7372         23.5         19.5
27......................................  TRAUMATIC STUPOR & COMA, COMA         1.1929         30.4         25.3
                                           1 HR.
28......................................  TRAUMATIC STUPOR & COMA, COMA         1.0211         29.0         24.1
                                           <1 HR AGE 17 W CC.
29......................................  TRAUMATIC STUPOR & COMA, COMA         0.9056         26.6         22.1
                                           <1 HR AGE 17 W/O CC.
30......................................  TRAUMATIC STUPOR & COMA, COMA         0.9562         26.1         21.7
                                           <1 HR AGE 0-17 \8\.
31......................................  CONCUSSION AGE 17 W        0.9562         26.1         21.7
                                           CC \7\.
32......................................  CONCUSSION AGE 17 W/       0.9562         26.1         21.7
                                           O CC \7\.
33......................................  CONCUSSION AGE 0-17 \8\........       0.7372         23.5         19.5
34......................................  OTHER DISORDERS OF NERVOUS            0.9140         27.8         23.1
                                           SYSTEM W CC.
35......................................  OTHER DISORDERS OF NERVOUS            0.6651         24.5         20.4
                                           SYSTEM W/O CC.
36......................................  RETINAL PROCEDURES \8\.........       0.4964         18.5         15.4
37......................................  ORBITAL PROCEDURES \8\.........       0.4964         18.5         15.4
38......................................  PRIMARY IRIS PROCEDURES \8\....       0.4964         18.5         15.4
39......................................  LENS PROCEDURES WITH OR WITHOUT       0.4964         18.5         15.4
                                           VITRECTOMY \8\.
40......................................  EXTRAOCULAR PROCEDURES EXCEPT         2.0841         40.0         33.3
                                           ORBIT AGE 17 \5\.
41......................................  EXTRAOCULAR PROCEDURES EXCEPT         0.4964         18.5         15.4
                                           ORBIT AGE 0-17 \8\.
42......................................  INTRAOCULAR PROCEDURES EXCEPT         0.4964         18.5         15.4
                                           RETINA, IRIS & LENS \8\.
43......................................  HYPHEMA \8\....................       0.4964         18.5         15.4
44......................................  ACUTE MAJOR EYE INFECTIONS \1\.       0.4964         18.5         15.4
45......................................  NEUROLOGICAL EYE DISORDERS \8\.       0.4964         18.5         15.4
46......................................  OTHER DISORDERS OF THE EYE AGE        0.4964         18.5         15.4
                                           17 W CC \1\.
47......................................  OTHER DISORDERS OF THE EYE AGE        0.4964         18.5         15.4
                                           17 W/O CC \1\.
48......................................  OTHER DISORDERS OF THE EYE AGE        0.4964         18.5         15.4
                                           0-17 \8\.
49......................................  MAJOR HEAD & NECK PROCEDURES          1.3569         32.5         27.0
                                           \8\.
50......................................  SIALOADENECTOMY \8\............       0.9562         26.1         21.7
51......................................  SALIVARY GLAND PROCEDURES             0.9562         26.1         21.7
                                           EXCEPT SIALOADENECTOMY \8\.
52......................................  CLEFT LIP & PALATE REPAIR \8\..       0.9562         26.1         21.7
53......................................  SINUS & MASTOID PROCEDURES AGE        0.7372         23.5         19.5
                                           17 \2\.
54......................................  SINUS & MASTOID PROCEDURES AGE        0.9562         26.1         21.7
                                           0-17 \8\.
55......................................  MISCELLANEOUS EAR, NOSE, MOUTH        0.9562         26.1         21.7
                                           & THROAT PROCEDURES \8\.
56......................................  RHINOPLASTY \8\................       0.7372         23.5         19.5
57......................................  T&A PROC, EXCEPT TONSILLECTOMY        0.9562         26.1         21.7
                                           &/OR ADENOIDECTOMY ONLY, AGE
                                           17 \8\.
58......................................  T&A PROC, EXCEPT TONSILLECTOMY        0.9562         26.1         21.7
                                           &/OR ADENOIDECTOMY ONLY, AGE 0-
                                           17 \8\.
59......................................  TONSILLECTOMY &/OR                    0.9562         26.1         21.7
                                           ADENOIDECTOMY ONLY, AGE 17 \8\.
60......................................  TONSILLECTOMY &/OR                    0.9562         26.1         21.7
                                           ADENOIDECTOMY ONLY, AGE 0-17
                                           \8\.
61......................................  MYRINGOTOMY W TUBE INSERTION          0.7372         23.5         19.5
                                           AGE 17 \2\.
62......................................  MYRINGOTOMY W TUBE INSERTION          0.9562         26.1         21.7
                                           AGE 0-17 \8\.
63......................................  OTHER EAR, NOSE, MOUTH & THROAT       0.9562         26.1         21.7
                                           O.R. PROCEDURES \3\.
64......................................  EAR, NOSE, MOUTH & THROAT             1.2540         27.5         22.9
                                           MALIGNANCY.
65......................................  DYSEQUILIBRIUM \1\.............       0.4964         18.5         15.4
66......................................  EPISTAXIS \1\..................       0.4964         18.5         15.4
67......................................  EPIGLOTTITIS \8\...............       0.9562         26.1         21.7
68......................................  OTITIS MEDIA & URI AGE 17 W CC.

[[Page 4810]]

 
69......................................  OTITIS MEDIA & URI AGE 17 W/O CC \1\.
70......................................  OTITIS MEDIA & URI AGE 0-17 \8\       0.4964         18.5         15.4
71......................................  LARYNGOTRACHEITIS \8\..........       0.4964         18.5         15.4
72......................................  NASAL TRAUMA & DEFORMITY \2\...       0.7372         23.5         19.5
73......................................  OTHER EAR, NOSE, MOUTH & THROAT       0.7215         20.3         16.9
                                           DIAGNOSES AGE 17.
74......................................  OTHER EAR, NOSE, MOUTH & THROAT       0.4964         18.5         15.4
                                           DIAGNOSES AGE 0-17 \8\.
75......................................  MAJOR CHEST PROCEDURES \5\.....       2.0841         40.0         33.3
76......................................  OTHER RESP SYSTEM O.R.                2.4382         43.9         36.5
                                           PROCEDURES W CC.
77......................................  OTHER RESP SYSTEM O.R.                2.0841         40.0         33.3
                                           PROCEDURES W/O CC \5\.
78......................................  PULMONARY EMBOLISM.............       0.8896         24.2         20.1
79......................................  RESPIRATORY INFECTIONS &              0.8985         22.6         18.8
                                           INFLAMMATIONS AGE 17 W CC.
80......................................  RESPIRATORY INFECTIONS &              0.7645         22.3         18.5
                                           INFLAMMATIONS AGE 17 W/O CC.
81......................................  RESPIRATORY INFECTIONS &              0.4964         18.5         15.4
                                           INFLAMMATIONS AGE 0-17 \8\.
82......................................  RESPIRATORY NEOPLASMS..........       0.7480         20.3         16.9
83......................................  MAJOR CHEST TRAUMA W CC \3\....       0.9562         26.1         21.7
84......................................  MAJOR CHEST TRAUMA W/O CC \2\..       0.7372         23.5         19.5
85......................................  PLEURAL EFFUSION W CC..........       0.8514         23.5         19.5
86......................................  PLEURAL EFFUSION W/O CC........       0.6540         22.4         18.6
87......................................  PULMONARY EDEMA & RESPIRATORY         1.6513         31.9         26.5
                                           FAILURE.
88......................................  CHRONIC OBSTRUCTIVE PULMONARY         0.7653         20.7         17.2
                                           DISEASE.
89......................................  SIMPLE PNEUMONIA & PLEURISY AGE       0.8428         23.1         19.2
                                           17 W CC.
90......................................  SIMPLE PNEUMONIA & PLEURISY AGE       0.7318         21.7         18.0
                                           17 W/O CC.
91......................................  SIMPLE PNEUMONIA & PLEURISY AGE       0.7372         23.5         19.5
                                           0-17 \8\.
92......................................  INTERSTITIAL LUNG DISEASE W CC.       0.7702         20.4         17.0
93......................................  INTERSTITIAL LUNG DISEASE W/O         0.4964         18.5         15.4
                                           CC \1\.
94......................................  PNEUMOTHORAX W CC..............       0.6571         18.9         15.7
95......................................  PNEUMOTHORAX W/O CC \1\........       0.4964         18.5         15.4
96......................................  BRONCHITIS & ASTHMA AGE 17 W CC.
97......................................  BRONCHITIS & ASTHMA AGE 17 W/O CC.
98......................................  BRONCHITIS & ASTHMA AGE 0-17          0.4964         18.5         15.4
                                           \8\.
99......................................  RESPIRATORY SIGNS & SYMPTOMS W        1.0622         26.6         22.1
                                           CC.
100.....................................  RESPIRATORY SIGNS & SYMPTOMS W/       1.0579         26.1         21.7
                                           O CC.
101.....................................  OTHER RESPIRATORY SYSTEM              0.9009         22.6         18.8
                                           DIAGNOSES W CC.
102.....................................  OTHER RESPIRATORY SYSTEM              0.7011         21.0         17.5
                                           DIAGNOSES W/O CC.
103.....................................  HEART TRANSPLANT \6\...........       0.0000          0.0          0.0
104.....................................  CARDIAC VALVE & OTHER MAJOR           2.0841         40.0         33.3
                                           CARDIOTHORACIC PROC W CARDIAC
                                           CATH \8\.
105.....................................  CARDIAC VALVE & OTHER MAJOR           2.0841         40.0         33.3
                                           CARDIOTHORACIC PROC W/O
                                           CARDIAC CATH \8\.
106.....................................  CORONARY BYPASS W PTCA \8\.....       2.0841         40.0         33.3
107.....................................  CORONARY BYPASS W CARDIAC CATH        2.0841         40.0         33.3
                                           \8\.
108.....................................  OTHER CARDIOTHORACIC PROCEDURES       2.0841         40.0         33.3
                                           \5\.
109.....................................  CORONARY BYPASS W/O PTCA OR           2.0841         40.0         33.3
                                           CARDIAC CATH \8\.
110.....................................  MAJOR CARDIOVASCULAR PROCEDURES       2.0841         40.0         33.3
                                           W CC \5\.
111.....................................  MAJOR CARDIOVASCULAR PROCEDURES       2.0841         40.0         33.3
                                           W/O CC \8\.
113.....................................  AMPUTATION FOR CIRC SYSTEM            1.5629         38.7         32.2
                                           DISORDERS EXCEPT UPPER LIMB &
                                           TOE.
114.....................................  UPPER LIMB & TOE AMPUTATION FOR       1.3604         38.3         31.9
                                           CIRC SYSTEM DISORDERS.
115.....................................  PRM CARD PACEM IMPL W AMI,HRT         2.0841         40.0         33.3
                                           FAIL OR SHK,OR AICD LEAD OR
                                           GNRTR P \5\.
116.....................................  OTH PERM CARD PACEMAK IMPL OR         2.0841         40.0         33.3
                                           PTCA W CORONARY ARTERY STENT
                                           IMPLNT \5\.
117.....................................  CARDIAC PACEMAKER REVISION            0.9562         26.1         21.7
                                           EXCEPT DEVICE REPLACEMENT \3\.
118.....................................  CARDIAC PACEMAKER DEVICE              2.0841         40.0         33.3
                                           REPLACEMENT \5\.
119.....................................  VEIN LIGATION & STRIPPING \4\..       1.3569         32.5         27.0
120.....................................  OTHER CIRCULATORY SYSTEM O.R.         1.2435         34.4         28.6
                                           PROCEDURES.
121.....................................  CIRCULATORY DISORDERS W AMI &         0.7467         22.1         18.4
                                           MAJOR COMP, DISCHARGED ALIVE.
122.....................................  CIRCULATORY DISORDERS W AMI W/O       0.6440         18.8         15.6
                                           MAJOR COMP, DISCHARGED ALIVE.
123.....................................  CIRCULATORY DISORDERS W AMI,          0.8527         18.8         15.6
                                           EXPIRED.
124.....................................  CIRCULATORY DISORDERS EXCEPT          1.3569         32.5         27.0
                                           AMI, W CARD CATH & COMPLEX
                                           DIAG \4\.
125.....................................  CIRCULATORY DISORDERS EXCEPT          1.3569         32.5         27.0
                                           AMI, W CARD CATH W/O COMPLEX
                                           DIAG \4\.
126.....................................  ACUTE & SUBACUTE ENDOCARDITIS..       0.8706         25.6         21.3
127.....................................  HEART FAILURE & SHOCK..........       0.7719         22.1         18.4
128.....................................  DEEP VEIN THROMBOPHLEBITIS \2\.       0.7372         23.5         19.5
129.....................................  CARDIAC ARREST, UNEXPLAINED \3\       0.9562         26.1         21.7
130.....................................  PERIPHERAL VASCULAR DISORDERS W       0.7712         24.4         20.3
                                           CC.
131.....................................  PERIPHERAL VASCULAR DISORDERS W/      0.6398         23.1         19.2
                                           O CC.
132.....................................  ATHEROSCLEROSIS W CC...........       0.8092         22.4         18.6

[[Page 4811]]

 
133.....................................  ATHEROSCLEROSIS W/O CC.........       0.7044         21.9         18.2
134.....................................  HYPERTENSION...................       0.9154         27.9         23.2
135.....................................  CARDIAC CONGENITAL & VALVULAR         0.9039         23.1         19.2
                                           DISORDERS AGE 17 W
                                           CC.
136.....................................  CARDIAC CONGENITAL & VALVULAR         0.7186         22.4         18.6
                                           DISORDERS AGE 17 W/
                                           O CC.
137.....................................  CARDIAC CONGENITAL & VALVULAR         0.7372         23.5         19.5
                                           DISORDERS AGE 0-17 \8\.
138.....................................  CARDIAC ARRHYTHMIA & CONDUCTION       0.7430         22.7         18.9
                                           DISORDERS W CC.
139.....................................  CARDIAC ARRHYTHMIA & CONDUCTION       0.6032         20.3         16.9
                                           DISORDERS W/O CC.
140.....................................  ANGINA PECTORIS................       0.6094         19.3         16.0
141.....................................  SYNCOPE & COLLAPSE W CC........       0.6453         22.9         19.0
142.....................................  SYNCOPE & COLLAPSE W/O CC......       0.5041         20.3         16.9
143.....................................  CHEST PAIN.....................       0.7314         21.8         18.1
144.....................................  OTHER CIRCULATORY SYSTEM              0.7921         22.2         18.5
                                           DIAGNOSES W CC.
145.....................................  OTHER CIRCULATORY SYSTEM              0.6983         20.7         17.2
                                           DIAGNOSES W/O CC.
146.....................................  RECTAL RESECTION W CC \8\......       2.0841         40.0         33.3
147.....................................  RECTAL RESECTION W/O CC \8\....       2.0841         40.0         33.3
148.....................................  MAJOR SMALL & LARGE BOWEL             2.0841         40.0         33.3
                                           PROCEDURES W CC \5\.
149.....................................  MAJOR SMALL & LARGE BOWEL             0.4964         18.5         15.4
                                           PROCEDURES W/O CC \1\.
150.....................................  PERITONEAL ADHESIOLYSIS W CC          1.3569         32.5         27.0
                                           \4\.
151.....................................  PERITONEAL ADHESIOLYSIS W/O CC        1.3569         32.5         27.0
                                           \8\.
152.....................................  MINOR SMALL & LARGE BOWEL             1.3569         32.5         27.0
                                           PROCEDURES W CC \4\.
153.....................................  MINOR SMALL & LARGE BOWEL             1.3569         32.5         27.0
                                           PROCEDURES W/O CC \8\.
154.....................................  STOMACH, ESOPHAGEAL & DUODENAL        2.0841         40.0         33.3
                                           PROCEDURES AGE 17 W
                                           CC \5\.
155.....................................  STOMACH, ESOPHAGEAL & DUODENAL        1.3569         32.5         27.0
                                           PROCEDURES AGE 17 W/
                                           O CC \8\.
156.....................................  STOMACH, ESOPHAGEAL & DUODENAL        1.3569         32.5         27.0
                                           PROCEDURES AGE 0-17 \8\.
157.....................................  ANAL & STOMAL PROCEDURES W CC         1.3569         32.5         27.0
                                           \4\.
158.....................................  ANAL & STOMAL PROCEDURES W/O CC       0.9562         26.1         21.7
                                           \3\.
159.....................................  HERNIA PROCEDURES EXCEPT              1.3569         32.5         27.0
                                           INGUINAL & FEMORAL AGE 17 W CC \8\.
160.....................................  HERNIA PROCEDURES EXCEPT              1.3569         32.5         27.0
                                           INGUINAL & FEMORAL AGE 17 W/O CC \8\.
161.....................................  INGUINAL & FEMORAL HERNIA             1.3569         32.5         27.0
                                           PROCEDURES AGE 17 W
                                           CC \4\.
162.....................................  INGUINAL & FEMORAL HERNIA             0.4964         18.5         15.4
                                           PROCEDURES AGE 17 W/
                                           O CC \8\.
163.....................................  HERNIA PROCEDURES AGE 0-17 \8\.       0.4964         18.5         15.4
164.....................................  APPENDECTOMY W COMPLICATED            2.0841         40.0         33.3
                                           PRINCIPAL DIAG WCC \8\.
165.....................................  APPENDECTOMY W COMPLICATED            0.4964         18.5         15.4
                                           PRINCIPAL DIAG W/O CC \8\.
166.....................................  APPENDECTOMY W/O COMPLICATED          2.0841         40.0         33.3
                                           PRINCIPAL DIAG W CC \8\.
167.....................................  APPENDECTOMY W/O COMPLICATED          0.4964         18.5         15.4
                                           PRINCIPAL DIAG W/O CC \8\.
168.....................................  MOUTH PROCEDURES W CC \5\......       2.0841         40.0         33.3
169.....................................  MOUTH PROCEDURES W/O CC \8\....       0.7372         23.5         19.5
170.....................................  OTHER DIGESTIVE SYSTEM O.R.           1.7006         40.3         33.5
                                           PROCEDURES W CC.
171.....................................  OTHER DIGESTIVE SYSTEM O.R.           1.3569         32.5         27.0
                                           PROCEDURES W/O CC \4\.
172.....................................  DIGESTIVE MALIGNANCY W CC......       0.8702         22.5         18.7
173.....................................  DIGESTIVE MALIGNANCY W/O CC....       0.7092         20.2         16.8
174.....................................  G.I. HEMORRHAGE W CC...........       0.7874         23.7         19.7
175.....................................  G.I. HEMORRHAGE W/O CC.........       0.6345         21.1         17.5
176.....................................  COMPLICATED PEPTIC ULCER.......       0.7728         21.2         17.6
177.....................................  UNCOMPLICATED PEPTIC ULCER W CC       0.7372         23.5         19.5
                                           \2\.
178.....................................  UNCOMPLICATED PEPTIC ULCER W/O        0.4964         18.5         15.4
                                           CC \1\.
179.....................................  INFLAMMATORY BOWEL DISEASE.....       1.0023         25.2         21.0
180.....................................  G.I. OBSTRUCTION W CC \7\......       0.8222         22.9         19.0
181.....................................  G.I. OBSTRUCTION W/O CC \7\....       0.8222         22.9         19.0
182.....................................  ESOPHAGITIS, GASTROENT & MISC         0.8449         23.5         19.5
                                           DIGEST DISORDERS AGE 17 W CC.
183.....................................  ESOPHAGITIS, GASTROENT & MISC         0.6362         20.3         16.9
                                           DIGEST DISORDERS AGE 17 W/O CC.
184.....................................  ESOPHAGITIS, GASTROENT & MISC         0.7372         23.5         19.5
                                           DIGEST DISORDERS AGE 0-17 \8\.
185.....................................  DENTAL & ORAL DIS EXCEPT              0.7372         23.5         19.5
                                           EXTRACTIONS & RESTORATIONS,
                                           AGE 17 \2\.
186.....................................  DENTAL & ORAL DIS EXCEPT              0.7372         23.5         19.5
                                           EXTRACTIONS & RESTORATIONS,
                                           AGE 0-17 \8\.
187.....................................  DENTAL EXTRACTIONS &                  0.7372         23.5         19.5
                                           RESTORATIONS \8\.
188.....................................  OTHER DIGESTIVE SYSTEM                1.0308         25.3         21.0
                                           DIAGNOSES AGE 17 W
                                           CC.
189.....................................  OTHER DIGESTIVE SYSTEM                0.7826         21.8         18.1
                                           DIAGNOSES AGE 17 W/
                                           O CC.
190.....................................  OTHER DIGESTIVE SYSTEM                0.7372         23.5         19.5
                                           DIAGNOSES AGE 0-17 \8\.
191.....................................  PANCREAS, LIVER & SHUNT               1.3569         32.5         27.0
                                           PROCEDURES W CC \4\.
192.....................................  PANCREAS, LIVER & SHUNT               0.4964         18.5         15.4
                                           PROCEDURES W/O CC \1\.
193.....................................  BILIARY TRACT PROC EXCEPT ONLY        0.7372         23.5         19.5
                                           CHOLECYST W OR W/O C.D.E. W CC
                                           \2\.
194.....................................  BILIARY TRACT PROC EXCEPT ONLY        0.7372         23.5         19.5
                                           CHOLECYST W OR W/O C.D.E. W/O
                                           CC \3\.
195.....................................  CHOLECYSTECTOMY W C.D.E. W CC         1.3569         32.5         27.0
                                           \4\.
196.....................................  CHOLECYSTECTOMY W C.D.E. W/O CC       0.9562         26.1         21.7
                                           \8\.
197.....................................  CHOLECYSTECTOMY EXCEPT BY             0.9562         26.1         21.7
                                           LAPAROSCOPE W/O C.D.E. W CC
                                           \3\.
198.....................................  CHOLECYSTECTOMY EXCEPT BY             0.9562         26.1         21.7
                                           LAPAROSCOPE W/O C.D.E. W/O CC
                                           \8\.
199.....................................  HEPATOBILIARY DIAGNOSTIC              0.7372         23.5         19.5
                                           PROCEDURE FOR MALIGNANCY \8\.

[[Page 4812]]

 
200.....................................  HEPATOBILIARY DIAGNOSTIC              0.7372         23.5         19.5
                                           PROCEDURE FOR NON-MALIGNANCY
                                           \2\.
201.....................................  OTHER HEPATOBILIARY OR PANCREAS       2.0841         40.0         33.3
                                           O.R. PROCEDURES \5\.
202.....................................  CIRRHOSIS & ALCOHOLIC HEPATITIS       0.7254         22.3         18.5
203.....................................  MALIGNANCY OF HEPATOBILIARY           0.6758         18.9         15.7
                                           SYSTEM OR PANCREAS.
204.....................................  DISORDERS OF PANCREAS EXCEPT          0.9986         23.4         19.5
                                           MALIGNANCY.
205.....................................  DISORDERS OF LIVER EXCEPT             0.7029         22.1         18.4
                                           MALIG,CIRR,ALC HEPA W CC \7\.
206.....................................  DISORDERS OF LIVER EXCEPT             0.7029         22.1         18.4
                                           MALIG,CIRR,ALC HEPA W/O CC \7\.
207.....................................  DISORDERS OF THE BILIARY TRACT        0.6671         20.5         17.0
                                           W CC \7\.
208.....................................  DISORDERS OF THE BILIARY TRACT        0.6671         20.5         17.0
                                           W/O CC \7\.
209.....................................  MAJOR JOINT & LIMB REATTACHMENT       1.3569         32.5         27.0
                                           PROCEDURES OF LOWER EXTREMITY
                                           \4\.
210.....................................  HIP & FEMUR PROCEDURES EXCEPT         1.3569         32.5         27.0
                                           MAJOR JOINT AGE 17
                                           W CC \4\.
211.....................................  HIP & FEMUR PROCEDURES EXCEPT         0.7372         23.5         19.5
                                           MAJOR JOINT AGE 17
                                           W/O CC \2\.
212.....................................  HIP & FEMUR PROCEDURES EXCEPT         0.7372         23.5         19.5
                                           MAJOR JOINT AGE 0-17 \8\.
213.....................................  AMPUTATION FOR MUSCULOSKELETAL        1.3851         33.8         28.1
                                           SYSTEM & CONN TISSUE DISORDERS.
216.....................................  BIOPSIES OF MUSCULOSKELETAL           1.3569         32.5         27.0
                                           SYSTEM & CONNECTIVE TISSUE \4\.
217.....................................  WND DEBRID & SKN GRFT EXCEPT          1.4038         39.3         32.7
                                           HAND,FOR MUSCSKELET & CONN
                                           TISS DIS.
218.....................................  LOWER EXTREM & HUMER PROC             0.9562         26.1         21.7
                                           EXCEPT HIP,FOOT,FEMUR AGE 17 W CC \3\.
219.....................................  LOWER EXTREM & HUMER PROC             0.9562         26.1         21.7
                                           EXCEPT HIP,FOOT,FEMUR AGE 17 W/O CC \8\.
220.....................................  LOWER EXTREM & HUMER PROC             0.9562         26.1         21.7
                                           EXCEPT HIP,FOOT,FEMUR AGE 0-17
                                           \8\.
223.....................................  MAJOR SHOULDER/ELBOW PROC, OR         0.9562         26.1         21.7
                                           OTHER UPPER EXTREMITY PROC W
                                           CC \3\.
224.....................................  SHOULDER,ELBOW OR FOREARM             0.9562         26.1         21.7
                                           PROC,EXC MAJOR JOINT PROC, W/O
                                           CC \8\.
225.....................................  FOOT PROCEDURES \3\............       0.9562         26.1         21.7
226.....................................  SOFT TISSUE PROCEDURES W CC \7\       1.3569         32.5         27.0
227.....................................  SOFT TISSUE PROCEDURES W/O CC         1.3569         32.5         27.0
                                           \7\.
228.....................................  MAJOR THUMB OR JOINT PROC,OR          1.3569         32.5         27.0
                                           OTH HAND OR WRIST PROC W CC
                                           \4\.
229.....................................  HAND OR WRIST PROC, EXCEPT            0.9562         26.1         21.7
                                           MAJOR JOINT PROC, W/O CC \8\.
230.....................................  LOCAL EXCISION & REMOVAL OF INT       1.3569         32.5         27.0
                                           FIX DEVICES OF HIP & FEMUR \4\.
232.....................................  ARTHROSCOPY \2\................       0.7372         23.5         19.5
233.....................................  OTHER MUSCULOSKELET SYS & CONN        0.9562         26.1         21.7
                                           TISS O.R. PROC W CC \3\.
234.....................................  OTHER MUSCULOSKELET SYS & CONN        0.9562         26.1         21.7
                                           TISS O.R. PROC W/O CC \3\.
235.....................................  FRACTURES OF FEMUR.............       0.8396         29.6         24.6
236.....................................  FRACTURES OF HIP & PELVIS......       0.7368         27.1         22.5
237.....................................  SPRAINS, STRAINS, &                   0.7372         23.5         19.5
                                           DISLOCATIONS OF HIP, PELVIS &
                                           THIGH \2\.
238.....................................  OSTEOMYELITIS..................       0.8432         27.9         23.2
239.....................................  PATHOLOGICAL FRACTURES &              0.6610         22.0         18.3
                                           MUSCULOSKELETAL & CONN TISS
                                           MALIGNANCY.
240.....................................  CONNECTIVE TISSUE DISORDERS W         0.6685         21.2         17.6
                                           CC.
241.....................................  CONNECTIVE TISSUE DISORDERS W/O       0.4538         18.7         15.5
                                           CC.
242.....................................  SEPTIC ARTHRITIS...............       0.7721         26.4         22.0
243.....................................  MEDICAL BACK PROBLEMS..........       0.6616         23.2         19.3
244.....................................  BONE DISEASES & SPECIFIC              0.5563         20.0         16.6
                                           ARTHROPATHIES W CC.
245.....................................  BONE DISEASES & SPECIFIC              0.4721         18.5         15.4
                                           ARTHROPATHIES W/O CC.
246.....................................  NON-SPECIFIC ARTHROPATHIES.....       0.5128         22.2         18.5
247.....................................  SIGNS & SYMPTOMS OF                   0.5536         20.2         16.8
                                           MUSCULOSKELETAL SYSTEM & CONN
                                           TISSUE.
248.....................................  TENDONITIS, MYOSITIS & BURSITIS       0.7274         24.5         20.4
249.....................................  AFTERCARE, MUSCULOSKELETAL            0.7829         27.0         22.5
                                           SYSTEM & CONNECTIVE TISSUE.
250.....................................  FX, SPRN, STRN & DISL OF              0.8206         29.9         24.9
                                           FOREARM, HAND, FOOT AGE 17 W CC.
251.....................................  FX, SPRN, STRN & DISL OF              0.6009         27.3         22.7
                                           FOREARM, HAND, FOOT AGE 17 W/O CC.
252.....................................  FX, SPRN, STRN & DISL OF              0.9562         26.1         21.7
                                           FOREARM, HAND, FOOT AGE 0-17
                                           \8\.
253.....................................  FX, SPRN, STRN & DISL OF UPARM,       0.8176         27.6         23.0
                                           LOWLEG EX FOOT AGE 17 W CC.
254.....................................  FX, SPRN, STRN & DISL OF UPARM,       0.6691         25.1         20.9
                                           LOWLEG EX FOOT AGE 17 W/O CC.
255.....................................  FX, SPRN, STRN & DISL OF UPARM,       0.9562         26.1         21.7
                                           LOWLEG EX FOOT AGE 0-17 \8\.
256.....................................  OTHER MUSCULOSKELETAL SYSTEM &        0.8294         25.9         21.5
                                           CONNECTIVE TISSUE DIAGNOSES.
257.....................................  TOTAL MASTECTOMY FOR MALIGNANCY       0.9562         26.1         21.7
                                           W CC \3\.
258.....................................  TOTAL MASTECTOMY FOR MALIGNANCY       0.9562         26.1         21.7
                                           W/O CC \8\.
259.....................................  SUBTOTAL MASTECTOMY FOR               0.9562         26.1         21.7
                                           MALIGNANCY W CC \8\.
260.....................................  SUBTOTAL MASTECTOMY FOR               0.9562         26.1         21.7
                                           MALIGNANCY W/O CC \8\.
261.....................................  BREAST PROC FOR NON-MALIGNANCY        2.0841         40.0         33.3
                                           EXCEPT BIOPSY & LOCAL EXCISION
                                           \5\.
262.....................................  BREAST BIOPSY & LOCAL EXCISION        0.9562         26.1         21.7
                                           FOR NON-MALIGNANCY \3\.
263.....................................  SKIN GRAFT &/OR DEBRID FOR SKN        1.4522         42.4         35.3
                                           ULCER OR CELLULITIS W CC.
264.....................................  SKIN GRAFT &/OR DEBRID FOR SKN        1.2892         44.1         36.7
                                           ULCER OR CELLULITIS W/O CC.
265.....................................  SKIN GRAFT &/OR DEBRID EXCEPT         1.2215         34.8         29.0
                                           FOR SKIN ULCER OR CELLULITIS W
                                           CC \7\.
266.....................................  SKIN GRAFT &/OR DEBRID EXCEPT         1.2215         34.8         29.0
                                           FOR SKIN ULCER OR CELLULITIS W/
                                           O CC \7\.
267.....................................  PERIANAL & PILONIDAL PROCEDURES       0.9562         26.1         21.7
                                           \8\.
268.....................................  SKIN, SUBCUTANEOUS TISSUE &           2.0841         40.0         33.3
                                           BREAST PLASTIC PROCEDURES \5\.
269.....................................  OTHER SKIN, SUBCUT TISS &             1.4466         43.0         35.8
                                           BREAST PROC W CC.

[[Page 4813]]

 
270.....................................  OTHER SKIN, SUBCUT TISS &             0.9916         33.9         28.2
                                           BREAST PROC W/O CC.
271.....................................  SKIN ULCERS....................       0.9620         30.4         25.3
272.....................................  MAJOR SKIN DISORDERS W CC......       0.7121         22.8         19.0
273.....................................  MAJOR SKIN DISORDERS W/O CC \1\       0.4964         18.5         15.4
274.....................................  MALIGNANT BREAST DISORDERS W CC       0.9072         24.9         20.7
275.....................................  MALIGNANT BREAST DISORDERS W/O        0.7372         23.5         19.5
                                           CC \2\.
276.....................................  NON-MALIGNANT BREAST DISORDERS        0.4964         18.5         15.4
                                           \1\.
277.....................................  CELLULITIS AGE 17 W        0.7409         23.6         19.6
                                           CC.
278.....................................  CELLULITIS AGE 17 W/       0.5982         20.7         17.2
                                           O CC.
279.....................................  CELLULITIS AGE 0-17 \8\........       0.9562         26.1         21.7
280.....................................  TRAUMA TO THE SKIN, SUBCUT TISS       0.9724         29.5         24.5
                                           & BREAST AGE 17 W
                                           CC.
281.....................................  TRAUMA TO THE SKIN, SUBCUT TISS       0.7386         26.4         22.0
                                           & BREAST AGE 17 W/O
                                           CC.
282.....................................  TRAUMA TO THE SKIN, SUBCUT TISS       0.7372         23.5         19.5
                                           & BREAST AGE 0-17.
283.....................................  MINOR SKIN DISORDERS W CC \8\..       0.6508         19.3         16.0
284.....................................  MINOR SKIN DISORDERS W/O CC \1\       0.4964         18.5         15.4
285.....................................  AMPUTAT OF LOWER LIMB FOR             1.5176         37.4         31.1
                                           ENDOCRINE, NUTRIT,& METABOL
                                           DISORDERS.
286.....................................  ADRENAL & PITUITARY PROCEDURES        0.7372         23.5         19.5
                                           \8\.
287.....................................  SKIN GRAFTS & WOUND DEBRID FOR        1.3982         39.7         33.0
                                           ENDOC, NUTRIT & METAB
                                           DISORDERS.
288.....................................  O.R. PROCEDURES FOR OBESITY \5\       2.0841         40.0         33.3
289.....................................  PARATHYROID PROCEDURES \8\.....       0.7372         23.5         19.5
290.....................................  THYROID PROCEDURES \8\.........       0.7372         23.5         19.5
291.....................................  THYROGLOSSAL PROCEDURES \8\....       0.7372         23.5         19.5
292.....................................  OTHER ENDOCRINE, NUTRIT & METAB       1.3569         32.5         27.0
                                           O.R. PROC W CC \4\.
293.....................................  OTHER ENDOCRINE, NUTRIT & METAB       0.9562         26.1         21.7
                                           O.R. PROC W/O CC \8\.
294.....................................  DIABETES AGE 35.....       0.8061         25.9         21.5
295.....................................  DIABETES AGE 0-35 \3\..........       0.9562         26.1         21.7
296.....................................  NUTRITIONAL & MISC METABOLIC          0.8207         24.1         20.0
                                           DISORDERS AGE 17 W
                                           CC.
297.....................................  NUTRITIONAL & MISC METABOLIC          0.6524         24.5         20.4
                                           DISORDERS AGE 17 W/
                                           O CC.
298.....................................  NUTRITIONAL & MISC METABOLIC          0.7372         23.5         19.5
                                           DISORDERS AGE 0-17 \8\.
299.....................................  INBORN ERRORS OF METABOLISM \3\       0.9562         26.1         21.7
300.....................................  ENDOCRINE DISORDERS W CC.......       0.7704         22.3         18.5
301.....................................  ENDOCRINE DISORDERS W/O CC \2\.       0.7372         23.5         19.5
302.....................................  KIDNEY TRANSPLANT \6\..........       0.0000          0.0          0.0
303.....................................  KIDNEY,URETER & MAJOR BLADDER         2.0841         40.0         33.3
                                           PROCEDURES FOR NEOPLASM \8\.
304.....................................  KIDNEY,URETER & MAJOR BLADDER         2.0841         40.0         33.3
                                           PROC FOR NON-NEOPL W CC \5\.
305.....................................  KIDNEY,URETER & MAJOR BLADDER         0.4964         18.5         15.4
                                           PROC FOR NON-NEOPL W/O CC \1\.
306.....................................  PROSTATECTOMY W CC \8\.........       1.3569         32.5         27.0
307.....................................  PROSTATECTOMY W/O CC \8\.......       1.3569         32.5         27.0
308.....................................  MINOR BLADDER PROCEDURES W CC         1.3569         32.5         27.0
                                           \4\.
309.....................................  MINOR BLADDER PROCEDURES W/O CC       0.7372         23.5         19.5
                                           \2\.
310.....................................  TRANSURETHRAL PROCEDURES W CC         1.3569         32.5         27.0
                                           \4\.
311.....................................  TRANSURETHRAL PROCEDURES W/O CC       0.4964         18.5         15.4
                                           \1\.
312.....................................  URETHRAL PROCEDURES, AGE 17 W CC \4\.
313.....................................  URETHRAL PROCEDURES, AGE 17 W/O CC \8\.
314.....................................  URETHRAL PROCEDURES, AGE 0-17         0.4964         18.5         15.4
                                           \8\.
315.....................................  OTHER KIDNEY & URINARY TRACT          1.5070         36.8         30.6
                                           O.R. PROCEDURES.
316.....................................  RENAL FAILURE..................       0.9214         23.8         19.8
317.....................................  ADMIT FOR RENAL DIALYSIS \3\...       0.9562         26.1         21.7
318.....................................  KIDNEY & URINARY TRACT                0.7048         21.1         17.5
                                           NEOPLASMS W CC.
319.....................................  KIDNEY & URINARY TRACT                0.4964         18.5         15.4
                                           NEOPLASMS W/O CC \1\.
320.....................................  KIDNEY & URINARY TRACT                0.7223         23.0         19.1
                                           INFECTIONS AGE 17 W
                                           CC.
321.....................................  KIDNEY & URINARY TRACT                0.6260         23.2         19.3
                                           INFECTIONS AGE 17 W/
                                           O CC.
322.....................................  KIDNEY & URINARY TRACT                0.4964         18.5         15.4
                                           INFECTIONS AGE 0-17 \8\.
323.....................................  URINARY STONES W CC, &/OR ESW         0.7372         23.5         19.5
                                           LITHOTRIPSY \2\.
324.....................................  URINARY STONES W/O CC \2\......       0.7372         23.5         19.5
325.....................................  KIDNEY & URINARY TRACT SIGNS &        0.9562         26.1         21.7
                                           SYMPTOMS AGE 17 W
                                           CC \3\.
326.....................................  KIDNEY & URINARY TRACT SIGNS &        0.4964         18.5         15.4
                                           SYMPTOMS AGE 17 W/O
                                           CC \1\.
327.....................................  KIDNEY & URINARY TRACT SIGNS &        0.4964         18.5         15.4
                                           SYMPTOMS AGE 0-17 \8\.
328.....................................  URETHRAL STRICTURE AGE 17 W CC \8\.
329.....................................  URETHRAL STRICTURE AGE 17 W/O CC \8\.
330.....................................  URETHRAL STRICTURE AGE 0-17 \8\       0.4964         18.5         15.4
331.....................................  OTHER KIDNEY & URINARY TRACT          0.8473         23.2         19.3
                                           DIAGNOSES AGE 17 W/
                                           O CC.
332.....................................  OTHER KIDNEY & URINARY TRACT          0.5722         21.1         17.5
                                           DIAGNOSES AGE 17 W/
                                           O CC.
333.....................................  OTHER KIDNEY & URINARY TRACT          0.4964         18.5         15.4
                                           DIAGNOSES AGE 0-17 \8\.
334.....................................  MAJOR MALE PELVIC PROCEDURES W        2.0841         40.0         33.3
                                           CC \8\.
335.....................................  MAJOR MALE PELVIC PROCEDURES W/       2.0841         40.0         33.3
                                           O CC \8\.
336.....................................  TRANSURETHRAL PROSTATECTOMY W         0.7372         23.5         19.5
                                           CC \8\.

[[Page 4814]]

 
337.....................................  TRANSURETHRAL PROSTATECTOMY W/O       0.7372         23.5         19.5
                                           CC \8\.
338.....................................  TESTES PROCEDURES, FOR                0.7372         23.5         19.5
                                           MALIGNANCY \8\.
339.....................................  TESTES PROCEDURES, NON-               0.7372         23.5         19.5
                                           MALIGNANCY AGE 17
                                           \2\.
340.....................................  TESTES PROCEDURES, NON-               0.7372         23.5         19.5
                                           MALIGNANCY AGE 0-17 \8\.
341.....................................  PENIS PROCEDURES \2\...........       0.7372         23.5         19.5
342.....................................  CIRCUMCISION AGE 17        0.4964         18.5         15.4
                                           \1\.
343.....................................  CIRCUMCISION AGE 0-17 \8\......       0.7372         23.5         19.5
344.....................................  OTHER MALE REPRODUCTIVE SYSTEM        0.4964         18.5         15.4
                                           O.R. PROCEDURES FOR MALIGNANCY
                                           \1\.
345.....................................  OTHER MALE REPRODUCTIVE SYSTEM        2.0841         40.0         33.3
                                           O.R. PROC EXCEPT FOR
                                           MALIGNANCY \5\.
346.....................................  MALIGNANCY, MALE REPRODUCTIVE         0.7150         22.3         18.5
                                           SYSTEM, W CC \7\.
347.....................................  MALIGNANCY, MALE REPRODUCTIVE         0.7150         22.3         18.5
                                           SYSTEM, W/O CC \7\.
348.....................................  BENIGN PROSTATIC HYPERTROPHY W        0.4964         18.5         15.4
                                           CC \1\.
349.....................................  BENIGN PROSTATIC HYPERTROPHY W/       0.4964         18.5         15.4
                                           O CC \1\.
350.....................................  INFLAMMATION OF THE MALE              1.1820         26.6         22.1
                                           REPRODUCTIVE SYSTEM.
351.....................................  STERILIZATION, MALE \8\........       0.7372         23.5         19.5
352.....................................  OTHER MALE REPRODUCTIVE SYSTEM        0.9562         26.1         21.7
                                           DIAGNOSES \3\.
353.....................................  PELVIC EVISCERATION, RADICAL          2.0841         40.0         33.3
                                           HYSTERECTOMY RADICAL
                                           VULVECTOMY \8\.
354.....................................  UTERINE,ADNEXA PROC FOR NON-          2.0841         40.0         33.3
                                           OVARIAN/ADNEXAL MALIG W CC \8\.
355.....................................  UTERINE,ADNEXA PROC FOR NON-          2.0841         40.0         33.3
                                           OVARIAN/ADNEXAL MALIG W/O CC
                                           \8\.
356.....................................  FEMALE REPRODUCTIVE SYSTEM            1.3569         32.5         27.0
                                           RECONSTRUCTIVE PROCEDURES \8\.
357.....................................  UTERINE & ADNEXA PROC FOR             1.3569         32.5         27.0
                                           OVARIAN OR ADNEXAL MALIGNANCY
                                           \8\.
358.....................................  UTERINE & ADNEXA PROC FOR NON-        1.3569         32.5         27.0
                                           MALIGNANCY W CC \8\.
359.....................................  UTERINE & ADNEXA PROC FOR NON-        1.3569         32.5         27.0
                                           MALIGNANCY W/O CC \8\.
360.....................................  VAGINA, CERVIX & VULVA                1.3569         32.5         27.0
                                           PROCEDURES \4\.
361.....................................  LAPAROSCOPY & INCISIONAL TUBAL        0.4964         18.5         15.4
                                           INTERRUPTION \8\.
362.....................................  ENDOSCOPIC TUBAL INTERRUPTION         0.4964         18.5         15.4
                                           \8\.
363.....................................  DC, CONIZATION & RADIO-IMPLANT,       0.4964         18.5         15.4
                                           FOR MALIGNANCY \8\.
364.....................................  DC, CONIZATION EXCEPT FOR             0.4964         18.5         15.4
                                           MALIGNANCY \8\.
365.....................................  OTHER FEMALE REPRODUCTIVE             2.0841         40.0         33.3
                                           SYSTEM O.R. PROCEDURES \5\.
366.....................................  MALIGNANCY, FEMALE REPRODUCTIVE       0.8139         23.1         19.2
                                           SYSTEM W CC.
367.....................................  MALIGNANCY, FEMALE REPRODUCTIVE       0.4964         18.5         15.4
                                           SYSTEM W/O CC \1\.
368.....................................  INFECTIONS, FEMALE REPRODUCTIVE       0.6963         19.3         16.0
                                           SYSTEM.
369.....................................  MENSTRUAL & OTHER FEMALE              0.9562         26.1         21.7
                                           REPRODUCTIVE SYSTEM DISORDERS
                                           \3\.
370.....................................  CESAREAN SECTION W CC \8\......       0.9562         26.1         21.7
371.....................................  CESAREAN SECTION W/O CC \8\....       0.4964         18.5         15.4
372.....................................  VAGINAL DELIVERY W COMPLICATING       0.4964         18.5         15.4
                                           DIAGNOSES \8\.
373.....................................  VAGINAL DELIVERY W/O                  0.4964         18.5         15.4
                                           COMPLICATING DIAGNOSES \8\.
374.....................................  VAGINAL DELIVERY W                    0.4964         18.5         15.4
                                           STERILIZATION /OR DaC \8\.
375.....................................  VAGINAL DELIVERY W O.R. PROC          0.4964         18.5         15.4
                                           EXCEPT STERIL /OR DaC \8\.
376.....................................  POSTPARTUM & POST ABORTION            0.4964         18.5         15.4
                                           DIAGNOSES W/O O.R. PROCEDURE
                                           \1\.
377.....................................  POSTPARTUM & POST ABORTION            0.4964         18.5         15.4
                                           DIAGNOSES W O.R. PROCEDURE \8\.
378.....................................  ECTOPIC PREGNANCY \8\..........       0.9562         26.1         21.7
379.....................................  THREATENED ABORTION \8\........       0.4964         18.5         15.4
380.....................................  ABORTION W/O D&C \8\...........       0.4964         18.5         15.4
381.....................................  ABORTION W D&C, ASPIRATION            0.4964         18.5         15.4
                                           CURETTAGE OR HYSTEROTOMY \8\.
382.....................................  FALSE LABOR \8\................       0.4964         18.5         15.4
383.....................................  OTHER ANTEPARTUM DIAGNOSES W          0.4964         18.5         15.4
                                           MEDICAL COMPLICATIONS \8\.
384.....................................  OTHER ANTEPARTUM DIAGNOSES W/O        0.4964         18.5         15.4
                                           MEDICAL COMPLICATIONS \8\.
385.....................................  NEONATES, DIED OR TRANSFERRED         0.4964         18.5         15.4
                                           TO ANOTHER ACUTE CARE FACILITY
                                           \8\.
386.....................................  EXTREME IMMATURITY \8\.........       0.4964         18.5         15.4
387.....................................  PREMATURITY W MAJOR PROBLEMS          0.4964         18.5         15.4
                                           \8\.
388.....................................  PREMATURITY W/O MAJOR PROBLEMS        0.4964         18.5         15.4
                                           \8\.
389.....................................  FULL TERM NEONATE W MAJOR             0.4964         18.5         15.4
                                           PROBLEMS \8\.
390.....................................  NEONATE W OTHER SIGNIFICANT           0.4964         18.5         15.4
                                           PROBLEMS \8\.
391.....................................  NORMAL NEWBORN \8\.............       0.4964         18.5         15.4
392.....................................  SPLENECTOMY AGE 17         0.7372         23.5         19.5
                                           \8\.
393.....................................  SPLENECTOMY AGE 0-17 \8\.......       0.7372         23.5         19.5
394.....................................  OTHER O.R. PROCEDURES OF THE          0.9562         26.1         21.7
                                           BLOOD AND BLOOD FORMING ORGANS
                                           \3\.
395.....................................  RED BLOOD CELL DISORDERS AGE          0.7782         24.0         20.0
                                           17.
396.....................................  RED BLOOD CELL DISORDERS AGE 0-       0.4964         18.5         15.4
                                           17 \8\.
397.....................................  COAGULATION DISORDERS..........       0.9454         23.5         19.5
398.....................................  RETICULOENDOTHELIAL & IMMUNITY        0.8372         22.0         18.3
                                           DISORDERS W CC.
399.....................................  RETICULOENDOTHELIAL & IMMUNITY        0.4964         18.5         15.4
                                           DISORDERS W/O CC \1\.
401.....................................  LYMPHOMA & NON-ACUTE LEUKEMIA W       2.0841         40.0         33.3
                                           OTHER O.R. PROC W CC \5\.
402.....................................  LYMPHOMA & NON-ACUTE LEUKEMIA W       0.9562         26.1         21.7
                                           OTHER O.R. PROC W/O CC \3\.

[[Page 4815]]

 
403.....................................  LYMPHOMA & NON-ACUTE LEUKEMIA W       0.8941         22.4         18.6
                                           CC.
404.....................................  LYMPHOMA & NON-ACUTE LEUKEMIA W/      0.7394         18.0         15.0
                                           O CC.
405.....................................  ACUTE LEUKEMIA W/O MAJOR O.R.         0.7372         23.5         19.5
                                           PROCEDURE AGE 0-17 \8\.
406.....................................  MYELOPROLIF DISORD OR POORLY          2.0841         40.0         33.3
                                           DIFF NEOPL W MAJ O.R.PROC W CC
                                           \5\.
407.....................................  MYELOPROLIF DISORD OR POORLY          0.9562         26.1         21.7
                                           DIFF NEOPL W MAJ O.R.PROC W/O
                                           CC \8\.
408.....................................  MYELOPROLIF DISORD OR POORLY          0.9562         26.1         21.7
                                           DIFF NEOPL W OTHER O.R.PROC
                                           \3\.
409.....................................  RADIOTHERAPY...................       0.8871         25.1         20.9
410.....................................  CHEMOTHERAPY W/O ACUTE LEUKEMIA       0.9562         26.1         21.7
                                           AS SECONDARY DIAGNOSIS \3\.
411.....................................  HISTORY OF MALIGNANCY W/O             0.4964         18.5         15.4
                                           ENDOSCOPY \8\.
412.....................................  HISTORY OF MALIGNANCY W               0.4964         18.5         15.4
                                           ENDOSCOPY \8\.
413.....................................  OTHER MYELOPROLIF DIS OR POORLY       0.9541         25.5         21.2
                                           DIFF NEOPL DIAG W CC.
414.....................................  OTHER MYELOPROLIF DIS OR POORLY       0.4964         18.5         15.4
                                           DIFF NEOPL DIAG W/O CC \1\.
415.....................................  O.R. PROCEDURE FOR INFECTIOUS &       1.6849         40.1         33.4
                                           PARASITIC DISEASES.
416.....................................  SEPTICEMIA AGE 17...       0.9191         24.9         20.7
417.....................................  SEPTICEMIA AGE 0-17 \8\........       0.9562         26.1         21.7
418.....................................  POSTOPERATIVE & POST-TRAUMATIC        0.8304         25.2         21.0
                                           INFECTIONS.
419.....................................  FEVER OF UNKNOWN ORIGIN AGE 17 W CC \3\.
420.....................................  FEVER OF UNKNOWN ORIGIN AGE 17 W/O CC \2\.
421.....................................  VIRAL ILLNESS AGE 17       0.7372         23.5         19.5
                                           \2\.
422.....................................  VIRAL ILLNESS & FEVER OF              0.7372         23.5         19.5
                                           UNKNOWN ORIGIN AGE 0-17 \8\.
423.....................................  OTHER INFECTIOUS & PARASITIC          0.9024         23.1         19.2
                                           DISEASES DIAGNOSES.
424.....................................  O.R. PROCEDURE W PRINCIPAL            1.3569         32.5         27.0
                                           DIAGNOSES OF MENTAL ILLNESS
                                           \4\.
425.....................................  ACUTE ADJUSTMENT REACTION &           0.5981         27.5         22.9
                                           PSYCHOLOGICAL DYSFUNCTION.
426.....................................  DEPRESSIVE NEUROSES............       0.4660         22.3         18.5
427.....................................  NEUROSES EXCEPT DEPRESSIVE \4\.       1.3569         32.5         27.0
428.....................................  DISORDERS OF PERSONALITY &            0.4964         18.5         15.4
                                           IMPULSE CONTROL \1\.
429.....................................  ORGANIC DISTURBANCES & MENTAL         0.6438         27.4         22.8
                                           RETARDATION.
430.....................................  PSYCHOSES......................       0.4689         22.7         18.9
431.....................................  CHILDHOOD MENTAL DISORDERS \1\.       0.4964         18.5         15.4
432.....................................  OTHER MENTAL DISORDER DIAGNOSES       0.4964         18.5         15.4
                                           \1\.
433.....................................  ALCOHOL/DRUG ABUSE OR                 0.4964         18.5         15.4
                                           DEPENDENCE, LEFT AMA \1\.
439.....................................  SKIN GRAFTS FOR INJURIES.......       1.3663         40.5         33.7
440.....................................  WOUND DEBRIDEMENTS FOR INJURIES       1.5854         40.0         33.3
441.....................................  HAND PROCEDURES FOR INJURIES          2.0841         40.0         33.3
                                           \5\.
442.....................................  OTHER O.R. PROCEDURES FOR             1.4971         44.6         37.1
                                           INJURIES W CC.
443.....................................  OTHER O.R. PROCEDURES FOR             1.3569         32.5         27.0
                                           INJURIES W/O CC \4\.
444.....................................  TRAUMATIC INJURY AGE 17 W CC.
445.....................................  TRAUMATIC INJURY AGE 17 W/O CC.
446.....................................  TRAUMATIC INJURY AGE 0-17 \8\..       0.7372         23.5         19.5
447.....................................  ALLERGIC REACTIONS AGE 17 \3\.
448.....................................  ALLERGIC REACTIONS AGE 0-17 \8\       0.7372         23.5         19.5
449.....................................  POISONING & TOXIC EFFECTS OF          0.9562         26.1         21.7
                                           DRUGS AGE 17 W CC
                                           \7\.
450.....................................  POISONING & TOXIC EFFECTS OF          0.9562         26.1         21.7
                                           DRUGS AGE 17 W/O CC
                                           \7\.
451.....................................  POISONING & TOXIC EFFECTS OF          0.7372         23.5         19.5
                                           DRUGS AGE 0-17 \8\.
452.....................................  COMPLICATIONS OF TREATMENT W CC       0.9692         24.9         20.7
453.....................................  COMPLICATIONS OF TREATMENT W/O        0.8633         24.2         20.1
                                           CC.
454.....................................  OTHER INJURY, POISONING & TOXIC       0.7372         23.5         19.5
                                           EFFECT DIAG W CC \2\.
455.....................................  OTHER INJURY, POISONING & TOXIC       0.7372         23.5         19.5
                                           EFFECT DIAG W/O CC \2\.
461.....................................  O.R. PROC W DIAGNOSES OF OTHER        1.3216         36.5         30.4
                                           CONTACT W HEALTH SERVICES.
462.....................................  REHABILITATION.................       0.6471         23.2         19.3
463.....................................  SIGNS & SYMPTOMS W CC..........       0.7541         26.8         22.3
464.....................................  SIGNS & SYMPTOMS W/O CC........       0.6170         25.5         21.2
465.....................................  AFTERCARE W HISTORY OF                0.7372         23.5         19.5
                                           MALIGNANCY AS SECONDARY
                                           DIAGNOSIS \2\.
466.....................................  AFTERCARE W/O HISTORY OF              0.7365         22.0         18.3
                                           MALIGNANCY AS SECONDARY
                                           DIAGNOSIS.
467.....................................  OTHER FACTORS INFLUENCING             0.4964         18.5         15.4
                                           HEALTH STATUS \1\.
468.....................................  EXTENSIVE O.R. PROCEDURE              2.0686         42.5         35.4
                                           UNRELATED TO PRINCIPAL
                                           DIAGNOSIS.
469.....................................  PRINCIPAL DIAGNOSIS INVALID AS        0.0000          0.0          0.0
                                           DISCHARGE DIAGNOSIS \6\.
470.....................................  UNGROUPABLE \6\................       0.0000          0.0          0.0
471.....................................  BILATERAL OR MULTIPLE MAJOR           2.0841         40.0         33.3
                                           JOINT PROCS OF LOWER EXTREMITY
                                           \5\.
473.....................................  ACUTE LEUKEMIA W/O MAJOR O.R.         0.9562         26.1         21.7
                                           PROCEDURE AGE 17
                                           \3\.
475.....................................  RESPIRATORY SYSTEM DIAGNOSIS          2.1358         35.2         29.3
                                           WITH VENTILATOR SUPPORT.
476.....................................  PROSTATIC O.R. PROCEDURE              1.0032         31.9         26.5
                                           UNRELATED TO PRINCIPAL
                                           DIAGNOSIS.
477.....................................  NON-EXTENSIVE O.R. PROCEDURE          1.8998         40.0         33.3
                                           UNRELATED TO PRINCIPAL
                                           DIAGNOSIS.
478.....................................  OTHER VASCULAR PROCEDURES W CC        1.2567         34.2         28.5
                                           \7\.
479.....................................  OTHER VASCULAR PROCEDURES W/O         1.2567         34.2         28.5
                                           CC \7\.
480.....................................  LIVER TRANSPLANT \6\...........       0.0000          0.0          0.0
481.....................................  BONE MARROW TRANSPLANT \8\.....       0.9562         26.1         21.7

[[Page 4816]]

 
482.....................................  TRACHEOSTOMY FOR FACE, MOUTH &        2.0841         40.0         33.3
                                           NECK DIAGNOSES \5\.
483.....................................  TRACH W MECH VENT 96+ HRS OR          3.2131         55.7         46.4
                                           PDX EXCEPT FACE,MOUTH & NECK
                                           DIAG.
484.....................................  CRANIOTOMY FOR MULTIPLE               2.0841         40.0         33.3
                                           SIGNIFICANT TRAUMA \8\.
485.....................................  LIMB REATTACHMENT, HIP AND            1.3569         32.5         27.0
                                           FEMUR PROC FOR MULTIPLE
                                           SIGNIFICANT TR \8\.
486.....................................  OTHER O.R. PROCEDURES FOR             1.3569         32.5         27.0
                                           MULTIPLE SIGNIFICANT TRAUMA
                                           \4\.
487.....................................  OTHER MULTIPLE SIGNIFICANT            1.2484         32.7         27.2
                                           TRAUMA.
488.....................................  HIV W EXTENSIVE O.R. PROCEDURE        2.0841         40.0         33.3
                                           \5\.
489.....................................  HIV W MAJOR RELATED CONDITION..       0.9254         21.3         17.7
490.....................................  HIV W OR W/O OTHER RELATED            0.7361         19.6         16.3
                                           CONDITION.
491.....................................  MAJOR JOINT & LIMB REATTACHMENT       1.3569         32.5         27.0
                                           PROCEDURES OF UPPER EXTREMITY
                                           \8\.
492.....................................  CHEMOTHERAPY W ACUTE LEUKEMIA         0.9562         26.1         21.7
                                           AS SECONDARY DIAGNOSIS OR W
                                           USE HIGH DOSE CHEMOTHERAPY
                                           AGENT \8\.
493.....................................  LAPAROSCOPIC CHOLECYSTECTOMY W/       1.3569         32.5         27.0
                                           O C.D.E. W CC \7\.
494.....................................  LAPAROSCOPIC CHOLECYSTECTOMY W/       2.0841         40.0         33.3
                                           O C.D.E. W/O CC \7\.
495.....................................  LUNG TRANSPLANT \6\............       0.0000          0.0          0.0
496.....................................  COMBINED ANTERIOR/POSTERIOR           1.3569         32.5         27.0
                                           SPINAL FUSION \8\.
497.....................................  SPINAL FUSION W CC \7\.........       0.9562         26.1         21.7
498.....................................  SPINAL FUSION W/O CC \7\.......       0.9562         26.1         21.7
499.....................................  BACK & NECK PROCEDURES EXCEPT         2.0841         40.0         33.3
                                           SPINAL FUSION W CC \5\.
500.....................................  BACK & NECK PROCEDURES EXCEPT         1.3569         32.5         27.0
                                           SPINAL FUSION W/O CC \4\.
501.....................................  KNEE PROCEDURES W PDX OF              2.0841         40.0         33.3
                                           INFECTION W CC \5\.
502.....................................  KNEE PROCEDURES W PDX OF              0.7372         23.5         19.5
                                           INFECTION W/O CC \2\.
503.....................................  KNEE PROCEDURES W/O PDX OF            0.9562         26.1         21.7
                                           INFECTION \3\.
504.....................................  EXTENSIVE 3RD DEGREE BURNS W          2.0841         40.0         33.3
                                           SKIN GRAFT \8\.
505.....................................  EXTENSIVE 3RD DEGREE BURNS W/O        1.3569         32.5         27.0
                                           SKIN GRAFT \4\.
506.....................................  FULL THICKNESS BURN W SKIN            0.7372         23.5         19.5
                                           GRAFT OR INHAL INJ W CC OR SIG
                                           TRAUMA \7\.
507.....................................  FULL THICKNESS BURN W SKIN GRFT       0.7372         23.5         19.5
                                           OR INHAL INJ W/O CC OR SIG
                                           TRAUMA \7\.
508.....................................  FULL THICKNESS BURN W/O SKIN          0.7372         23.5         19.5
                                           GRFT OR INHAL INJ W CC OR SIG
                                           TRAUMA \2\.
509.....................................  FULL THICKNESS BURN W/O SKIN          0.7372         23.5         19.5
                                           GRFT OR INH INJ W/O CC OR SIG
                                           TRAUMA \2\.
510.....................................  NON-EXTENSIVE BURNS W CC OR           0.7372         23.5         19.5
                                           SIGNIFICANT TRAUMA \2\.
511.....................................  NON-EXTENSIVE BURNS W/O CC OR         0.4964         18.5         15.4
                                           SIGNIFICANT TRAUMA \1\.
512.....................................  SIMULTANEOUS PANCREAS/KIDNEY          0.0000          0.0          0.0
                                           TRANSPLANT \6\.
513.....................................  PANCREAS TRANSPLANT \6\........       0.0000          0.0          0.0
515.....................................  CARDIAC DEFIBRILATOR IMPLANT W/       2.0841         40.0         33.3
                                           O CARDIAC CATH \5\.
516.....................................  PERCUTANEOUS CARDIVASCULAR            0.9562         26.1         21.7
                                           PROCEDURE W AMI \8\.
517.....................................  PERCUTANEOUS CARDIVASCULAR PROC       1.3569         32.5         27.0
                                           W NON-DRUG ELUTING STENT W/O
                                           AMI \4\.
518.....................................  PERCUTANEOUS CARDIVASCULAR PROC       0.9562         26.1         21.7
                                           W/O CORONARY ARTERY STENT OR
                                           AMI \3\.
519.....................................  CERVICAL SPINAL FUSION W CC \4\       1.3569         32.5         27.0
520.....................................  CERVICAL SPINAL FUSION W/O CC         0.9562         26.1         21.7
                                           \8\.
521.....................................  ALCOHOL/DRUG ABUSE OR                 0.4753         20.5         17.0
                                           DEPENDENCE W CC.
522.....................................  ALCOHOL/DRUG ABUSE OR                 0.4061         20.4         17.0
                                           DEPENDENCE W REHABILITATION
                                           THERAPY W/O CC.
523.....................................  ALCOHOL/DRUG ABUSE OR                 0.4214         19.8         16.5
                                           DEPENDENCE W/O REHABILITATION
                                           THERAPY W/O CC.
524.....................................  TRANSIENT ISCHEMIA.............       0.5885         22.9         19.0
525.....................................  HEART ASSIST SYSTEM, OTHER THAN       2.0841         40.0         33.3
                                           IMPLANT \8\.
526.....................................  PERCUTANEOUS CARVIOVASCULAR           1.3569         32.5         27.0
                                           PROC W DRUG-ELUTING STENT W
                                           AMI \8\.
527.....................................  PERCUTANEOUS CARVIOVASCULAR           1.3569         32.5         27.0
                                           PROC W DRUG-ELUTING STENT W/O
                                           AMI \8\.
528.....................................  INTRACRANIAL VASCLUAR                 2.0841         40.0         33.3
                                           PROCEDURES WITH PDX HEMORRHAGE
                                           \8\.
529.....................................  VENTRICULAR SHUNT PROCEDURES          0.7372         23.5         19.5
                                           WITH CC \2\.
530.....................................  VENTRICULAR SHUNT PROCEDURES          0.7372         23.5         19.5
                                           WITHOUT CC \8\.
531.....................................  SPINAL PROCEDURES WITH CC \4\..       1.3569         32.5         27.0
532.....................................  SPINAL PROCEDURES WITHOUT CC          0.9562         26.1         21.7
                                           \3\.
533.....................................  EXTRACRANIAL VASCULAR                 2.0841         40.0         33.3
                                           PROCEDURES WITH CC \5\.
534.....................................  EXTRACRANIAL VASCULAR                 1.3569         32.5         27.0
                                           PROCEDURES WITHOUT CC \8\.
535.....................................  CARDIAC DEFIB IMPLANT WITH            2.0841         40.0         33.3
                                           CARDIAC CATH WITH AMI/HF/SHOCK
                                           \8\.
536.....................................  CARDIAC DEFIB IMPLANT WITH            2.0841         40.0         33.3
                                           CARDIAC CATH WITHOUT AMI/HF/
                                           SHOCK \5\.
537.....................................  LOCAL EXCISION AND REMOVAL OF         1.3569         32.5         27.0
                                           INTERNAL FIXATION DEVICES
                                           EXCEPT HIP AND FEMUR WITH CC
                                           \4\.
538.....................................  LOCAL EXCISION AND REMOVAL OF         0.4964         18.5         15.4
                                           INTERNAL FIXATION DEVICES
                                           EXCEPT HIP AND FEMUR WITHOUT
                                           CC \1\.
539.....................................  LYMPHOMA AND LEUKEMIA WITH            2.0841         40.0         33.3
                                           MAJOR O.R. PROCEDURE WITH CC
                                           \8\.
540.....................................  LYMPHOMA AND LEUKEMIA WITH            0.4964         18.5         15.4
                                           MAJOR O.R. PROCEDURE WITHOUT
                                           CC \1\.

[[Page 4817]]

 
541.....................................  IMPLANT, PULSATILE HEART ASSIST       0.0000          0.0         0.0
                                           SYSTEM \6\.
----------------------------------------------------------------------------------------------------------------
\1\ Proposed Relative weights for these LTC-DRGs were determined by assigning these cases to low volume quintile
  1.
\2\ Proposed Relative weights for these LTC-DRGs were determined by assigning these cases to low volume quintile
  2.
\3\ Proposed Relative weights for these LTC-DRGs were determined by assigning these cases to low volume quintile
  3.
\4\ Proposed Relative weights for these LTC-DRGs were determined by assigning these cases to low volume quintile
  4.
\5\ Proposed Relative weights for these LTC-DRGs were determined by assigning these cases to low volume quintile
  5.
\6\ Proposed Relative weights for these LTC-DRGs were assigned a value of 0.000.
\7\ Proposed Relative weights for these LTC-DRGs were determined after adjusting to account for nonmonotonicity.
 
\8\ Proposed Relative weights for these LTC-DRGs were determined by assigning these cases to the appropriate low
  volume quintile because they had no LTCH cases in the FY 2002 MedPAR.

[FR Doc. 04-1886 Filed 1-23-04; 5:03 pm]
BILLING CODE 4120-01-P