[Federal Register Volume 71, Number 95 (Wednesday, May 17, 2006)]
[Proposed Rules]
[Pages 28644-28653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-4608]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 412
[CMS-1488-P2]
RIN 0938-AO12
Medicare Program; Hospital Inpatient Prospective Payment Systems
Implementation of the Fiscal Year 2007 Occupational Mix Adjustment to
the Wage Index
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would revise the methodology for
calculating the occupational mix adjustment announced in the Fiscal
Year (FY) 2007 Hospital Inpatient Prospective Payment System (IPPS)
proposed rule by applying the occupational mix
[[Page 28645]]
adjustment to 100 percent of the wage index using the new occupational
mix data collected from hospitals. This proposed rule also proposes to
modify hospitals' procedures for withdrawing requests to reclassify for
the FY 2007 wage index and for supplementing the FY 2008
reclassification application with official data used to develop the FY
2007 wage index. In addition, we are proposing to replace in full the
descriptions of the data and methodology that would be used in
calculating the occupational mix adjustment discussed in the FY 2007
IPPS proposed rule.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on June 12, 2006.
ADDRESSES: In commenting, please refer to file code CMS-1488-P2.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on specific
issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click
on the link ``Submit electronic comments on CMS regulations with an
open comment period.'' (Attachments should be in Microsoft Word,
WordPerfect, or Excel; however, we prefer Microsoft Word.)
2. By regular mail. You may 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-1488-P2, P.O. Box 8012, Baltimore, MD 21244-8012. Please allow
sufficient time for mailed comments to be received before the close of
the comment period.
3. By express or overnight mail. You may send 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-1488-PN2, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-8012.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses. If you
intend to deliver your comments to the Baltimore address, please call
telephone number (410) 786-4492 in advance to schedule your arrival
with one of our staff members. Room 445-G, Hubert H. Humphrey Building,
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security
Boulevard, Baltimore, MD 21244-1850. (Because access to the interior of
the HHH Building is not readily available to persons without Federal
Government identification, commenters are encouraged to leave their
comments in the CMS drop slots located in the main lobby of the
building. A stamp-in clock is available for persons wishing to retain a
proof of filing by stamping in and retaining an extra copy of the
comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by mailing your
comments to the addresses provided at the end of the ``Collection of
Information Requirements'' section in this document.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Valerie Miller, (410) 786-4535.
SUPPLEMENTARY INFORMATION: Submitting Comments: We welcome comments
from the public on all issues set forth in this rule to assist us in
fully considering issues and developing CMS-1488-P2 and the specific
``issue identifier'' that precedes the section on which you choose to
comment.
Inspection of Public Comments: 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. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking. Click on the link ``Electronic Comments on
CMS Regulations'' on that Web site to view public comments.
Comments received timely will also be 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 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.
I. Background
[If you choose to comment on issues in this section, please include
the caption ``BACKGROUND'' at the beginning of your comments.]
A. General Background
On April 25, 2006, we published in the Federal Register the FY 2007
IPPS proposed rule (71 FR 23996) that set forth the proposed changes to
the Medicare IPPS for operating costs and for capital-related costs. In
the FY 2007 IPPS proposed rule, we discussed our proposals for
calculating the FY 2007 occupational mix adjustment. We proposed to use
the same CMS Wage Index Occupational Mix Survey and Bureau of Labor
Statistics (BLS) data that we used for the FY 2005 and FY 2006 wage
indices, with a few exceptions. We also proposed to use a blend of the
occupational mix adjusted wage index and the unadjusted wage index.
Specifically, we proposed to adjust 10 percent of the FY 2007 wage
index by a factor reflecting occupational mix. We stated that a 10
percent adjustment for occupational mix was a prudent policy because we
were proposing to rely on the same survey data used in FY 2005 and FY
2006 wage indices.
On April 3, 2006, in Bellevue Hosp. Ctr v. Leavitt, the Court of
Appeals for the Second Circuit (the Court) ordered the Centers for
Medicare & Medicaid Services (CMS) to apply the occupational mix
adjustment to 100 percent of the wage index effective for FY 2007. The
Court ordered CMS to ``immediately * * * collect data that are
sufficiently robust to permit full application of the occupational mix
adjustment.'' The Court also ordered that all ``data collection and
measurement and any other preparations necessary for full application
be completed by September 30, 2006, at which time the agency is to
immediately apply the adjustment in full.'' For more information see
WestLaw 2006 WL 851934 at *13.
To comply with the Court's order, on April 21, 2006, we issued a
Joint-Signature Memorandum (see JSM-06412) to all Medicare Fiscal
Intermediaries (FIs) announcing our plans to collect new occupational
mix data from hospitals.
B. Legislative History
Section 1886(d)(3)(E) of the Social Security Act (the Act) requires
that, as part of the methodology for determining prospective payments
to hospitals, the Secretary must adjust the standardized amounts ``for
area differences in
[[Page 28646]]
hospital wage levels by a factor (established by the Secretary)
reflecting the relative hospital wage level in the geographic area of
the hospital compared to the national average hospital wage level.'' In
accordance with the broad discretion conferred under the Act, we
currently define hospital labor market areas based on the definitions
of statistical areas established by the Office of Management and Budget
(OMB). (See (71 FR 24074) for a discussion of the proposed FY 2007
hospital wage index based on the statistical areas, including OMB's
revised definitions of Metropolitan Areas).
Beginning October 1, 1993, section 1886(d)(3)(E) of the Act
requires that we update the wage index annually. Furthermore, the
section provides that the Secretary base the update on a survey of
wages and wage-related costs of short-term, acute care hospitals. The
survey should measure the earnings and paid hours of employment by
occupational category, and must exclude the wages and wage-related
costs incurred in furnishing skilled nursing services. The provision
also requires us to make any updates or adjustments to the wage index
in a manner that ensures that aggregate payments to hospitals are not
affected by the change in the wage index. See the FY 2007 IPPS proposed
rule (71 FR 24148 through 24149) for a discussion of the original
proposed adjustment for FY 2007.
As discussed in the FY 2007 IPPS proposed rule (71 FR 24082), we
also take into account the geographic reclassification of hospitals in
accordance with sections 1886(d)(8)(B) and section 1886(d)(10) of the
Act when calculating the wage index. Under section 1886(d)(8)(D) of the
Act, the Secretary is required to adjust the standardized amounts to
ensure that aggregate payments under the IPPS after implementation of
the provisions of sections 1886(d)(8)(B) and section 1886(d)(8)(C) of
the Act and section 1886(d)(10) of the Act are equal to the aggregate
prospective payments that would have been made absent these provisions.
See the FY 2007 IPPS proposed rule (71 FR 24149) for a discussion of
the original proposed budget neutrality adjustment for FY 2007.
C. Revised Proposed Changes to the Occupational Mix Adjustment for the
Proposed FY 2007 Wage Index
Section 1886(d)(3)(E) of the Act provides for the collection of
data every 3 years on the occupational mix of employees for each short-
term, acute care hospital participating in the Medicare program, in
order to construct an occupational mix adjustment to the wage index,
for application beginning October 1, 2004 (the FY 2005 wage index). The
purpose of the occupational mix adjustment is to control for the effect
of hospitals' employment choices on the wage index. For example,
hospitals may choose to employ different combinations of registered
nurses (RNs), licensed practical nurses (LPNs), nursing aides, and
medical assistants for the purpose of providing nursing care to their
patients. The varying labor costs associated with these choices reflect
hospital management decisions rather than geographic differences in the
costs of labor.
1. Development of Data for the Proposed Occupational Mix Adjustment
[If you choose to comment on issues in this section, please include
the caption ``DEVELOPMENT OF DATA FOR THE PROPOSED OCCUPATIONAL MIX
ADJUSTMENT'' at the beginning of your comments.]
Section 1886(d)(3)(E) of the Act requires us to conduct a new
survey at least once every 3 years. On October 14, 2005, we published a
notice in the Federal Register (70 FR 60092) proposing to use a new
survey, the 2006 Medicare Wage Index Occupational Mix Survey, (the 2006
survey) to apply an occupational mix adjustment to the FY 2008 wage
index. In the proposed 2006 survey, we included several modifications
based on the comments and recommendations we received on the 2003
survey including (1) Allowing hospitals to report their own average
hourly wage rather than using BLS data; (2) extending the prospective
survey period; and (3) reducing the number of occupational categories
but refining the subcategories for RNs.
We made the changes to the occupational categories in response to
MedPAC comments to the FY 2005 IPPS final rule (69 FR 49036).
Specifically, MedPAC recommended that CMS assess whether including
subcategories of RNs would result in a more accurate occupational mix
adjustment. MedPAC believed that including all RNs in a single category
may obscure significant wage differences among the subcategories of
RNs, for example, the wages of surgical RNs and floor RNs may differ.
Also, to offset additional reporting burden for hospitals, MedPAC
recommended that CMS should combine the general service categories that
account for only a small percentage of a hospital's total hours with
the ``all other occupations'' category, since most of the occupational
mix adjustment is correlated with the nursing general service category.
Also, in response to the public comments on the October 14, 2005
notice, we modified the 2006 survey. On February 10, 2006, we published
a Federal Register notice (71 FR 7047) that solicited comments and
announced our intent to seek OMB approval on the revised occupational
mix survey (Form CMS-10079 (2006)).
The revised 2006 survey provides for the collection of hospital-
specific wages and hours data, a 6-month prospective reporting period
(that is, January 1, 2006 through June 30, 2006), the transfer of each
general service category that comprised less than 4 percent of total
hospital employees in the 2003 survey to the ``all other occupations''
category (the revised survey focuses only on the mix of nursing
occupations), additional clarification of the definitions for the
occupational categories, an expansion of the RN category to include
functional subcategories, and the exclusion of average hourly rate data
associated with advance practice nurses.
The 2006 survey includes only 2 general occupational categories:
Nursing and ``all other occupations.'' The Nursing category has 4
subcategories: RNs, LPNs, Aides, Orderlies, Attendants, and Medical
Assistants. The RN subcategory includes 2 functional subcategories:
Management Personnel and Staff Nurses or Clinicians. As indicated
above, the 2006 survey provides for a 6-month data collection period,
from January 1, 2006 through June 30, 2006. However, we are allowing
flexibility for the reporting period begin and end dates to accommodate
some hospitals' bi-weekly payroll and reporting systems. That is, the
6-month reporting period must begin on or after December 25, 2005, and
must end before July 9, 2006.
To comply with the Bellevue Court's order, as discussed above, we
propose to collect new survey data, instead of using the 2003 survey
data proposed in the FY 2007 IPPS proposed rule, to calculate the
occupational mix adjustment for the FY 2007 wage index. Since hospitals
are currently collecting data for the revised 2006 survey, we are
proposing to use the first 3 months of that data (that is, from January
1, 2006 through March 31, 2006) to calculate the FY 2007 occupational
mix adjustment. In order to allow sufficient time for hospitals, FIs,
and CMS to collect, review, and correct the new data, and for us to
perform required analyses and apply the new data in calculating the FY
2007 occupational mix adjustment, it would be impossible for us to
apply the full 6-months of data by October 1, 2006. (See
[[Page 28647]]
section II.C.2 below for proposed detailed data collection, review, and
correction process.)
2. Timeline for the Collection, Review, and Correction of the
Occupational Mix Data
[If you choose to comment on issues in this section, please include
the caption ``TIMELINE'' at the beginning of your comments.]
On April 21, 2006, we issued a Joint-Signature Memorandum (JSM-
06412) instructing all FIs to immediately alert the hospitals they
service to the changes in the schedule for submitting the occupational
mix data files. The Joint-Signature Memorandum is available on the CMS
Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS. Click on ``Wage
Index Files'' and the link is titled: 2006 Occupational Mix Survey--
Interim Data Collection--CMS Memo to Fiscal Intermediaries.
The Joint-Signature Memorandum provides hospitals and FIs with the
revised schedule for the occupational mix survey data that would be
used in the FY 2007 wage index. The schedule includes deadlines for--
Hospitals to submit occupational mix data. The deadline is
June 1, 2006.
FI review of the submitted data. The deadline is June 22,
2006.
Availability of the submitted data on the CMS Web site.
The deadline is June 29, 2006.
Hospitals to submit requests to their FIs for corrections
to their interim occupational mix data. The deadline is July 13, 2006.
FIs to submit corrected interim occupational mix survey
data for the January 1, 2006 through March 31, 2006 period. The
deadline is July 27, 2006.
We note that it is critical that hospitals provide information
according to the dates provided in this schedule in order to be able to
appeal any disputed calculations at a later point to the Provider
Review Reimbursement Board (PRRB). The final deadline for the FIs to
make occupational mix data available to CMS is July 27, 2006. These
data would reflect FI review and the resolution of any errors or
adjustments between the hospitals and FI. Once these data are available
on the CMS Web site, changes to a hospital's occupational mix data
would be allowed only in those very limited situations involving an
error by the FI or CMS that the hospital could not have known about
before its review of the final occupational mix data file.
Specifically, neither the FI nor CMS would approve the following types
of requests:
Requests for occupational mix data corrections that were
submitted too late to be included in the data transmitted to CMS by FIs
on or before July 27, 2006.
Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the June 29, 2006
occupational mix file.
Verified corrections to the occupational mix received by the FIs
and CMS (that is, by July 13, 2006) would be incorporated into the
final wage index for FY 2007, to be effective October 1, 2006.
We created the process described above to resolve all substantive
occupational mix correction disputes before we finalize the wage and
occupational mix data for the FY 2007 payment rates. Accordingly,
hospitals that do not meet the procedural deadlines set forth above
would not be afforded a later opportunity to submit occupational mix
data corrections or to dispute the FI's decision with respect to
requested changes. Specifically, our policy is that hospitals that do
not meet the procedural deadlines set forth above would not be
permitted to challenge later, before the PRRB, the failure of CMS to
make a requested data revision. (See W.A. Foote Memorial Hospital v.
Shalala, No. 99-CV-75202-DT (E.D. Mich. 2001) and Palisades General
Hospital v. Thompson, No. 99-1230 (D.D.C. 2003)). We also refer the
reader to the FY 2000 IPPS final rule (64 FR 41513) for a discussion of
the parameters for appealing to the PRRB for wage index data
corrections.
We believe the occupational mix data correction process described
above provides hospitals with the opportunity to bring errors in their
occupational mix data to the FI's attention.
Since hospitals would have access to the final occupational mix
data by June 29, 2006, they would have the opportunity to detect any
data entry or tabulation errors made by the FI or CMS before the
development and publication of the final FY 2007 wage index and the
implementation of the FY 2007 wage index on October 1, 2006. We believe
that if hospitals avail themselves of the opportunities afforded to
provide and make corrections to the occupational mix data, the wage
index implemented on October 1, 2006 should be accurate. In the event
that errors are identified by hospitals and brought to our attention
after July 13, 2006, we would only make mid-year changes to the wage
index in accordance with Sec. 412.64(k). For a detailed discussion see
the FY 2007 IPPS proposed rule (71 FR 24089). However, note that a
hospital's deadline for making corrections to the proposed occupational
mix data is July 13, 2006.
3. Calculation of the Proposed FY 2007 Occupational Mix Adjustment
Factor and the Proposed FY 2007 Occupational Mix Adjusted Wage Index
[If you choose to comment on issues in this section, please include
the caption ``CALCULATION OF THE PROPOSED FY 2007 OCCUPATIONAL MIX
ADJUSTMENT'' at the beginning of your comments.]
We are proposing to use the following steps for calculating the
proposed FY 2007 occupational mix adjustment factor for the proposed FY
2007 wage index:
Step 1--For each hospital, determine the percentage of the total
nursing category attributable to a nursing subcategory by dividing the
nursing subcategory hours by the total nursing category's hours (RN
Management Personnel and RN Staff Nurses or Clinicians are treated as
separate nursing subcategories). Repeat this computation for each of
the 5 nursing subcategories: RN Management Personnel, RN Staff Nurses
or Clinicians, LPNs; Nursing Aides, Orderlies, and Attendants; and
Medical Assistants.
Step 2--Determine a national average hourly rate for each nursing
subcategory by dividing a subcategory's total salaries for all
hospitals in the occupational mix survey database by the subcategory's
total hours for all hospitals in the occupational mix survey database.
Step 3--For each hospital, determine an adjusted average hourly
rate for each nursing subcategory by multiplying the percentage of the
total nursing category (from Step 1) by the national average hourly
rate for that nursing subcategory (from Step 2). Repeat this
calculation for each of the 5 nursing subcategories.
Step 4--For each hospital, determine the adjusted average hourly
rate for the total nursing category by summing the adjusted average
hourly rate (from Step 3) for each of the nursing subcategories.
Step 5--Determine the national average hourly rate for the total
nursing category by dividing total nursing category salaries for all
hospitals in the occupational mix survey database by total nursing
category hours for all hospitals in the occupational mix survey
database.
Step 6--For each hospital, compute the occupational mix adjustment
factor for the total nursing category by dividing the national average
hourly rate for the total nursing category (from Step 5) by the
hospital's adjusted average hourly rate for the total nursing category
(from Step 4).
If the hospital's adjusted average hourly rate is less than the
national
[[Page 28648]]
average hourly rate (indicating the hospital employs a less costly mix
of nursing employees), the occupational mix adjustment factor would be
greater than 1.0000.
If the hospital's adjusted average hourly rate is greater than the
national average hourly rate, the occupational mix adjustment factor
would be less than 1.0000.
Step 7--For each hospital, calculate the occupational mix adjusted
salaries and wage-related costs for the total nursing category by
multiplying the hospital's total salaries and wage-related costs (from
Step 5 of the unadjusted wage index calculation in section III.F. of
the preamble of the FY 2007 IPPS proposed rule (71 FR 24081), by the
percentage of the hospital's total workers attributable to the total
nursing category (using the occupational mix survey data, this
percentage is determined by dividing the hospital's total nursing
category hours by the hospital's total hours for ``nursing and all
other'') and by the total nursing category's occupational mix
adjustment factor (from Step 6 above).
The remaining portion of the hospital's total salaries and wage-
related costs that is attributable to all other employees of the
hospital is not adjusted by the occupational mix. A hospital's all
other portion is determined by subtracting the hospital's nursing
category percentage from 100 percent.
Step 8--For each hospital, calculate the total occupational mix
adjusted salaries and wage-related costs for a hospital by summing the
occupational mix adjusted salaries and wage-related costs for the total
nursing category (from Step 7) and the portion of the hospital's
salaries and wage-related costs for all other employees (from Step 7).
To compute a hospital's occupational mix adjusted average hourly
wage, divide the hospital's total occupational mix adjusted salaries
and wage-related costs by the hospital's total hours (from Step 4 of
the unadjusted wage index calculation in section III.F. of the preamble
of the FY 2007 IPPS proposed rule (71 FR 24080).
Step 9--To compute the occupational mix adjusted average hourly
wage for an urban or rural area, sum the total occupational mix
adjusted salaries and wage-related costs for all hospitals in the area,
then sum the total hours for all hospitals in the area. Next, divide
the area's occupational mix adjusted salaries and wage-related costs by
the area's hours.
Step 10--To compute the national occupational mix adjusted average
hourly wage, sum the total occupational mix adjusted salaries and wage-
related costs for all hospitals in the Nation, then sum the total hours
for all hospitals in the Nation. Next, divide the national occupational
mix adjusted salaries and wage-related costs by the national hours.
Step 11--To compute the occupational mix adjusted wage index,
divide each area's occupational mix adjusted average hourly wage (Step
9) by the national occupational mix adjusted average hourly wage (Step
10).
Step 12--To compute the Puerto Rico specific occupational mix
adjusted wage index, follow Steps 1 through 11 above.
Table 1 below is an illustrative example of the occupational mix
adjustment.
Table 1.--Example of Occupational Mix Adjustment
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Step 1 Step 2 Step 3 Step 5 Step 6 In Step 7
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National-
Provider National Provider- adjusted Nursing
percentage average adjusted nursing occupational Provider
by hourly average average mix percentage
subcategory wages by hourly hourly adjustment by total
subcategory wage wage factor
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Hospital A
========================================================================================================================================================
Provider Occupational Mix Hours
Nursing Hours:
RN Management............................ 202,387.00 .......... 9.84 $50.00 $4.92
RN Staff................................. 1,439,742.00 .......... 70.00 30.00 21.00
LPNs..................................... 67,860.00 .......... 3.30 20.00 0.66
Nurse Aides.............................. 259,177.00 .......... 12.60 13.00 1.64
Medical Assistants....................... 87,622.00 .......... 4.26 12.00 0.51
Total Nursing Hours.......................... 2,056,788.00 .......... ........... ........... 28.73 $27.00 0.9398 29.15
All Other Employees Hours.................... 5,000,000.00 .......... ........... ........... step 4 .......... ............ 70.85
Total Hours.............................. 7,056,788.00
========================================================================================================================================================
Wage Data from Cost Report:
Wages (From S-3, Parts II and III)....... $83,312,942.55
Hours (From S-3, Parts II and III)....... 3,836,299.60
Hospital A Unadjusted Average Hourly Wage.... $21.72
Nursing Occupational Mix Wages............... $22,821,141 step 7
All Other Employees Unadjusted Occupational $59,030,357 step 7
Mix Wages...................................
Total Occupational Mix Wages................. $81,851,498 step 8
[[Page 28649]]
Hospital A Final Occupational Mix Adj. Avg. $21.34 step 8
Hourly Wage.................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital B
--------------------------------------------------------------------------------------------------------------------------------------------------------
Provider Occupational Mix Hours:
Nursing Hours:
RN Management............................ 70,333.00 .......... 3.01 50.00 1.51
RN Staff................................. 1,430,114.00 .......... 61.27 30.00 18.38
LPNs..................................... 159,795.00 .......... 6.85 20.00 1.37
Nurse Aides.............................. 391,201.00 .......... 16.76 13.00 2.18
Medical Assistants....................... 282,728.00 .......... 12.11 12.00 1.45
Total Nursing Hours.......................... 2,334,171.00 .......... ........... ........... 24.89 27.00 1.0848 31.83
All Other Employees Hours.................... 5,000,000.00 .......... ........... ........... step 4 .......... ............ 70.85
Total Hours.............................. 7,334,171.00
========================================================================================================================================================
Wage Data from Cost Report
Wages (From S-3, Parts II and III)....... $25,979,714
Hours (From S-3, Parts II and III)....... 1,097,585
Hospital B Unadjusted Average Hourly Wage.... $23.67
Nursing Occupational Mix Wages............... $8,969,717 step 7
All Other Employees Unadjusted Occupational $17,711,418 step 7
Mix Wages...................................
Total Occupational Mix Wages................. $26,681,135 step 8
Hospital B Final Occupational Mix Adj. Avg. $24.31 step 8
Hourly Wage.................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The numbers used in this example are hypothetical.
Because the occupational mix adjustment is required by statute, all
hospitals that are subject to payments under the IPPS, or any hospital
that would be subject to the IPPS if not granted a waiver, must
complete the occupational mix survey, unless the hospital has no
associated cost report wage data that are included in the FY 2007 wage
index.
For the FY 2005 and FY 2006 final wage indices, we used the
unadjusted wage data for hospitals that did not submit occupational mix
survey data. For calculation purposes, this equates to applying the
national nursing mix to the wage data for these hospitals, because
hospitals having the same mix as the Nation would have an occupational
mix adjustment factor equaling 1.0000. However, an adjustment may not
be equitable in situations where the hospital has a higher or lower
than average occupational mix than the Nation as a whole. If the
hospital's occupational mix is higher than the average for the nation
as a whole, hospitals in other areas are disadvantaged by the hospital
not providing occupational mix information. If the hospital's
occupational mix is lower than the average for the Nation as a whole,
other hospitals in the same geographic area would be disadvantaged by
the hospital not providing the information.
In the FY 2005 and FY 2006 IPPS final rules (69 FR 49035 and 70 FR
47368), we noted that we would revisit this matter with subsequent
collections of the occupational mix data. For the FY 2007 wage index,
we are proposing to use 1 of 4 options for treating the occupational
mix data for non-responsive hospitals: (1) Assign the hospital an
occupational mix adjustment factor of 1.0000 as we did for FY 2005 and
FY 2006; (2) assign the hospital the average occupational mix
adjustment factor for its labor market area; (3) assign the hospital
the lowest occupational mix adjustment factor for its labor market
area; or (4) assign the hospital the average occupational mix factor
for similar hospitals, based on factors such as, geographic location,
bed size, teaching versus non-teaching status and case mix. We are
requesting comments on these or other alternatives for equitably
addressing the situation of hospitals that are not responsive to the
occupational mix survey.
D. Implementation of the Proposed FY 2007 Occupational Mix Adjusted
Wage Index
[If you choose to comment on issues in this section, please include
the caption ``IMPLEMENTATION OF
[[Page 28650]]
PROPOSED FY 2007 OCCUPATIONAL MIX ADJUSTMENT'' at the beginning of your
comments.]
In the FY 2007 IPPS proposed rule, we proposed to adjust 10 percent
of the FY 2007 wage index by the occupational mix adjustment factor.
However, to comply with the Court's order, we would apply the
occupational mix adjustment to 100 percent of the FY 2007 wage index.
Therefore, we are proposing to calculate the FY 2007 occupational mix
adjustment using the first 3 months of the 2006 survey data and apply
that adjustment to 100 percent of the FY 2007 wage index. We also
believe that, with the modifications we included in the 2006 survey,
hospitals' experience with collecting occupational mix survey data, and
the review and correction process described in section C.2 of this
preamble, a 100 percent adjustment is reasonable.
Since the 2006 survey data is currently being collected by
hospitals, we are unable to estimate how the new data would affect the
FY 2007 wage index. Due to the short time frame for implementing the
Court's order, we do not expect to be able to provide the occupational
mix adjusted wage index tables, rates, and impacts with the FY 2007
IPPS final rule. We are proposing to post the FY 2007 occupational mix
adjusted wage index tables and related impacts on the CMS Web site
shortly after we publish the FY 2007 IPPS final rule, and in advance of
October 1, 2006. We believe these procedures would comply with section
1886(d)(6) of the Act because, by August 1, we would describe our data
and methods for calculating the wage index and IPPS rates in the FY
2007 IPPS final rule, but the actual rates and wage tables would not be
issued until a later date. Further, we expect to discuss in the IPPS
final rule that the new occupational mix data should have a
redistributive effect on hospital payments and should not increase or
decrease total payments, as the wage index is budget neutral. Also, due
to the unusual circumstances imposed by the Court's order, we therefore
would depart from our normal practice of providing the weights and
factors that would be used in calculating the IPPS rates along with the
final rule. Given the short timeframe for collecting and properly
allowing for corrections of occupational mix data, for FY 2007, these
weights and factors would be published on the CMS Web site after the
final rule, but in advance of October 1, 2006.
E. Impact of the Proposed FY 2007 Occupational Mix Adjusted Wage Index
on the Out-migration Adjustment and Hospital Reclassifications
[If you choose to comment on issues in this section, please include
the caption ``OUT-MIGRATION'' at the beginning of your comments.]
1. FY 2007 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees
In accordance with section 505 of Public Law 108-173, beginning
with FY 2005, we established a process to make adjustments to the
hospital wage index based on commuting patterns of hospital employees.
The process, outlined in the FY 2005 IPPS final rule (69 FR 49061),
provides for an increase in the wage index for hospitals located in
certain counties that have a relatively high percentage of hospital
employees who reside in the county but work in a different county (or
counties) with a higher wage index. The adjustments to the wage index
are effective for 3 years, unless a hospital requests to waive the
application of the adjustment. A county would not lose its status as a
qualifying county due to wage index changes during the 3-year period,
and counties would receive the same wage index increase for those 3
years. Hospitals that receive the adjustment to their wage index are
not eligible for reclassification under section 1886(d)(8) of the Act
or section 1886(d)(10) of the Act.
Hospitals located in counties that qualify for the wage index
adjustment are to receive an increase in the wage index that is equal
to the average of the differences between the wage indices of the labor
market area(s) with higher wage indices and the wage index of the
resident county, weighted by the overall percentage of hospital workers
residing in the qualifying county who are employed in any labor market
area with a higher wage index. We employ the pre-reclassified wage
indices in making these calculations.
In the FY 2007 IPPS proposed rule (71 FR 24264 through 24272), in
the Out-Migration Adjustment table, Table 4J, we identified hospitals
located in qualifying counties. Table 4J also lists the proposed
adjustments calculated for qualifying hospitals. Hospitals that newly
qualified for the adjustment in FY 2005 or FY 2006 are eligible to
receive the same adjustment in FY 2007. In the FY 2007 IPPS proposed
rule, we determined county eligibility based on a 10 percent
occupational mix adjustment to the wage index. However, under this
proposed rule, we would apply the occupational mix adjustment to 100
percent of the FY 2007 wage index. Therefore, we must re-evaluate which
counties are newly eligible for the out-migration adjustment in FY 2007
using the 100 percent occupational mix adjusted wage index data. We are
proposing to publish an updated version of Table 4J showing eligible
hospitals and their corresponding wage index adjustments on the CMS Web
site shortly after we publish the IPPS final rule, and in advance of
October 1, 2006.
2. Proposed Procedures for Withdrawing Reclassifications in FY 2007
[If you choose to comment on issues in this section, please include
the caption ``WITHDRAWING RECLASSIFICATIONS'' at the beginning of your
comments.]
Under section 1886(d)(10) of the Act, the Medicare Geographic
Classification Review Board (MGCRB) considers applications by hospitals
for geographic reclassification for purposes of payment under the IPPS.
The specific procedures and rules that apply to the geographic
reclassification process are outlined in Sec. 412.230 through Sec.
412.280.
In the FY 2007 IPPS proposed rule (71 FR 24377), we identified
hospitals that have reclassifications effective in FY 2007. As
specified in Sec. 412.273, hospitals that have been reclassified by
the MGCRB are permitted to withdraw an application for reclassification
or terminate an existing 3-year reclassification for FY 2007. The
request must be received by the MGCRB within 45 days of publication of
the IPPS proposed rule.
However, as a result of the Court order that we collect new
occupational mix data and calculate a 100 percent occupational mix
adjustment, information in the IPPS proposed rule that hospitals use to
make these decisions regarding reclassification withdrawals is now
obsolete. In addition, the necessary data (including wage indices and
out-migration adjustments) hospitals utilize in evaluating whether to
accept or terminate a previously approved reclassification would not be
available until after the IPPS final rule has been published.
Therefore, in this limited circumstance, we are proposing to suspend
the 45-day deadline and are proposing to establish the new procedure
described below to withdraw from reclassifications for FY 2007. Some
hospitals may have adhered to the established process and notified the
MGCRB of their decision to withdraw or terminate a reclassification in
accordance with Sec. 412.273 before publication of this proposed rule.
[[Page 28651]]
Since hospitals made these decisions based on information in the FY
2007 IPPS proposed rule that is now obsolete, we are proposing that the
MGCRB not act on these withdrawal requests. Instead, we are proposing
to apply the following procedures for withdrawal determinations for all
hospital reclassifications for FY 2007. Specifically, the FY 2007 IPPS
rates must go into effect on October 1, 2006. Based on our current
schedule, we do not expect to calculate the final occupational mix
adjusted wage indices until sometime after August 1, 2006 and before
October 1, 2006. For this reason, we do not believe there is sufficient
time for CMS to make the final occupational mix adjusted wage indices
available and allow hospitals a 45-day period to make a final decision
regarding whether to withdraw a reclassification for FY 2007. In the
interim, we propose to make reclassification withdrawal determinations
based on what we perceive would be most advantageous to the hospital
based on the 100 percent occupational adjusted wage index data and the
out-migration adjustment, if applicable.
We also propose to make the final occupational mix adjusted wage
indices and out-migration adjustments and our interim decisions on
hospital reclassifications available to the public on the CMS Web site
sometime after August 1, 2006, but before October 1, 2006. We would
allow hospitals a 30-day period from the date the 100 percent
occupational mix adjusted wage index data is made available where they
can make final, informed determinations regarding whether to maintain
or revise the decision made by CMS regarding its reclassification
status.
Hospitals would have 30 days after the data is made available on
the CMS Web site to submit, in writing, whether they wish to reverse
the reclassification decision made by CMS. We will make every effort to
provide the final data before September 1, 2006 so that the 30 day
period to make these determinations would end before October 1, 2006
and no retroactive adjustments would be necessary. The request for a
withdrawal of a reclassification or termination of an existing 3-year
reclassification that would be effective in FY 2007 must be received by
the MGCRB, in writing with a copy to CMS, no later 30 days after the
data is made available on the CMS Web site. The mailing address is:
2520 Lord Baltimore Drive, Suite L, Baltimore, MD 21244-2670.
3. Procedures for Hospitals Applying for Reclassification Effective in
FY 2008 and Reinstating Reclassifications in FY 2008.
[If you choose to comment on issues in this section, please include
the caption ``RECLASSIFICATION FOR FY 2008'' at the beginning of your
comments.]
Applications for FY 2008 reclassifications are due to the MGCRB by
September 1, 2006. We note that this deadline also applies for
canceling a previous wage index reclassification withdrawal or
termination under Sec. 412.273(d). As we noted in the FY 2007 IPPS
proposed rule (71 FR 24083), applications and other information about
MGCRB reclassifications may be obtained, beginning in mid-July, on the
CMS Web site at: http://www.cms.hhs.gov/mgcrb/, or by calling the MGCRB
at (410) 786-1174.
The MGCRB, in evaluating a hospital's request for reclassification
for FY 2008 for the wage index, must utilize the official data used to
develop the FY 2007 wage index. The wage data used to support the
hospital's wage comparisons must be from the CMS hospital wage survey.
Generally, the source for this data would be the IPPS final rule that
is expected to be published on or about August 1, 2006. However, under
this rule, the wage tables identifying the 3-year average hourly wage
of hospitals would not be available for the FY 2007 IPPS final rule.
Therefore, we are proposing to make the data available subsequent to
August 1, 2006 but before October 1, 2006.
Section 1886(d)(10)(C)(ii) of the Act indicates that a hospital
requesting a change in geographic classification for a FY must submit
its application to the MGCRB not later than the first day of the 13-
month period ending on September 30 of the preceding FY. Thus, the
statute requires that FY 2008 reclassification applications be
submitted to the MGCRB by no later than September 1, 2006. For this
reason, hospitals must file an FY 2008 reclassification application by
the September 1, 2006 deadline even though the average hourly wage data
used to develop the final FY 2007 wage indices may not yet be
available. We note that, under Sec. 412.256(c), the MGCRB must review
applications and notify the hospital if it determines that the
application is incomplete.
As outlined in Sec. 412.256(c)(2), hospitals with incomplete
applications have the opportunity to request that the MGCRB grant a
hospital that has submitted an application by September 1, 2006 an
extension beyond September 1, 2006 to complete its application. Thus,
while hospitals must file an application for reclassification to the
MGCRB by September 1, 2006, they would be able to supplement the
reclassification application with official data used to develop the FY
2007 wage index after filing their initial application. We are
proposing that hospitals file a supplement to the reclassification
application with official data used to develop the FY 2007 wage index
no later than 30 days after the data is made available on the CMS
website.
II. Provisions of the Proposed Rule
This proposed rule replaces in full the descriptions of the data
and methodology that would be used in calculating the occupational mix
adjustment discussed in the FY 2007 IPPS proposed rule (71 FR 23996).
Readers should refer to this proposed rule on the occupational mix
adjustment and reclassification deadlines and procedures.
Consistent with the Court's order to collect new occupational mix
data and apply the ``adjustment in full,'' we are proposing to apply
the occupational mix adjustment to 100 percent, rather than 10 percent,
of the wage index using the new occupational mix data we are collecting
from hospitals.
We are proposing to modify procedures for withdrawing requests to
reclassify for the FY 2007 wage index so that hospitals would be able
to make these decisions after we publish the new occupational mix
adjusted average hourly wages and wage index values. In addition, we
are proposing that hospitals applying for reclassification in FY 2008
file a supplement that includes the official data used to develop the
FY 2007 wage index no later than 30 days after the data is made
available on the CMS website.
We are proposing to calculate the FY 2007 occupational mix
adjustment using the first 3 months of the 2006 survey data.
We are proposing 4 options for treating the occupational mix data
for non-responsive hospitals: (1) Assign the hospital an occupational
mix adjustment factor of 1.0000 as we did for FYs 2005 and 2006; (2)
assign the hospital the average occupational mix adjustment factor for
its labor market area; (3) assign the hospital the lowest occupational
mix adjustment factor for its labor market area; or (4) assign the
hospital the average occupational mix factor for similar hospitals,
based on factors such as, geographic location, bed
[[Page 28652]]
size, teaching versus nonteaching status and case mix.
We are proposing to respond to public comments in the FY 2007 IPPS
final rule.
We are proposing to post the FY 2007 occupational mix adjusted wage
index tables and related impacts on the CMS Web site shortly after we
publish the FY 2007 IPPS final rule, and in advance of October 1, 2006.
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. 35).''
IV. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, 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 this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.
V. Waiver of 60-Day Comment Period
[If you choose to comment on issues in this section, please include
the caption ``WAIVER OF 60-DAY COMMENT PERIOD'' at the beginning of
your comments.]
We ordinarily publish a notice of proposed rulemaking in the
Federal Register and permit a 60-day comment period. This period,
however, may be shortened when the agency finds good cause that a 60-
day comment period would be impracticable, unnecessary, or contrary to
the public interest and incorporates a statement of the finding and its
reasons in the rule issued. For this proposed rule, we are waiving the
60-day comment period for good cause and allowing a 30-day comment
period that coincides with the comment period on the FY 2007 IPPS
proposed rule.
Ordinarily, we begin our preparations for issuing an IPPS proposed
rule early in a calendar year so that our proposals may be on public
display in early spring of that year. This schedule allows for a 60-day
comment period closing in either late spring or early summer, as well
as a one-to-two-month period to consider all comments and appropriately
respond to them.
In this case, we received the Court's order after almost all of the
IPPS proposed rule had already been prepared and finalized. The Court's
order requiring that we collect new occupational mix data by September
30, 2006 with immediate application necessitated this modification to
the original FY 2007 IPPS proposed rule. A 60-day comment period on
this proposal for how we plan to implement the Court's order would be
both impracticable and contrary to the public interest, because the
comment period would end on July 11, 2006 and would not allow the
agency sufficient time to process the comments and respond to them by
the August 1, 2006 date for the final rule. In addition, we do not
believe it would be appropriate to review comments relating to the
occupational mix in isolation from comments received on the remainder
of the FY 2007 IPPS proposed rule.
Because the FY 2007 IPPS proposed rule is an inter-dependent system
(for example, occupational mix adjustments affect wage indices, which
affect reclassifications and budget neutrality) extending the comment
period to take account of this occupational mix proposal would
necessarily entail not being able to consider the comments on the
remainder of the proposed rule until July 11, 2006. We believe it would
be contrary to the public interest to delay consideration of comments
that were received timely on the original FY 2007 IPPS proposed rule,
solely due to an intervening Court order. If we did delay
consideration, timely filed comments would receive a shorter period of
time for consideration by the agency. It also would be impracticable to
consider all FY 2007 IPPS comments by July 11, 2006, as doing so would
leave insufficient time for the agency to properly respond to comments
and appropriately consider and resolve whether any of the proposed
policies would be modified in light of comments received. Therefore, we
find good cause to waive the 60-day comment period for this rule of
proposed rulemaking.
VI. Regulatory Impact Statement
[If you choose to comment on issues in this section, please include
the caption ``IMPACT'' at the beginning of your comments.]
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 19, 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).
This proposed rule is not a major rule, rather it modifies the
occupational mix adjustment to the wage index, which is budget neutral,
as published in the FY 2007 IPPS proposed rule (71 FR 23996). While
there may be a redistributive effect on payments to hospitals, total
program payments would neither increase nor decrease as a result of
this proposed rule.
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 small governmental
jurisdictions. 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 in any 1 year. (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, all
hospitals and other providers and suppliers are considered to be small
entities. Individuals and States are not included in the definition of
a small entity. This proposed rule may result in a redistributive
effect on payments to hospitals, therefore, it could result in a
significant impact on small entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 100 beds. This proposed rule may
result in a redistributive effect on payments to hospitals, therefore,
it could result in a significant impact on small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
[[Page 28653]]
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. That threshold
level is currently approximately $120 million. This proposed rule will
not have an effect on State, local, or tribal governments in the
aggregate nor will private sector costs be greater than the $120
million threshold, since this rule is purely budget neutral.
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. This proposed rule would not have a substantial effect on
State or local governments.
This proposed rule does not include analyses for either the RFA or
section 1102(b) of the Act because the data are currently being
collected for the 2006 occupational mix survey. Therefore, in this
proposed rule, we are unable to estimate how the new occupational mix
data would affect the FY 2007 wage index.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program)
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: May 9, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
Approved: May 11, 2006.
Michael O. Leavitt,
Secretary.
[FR Doc. 06-4608 Filed 5-12-06; 4:00 pm]
BILLING CODE 4120-01-P