[Federal Register Volume 69, Number 106 (Wednesday, June 2, 2004)]
[Proposed Rules]
[Pages 31248-31275]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-12314]



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Part IV





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 484



Medicare Program; Home Health Prospective Payment System Rate Update 
for Calendar Year 2005; Proposed Rule

  Federal Register / Vol. 69, No. 106 / Wednesday, June 2, 2004 / 
Proposed Rules  

[[Page 31248]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 484

[CMS-1265-P]
RIN 0938-AM93


Medicare Program; Home Health Prospective Payment System Rate 
Update for Calendar Year 2005

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would set forth an update to the 60-day 
national episode rates and the national per-visit amounts under the 
Medicare prospective payment system for home health agencies. As part 
of this proposed rule, we also are proposing to rebase and revise the 
home health market basket to ensure it continues to adequately reflect 
the price changes of efficiently providing home health services. In 
addition, we are proposing to revise the fixed dollar loss ratio, which 
is used in the calculation of outlier payments. This proposed rule 
would be the first update of the home health prospective payment system 
(HH PPS) rates on a calendar year update cycle. HH PPS was moved to a 
calendar year update cycle as a result the provisions of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003.

DATE: To be assured of consideration, comments must be received at one 
of the addresses provided below, no later than 5 p.m. on August 2, 
2004.

ADDRESSES: In commenting, please refer to file code CMS-1265-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Submit electronic comments to http://www.cms.hhs.gov/regulations/ecomments 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-1265-P, P.O. Box 8016, Baltimore, MD 
21244-8016.
    Please allow sufficient time for mailed comments to be timely 
received in the event of delivery delays.
    If you prefer, you may deliver (by hand or courier) your written 
comments (one original and 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, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    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:
    Randy Throndset, (410) 786-0131.
    Debra Gillespie, (410) 786-4631.
    Mary Lee Seifert (Market Basket), (410) 786-0030.
    Mollie Knight (Market Basket), (410) 786-7948.

SUPPLEMENTARY INFORMATION:
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available for public inspection as they are received, generally 
beginning approximately 3 weeks after publication of a document, at the 
headquarters of the Centers for Medicare & Medicaid Services, 7500 
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I. Background

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

A. Statutory Background

    The Balanced Budget Act of 1997 (BBA), Pub. L. 105-33, enacted on 
August 5, 1997, significantly changed the way Medicare pays for 
Medicare home health services. Until the implementation of a home 
health prospective payment system (HH PPS) on October 1, 2000, home 
health agencies (HHAs) received payment under a cost-based 
reimbursement system. Section 4603 of the BBA governed the development 
of the HH PPS.
    Section 4603(a) of the BBA provides the authority for the 
development of a PPS for all Medicare-covered home health services 
provided under a plan of care that were paid on a reasonable cost basis 
by adding section 1895, entitled ``Prospective Payment For Home Health 
Services,'' to the Social Security Act (the Act).
    Section 1895(b)(1) of the Act requires the Secretary to establish a 
PPS for all costs of home health services paid under Medicare.
    Section 1895(b)(3)(A) of the Act requires that (1) the computation 
of a standard prospective payment amount include all costs of home 
health services covered and paid for on a reasonable cost basis and be 
initially based on the most recent audited cost report data available 
to the Secretary, and (2) the prospective payment amounts be 
standardized to eliminate the effects of case-mix and wage levels among 
HHAs.
    Section 1895(b)(3)(B) of the Act addresses the annual update to the 
standard prospective payment amounts by the home health applicable 
increase percentage as specified in the statute.
    Section 1895(b)(4) of the Act governs the payment computation. 
Sections 1895(b)(4)(A)(i) and (b)(4)(A)(ii) of the Act require the 
standard prospective payment amount to be adjusted for case-mix and 
geographic differences in wage levels. Section 1895(b)(4)(B) of the Act 
requires the establishment of an appropriate case-mix adjustment factor 
that explains a significant amount of the variation in cost among 
different units of services. Similarly, section 1895(b)(4)(C) of the 
Act requires the establishment of wage adjustment factors that reflect 
the relative level of wages and wage-related costs applicable

[[Page 31249]]

to the furnishing of home health services in a geographic area compared 
to the national average applicable level. These wage-adjustment factors 
may be the factors used by the Secretary for the different area wage 
levels for purposes of section 1886(d)(3)(E) of the Act.
    Section 1895(b)(5) of the Act gives the Secretary the option to 
grant additions or adjustments to the payment amount otherwise made in 
the case of outliers because of unusual variations in the type or 
amount of medically necessary care. Total outlier payments in a given 
fiscal year cannot exceed 5 percent of total payments projected or 
estimated.

B. Updates

    On July 3, 2000, we published a final rule (65 FR 41128) in the 
Federal Register to implement the HH PPS legislation. That final rule 
established requirements for the new PPS for HHAs as required by 
section 4603 of the BBA, and as subsequently amended by section 5101 of 
the Omnibus Consolidated and Emergency Supplemental Appropriations Act 
(OCESAA) for Fiscal Year 1999, Public Law 105-277, enacted on October 
21, 1998; and by sections 302, 305, and 306 of the Medicare, Medicaid, 
and SCHIP Balanced Budget Refinement Act (BBRA) of 1999, Public Law 
106-113, enacted on November 29, 1999. The requirements include the 
implementation of a PPS for HHAs, consolidated billing requirements, 
and a number of other related changes. The PPS described in that rule 
replaced the retrospective reasonable-cost-based system that was used 
by Medicare for the payment of home health services under Part A and 
Part B.
    As required by section 1895(b)(3)(B) of the Act, we have updated 
the HH PPS rates annually in a separate Federal Register document. We 
will respond to public comments received on the FY 2004 update notice 
(68 FR 39764) published on July 2, 2003 in the CY 2005 final rule.

C. System for Payment of Home Health Services

    Generally, Medicare makes payment under the HH PPS on the basis of 
a national standardized 60-day episode payment, adjusted for case mix 
and wage index. For episodes with four or fewer visits, Medicare pays 
on the basis of a national per-visit amount by discipline, referred to 
as a low utilization payment adjustment (LUPA). Medicare also adjusts 
the 60-day episode payment for certain intervening events that give 
rise to a partial episode payment adjustment (PEP adjustment) or a 
significant change in condition adjustment (SCIC). For certain cases 
that exceed a specific cost threshold, an outlier adjustment may also 
be available. For a complete and full description of the HH PPS as 
required by the BBA and as amended by OCESAA and BBRA, see the July 3, 
2000 HH PPS final rule (65 FR 41128).

D. Medicare Prescription Drug, Improvement, and Modernization Act of 
2003

    On December 8, 2003, the Congress enacted the Medicare Prescription 
Drug, Improvement, and Modernization Act (MMA) of 2003 (Pub. L. 108-
173). This new legislation affects our proposed update to HH payment 
rates. Specifically, section 421 of MMA requires, for home health 
services furnished in a rural area (as defined in section 1886(d)(2)(D) 
of the Act), with respect to episodes or visits ending on or after 
April 1, 2004 and before April 1, 2005, that the Secretary increase the 
payment amount that otherwise would have been made under section 1895 
of the Act for the services by 5 percent.
    The statute waives budget neutrality for the purposes of this 
increase as it specifically states that the Secretary will not reduce 
the standard prospective payment amount (or amounts) under section 1895 
of the Act applicable to home health services furnished during a period 
to offset the increase in payments resulting in the application of this 
section of the statute.
    Section 701 of the MMA changes the yearly update cycle of the HH 
PPS rates from that of a fiscal year to a calendar year update cycle 
for 2004 and any subsequent year. Generally, section 701(a) of the MMA 
changes the references in the statute to refer to the calendar year for 
2004 and any subsequent year. The changes result in updates to the HH 
PPS rates described as ``fiscal year'' updates for 2002 and 2003 and as 
calendar ``year'' updates for 2004 and any subsequent year (section 
1895(b)(3)(B)(i) of the Act). In light of these provisions, we will not 
be updating the HH PPS rates on October 1, 2004 as HH PPS will now be 
updated on a calendar year update cycle.
    In addition to changing the update cycle for HH PPS rates, section 
701 of the MMA makes adjustments to the home health applicable increase 
percentage for 2004, 2005, and 2006. Specifically, section 701(a)(2)(D) 
of the MMA leaves unchanged the home health market basket increase for 
the last calendar year quarter of 2003 and the first calendar year 
quarter of 2004 (section 1895(b)(3)(B)(ii)(II) of the Act). 
Furthermore, section 701(b)(4) of the MMA sets the home health 
applicable percentage increase for the last 3 quarters of 2004 as the 
home health market basket (3.3 percent) minus 0.8 percentage point 
(section 1895(b)(3)(B)(ii)(III) of the Act). We implemented this 
provision through Pub. 100-20, One Time Notification, Transmittal 59, 
issued February 20, 2004. Section 701(b)(4) of the MMA also provides 
that updates for CY 2005 and CY 2006 will equal the applicable home 
health market basket percentage increase minus 0.8 percentage point. 
Lastly, section 701(b)(3) of the MMA revises the statute to provide 
that HH PPS rates for CY 2007 and any subsequent year will be updated 
by that year's home health market basket percentage increase (section 
1895(b)(3)(B)(ii)(IV) of the Act).

II. Provisions of the Proposed Regulations

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

A. National Standardized 60-Day Episode Rate

    Medicare HH PPS has been effective since October 1, 2000. As set 
forth in the final rule published July 3, 2000 in the Federal Register 
(65 FR 41128), the unit of payment under Medicare HH PPS is a national 
standardized 60-day episode rate. As set forth in 42 CFR 484.220, we 
adjust the national standardized 60-day episode rate by a case mix 
grouping and a wage index value based on the site of service for the 
beneficiary. The proposed CY 2005 HH PPS rates use the same case-mix 
methodology and application of the wage index adjustment to the labor 
portion of the HH PPS rates as set forth in the July 3, 2000 final 
rule. We multiply the national 60-day episode rate by the patient's 
applicable case-mix weight. We divide the case-mix adjusted amount into 
a labor and non-labor portion. We multiply the labor portion by the 
applicable wage index based on the site of service of the beneficiary.
    As required by section 1895(b)(3)(B) of the Act, we have updated 
the HH PPS rates annually in a separate Federal Register document. 
Section 484.225 sets forth the specific percentage update for fiscal 
years 2001, 2002, and 2003. To reflect the new statutory provisions 
enacted by section 701 of the MMA, in Sec.  484.225, we are proposing 
to redesignate paragraph (d) as paragraph (g) and revising it to read 
as follows:
    (g) For 2007 and subsequent calendar years, the unadjusted national 
rate is equal to the rate for the previous

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calendar year increased by the applicable home health market basket 
index amount.
    We are proposing to add new paragraphs (d), (e), and (f) to read as 
follows:
    (d) For the last calendar quarter of 2003 and the first calendar 
quarter of 2004, the unadjusted national prospective 60-day episode 
payment rate is equal to the rate from the previous fiscal year (FY 
2003) increased by the applicable home health market basket index 
amount.
    (e) For the last 3 calendar quarters of 2004, the unadjusted 
national prospective 60-day episode payment rate is equal to the rate 
from the previous fiscal year (FY 2003) increased by the applicable 
home health market basket minus 0.8 percentage point.
    (f) For each of calendar years 2005 and 2006, the unadjusted 
national prospective 60-day episode payment rate is equal to the rate 
from the previous calendar year, increased by the applicable home 
health market basket minus 0.8 percentage point.
    As described in section II.B.2 of this proposed rule, we are 
proposing to rebase and revise the home health market basket. As 
proposed, the labor related portion of the rebased and revised home 
health market basket would be 76.775 percent, and the non-labor portion 
would be 23.225 percent. We add the wage-adjusted portion to the non-
labor portion yielding the case-mix and wage-adjusted 60-day episode 
rate subject to applicable adjustments.
    For CY 2005, we are proposing to use again the design and case-mix 
methodology described in section III.G of the HH PPS July 3, 2000 final 
rule (65 FR 41192 through 41203). For CY 2005, we are proposing to base 
the wage index adjustment to the labor portion of the PPS rates on the 
most recent pre-floor and pre-reclassified hospital wage index as 
discussed in section III.C of this proposed rule.
    As discussed in the July 3, 2000 HH PPS final rule, for episodes 
with four or fewer visits, Medicare pays the national per-visit amount 
by discipline, referred to as a LUPA. We update the national per-visit 
amounts by discipline annually by the applicable home health market 
basket percentage. We adjust the national per-visit amount by the 
appropriate wage index based on the site of service for the beneficiary 
as set forth in Sec.  484.230. We propose to adjust the labor portion 
of the updated national per-visit amounts by discipline used to 
calculate the LUPA by the most recent pre-floor and pre-reclassified 
hospital wage index, as discussed in section III.C of this proposed 
rule.
    Medicare pays the 60-day case-mix and wage-adjusted episode payment 
on a split percentage payment approach. The split percentage payment 
approach includes an initial percentage payment and a final percentage 
payment as set forth in Sec.  484.205(b)(1) and (b)(2). We may base the 
initial percentage payment on the submission of a request for 
anticipated payment and the final percentage payment on the submission 
of the claim for the episode, as discussed in Sec.  409.43. The claim 
for the episode that the HHA submits for the final percentage payment 
determines the total payment amount for the episode and whether we make 
an applicable adjustment to the 60-day case-mix and wage-adjusted 
episode payment. The end date of the 60-day episode as reported on the 
claim determines the rate level at which Medicare will pay the claim 
for the fiscal period.
    We may also adjust the 60-day case-mix and wage-adjusted episode 
payment based on the information submitted on the claim to reflect the 
following:
     A low utilization payment provided on a per-visit basis as 
set forth in Sec.  484.205(c) and Sec.  484.230.
     A partial episode payment adjustment as set forth in Sec.  
484.205(d) and Sec.  484.235.
     A significant change in condition adjustment as set forth 
in Sec.  484.205(e) and Sec.  484.237.
     An outlier payment as set forth in Sec.  484.205(f) and 
Sec.  484.240.
    This proposed rule would reflect the updated CY 2005 rates that 
would be effective January 1, 2005.

B. Rebasing and Revising of the Home Health Market Basket

1. Background
    For CY 2005, section 1895(b)(3)(B) of the Act, as amended by MMA, 
requires the standard prospective payment amounts to be adjusted by a 
factor equal to the applicable home health market basket increase minus 
0.8 percentage point.
    Effective for cost reporting periods beginning on or after July 1, 
1980, we developed and adopted an HHA input price index (that is, the 
home health ``market basket''). Although ``market basket'' technically 
describes the mix of goods and services used to produce home health 
care, this term is also commonly used to denote the input price index 
derived from that market basket. Accordingly, the term ``home health 
market basket'' used in this document refers to the HHA input price 
index.
    The percentage change in the home health market basket reflects the 
average change in the price of goods and services purchased by HHAs in 
providing an efficient level of home health care services. We first 
used the home health market basket to adjust HHA cost limits by an 
amount that reflected the average increase in the prices of the goods 
and services used to furnish reasonable cost home health care. This 
approach linked the increase in the cost limits to the efficient 
utilization of resources. For a greater discussion on the home health 
market basket, see the notice with comment period published in the 
Federal Register on February 15, 1980 (45 FR 10450, 10451), notice with 
comment period published in the Federal Register on February 14, 1995 
(60 FR 8389, 8392), and notice with comment period published in Federal 
Register on July 1, 1996 (61 FR 34344, 34347). Beginning with FY 2002, 
we used the home health market basket to update payments under the home 
health PPS.
    The home health market basket is a fixed-weight Laspeyres-type 
price index; its weights reflect the cost distribution for the base 
year while current period price changes are measured. The home health 
market basket is constructed in three steps. First, a base period is 
selected and total base period expenditures are estimated for mutually 
exclusive and exhaustive spending categories based upon type of 
expenditure. Then the proportion of total costs that each spending 
category represents is determined. These proportions are called cost or 
expenditure weights.
    The second step essential for developing an input price index is to 
match each expenditure category to an appropriate price/wage variable, 
called a price proxy. These proxy variables are drawn from publicly 
available statistical series published on a consistent schedule, 
preferably at least quarterly.
    In the third and final step, the price level for each spending 
category is multiplied by the expenditure weight for that category. The 
sum of these products for all cost categories yields the composite 
index level in the market basket in a given year. Repeating the third 
step for other years will produce a time series of market basket index 
levels. Dividing one index level by an earlier index level will produce 
rates of growth in the input price index.
    We described the market basket as a fixed-weight index because it 
answers the question of how much more or less it would cost, at a later 
time, to purchase the same mix of goods and services that was purchased 
in the base

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period. As such, it measures ``pure'' price changes only. The effects 
on total expenditures resulting from changes in the quantity or mix of 
goods and services purchased subsequent to the base period are, by 
design, not considered.
2. Rebasing and Revising the Home Health Market Basket
    We believe that it is desirable to rebase the home health market 
basket periodically so the cost category weights reflect changes in the 
mix of goods and services that HHAs purchase in furnishing home health 
care. We based the cost category weights in the current home health 
market basket on FY 1993 data. We are proposing to rebase and revise 
the home health market basket to reflect FY 2000 Medicare cost report 
data, the latest available, thorough data on the structure of HHA 
costs.
    The terms ``rebasing'' and ``revising,'' while often used 
interchangeably, actually denote different activities. Rebasing is the 
term used to define moving the base year for the structure of costs of 
an input price index (that is, in this rule, we are proposing to move 
the base year cost structure from FY 1993 to FY 2000). Revising is the 
term used to define changing data sources, cost categories, and/or 
price proxies used in the input price index.
    For this proposed revising and rebasing, we modified several 
categories in the market basket cost structure. The major revision to 
the proposed revised and rebased market basket was the combining of the 
Administrative and General and Other Expenses cost categories. The 
proposed revised Administrative and General and Other Expenses cost 
category was disaggregated further into five separate cost categories 
(Telephone, Postage, Professional Fees, Other Products, and Other 
Services). The Paper and Printing cost category, which was broken out 
in the 1993-based market basket, is included in the proposed Other 
Products cost category.
    With the exception of the price proxies for the proposed modified 
cost categories in the Administrative and General and Other cost 
category, we propose no further changes to any of the price proxies.
    For this proposed rebased and revised market basket, we reviewed 
HHA expenditure data for the market basket cost categories. For each 
freestanding HHA, we reviewed Medicare cost reports whose cost 
reporting period began on or after October 1, 1999 and before October 
1, 2000. We maintained our policy of using data from freestanding HHAs 
because they reflect the actual cost structure faced by HHAs. Expense 
data for a hospital-based HHA are affected by the allocation of 
overhead costs over the entire institution (including but not limited 
to hospital, hospital-based skilled nursing facility, hospital-based 
HHA). Due to the method of allocation, total expenses will be correct, 
but the individual components' expenses may be skewed. Therefore, if 
data from hospital-based HHAs were included, the resultant cost 
structure could be unrepresentative of the costs facing an average HHA.
    Data on HHA expenditures for nine major expense categories (wages 
and salaries, employee benefits, transportation, operation and 
maintenance, administrative and general, insurance, fixed capital, 
movable capital, and a residual ``all other'') were tabulated from the 
FY 2000 Medicare HHA cost reports. Since prescription drugs and durable 
medical equipment are not payable under the HH PPS, we excluded those 
items from the home health market basket. Expenditures for contract 
services were also tabulated from these FY 2000 Medicare HHA cost 
reports. After totals for these major cost categories were edited to 
remove reports where the data were deemed unreasonable (for example, 
when total costs were not greater than zero), we then determined the 
proportion of total costs that each category represents. The 
proportions represent the major rebased home health market basket 
weights.
    We determined the weights for subcategories (Telephone, Postage, 
Professional Fees, Other Products, and Other Services) within the 
combined Administrative and General and Other Expenses using the latest 
available (1997 benchmark) U.S. Department of Commerce, Bureau of 
Economic Analysis (BEA) Input-Output Table, from which we extracted 
data for HHAs. The BEA Input-Output table, which is updated at 5-year 
intervals, was most recently described in the Survey of Current 
Business article, ``Benchmark Input-Output Accounts of the U.S., 1997'' 
(December 2002). These data were aged from 1997 to 2000 using relevant 
price changes.
    This work resulted in the identification of 12 separate cost 
categories, the same number found in the 1993-based home health market 
basket. The differences between the major categories for the proposed 
2000-based index and those used for the current 1993-based index are 
summarized in Table 1. We have allocated the Contracted Services weight 
to the Wages and Salaries, Employee Benefits, and Administrative and 
General and Other Expenses cost categories in the proposed 2000-based 
index as we did in the 1993-based index.

 Table 1.--Comparison of 1993 and Proposed 2000-Based Home Health Market
                Basket Major Cost Categories and Weights
------------------------------------------------------------------------
                                     1993-Based home     Proposed 2000-
          Cost categories             health  market   based home health
                                          basket          market basket
------------------------------------------------------------------------
Wages and Salaries, including                  64.226             65.766
 allocated contract services'
 labor............................
Employee Benefits, including                   13.442             11.009
 allocated contract services'
 labor............................
All Other Expenses including                   22.332             23.225
 allocated contract services'
 labor............................
                                   --------------------
    Total.........................            100.000            100.000
------------------------------------------------------------------------

    The complete proposed 2000-based cost categories and weights are 
listed in Table 2.

[[Page 31252]]



     Table 2.--Cost Categories, Weights, and Price Proxies in Proposed 2000-Based Home Health Market Basket
----------------------------------------------------------------------------------------------------------------
                 Cost categories                      Weight                       Price proxy
----------------------------------------------------------------------------------------------------------------
Compensation, including allocated contract              76.775
 services' labor.
    Wages and Salaries, including allocated             65.766  Proposed Home Health Occupational Wage Index.
     contract services' labor.
    Employee Benefits, including allocated              11.009  Proposed Home Health Occupational Benefits
     contract services' labor.                                   Index.
Operations & Maintenance.........................        0.825  CPI Fuel & Other Utilities.
Administrative & General & Other Expenses               16.633
 including allocated contract services' labor*.
    Telephone....................................        0.850  CPI Telephone Services.
    Postage......................................        0.563  CPI Postage.
    Professional Fees*...........................        1.405  ECI for Compensation for Professional and
                                                                 Technical Workers.
    Other Products*..............................        6.419  CPI All Items Less Food and Energy.
    Other Services*..............................        7.396  ECI for Compensation for Service Workers.
Transportation...................................        2.744  CPI Private Transportation.
Capital-Related..................................        3.023
    Insurance....................................        0.275  CPI Household Insurance.
    Fixed Capital................................        1.777  CPI Owner's Equivalent Rent.
    Movable Capital..............................        0.971  PPI Machinery & Equipment.
        Total....................................      100.000  **
----------------------------------------------------------------------------------------------------------------
* New break-out in cost structure when compared with the 1993-Based home health market basket.
** Figures may not sum to total due to rounding.
Note: Price Proxy explanations are described below.
 

    After we computed the 2000 cost category weights for the proposed 
rebased home health market basket, we selected the most appropriate 
wage and price indexes to proxy the rate of change for each expenditure 
category. These price proxies are based on Bureau of Labor Statistics 
(BLS) data and are grouped into one of the following BLS categories:
     Employment Cost Indexes--Employment Cost Indexes (ECIs) 
measure the rate of change in employee wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. They are not affected by shifts in skill mix. ECIs 
are superior to average hourly earnings as price proxies for input 
price indexes for two reasons: (a) They measure pure price change; and 
(b) they are available by occupational groups, not just by industry.
     Consumer Price Indexes--Consumer Price Indexes (CPIs) 
measure change in the prices of final goods and services bought by the 
typical consumer. Consumer price indexes are used when the expenditure 
is more similar to that of a purchase at the retail level rather than 
at the wholesale level, or if no appropriate Producer Price Indexes 
(PPIs) were available.
     Producer Price Indexes--PPIs are used to measure price 
changes for goods sold in other than retail markets. For example, a PPI 
for movable equipment is used rather than a CPI for equipment. PPIs in 
some cases are preferable price proxies for goods that HHAs purchase at 
wholesale levels. These fixed-weight indexes are a measure of price 
change at the producer or at the intermediate stage of production.
    As part of the revising and rebasing of the home health market 
basket, we are proposing to rebase the home health blended wage and 
salary index and the home health blended benefits index. We would use 
these blended indexes as price proxies for the wages and salary and the 
employee benefits portions of the proposed 2000-based home health 
market basket, as we did in the 1993-based home health market basket. 
The price proxies for these two cost categories are the same as those 
used in the 1993-based home health market basket with occupational 
weights reflecting the FY 2000 occupational mix in HHAs. These proxies 
are a combination of internal (health-industry specific) and external 
(economy-wide) proxies. The supply and demand relationships for certain 
professional-technical occupations, such as registered nurses, may be 
more appropriately reflected in the blended indicators of compensation 
changes for professional and technical employees.
3. Price Proxies Used To Measure Cost Category Growth
    a. Wages and Salaries, including an allocation for contract 
services' labor: For measuring price growth in the 2000-based home 
health market basket, as we did in the 1993-based index, five price 
proxies would be applied to the four occupational subcategories within 
the wages and salaries component, and would be weighted to reflect the 
HHA occupational mix. This approach was used because there is not a 
wage proxy for home health care workers that reflects only wage changes 
and not both wage and skill mix changes. The Professional and Technical 
occupational subcategory is represented by a 50-50 blend of hospital 
industry and economy-wide price proxies. Therefore, there are five 
price proxies used for the four occupational subcategories. The 
percentage change in the blended wages and salaries price is applied to 
the wages and salaries component of the home health market basket, 
which is described in Table 3.

[[Page 31253]]



  Table 3.--Proposed Home Health Occupational Wages and Salaries Index
  [Wages and salaries component of the proposed 2000-based home health
                             market basket]
------------------------------------------------------------------------
           Cost category                Weight           Price proxy
------------------------------------------------------------------------
Skilled Nursing & Therapists &              53.816   50 percent
 Other Professional/Technical,                       ECI for Wages &
 including an allocation for                         Salaries in Private
 contract services' labor.                           Industry for
                                                     Professional,
                                                     Specialty &
                                                     Technical Workers.
                                                      50 percent
                                                     ECI for Wages &
                                                     Salaries for
                                                     Civilian Hospital
                                                     Workers.
Managerial/Supervisory, including            7.431  ECI for Wages &
 an allocation for contract                          Salaries in Private
 services' labor.                                    Industry for
                                                     Executive,
                                                     Administrative &
                                                     Managerial Workers.
Clerical, including an allocation            6.822  ECI for Wages &
 for contract services' labor.                       Salaries in Private
                                                     Industry for
                                                     Administrative
                                                     Support, Including
                                                     Clerical Workers.
Service, including an allocation            31.931  ECI for Wages &
 for contract services' labor.                       Salaries in Private
                                                     Industry Service
                                                     Occupations.
                                   ----------------
    Total.........................         100.000
------------------------------------------------------------------------

    We experimented with using a different blend of ECIs for wages and 
salaries. In addition to using 50 percent professional and technical 
workers and 50 percent hospital workers for the professional/technical 
workers category, we also tried using--
     100 percent of the professional and technical ECI;
     50 percent professional/technical and 50 percent health 
services workers; and
     100 percent health services workers.
    There was very little difference between the three wage and salary 
blends and the proposed price proxy. The average difference from 1998 
to 2002 between the price proxy chosen and the experimental blends was 
at most 0.2 percentage point in any given year. We did not propose a 
change from our current blended measure because we believe it reflects 
the competition between HHAs and hospitals for registered nurses, while 
still capturing the overall wage trends for professional and technical 
workers.
    b. Employee Benefits, including an allocation for contract 
services' labor: For measuring employee benefits price growth in the 
2000-based home health market basket, price proxies are applied to the 
four occupational subcategories within the employee benefits component, 
weighted to reflect the home health occupational mix. The professional 
and technical occupational subcategory is represented by a blend of 
hospital industry and economy-wide price proxies. Therefore, there are 
five price proxies for four occupational subcategories. The percentage 
change in the blended price of home health employee benefits is applied 
to this component, which is described in Table 4.

       Table 4.--Proposed Home Health Occupational Benefits Index
   [Employee benefits component of the proposed 2000-based home health
                             market basket]
------------------------------------------------------------------------
           Cost category                Weight           Price proxy
------------------------------------------------------------------------
Skilled Nursing & Therapists &              53.492   50 percent
 Other Professional/Technical,                       ECI for Benefits in
 including an allocation for                         Private Industry
 contract services' labor.                           for Professional,
                                                     Specialty &
                                                     Technical Workers.
                                                     50 percent
                                                     ECI for Benefits
                                                     for Civilian
                                                     Hospital Workers.
Managerial/Supervisory, including            7.232  ECI for Benefits in
 an allocation for contract                          Private Industry
 services' labor.                                    for Executive,
                                                     Administrative &
                                                     Managerial Workers.
Clerical, including an allocation            6.914  ECI for Benefits in
 for contract services' labor.                       Private Industry
                                                     for Administrative
                                                     Support, Including
                                                     Clerical Workers.
Service, including an allocation            32.362  ECI for Benefits in
 for contract services' labor.                       Private Industry
                                                     Service
                                                     Occupations.
                                   ----------------
    Total.........................         100.000
------------------------------------------------------------------------

    As we did for wages and salaries, we analyzed three different 
alternatives to use as a proxy for professional/technical benefits. The 
result of this analysis was similar to that found for wages and 
salaries. Therefore, we are proposing to continue to use the same 50-50 
split for benefits for professional and technical workers (50 percent 
hospital workers and 50 percent professional and technical workers) as 
we did in the 1993-based market basket.
    c. Operations and Maintenance: The percentage change in the price 
of Fuel and Other Utilities as measured by the Consumer Price Index is 
applied to this component. The same proxy was used for the 1993-based 
market basket.
    d. Telephone: The percentage change in the price of Telephone 
Service as measured by the Consumer Price Index is applied to this 
component. The same proxy was used for the 1993-based market basket.
    e. Postage: The percentage change in the price of Postage as 
measured by the Consumer Price Index is applied to this component. The 
same proxy was used for the 1993-based market basket.
    f. Professional Fees: The percentage change in the price of 
Professional Fees as measured by the ECI for Compensation for 
Professional and Technical Workers is applied to this component. This 
category was not broken out separately in the 1993-based home health 
market basket.
    g. Other Products: The percentage change in the price for all items 
less food and energy as measured by the Consumer Price Index is applied 
to this component. This category was not broken out separately in the 
1993-based home health market basket. It includes paper and printing 
that was a separate cost category in the 1993-based home health market 
basket.
    h. Other Services: The percentage change in the Employment Cost 
Index for Compensation for Service Workers is applied to this 
component. This category was not broken out separately

[[Page 31254]]

in the 1993-based home health market basket.
    i. Transportation: The percentage change in the price of 
Transportation as measured by the Consumer Price Index is applied to 
this component. The same proxy was used for the 1993-based market 
basket.
    j. Insurance: The percentage change in the price of Household 
Insurance as measured by the Consumer Price Index is applied to this 
component. The same proxy was used for the 1993-based market basket.
    k. Fixed Capital: The percentage change in the price of Owner's 
Equivalent Rent as measured by the Consumer Price Index is applied to 
this component. The same proxy was used for the 1993-based market 
basket.
    l. Movable Capital: The percentage change in the price of Machinery 
and Equipment as measured by the Producer Price Index is applied to 
this component. The same proxy was used for the 1993-based market 
basket.
    As we did in the 1993-based home health market basket, we allocated 
the Contract Services' share of home health agency expenditures among 
Wages and Salaries, Employee Benefits, Administrative and General and 
Other Expenses. This method reflects the distribution of expenditures 
for contract services as indicated in the Medicare Cost Report.
    Table 5 summarizes the proposed 2000-based proxies and compares 
them to the 1993-based proxies.

   Table 5.--Comparison of Price Proxies Used in the 1993-Based and the Proposed 2000-Based Home Health Market
                                                     Baskets
----------------------------------------------------------------------------------------------------------------
               Cost category                       1993-based price proxy        2000-based proposed price proxy
----------------------------------------------------------------------------------------------------------------
Compensation, including allocated contract                                      ................................
 services' labor:
     Wages and Salaries, including           Home Health Agency Occupational    Same.
     allocated contract services' labor.      Wage Index.
    Employee Benefits, including allocated   Home Health Agency Occupational    Same.
     contract services' labor.                Benefits Index.
Operations and Maintenance.................  CPI-Fuel and Other Utilities.....  Same.
Adminstrative & General & Other Expenses,                                       ................................
 including allocated contract services'
 labor:
    Telephone..............................  CPI-U Telephone..................  Same.
    Postage................................  CPI-U Postage....................  Same.
    Professional Fees......................  N/A..............................  ECI for Compensation for
                                                                                 Professional and Technical
                                                                                 Workers.
    Other Products.........................  N/A..............................  CPI-U for All Items Less Food
                                                                                 and Energy.
    Other Services.........................  DN/A.............................  ECI for Compensation for Service
                                                                                 Workers.
    Other Administrative and General.......  CPI Services.....................  N/A.
    Paper & Printing.......................  CPI for Household Paper Products   N/A.
                                              & Stationary Supplies.
Transportation.............................  CPI Transportation...............  Same.
Capital-Related:                                                                ................................
    Insurance..............................  CPI Household Insurance..........  Same.
    Fixed Capital..........................  CPI Owner's Equivalent Rent......  Same.
    Movable Capital........................  PPI Machinery and Equipment......  Same.
Other Expenses, including allocated          CPI All Items Less Food and        N/A.
 contract services' labor.                    Energy.
Contract Services..........................  Contained within Wages &           Contained within Wages &
                                              Salaries, Employee Benefits,       Salaries, Employee Benefits,
                                              Administrative & General, Other    Administrative & General &
                                              Expenses; see those price          Other Expenses; see those price
                                              proxies.                           proxies.
----------------------------------------------------------------------------------------------------------------

4. Rebasing Results
    A comparison of the yearly changes from FY 1999 to FY 2002 for the 
1993-based home health market basket and the proposed 2000-based home 
health market basket is shown in Table 6. The average annual increase 
in the two market baskets is similar, and in no year is the difference 
as much as 0.1 percentage point.

 Table 6.--Comparison of the 1993-Based Home Health Market Basket and the Proposed 2000-Based Home Health Market
                                        Basket, Percent Change, 1999-2002
----------------------------------------------------------------------------------------------------------------
                                                                              Proposed  home       Difference
                                                            Home health       health  market    (proposed 2000-
            Fiscal years beginning October 1               market basket,     basket,  2000-   based less  1993-
                                                             1993-based           based              based)
----------------------------------------------------------------------------------------------------------------
Historical: October 1998, FY 1999......................                2.8                2.8                0.0
October 1999, FY 2000..................................                3.6                3.5               -0.1
Ocobter 2000, FY 2001..................................                4.2                4.1               -0.1
October 2001, FY 2002..................................                3.6                3.6                0.0
Average Change: 1999-2002..............................                3.6                3.5              -0.1
----------------------------------------------------------------------------------------------------------------
Source: Global Insight, Inc, 4th Qtr, 2003; @USMACRO/CONTROL1103 @CISSIM/TL1103.SIM.


[[Page 31255]]

    Section 1895(b)(3)(B) of the Act, as amended by MMA, requires the 
standard prospective payment amounts to be paid on a calendar year 
basis for 2004 and any subsequent year. Previous market basket updates 
were calculated on a fiscal year basis. Table 7 shows that the 
forecasted rate of growth for CY 2005, beginning January 1, 2005, for 
the proposed rebased and revised home health market basket is 3.3 
percent, while the forecasted rate of growth for the current 1993-based 
home health market basket is also 3.3 percent. As previously mentioned, 
we rebase the home health market basket periodically so the cost 
category weights continue to reflect changes in the mix of goods and 
services that HHAs purchase in furnishing home health care.

  Table 7.--Forecasted Annual Percent Change in the Current and Proposed Revised and Rebased Home Health Market
----------------------------------------------------------------------------------------------------------------
                                                                              Proposed  home       Difference
                                                            Home health       health  market    (proposed 2000-
           Calendar year beginning January 1               market basket,     basket,  2000-   based less  1993-
                                                             1993-based           based              based)
----------------------------------------------------------------------------------------------------------------
January 2005, CY 2005..................................                3.3                3.3               0.0
----------------------------------------------------------------------------------------------------------------
Source: Global Insight, Inc, 4th Qtr, 2003; @USMACRO/CONTROL1103 @CISSIM/TL1103.SIM.


    Table 8 shows the percent changes for CY 2005 for each cost 
category in the home health market basket.

   Table 8.--CY 2005 Forecasted Annual Percent Change for All Cost Categories in the Proposed 2000-Based Home
                                              Health Market Basket
----------------------------------------------------------------------------------------------------------------
                                                                                                    Forecasted
                                                                                                  annual percent
                Cost categories                     Weight                 Price proxy             change for CY
                                                                                                       2005
----------------------------------------------------------------------------------------------------------------
Total.........................................         100.000  ................................             3.3
Compensation..................................          76.775  ................................             3.6
    Wages and Salaries........................          65.766  Proposed Home Health                         3.5
                                                                 Occupational Wage Index.
    Employee Benefits.........................          11.009  Proposed Home Health                         4.3
                                                                 Occupational Benefits Index.
Operations & Maintenance......................           0.825  CPI Fuel & Other Utilities......             0.0
Adminsitrative & General & Other Expenses.....          16.633  ................................             2.5
    Telephone.................................           0.850  CPI Telephone Services..........             0.8
    Postage...................................           0.563  CPI Postage.....................             3.7
    Professional Fees*........................           1.405  ECI for Compensation for                     3.7
                                                                 Professional and Technical
                                                                 Workers.
    Other Products*...........................           6.419  CPI All Items Less Food and                  1.3
                                                                 Energy.
    Other Services*...........................           7.396  ECI for Compensation for Service             3.6
                                                                 Workers.
Transportation................................           2.744  CPI Private Transportation......             2.2
Capital-Related...............................           3.023  ................................             1.8
    Insurance.................................           0.275  CPI Household Insurance.........             3.2
    Fixed Capital.............................           1.777  CPI Owner's Equivalent Rent.....             2.4
    Movable Capital...........................           0.971  PPI Machinery & Equipment.......            0.3
----------------------------------------------------------------------------------------------------------------
* New break-out in cost structure when compared with the 1993-based home health market basket.
Source: Global Insight, Inc, 4th Qtr, 2003; @USMACRO/CONTROL1103 @CISSIM/TL1103.SIM.

5. Labor-Related Share
    In the 1993-based home health market basket the labor-related share 
was 77.668 percent while the remaining nonlabor-related share was 
22.332 percent. In the proposed revised and rebased home health market 
basket, the labor-related share would be 76.775 percent. The labor-
related share includes wages and salaries and employee benefits. The 
proposed nonlabor-related share would be 23.225 percent. The lower 
share of labor-related costs in 2000 may reflect in part the changing 
cost structure associated with the implementation of the prospective 
payment system for HHAs.
    Table 9 details the components of the labor-related share for the 
1993-based and proposed 2000-based home health market baskets.

Table 9.--Labor-Related Share of Current and Proposed Home Health Market
                                 Baskets
------------------------------------------------------------------------
                                         1993-based      Proposed 2000-
            Cost category               market basket     based market
                                           weight         basket weight
------------------------------------------------------------------------
Wages and Salaries..................            64.226            65.766
Employee Benefits...................            13.442            11.009
Total Labor Related.................            77.668            76.775

[[Page 31256]]

 
Total Non-Labor Related.............            22.332            23.225
------------------------------------------------------------------------

C. Proposed CY 2005 Update to the Home Health Market Basket Index

    Section 1895(b)(3)(B) of the Act, as amended by section 701 of the 
MMA, requires for CY 2005 that the standard prospective payment amounts 
be increased by a factor equal to the applicable home health market 
basket increase minus 0.8 percentage point. As previously noted, we are 
proposing to amend the regulations in Sec.  484.225 to reflect this 
requirement.
     Proposed CY 2005 Adjustments
    In calculating the annual update for the CY 2005 60-day episode 
rates, we are proposing to first look at the CY 2004 rates as a 
starting point. The CY 2004 national 60-day episode rate, as modified 
by section 701 of the MMA and implemented through Pub. 100-20 One Time 
Notification, Transmittal 59 issued February 20, 2004 is $2,213.37.
    In order to calculate the CY 2005 national 60-day episode rate, we 
are proposing to multiply the CY 2004 national 60-day episode rate 
($2,213.37) by the applicable home health market basket update of 3.3 
percent for CY 2005 minus 0.8 percentage point.
    We would increase the CY 2004 60-day episode payment rate by the 
proposed home health market basket increase (3.3 percent) minus 0.8 
percentage point ($2,213.37 x 2.5 percent) to yield the proposed 
updated CY 2005 national 60-day episode rate ($2,268.70) (see Table 10 
below).

Table 10.--Proposed National 60-Day Episode Amounts Updated by the Applicable Home Health Market Basket CY 2005,
 Minus 0.8 Percentage Point, Before Case-Mix Adjustment, Wage Index Adjustment Based on the Site of Service for
                                the Beneficiary or Applicable Payment Adjustment
----------------------------------------------------------------------------------------------------------------
                                                                   Multiply by the
                                                               applicable home health   Proposed CY 2005 updated
 Total prospective payment amount per 60-day episode for CY    market basket increase    national 60-day episode
                   2004  (as of 04/04/04)                      (3.3 percent) minus 0.8            rate
                                                                  percentage point
----------------------------------------------------------------------------------------------------------------
$2,213.37...................................................                  x 1.025                 $2,268.70
----------------------------------------------------------------------------------------------------------------

     National Per-visit Amounts Used to Pay LUPAs and Compute 
Imputed Costs Used in Outlier Calculations
    As discussed previously in this proposed rule, the policies 
governing the LUPAs and outlier calculations set forth in the July 3, 
2000 HH PPS final rule will continue during CY 2005. In calculating the 
annual update for the CY 2005 national per-visit amounts we use to pay 
LUPAs and to compute the imputed costs in outlier calculations, we are 
proposing to look again at the CY 2004 rates as a starting point. We 
then are proposing to multiply those amounts by the proposed home 
health market basket increase minus 0.8 percentage point for CY 2005 to 
yield the updated per-visit amounts for each home health discipline for 
CY 2005. (See Table 11 below.)

Table 11.--Proposed National Per-Visit Amounts for LUPAs and Outlier Calculations Updated by the Applicable Home
Health Market Basket Increase for CY 2005, Minus 0.8 Percentage Point, Before Wage Index Adjustment Based on the
                                       Site of Service for the Beneficiary
----------------------------------------------------------------------------------------------------------------
                                                                    Multiply by the
                                       Final per-visit amounts   applicable home health     Proposed per-visit
     Home health discipline type        per 60-day episode for     market basket (3.3       payment amount per
                                        CY 2004 for LUPAs (as      percent) minus 0.8     discipline for CY 2005
                                             of 04/01/04)           percentage point            for LUPAs
----------------------------------------------------------------------------------------------------------------
Home Health Aide.....................                   $43.75                  x 1.025                   $44.84
Medical Social Services..............                   154.89                  x 1.025                   158.76
Occupational Therapy.................                   106.36                  x 1.025                   109.02
Physical Therapy.....................                   105.65                  x 1.025                   108.29
Skilled Nursing......................                    96.63                  x 1.025                    99.05
Speech-Language Pathology............                   114.80                  x 1.025                   117.67
----------------------------------------------------------------------------------------------------------------

D. Proposed Update to the Outlier Fixed Dollar Loss Ratio

    Outlier payments are payments made in addition to regular 60-day 
case-mix and wage-adjusted episode payments for episodes that incur 
unusually large costs due to patient home health care needs. Outlier 
payments are made for episodes whose estimated cost exceeds a threshold 
amount. The episode's estimated cost is the sum of the national wage-
adjusted per-visit payment amounts for all visits delivered during the 
episode. The outlier threshold for each case-mix group, PEP adjustment, 
or total SCIC adjustment is defined as the 60-day episode payment 
amount, PEP adjustment, or total SCIC adjustment for that group plus a 
fixed dollar loss amount. Both components of the outlier threshold are 
wage-adjusted.
    The wage-adjusted fixed dollar loss amount (FDL) represents the 
amount of loss that an agency must bear before an episode becomes 
eligible for outlier payments. The FDL is computed by

[[Page 31257]]

multiplying the wage-adjusted 60-day episode payment amount by the 
fixed dollar loss ratio, which is a proportion expressed in terms of 
the national standardized episode payment amount. The outlier payment 
is defined to be a proportion of the wage-adjusted estimated costs 
beyond the wage-adjusted threshold. The proportion of additional costs 
paid as outlier payments is referred to as the loss-sharing ratio.
    Section 1895(b)(5) of the Act requires that estimated total outlier 
payments are no more than 5 percent of total estimated HH PPS payments. 
In response to the concerns about potential financial losses that might 
result from unusually expensive cases expressed in comments to the 
October 28, 1999 proposed rule (64 FR 58133), the July 2000 final rule 
set the target for estimated outlier payments at the 5 percent level. 
The fixed dollar loss ratio and the loss-sharing ratio were then 
selected so that estimated total outlier payments would meet the 5 
percent target.
    For a given level of outlier payments, there is a trade-off between 
the values selected for the fixed dollar loss ratio and the loss-
sharing ratio. A high fixed dollar loss ratio reduces the number of 
episodes that can receive outlier payments, but makes it possible to 
select a higher loss-sharing ratio and, therefore, increase outlier 
payments for outlier episodes. Alternatively, a lower fixed dollar loss 
ratio means that more episodes can qualify for outlier payments, but 
outlier payments per episode must be lower. As a result of public 
comments on the October 28, 1999 proposed rule, in our July 2000 final 
rule, we made the decision to attempt to cover a relatively high 
proportion of the costs of outlier cases for the most expensive 
episodes that would qualify for outlier payments within the 5 percent 
constraint.
    We chose a value of 0.80 for the loss-sharing ratio, which is 
relatively high, but which preserves incentives for agencies to attempt 
to provide care efficiently for outlier cases. It is also consistent 
with the loss-sharing ratios used in other Medicare PPS outlier 
policies. Having made this decision, we estimated the value of the 
fixed dollar loss ratio that would yield estimated total outlier 
payments that were 5 percent of total home health PPS payments. The 
resulting value for the fixed dollar loss ratio was 1.13.
    Analysis of 100 percent of CY 2001 home health claims data reflects 
that outlier episodes represent approximately 3 percent of total 
episodes and 3 percent of total HH PPS payments. Preliminary analysis 
of CY 2002 home health claims data indicates no change in that 
parameter. Therefore, it is appropriate to update the outlier policy 
based on more recent data than were available when the July 2000 final 
rule for HH PPS was developed. We are proposing to make no change in 
the 5 percent target for outlier expenditures as a percent of total HH 
PPS payments. In addition, we are not proposing to change the loss-
sharing ratio of 0.80. Further, section 1895(b)(3)(C) of the Act 
requires that the episode payment amounts be adjusted to effectively 
pay for outlier payments within the same level of estimated total 
spending. We are not proposing to change the adjustment to the episode 
payment amounts for outlier payments. Therefore, the proposed update 
would only change the fixed dollar loss ratio, and in turn, the fixed 
dollar loss amount.
    We performed data analysis on CY 2001 HH PPS analytic data to 
update the fixed dollar loss ratio to enable the total estimated 
outlier payments to be 5 percent of total HH PPS payments. The results 
of this analysis indicate that a fixed dollar loss ratio of 0.72 is 
consistent with the existing loss-sharing ratio of 0.80 and a target 
percentage of estimated outlier payments of 5 percent. Consequently, we 
are proposing to update the fixed dollar loss ratio from the current 
ratio of 1.13 to the fixed dollar loss ratio of 0.72. Reducing the 
fixed dollar loss ratio from 1.13 to 0.72 would allow approximately 6.5 
percent of episodes to qualify for outlier payments. The estimated 6.5 
percent outlier episodes is greater than the 3.0 percent of episodes 
that currently qualify for outlier payments, and is about the same as 
the 6.8 percent for outlier episodes that we estimated in our July 2000 
final rule.
    Expressed in terms of a fixed dollar loss amount, the proposed 
fixed dollar loss ratio of 0.72 implies that providers would absorb 
approximately $1,633 of their costs (before wage adjustment), in 
addition to their loss-sharing portion of the estimated cost in excess 
of the outlier threshold. This fixed dollar loss amount of 
approximately $1,633 is computed by multiplying the proposed standard 
60-day episode payment amount ($2,268.70) by the proposed fixed dollar 
loss ratio (0.72). Using the current fixed dollar loss ratio (1.13), 
the fixed dollar loss amount would be approximately $2,564 ($2,268.70 * 
1.13). We believe that our proposed fixed dollar loss ratio of 0.72 
preserves a reasonable degree of cost sharing, while allowing a greater 
number of episodes to qualify for outlier payments. In the final rule, 
following publication of this proposed rule, we plan to update our 
estimate of the fixed dollar loss ratio using the most current, 
complete year of HH PPS data available.
    The following analytical tables 12(a) through 12(f), derived from 
analysis of CY 2001 home health claims data, characterize outlier 
episodes, and depict the differences between outlier and non-outlier 
episodes with regards to home health resource groups (HHRGs) and visit 
disciplines. Tables 12(a) through 12(f) illustrate various 
characteristics of outlier episodes. Outlier episodes are more likely 
to be of a higher clinical severity than are non-outlier episodes. 
Functional status levels are, however, very similar across all types of 
episodes. Our analysis further shows that outlier episodes are less 
likely to be high in therapy use than non-outlier episodes. In 
addition, the top high volume HHRGs seen in outlier episodes are also 
seen as high volume HHRGs in non-outlier episodes. Finally, our 
analysis also shows that skilled nursing visits are highly prevalent in 
outlier episodes. This analysis excludes LUPAs, as those episodes 
inherently do not involve the use of HHRGs and hence are not paid based 
on HHRGs. In the final rule, we will confirm all data analysis based on 
100 percent home health claims for CY 2002 and available preliminary CY 
2003 home health claims data.

   Table 12-a.--Severity Level Comparison of HHRG's Clinical Domain in
                     Outlier & Non-Outlier Episodes
------------------------------------------------------------------------
    Clinical domain       Percentage  of outlier    Percentage of non-
     severity level              episodes            outlier episodes
------------------------------------------------------------------------
                 C1                      9                      20
                 C2                     19                      33
                 C3[hairsp]*            52                      36
                 C4[hairsp]*            20                     11
------------------------------------------------------------------------
* Outlier episodes are more likely to be of a higher clinical severity
  level than are non-outlier episodes.


  Table 12-b.--Severity Level Comparison of HHRG's Functional Domain in
                    Outlier and Non-Outlier Episodes
------------------------------------------------------------------------
   Functional domain      Percentage  of outlier    Percentage of non-
     severity level              episodes            outlier episodes
------------------------------------------------------------------------
               F0                        6                       7
               F1                       22                      25
               F2                       47                      43
               F3                       13                      13
               F4                       12                      12
------------------------------------------------------------------------


    Note: Functional status levels are similar for both outlier and 
non-outlier episodes.


[[Page 31258]]



 Table 12-c.--High-Therapy Episode Comparison in Outlier and Non-Outlier
                                Episodes
------------------------------------------------------------------------
                                                              Percentage
                                                  Percentage    of non-
                 Type of episode                  of outlier    outlier
                                                   episodes    episodes
------------------------------------------------------------------------
Episodes with 10 or more therapy visits.........        11*          24
All Other Episodes..............................         89         76
------------------------------------------------------------------------
* Outlier episodes are less likely to be episodes with high therapy use
  (at least 10 therapy visits) than are non-outlier episodes.


                     Table 12-d.--Top 10 HHRG Comparison in Outlier and Non-Outlier Episodes
----------------------------------------------------------------------------------------------------------------
                                                                   Percentage of                   Percentage of
                  HHRG (weight)                    Outlier rank       outlier       Non-outlier     non-outlier
                                                                     episodes          rank          episodes
----------------------------------------------------------------------------------------------------------------
C2F2S0..........................................               1            20.3               2            10.7
C2F1S0..........................................               2            12.4               6             5.1
C1F2S0..........................................               3             6.1               1            11.3
C3F2S0..........................................               4             5.8              13             2.4
C1F1S0..........................................               5             5.3               3             6.4
C3F4S0..........................................               6             5.0               8             3.9
C2F3S0..........................................               7             4.8              11             3.2
C2F4S0..........................................               8             3.8              10             3.5
C3F0S0..........................................               9             3.6              23             1.3
C3F3S0..........................................              10             3.3              20             1.4
C0F2S0..........................................              11             3.1               4             6.0
C0F1S0..........................................              12             2.6               5             5.7
C2F2S1..........................................              15             1.7               7             4.1
C1F2S2..........................................              18             1.0               9             3.7
Top 10 HHRGs, Outlier Episodes..................  ..............            70.4  ..............  ..............
Top 10 HHRGs, Non-Outlier Episodes..............  ..............  ..............  ..............           60.4
----------------------------------------------------------------------------------------------------------------
Note: Except for two HHRGs (C3F0S0 & C3F3S0), the top 10 HHRGs that occur in outlier episodes are also within
  the top 13 HHRGs in non-outlier episodes.



   Table 12-e.--Percentages of Visit Types in Outlier and Non-Outlier
                                Episodes
------------------------------------------------------------------------
                                              Outlier       Non-outlier
           Home health visits                episodes        episodes
------------------------------------------------------------------------
Average Total Visits....................            84.5            19.7
Percentage of Total Visits:
    Skilled Nursing Visits \1\..........            75.3            45.1
    Home Health Aide Visits.............            18.6            26.3
    Physical Therapy Visits \2\.........             3.8            22.8
    Occupational Therapy Visits \2\.....             1.4             4.0
    Speech Therapy Visits \2\...........             0.5             0.8
    Medical Social Visits...............             0.4            1.0
------------------------------------------------------------------------
\1\ Skilled nursing visits make up a significantly greater percentage of
  total visits in outlier episodes than in non-outlier episodes.
\2\ Therapy visits are a substantially smaller percentage of total
  visits in outlier episodes than in non-outlier episodes.


 Table 12-f.--Probability of at Least 1 Occurrence of a Particular Type
       of Visit in an Episode for Outlier and Non-Outlier Episodes
------------------------------------------------------------------------
                                              Outlier       Non-outlier
           Home health visits                episodes        episodes
                                             (percent)       (percent)
------------------------------------------------------------------------
Probability of at least 1 service
 occurring:
    Skilled Nursing Visits \1\..........            99.8            89.3
    Home Health Aide Visits \2\.........            44.6            35.6
    Physical Therapy (PT) Visits \3\....            27.9            48.6
    Occupational Therapy (OT) Visits....            11.6            14.4
    Speech Therapy Visits...............             3.4             2.7
    Medical Social Visits...............            16.4            12.5

[[Page 31259]]

 
    Any Therapy (PT, OT, Speech)........            29.4           50.4
------------------------------------------------------------------------
\1\ Skilled nursing visits are almost always present in outlier
  episodes.
\2\ Home health aide visits occur in slightly less than 50 percent of
  outlier episodes.
\3\ Physical Therapy is less likely to occur in an outlier episode than
  in a non-outlier episode.

E. Rural Add-On as Required by the MMA

    As discussed in section I.D. of this preamble, section 421 of the 
MMA requires, for home health services furnished in a rural area with 
respect to episodes and visits ending on or after April 1, 2004 and 
before April 1, 2005, that we increase by 5 percent the payment amount 
that otherwise would be made for these services. The statute waives 
budget neutrality related to this provision. By statute, the 5 percent 
rural add-on applies to home health services furnished in a rural area 
(as defined in section 1886(d)(2)(D) of the Act) for episodes and 
visits ending on or after April 1, 2004 and before April 1, 2005. 
Therefore, the 5 percent rural add-on ends after the first quarter of 
CY 2005 for episodes and visits ending before April 1, 2005. After the 
rural add-on is determined, the applicable case-mix and wage index 
adjustment is then subsequently applied for the provision of home 
health services where the site of service is the non-Metropolitan 
Statistical Area (MSA) of the beneficiary. Similarly, the applicable 
wage index adjustment is subsequently applied to the LUPA per visit 
amounts adjusted for the provision of home health services where the 
site of service for the beneficiary is a non-MSA area. We implemented 
this provision for CY 2004 on April 1, 2004 through Pub. 100-20 One 
Time Notification, Transmittal 59 issued February 20, 2004. The CY 2005 
5 percent rural add-on is noted in tables below.

 Table 13.--Proposed CY 2005 Rural Add-On to 60-Day Episode Payment Amounts Ending On or After April 1, 2004 and
   Before April 1, 2005 for Beneficiaries Who Reside in a Non-MSA Area Before Case-Mix Adjustment, Wage Index
          Adjustment Based on the Site of Service for the Beneficiary or Applicable Payment Adjustment
----------------------------------------------------------------------------------------------------------------
                                                                                         Proposed CY 2005 final
                                                                                         payment amount per 60-
                                                                                           day episode ending
Proposed total prospective payment amount per 60-day episode   5 percent rural add-on   before April 1, 2005 for
                         for CY 2005                                                        a beneficiary who
                                                                                          resides in a non-MSA
                                                                                                  area
----------------------------------------------------------------------------------------------------------------
$2,268.70...................................................                   x 1.05                 $2,382.14
----------------------------------------------------------------------------------------------------------------


  Table 14.--Proposed CY 2005 Add-On to LUPA Per-Visit Amounts for Visits Ending On or After April 1, 2004 and
 Before April 1, 2005, Before Wage Index Adjustment Based on the Site of Service of the Beneficiary Who Resides
                               in a Non-MSA Area or Payment Applicable Adjustment
----------------------------------------------------------------------------------------------------------------
                                                                                          Proposed CY 2005 per-
                                                                                          visit payment amounts
                                          Proposed per-visit                                per 60-day episode
     Home health discipline type       payment amounts per 60-   5 percent rural add-on   ending before April 1,
                                       day episode for CY 2005                             2005 for LUPAs for a
                                              for LUPAs                                  beneficiary who resides
                                                                                            in a non-MSA area
----------------------------------------------------------------------------------------------------------------
Home Health Aide.....................                   $44.84                   x 1.05                   $47.08
Medical Social Services..............                   158.76                   x 1.05                   166.70
Occupational Therapy.................                   109.02                   x 1.05                   114.47
Physical Therapy.....................                   108.29                   x 1.05                   113.70
Skilled Nursing......................                    99.05                   x 1.05                   104.00
Speech-Language Pathology............                   117.67                   x 1.05                   123.55
----------------------------------------------------------------------------------------------------------------

F. Hospital Wage Index

    Sections 1895(b)(4)(A)(ii) and (b)(4)(C) of the Act require the 
Secretary to establish area wage adjustment factors that reflect the 
relative level of wages and wage-related costs applicable to the 
furnishing of home health services and to provide appropriate 
adjustments to the episode payment amounts under HH PPS to account for 
area wage differences. We apply the appropriate wage index value to the 
labor portion of the HH PPS rates based on the geographic area in which 
the beneficiary received home health services. We determine each HHA's 
labor market area based on definitions of Metropolitan Statistical 
Areas (MSAs) issued by the Office of Management and Budget (OMB). We 
recognize that on June 6, 2003, the Office of Management and Budget 
(OMB) issued OMB Bulletin No. 03-04, announcing revised definitions of 
Metropolitan Statistical Areas, and new definitions of Micropolitan 
Statistical Areas, and Combined Statistical Areas. A copy of the 
Bulletin

[[Page 31260]]

may be obtained at the following Internet address: http://www.whitehouse.gov/omb/bulletins/b03-04.html. These new definitions 
will not be applied to the CY 2005 wage index used in this proposed 
update to the HH payment rates.
    On May 18, 2004, we published a proposed rule entitled ``Medicare 
Program; Changes to the Hospital Inpatient Prospective Payment Systems 
and FY 2005 Rates'' (69 FR 28195), which discusses some of the issues 
associated with using these new definitions and proposes to use these 
new definitions for the Inpatient Hospital PPS for FY 2005. We believe 
it is appropriate to wait until the public comments on that proposed 
rule have been submitted and analyzed before we consider proposing any 
new labor market definitions in the home health context.
    As discussed previously and set forth in the July 3, 2000 final 
rule, the statute provides that the wage adjustment factors may be the 
factors used by the Secretary for purposes of section 1886(d)(3)(E) of 
the Act for hospital wage adjustment factors. Again, as discussed in 
the July 3, 2000 final rule, we are proposing to use the pre-floor and 
pre-reclassified hospital wage index to adjust the labor portion of the 
HH PPS rates based on the geographic area in which the beneficiary 
receives the home health services. We believe the use of the pre-floor 
and pre-reclassified hospital wage index results in the appropriate 
adjustment to the labor portion of the costs as required by statute. 
For this update to the CY 2005 home health payment rates, we propose to 
continue to use the most recent pre-floor and pre-reclassified hospital 
wage index available at the time of the final rule. Due to the mandated 
change from a fiscal year update cycle to that of a calendar year 
update cycle, the most recent pre-floor and pre-reclassified hospital 
wage index available for this update of the CY 2005 home health payment 
rates will be that of the 2005 pre-floor/pre-reclassified hospital wage 
index.
    Under previous fiscal year updates, the most recent pre-floor and 
pre-reclassified hospital wage index available at the time of 
publication of the HH PPS fiscal year update was that of the previous 
year. Beginning with the CY 2005 update to home health payment rates, 
the most recent pre-floor and pre-reclassified hospital wage index 
available at the time of publication will be that of the current year. 
Consequently, for our proposed CY 2005 update to the home health 
payment rates, we propose to continue to use the most recent pre-floor 
and pre-reclassified hospital wage index available at the time of 
publication. We recognize that this change to a calendar year update 
cycle results in using the current year's wage index values. See 
addenda A and B of this proposed rule, respectively, for the proposed 
rural and urban hospital wage indexes. Furthermore, we have added an 
addendum C that shows a side-by-side comparison of the FY 2003 pre-
floor and pre-reclassified hospital wage index and proposed CY 2005 
pre-floor and pre-reclassified hospital wage index for the CY 2005 HH 
PPS update proposed rule. For HH PPS rates addressed in this proposed 
rule, we are using a preliminary 2005 pre-floor and pre-reclassified 
hospital wage index. We will incorporate updated wage data for the 2005 
pre-floor and pre-reclassified hospital wage index in the final rule 
for the CY 2005 HH PPS update.

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

IV. Response to Comments

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

V. 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. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely reassigns responsibility of duties) directs agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
The update set forth in this proposed rule would apply to Medicare 
payments under HH PPS in CY 2005. Accordingly, the following analysis 
describes the impact in CY 2005 only. We estimate that there would be 
an additional $270 million in CY 2005 expenditures attributable to the 
CY 2005 proposed market basket (3.3 percent), minus 0.8 percentage 
point, an estimated increase of 2.5 percent.
    Section 421 of the MMA provides for a 5 percent increase in home 
health payments to rural providers for episodes and visits ending after 
April 1, 2004 and before April 1, 2005. This increase is not subject to 
budget neutrality. Consequently, this increase in payments to rural 
providers will result in an estimated increase in expenditures of $20 
million in FY 2004 and $100 million in FY 2005.
    Section 701 of the MMA includes a provision that changes the update 
cycle for HH PPS, and thus the home health market basket update, from a 
fiscal year basis to that of a calendar year basis in 2004. This 
results in a projected reduction in expenditures of approximately $90 
million in FY 2005.
    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 $6 
million to $29 million or less annually (for details, see the Small 
Business Administration's regulation that set forth size standards for 
health care industries at 65 FR 69432). For purposes of the RFA, 
approximately 75 percent of HHAs are considered small businesses 
according to the Small Business Administration's size standards with 
total revenues of $11.5 million or less in 1 year. Individuals and 
States are not included in the definition of a small

[[Page 31261]]

entity. As stated above, this proposed rule would provide an update to 
all HHAs for CY 2005 as required by statute. This proposed rule would 
have a significant positive effect upon small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area (MSA) and has fewer than 100 beds. We have determined 
that this proposed rule would not have a significant economic impact on 
the operations of a substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure in any 1 year by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $110 million. We believe this proposed rule would not 
mandate expenditures in that amount.
    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 reviewed this rule under the threshold criteria 
of Executive Order 13132, Federalism. We have determined that this 
proposed rule would not have substantial direct effects on the rights, 
roles, and responsibilities of States.

B. Anticipated Effects

    In accordance with the requirements of section 1895(b)(3) of the 
Act, we publish an update for each subsequent fiscal year that will 
provide an update to the payment rates. Section 1895(b)(3)(B) of the 
Act, as amended by section 701 of the MMA, requires us, for CY 2005, to 
increase the prospective payment amounts by the applicable home health 
market basket increase minus 0.8 percentage point. We estimate that 
with a proposed home health market basket of 3.3 percent minus 0.8 
percentage point, the estimated proposed increase for CY 2005 is 2.5 
percent.
1. Effects on the Medicare Program
    This proposed rule would merely provide a percentage update to all 
Medicare HHAs. Therefore, we have not furnished any impact tables. We 
would increase the payment to each Medicare HHA equally by the home 
health market basket update for CY 2005, minus 0.8 percentage point, as 
required by statute. There is no differential impact among provider 
types. The impact is in the aggregate. We can show the impact that the 
proposed CY 2005 wage index would have on providers. Addendum C shows a 
side-by-side comparison of the FY 2003 pre-floor and pre-reclassified 
hospital wage index and the proposed CY 2005 pre-floor and pre-
reclassified hospital wage index for the CY 2005 HH PPS update proposed 
rule. We estimate that there would be an additional $270 million in CY 
2005 expenditures attributable to the CY 2005 proposed market basket 
(3.3 percent), minus 0.8 percentage point, estimated increase resulting 
in 2.5 percent. Thus, the anticipated expenditures outlined in this 
proposed rule would exceed the $100 million annual threshold for a 
major rule as defined in Title 5, USC, section 804(2).
    We estimate that the applicable home health market basket (minus 
0.8 percentage point) increase of 2.5 percent for CY 2005 applies to 
all Medicare-participating HHAs. We do not believe there is a 
differential impact due to the aggregate nature of the update.

                                Table 15
------------------------------------------------------------------------
                                                      Additional CY 2005
                                                         Medicare home
 CY 2005 update to home health PPS rates required by   health  estimated
                       the act                         expenditures due
                                                       to annual  update
                                                        required by law
------------------------------------------------------------------------
Section 1895(b)(3)(B) of the Act requires HH PPS               \1\ $270
 rates increased by applicable home health market
 basket increase (3.3 percent) minus 0.8 percentage
 point, yielding 2.5 percent........................
------------------------------------------------------------------------
Source: President's FY 2004 Budget.
\1\ In millions.

2. Effects on Providers
    This proposed rule would have a positive effect on providers of 
Medicare home health services by increasing their rate of Medicare 
payment. We do not anticipate specific effects on other providers. This 
proposed rule would reflect the statutorily required annual update to 
the HH PPS rates. We do not believe there is a differential impact due 
to the consistent and aggregate nature of the update.

C. Alternatives Considered

    As discussed in section II, this proposed rule reflects an annual 
update to the HH PPS rates as required by statute. We believe that the 
statute provides no latitude for alternatives other than the approach 
set forth in this proposed rule reflecting the CY 2005 proposed annual 
update to the HH PPS rates. Other than the positive effect of the 
market basket increase, this proposed rule would not have a significant 
economic impact nor would it impose an additional burden on small 
entities. When a regulation or notice imposes additional burden on 
small entities, we are required under the RFA to examine alternatives 
for reducing burden.
    As discussed in the ``Rebasing and Revising the Home Health Market 
Basket'' section of this proposed rule, we believe that it is desirable 
to rebase the home health market basket periodically. Consequently, as 
part of this proposed rule, we are proposing to rebase and revise the 
home health market basket by moving the base year from FY 1993 to FY 
2000 to reflect the latest available, thorough data on the structure of 
HHA costs. CMS periodically rebases and revises market baskets for 
multiple types of health care providers, generally on a 5-year cycle. 
We continue to believe that by rebasing and revising the home health 
market basket periodically, cost category weights will better reflect 
changes in the mix of goods and services that HHAs purchase in 
furnishing home health

[[Page 31262]]

care. The alternative to not rebase and revise the market basket would 
be to delay the inevitable task of rebasing and revising the home 
health market basket to some later date. For this proposed rule, the 
forecasted rate of growth for CY 2005 for both the proposed rebased and 
revised home health market basket and the current 1993-based home 
health market basket is 3.3 percent (see Table 7 of this proposed 
rule). However, it should be noted that while for this proposed rule 
the home health market basket percentage is the same for both the 1993-
based and the proposed 2000-based rate of growth, that future updates 
will be better served by using a more up-to-date cost structure, as 
proposed in the revised and rebased home health market basket.
    Section 1895(b)(5) of the Act states that the total amount of 
payments for outliers, under HH PPS, may not exceed 5 percent of the 
total payments projected or estimated to be made for a given fiscal 
year or years. As discussed in the ``Proposed Update to the Outlier 
Fixed Dollar Loss Ratio'' section of this proposed rule, we are 
proposing to reduce the fixed dollar loss ratio used in the formula to 
determine outlier cases in HH PPS, from that of 1.13 to 0.72. Analysis 
indicates that a fixed dollar loss ratio of 0.72 is consistent with the 
existing loss-sharing ratio of 0.80 and our target percentage of 
estimated outlier payments of 5 percent of total home health payments. 
Other alternatives considered in the updating of the formula for 
determining outlier cases included updating/changing the loss-sharing 
ratio from that of 0.80 as well as changing the outlier payment target 
of to less than 5 percent of total home health payments. We believe 
that a value of 0.80 for the loss-sharing ratio is appropriate in that 
it preserves incentives for agencies to provide care efficiently for 
outlier cases. Similarly, we continue to believe that the total outlier 
payment target of 5 percent of total home health payments appropriately 
targets the most costly cases under HH PPS.

D. Conclusion

    We have examined the economic impact of this proposed rule on small 
entities and have determined that the economic impact is positive, 
significant, and that all HHAs would be affected. To the extent that 
small rural hospitals are affiliated with HHAs, the impact on these 
facilities would also be positive. Finally, we have determined that the 
economic effects described above are largely the result of the specific 
statutory provisions, which this proposed rule serves to announce.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 484

    Health facilities, Health professions, Medicare, Reporting and 
recordkeeping requirements.

    For the reasons set forth in the preamble, 42 CFR chapter IV is 
proposed to be amended as set forth below:

PART 484--HOME HEALTH SERVICES

    1. The authority citation for part 484 continues to read as 
follows:

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

    2. Section 484.225 is amended as follows:
    A. Paragraph (d) is redesignated as paragraph (g) and is revised.
    B. New paragraph (d) is added.
    C. New paragraph (e) is added.
    D. New paragraph (f) is added.
    The revisions and additions read as follows: Sec.  484.225 Annual 
update of the unadjusted national prospective 60-day episode payment 
rate.
* * * * *
    (d) For the last calendar quarter of 2003 and the first calendar 
quarter of 2004, the unadjusted national prospective 60-day episode 
payment rate is equal to the rate from the previous fiscal year (FY 
2003) increased by the applicable home health market basket index 
amount.
    (e) For the last 3 calendar quarters of 2004, the unadjusted 
national prospective 60-day episode payment rate is equal to the rate 
from the previous fiscal year (FY 2003) increased by the applicable 
home health market basket minus 0.8 percentage point.
    (f) For each calendar year of 2005 and 2006, the unadjusted 
national prospective 60-day episode payment rate is equal to the rate 
from the previous calendar year, increased by the applicable home 
health market basket minus 0.8 percentage point.
    (g) For 2007 and subsequent calendar years, the unadjusted national 
rate is equal to the rate for the previous calendar year increased by 
the applicable home health market basket index amount.


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

    Dated: November 5, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: April 23, 2004.
Tommy G. Thompson,
Secretary.

    Note: The following addenda will not be published in the Code of 
Federal Regulations.


 Addendum A.--Proposed Wage Index for Rural Areas--Applicable Pre-Floor
                and Pre-Reclassified Hospital Wage Index
                                [CY 2005]
------------------------------------------------------------------------
                                                                  Wage
                           MSA name                              index
------------------------------------------------------------------------
ALABAMA......................................................     0.7492
ALASKA.......................................................     1.1886
ARIZONA......................................................     0.9270
ARKANSAS.....................................................     0.7734
CALIFORNIA...................................................     0.9967
COLORADO.....................................................     0.9328
CONNECTICUT..................................................     1.2183
DELAWARE.....................................................     0.9557
FLORIDA......................................................     0.8855
GEORGIA......................................................     0.8369
GUAM.........................................................     0.9611
HAWAII.......................................................     0.9958
IDAHO........................................................     0.8974
ILLINOIS.....................................................     0.8254
INDIANA......................................................     0.8824
IOWA.........................................................     0.8416
KANSAS.......................................................     0.8074
KENTUCKY.....................................................     0.7973
LOUISIANA....................................................     0.7451
MAINE........................................................     0.8812
MARYLAND.....................................................     0.9125
MASSACHUSETTS................................................     1.0432
MICHIGAN.....................................................     0.8877
MINNESOTA....................................................     0.9330
MISSISSIPPI..................................................     0.7778
MISSOURI.....................................................     0.8056
MONTANA......................................................     0.8800
NEBRASKA.....................................................     0.8822
NEVADA.......................................................     0.9806
NEW HAMPSHIRE................................................     1.0030
NEW JERSEY \1\
NEW MEXICO...................................................     0.8270
NEW YORK.....................................................     0.8526
NORTH CAROLINA...............................................     0.8456
NORTH DAKOTA.................................................     0.7778
OHIO.........................................................     0.8820
OKLAHOMA.....................................................     0.7537
OREGON.......................................................     0.9994
PENNSYLVANIA.................................................     0.8378
PUERTO RICO..................................................     0.4018
RHODE ISLAND \1\
SOUTH CAROLINA...............................................     0.8498
SOUTH DAKOTA.................................................     0.8195
TENNESSEE....................................................     0.7886
TEXAS........................................................     0.7780
UTAH.........................................................     0.8974
VERMONT......................................................     0.9307
VIRGINIA.....................................................     0.8498
VIRGIN ISLANDS...............................................     0.7195
WASHINGTON...................................................     1.0388
WEST VIRGINIA................................................     0.8018
WISCONSIN....................................................     0.9304

[[Page 31263]]

 
WYOMING......................................................    0.9110
------------------------------------------------------------------------
\1\ All counties within State are classified as Urban.


 Addendum B.--Proposed CY 2005 Wage Index for Urban Areas--Pre-Floor and
                  Pre-Reclassified Hospital Wage Index
------------------------------------------------------------------------
                                                                  Wage
            MSA              Urban area (constituent counties)    index
------------------------------------------------------------------------
0040.......................  Abilene, TX......................    0.7627
                             Taylor, TX
0060.......................  Aguadilla, PR....................    0.4306
                             Aguada, PR
                             Aguadilla, PR
                             Moca, PR
0080.......................  Akron, OH........................    0.9246
                             Portage, OH
                             Summit, OH
0120.......................  Albany, GA.......................    1.0863
                             Dougherty, GA
                             Lee, GA
0160.......................  Albany-Schenectady-Troy, NY......    0.8489
                             Albany, NY
                             Montgomery, NY
                             Rensselaer, NY
                             Saratoga, NY
                             Schenectady, NY
                             Schoharie, NY
0200.......................  Albuquerque, NM..................    0.9300
                             Bernalillo, NM
                             Sandoval, NM
                             Valencia, NM
0220.......................  Alexandria, LA...................    0.8019
                             Rapides, LA
0240.......................  Allentown-Bethlehem-Easton, PA...    0.9721
                             Carbon, PA
                             Lehigh, PA
                             Northampton, PA
0280.......................  Altoona, PA......................    0.8806
                             Blair, PA
0320.......................  Amarillo, TX, Potter, TX.........    0.8986
                             Randall, TX
0380.......................  Anchorage, AK....................    1.2216
                             Anchorage, AK
0440.......................  Ann Arbor, MI....................    1.1074
                             Lenawee, MI
                             Livingston, MI
                             Washtenaw, MI
0450.......................  Anniston, AL.....................    0.8090
                             Calhoun, AL
0460.......................  Appleton-Oshkosh-Neenah, WI......    0.9035
                             Calumet, WI
                             Outagamie, WI
                             Winnebago, WI
0470.......................  Arecibo, PR......................    0.4155
                             Arecibo, PR
                             Camuy, PR
                             Hatillo, PR
0480.......................  Asheville, NC....................    0.9720
                             Buncombe, NC
                             Madison, NC
0500.......................  Athens, GA.......................    0.9818
                             Clarke, GA
                             Madison, GA
                             Oconee, GA
0520.......................  Atlanta, GA......................    1.0130
                             Barrow, GA
                             Bartow, GA
                             Carroll, GA
                             Cherokee, GA
                             Clayton, GA
                             Cobb, GA
                             Coweta, GA
                             DeKalb, GA
                             Douglas, GA
                             Fayette, GA
                             Forsyth, GA
                             Fulton, GA
                             Gwinnett, GA
                             Henry, GA
                             Newton, GA
                             Paulding, GA
                             Pickens, GA
                             Rockdale, GA
                             Spalding, GA
                             Walton, GA
0560.......................  Atlantic-Cape May, NJ............    1.0795
                             Atlantic, NJ
                             Cape May, NJ
0580.......................  Auburn-Opelka, AL................    0.8494
                             Lee, AL
0600.......................  Augusta-Aiken, GA-SC.............    0.9625
                             Columbia, GA
                             McDuffie, GA
                             Richmond, GA
                             Aiken, SC
                             Edgefield, SC
0640.......................  Austin-San Marcos, TX............    0.9609
                             Bastrop, TX
                             Caldwell, TX
                             Hays, TX
                             Travis, TX
                             Williamson, TX
0680.......................  Bakersfield, CA..................    0.9810
                             Kern, CA
0720.......................  Baltimore, MD....................    0.9919
                             Anne Arundel, MD
                             Baltimore City, MD
                             Carroll, MD
                             Harford, MD
                             Howard, MD
                             Queen Annes, MD
0733.......................  Bangor, ME.......................    0.9904
                             Penobscot, ME
0743.......................  Barnstable-Yarmouth, MA..........    1.2956
                             Barnstable, MA
0760.......................  Baton Rouge, LA..................    0.8406
                             Ascension, LA
                             East Baton Rouge, LA
                             Livingston, LA
                             West Baton Rouge, LA
0840.......................  Beaumont-Port Arthur, TX.........    0.8424
                             Hardin, TX
                             Jefferson, TX
                             Orange, TX
0860.......................  Bellingham, WA...................    1.1757
                             Whatcom, WA
0870.......................  Benton Harbor, MI................    0.8935
                             Berrien, MI
0875.......................  Bergen-Passaic, NJ...............    1.1692
                             Bergen, NJ
                             Passaic, NJ
0880.......................  Billings, MT.....................    0.8961
                             Yellowstone, MT
0920.......................  Biloxi-Gulfport-Pascagoula, MS...    0.9029
                             Hancock, MS
                             Harrison, MS
                             Jackson, MS
0960.......................  Binghamton, NY...................    0.8428
                             Broome, NY
                             Tioga, NY
1000.......................  Birmingham, AL...................    0.9212
                             Blount, AL
                             Jefferson, AL
                             St. Clair, AL
                             Shelby, AL
1010.......................  Bismarck, ND.....................    0.7965
                             Burleigh, ND
                             Morton, ND
1020.......................  Bloomington, IN..................    0.8662
                             Monroe, IN
1040.......................  Bloomington-Normal, IL...........    0.8832
                             McLean, IL
1080.......................  Boise City, ID...................    0.9209
                             Ada, ID
                             Canyon, ID
1123.......................  Boston-Worcester-Lawrence-Lowell-    1.1233
                              Brockton, MA-NH.
                             Bristol, MA
                             Essex, MA
                             Middlesex, MA
                             Norfolk, MA
                             Plymouth, MA
                             Suffolk, MA
                             Worcester, MA
                             Hillsborough, NH
                             Merrimack, NH
                             Rockingham, NH
                             Strafford, NH
1125.......................  Boulder-Longmont, CO.............    1.0049
                             Boulder, CO
1145.......................  Brazoria, TX.....................    0.8137
                             Brazoria, TX
1150.......................  Bremerton, WA....................    1.0580
                             Kitsap, WA
1240.......................  Brownsville-Harlingen-San Benito,    1.0303
                              TX.
                             Cameron, TX......................
1260.......................  Bryan-College Station, TX........    0.9019
                             Brazos, TX
1280.......................  Buffalo-Niagara Falls, NY........    0.9604
                             Erie, NY
                             Niagara, NY
1303.......................  Burlington, VT...................    0.9704
                             Chittenden, VT
                             Franklin, VT
                             Grand Isle, VT
1310.......................  Caguas, PR.......................    0.4158
                             Caguas, PR

[[Page 31264]]

 
                             Cayey, PR
                             Cidra, PR
                             Gurabo, PR
                             San Lorenzo, PR
1320.......................  Canton-Massillon, OH.............    0.9071
                             Carroll, OH
                             Stark, OH
1350.......................  Casper, WY.......................    0.9095
                             Natrona, WY
1360.......................  Cedar Rapids, IA.................    0.8874
                             Linn, IA
1400.......................  Champaign-Urbana, IL.............    0.9907
                             Champaign, IL
1440.......................  Charleston-North Charleston, SC..    0.9332
                             Berkeley, SC
                             Charleston, SC
                             Dorchester, SC
1480.......................  Charleston, WV...................    0.8880
                             Kanawha, WV
                             Putnam, WV
1520.......................  Charlotte-Gastonia-Rock Hill, NC-    0.9730
                              SC.
                             Cabarrus, NC
                             Gaston, NC
                             Lincoln, NC
                             Mecklenburg, NC
                             Rowan, NC
                             Stanley, NC
                             Union, NC
                             York, SC
1540.......................  Charlottesville, VA..............    1.0025
                             Albemarle, VA
                             Charlottesville City, VA
                             Fluvanna, VA
                             Greene, VA
1560.......................  Chattanooga, TN-GA...............    0.9086
                             Catoosa, GA
                             Dade, GA
                             Walker, GA
                             Hamilton, TN
                             Marion, TN
1580.......................  Cheyenne, WY.....................    0.8796
                             Laramie, WY
1600.......................  Chicago, IL......................    1.0892
                             Cook, IL
                             DeKalb, IL
                             DuPage, IL
                             Grundy, IL
                             Kane, IL
                             Kendall, IL
                             Lake, IL
                             McHenry, IL
                             Will, IL
1620.......................  Chico-Paradise, CA...............    1.0193
                             Butte, CA
1640.......................  Cincinnati, OH-KY-IN                 0.9413
                             Dearborn, IN
                             Ohio, IN
                             Boone, KY
                             Campbell, KY
                             Gallatin, KY
                             Grant, KY
                             Kenton, KY
                             Pendleton, KY
                             Brown, OH
                             Clermont, OH
                             Hamilton, OH
                             Warren, OH
1660.......................  Clarksville-Hopkinsville, TN-KY..    0.8244
                             Christian, KY
                             Montgomery, TN
1680.......................  Cleveland-Lorain-Elyria, OH......    0.9671
                             Ashtabula, OH
                             Cuyahoga, OH
                             Geauga, OH
                             Lake, OH
                             Lorain, OH
                             Medina, OH
1720.......................  Colorado Springs, CO.............    0.9833
                             El Paso, CO
1740.......................  Columbia, MO.....................    0.8695
                             Boone, MO
1760.......................  Columbia, SC.....................    0.8902
                             Lexington, SC
                             Richland, SC
1800.......................  Columbus, GA-AL..................    0.8694
                             Russell, AL
                             Chattahoochee, GA
                             Harris, GA
                             Muscogee, GA
1840.......................  Columbus, OH.....................    0.9648
                             Delaware, OH
                             Fairfield, OH
                             Franklin, OH
                             Licking, OH
                             Madison, OH
                             Pickaway, OH
1880.......................  Corpus Christi, TX...............    0.8521
                             Nueces, TX
                             San Patricio, TX
1890.......................  Corvallis, OR....................    1.1516
                             Benton, OR
1900.......................  Cumberland, MD-WV................    0.8200
                             Allegany, MD
                             Mineral, WV
1920.......................  Dallas, TX.......................    0.9974
                             Collin, TX
                             Dallas, TX
                             Denton, TX
                             Ellis, TX
                             Henderson, TX
                             Hunt, TX
                             Kaufman, TX
                             Rockwall, TX
1950.......................  Danville, VA.....................    0.9035
                             Danville City, VA
                             Pittsylvania, VA
1960.......................  Davenport-Moline-Rock Island, IA-    0.8985
                              IL
                             Scott, IA
                             Henry, IL
                             Rock Island, IL
2000.......................  Dayton-Springfield, OH...........    0.9518
                             Clark, OH
                             Greene, OH
                             Miami, OH
                             Montgomery, OH
2020.......................  Daytona Beach, FL................    0.9060
                             Flagler, FL
                             Volusia, FL
2030.......................  Dacatur, AL......................    0.8828
                             Lawrence, AL
                             Morgan, AL
2040.......................  Dacatur, IL......................    0.8161
                             Macon, IL
2080.......................  Denver, CO.......................    1.0837
                             Adams, CO
                             Arapahoe, CO
                             Denver, CO
                             Douglas, CO
                             Jefferson, CO
2120.......................  Des Moines, IA...................    0.9106
                             Dallas, IA                         ........
                             Polk, IA
                             Warren, IA
2160.......................  Detroit, MI......................    1.0101
                             Lapeer, MI
                             Macomb, MI
                             Monroe, MI
                             Oakland, MI
                             St. Clair, MI
                             Wayne, MI
2180.......................  Dothan, AL.......................    0.7741
                             Dale, AL
                             Houston, AL
2190.......................  Dover, DE........................    0.9805
                             Kent, DE
2200.......................  Dubuque, IA......................    0.8886
                             Dubuque, IA
2240.......................  Duluth-Superior, MN-WI...........    1.0171
                             St. Louis, MN
                             Douglas, WI
2281.......................  Dutchess County, NY..............    1.0934
                             Dutchess, NY
2290.......................  Eau Claire, WI...................    0.9064
                             Chippewa, WI
                             Eau Claire, WI
2320.......................  El Paso, TX......................    0.9196
                             El Paso, TX
2330.......................  Elkhart-Goshen, IN...............    0.9783
                             Elkhart, IN
2335.......................  Elmira, NY.......................    0.8377
                             Chemung, NY
2340.......................  Enid, OK.........................    0.8559
                             Garfield, OK
2360.......................  Erie, PA.........................    0.8601
                             Erie, PA
2400.......................  Eugene-Springfield, OR...........    1.1456
                             Lane, OR
2440.......................  Evansville-Henderson, IN-KY......    0.8429
                             Posey, IN
                             Vanderburgh, IN
                             Warrick, IN
                             Henderson, KY
2520.......................  Fargo-Moorhead, ND-MN............    0.9797
                             Clay, MN
                             Cass, ND
2560.......................  Fayetteville, NC.................    0.8986
                             Cumberland, NC
2580.......................  Fayetteville-Springdale-Rogers,      0.8396
                              AR.
                             Benton, AR
                             Washington, AR
2620.......................  Flagstaff, AZ-UT.................    1.1333
                             Coconino, AZ
                             Kane, UT
2640.......................  Flint, MI........................    1.0858

[[Page 31265]]

 
                             Genesee, MI
2650.......................  Florence, AL.....................    0.7747
                             Colbert, AL
                             Lauderdale, AL
2655.......................  Florence, SC.....................    0.8709
                             Florence, SC
2670.......................  Fort Collins-Loveland, CO........    1.0108
                             Larimer, CO
2680.......................  Ft. Lauderdale, FL...............    1.0163
                             Broward, FL
2700.......................  Fort Myers-Cape Coral, FL........    0.9816
                             Lee, FL
2710.......................  Fort Pierce-Port St. Lucie, FL...    1.0008
                             Martin, FL
                             St. Lucie, FL
2720.......................  Fort Smith, AR-OK................    0.8424
                             Crawford, AR
                             Sebastian, AR
                             Sequoyah, OK
2750.......................  Fort Walton Beach, FL............    0.8966
                             Okaloosa, FL
2760.......................  Fort Wayne, IN...................    0.9585
                             Adams, IN
                             Allen, IN
                             De Kalb, IN
                             Huntington, IN
                             Wells, IN
                             Whitley, IN
2800.......................  Forth Worth-Arlington, TX........    0.9359
                             Hood, TX
                             Johnson, TX
                             Parker, TX
                             Tarrant, TX
2840.......................  Fresno, CA.......................    1.0142
                             Fresno, CA
                             Madera, CA
2880.......................  Gadsden, AL......................    0.8206
                             Etowah, AL
2900.......................  Gainesville, FL..................    0.9693
                             Alachua, FL
2920.......................  Galveston-Texas City, TX.........    0.9279
                             Galveston, TX
2960.......................  Gary, IN.........................    0.9410
                             Lake, IN
                             Porter, IN
2975.......................  Glens Falls, NY..................    0.8475
                             Warren, NY
                             Washington, NY
2980.......................  Goldsboro, NC....................    0.8622
                             Wayne, NC
2985.......................  Grand Forks, ND-MN...............    0.8636
                             Polk, MN
                             Grand Forks, ND
2995.......................  Grand Junction, CO...............    0.9633
                             Mesa, CO
3000.......................  Grand Rapids-Muskegon-Holland, MI    0.9469
                             Allegan, MI
                             Kent, MI
                             Muskegon, MI
                             Ottawa, MI
3040.......................  Great Falls, MT..................    0.8809
                             Cascade, MT
3060.......................  Greeley, CO......................    0.9372
                             Weld, CO
3080.......................  Green Bay, WI....................    0.9461
                             Brown, WI
3120.......................  Greensboro-Winston-Salem-High        0.9166
                              Point, NC.
                             Alamance, NC
                             Davidson, NC
                             Davie, NC
                             Forsyth, NC
                             Guilford, NC
                             Randolph, NC
                             Stokes, NC
                             Yadin, NC
3150.......................  Greenville, NC...................    0.9098
                             Pitt, NC
3160.......................  Greenville, Spartanburg-Anderson,    0.9335
                              SC.
                             Anderson, SC
                             Cherokee, SC
                             Greenville, SC
                             Pickens, SC
                             Spartanburg, SC
3180.......................  Hagerstown, MD...................    0.9172
                             Washington, MD
3200.......................  Hamilton-Middletown, OH..........    0.9214
                             Butler, OH
3240.......................  Harrisburg-Lebanon-Carlisle, PA..    0.9164
                             Cumberland, PA
                             Dauphin, PA
                             Lebanon, PA
                             Perry, PA
3283.......................  Hartford, CT.....................    1.1555
                             Hartford, CT
                             Litchfield, CT
                             Middlesex, CT
                             Tolland, CT
3285.......................  Hattiesburg, MS..................    0.7307
                             Forrest, MS
                             Lamar, MS
3290.......................  Hickory-Morganton-Lenoir, NC.....    0.9242
                             Alexander, NC
                             Burke, NC
                             Caldwell, NC
                             Catawaba, NC
3320.......................  Honolulu, HI.....................    1.1098
                             Honolulu, HI
3350.......................  Houma, LA........................    0.7771
                             Lafourche, LA
                             Terrebonne, LA
3360.......................  Houston, TX......................    0.9834
                             Chambers, TX
                             Fort Bend, TX
                             Harris, TX
                             Liberty, TX
                             Montgomery, TX
                             Waller, TX
3400.......................  Huntington-Ashland, WV-KY-OH.....    0.9595
                             Boyd, KY
                             Carter, KY
                             Grenup, KY
                             Lawrence, OH
                             Cabell, WV
                             Wayne, WV
3440.......................  Huntsville, AL...................    0.9245
                             Limestone, AL
                             Madison, AL
3480.......................  Indianapolis, IN.................    0.9916
                             Boone, IN
                             Hamilton, IN
                             Hancoock, IN
                             Hendricks, IN
                             Johnson, IN
                             Madison, IN
                             Marion, IN
                             Morgan, IN
                             Shelby, IN
3500.......................  Iowa City, IA....................    0.9548
                             Johnson, IA
3520.......................  Jackson, MI......................    0.8986
                             Jackson, MI
3560.......................  Jackson, MS......................    0.8357
                             Hinds, MS
                             Madison, MS
                             Rankin MS
3580.......................  Jackson, TN......................    0.8984
                             Madison, TN
                             Chester, TN
3600.......................  Jacksonville, FL.................   10.9529
                             Clay, FL
                             Duval, FL
                             Nassau, FL
                             St. Johns, FL
3605.......................  Jacksonville, NC.................    0.8544
                             Onslow, NC
3610.......................  Jamestown, NY....................    0.7762
                             Chautauqua, NY
3620.......................  Janesville-Beloit, WI............    0.9282
                             Rock, WI
3640.......................  Jersey City, NJ..................    1.1115
                             Hudson, NJ
3660.......................  Johnson City-Kingsport-Bristol,      0.8253
                              TN-VA.
                             Carter, TN.......................
                             Hawkins, TN
                             Sullivan, TN
                             Unicoi, TN
                             Washington, TN
                             Bristol City, VA
                             Scott, VA
                             Washington, VA
3680.......................  Johnstown, PA....................    0.8158
                             Cambria, PA
                             Somerset, PA
3700.......................  Jonesboro, AR....................    0.7794
                             Craighead, AR
3710.......................  Joplin, MO.......................    0.8681
                             Jasper, MO
                             Newton, MO
3720.......................  Kalamazoo-Battlecreek, MI            1.0500
                             Calhoun, MI
                             Kalamazoo, MI
                             Van Buren, MI
3740.......................  Kankakee, IL.....................    1.0419
                             Kankakee, IL
3760.......................  Kansas City, KS-MO...............    0.9715
                             Johnson, KS
                             Leavenworth, KS
                             Miami, KS
                             Wyandotte, KS
                             Cass, MO
                             Clay, MO

[[Page 31266]]

 
                             Clinton, MO
                             Jackson, MO
                             Lafayette, MO
                             Platte, MO
                             Ray, MO
3800.......................  Kenosha, WI......................    0.9761
                             Kenosha, WI
3810.......................  Killeen-Temple, TX...............    0.9159
                             Bell, TX
                             Coryell, TX
3840.......................  Knoxville, TN....................    0.8820
                             Anderson, TN
                             Blount, TN
                             Knox, TN
                             Loudon, TN
                             Sevier, TN
                             Union, TN
 3850......................  Kokomo, IN.......................    0.9045
                             Howard, IN
                             Tipton, IN
3870.......................  La Crosse, WI-MN.................    0.9247
                             Houston, MN
                             La Crosse, WI
3880.......................  Lafayette, LA....................    0.8207
                             Acadia, LA
                             Lafayette, LA
                             St. Landry, LA
                             St. Martin, LA
3920.......................  Lafayette, IN....................    0.9036
                             Clinton, IN
                             Tippecanoe, IN
3960.......................  Lake Charles, LA.................    0.7841
                             Calcasieu, LA
3980.......................  Lakeland-Winter Haven, FL........    0.8811
                             Polk, FL
4000.......................  Lancaster, PA....................    0.9282
                             Lancaster, PA
4040.......................  Lansing-East Lansing, MI.........    0.9714
                             Clinton, MI
                             Eaton, MI
                             Ingham, MI
4080.......................  Laredo, TX.......................    0.8091
                             Webb, TX
4100.......................  Las Cruces, NM...................    0.8688
                             Dona Ana, NM
4120.......................  Las Vegas, NV-AZ.................    1.1528
                             Mohave, AZ
                             Clark, NV
                             Nye, NV
4150.......................  Lawrence, KS.....................    0.8074
                             Douglas, KS
4200.......................  Lawton, OK.......................    0.8267
                             Comanche, OK
4243.......................  Lewiston-Auburn, ME..............    0.9383
                             Androscoggin, ME
4280.......................  Lexington, KY....................    0.8685
                             Bourbon, KY
                             Clark, KY
                             Fayette, KY
                             Jessamine, KY
                             Madison, KY
                             Scott, KY
                             Woodford, KY
4320.......................  Lima, OH.........................    0.9522
                             Allen, OH
                             Auglaize, OH
4360.......................  Lincoln, NE......................    1.0033
                             Lancaster, NE
4400.......................  Little Rock-North Little Rock, AR    0.8923
                             Faulkner, AR
                             Lonoke, AR
                             Pulaski, AR
                             Saline, AR
4420.......................  Longview-Marshall, TX............    0.9113
                             Gregg, TX
                             Harrison, TX
                             Upshur, TX
4480.......................  Los Angeles-Long Beach, CA.......    1.1795
                             Los Angeles, CA
4520.......................  Louisville, KY-IN................    0.9242
                             Clark, IN
                             Floyd, IN
                             Harrison, IN
                             Scott, IN
                             Bullitt, KY
                             Jefferson, KY
                             Oldham, KY
4600.......................  Lubbock, TX......................    0.8272
                             Lubbock, TX
4640.......................  Lynchburg, VA....................    0.9134
                             Amherst, VA
                             Bedford, VA
                             Bedford City, VA
                             Campbell, VA
                             Lynchburg City, VA
4680.......................  Macon, GA........................    0.8953
                             Bibb, GA
                             Houston, GA
                             Jones, GA
                             Peach, GA
                             Twiggs, GA
4720.......................  Madison, WI......................    1.0264
                             Dane, WI
4800.......................  Mansfield, OH....................    0.9180
                             Crawford, OH
                             Richland, OH
4840.......................  Mayaguez, PR.....................    0.4795
                             Anasco, PR
                             Cabo Rojo, PR
                             Hormigueros, PR
                             Mayaguez, PR
                             Sabana Grande, PR
                             San German, PR
4880.......................  McAllen-Edinburg-Mission, TX.....    0.8381
                             Hidalgo, TX
4890.......................  Medford-Ashland, OR..............    1.0772
                             Jackson, OR
4900.......................  Melbourne-Titusville-Palm Bay, FL    0.9776
                             Brevard, FL
4920.......................  Memphis, TN-AR-MS................    0.9009
                             Crittenden, AR
                             DeSoto, MS
                             Fayette, TN
                             Shelby, TN
                             Tipton, TN
4940.......................  Merced, CA.......................    0.9692
                             Merced, CA
5000.......................  Miami, FL........................    0.9894
                             Dade, FL
5015.......................  Middlesex-Somerset-Hunterdon, NJ.    1.1366
                             Hunterdon, NJ
                             Middlesex, NJ
                             Somerset, NJ
5080.......................  Milwaukee-Waukesha, WI...........    0.9988
                             Milwaukee, WI
                             Ozaukee, WI
                             Washington, WI
                             Waukesha, WI
5120.......................  Minneapolis-St. Paul, MN-WI......    1.1001
                             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
                             Missoula, MT
5160.......................  Mobile, AL.......................    0.7994
                             Baldwin, AL
                             Mobile, AL
5170.......................  Modesto, CA......................    1.1275
                             Stanislaus, CA
5190.......................  Monmouth-Ocean, NJ...............    1.0956
                             Monmouth, NJ
                             Ocean, NJ
5200.......................  Monroe, LA.......................    0.7922
                             Ouachita, LA
5240.......................  Montgomery, AL...................    0.7907
                             Autauga, AL
                             Elmore, AL
                             Montgomery, AL
5280.......................  Muncie, IN.......................    0.8775
                             Delaware, IN
5330.......................  Myrtle Beach, SC.................    0.9112
                             Horry, SC
5345.......................  Naples, FL.......................    0.9790
                             Collier, FL
5360.......................  Nashville, TN....................    0.9855
                             Cheatham, TN
                             Davidson, TN
                             Dickson, TN
                             Robertson, TN
                             Rutherford, TN
                             Sumner, TN
                             Williamson, TN
                             Wilson, TN
5380.......................  Nassau-Suffolk, NY...............    1.3140
                             Nassau, NY
                             Suffolk, NY
5483.......................  New Haven-Bridgeport-Stamford-       1.2385
                              Waterbury-Danbury, CT.
                             Fairfield, CT
                             New Haven, CT
5523.......................  New London-Norwich, CT...........    1.1631
                             New London, CT

[[Page 31267]]

 
5560.......................  New Orleans, LA..................    0.9174
                             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
                             Bronx, NY
                             Kings, NY
                             New York, NY
                             Putnam, NY
                             Queens, NY
                             Richmond, NY
                             Rockland, NY
                             Westchester, NY
5640.......................  Newark, NJ.......................    1.1518
                             Essex, NJ
                             Morris, NJ
                             Sussex, NJ
                             Union, NJ
                             Warren, NJ
5660.......................  Newburgh, NY--PA.................    1.1509
                             Orange, NY
                             Pike, PA
5720.......................  Norfolk-Virginia Beach-Newport       0.8619
                              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
                             Alameda, CA
                             Contra Costa, CA
5790.......................  Ocala, FL........................    0.9728
                             Marion, FL
5800.......................  Odessa-Midland, TX...............    0.9327
                             Ector, TX
                             Midland, TX
5880.......................  Oklahoma City, OK................    0.8984
                             Canadian, OK
                             Cleveland, OK
                             Logan, OK
                             McClain, OK
                             Oklahoma, OK
                             Pottawatomie, OK
5910.......................  Olympia, WA......................    1.0963
                             Thurston, WA
5920.......................  Omaha, NE-IA.....................    0.9745
                             Pottawattamie, IA
                             Cass, NE
                             Douglas, NE
                             Sarpy, NE
                             Washington, NE
5945.......................  Orange County, CA................    1.1372
                             Orange, CA
5960.......................  Orlando, FL......................    0.9654
                             Lake, FL
                             Orange, FL
                             Osceola, FL
                             Seminole, FL
5990.......................  Owensboro, KY....................    0.8374
                             Daviess, KY
6015.......................  Panama City, FL..................    0.8202
                             Bay, FL
6020.......................  Parkersburg-Marietta, WV-OH......    0.8039
                             Washington, OH
                             Wood, WV
6080.......................  Pensacola, FL....................    0.8753
                             Escambia, FL
                             Santa Rosa, FL
6120.......................  Peoria-Pekin, IL.................    0.8734
                             Peoria, IL
                             Tazewell, IL
                             Woodford, IL
6160.......................  Philadelphia, PA-NJ..............    1.0883
                             Burlington, NJ
                             Camden, NJ
                             Gloucester, NJ
                             Salem, NJ
                             Bucks, PA
                             Chester, PA
                             Delaware, PA
                             Mongtomery, PA
                             Philadelphia, PA
6200.......................  Phoenix-Mesa, AZ.................    1.0129
                             Maricopa, AZ
                             Pinal, AZ
6240.......................  Pine Bluff, AR...................    0.7865
                             Jefferson, AR
6280.......................  Pittsburgh, PA...................    0.8901
                             Allegheny, PA
                             Beaver, PA
                             Butler, PA
                             Fayette, PA
                             Washington, PA
                             Westmoreland, PA
6323.......................  Pittsfield, MA...................    1.0276
                             Berkshire, MA
6340.......................  Pocatello, ID....................    0.9042
                             Bannock, ID
6360.......................  Ponce, PR........................    0.4708
                             Guayanilla, PR
                             Juana Diaz, PR
                             Penuelas, PR
                             Ponce, PR
                             Villalba, PR
                             Yauco, PR
6403.......................  Portland, ME.....................    0.9949
                             Cumberland, ME
                             Sagadahoc, ME
                             York, ME
6440.......................  Portland-Vancouver, OR-WA........    1.1213
                             Clackamas, OR
                             Columbia, OR
                             Multnomah, OR
                             Washington, OR
                             Yamhill, OR
                             Clark, WA
6483.......................  Providence-Warwick-Pawtucket, RI.    1.0977
                             Bristol, RI
                             Kent, RI
                             Newport, RI
                             Providence, RI
                             Washington, RI
6520.......................  Provo-Orem, UT...................    0.9976
                             Utah, UT
6560.......................  Pueblo, CO.......................    0.8778
                             Pueblo, CO
6580.......................  Punta Gorda, FL..................    0.9510
                             Charlotte, FL
6600.......................  Racine, WI.......................    0.8814
                             Racine, WI
6640.......................  Raleigh-Durham-Chapel Hill, NC...    0.9959
                             Chatham, NC
                             Durham, NC
                             Franklin, NC
                             Johnston, NC
                             Orange, NC
                             Wake, NC
6660.......................  Rapid City, SD...................    0.8806
                             Pennington, SD
6680.......................  Reading, PA......................    0.9133
                             Berks, PA
6690.......................  Redding, CA......................    1.1352
                             Shasta, CA
6720.......................  Reno, NV.........................    1.0682
                             Washoe, NV
6740.......................  Richland-Kennewick-Pasco, WA.....    1.0609
                             Benton, WA
                             Franklin, WA
6760.......................  Richmond-Petersburg, VA..........    0.9349
                             Charles City County, VA
                             Chesterfield, VA
                             Colonia 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.....    1.1348
                             Riverside, CA
                             San Bernardino, CA
6800.......................  Roanoke, VA......................    0.8700
                             Botetourt, VA
                             Roanoke, VA
                             Roanoke City, VA
                             Salem City, VA
6820.......................  Rochester, MN....................    1.1739
                             Olmsted, MN
6840.......................  Rochester, NY....................    0.9430
                             Genesee, NY
                             Livingston, NY
                             Monroe, NY
                             Ontario, NY
                             Orleans, NY
                             Wayne, NY

[[Page 31268]]

 
6880.......................  Rockford, IL.....................    0.9666
                             Boone, IL
                             Ogle, IL
                             Winnebago, IL
6895.......................  Rocky Mount, NC..................    0.9076
                             Edgecombe, NC
                             Nash, NC
6920.......................  Sacramento, CA...................    1.1845
                             El Dorado, CA
                             Placer, CA
                             Sacramento, CA
6960.......................  Saginaw-Bay City-Midland, MI.....    1.0032
                             Bay, MI
                             Midland, MI
                             Saginaw, MI
6980.......................  St. Cloud, MN....................    0.9506
                             Benton, MN
                             Stearns, MN
7000.......................  St. Joseph, MO...................    0.8056
                             Andrew, MO
                             Buchanan, MO
7040.......................  St. Louis, MO-IL.................    0.9033
                             Clinton, IL
                             Jersey, IL
                             Madison, IL
                             Monroe, IL
                             St. Clair, IL
                             Franklin, MO
                             Jefferson, MO
                             Lincoln, MO
                             St. Charles, MO
                             St. Louis, MO
                             St. Louis City, MO
                             Warren, MO
7080.......................  Salem, OR........................    1.0482
                             Marion, OR
                             Polk, OR
7120.......................  Salinas, CA......................    1.4339
                             Monterey, CA
7160.......................  Salt Lake City-Ogden, UT.........    0.9913
                             Davis, UT
                             Salt Lake, UT
                             Weber, UT
7200.......................  San Angelo, TX...................    0.8535
                             Tom Green, TX
7240.......................  San Antonio, TX..................    0.8870
                             Bexar, TX
                             Comal, TX
                             Guadalupe, TX
                             Wilson, TX
7320.......................  San Diego, CA....................    1.1147
                             San Diego, CA
7360.......................  San Francisco, CA................    1.4514
                             Marin, CA
                             San Francisco, CA
                             San Mateo, CA
7400.......................  San Jose, CA.....................    1.4626
                             Santa Clara, CA
7440.......................  San Juan-Bayamon, PR.............    0.4909
                             Aguas Buenas, PR
                             Barceloneta, PR
                             Bayamon, PR
                             Canovanas, PR
                             Carolina, PR
                             Catano, PR
                             Ceiba, PR
                             Comerio, PR
                             Corozal, PR
                             Dorado, PR
                             Fajardo, PR
                             Florida, PR
                             Guaynabo, PR
                             Humacao, PR
                             Juncos, PR
                             Los Piedras, PR
                             Loiza, PR
                             Luguillo, PR
                             Manati, PR
                             Morovis, PR
                             Naguabo, PR
                             Naranjito, PR
                             Rio Grande, PR
                             San Juan, PR
                             Toa Alta, PR
                             Toa Baja, PR
                             Trujillo Alto, PR
                             Vega Alta, PR
                             Vega Baja, PR
                             Yabucoa, PR
7460.......................  San Luis Obispo-Atascadero-Paso..    1.1429
                             Robles, CA
                             San Luis Obispo, CA
7480.......................  Santa Barbara-Santa Maria-Lompoc,    1.0441
                              CA
                             Santa Barbara, CA
7485.......................  Santa Cruz-Watsonville, CA           1.2942
                             Santa Cruz, CA
7490.......................  Santa Fe, NM.....................    1.0653
                             Los Alamos, NM
                             Santa Fe, NM
7500.......................  Santa Rosa, CA...................    1.2877
                             Sonoma, CA
7510.......................  Sarasota-Bradenton, FL...........    0.9964
                             Manatee, FL
                             Sarasota, FL
7520.......................  Savannah, GA.....................    0.9472
                             Bryan, GA
                             Chatham, GA
                             Effingham, GA
7560.......................  Scranton-Wilkes-Barre-Hazleton,      0.8412
                              PA
                             Columbia, PA
                             Lackawanna, PA
                             Luzerne, PA
                             Wyoming, PA
7600.......................  Seattle-Bellevue-Everett, WA         1.1562
                             Island, WA
                             King, WA
                             Snohomish, WA
7610.......................  Sharon, PA.......................    0.7751
                             Mercer, PA
7620.......................  Sheboygan, WI....................    0.8624
                             Sheboygan, WI
7640.......................  Sherman-Denison, TX..............    0.9700
                             Grayson, TX
7680.......................  Shreveport-Bossier City, LA          0.9083
                             Bossier, LA
                             Caddo, LA
                             Webster, LA
7720.......................  Sioux City, IA-NE................    0.8993
                             Woodbury, IA
                             Dakota, NE
7760.......................  Sioux Falls, SD..................    0.9309
                             Lincoln, SD
                             Minnehaha, SD
7800.......................  South Bend, IN...................    0.9821
                             St. Joseph, IN
7840.......................  Spokane, WA......................    1.0901
                             Spokane, WA
7880.......................  Springfield, IL..................    0.8944
                             Menard, IL
                             Sangamon, IL
7920.......................  Springfield, MO..................    0.8457
                             Christian, MO
                             Greene, MO
                             Webster, MO
8003.......................  Springfield, MA..................    1.0543
                             Hampden, MA
                             Hampshire, MA
8050.......................  State College, PA................    0.8740
                             Centre, PA
8080.......................  Steubenville-Weirton, OH-WV          0.8398
                             Jefferson, OH
                             Brooke, WV
                             Hancock, WV
8120.......................  Stockton-Lodi, CA................    1.0404
                             San Joaquin, CA
8140.......................  Sumter, SC.......................    0.8243
                             Sumter, SC
8160.......................  Syracuse, NY.....................    0.9412
                             Cayuga, NY
                             Madison, NY
                             Onondaga, NY
                             Oswego, NY
8200.......................  Tacoma, WA.......................    1.1116
                             Pierce, WA
8240.......................  Tallahassee, FL..................    0.8520
                             Gadsden, FL
                             Leon, FL
8280.......................  Tampa-St. Petersburg-Clearwater,     0.9103
                              FL.
                             Hernando, FL
                             Hillsborough, FL
                             Pasco, FL
                             Pinellas, FL
8320.......................  Terre Haute, IN..................    0.8325
                             Clay, IN
                             Vermillion, IN
                             Vigo, IN
8360.......................  Texarkana, AR-Texarkana, TX......    0.8150
                             Miller, AR
                             Bowie, TX
8400.......................  Toledo, OH.......................    0.9381
                             Fulton, OH
                             Lucas, OH
                             Wood, OH
8440.......................  Topeka, KS.......................    0.9108
                             Shawnee, KS
8480.......................  Trenton, NJ......................    1.0517
                             Mercer, NJ
8520.......................  Tucson, AZ.......................    0.8981
                             Pima, AZ
8560.......................  Tulsa, OK........................    0.9185
                             Creek, OK

[[Page 31269]]

 
                             Osage, OK
                             Rogers, OK
                             Tulsa, OK
                             Wagoner, OK
8600.......................  Tuscaloosa, AL...................    0.8212
                             Tuscaloosa, AL
8640.......................  Tyler, TX........................    0.9404
                             Smith, TX
8680.......................  Utica-Rome, NY...................    0.8403
                             Herkimer, NY
                             Oneida, NY
8720.......................  Vallejo-Fairfield-Napa, CA.......    1.3377
                             Napa, CA
                             Solano, CA
8735.......................  Ventura, CA......................    1.1064
                             Ventura, CA
8750.......................  Victoria, TX.....................    0.8184
                             Victoria, TX
8760.......................  Vineland-Millville-Bridgeton, NJ.    1.0405
                             Cumberland, NJ
8780.......................  Visalia-Tulare-Porterville, CA...    0.9856
                             Tulare, CA
8800.......................  Waco, TX.........................    0.8394
                             McLennan, TX
8840.......................  Washington, DC-MD-VA-WV..........    1.0904
                             District of Columbia, DC
                             Calvert, MD
                             Charles, MD
                             Frederick, MD
                             Montgomery, MD
                             Prince Georges, MD
                             Alexandria City, VA
                             Arlington, VA
                             Clarke, VA
                             Culpeper, VA
                             Fairfax, VA
                             Fairfax City, VA
                             Falls Church City, VA
                             Fauquier, VA
                             Fredericksburg City, VA
                             King George, VA
                             Loudoun, VA
                             Manassas City, VA
                             Manassas Park City, VA
                             Prince William, VA
                             Spotsylvania, VA
                             Stafford, VA
                             Warren, VA
                             Berkeley, WV
                             Jefferson, WV
8920.......................  Waterloo-Cedar Falls, IA.........    0.8366
                             Black Hawk, IA
8940.......................  Wausau, WI.......................    0.9692
                             Marathon, WI
8960.......................  West Palm Beach-Boca Raton, FL...    0.9798
                             Palm Beach, FL
9000.......................  Wheeling, WV-OH..................    0.7494
                             Belmont, OH
                             Marshall, WV
                             Ohio, WV
9040.......................  Wichita, KS......................    0.9238
                             Butler, KS
                             Harvey, KS
                             Sedgwick, KS
9080.......................  Wichita Falls, TX................    0.8341
                             Archer, TX
                             Wichita, TX
9140.......................  Williamsport, PA.................    0.8158
                             Lycoming, PA
9160.......................  Wilmington-Newark, DE-MD.........    1.0882
                             New Castle, DE
                             Cecil, MD
9200.......................  Wilmington, NC...................    0.9563
                             New Hanover, NC
                             Brunswick, NC
9260.......................  Yakima, WA.......................    1.0372
                             Yakima, WA
9270.......................  Yolo, CA.........................    0.9204
                             Yolo, CA
9280.......................  York, PA.........................    0.9119
                             York, PA
9320.......................  Youngstown-Warren, OH............    0.9214
                             Columbiana, OH
                             Mahoning, OH
                             Trumbull, OH
9340.......................  Yuba City, CA....................    1.0196
                             Sutter, CA
                             Yuba, CA
9360.......................  Yuma, AZ.........................    0.8895
                             Yuma, AZ
------------------------------------------------------------------------


 Addendum C.--Comparison of Pre-Floor and Pre-Reclassified Hospital Wage
                 Index for FY 2003 and Proposed CY 2005
------------------------------------------------------------------------
                                                Proposed      Percent
                                     FY 2003    CY 2005     change, FY
            Rural area                 wage       wage    2003--proposed
                                      index      index        CY 2005
------------------------------------------------------------------------
ALABAMA...........................      0.766     0.7492         -2.19
ALASKA............................     1.2293     1.1886         -3.31
ARIZONA...........................     0.8493     0.9270          9.15
ARKANSAS..........................     0.7666     0.7734          0.89
CALIFORNIA........................     0.9840     0.9967          1.29
COLORADO..........................     0.9015     0.9328          3.47
CONNECTICUT.......................     1.2394     1.2183         -1.70
DELAWARE..........................     0.9128     0.9557          4.70
FLORIDA...........................     0.8814     0.8855          0.47
GEORGIA...........................     0.8230     0.8369          1.69
GUAM..............................     0.9611     0.9611
HAWAII............................     1.0255     0.9958         -2.90
IDAHO.............................     0.8747     0.8974          2.60
ILLINOIS..........................     0.8204     0.8254          0.61
INDIANA...........................     0.8755     0.8824          0.79
IOWA..............................     0.8315     0.8416          1.21
KANSAS............................     0.7923     0.8074          1.91
KENTUCKY..........................     0.8079     0.7973         -1.31
LOUISIANA.........................     0.7567     0.7451         -1.53
MAINE.............................     0.8874     0.8812         -0.70
MARYLAND..........................     0.8946     0.9125          2.00
MASSACHUSETTS.....................     1.1288     1.0432         -7.58
MICHIGAN..........................     0.9000     0.8877         -1.37
MINNESOTA.........................     0.9151     0.9330          1.96
MISSISSIPPI.......................     0.7680     0.7778          1.28

[[Page 31270]]

 
MISSOURI..........................     0.8021     0.8056          0.44
MONTANA...........................     0.8481     0.8800          3.76
NEBRASKA..........................     0.8204     0.8822          7.53
NEVADA............................     0.9577     0.9806          2.39
NEW HAMPSHIRE.....................     0.9796     1.0030          2.39
NEW JERSEY........................  .........  .........  ..............
NEW MEXICO........................     0.8872     0.8270         -6.79
NEW YORK..........................     0.8542     0.8526         -0.19
NORTH CAROLINA....................     0.8666     0.8456         -2.42
NORTH DAKOTA......................     0.7788     0.7778         -0.13
OHIO..............................     0.8613     0.8820          2.40
OKLAHOMA..........................     0.7590     0.7537         -0.70
OREGON............................     1.0303     0.9994         -3.00
PENNSYLVANIA......................     0.8462     0.8378         -0.99
PUERTO RICO.......................     0.4356     0.4018         -7.76
RHODE ISLAND......................  .........  .........  ..............
SOUTH CAROLINA....................     0.8607     0.8498         -1.27
SOUTH DAKOTA......................     0.7815     0.8195          4.86
TENNESSEE.........................     0.7877     0.7886          0.11
TEXAS.............................     0.7821     0.7780         -0.52
UTAH..............................     0.9312     0.8974         -3.63
VERMONT...........................     0.9345     0.9307         -0.41
VIRGINIA..........................     0.8504     0.8498         -0.07
VIRGIN ISLANDS....................     0.7845     0.7195         -8.29
WASHINGTON........................     1.0179     1.0388          2.05
WEST VIRGINIA.....................     0.7975     0.8018          0.54
WISCONSIN.........................     0.9162     0.9304          1.55
WYOMING...........................     0.9007     0.9110          1.14
------------------------------------------------------------------------


------------------------------------------------------------------------
                                                              Percent
                                  FY 2003    Proposed CY    change, FY
           Urban MSA             wage index   2005 wage   2003--proposed
                                                index         CY 2005
------------------------------------------------------------------------
0040..........................       0.7792       0.7627          -2.12
0060..........................       0.4587       0.4306          -6.13
0080..........................       0.9600       0.9246          -3.69
0120..........................       1.0594       1.0863           2.54
0160..........................       0.8384       0.8489           1.25
0200..........................       0.9315       0.9300          -0.16
0220..........................       0.7859       0.8019           2.04
0240..........................       0.9735       0.9721          -0.14
0280..........................       0.9225       0.8806          -4.54
0320..........................       0.9034       0.8986          -0.53
0380..........................       1.2358       1.2216          -1.15
0440..........................       1.1103       1.1074          -0.26
0450..........................       0.8044       0.8090           0.57
0460..........................       0.8997       0.9035           0.42
0470..........................       0.4337       0.4155          -4.20
0480..........................       0.9876       0.9720          -1.58
0500..........................       1.0211       0.9818          -3.85
0520..........................       0.9991       1.0130           1.39
0560..........................       1.1017       1.0795          -2.02
0580..........................       0.8325       0.8494           2.03
0600..........................       1.0264       0.9625          -6.23
0640..........................       0.9637       0.9609          -0.29
0680..........................       0.9899       0.9810          -0.90
0720..........................       0.9929       0.9919          -0.10
0733..........................       0.9664       0.9904           2.48
0743..........................       1.3202       1.2956          -1.86
0760..........................       0.8294       0.8406           1.35
0840..........................       0.8324       0.8424           1.20
0860..........................       1.2282       1.1757          -4.27
0870..........................       0.9042       0.8935          -1.18
0875..........................       1.2150       1.1692          -3.77

[[Page 31271]]

 
0880..........................       0.9022       0.8961          -0.68
0920..........................       0.8757       0.9029           3.11
0960..........................       0.8341       0.8428           1.04
1000..........................       0.9222       0.9212          -0.11
1010..........................       0.7972       0.7965          -0.09
1020..........................       0.8907       0.8662          -2.75
1040..........................       0.9109       0.8832          -3.04
1080..........................       0.9310       0.9209          -1.08
1123..........................       1.1235       1.1233          -0.02
1125..........................       0.9689       1.0049           3.72
1145..........................       0.8535       0.8137          -4.66
1150..........................       1.0944       1.0580          -3.33
1240..........................       0.8880       1.0303          16.02
1260..........................       0.8821       0.9019           2.24
1280..........................       0.9365       0.9604           2.55
1303..........................       1.0052       0.9704          -3.46
1310..........................       0.4371       0.4158          -4.87
1320..........................       0.8932       0.9071           1.56
1350..........................       0.9690       0.9095          -6.14
1360..........................       0.9056       0.8874          -2.01
1400..........................       1.0635       0.9907          -6.85
1440..........................       0.9235       0.9332           1.05
1480..........................       0.8898       0.8880          -0.20
1520..........................       0.9850       0.9730          -1.22
1540..........................       1.0438       1.0025          -3.96
1560..........................       0.8976       0.9086           1.23
1580..........................       0.8628       0.8796           1.95
1600..........................       1.1044       1.0892          -1.38
1620..........................       0.9745       1.0193           4.60
1640..........................       0.9381       0.9413           0.34
1660..........................       0.8406       0.8244          -1.93
1680..........................       0.9670       0.9671           0.01
1720..........................       0.9916       0.9833          -0.84
1740..........................       0.8496       0.8695           2.34
1760..........................       0.9307       0.8902          -4.35
1800..........................       0.8374       0.8694           3.82
1840..........................       0.9751       0.9648          -1.06
1880..........................       0.8729       0.8521          -2.38
1890..........................       1.1453       1.1516           0.55
1900..........................       0.7847       0.8200           4.50
1920..........................       0.9998       0.9974          -0.24
1950..........................       0.8859       0.9035           1.99
1960..........................       0.8835       0.8985           1.70
2000..........................       0.9282       0.9518           2.54
2020..........................       0.9062       0.9060          -0.02
2030..........................       0.8973       0.8828          -1.62
2040..........................       0.8055       0.8161           1.32
2080..........................       1.0601       1.0837           2.23
2120..........................       0.8791       0.9106           3.58
2160..........................       1.0448       1.0101          -3.32
2180..........................       0.8137       0.7741          -4.87
2190..........................       0.9356       0.9805           4.80
2200..........................       0.8795       0.8886           1.03
2240..........................       1.0368       1.0171          -1.90
2281..........................       1.0684       1.0934           2.34
2290..........................       0.8952       0.9064           1.25
2320..........................       0.9265       0.9196          -0.74
2330..........................       0.9722       0.9783           0.63
2335..........................       0.8416       0.8377          -0.46
2340..........................       0.8376       0.8559           2.18
2360..........................       0.8925       0.8601          -3.63
2400..........................       1.0944       1.1456           4.68
2440..........................       0.8177       0.8429           3.08
2520..........................       0.9684       0.9797           1.17
2560..........................       0.8889       0.8986           1.09
2580..........................       0.8100       0.8396           3.65
2620..........................       1.0682       1.1333           6.09
2640..........................       1.1135       1.0858          -2.49
2650..........................       0.7792       0.7747          -0.58
2655..........................       0.8780       0.8709          -0.81

[[Page 31272]]

 
2670..........................       1.0066       1.0108           0.42
2680..........................       1.0297       1.0163          -1.30
2700..........................       0.9680       0.9816           1.40
2710..........................       0.9823       1.0008           1.88
2720..........................       0.7895       0.8424           6.70
2750..........................       0.9693       0.8966          -7.50
2760..........................       0.9457       0.9585           1.35
2800..........................       0.9446       0.9359          -0.92
2840..........................       1.0216       1.0142          -0.72
2880..........................       0.8505       0.8206          -3.52
2900..........................       0.9871       0.9693          -1.80
2920..........................       0.9465       0.9279          -1.97
2960..........................       0.9584       0.9410          -1.82
2975..........................       0.8281       0.8475           2.34
2980..........................       0.8892       0.8622          -3.04
2985..........................       0.8897       0.8636          -2.93
2995..........................       0.9456       0.9633           1.87
3000..........................       0.9525       0.9469          -0.59
3040..........................       0.8950       0.8809          -1.58
3060..........................       0.9237       0.9372           1.46
3080..........................       0.9502       0.9461          -0.43
3120..........................       0.9282       0.9166          -1.25
3150..........................       0.9100       0.9098          -0.02
3160..........................       0.9122       0.9335           2.34
3180..........................       0.9268       0.9172          -1.04
3200..........................       0.9418       0.9214          -2.17
3240..........................       0.9223       0.9164          -0.64
3283..........................       1.1549       1.1555           0.05
3285..........................       0.7659       0.7307          -4.60
3290..........................       0.9028       0.9242           2.37
3320..........................       1.1457       1.1098          -3.13
3350..........................       0.8385       0.7771          -7.32
3360..........................       0.9892       0.9834          -0.59
3400..........................       0.9636       0.9595          -0.43
3440..........................       0.8903       0.9245           3.84
3480..........................       0.9717       0.9916           2.05
3500..........................       0.9587       0.9548          -0.41
3520..........................       0.9532       0.8986          -5.73
3560..........................       0.8607       0.8357          -2.90
3580..........................       0.9275       0.8984          -3.14
3600..........................       0.9381       0.9529           1.58
3605..........................       0.8239       0.8544           3.70
3610..........................       0.7976       0.7762          -2.68
3620..........................       0.9849       0.9282          -5.76
3640..........................       1.1190       1.1115          -0.67
3660..........................       0.8268       0.8253          -0.18
3680..........................       0.8329       0.8158          -2.05
3700..........................       0.7749       0.7794           0.58
3710..........................       0.8613       0.8681           0.79
3720..........................       1.0595       1.0500          -0.90
3740..........................       1.0790       1.0419          -3.44
3760..........................       0.9736       0.9715          -0.22
3800..........................       0.9686       0.9761           0.77
3810..........................       1.0399       0.9159         -11.92
3840..........................       0.8970       0.8820          -1.67
3850..........................       0.8971       0.9045           0.82
3870..........................       0.9400       0.9247          -1.63
3880..........................       0.8475       0.8207          -3.16
3920..........................       0.9278       0.9036          -2.61
3960..........................       0.7965       0.7841          -1.56
3980..........................       0.9357       0.8811          -5.84
4000..........................       0.9078       0.9282           2.25
4040..........................       0.9726       0.9714          -0.12
4080..........................       0.8472       0.8091          -4.50
4100..........................       0.8745       0.8688          -0.65
4120..........................       1.1521       1.1528           0.06
4150..........................       0.7923       0.8074           1.91
4200..........................       0.8315       0.8267          -0.58
4243..........................       0.9179       0.9383           2.22
4280..........................       0.8581       0.8685           1.21

[[Page 31273]]

 
4320..........................       0.9483       0.9522           0.41
4360..........................       0.9892       1.0033           1.43
4400..........................       0.9097       0.8923          -1.91
4420..........................       0.8629       0.9113           5.61
4480..........................       1.2001       1.1795          -1.72
4520..........................       0.9276       0.9242          -0.37
4600..........................       0.9646       0.8272         -14.24
4640..........................       0.9219       0.9134          -0.92
4680..........................       0.9204       0.8953          -2.73
4720..........................       1.0467       1.0264          -1.94
4800..........................       0.8900       0.9180           3.15
4840..........................       0.4914       0.4795          -2.42
4880..........................       0.8428       0.8381          -0.56
4890..........................       1.0498       1.0772           2.61
4900..........................       1.0253       0.9776          -4.65
4920..........................       0.8920       0.9009           1.00
4940..........................       0.9837       0.9692          -1.47
5000..........................       0.9802       0.9894           0.94
5015..........................       1.1213       1.1366           1.36
5080..........................       0.9893       0.9988           0.96
5120..........................       1.0903       1.1001           0.90
5140..........................       0.9157       0.8718          -4.79
5160..........................       0.8108       0.7994          -1.41
5170..........................       1.0498       1.1275           7.40
5190..........................       1.0674       1.0956           2.64
5200..........................       0.8137       0.7922          -2.64
5240..........................       0.7734       0.7907           2.24
5280..........................       0.9284       0.8775          -5.48
5330..........................       0.8976       0.9112           1.52
5345..........................       0.9754       0.9790           0.37
5360..........................       0.9578       0.9855           2.89
5380..........................       1.3357       1.3140          -1.62
5483..........................       1.2408       1.2385          -0.19
5523..........................       1.1767       1.1631          -1.16
5560..........................       0.9046       0.9174           1.41
5600..........................       1.4414       1.4018          -2.75
5640..........................       1.1381       1.1518           1.20
5660..........................       1.1387       1.1509           1.07
5720..........................       0.8574       0.8619           0.52
5775..........................       1.5072       1.4921          -1.00
5790..........................       0.9402       0.9728           3.47
5800..........................       0.9397       0.9327          -0.74
5880..........................       0.8900       0.8984           0.94
5910..........................       1.0960       1.0963           0.03
5920..........................       0.9978       0.9745          -2.34
5945..........................       1.1474       1.1372          -0.89
5960..........................       0.9640       0.9654           0.15
5990..........................       0.8344       0.8374           0.36
6015..........................       0.8865       0.8202          -7.48
6020..........................       0.8127       0.8039          -1.08
6080..........................       0.8645       0.8753           1.25
6120..........................       0.8739       0.8734          -0.06
6160..........................       1.0713       1.0883           1.59
6200..........................       0.9820       1.0129           3.15
6240..........................       0.7962       0.7865          -1.22
6280..........................       0.9365       0.8901          -4.95
6323..........................       1.0235       1.0276           0.40
6340..........................       0.9372       0.9042          -3.52
6360..........................       0.5169       0.4708          -8.92
6403..........................       0.9794       0.9949           1.58
6440..........................       1.0667       1.1213           5.12
6483..........................       1.0854       1.0977           1.13
6520..........................       0.9984       0.9976          -0.08
6560..........................       0.8820       0.8778          -0.48
6580..........................       0.9218       0.9510           3.17
6600..........................       0.9334       0.8814          -5.57
6640..........................       0.9990       0.9959          -0.31
6660..........................       0.8846       0.8806          -0.45
6680..........................       0.9295       0.9133          -1.74
6690..........................       1.1135       1.1352           1.95

[[Page 31274]]

 
6720..........................       1.0648       1.0682           0.32
6740..........................       1.1491       1.0609          -7.68
6760..........................       0.9477       0.9349          -1.35
6780..........................       1.1365       1.1348          -0.15
6800..........................       0.8614       0.8700           1.00
6820..........................       1.2139       1.1739          -3.30
6840..........................       0.9194       0.9430           2.57
6880..........................       0.9625       0.9666           0.43
6895..........................       0.9228       0.9076          -1.65
6920..........................       1.1500       1.1845           3.00
6960..........................       0.9650       1.0032           3.96
6980..........................       0.9700       0.9506          -2.00
7000..........................       0.8021       0.8056           0.44
7040..........................       0.8855       0.9033           2.01
7080..........................       1.0367       1.0482           1.11
7120..........................       1.4623       1.4339          -1.94
7160..........................       0.9945       0.9913          -0.32
7200..........................       0.8374       0.8535           1.92
7240..........................       0.8753       0.8870           1.34
7320..........................       1.1131       1.1147           0.14
7360..........................       1.4142       1.4514           2.63
7400..........................       1.4145       1.4626           3.40
7440..........................       0.4741       0.4909           3.54
7460..........................       1.1271       1.1429           1.40
7480..........................       1.0481       1.0441          -0.38
7485..........................       1.3646       1.2942          -5.16
7490..........................       1.0712       1.0653          -0.55
7500..........................       1.3046       1.2877          -1.30
7510..........................       0.9425       0.9964           5.72
7520..........................       0.9376       0.9472           1.02
7560..........................       0.8599       0.8412          -2.17
7600..........................       1.1474       1.1562           0.77
7610..........................       0.7869       0.7751          -1.50
7620..........................       0.8697       0.8624          -0.84
7640..........................       0.9255       0.9700           4.81
7680..........................       0.8987       0.9083           1.07
7720..........................       0.9046       0.8993          -0.59
7760..........................       0.9257       0.9309           0.56
7800..........................       0.9802       0.9821           0.19
7840..........................       1.0852       1.0901           0.45
7880..........................       0.8659       0.8944           3.29
7920..........................       0.8424       0.8457           0.39
8003..........................       1.0927       1.0543          -3.51
8050..........................       0.8941       0.8740          -2.25
8080..........................       0.8804       0.8398          -4.61
8120..........................       1.0506       1.0404          -0.97
8140..........................       0.8273       0.8243          -0.36
8160..........................       0.9714       0.9412          -3.11
8200..........................       1.0940       1.1116           1.61
8240..........................       0.8504       0.8520           0.19
8280..........................       0.9065       0.9103           0.42
8320..........................       0.8599       0.8325          -3.19
8360..........................       0.8088       0.8150           0.77
8400..........................       0.9810       0.9381          -4.37
8440..........................       0.9199       0.9108          -0.99
8480..........................       1.0432       1.0517           0.81
8520..........................       0.8911       0.8981           0.79
8560..........................       0.8332       0.9185          10.24
8600..........................       0.8130       0.8212           1.01
8640..........................       0.9521       0.9404          -1.23
8680..........................       0.8465       0.8403          -0.73
8720..........................       1.3354       1.3377           0.17
8735..........................       1.1096       1.1064          -0.29
8750..........................       0.8756       0.8184          -6.53
8760..........................       1.0031       1.0405           3.73
8780..........................       0.9429       0.9856           4.53
8800..........................       0.8073       0.8394           3.98
8840..........................       1.0851       1.0904           0.49
8920..........................       0.8069       0.8366           3.68
8940..........................       0.9782       0.9692          -0.92

[[Page 31275]]

 
8960..........................       0.9939       0.9798          -1.42
9000..........................       0.7670       0.7494          -2.29
9040..........................       0.9520       0.9238          -2.96
9080..........................       0.8498       0.8341          -1.85
9140..........................       0.8544       0.8158          -4.52
9160..........................       1.1173       1.0882          -2.60
9200..........................       0.9640       0.9563          -0.80
9260..........................       1.0569       1.0372          -1.86
9270..........................       0.9434       0.9204          -2.44
9280..........................       0.9026       0.9119           1.03
9320..........................       0.9358       0.9214          -1.54
9340..........................       1.0276       1.0196          -0.78
9360..........................       0.8589       0.8895           3.56
------------------------------------------------------------------------

[FR Doc. 04-12314 Filed 5-28-04; 4:00 pm]
BILLING CODE 4120-01-P